Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is the Bloomberg Day BAQT podcast. Good morning, It's Thursday,
Speaker 2: the sixteenth of October. I'm Caroline hepkat in London and.
Speaker 1: I'm Stephen Caroline Brussels. Coming up today, British officials revealed
Speaker 1: that China has been accessing classified UK systems for at
Speaker 1: least ten years.
Speaker 2: A leading economic think tank says the Chancellor Rachel Reeves
Speaker 2: needs a fifty billion pound buffer if she wants to
Speaker 2: balance the UK's books in the years ahead.
Speaker 3: Plus not such smart money.
Speaker 1: Billionaire investor Ken Griffin says Generative AI isn't helping hedge
Speaker 1: funds beat the market.
Speaker 2: Let's start with a roundup of our top stories.
Speaker 1: Chinese state actors have systematically compromised the UK government's classified
Speaker 1: computer systems for more than a decade. Bloomberg has learned
Speaker 1: China routinely accessed Britain's secret information, in one example by
Speaker 1: purchasing a data center which held confidential intelligence. The news
Speaker 1: comes as politicians in Westminster are debating if China is
Speaker 1: a threat after a court case around alleged Chinese spies collapsed.
Speaker 3: Leader of the Opposition Kenny.
Speaker 1: Badenock says, the Prime Minister has questions to answer.
Speaker 4: He cannot explain why he could not see this case through.
Speaker 5: He should have seen this case through.
Speaker 4: And let me be clear, mister speaker, about what has happened.
Speaker 4: A serious case involving national security has collapsed because this government.
Speaker 5: Is too weak to stand up to China now.
Speaker 1: In response to the government says that the previous conservative
Speaker 1: Conservative administration did to not desiccate designate China as a threat.
Speaker 1: Several government officials who spoke to Bloomberg anonymously say the
Speaker 1: scale of cybersecurity breaches show Beijing poses a significant threat
Speaker 1: to national security. A recent breach of a major US
Speaker 1: based cybersecurity provider has also been blamed on state backed
Speaker 1: hackers from China. Chinese officials have not responded to Bloomberg's
Speaker 1: requests for comment.
Speaker 2: US Treasury Secretary Scott Bessent is suggesting a new pause
Speaker 2: on tariffs for Chinese goods if the country stops its
Speaker 2: plans for rare earth market dominance. The two countries have
Speaker 2: both significantly ramped up their threats and sanctions over the
Speaker 2: past week. The US Treasury Secretary also took aim at
Speaker 2: one of China's top negotiators, calling him quote unhinged.
Speaker 6: Perhaps the Vice Minister who showed up here with variancendiari
Speaker 6: language on August twenty eighth has gone rogue instead quote,
Speaker 6: China will cause global chaos if.
Speaker 3: If the port shipping fees go through.
Speaker 2: Bessend added that he wants to coordinate an international response
Speaker 2: from democracies to undermine China's plans to control the rare
Speaker 2: earth metals market. He added that market moves wouldn't influence him,
Speaker 2: saying that the US won't negotiate with China quote because
Speaker 2: the stock market is going down.
Speaker 1: The UK's Chancellor Rachel Reeves needs to raise her fiscal
Speaker 1: boffer five fold to have a better than even chance
Speaker 1: of avoiding more tax rises and spending cuts. That's according
Speaker 1: to the Institute for Fiscal Studies, which warns that restoring
Speaker 1: the current nine point nine billion pound margin won't be
Speaker 1: enough to balance the book's long term with more. Here's
Speaker 1: Bimberg's Crispitz fifty billion.
Speaker 7: That's the figure the IFS says is needed to avoid
Speaker 7: what it calls a fiscal groundhog day, where the government
Speaker 7: repeatedly faces pressure to tighten policy from one forecast to
Speaker 7: the next by comparison, the leading economics think tank says
Speaker 7: that restoring the government's current raiser thin headroom would still
Speaker 7: only give Reeves a one in three chance of meeting
Speaker 7: her pledge to balance spending long term. The analysis highlights
Speaker 7: the scale of the challenge facing the Chancellor ahead of
Speaker 7: what's expected to be a difficult budget later this month
Speaker 7: in London. Chris Pitt Bloomberg Radio.
