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Speaker 1: This is Bloomberg Daybreak here for this Friday, the twenty

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Speaker 1: fourth of March in London. Coming up today, an inflated outlook.

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Speaker 1: Bank of England says the UK will avoid a recession

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Speaker 1: and raises rates yet again. Back in the spotlights, Credit

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Speaker 1: sweetened ubs face US scrutiny over Russian sanctions. It's time

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Speaker 1: up the TikTok. The Chinese owned social networks CEO appears

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Speaker 1: before Congress but leaves lawmakers unsatisfied. Capital pushback, One letter

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Speaker 1: in dup and the Missing ninety nine percent. Those of

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Speaker 1: the stories we're looking at in today's papers. I'm Joe's

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Speaker 1: Alcock plus Jack Dorsey's fortune on the chopping block. The

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Speaker 1: tech founder sees half a billion dollars wiped off his

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Speaker 1: net worth as Hindenburg Research drops a new report that's

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Speaker 1: all straight ahead. On Bloomberg Daybreak Europe, The Business News

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Speaker 1: you need to start your day in just one fifteen

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Speaker 1: minute podcast on Apple, Spotify, the Bloomberg Business App and

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Speaker 1: everywhere you get your podcast. Good morning. I'm Lizzie Burden

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Speaker 1: and I'm Caroline Hitker. Here are the stories that we're

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Speaker 1: following today. The Bank of England has pushed ahead with

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Speaker 1: another hike, taking rates to their highest level since two

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Speaker 1: thousand and eight. The Central Bank raised its benchmark lending

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Speaker 1: rate by a quarter point to four point to five percent.

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Speaker 1: Bank of England Governor Andrew Bailey says the bank still

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Speaker 1: expects price rises to slow this year. We've seen signs

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Speaker 1: of inflation really peaking now, but of course it's far

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Speaker 1: too high now. We think it's going to come down

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Speaker 1: sharply really from the early summer onwards, but we haven't

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Speaker 1: seen that happen yet. We had some news this week

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Speaker 1: which was unfortunately going a bit the other way. We

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Speaker 1: think there's probably some one off elementths of that, but

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Speaker 1: we need to see at starting to come down progressively

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Speaker 1: and get back to target. Bailey also said the UK

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Speaker 1: economy has been more resilient than the bank had expected.

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Speaker 1: It now expects GDP to rise slightly in the second quarter.

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Speaker 1: That's a sharp upgrade from the north point four decline

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Speaker 1: that it projected last month. The UK government has condemned

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Speaker 1: power traders who are turning off their generators to make money.

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Speaker 1: Bloomberg's exclusive story shows how brokers gained the UK energy

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Speaker 1: system to gain more than half a billion pounds in

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Speaker 1: excess charges yesterday and in response, the Prime Minister, which

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Speaker 1: she soon act spokesperson, called the practice aren't acceptable, but

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Speaker 1: reporter Todd Gillespie says that the trading is technically legal.

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Speaker 1: I mean, the simple answer that we got from all

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Speaker 1: of these companies is that they aren't breaking the rules.

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Speaker 1: And it's true. The regulator hasn't found any conclusive evidence

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Speaker 1: of rule breaking. But what you will find now is

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Speaker 1: that the regulator, which is for the first time in

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Speaker 1: our story, called this practice manipulation. They are coming out

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Speaker 1: now and trying to change the rules to make it

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Speaker 1: explicitly not allowed. So the regulator that Todd mentioned off

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Speaker 1: JEM is now reportedly urgently looking into the practice. Sources

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Speaker 1: tell Bloomberg that Credit Suites and BS they're among the

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Speaker 1: banks under scrutiny in a Justice Department probe. The story

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Speaker 1: from Bloomberg's Charlie Pellett. Those sources say investigators are looking

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Speaker 1: into whether financial professionals helped Russian oligarchs evade sanctions. The

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Speaker 1: sources say the Swiss banks were included in a recent

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Speaker 1: wave of subpoenas sent out by the government. The information

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Speaker 1: requests were sent before the crisis that engulfed Credit Suis

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Speaker 1: and resulted in UBS's proposed takeover of its rival. According

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Speaker 1: to one of the sources, the Justice Department inquiries are

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Speaker 1: focused on identifying which bank employees dealt with sanctioned clients

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Speaker 1: and how those clients were vetted over the past several years.

