Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is the Bloomberg Daybreakerate podcast. Good Morning, It's Finday
Speaker 2: the twenty second of May. I'm Caline Hepgitt in London.
Speaker 2: Coming up today, The Iran war upends inflation beds, as
Speaker 2: one analyst warns, the whole Moves closure threatens a recession
Speaker 2: rivaling two thousand and eight. European growth buckles under the
Speaker 2: weight of the war as energy costs surge. Plus why
Speaker 2: global aid cuts could be making the growing Ebola crisis
Speaker 2: in Africa worse. Let's start with a roundup of our
Speaker 2: top stories. The US war in Iran is triggering another
Speaker 2: wave of price hikes across a global economy that has
Speaker 2: barely recovered from the last inflation shock. Investors are also
Speaker 2: starting to worry about the implications for the more than
Speaker 2: fifty trillion dollar market for G seven sovereign bombs. Bloomberg
Speaker 2: Economics says that the oil shot caused by the closure
Speaker 2: of the Strait of Homers is ending the global trend
Speaker 2: of disinflation. Higher crude gas and shipping costs are lifting
Speaker 2: prices across major economies. The impact is clearest in North
Speaker 2: America and in Europe. USCPI is moving back towards four percent,
Speaker 2: while inflation in the Euro Area has risen by around
Speaker 2: one percentage point. Ali Dorweller is cocio at Rock Creek.
Speaker 3: The risks just keep multiplying in terms of what investors
Speaker 3: have to think about and interest rates, consumer sentiment, what
Speaker 3: is driving inflation. If we don't have some resolution in
Speaker 3: terms of energy prices, we think all of that will
Speaker 3: continue to be an increased risk to portfolios and it
Speaker 3: will mean more bond volatility, which I think investors have
Speaker 3: now gotten used to.
Speaker 2: Ali Dorweller, speaking there as rapid Down Energy, has warned
Speaker 2: that a closure of the Strait of Houmers until the
Speaker 2: end of August would raise the risk of an economic
Speaker 2: downturn approaching the scale of the two thousand and eight
Speaker 2: Great Recession. In its latest note, Rapidan said that if
Speaker 2: the waterway remains shut until August, it would deepen the
Speaker 2: third quarter supply deficit to roughly six million bars of
Speaker 2: oil a day. Now, the EU is slashing its growth
Speaker 2: forecasts as the scale of the fallout from Iran becomes clearer.
Speaker 2: The Block now expects Euro Area GDP to increase zero
Speaker 2: point nine percent this year. That's compared to one point
Speaker 2: four percent last year. Economy Commission at Valdis Dombrovskis says
Speaker 2: both growth and inflation are going in the wrong direction.
Speaker 4: In basically conforms to esawcoming, which is stokeflationary shocked to
Speaker 4: European economy, meaning simultaneous slow down of economic growth and
Speaker 4: increase in inflation.
Speaker 2: Don Brovskis adds if energy prices stay higher for longer,
Speaker 2: growth prospects for the EU will be roughly halved both
Speaker 2: this year and next year. The Commission has called for
Speaker 2: restraint from European countries despite the downturn, fearing a breach
Speaker 2: of their fiscal rules. Confidence among the lowest earning Britains
Speaker 2: plunged in May as the Iran energy shot reaches household budgets.
Speaker 2: GfK's consumer spending INDEGS shows those at the bottom are
Speaker 2: pulling back from purchases even before the worst of the
Speaker 2: shock actually arrives. Chancellor of chel Reeves set out a
Speaker 2: number of measures to try to ease the cost of
Speaker 2: living crisis.
Speaker 5: First of all, we have extended the freeze on fuel
Speaker 5: duty until at least the end of this year. I
Speaker 5: understand how concern families and businesses are at the moment
Speaker 5: about the implications of the conflict in the Middle East.
Speaker 5: This is not a war that we started.
Speaker 6: I've been very.
Speaker 5: Open in my views that this war was a mistake.
Speaker 5: But regardless of that, it is having an impact on
Speaker 5: people here in the UK.
Speaker 2: But the Chancellor has ruled out universal energy bills support
Speaker 2: in the announcement that she made yesterday. Both Reeves and
Speaker 2: her Prime Minister Kirs Armer have been trying to convey
Speaker 2: a sense of business as usual despite the leadership battle
Speaker 2: with Andy Burnham. Iran says that there has been progress
Speaker 2: in talks with the US, but the country is also
Speaker 2: trying to set up a permanent toll in the Strait
Speaker 2: of Hormuz. The semi official Iranian Students news agency reported
Speaker 2: the latest peace proposal from the US has narrowed the
Speaker 2: gap between the two sides, but a Bloomberg interview with
Speaker 2: the Iranian ambassador to France revealed that the country was
Speaker 2: in talks with Oman about setting up a toll system
Speaker 2: in the strait. US Section of State Marco Rubio says
Speaker 2: that would not be feasible.
