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

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Speaker 1: DAYBAQ podcast, available every morning on Apple, Spotify or wherever

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Speaker 1: you listen. It's Friday, the tenth of January in London.

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Speaker 2: I'm Caroline Hepkip.

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Speaker 3: And I'm Stephen Carroll. Coming up today. Rising borrowing costs

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Speaker 3: put the UK government's grand economic plans in peril.

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Speaker 1: Authorities brace for a worsening tragedy as the Los Angeles

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Speaker 1: wildfires continue to burn.

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Speaker 3: Plus why Donald Trump's obsession with Greenland has put the

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Speaker 3: world's largest island in an unexpected position.

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

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Speaker 3: The UK Government's economic project is close to being in

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Speaker 3: tatters after this week's market turmoil. Investors of dumped guilts

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Speaker 3: and the pound, signaling fears around inflation and low confidence

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Speaker 3: in the government's growth plans. Bloomberg's Chief UK economist Jan

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Speaker 3: Hansen says it's a verdict on the plans from the Chancellor.

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Speaker 4: Rachel reeves what the market wants is austerity because I

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Speaker 4: think for me at least I can't speak for all

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Speaker 4: market participants clearly, but for me, I think the biggest

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Speaker 4: concern is around growth and around the obl's optimism around

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Speaker 4: the gross outlook.

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Speaker 3: Hans And ads that Britain is a victim of global

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Speaker 3: market moves of the UK's particularly badly hit. The pound

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Speaker 3: fell to its lowest level and over a year, down

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Speaker 3: one percent to one dollar and twenty two cents on Thursday,

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Speaker 3: while the tenuere guilty'll close little changed on the day

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Speaker 3: at four point eight one percent. That's near the highest

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Speaker 3: level since two thousand and eight. The domestically focused forty

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Speaker 3: two to fifty index closed near the weakest level since April.

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Speaker 3: The market move comes as the Chancellor rache Reeves heads

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Speaker 3: to China. Opposition politicians had Coldener to call off the trip,

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Speaker 3: which is by which is the most high level visit

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Speaker 3: by a British official Tubaijing in seven years.

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Speaker 1: Well, Britain's market upheaval has put the spotlight on its

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Speaker 1: fiscal woes, but economists say that the Bank of England

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Speaker 1: may all so have to slow interest rate cuts. While

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Speaker 1: the Beery is not expected to intervene in the volatility,

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Speaker 1: it may have to demonstrate a renewed commitment to tackling inflation.

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Speaker 1: JP Morgan's global economist noras Centavania says that the Central

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Speaker 1: Bank will need to reevaluate.

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Speaker 5: I think it's going to be increasingly difficult for the

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Speaker 5: Bank of England to have confidence in reducing interest rates

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Speaker 5: further to the extent that the markets had previously been pricing.

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Speaker 5: So I think that we've got room for the Bank

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Speaker 5: of England is now much narrower, especially if we don't

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Speaker 5: get further fiscal deficit are consolidation.

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Speaker 1: Centavanya's house view is that the Bank of England has

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Speaker 1: space for one cut in the near term. Despite the

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Speaker 1: market view, the Central Bank's Deputy Governor Sarah Breeden backed

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Speaker 1: further interest rate cuts in a speech yesterday.

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Speaker 3: Today's US jobs report is expected to shown on farm

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Speaker 3: payrolls rose by one hundred and sixty five thousand last month.

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Speaker 3: That's according to Bloomberg's survey of economists. To figure woodmark

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Speaker 3: a step down from November and odd fuel to the

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Speaker 3: narrative that the labor market in the United States continues

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Speaker 3: to moderate only gradually. Today's data, due out at one

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Speaker 3: thirty pm London time, comes after more Fed policymakers signals

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Speaker 3: the Central Bank will likely hold interest rates at current

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Speaker 3: levels for an extended period. Here's Governor Michelle Bowman, I.

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Speaker 6: Also continue to be concerned that the current stance of

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Speaker 6: policy may not be as restrictive as others may see it.

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Speaker 6: Even the ongoing strength in the economy, it seems unlikely

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Speaker 6: that the overall level of interest rates and borrowing costs

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Speaker 6: are providing meaningful for strength.