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Speaker 1: In New York, Charlie Pellett Bloomberg Daybreak Europe, US Treasury

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Speaker 1: Secretary Janet Yellen says that regulators would be prepared to

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Speaker 1: take further steps to protect the banking system. The strong

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Speaker 1: actions we've taken ensure that Americans deposits are safe. Certainly,

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Speaker 1: we would be prepared to take additional elections if warranted. Yesterday,

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Speaker 1: bank stocks tumbled after Yellen said that Treasury officials were

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Speaker 1: not considering the possibility of temporarily ensuring all US bank

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Speaker 1: deposits without congressional approval. Former Fed Governor Dan Trulo says

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Speaker 1: US regulators need to be clearer in their position on

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Speaker 1: supporting uninsured depositors. Speaking in a Bloomberg round table, Trulo

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Speaker 1: said Yellen and pal seem to be saying that regulators

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Speaker 1: have the power to backstop previously uninsured deposits of insolvent banks.

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Speaker 1: They do not have the authority without congressional action to

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Speaker 1: ensure the deposits and open banks. What I think they

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Speaker 1: have done is effectively to say the following. We do

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Speaker 1: have the authority along with the FDIC to ensure previously

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Speaker 1: uninsured deposits in failed backs. And so what we are

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Speaker 1: basically telling you is, if a bank fails, we will

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Speaker 1: sure the uninsured deposits. Dontarrillo, who oversaw financial regulation and

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Speaker 1: supervision at the FED, also sharply criticize the central banks

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Speaker 1: twenty twenty two stress test metrics. He says, even if

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Speaker 1: Silicon Valley Bank had been tested at the time, it

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Speaker 1: wouldn't have been seen as risky. Now, the appearance of

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Speaker 1: TikTok's CEO before US lawmakers appears to have done little

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Speaker 1: to quell the political fury directed at his firm. Defending

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Speaker 1: his company against a barrage of criticism showed Chow sought

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Speaker 1: to underline the app's independence from its Chinese owners. The

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Speaker 1: potential security, privacy, content and nippulation concerns raised about TikTok

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Speaker 1: are really not unique to us. The same issues applied

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Speaker 1: to other companies. We believe what's needed are clear, transparent

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Speaker 1: rules that applied broadly to all tech companies, ownership is

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Speaker 1: not at the core of addressing these concerns well. Whilst

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Speaker 1: Chow was answering those questions, in the US, the UK

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Speaker 1: Parliament banned TikTok on local networks and staff devices. US

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Speaker 1: lawmakers and the Biden administration are exploring how to force

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Speaker 1: byte Dance to sell its share of TikTok or to

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Speaker 1: ban the Apple together payment company Block says it will

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Speaker 1: explore legal action against short seller Hindenburg Research over its

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Speaker 1: report accusing the business of enabling fraudsters. Hindenberg's investigation alleges

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Speaker 1: scammers were using blocks cash app to take advantage of

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Speaker 1: the US government's pandemic stimulus programs. Shares in Block fell

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Speaker 1: on the news, closing down fifteen percent. As a result,

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Speaker 1: co founder Jack Dorsey saw his fortune plunge, with five

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Speaker 1: twenty six million dollars wiped off his net worth. According

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Speaker 1: to bloomberg It's Billionaires Index, He's now worth four point

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Speaker 1: four billion dollars. The top stories, those are the top stories.

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Speaker 1: I want to shine little spotlight though on Todd Gillespie,

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Speaker 1: our Bloomberg reporter, and Joe Mays and Gavin Finch, who

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Speaker 1: wrote that piece yesterday about power traders here in the UK.

