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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg Daybreak Europe podcast, available every morning

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Speaker 2: on Apple, Spotify or wherever you listen. It's Wednesday, the

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Speaker 2: third of April in London. I'm Stephen Carroll coming up today.

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Speaker 2: Taiwan is hit by the strongest earthquake in a quarter

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Speaker 2: of a century, leveling buildings and disrupting the.

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Speaker 3: World's biggest chip maker.

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Speaker 2: Ritchie Sunak says he's appalled by the deaths of three

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Speaker 2: British aid workers in Gaza as Joe Biden also escalates

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Speaker 2: his criticism of Israel and going for a trio fed

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Speaker 2: speaker's wigh in on the number of times they expect

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Speaker 2: to cut interest rates this year. Let's start with a

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Speaker 2: roundup of our top stories. Taiwan has been hit by

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Speaker 2: the strongest earthquake in twenty five years. The seven point

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Speaker 2: four magnitude quake struck the east of the island just

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Speaker 2: before eight am local time. Bloomberg's Adrian Kennedy is in

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Speaker 2: the capital Taipei.

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Speaker 4: Taipei right now is back to normal. There kaws and

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Speaker 4: motorcycles on the street. We're operating for our offices here normally,

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Speaker 4: you know, Taiwan people are pretty resilient. They're used to earthquakes,

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Speaker 4: the use of severe flooding and typhoons. Is a Philly

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Speaker 4: natural disaster prone island on the east coast. That is

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Speaker 4: an area which was more remote. It's cut off from

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Speaker 4: much of the island by mountains. We do have reports

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Speaker 4: of some houses having collapsed. We do have some reports

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Speaker 4: that rescues being underway for people who may be trapped

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Speaker 4: in those houses.

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Speaker 2: Bloomberg's Adrian Kennedy also adding that the world's largest chip

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Speaker 2: maker TSMC, is still assessing the impact.

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Speaker 3: Of the quake.

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Speaker 2: Taiwan accounts for more than half of the global market

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Speaker 2: for laptops, motherboards, and routers. Tsunami warnings were issued in

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Speaker 2: parts of Japan and China, but later downgraded. Ritchie Sunak

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Speaker 2: has told he's rarely Prime Minister Benjamin Netanyahu that he's

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Speaker 2: appalled by the deaths of seven aid workers in central Gaza,

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Speaker 2: including three British citizens. Sunak joins several other Western leaders

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Speaker 2: who've condemned the airstrike, including US President Joe Biden, who

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Speaker 2: issued his strongest criticism of Israel yet. Bloomberg's At Baxter

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Speaker 2: has the story.

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Speaker 5: President Biden says Israel has not done enough to protect

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Speaker 5: civilians in Gaza. This following the killing of seven World

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Speaker 5: Central Kitchen workers providing aid to Palestinians. Secretary of State

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Speaker 5: Anthony Blincoln says the work they're doing there is extraordinary.

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Speaker 6: Spoken directly to the Israeli government about this particular incident.

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Speaker 6: We verged a swift, a thorough, an impartial investigation to

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Speaker 6: understand exactly what happened.

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Speaker 5: And the President is now also pushing for an immediate

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Speaker 5: cease fire as part of a hostage deal ed Baxter

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Speaker 5: Bloomberg Radio.

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Speaker 2: The US President also spoke with Chinese leaders she's inpaying

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Speaker 2: their first one to one conversation since last November. Biden

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Speaker 2: discussed concerns about China's trade policies and support of Russia.

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Speaker 2: China analyst Anna Ashton says the US administration is actually

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Speaker 2: managed to get China to engage positively.

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Speaker 7: Beijing was avoiding senior level military to military engagement, but

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Speaker 7: we've seen multiple meetings since last November that have made

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Speaker 7: progress on that. There's upcoming efforts to have a bilateral

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Speaker 7: dialogue on AI risk mitigation. It's refreshing to see that

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Speaker 7: both sides have found something like that that is pressing

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Speaker 7: and potentially significantly disruptive to countries everywhere that they want

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Speaker 7: to work on despite their distrust of each other on

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Speaker 7: so many friends.