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Speaker 3: Governor Michelle Bowman's comments were echoed yesterday by the Boston

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Speaker 3: Fed President Susan Collins. She says a slower approach to

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Speaker 3: adjusting interest rates is merited now as officials confront considerable

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Speaker 3: uncertainty now.

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Speaker 1: Two other news, ongoing wildfires in Los Angeles have killed

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Speaker 1: at least ten people and force one hundred and eighty

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Speaker 1: thousand residents to flee. Estimates from ACU where the put

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Speaker 1: the economic losses at up to one hundred and fifty

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Speaker 1: billion dollars, which would rank among the highest for a

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Speaker 1: natural disaster in US history. La County Sheriff Robert Luna

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Speaker 1: says the number of casualties is likely to change as

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Speaker 1: relief efforts continue.

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Speaker 7: At one point, we'll be able to do a more

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Speaker 7: thorough search of these impacted areas. Some of them look

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Speaker 7: like a bomb was dropped in them, where we will

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Speaker 7: be able to bring in canines and other things to

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Speaker 7: help us hopefully not discover too many fatalities. That's our prayer.

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Speaker 7: But this is a crisis and we don't know what

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Speaker 7: to expect, but we're ready for everything.

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Speaker 1: La Counties Robert Luna, speaking as the fires have now

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Speaker 1: scorched more than thirty thousand acres, officials say that they

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Speaker 1: are hoping the tide against the blazes is turning, with

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Speaker 1: forecosts predicting the wind that has flanned the flames will

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Speaker 1: weaken later today.

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Speaker 3: China Center Bank says that will suspend buying government bonds

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Speaker 3: as supply has fallen short of demand. The move is

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Speaker 3: being seen as an attempt to temper investor bets on

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Speaker 3: weak economic growth that have undermined the U want unsapped

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Speaker 3: business and consumer confidence. Christy Tan, Institute investment strategist at

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Speaker 3: Franklin Templeton says action is being taken to alleviate fiscal pressures.

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Speaker 8: It is definitely a counter measure to deal with the

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Speaker 8: falling bond yields, and we've seen this unprecedented moves in

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Speaker 8: Chinese government bond yiels decline recently, and that is at

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Speaker 8: the point where it is actually putting a pressure on

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Speaker 8: the R and B. So all this is manifesting into

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Speaker 8: some kind of a response function from the PBOC, understandably.

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Speaker 3: Christy Tan from Franklin Templeton there speaking on Bloomberg Television

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Speaker 3: in a statement to People's Bank of China out of

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Speaker 3: that it will pick a time to resume purchasing sovereign

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Speaker 3: debt depending on market conditions.

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Speaker 1: The world's richest person, Elon Musk, has once again waded

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Speaker 1: into next month's German election. He live streamed a conversation

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Speaker 1: with the co leader of the far right Alternative for

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Speaker 1: Germany party, Alice Weedel Three AfD state chapters are classified

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Speaker 1: as extremists and are under surveillance by Germany's domestic intelligence service,

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Speaker 1: but during the ex spaces event, the Tesla and SpaceX

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Speaker 1: ceo once again endorsed the party.

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Speaker 9: I think only AfD can save Germany, and I just

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Speaker 9: want to be very clear about that.

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Speaker 6: Only AfD can save Germany, end of story.

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Speaker 10: And people really need to get behind AFP and otherwise

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Speaker 10: things are going to get very very much worse in Germany.

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Speaker 1: Elon Musk has extensive business interests in Germany and has

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Speaker 1: been a key advisor and major donor to US presidents

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Speaker 1: elect Donald Trump. Germany's leader, Earl of Schultz, has previously

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Speaker 1: responded to Musk, saying freedom of speech means you can

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Speaker 1: say things quote that do not contain good political advice.

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Speaker 3: Executives at top Wall Street investment banks are planning to

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Speaker 3: award traders and deal makers with their largest bonus increases

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Speaker 3: since the pandemic. The expected double digit hikes from any

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Speaker 3: desks reflects an upturn in business and optimism for the

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Speaker 3: year aheads with more Harris Bloomberg's Charlie Pallace.