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Speaker 1: It got frankly instant reaction from the government and no

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Speaker 1: surprise given how much money the traders seem to have

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Speaker 1: been making from consumers and businesses from well what the

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Speaker 1: regulators called us sort of sharp practice I saying oh,

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Speaker 1: you know, we don't have enough energy or power to

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Speaker 1: cover this particular period of high demand. Oh no, now

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Speaker 1: we do, and then charging a higher price. But the

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Speaker 1: spokesperson for the Prime Minister saying it's going to be

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Speaker 1: looked into. Yeah, it's an incredible scoop. I think you

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Speaker 1: had to Todd on the UK Politics podcast we did.

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Speaker 1: You can download it. It's true if you want to

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Speaker 1: deeper look at it, it's clearly outrageous, Caroline. When we're

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Speaker 1: in a cost living crisis, to use the cliche, people

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Speaker 1: are choosing between heating and eating and the power and

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Speaker 1: this is going on with the power traders. Yeah. Absolutely. Also,

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Speaker 1: you know it shows up in the latest GfK survey

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Speaker 1: of UK consumers who are immensely downbeat about their finances. Yes,

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Speaker 1: the kind of overall measure of consumer confidence in Britain.

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Speaker 1: This is very closely watched. It ticked up. Does a

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Speaker 1: little bit, but on delying that people are really still

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Speaker 1: worried about the finance, and of course that consumer confidence

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Speaker 1: set to play into the retail sales data that we

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Speaker 1: get out from the UK Office for National Statistics at

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Speaker 1: seven am. Currently we're expecting sales including auto fuel to

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Speaker 1: be not point two percent in the next reading. That's

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Speaker 1: down from the last month of not point five percent

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Speaker 1: because ofcause you say, because of this cost of living squeeze. Yeah, absolutely, Okay.

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Speaker 1: Let's talk though about the bank jitters which have dominated

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Speaker 1: over the last a few days and weeks. They are

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Speaker 1: casting a long shadow even though as I mentioned, the

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Speaker 1: NASDAC is closing in on a bullmarket. Joining us now

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Speaker 1: our senior European strategist and director of research for Bloomberg Intelligence,

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Speaker 1: Tim Craighead. Tim, good morning, Thank you so much for

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Speaker 1: being with us. What's your view on whether SVB and

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Speaker 1: credit Suite represent a systematic risk company specific versus one off.

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Speaker 1: What are we thinking about in terms of financials? I mean,

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Speaker 1: the ECB is looking into this in terms of financial risk,

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Speaker 1: no doubt that. It's It's great to be here with you.

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Speaker 1: As always, I'll give you a really definitive I hope

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Speaker 1: it's not systemic. But and by that what I mean is,

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Speaker 1: I think both instances SVB and credit suites are definitely idiosyncratic.

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Speaker 1: That there are companies, specific elements that are at the

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Speaker 1: heart of both of those and they're different, and definitely

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Speaker 1: give them as one off. But it's the extraordinary speed

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Speaker 1: and magnitude of central bank tightening in the US and

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Speaker 1: in Europe that was the catalyst. It's sort of, you know,

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Speaker 1: the river of free money dries up and the rocks

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Speaker 1: start to show. And I think the telling period maybe

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Speaker 1: qu one earnings, when banks and financials and others have

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Speaker 1: to report new stats that might show other rocks and

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Speaker 1: fingers crossed. There aren't any, but I think that's what

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Speaker 1: you have to watch for. And so what does it

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Speaker 1: show when you see demand for two fired backstop facilities

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Speaker 1: only fell slightly in the most recent week, Well, I

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Speaker 1: think that goes to the idea of number one. It's

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Speaker 1: right that the central banks are drawing a line under

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Speaker 1: elements that they can. And you know, it was bank

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Speaker 1: quality that was an issue in the last cycle and

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Speaker 1: regulations tightened. Now maybe it's it's a deposit security that's

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Speaker 1: the next thing that regulators focused on you know, they're

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Speaker 1: always thinking about, you know, kind of the last cycle,

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Speaker 1: and you know, I think banks are going to be

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Speaker 1: really conservative over the course of you know, the next

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Speaker 1: number of weeks to make sure that calm is back

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Speaker 1: in the market. It's good that this is being stigmatized. Okay,

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Speaker 1: So talk us through the fundamentals though, I mean banks,

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Speaker 1: financials were part of the big rally at the start

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Speaker 1: of the year. What are the underlying fundamentals right now?