Speaker 7: We were in China last week. We mentioned this about
Speaker 7: the tolling there against it. No one in the world
Speaker 7: is in favor of a tolling system.
Speaker 2: It can't happen.
Speaker 7: It would be unacceptable, would make a diplomatic deal unfeasible
Speaker 7: if they were to continue to pursue that. It's a
Speaker 7: threat to the world that they were trying to do that.
Speaker 2: The conflicting statements on the two sides make it unclear
Speaker 2: if they are actually any closer to a deal. Oil
Speaker 2: prices are consistently trading above one hundred dollars a bow
Speaker 2: as the world's buffers of reserves shrink rapidly. President Trump
Speaker 2: says that the US will deploy an additional five thousand
Speaker 2: troops to Poland, reversing plans to suspend deployment to the country.
Speaker 2: He announced the news via social media yesterday, citing the
Speaker 2: election of nationalists Carol Navrocki as Poland's president. The decision
Speaker 2: marks an abrupt u turn a week after the Pentagon
Speaker 2: paused plans to send about four thousand soldiers to Poland,
Speaker 2: even though some were already en route. Vita ni Leo Shiny,
Speaker 2: who is the ambassador of the European Union to the
Speaker 2: United States, urged the White House to uphold its commitments
Speaker 2: to NATO.
Speaker 6: The President request that in European countries and European Alliance
Speaker 6: allies in the NATO do their part. We are following
Speaker 6: it through. So I do believe that you know the
Speaker 6: strategic part which US presence in the in Europe is
Speaker 6: as well, probably the expectation that the members tips fairly have.
Speaker 2: That was the EU ambassador to the US, Jovita and
Speaker 2: Nelio Shiny, speaking there. The US president also earlier threatened
Speaker 2: to pull troops from Germany and suggested that a broader
Speaker 2: draw down of US forces in Europe after a feud
Speaker 2: with other NATO nations over their refusal to help in
Speaker 2: the Iran War. Ukraine and its allies are increasingly confident
Speaker 2: that Russia's invasion is losing steam. The country's growing effectiveness
Speaker 2: at deploying drones capable of inflicting heavy Russian troop losses
Speaker 2: is being matched by strikes deep inside Russia. This, alongside
Speaker 2: an economic slowdown and internet restrictions, is stoking domestic criticism
Speaker 2: of Russian President Vlasimir Putin. BlueBag understands that some Kremlin
Speaker 2: officials believe that the conflict has reached a dead end
Speaker 2: with no clear resolution. The news comes as the US
Speaker 2: Defense Agency found a Ukrainian offensive earlier this year retook
Speaker 2: about four hundred square kilometers from Russia after thousands of
Speaker 2: Starlink Internet terminals operated by Putin's forces were deactivated. So
Speaker 2: those are our top stories for you this morning. Let's
Speaker 2: get to the markets. So in terms of stocks, we
Speaker 2: see a big rally in Asia. The MCI Asia Pacific
Speaker 2: indexes up at one percent, so continuing games that we
Speaker 2: saw yesterday, the Nike jumps by two point seven percent.
Speaker 2: Worth noting a couple of individual stock moves, soft bank
Speaker 2: surging in Japan, Lenovo climbing to a twenty six year
Speaker 2: high in Hong Kong. Stop futures for Europe and the
Speaker 2: US also very positive one percent. Half of the US
Speaker 2: SOX fifty futures this after bent crewed futures have rebounded
Speaker 2: one point seven percent, trading at one hundred and four
Speaker 2: dollars thirty. Gold is edging lowre this morning, three tenths
Speaker 2: of one percent. TENNY US Treasury yeels down at basis
Speaker 2: point at four point fifty six this hour. Those are
Speaker 2: the markets now. In a moment, we're going to bring
Speaker 2: you more on whether investors no longer see inflation as
Speaker 2: temporary after these crisis well in the Middle East, but
Speaker 2: also COVID and the efforts to contain the deadly Ebola outbreak.
Speaker 2: We'll be bringing you more on that. But another story
Speaker 2: has caught my eye this morning. Bike lanes with miniature
Speaker 2: green areas. They're popping up all over cities everywhere, it seems.