Speaker 2: France's Prime Minister Sebacia Lecornu may be able to survive
Speaker 2: to no confidence motions. Today he won the backing of
Speaker 2: the Socialist Party after announcing the suspension of contentious pension changes.
Speaker 2: Lecorn Who's probable survival brings some respite from the recent
Speaker 2: political turmoil that has driven up France's boring costs. The
Speaker 2: government still faces major fiscal challenges, though Charlotte de Montpellier's
Speaker 2: senior economists at IG has told Bloomberg the current situation
Speaker 2: isn't much of a relief for markets.
Speaker 5: Given the political landscape currently. I think we can expect.
Speaker 2: That if it goes through, the budget will be.
Speaker 5: More expansionary than this one, so it.
Speaker 2: Means that the deficit to GDP ratio will be worse
Speaker 2: than the one that is.
Speaker 5: Currently the imph next year.
Speaker 2: Charlotte de Montpellier's senior economists at ing speaking then, these
Speaker 2: socialists have already warned that their decision not to Censulo
Speaker 2: Corny today doesn't give the premier a blank check.
Speaker 1: US President Donald Trump says he's authorized the CIA to
Speaker 1: take covert action in Venezuela in order to stem a
Speaker 1: flow of drugs and illegal migrants to the United States.
Speaker 1: It confirms an earlier report in The New York Times,
Speaker 1: which said the agency would be enabled to carry out
Speaker 1: lethal operations in Venezuela and wider action in the Caribbean.
Speaker 1: Speaking at the White House, Trump rebuff to reporters' question
Speaker 1: on whether the CIA has the authority to take out
Speaker 1: Venezuelan President Nicholas Maduro.
Speaker 8: I think Venezuela is feeling heat, but I think a
Speaker 8: lot of other countries are feeling heat too. We're not
Speaker 8: going to let this country, our country, be ruined because
Speaker 8: other people want to drop. As you say, their worst,
Speaker 8: they have given us their worst, I.
Speaker 1: Was President Trump, speaking as the US has already hit
Speaker 1: half a dozen voats in the Southern Caribbean since the
Speaker 1: start of September, saying the vessels were transporting drugs to America.
Speaker 2: Now, Bloomberg understands that EU countries will begin debating next
Speaker 2: week just how much preferential treatment to give European firms
Speaker 2: bidding for public contracts.
Speaker 5: Bloomberg's Mihil Kubala has more.
Speaker 9: The EU is looking for ways to boost homegrown companies
Speaker 9: and strengthen its industrial base, sources have told Bloomberg France
Speaker 9: is leading the drive to prioritize European companies in public
Speaker 9: contracts worth about two and a half trillion euros. That's
Speaker 9: a market equivalent to about fifteen percent of the bloc's GDP.
Speaker 9: The push is a way to counterbalance protection as US
Speaker 9: trade policies or Chinnel's weaponization of certain raw materials. Still,
Speaker 9: officials war that implementing the buy European approach could be
Speaker 9: complex in some sectors. Defense, for example, the block is
Speaker 9: still heavily reliant on American suppliers in Brussels.
Speaker 1: Michael Kubala Bloomberg Radio, and those are your top stories
Speaker 1: on the market. It's the MSCIS Specific Index seven tents
Speaker 1: higher this morning. The NICK and Tokyo's up by one
Speaker 1: point three percent. Eurostocks fifty futures down four tenths this morning,
Speaker 1: as we're looking at the Bloomberg Dollar Spot Index, a
Speaker 1: tenth of one percent weeker, the euros at one sixteen
Speaker 1: fifty six, the tenure treasury yield holding steady at four
Speaker 1: point zero two percent.
Speaker 2: Well, in a moment, we'll bring you more on the
Speaker 2: UK cybersecurity breach and also why Citadel's Ken Griffin isn't
Speaker 2: impressed by.
Speaker 5: AI, at least not yet.
Speaker 2: There's also another story though here that's got our attention today.
Speaker 2: Perhaps I should say caught our eye haha. Could smart
Speaker 2: glasses replace our smartphones?
Speaker 1: I'm really glad that someone else has joined ludd Eyede's
Speaker 1: corner with you and me, Caroline, who's essentially somewhat suspicious
Speaker 1: of new technology.
Speaker 3: This has been Burke.