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Speaker 9: Sources say bonuses will rise more than ten percent for

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Speaker 9: traders at Morgan Stanley and JP Morgan Chase, and around

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Speaker 9: fifteen percent for JP Morgan's investment bankers. Among senior industry executives,

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Speaker 9: it's broadly expected that Goldman Sachs will go even further

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Speaker 9: for some of its trading desks. The raises follow two

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Speaker 9: years of industry wide restraint, whose investment banks struggle to

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Speaker 9: maintain the flurry of trading and deal making they handled

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Speaker 9: at the height of the coronavirus pandemic. Wall Street's year

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Speaker 9: end rewards are notoriously volatile as the industry cycles through

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Speaker 9: booms and busts in New York, Charlie Pellett, Bloomberg Radio.

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Speaker 1: Those are our top stories for you this morning. In

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Speaker 1: terms of the markets, US treasury is the route that

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Speaker 1: we've seen in recent days, took a breather on Thursday

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Speaker 1: ahead of the non farm payrolls data we get today.

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Speaker 1: The guilt sell off also paused ten year guilt yields

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Speaker 1: rising two basis points yesterday. The pound, though did fall

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Speaker 1: nearly one percent. European stocks yesterday managed to end in

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Speaker 1: the green.

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Speaker 2: Stop.

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Speaker 1: Futures right now are in the red though for Europe

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Speaker 1: and for the US stock futures In Asia, Chinese yields

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Speaker 1: edge higher after the PBOC suspended buying of government bonds,

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Speaker 1: Japanese yields hitting fresh cycle highs, and you've also got

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Speaker 1: the Bloomberg Dollar Spot index back up a tenth of

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Speaker 1: one percent, so a fourth day of strength for the

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Speaker 1: US dollar.

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Speaker 3: In a moment, we'll bring you more on what the

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Speaker 3: UK market turmoil this week means for the Chancellor of

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Speaker 3: Rachel Reeves and for the Bank of England. Plus why

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Speaker 3: Donald Trump's Greenland attempted land grab remarks have bolstered the

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Speaker 3: country's independence movement. Between another story this morning, and to

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Speaker 3: a product that I suppose gets a lot of attention

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Speaker 3: at this time of year as people are perhaps trying

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Speaker 3: to ease off the indulgences after the festive season, and

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Speaker 3: this is non alcoholic spirits. Our colleague Mark laid Off, though,

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Speaker 3: has been writing about while the marketing around these is

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Speaker 3: very much around the idea of you being able to

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Speaker 3: have a drink that might look like an alcoholic drink

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Speaker 3: and make you feel more involved in festivities, that there's

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Speaker 3: a whole cohort of people out there who don't basically

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Speaker 3: don't want that, and that it's not essentially targeted at them.

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Speaker 1: Yes, and this is a particularly people who might be

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Speaker 1: in recovery from addiction. And he's looking he's looked at

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Speaker 1: a lot of the brands. He says that they're pushing

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Speaker 1: this kind of general concept of wellness, but actually forty

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Speaker 1: nine million Americans, it's thought, have some kind of substance

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Speaker 1: use disorder, and he's saying essentially that these products are

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Speaker 1: really not inclusive of those people, which I think is

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Speaker 1: just really interesting read kind of framing of wellness and

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Speaker 1: these sorts of products. He discusses all the marketing and

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Speaker 1: then the taste of a number of these different brands

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Speaker 1: in this space, seed Lip, Free Spirits, Penti and Athletic Brewing,

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Speaker 1: all the different names in this market that is growing,

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Speaker 1: or maybe being invented or being kind of given to adults.

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Speaker 3: I think is a great certainly for brewers. It's been

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Speaker 3: a huge move towards low alcohol or no alcohol beers, and.

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Speaker 9: With good success.

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Speaker 3: I think it's fair to say looking at the numbers

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Speaker 3: in this as well, but certainly a very interesting perspective

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Speaker 3: and the thought perhaps going into your weekend, if you're

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Speaker 3: attempting not to indulge, I suppose what's being marketed at

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Speaker 3: you on that front.

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Speaker 2: Yeah, absolutely right.

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Speaker 1: Let's send our attention then to the turmoil that we've

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Speaker 1: seen the termial in UK assets and what is next

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Speaker 1: after a week that's seen the pound tumble and guilt

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Speaker 1: yield surge. Although they took a little break yesterday, it

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Speaker 1: has been an epic week. Our managing editor for F

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Speaker 1: and Rates, Rachel Evans, has been with us throughout the

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Speaker 1: week to discuss this.