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Speaker 2: The founder of Ashton Analytics also predicted China wouldn't intervene

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Speaker 2: on plans to ban TikTok. For his part, President She

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Speaker 2: said that Beijing seeks stable US ties but won't tolerate

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Speaker 2: Taiwanese independence to Federal Reserve officials say it's reasonable to

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Speaker 2: expect three interest rate cuts this year. Cleveland FED president

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Speaker 2: Lorata Master sees three cuts as appropriate, but admits the

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Speaker 2: decision will be a close call. Her comments were echoed

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Speaker 2: by San Francisco's Mary Daily, who predicts trimming rates three

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Speaker 2: times but can't guarantee it.

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Speaker 8: Pre Rate cuts is a projection, and a projection is

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Speaker 8: not a promise, And I think that's really important, because

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Speaker 8: a projection is saying, here's how the economy is expected

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Speaker 8: to evolve, and here's how policy evolve should that occur.

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Speaker 8: We have to be ready for what if inflation's stickier

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Speaker 8: than we projected or I projected. If I look out

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Speaker 8: at my projection and I say, well, what if inflation's

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Speaker 8: stickier we may want to cut less.

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Speaker 2: San Francisco FED president Mary Daily speaking there, both policymakers

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Speaker 2: maintain that the Center Bank is in no rush to

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Speaker 2: adjust rates at the moment. The Rettamester added she still

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Speaker 2: wants to see more evidence that inflation is falling before

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Speaker 2: embarking on rate cuts. Tesla has missed it's twenty twenty

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Speaker 2: four first quarter sales target by the biggest margin ever.

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Speaker 2: According to Bloomberg Data, the carmaker delivered just under three

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Speaker 2: hundred and eighty seven thousand vehicles in the first three

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Speaker 2: months of the year. Senior equity analyst at Webbush Security

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Speaker 2: says Tesla's now at a crossroads now.

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Speaker 9: I think for Tesla this is a fork in the

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Speaker 9: road period in terms of what they're going to do

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Speaker 9: from price perspective, new models over the next few years,

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Speaker 9: advertising competitions, increasing demandshoft and not just from China but Goalboy.

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Speaker 9: This is probably one of the more challenging periods I

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Speaker 9: think they we'd seen from Musk and Tesla in the

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Speaker 9: last four or five years.

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Speaker 3: Dan, I've speaking to Bloomberg there.

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Speaker 2: The results come after warnings from the firm that its

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Speaker 2: growth rate would be notably lower this year. Thanks to

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Speaker 2: interest rate hikes making its cars unaffordable. Tesla shares fell

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Speaker 2: by four point nine percent in New York, extending their

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Speaker 2: twenty twenty fourth slide to thirty three percent, the second

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Speaker 2: worst showing in.

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Speaker 3: The SMP five hundred index.

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Speaker 2: And NATO is proposing a fund worth one hundred billion

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Speaker 2: dollars over five years for Kiev as part of a

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Speaker 2: package to be agreed when leaders gather in July. As

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Speaker 2: part of the package, NATO could take over the US

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Speaker 2: led coordination of weapons deliveries for Ukraine. The alliance's thirty

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Speaker 2: two members would all need to approve the package. If agreed,

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Speaker 2: it would mark a paradigm shift for NATO, which has

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Speaker 2: previously only sent non lethal aid to Ukraine. But in

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Speaker 2: a moment, we'll get the latest from Taiwan on the

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Speaker 2: earthquake there, plus we'll get analysis of the latest commentary

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Speaker 2: from FED policymakers. But another story that caught our eye

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Speaker 2: this morning. The next innovation from the maker of chat

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Speaker 2: GPT a tool that replicates your voice. It's called Voice Engine.

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Speaker 2: A Bloomberg opinion columnist parme Elsena has been writing about it.

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Speaker 2: She points out that open ai isn't the first company

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Speaker 2: to launch such a tool, but given how they've leapfrogged

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Speaker 2: rivals in the past with other products in the AI space,

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Speaker 2: she's urging caution against its general release. Access is currently

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Speaker 2: limited now. The company says that it will decide on

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Speaker 2: whether to deploy Voice Engine at scale once it's conducted

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Speaker 2: more tests and assess the result of conversations over how

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Speaker 2: society will adapt now. Parmielsen says that cloning voices has

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Speaker 2: obvious risks and open AI, noting that the risks are

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Speaker 2: high in a big election year, but the company's goal

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Speaker 2: is also to understand the technical frontier and openly share

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Speaker 2: what's becoming possible with AI now. The guardrails that the

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Speaker 2: company is proposing, according to Parmeolson, don't inspire confidence. The