Speaker 1: Opinion column as Katherine Thorbeck has been writing about the
Speaker 1: massive amounts of money that big tech companies are pouring
Speaker 1: into developing smart glasses, doing things like making them look
Speaker 1: better of course making them more functional. AIS helping with
Speaker 1: that as well. She points to a recent survey of
Speaker 1: eight con trees, which includes China, India and the US
Speaker 1: stow and that forty eight percent of people were interested
Speaker 1: in purchasing a pair of smart glasses in.
Speaker 3: The next year.
Speaker 1: The trust of Catherine's argument, though, was essentially they might
Speaker 1: have the technopanies might have to go a bit further
Speaker 1: to try and convince us that we need this technology.
Speaker 2: Look, I think fifty to fifty is actually pretty good.
Speaker 2: To my mind, is a bit kind of Ready Player
Speaker 2: one or even Stephen They Live, which is a really
Speaker 2: old movie reference. Basically, are we in this kind of
Speaker 2: post privacy sort of world where you're going to wear
Speaker 2: those smart glasses. I always thought that headphones might not
Speaker 2: take off. They are absolutely ubiquitous. I'm surprised that people
Speaker 2: wear them at all times of the day and night.
Speaker 2: So maybe it's not so far fetched that people will
Speaker 2: also wear tech on their faces on their glasses.
Speaker 1: We need to draw two lists after this conversation. One
Speaker 1: is pieces of technology we thought wouldn't take off but did.
Speaker 1: Another is films that Stephen has not seen to get
Speaker 1: reference in our conversations. You can read Captain's piece at
Speaker 1: Bloomberg dot com Forward slash Opinion.
Speaker 2: Okay, let's get to our top story here in the UK,
Speaker 2: Chinese state actors have compromised classified UK government systems for
Speaker 2: more than a decade. We now learn joining US is
Speaker 2: our chief Asia correspondent Roslyn matheson Good Morning, Roz. Look
Speaker 2: what do we know that about this security breach? What
Speaker 2: information was accessed and also how.
Speaker 10: This was our exclusive reporting which shows that they were
Speaker 10: routinely and successfully accessing low and medium level classified information
Speaker 10: for at least a decade. And this is things like
Speaker 10: private communications, some diplomatic cables, discussion around government policy, so
Speaker 10: it wasn't top secret information, but it was still classified
Speaker 10: information and doing so it seems routinely, and one person
Speaker 10: told us endlessly for about ten years without detection, and
Speaker 10: some of it was potentially through a particular data center
Speaker 10: that was sold to an entity that had a link
Speaker 10: to China some time ago.
Speaker 5: That's now been tightened up.
Speaker 10: But the fact is that it seems like these Chinese
Speaker 10: state actors were just coming in constantly and getting fairly
Speaker 10: low level information, but information that's still class is classified
Speaker 10: and information that could be used potentially against the UK
Speaker 10: given it's about things like again that the formulation of
Speaker 10: government policy ross.
Speaker 1: This exclusive reporting is coming after the collapse of a
Speaker 1: trial of two men accused of spying for China because,
Speaker 1: according to prosecutors, successive British governments had declined to formally
Speaker 1: designate China as a threat to national security.
Speaker 3: Could that designation change now?
Speaker 10: Well, there's obviously a bit of pressure again around there.
Speaker 10: So this is something that's come up for many years,
Speaker 10: and not just under this administration. Is you have China
Speaker 10: hawks in various governments saying that the UK needs to
Speaker 10: move forward and do this. And obviously the fact that
Speaker 10: this case was seen to have collapsed in part because
Speaker 10: of the UK not using this designation has brought it
Speaker 10: back into the conversation. But you can see from some
Speaker 10: of the witness statements that we're given from bureaucrats at
Speaker 10: least is that they couch this as a complex relationship
Speaker 10: with China, between the China and UK, and that they
Speaker 10: say that the UK is ready to confront China, it's
Speaker 10: ready to compete with China, but also it does want
Speaker 10: an economic relationship with China, and just points again to
Speaker 10: that type rope that many UK governments seem to walk,
Speaker 10: and that the Starma government certainly is very much walking,
Speaker 10: is that it wants that door open to China, it
Speaker 10: needs that economic relationship and so you've got to make
Speaker 10: political calculations out of that.
