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Speaker 1: Good morning. It's finday, the twenty second of December here

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Speaker 1: in London. This is the Bloomberg Daybreak you a podcast.

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Speaker 1: I'm Caroline Hepka. Coming up today, the Chancellor Jeremy Hunt

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Speaker 1: tells Bloomberg that more tax cuts could be on the

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Speaker 1: way for the UK economy. Elon Musk takes aim at

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Speaker 1: public markets and says that indexing has gone too far.

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Speaker 1: And we have a special report on why weak demand

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Speaker 1: for used electric vehicles is now making new ones a

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Speaker 1: tougher sell. Let's start with a roundup of our top stories.

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Speaker 1: Jeremy Hunt says that falling debt interest payments might allow

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Speaker 1: for more tax cuts in the spring, boosting the governing

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Speaker 1: Conservative Party in what is likely to be an election year.

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Speaker 1: Speaking to Bloomberg, the UK Chancellor said that he will

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Speaker 1: cut the tax burden if he's able to. Here's what

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Speaker 1: he told our colleague Lisa Abramovitz.

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Speaker 2: We would like to cut the tax burden more if

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Speaker 2: we're able to do so, but we won't be in

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Speaker 2: a position to do that until much closer to the

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Speaker 2: spring budget. We haven't announced a date for that yet,

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Speaker 2: but you know, we won't find out what the latest

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Speaker 2: forecasts are from the Officer budget responsibility to know whether

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Speaker 2: we're in a position to do that for some time,

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Speaker 2: but we would like to bring down the tax burden

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Speaker 2: in a way that is responsible, if we're able to

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Speaker 2: do so.

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Speaker 1: Jeremie Hunt, speaking to Bloomberg, he and the Prime Minister

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Speaker 1: Yhisunak are under pressure from members of their own Tory

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Speaker 1: party to cut taxes in order to boost the party's

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Speaker 1: electoral prospects. Hunt added that there was still work to

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Speaker 1: do in cutting inflation, which has fallen to three point

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Speaker 1: nine percent from eleven point one percent last year, and

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Speaker 1: that it remained the government's immediate priority. The Czech Republic

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Speaker 1: has declared a national day of morning on Saturday after

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Speaker 1: the worst shooting in its history. At least fifteen people

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Speaker 1: died after a twenty four year old student opened fire

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Speaker 1: at Prague's Charles University. The country's Prime Minister, Pieta Fiala

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Speaker 1: is calling on citizens to support each other through the tragedy.

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Speaker 3: In this difficult moment, we should all come together and

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Speaker 3: show our mutual understanding and in this way express our

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Speaker 3: respect towards the victims of this brutal crime.

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Speaker 1: Check. Prime Minister Peter Fiala speaking their through a translator.

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Speaker 1: According to Prague's police chief, the gunment legally owned several weapons,

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Speaker 1: but officials say that there is no evidence he had

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Speaker 1: links to international terrorism. A sales ban imposed on the

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Speaker 1: world's most valuable tech company could create a headache for

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Speaker 1: consumers approaching the festive period and more now from Bloomberg's

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Speaker 1: Tom Busby.

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Speaker 4: As part of that patent dispute settlement, Apple today stop

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Speaker 4: selling the Apple Watch Series nine and the Ultra to

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Speaker 4: on its US online store, and it'll have to stop

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Speaker 4: selling them at its two hundred and seven any physical

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Speaker 4: US stores this coming Sunday. Apple Watch se models that

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Speaker 4: do not have the ability to measure blood oxygen. Those

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Speaker 4: are still on sale, But in another potential problem, at

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Speaker 4: least for Apple customers, the company is also no longer

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Speaker 4: repairing older smart watches that are now out of warranty.

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Speaker 4: Tom Busby Bloomberg Radio.

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Speaker 1: Nike says that he's looking for as much as two

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Speaker 1: billion dollars in cost savings by dismissing workers and simplifying

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Speaker 1: the trainer company's product mix. A midday weaker sales outlook

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Speaker 1: the story from Bloomberg's Charlie Pellett well sportswear and sneaker

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Speaker 1: Giants set of will incur restructuring charges of four hundred

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Speaker 1: to five hundred million dollars in the current quarter quote,

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Speaker 1: primarily associated with employees severance costs.