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Speaker 1: The valuations and earnings for European banks. Yeah, so, you know,

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Speaker 1: the interesting thing on banks is the fundamentals have in

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Speaker 1: fact changed a lot. You know, the story was rising

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Speaker 1: interest rates, improving that interest margin, strong credit quality, and

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Speaker 1: all of this was helping to drive better earnings, dividends

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Speaker 1: and buy backs, and all of a sudden over the

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Speaker 1: course of you know, the last couple of months, and

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Speaker 1: it accelerated the last couple of weeks. Now, less of

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Speaker 1: a rate rise, more economic risk, which creates less profitability expansion,

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Speaker 1: and some risk to what had been dividend buy back

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Speaker 1: improvement expectations. You know. So you know that story for

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Speaker 1: earnings and distributions is less still valued, pretty lowly Recession

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Speaker 1: risk is relatively modest and frankly, yeah, if you ask me,

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Speaker 1: I think central bank expectation to may have shifted too

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Speaker 1: much in terms of the pivot coming at a lower

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Speaker 1: level and sooner than what in fact might happen. So

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Speaker 1: there's tension in the banks. It's just not the positive

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Speaker 1: that it was through most of the last year from

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Speaker 1: our underlying view. Okay, Tim, thank you so much for

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Speaker 1: your time. Thank you for being with us. Tim Craighead

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Speaker 1: is senior Europeans Trashes and our director of research at

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Speaker 1: Bloomberg Intelligence. Up next, Capital Pushback, one Letter in DUP

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Speaker 1: and the Missing ninety nine Percent. We'll get the papers

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Speaker 1: with James Wilcock. Now the paper Review on Bluebird day

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Speaker 1: Break Europe, the news you need to know from today's papers,

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Speaker 1: and James Wilcock is in studio with us. Let's start

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Speaker 1: with the Telegraph, James, which has a story around Rishi

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Speaker 1: Soon Act's tax returns. Now, are they getting a bit

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Speaker 1: more interesting? It's not. Well, they came out during Boris

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Speaker 1: Johnson's parliamentary inquiry, Caroline, So what is interesting is there

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Speaker 1: is they were snuck out and now we're all digesting that. Okay,

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Speaker 1: but what is interesting about them is they've started this

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Speaker 1: debate about who bears kind of the burden of this

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Speaker 1: difficult period of economic stats we're looking at right now.

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Speaker 1: And that's not mine, which that's Charlie being one of

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Speaker 1: Britain's foremost economists and former BOE member who said that

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Speaker 1: real incomes across the UK will need to four five

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Speaker 1: percent to adjust for shocks. So he's saying broadly, there's

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Speaker 1: pain in this economy and it's a choice about who

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Speaker 1: bears it. I always fell over when I saw the

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Speaker 1: five percent we already have since stagnant wages for fifteen

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Speaker 1: years and the cost of living crisis. But then when

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Speaker 1: you se inflation at ten percent and he talks about

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Speaker 1: say union members negotiating for five percent, that's a five

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Speaker 1: percent real income shocks. Yes, so it does add up.

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Speaker 1: But so where this is where capital gains comes into it.

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Speaker 1: Ritchie Sunac's taxes show that he makes far more in

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Speaker 1: capital gains than he does an income. Now, capital gains

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Speaker 1: is levied at roughly twenty percent on most assets. Income

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Speaker 1: is at forty percent. And so with the British public

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Speaker 1: basically a highest income tax burden in seventy years labor

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Speaker 1: and some tax economists are saying maybe you should look

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Speaker 1: at capital gains. That's what the Telegraph are writing about today,

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Speaker 1: is saying, actually more Britains are saving than ever before

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Speaker 1: and to up cappital gains would actually harm the saving

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Speaker 1: part of the economy that we will rely on for

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Speaker 1: a future investment. If the Tories ever went anywhere near

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Speaker 1: quote unquote own earned income, I'm sure it would be outrage.