Speaker 2: I wonder whether you've noticed them. These green verges that
Speaker 2: incorporate cycle paths help cities with flood protection, also wildlife
Speaker 2: protection in this era of climate change. It's also because
Speaker 2: of tight budgets, cities can use these multi purpose sort
Speaker 2: of designs in cities and pull funding from different pots
Speaker 2: to pay for them. Blomberg's Laura Laker has been writing
Speaker 2: about their use in one city in Wales and Cardiff,
Speaker 2: about how some otters apparently have moved into a section
Speaker 2: of this sort of greenery along the canal in Cardiff,
Speaker 2: and that that footage really sent this kind of ripple
Speaker 2: of excitement across the city about it. I love this story.
Speaker 2: I get why people see these patches of greenery as
Speaker 2: something good. You know, it's about sustainable drainage for cities
Speaker 2: to try to lower temperatures, especially as you know London's
Speaker 2: going to head into this heat wave over the weekend. Esthetically,
Speaker 2: though I have some doubts they can kind of end
Speaker 2: up just running wild. They're expensive to maintain, and I
Speaker 2: do think that there's a danger of councils adding up
Speaker 2: these tiny areas of square footage into one big number,
Speaker 2: making it sound like, you know, the greenery, maybe the
Speaker 2: size of a park, when of course it isn't a
Speaker 2: new park. But I thought that discussion, which has been
Speaker 2: massively contentious in so many places, is very interesting. We're
Speaker 2: going to put a link to it in our podcast
Speaker 2: show notes for you to learn more about it. Now
Speaker 2: to the bond market's next by way of Oscar Wild's
Speaker 2: famous quote, to lose one parent, mister worthing may be
Speaker 2: regarded as misfortune. To lose both looks like carelessness. While
Speaker 2: investors seem to feel that way about inflation. One episode
Speaker 2: in the twenty twenties may be misfortune, but two could
Speaker 2: be a bad trend, and it is upending and threatening
Speaker 2: to upend the fifty trillion dollar plus market for sovereign
Speaker 2: bonds across g seven countries. Our Bloomberg economic reporter Mark
Speaker 2: Schrewers is in Frankfurt and joins us to discuss. Good morning, Mark,
Speaker 2: I hope you don't mind my little diversion into the
Speaker 2: literary world to talk about bond yields. How much have
Speaker 2: bond yields moved due to the war in Iran and
Speaker 2: also concerns about another energy price shock.
Speaker 8: Yeah, good morning from Frankfurt. We indeed saw quite some
Speaker 8: movement in bondmarks in recent days and weeks, and boring
Speaker 8: casts are searching globally. Are also among the Group of
Speaker 8: Seven countries or the major economies, they have reached the
Speaker 8: many cases levels we haven't seen since the financial crisis,
Speaker 8: in some case not even since the nineteen nineties. I
Speaker 8: think we need to separate issues here. One is the
Speaker 8: more short term, the other is the more medium to
Speaker 8: longer term. In the short term, we have the US
Speaker 8: war on Iran that has triggered a search and an
Speaker 8: energy costs and is pushing inflation up globally, and given
Speaker 8: the back and forth between the US and in Iran,
Speaker 8: it's likely that the conflict will last longer and keep
Speaker 8: inflation higher for longer. On the other hand, we have
Speaker 8: more medium to longer term factors. Investors are starting to
Speaker 8: worry that inflation, higher inflation is here to stay, and indeed,
Speaker 8: there are some good reasons to believe that the future
Speaker 8: will bring more volatile and probably also higher inflation, more
Speaker 8: frequent supply shocks. You need to remember that the one
Speaker 8: we see at the moment is only happening four years
Speaker 8: after the last one, and commodity price shots have been
Speaker 8: the biggest drive of global inflation historically. And on the
Speaker 8: other hand, there are some big structural changes in the
Speaker 8: global economy that could lead to more inflation, volatile and
Speaker 8: higher price pressures in the future, and investors one compensation
Speaker 8: for that. Yeah.
Speaker 2: Okay, So then in terms of the sort of main reasons,
Speaker 2: I mean you started to outline them a bit there.
Speaker 2: What are the main reasons that markets may expect higher
Speaker 2: inflation in the future, maybe even structurally higher inflation actually
Speaker 2: going forwards?
Speaker 8: Yeah, I would say there are quite a number of
Speaker 8: factors that play here, and many present a kind of
Speaker 8: reversal of turns we saw in the past when it
Speaker 8: kept inflation lower pre pandemic. For example, we have the
Speaker 8: le globalization, so that means geopolitical tangions and fragmentation, disrupting
Speaker 8: global supply chains, rising cars and it will take It
Speaker 8: will take time for companies to adjust. We have demographics,
Speaker 8: so the supply of labor is declining with the ongoing aging,
Speaker 8: with the aging of societies, and that will likely increase
Speaker 8: wage pressures we have there So rising dead levels, not
Speaker 8: least public debt levels could also generate a kind of
Speaker 8: inflation bias, also because it could prevent central banks from
Speaker 8: hiking rates as needed, and also other factors that play decombanization.