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Speaker 5: In the statement for the quarter ending November thirtieth, CFO

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Speaker 5: Matt Friends said the company sees a softer second half

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Speaker 5: revenue outlook and is focusing on profitability and discipline cost management.

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Speaker 5: Sales in the key Greater China region came in lawer

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Speaker 5: than expected, while earnings per share surpassed Wall Street Testament

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Speaker 5: in New York, Charlie Bloomberg Radio.

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Speaker 1: Banks borrowed a record amount from the fair's newest backstop

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Speaker 1: facility this week, as increasing wages on rate cuts made

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Speaker 1: it more attractive. Data from the US Central Bank showed

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Speaker 1: an all time high of one hundred and thirty one

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Speaker 1: billion dollars was borrowed from the Bank Term Funding Program.

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Speaker 1: Launched amid this year's banking crisis. The BTFP allows banks

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Speaker 1: to borrow funds for up to one year, with treasuries

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Speaker 1: and agency debt used as collateral valued in terms of

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Speaker 1: Elon Musk, He's lashed out at the state of US

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Speaker 1: financial market, speaking to Ark Investment Management CEO Kathy Wood

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Speaker 1: during a discussion on the social media platform X he

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Speaker 1: complained about the scrutiny facing listed companies.

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Speaker 6: There's a lot of pressure, like an immense pressure on

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Speaker 6: a public company to not have a bad quarter. So

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Speaker 6: this can actually result in a less efficient operation where

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Speaker 6: you're going to great lengths at the end of a

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Speaker 6: quarter to not disappoint people.

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Speaker 7: You know, that's just that's just how it goes. And

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Speaker 7: then you know, you've also got a lot of sort.

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Speaker 6: Of a long term challenge with public markets, where a

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Speaker 6: lot of the analysts following companies have a time horizon

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Speaker 6: that is maybe only a year or two, rarely more

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Speaker 6: than a few years, and so they literally don't care

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Speaker 6: because then their incentive structure is a short term. They

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Speaker 6: do not care about what your long term out come

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Speaker 6: will be because their careers dependent on how you do

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Speaker 6: in the short term.

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Speaker 1: The complaints add to a litany of grievances that Musk

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Speaker 1: has raised over the years about the trade offs of

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Speaker 1: tapping public markets to build some of his many ventures

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Speaker 1: to Tesla and SpaceX CEO also weighed in on passive investing,

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Speaker 1: saying that the trend has gone too far, adding that

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Speaker 1: somebody actually has to make an active decision. Tesla is

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Speaker 1: currently the second largest holding in woods Arc Innovation ETF.

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Speaker 1: So that conversation between Elon Musk and Kathy Wood.

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Speaker 2: Now.

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Speaker 1: Just lastly, Bloomberg has learned that Barclay's will delay the

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Speaker 1: final decision on its bonus pool for top investment bankers

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Speaker 1: this year to reflect last minute business. So to say

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Speaker 1: that staffer arguing that capital markets activity is picking up

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Speaker 1: and their bonuses should therefore count for that. The decision

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Speaker 1: on bonuses has now been delayed until the new year.

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Speaker 1: So those are a few of our top stories this

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Speaker 1: morning for you. In terms of the market's the SSCI

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Speaker 1: Asia Pacific Index currently down two tenths of one percent,

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Speaker 1: Stop futures your stocks fifty futures down two tenths this morning,

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Speaker 1: and the ten year US Treasury yield up barely a

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Speaker 1: basis point three point eighty nine. So those are the

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Speaker 1: markets this hour. Well, this was a fun read though

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Speaker 1: on the Bloomberg terminal. I wonder whether you've had a

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Speaker 1: chance to have a look at it. A big AI

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Speaker 1: trade rescuing the stock market, a niche bet on bed

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Speaker 1: bath and beyond sinking some amateur day traders, and then

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Speaker 1: the by China call backfiring. These are all amongst Bloomberg's

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Speaker 1: top picks for the eleven biggest trades of twenty twenty three,

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Speaker 1: the marketing pens that either busted careers or made them crypto.