Speaker 2: And yet this is in a complex, you know, global situation.
Speaker 2: It also comes as US authorities have issued these warnings
Speaker 2: about significant cyber threat because of a breach of a
Speaker 2: major US based cybersecurity provider F five. They call it
Speaker 2: a catastrophic breach. And again this is something that is
Speaker 2: blamed on state backed hackers from China. So there's also
Speaker 2: a broader concern and it's about you know, the US
Speaker 2: China relation and the UK US China relationship.
Speaker 10: Well, that's right, and in fact the UK has been
Speaker 10: caught up in this because there's been warnings issued here
Speaker 10: because of customers potentially have been breached in the UK,
Speaker 10: not just in the US. And some of these are
Speaker 10: really big companies and they use some of these systems,
Speaker 10: and you know, the reporting shows that these hackers possibly
Speaker 10: stole parts of source code which are used in application services,
Speaker 10: again by very big companies, and so you've had warnings
Speaker 10: to companies across the US but also in the UK
Speaker 10: that they need to go and check their systems and
Speaker 10: they're going to be seeing if there's been any infiltration.
Speaker 10: And so certainly that has also come across here doubt
Speaker 10: will be part of the conversation about how countries not
Speaker 10: to see UK, but the US and well, frankly everywhere
Speaker 10: are handling this proliferation of cyber attacks that come from
Speaker 10: China actors, but also from actors all around the world,
Speaker 10: and how do you bulletproof your systems and also how
Speaker 10: do you respond to the fact that often it's state
Speaker 10: barked rols.
Speaker 3: Have we heard any thing from China about all of this, It's.
Speaker 5: Interesting they've been pretty quiet.
Speaker 10: I mean they did when the case was dropped against
Speaker 10: these two people in the UK, they did say it
Speaker 10: showed the case was without merit. And they've also there's
Speaker 10: been a few editorials in China state media in recent
Speaker 10: days saying that this shows that there's just an unnecessary
Speaker 10: level of paranoia, as they call it in the UK
Speaker 10: about China, and there are people who are tempting to
Speaker 10: use all of this to try and cause problems in
Speaker 10: the relationship. But you haven't had a lot of very
Speaker 10: public comments made from China specifically about this by case
Speaker 10: with the two being dropped, and perhaps they just want
Speaker 10: to let that be because again, China has its own
Speaker 10: incentive to have the relationship stay on and improved footing
Speaker 10: with the UK again mostly around train and investment.
Speaker 2: Okay, Rolls, thank you so much for being with us.
Speaker 2: That is our chief Asia correspondent rose In Mathison, thank
Speaker 2: you stay with us. More from Bloomberg daybaqube coming up
Speaker 2: after this.
Speaker 1: What's Citadel's Cam Griffin is the I just big name
Speaker 1: and finance to weigh in on the subject of artificial
Speaker 1: intelligence as companies have been investing massive amounts of money
Speaker 1: in the technology, but the debate over what returns it
Speaker 1: can provide is continuing. Cam Griffin saying that AI isn't
Speaker 1: meaningfully affecting hedgephones so far. Our reporter to out bios
Speaker 1: here with more details.
Speaker 3: TIA. What is Cam Griffin's view on this? Then?
Speaker 5: Yeah, it's interesting.
Speaker 11: So he was speaking at an investors conference in New
Speaker 11: York and he made his views on this issue pretty clear. Essentially,
Speaker 11: he says there are ways that AI can help enhance productivity,
Speaker 11: but when it comes to actually helping hedge funds beat
Speaker 11: the market and generate alpha, he thinks it falls short.
Speaker 11: And when talking about his own shop Citadel, Griffin said
Speaker 11: that AI hasn't replaced meaningful research. This isn't the first time,
Speaker 11: he's made sort of skeptical comments about AI. He's previously
Speaker 11: called it a limited tool when it comes to investment analysis,
Speaker 11: and has typically downplayed fears that the tech could replace
Speaker 11: human jobs in the past. So fundamentally he thinks that
Speaker 11: it's unlikely to create widespread change, So it will have impact,
Speaker 11: but not perhaps in the profound way that others in
Speaker 11: the industry have come to expect.