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Speaker 1: And the right wing press right moving on James the

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Speaker 1: Ft are writing about Northern Ireland. So in some ways, Lizzie,

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Speaker 1: the EU dealers all wrapping up today. Maru Sefkovich is

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Speaker 1: meeting with James cleverly today they're set to sign off

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Speaker 1: the Windsor Framework, passed by a decisive five hundred and

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Speaker 1: fifteen to twenty nine votes, and Wednesday, but but but

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Speaker 1: but the DUP are still calling for more and they

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Speaker 1: are not happy with the deal, and they also are

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Speaker 1: not returned to parasharing in Northern Ireland, which is a

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Speaker 1: key issue ahead of the twenty fifth anniversary of the

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Speaker 1: Good Friday Agreements, which is happening in April now. One

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Speaker 1: of their key claims is that they want both laws,

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Speaker 1: both EU law and UK law to work in Northern

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Speaker 1: ireanths that way, they feel like they are still part

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Speaker 1: of the union. However, this is why the ft Scoop

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Speaker 1: come in. They've got a letter from Sammy Wilson, who's

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Speaker 1: an MP and DUP, arguing last year that that same

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Speaker 1: rule that is now a key demand. He said that

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Speaker 1: commercial groups had no interest in it back a few

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Speaker 1: months back. It shows how difficult it's going to be

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Speaker 1: to unravel this very tense situation where the DPR and

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Speaker 1: a standoff here, because what is the quite policy that

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Speaker 1: will calm them down? Well, are they really in a standoff?

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Speaker 1: Is my question? You know, has actually the kind of

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Speaker 1: power of the DP faded now that it's been passed

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Speaker 1: in Parliament? I mean that's a whole debate, isn't it.

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Speaker 1: The Times and COVID loans, This is very frustrating now

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Speaker 1: we've been talking about COVID loans on this program for

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Speaker 1: quite some time. It's because there are billions tied up

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Speaker 1: in the space and the numbers that were lent out

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Speaker 1: by the government were astronomical. Now what has changed today

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Speaker 1: is the National Audit Office themselves have said that one

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Speaker 1: point one billion pounds of state business grounds were lost

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Speaker 1: to fraud and error and only one percent eleven million

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Speaker 1: pounds have been recovered. Now, this is interesting, but not

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Speaker 1: just because of the sheer amount, and it shows an

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Speaker 1: issue in recovering the stuff. The defense of the government,

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Speaker 1: I mean Matt Hancott, the Health Secrety in particular, was

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Speaker 1: work fast, break things, get this done for COVID. Yeah,

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Speaker 1: but that you can understand that, yeah, Well that defense

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Speaker 1: is in trouble because Gareth Davy is the head of

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Speaker 1: an NAO, the National Order Office, says we don't actually

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Speaker 1: know the impact of these loans because they've never been

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Speaker 1: recovered and there never any conditions tied to them, so

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Speaker 1: we can't prove value for money. We can't prove that

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Speaker 1: we were working fast because we don't know if they

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Speaker 1: were working. So it really does raise some questions around

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Speaker 1: both how we handle these crises in future if we

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Speaker 1: are going to lend out largs and outs of government money.

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Speaker 1: This is Bloomberg Daybreak Europe, your morning brief on the

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Speaker 1: stories making news from London to Wall Street and beyond.

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Speaker 1: also listen live each morning on London DAB Radio, the

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Speaker 1: York station is also available on your Amazon Alexa devices.

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Speaker 1: Just Say Alexa played Bloomberg eleven thirty. I'm Caroline Hipka

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Speaker 1: and I'm Lizzie Burden. Join us again tomorrow morning for

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Speaker 1: all the news you need to start your day right

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Speaker 1: here on Bloomberg day Break Europe