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Speaker 2: company's just in creating a no goal list to block

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Speaker 2: the creation of certain voices that sound too similar to

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Speaker 2: prominent figures, and this is something Parmeelson is urging a

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Speaker 2: note of caution in her Bloomberg opinion article this morning

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Speaker 2: as to the extent to which Voice Engine could pose

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Speaker 2: risks in its development as well. So that is the

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Speaker 2: one other piece that caught her eye this morning. You'll

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Speaker 2: see it on Bloomberg dot Com. Well, let's get the

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Speaker 2: latest now from Taiwan. After that earthquake, the strongest and

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Speaker 2: twenty five years to hit the island. Dozens of people

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Speaker 2: who have been injured, more than twenty five buildings have collapsed.

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Speaker 2: Tsunami warnings it is in the immediate aftermath of the

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Speaker 2: quake have now been lifted our scene. Your editor Adrian

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Speaker 2: Kennedy joins us from Taipei with the latest. Adrian, great

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Speaker 2: to have you on. What can you tell us about

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Speaker 2: the damage that's been caused by this earthquake.

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Speaker 4: Okay, we continue to suffer from aftershocks to the seven

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Speaker 4: fifty eight am earthquake which we this morning, but Tie

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Speaker 4: Pay itself, the capital, which we're buildings shock strongly is

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Speaker 4: back to business as usual. The real issue is in

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Speaker 4: the east of the island, in Highly End, which is

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Speaker 4: relatively remote and sort of sheltered from the rest of

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Speaker 4: the island by a large mountain chain. Over there, we

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Speaker 4: have a blocked roads, suspended rail services, and a number

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Speaker 4: of collapsed buildings. We understand that there's been at least

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Speaker 4: four fatalities. There are rescue undertakings to seek those people

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Speaker 4: who may be trapped and rubble, but thus far it

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Speaker 4: appears that while it's the most severe quake since nineteen

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Speaker 4: ninety nine, we won't have anything like the death toll

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Speaker 4: that was seen then when more than twenty four hundred

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Speaker 4: people died the incident, saying when very quickly after the quake,

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Speaker 4: Struck mobilized an emergency response center and announced that military

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Speaker 4: assistance would be made available to provincial authorities to assist

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Speaker 4: them with the rescue and clean up efforts. We do

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Speaker 4: have to wait for more information to come out of

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Speaker 4: highly end because of its remoteness, and it's possible, indeed likely,

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Speaker 4: that the deaththole and the casualty figure will climb in

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Speaker 4: the west, however, which is where the main industrial heartland

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Speaker 4: of Taiwan is located. While we did see some fabs,

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Speaker 4: including some from Taiwan's semiconductive manufacturing, suspend operations briefly and

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Speaker 4: evacuate some facilities, and while we understand that at least

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Speaker 4: one refinery briefly suspended, we don't appear to have had

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Speaker 4: much damage. We also expect that Taiwan's general customers to typhoons,

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Speaker 4: to regular earthquakes, and to various other threats means that

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Speaker 4: it'll be relevant, relatively resilient in terms of production and capacity.

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Speaker 2: Yeah, we have seen financial markets largely shrugging off the quake.

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Speaker 2: For now, the tai exender extend four tenths of one percent.

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Speaker 2: How much potential I suppose is there to disruption to

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Speaker 2: the semiconductor industry, Given that the industry seems to have

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Speaker 2: adapted quite quickly.

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Speaker 4: I would expect that there will be minimal disruption. I'm

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Speaker 4: not a tech expert, but understanding from what my colleagues

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Speaker 4: who are saying, and also from what the reporting is

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Speaker 4: coming out from TSMC, A lot of these evacuations were

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Speaker 4: basically exercises which are immediately undertaken when there's a significant

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Speaker 4: earthquake or temblar. But the underlying facilities, they're built very strongly.

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Speaker 4: The science parks are designed to withstand earthquakes. PA One

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Speaker 4: had a very strong earthquake in twenty sixteen in which

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Speaker 4: more than one hundred people died, for example. But we

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Speaker 4: haven't seen significant disruption of the tech industry. And indeed,

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Speaker 4: you could argue that there were billions of the island

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Speaker 4: during the pandemic. You know, underscored just how strong the

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Speaker 4: supply chains internally are.