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Speaker 1: Of course, Diehard's got a shot at redemption with the

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Speaker 1: huge bitcoin swing upwards. It's a really great deep dive

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Speaker 1: into who made money who didn't. Bill Agman betting big

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Speaker 1: against thirty year treasuries between August and October. He got

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Speaker 1: it hugely right. Almost everybody got the bet on China wrong.

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Speaker 1: The comeback did not happen also, of cause the sneaky

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Speaker 1: buy India trade now very very popular, not so back

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Speaker 1: in January. Of course, you can read all about the

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Speaker 1: top trades on the Bloomberg terminal this morning, looking back

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Speaker 1: at twenty twenty three, Let's hope for good luck in

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Speaker 1: twenty twenty four. Meanwhile, one of our top interviews now

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Speaker 1: on yesterday's show, we previewed news about this new agreement

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Speaker 1: between the UK and Switzerland to recognize each other's laws

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Speaker 1: and regulations in financial services. So the chances of Jeremy

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Speaker 1: Hunt and his Swiss counterparts signed that treaty in burn

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Speaker 1: yesterday which will ease post Brexit market access for firms,

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Speaker 1: including for banks, insurers, and asset managers. Well after the announcement,

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Speaker 1: Jeremy Hunt spoke to Bloomberg's Lisa Abramovitz about the deal,

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Speaker 1: the UK's fiscal outlook, and also that possibility of UK

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Speaker 1: tax cuts. Here is Jeremy Hunt.

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Speaker 7: This is a very groundbreaking agreement.

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Speaker 2: It's never happened anywhere in the world before, and it

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Speaker 2: links two of Europe's largest financial centers, City of London

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Speaker 2: and Zurich. And instead of doing what previous trade deals

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Speaker 2: and mutual recognition deals do, which is try to align

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Speaker 2: legal frameworks, what we're doing here is we're saying that

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Speaker 2: in the UK we will allow Swiss companies to operate

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Speaker 2: following Swiss regulatory structures and rules, and in Switzerland they

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Speaker 2: will allow British based companies to operate following UK rules

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Speaker 2: and regulations without the need for both countries to align

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Speaker 2: them legal frameworks. And so in terms of the wholesale

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Speaker 2: insurance market, asset management, banking, this is a really significant

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Speaker 2: deal but also could be a template for the kind

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Speaker 2: of deals that the UK does with other countries. Going forward.

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Speaker 8: That's exactly where I was going to go. Chancellor, Who's

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Speaker 8: next one other country?

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Speaker 7: Well, we're open to discussions with anyone.

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Speaker 2: What I would say is it was much easier to

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Speaker 2: do this deal with Switzerland because there's a lot of

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Speaker 2: trust between Switzerland and the UK. We've been friends for

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Speaker 2: a very long time, and there's a lot of confidence

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Speaker 2: in each other's legal systems.

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Speaker 7: And regulatory structures.

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Speaker 2: But we're open to this kind of discussion with any

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Speaker 2: countries all over the world. Anything that boosts choice and competition,

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Speaker 2: whilst respecting our sovereignty and our ability to make our

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Speaker 2: own rules and regulations is something we're happy to talk.

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Speaker 8: Tess how important is this given the fact that there

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Speaker 8: have been discussions about financial hubs moving to Paris or

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Speaker 8: moving to Frankfurt or Berlin. How much is it important

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Speaker 8: to get some of these connections in order to boost

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Speaker 8: tax revenue and keep the banking sector in the United Kingdom.

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Speaker 2: Well, we've had a lot of discussion post Brexit of

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Speaker 2: people banks operations potentially moving out of London, but it

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Speaker 2: hasn't materialized on anything like the scale that people predicted.

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Speaker 2: London has shown itself to be very resilient and if

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Speaker 2: you look at what's happened in the last year, what

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Speaker 2: we've done in the UK's we've shown we're going to

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Speaker 2: be hungry to keep all that business that's come to London.

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Speaker 2: We are very committed to financial services in the UK.