Speaker 8: For example, I would say, to be fair, there are
Speaker 8: also other factors like AI, whether the jury is still out,
Speaker 8: and whether it will be inflationary or disinflationary. But bottom line,
Speaker 8: I would say there are quite a number of reasons
Speaker 8: to believe in or expect higher inflation in the future.
Speaker 2: Yes, that maybe we'll be going in you know that,
Speaker 2: maybe we're entering a whole new area. Well, how will
Speaker 2: central banks react?
Speaker 8: That's the one billion dollar question. What will center banks do?
Speaker 8: What will happen to two rates? For sure, policymakers are
Speaker 8: in an increasingly tricky spot short term looking at the war.
Speaker 8: You know, we have rising inflation, we have rising price pressures,
Speaker 8: and that would call for rate hikes. But there's also
Speaker 8: a severe risk of a significant slowdown of the global
Speaker 8: economy of growth, and central banks don't want to worsen
Speaker 8: that by tightening. Looking at the medium to longer term,
Speaker 8: I would say central banks will have to defend their
Speaker 8: heart won credibility. But it also seems reasonable to expect
Speaker 8: that there will be enormous pressure from governments to keep
Speaker 8: rates lower given the high dead levels we talked about earlier.
Speaker 8: For the big take we did, I talked to to
Speaker 8: to a guy Claudy Borio, former head of monetary in
Speaker 8: the Economic Department at the bis SO, the Center banks
Speaker 8: of central banks, and he said he would expect that
Speaker 8: the next decade will present the biggest challenge for central
Speaker 8: banks indicates, and it will be particularly interesting in the
Speaker 8: US because you know, incoming fetcher Kevin Walsh is under
Speaker 8: pressure to cut rates, while the circumstances don't speak in
Speaker 8: favor of that. So coming back to your question, I
Speaker 8: would say it's fair to expect that rates will be
Speaker 8: structurally higher in the future, and for sure, at least
Speaker 8: for the moment, a return to zero rates or even
Speaker 8: negative rates we saw on parts of the world economy
Speaker 8: in recent years they seemed very unlikely.
Speaker 2: Yes, okay, so maybe it's a new decade long trend
Speaker 2: that we're going into. Mark, thank you so much for
Speaker 2: being with me. Very interesting to get your views. That
Speaker 2: is Bloomberg Economic reporter Marksraers in Frankfort, and you can
Speaker 2: read Mark's piece that he has written alongside a number
Speaker 2: of other Bloomberg colleagues. Is the big take story today.
Speaker 2: Iran war upends inflation, bets in global debt markets. Stay
Speaker 2: with us. More from Bloomberg Day baqub coming up after
Speaker 2: this now the Ebola outbreak in Central Africa, which the
Speaker 2: World Health Organization has declared a public health emergency of
Speaker 2: International concern with no approved vaccine or treatment. The disease
Speaker 2: is spreading in a conflict ravage region. Joining us now
Speaker 2: is Bloomberg TV correspondent and anchor Jennifer Zabasaja. Good to
Speaker 2: speak to. Jennifer. Congo suffered its first nony boler outbreak
Speaker 2: half a century ago, I learned, and it has dealt
Speaker 2: with sixteen outbreaks since. What is the latest in terms
Speaker 2: of the extent of this outbreak.
Speaker 9: That's right, Caroline, this country is no stranger to outbreaks,
Speaker 9: and as you were mentioning, we've seen sixteen outbreaks before
Speaker 9: this is the seventeenth, and so as of today we
Speaker 9: are learning hundreds of people in the Congo are suspected
Speaker 9: to be infected and at least more than one hundred
Speaker 9: people have died according to the World Health Organization. Much
Speaker 9: of the suspected cases are centered in the Democratic Republic
Speaker 9: of Congo. Although because this is a rare evil a strain,
Speaker 9: as you were mentioning there in the intro, the concern
Speaker 9: really from health officials is that we had been seeing
Speaker 9: this spread going undetected for weeks and so we do
Speaker 9: know of one additional death that happened in neighboring Uganda,
Speaker 9: and the concern is that this could become a potentially
Speaker 9: regional outbreak if we aren't able to get to the
Speaker 9: heart of some of the symptoms around this ballustrain and
Speaker 9: also some vaccines and resolutions around contract tracing and surveillance.