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Speaker 2: We're going to touch the latest conversations about the Federal

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Speaker 2: Reserves rate path. Now, rate setters Mary Daily and the

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Speaker 2: RATA Master both say that three interest rate cuts this

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Speaker 2: year are a reasonable baseline. Bloomberg TV anchor Pritty Gup

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Speaker 2: does with me now to discuss more details. I assume

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Speaker 2: that's FED policymakers texting you there, right, just get to

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Speaker 2: see Yeah, clearly, Look, how does what we've heard from

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Speaker 2: Mary Daily and the REATA master fit into what we've

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Speaker 2: been hearing from other officials in the FMC.

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Speaker 1: The divergence between the FMC is one that is creating

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Speaker 1: even less clarity than we already have from the Federal

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Speaker 1: Reserve and other central banks around the world about just

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Speaker 1: what that time frame around cuts looks like. But the

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Speaker 1: base case between Daily and Master was the same. Actually,

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Speaker 1: the three rate cuts are due by the end of

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Speaker 1: the year. Now, if you talk to traders, and you

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Speaker 1: talk to kind of economists who hear those comments, you say,

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Speaker 1: when when is that going to happen? Because if you're

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Speaker 1: already pricing in the first rate cut for sure by

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Speaker 1: the markets, because the markets are always right, obviously has

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Speaker 1: them intended? The first one comes in July that doesn't

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Speaker 1: leave you a ton of room before the election to

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Speaker 1: really deliver on those three rate cuts. Remember, the federal

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Speaker 1: reserves going to be trying very hard to kind of

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Speaker 1: evade the timing of the election as well to evade

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Speaker 1: any sort of kind of political ramifications around boosting the

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Speaker 1: economy or boosting the stock market around the time that

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Speaker 1: people hit the polls. So that's going to be to

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Speaker 1: front and center. But one of the concerns here simply

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Speaker 1: that we're now going from evidence of overheating perhaps or

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Speaker 1: normalizing to evidence of that reacceleration. And that's where Mary

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Speaker 1: Daily I think those comments were really important, where she said,

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Speaker 1: let's give it a second, let's see what really reiterating

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Speaker 1: that cautious approach, which is interesting because they're just kind

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Speaker 1: of a double sided take on this. On the one hand,

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Speaker 1: she's dubvish and talking about these rate cuts as well,

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Speaker 1: but on the other hand, she's also talking a lot

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Speaker 1: about caution. So it's hard you can see why I

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Speaker 1: and the entire investment communities confuse when you look at

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Speaker 1: some of these these rules, because there's a clear consensus

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Speaker 1: among the FMC members that there's a need to cut

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Speaker 1: but it's also unclear what they're basing that on.

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Speaker 3: Yeah, indeed, and look, this is interesting that.

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Speaker 2: I mean, you say sarcasm about what the markets are expecting,

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Speaker 2: but they say is a question of there was a

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Speaker 2: brief moment last week where we thought the markets in

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Speaker 2: the FED were on the same page, and now it

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Speaker 2: seems again that we're starting to move into virgin pots,

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Speaker 2: but in the opposite direction to that we were before.

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Speaker 3: Yeah, I mean, what does that mean for yeld We got.

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Speaker 1: Too excited too quickly, apparently, just me Then what it

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Speaker 1: means for yields is you start to see some well wonkiness,

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Speaker 1: for lack of better term, you basically a disconnect in

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Speaker 1: the yield which is what we've been seeing kind of

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Speaker 1: all year long anyway, where you see FED swaps kind

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Speaker 1: of pricing in this massive moves, but you see the

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Speaker 1: nominal yields not move as much. We've seen that in

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Speaker 1: FED swaps pricing in seven six rate cuts at the

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Speaker 1: beginning of the year, nominal yields being at say four

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Speaker 1: to ten for example, not really hitting I think crossing

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Speaker 1: four to twelve was the technical level at that time.

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Speaker 1: Now you're saying, to your point, the exact opposite, where

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Speaker 1: fed swaps are pricing in fewer rate cuts. We're still

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Speaker 1: looking at one to two fifty percent chance in June

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Speaker 1: that pricing hasn't changed even in the last twenty four hours.

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Speaker 1: But you are seeing the idea that nominal yields are

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Speaker 1: now at four thirty one, and you're even hearing the

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Speaker 1: discourse that they might hit four and a half even

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Speaker 1: five percent before they come back down, and that, to

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Speaker 1: your point, illustrates the exact opposite dynamic we saw last week.

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