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Speaker 2: So Rachel, good morning.

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Speaker 1: The Bank of England has not intervened, is not expected

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Speaker 1: to intervene, but markets are starting to think that it

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Speaker 1: might mean slower interest rate cuts. Why would the Bank

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Speaker 1: of England have to slow interest rate cuts?

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Speaker 2: And will it?

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Speaker 11: Yeah, So I think it comes back to the two

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Speaker 11: main factors behind the turmoil this week have really been

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Speaker 11: supply and then also inflation. Now the Bank of England

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Speaker 11: isn't in control of supply, but it is tasked with

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Speaker 11: raining in inflation, So the inflation repressures that that kind

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Speaker 11: of the market has really started talking about again, you know,

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Speaker 11: in earnest have really been you know, partly largely as

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Speaker 11: a result of sort of the incoming Trump administration, but

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Speaker 11: obviously inflation has been a really big problem for the

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Speaker 11: UK already. We've seen very sticky price pressures here and

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Speaker 11: with kind of that new administration coming in and expected

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Speaker 11: to sort of potentially increase inflation with tariffs, for example,

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Speaker 11: there's a renewed focus on that and that's something that's

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Speaker 11: going to be worrying the Bank of England. So yes,

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Speaker 11: as you pointed out, traders have really been raining in

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Speaker 11: sort of their expectations for how much the Bank of

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Speaker 11: England could cut, you know, sort of heading into this week,

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Speaker 11: you know, two cuts were seen as a lock and

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Speaker 11: there was kind of a sort of likelihood of a

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Speaker 11: third as well. Now we're back to sort of seeing too,

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Speaker 11: you know, flat as it were. So I think it's

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Speaker 11: going to be something that you know, is going to

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Speaker 11: draw a lot of attention to inflation data incoming weeks.

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Speaker 11: We do have CPI out next Wednesday, so that's going

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Speaker 11: to be sort of the market's first chance to see

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Speaker 11: perhaps what the Bank of England might need to react to.

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Speaker 3: What about questions over the quantities of tightening program and

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Speaker 3: how adjustments to that might help ease some of the

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Speaker 3: tensions on markets in a less dramatic way than shifting

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Speaker 3: the interest rate path.

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Speaker 11: Yeah, so, I mean the QT program has been rolling

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Speaker 11: on for a while. It is pretty substantive. You know,

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Speaker 11: we're looking kind of one hundred billion a year. But

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Speaker 11: it's worth remembering that a lot of that is now

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Speaker 11: coming from redemption, so so bonds that are maturing that

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Speaker 11: the Bank of England holds. And there's only about thirteen

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Speaker 11: billion pounds worth of active sales expected this year. Now

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Speaker 11: obviously that's a chunky number, but in the context of

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Speaker 11: how much that the UK is trying to sell already

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Speaker 11: about two hundred and ninety seven billion pounds of debt

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Speaker 11: is not a huge number, so of course, you know,

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Speaker 11: all all changes in supply, you know, help the market

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Speaker 11: to a degree if they're going lower. But I mean,

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Speaker 11: this seems like something that's not necessarily going to be

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Speaker 11: on the table, particularly as we're not at a point

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Speaker 11: yet where we're seeing any concerns about liquidity, which would

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Speaker 11: be sort of a market functioning issue that the Bank

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Speaker 11: of England would want to address.

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Speaker 1: Pulling out to the more political angle of this, does

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Speaker 1: Chancellor Rachel Reeves have to do a repair job in

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Speaker 1: the spring statement? You know, she wanted to do the

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Speaker 1: tax and spending decisions all in the autumn only once

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Speaker 1: a year, but the pressure is now mounting.

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Speaker 11: Yeah, I think that's a good observation. I mean, I

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Speaker 11: think we're obviously unsure of what exactly she will have

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Speaker 11: to say, but clearly there's going to need to be

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Speaker 11: some at the very least messaging about how the government

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Speaker 11: maintains credibility given these questions that are being asked by

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Speaker 11: the market. The market is telling us very clearly that

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Speaker 11: there is too much borrowing and that they are not

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Speaker 11: sure how the books are going to balance, particularly with

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Speaker 11: deck costs likely heading higher globally or staying higher globally.