Speaker 3: Well, that's the thing.
Speaker 2: It's a lively debate in the industry, and one you know,
Speaker 2: with a lot of money potentially resting on it.
Speaker 5: What are the other views?
Speaker 11: So this view definitely does set Griffin apart from his peers.
Speaker 11: I mean, just take the example of JP Morgan CEO
Speaker 11: Jamie Diamond. He recently said that the Bank spends two
Speaker 11: billion dollars a year developing AI technology, but also crucially
Speaker 11: that they save the same amount because of the tech.
Speaker 11: He was speaking to Bloomberg last week and he was
Speaker 11: very clear about just how impactful he thinks that AI
Speaker 11: is and how impactful it could be in the future.
Speaker 11: He said the Bank already has hundreds of use cases
Speaker 11: for it and only expects that to grow, and in
Speaker 11: terms of its impact in the world, he compared it
Speaker 11: to something like the printing press, so hugely significant in
Speaker 11: terms of history and its impact.
Speaker 5: On the future.
Speaker 11: But we have also heard from multiple others in the
Speaker 11: world of financial services. They've praised AI, and that includes
Speaker 11: a former Treasury Secretary Larry Summers. He called the emergence
Speaker 11: of AI a moment of stunning technological possibility. In the UK,
Speaker 11: there's also been Charlie Nunn, the CEO of Lloyd's Bank,
Speaker 11: he said the AI is core to the firm's operations,
Speaker 11: and just recently Golden Sachs CEO David Solomon released a
Speaker 11: vision statement about how the company is going to reorganize
Speaker 11: itself to fully benefit from AI. So in terms of
Speaker 11: the financial services sector at least, Griffin seems to be
Speaker 11: certainly in the minority here.
Speaker 3: Outside of the financial industry though too.
Speaker 1: But I mean, what do we know about the broader
Speaker 1: effects that AI is already having on the economy.
Speaker 11: Well, there are mixed opinions about this, so you know,
Speaker 11: on the one hand, there are some that argue that
Speaker 11: the productivity gains from AI will result in faster and
Speaker 11: certainly more sustainable economic growth. For example, recently, Federal Reserve
Speaker 11: Governor Christopher Waller said that AI will be a huge
Speaker 11: boost to the economy.
Speaker 12: Aside from questions about how AI's gained will be distributed,
Speaker 12: there's a more fundamental matter of how they will be measured.
Speaker 3: Even at a macro level.
Speaker 12: Are using AI to increase productivity, that's the payoff for
Speaker 12: a profit maximizing firm. This gain in producing more output
Speaker 12: with the same inputs is counted in gross domestic product
Speaker 12: and as a result you're getting more output the same
Speaker 12: number of inputs. Productivity per unit of input goes up,
Speaker 12: and that raises GDP and productivity growth.
Speaker 11: So the Fed's Christopher Waller, they're talking about the payoff
Speaker 11: from AI, but not everyone agrees with this entirely. There
Speaker 11: are specific concerns about the impact of AI on the
Speaker 11: labor market, particularly entry level jobs that could be vulnerable.
Speaker 11: Bloomberg reporting actually from this summer concluded that even if
Speaker 11: the technology only eliminates one fifth of new graduate jobs
Speaker 11: over the next five years, that would still have major
Speaker 11: ramifications for a generation of young workers and also for
Speaker 11: the economy. So there is both anxiety and optimism about
Speaker 11: a potential impact.
Speaker 1: This is Bloomberg Daybreak Europe, your morning brief on the
Speaker 1: stories making news from London to Wall Street and beyond.
Speaker 2: Look for us on your podcast feed every morning, on Apple, Spotify,
Speaker 2: and anywhere else you get your podcasts.
Speaker 1: You can also listen live each morning on London Dab Radio,
Speaker 1: the Bloomberg Business app, and Bloomberg dot Com.
Speaker 2: Our flagship New York station, is also available on your
Speaker 2: Amazon Alexa devices. Just say Alexa Play Bloomberg eleven thirty.
Speaker 2: I'm Caroline Hipka and.
Speaker 3: I'm Stephen Carroll.
Speaker 1: Join us again tomorrow morning for all the news you
Speaker 1: need to start your day right here on Bloomberg Daybreak
Speaker 1: Europe