Speaker 9: And so that is why we are hearing from the WHO,
Speaker 9: also the Africa CDC increasing the importance of what we
Speaker 9: are seeing right now in Central and Eastern Africa.
Speaker 2: Yeah, and you've been doing a lot of reporting around this.
Speaker 2: Earlier this week you spoke to the Congo country director
Speaker 2: for the Danish Refugee Council, Caitlin Brady, I wanted to
Speaker 2: bring our listeners some of this, giving some details about
Speaker 2: the developing situation on the ground. Have a listen.
Speaker 10: So for at least two weeks, it would seem there
Speaker 10: were some cases, some deaths before the alert was raised,
Speaker 10: and as jonas when health worker started dying. What we've
Speaker 10: seen now is a very rapid response by the government
Speaker 10: and also by the health agencies like MSF and medic
Speaker 10: for example, who are doing the very best to do
Speaker 10: the contact tracing and to identify among those contacts who
Speaker 10: shows preliminary symptoms make sure those people are isolating.
Speaker 2: So that was the Congo country director for the Danish
Speaker 2: Refugee Council, Caitlin Brady, that you were speaking to. So
Speaker 2: then how are authorities and charities and aide groups, Jennifer
Speaker 2: helping people to deal with the spread? I mean, the
Speaker 2: early detection we learn failed because this is a very
Speaker 2: rare strain and it's a very volatile region of the world.
Speaker 9: Right, volatile region, a rare strain, and of course we
Speaker 9: should mention Caroline important context is that we have seen
Speaker 9: aid decreasing over the past year, of course, beginning with
Speaker 9: the US and ending USAID, but also a number of
Speaker 9: other Western governments that just contributing to a weakening of
Speaker 9: surveillance systems and health systems. And so this week on
Speaker 9: our Next Africa podcast, we spoke to Caitlin who is
Speaker 9: in Goma about the situation on the ground and really
Speaker 9: what her and her peers are trying to do and
Speaker 9: trying to step in in the absence of some of
Speaker 9: these other health agencies and officials that had decreased. I
Speaker 9: guess I should say because of some of the cuts
Speaker 9: that we had seen, and a lot of the focus
Speaker 9: that she gets into is the importance of education in
Speaker 9: the population. But then also you know every day stemming
Speaker 9: of virus, so cleaning of hands, having clean sanitation and water.
Speaker 9: And again this is a conflict ravage area, but also
Speaker 9: population dense and very difficult terrain, and so getting any
Speaker 9: sort of vaccinations or any supplies that they need isn't
Speaker 9: as easy as potentially in the neighboring Uganda, where the
Speaker 9: terrain is a little bit less less severe and less mountainous,
Speaker 9: I guess I should say. And so we are seeing
Speaker 9: officials really just trying to step up their surveillance, stepping
Speaker 9: up education and doing just about anything they can in
Speaker 9: order to keep the population safe and isolate those who
Speaker 9: potentially are showing some signs of symptoms. And we should
Speaker 9: note that this ebola strain, there's still not a lot
Speaker 9: that is known about it, and the concern with ibola
Speaker 9: is that it is very fatal, and so they want
Speaker 9: to make sure that they are treating for the right strain,
Speaker 9: especially considering and I heard you mention this, Caroline, there
Speaker 9: is no vaccine and treatment at this case, so it's
Speaker 9: still quite an evolving situation, not just for the region,
Speaker 9: I should mention, but also internationally for a number of
Speaker 9: health agencies and countries.
Speaker 2: Yeah, just very briefly, the World Health Organization saying that
Speaker 2: there's a low probability of international spread, but that doesn't
Speaker 2: mean that aren't international week percussions.
Speaker 9: Yeah, and we're hearing from the CDC saying that the
Speaker 9: risk to the public remains low. But still we're seeing
Speaker 9: international health agencies stepping up their own surveillance, where we've
Speaker 9: heard the US CDC stepping in as well. And yeah,
Speaker 9: we are seeing a number of countries in the region
Speaker 9: continue to step up testing and also surveillance testing of
Speaker 9: getting your temperature checked and even from the US, residents
Speaker 9: are being cautioned not to travel or if they have
Speaker 9: traveled to the region, ensuring that they are isolated and
Speaker 9: just tested before going out into the public. So definitely
Speaker 9: becoming an international concern as we heard from the WHO,
Speaker 9: and really that we should point out that is to
Speaker 9: mobilize resources, which is effectively what we have been seeing
Speaker 9: over the past few days.
Speaker 1: This is Bloomberg Daybreak Europe, your morning brief on the
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