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Speaker 11: That's something that hasn't necessarily been factored in by the

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Speaker 11: UK in terms of how they're thinking about sort of

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Speaker 11: the money coming in and the money going out. So

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Speaker 11: there's going to need to be some comments, maybe even

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Speaker 11: before the Spring statement that sort of explain kind of

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Speaker 11: how those higher deck cost figures impact the situation. We've

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Speaker 11: had some nice reporting this week that suggests that sort

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Speaker 11: of spending cuts are likely given sort of the government

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Speaker 11: has been very forthrightd about its design not to raise taxes,

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Speaker 11: so I think, you know, we'll obviously see whether that

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Speaker 11: comes through in the Spring statement or whether this is

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Speaker 11: done in a more incremental way. But it certainly does

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Speaker 11: feel that that you know, Reeves does need to address this,

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Speaker 11: you know, at some point in coming weeks and months,

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Speaker 11: in order to kind of try and bring the market

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Speaker 11: back on side and make sure that you know that

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Speaker 11: they have faith in the labor government to kind of

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Speaker 11: keep the economy on track.

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Speaker 3: Rachel in terms of the outlook for Sterling weaker again

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Speaker 3: this morning slightly. There are some banks, including Wells Fargo

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Speaker 3: and Deutsche Bank to say there's room for sterling to

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Speaker 3: drop further. What should we be watching out for.

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Speaker 11: Yeah, I mean, I think yes, weakness, definitely, we're we're

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Speaker 11: seeing for some of the most bearish positioning for sterling

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Speaker 11: in years. I think Welles was looking at it to

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Speaker 11: go blow one point to zero. Obviously we're quite close

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Speaker 11: to that already, so I think, I mean, something to

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Speaker 11: watch out for is really just kind of walls through

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Speaker 11: recalibrating as sterling forecasts. There's going to be a lot

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Speaker 11: of people currently in the city and further afield who

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Speaker 11: are thinking about kind of what this looks like longer term.

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Speaker 11: I've certainly seen some suggestions that you, even if yields stabilized,

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Speaker 11: sterling itself could be the thing that becomes, you know,

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Speaker 11: the real driver of sort of woes for UK markets,

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Speaker 11: because of course we have to remember that sterling is

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Speaker 11: not just being driven by UK factors but also US factors,

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Speaker 11: and a stronger dollar is something that's very much anticipated

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Speaker 11: this year, given what we were talking about around sort

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Speaker 11: of the Trump administration, whether they're going to sort of

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Speaker 11: keep meaning that inflation is back and rates stay higher

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Speaker 11: in the US, So strong dollar means weaker sterling all

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Speaker 11: else equal, So I think that's something that we'll want

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Speaker 11: to watch out that kind of cross current from overseas.

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Speaker 1: Okay, Rachel, thank you so much for being with us then,

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Speaker 1: And the indication is what we should be watching in markets.

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Speaker 1: That is our manager, get it of FX and rates,

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Speaker 1: Rachel Evans, The.

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Speaker 3: US president of like, Donald Trump says Russia is Vladimir

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Speaker 3: Putin wants to meet him and that an encounter is

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Speaker 3: being set up. The latest indication of Trump's approach to

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Speaker 3: foreign policy during his second term comes after a week

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Speaker 3: in which the incoming US leader once again raised the

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Speaker 3: prospect of trying to buy Greenland, declining to rule out

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Speaker 3: the use of military force to take the territory. Russia

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Speaker 3: says it would react to any expansion of the US

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Speaker 3: military presence there, while the Danish Prime minister has once

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Speaker 3: again ruled out a sale of the island, but for

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Speaker 3: those on the self governing territory. The comments have also

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Speaker 3: had an impact, leading to a renewed push for independence.

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Speaker 3: Joining us for more on this is our Copenhagen reporter

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Speaker 3: Sana Vas Sana, good morning. Could Donald Trump actually buy Greenland?

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Speaker 10: Well, the short answer is no. Greenland has made it

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Speaker 10: very clear it's not for sale, it never will be

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Speaker 10: for sale. But I think even if Trump doesn't succeed

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Speaker 10: in buying Greenland, He's definitely laying.

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Speaker 11: The groundwork for more power in the region.

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Speaker 10: And I think the timing of Trump's comments and you

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Speaker 10: may have seen also his son visiting the capital of

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Speaker 10: Greenland this week, which really made everyone talk about Greenland.

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Speaker 10: The timing is interesting because back in twenty nineteen, when

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Speaker 10: Trump suggested to buy Greenland, this was quickly dismissed as

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Speaker 10: a joke. But what's changed sense is really that Greenland

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Speaker 10: is moving closer, has been moving closer to war's independence

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Speaker 10: from Denmark, and Trump is absolutely capitalizing on that. He

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Speaker 10: wants to get more influence when it happens. Greenland. It's

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Speaker 10: the world's biggest island. It's very important to the US geopolitically,

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Speaker 10: it's already home to a US military base, and it's

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Speaker 10: got large reserves of critical minerals. So Trump, he really

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Speaker 10: sees opportunities here.

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Speaker 2: Yeah, and it is.

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Speaker 1: It does seem to be adjusting things, doesn't it Trump's position.

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Speaker 1: It's a huge space, it's a tiny population, fifty six

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Speaker 1: thousand people who live in Greenland. The relationship between Greenland

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Speaker 1: and Denmark, I mean, how close might Greenland be coming

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Speaker 1: to independence.

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Speaker 2: Yeah.

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Speaker 10: Today it's formally a self ruling territory of the Danish Kingdom.

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Speaker 10: Is that Greenland controls most domestic issues, and then Denmark

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Speaker 10: is in charge of foreign policy and security. Greenland has

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Speaker 10: long wanted to be their own nation. One of the

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Speaker 10: key challenges has been an economic one. Can it become

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Speaker 10: independent and still sustain itself economically? But it has been

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Speaker 10: gaining more autonomy in the past few decades and now

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Speaker 10: it's really in the final stages of that journey towards independence.

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Speaker 10: They now have a draft constitution. Last year they also

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Speaker 10: published a blueprint for what their foreign policy might look like.

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Speaker 10: And then there's a general election coming up this spring

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Speaker 10: in Greenland and that will really define the path forward

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Speaker 10: for the territory. A referendum it may still be some

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Speaker 10: years away, but definitely could happen while Trump is president.

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Speaker 3: What does Donald Trump's interest though, mean for that path

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Speaker 3: for Greenland.

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Speaker 10: I think it's helping in a way to accelerate Greenland's

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Speaker 10: independence push because he's sending a signal to the Greenland

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Speaker 10: is that they won't be on their own if and

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Speaker 10: when they become independent, and that's very important for Greenland.

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Speaker 10: I mean I said before that the economic question is

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Speaker 10: a big one. Today Greenland receives financial support from Denmark

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Speaker 10: and they will need someone to provide that money. And

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Speaker 10: once they become their own state, whether that's from Denmark

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Speaker 10: or the US or somewhere else, Greenland will be looking

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Speaker 10: for new partners. So in a way, Trump's comments and

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Speaker 10: all this attention to Greenland, it's put Greenland in a

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Speaker 10: position of power. Now more countries are interested, and it

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Speaker 10: can use that to get a more beneficial deal both

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Speaker 10: for itself now but also once it desires to break

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Speaker 10: away from Denmark.

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Speaker 2: And so a final word then on Denmark's position.

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Speaker 10: Here, Yeah, the Danish government is definitely in a difficult

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Speaker 10: situation because on the one hand, US is Denmark's most

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Speaker 10: important ally, and then of course on the other we

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Speaker 10: have Greenland, which is an important part of the Kingdom

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Speaker 10: and Danes. According to Pol's they generally don't want to

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Speaker 10: give it up. But it seems that Denmark is really

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Speaker 10: trying to take this very diplomatic stance it wants to

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Speaker 10: avoid across with the US. It's put a very positive

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Speaker 10: spin on it, saying that it's welcoming US interest in

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Speaker 10: Greenland and wants to collaborate more with the US and

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Speaker 10: on the other hand with Greenland. It's the rhetoric has

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Speaker 10: changed too. The Prime Minister of Denmark has made it

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Speaker 10: clear that Greenland it's Greenland that will determine Greenland's future,

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Speaker 10: not Denmark and not the US for that sake, But

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Speaker 10: there's no doubt that she's under a lot of pressure

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Speaker 10: nowt to give Greenland more or offer a better post

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Speaker 10: independence deal. And I'm sure with Trump as president for

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Speaker 10: the next four years that will that pressure will definitely intensify.

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