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Speaker 2: We passed the Financial Services and Markets Act. We are

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Speaker 2: changing the rules for prospectuses and for all sorts of

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Speaker 2: the rules around IPOs to make the London Stock Exchange

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Speaker 2: more competitive. We've got the mentioned House reforms which is

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Speaker 2: going to unlock a lot of capital into growth businesses

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Speaker 2: from pension funds.

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Speaker 7: So we are really motoring in the UK. We're hungry

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Speaker 7: to business.

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Speaker 2: All around the world and this deal with Switzerland is

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Speaker 2: just another step in that direction.

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Speaker 8: How much are you looking to some of these revenues though,

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Speaker 8: to be able to enact tax cuts. You're talking about

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Speaker 8: additional tax CITs coming down the pike. Are you still

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Speaker 8: planning that and specifically where are you planning to have

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Speaker 8: those tax cuits. Is it going to be with the

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Speaker 8: savings or property other areas well.

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Speaker 2: Richard Sunak and I have said that we would like

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Speaker 2: to cut the tax burden more if we're able to

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Speaker 2: do so, but we won't be in a position to

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Speaker 2: do that until much closer to the spring budget. We

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Speaker 2: haven't announced a date for that yet, but you know,

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Speaker 2: we won't find out what the latest forecasts are from

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Speaker 2: the Office of Budget Responsibility to.

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Speaker 7: Know whether we're in a position to do that for

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Speaker 7: some time.

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Speaker 2: But we would like to bring down the tax burden

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Speaker 2: in a way that is responsible if we're able to

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Speaker 2: do so.

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Speaker 7: But right now our priority is to bring down it inflation.

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Speaker 2: We have really good news yesterday three point nine percent inflation,

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Speaker 2: beating market expectations by some way.

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Speaker 7: That is because we have shown discipline in government.

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Speaker 2: We've taken decisions that have supported the Bank of England

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Speaker 2: and what they're trying to do with interest rates to

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Speaker 2: bring down inflation, and it's.

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Speaker 7: Still above target.

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Speaker 2: We've still got more work to do, so that will

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Speaker 2: remain our primary focus.

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Speaker 8: There is a concern abound strikes. There was another strike

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Speaker 8: shutting down some of the train systems recently. That was

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Speaker 8: some of the reports this morning. Doctors are striking again.

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Speaker 8: Are you prepared to start to increase materially increase salaries

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Speaker 8: at a time when you're still concerned also about inflation.

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Speaker 2: Well, that's a very important question to ask and what

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Speaker 2: I would say is I put it the other way around.

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Speaker 7: Actually, I would say the reason why we're having.

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Speaker 2: These strikes is because when I became chancellor, after what

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Speaker 2: Putin did in Ukraine, we had inflation of eleven point

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Speaker 2: one percent.

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Speaker 7: Can see their.

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Speaker 2: Living standards eroding because the price of a weekly shot,

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Speaker 2: the price of filling up the car is going up.

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Speaker 2: So the way that you bring back industrial harmony is

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Speaker 2: to bring down inflation, and that is why it is

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Speaker 2: the primary focus for myself and Rishie Sunac, And when

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Speaker 2: it comes to talking to junior doctors in the NHS

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Speaker 2: or train drivers, we're always prepared to be reasonable, pragmatic

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Speaker 2: and sensible.

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Speaker 7: We've always said we are not going to agree to.

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Speaker 2: Pay deals that threaten our progress in bringing down inflation,

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Speaker 2: because that doesn't help anyone if you agree to pay

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Speaker 2: deals that mean that next year's inflation ends.

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Speaker 7: Up being higher.

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Speaker 2: But we are willing to talk to anyone at any

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Speaker 2: time to try and come to a reasonable solution. And

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Speaker 2: that's why more than a million employees in the NHS

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Speaker 2: have agreed to deals, why unions in many other parts

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Speaker 2: of the economy have agreed to deals, and we hope

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Speaker 2: the small number of unions that are holding out will

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Speaker 2: also do the same.

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Speaker 8: I do want to just finish up. From a market's perspective,

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Speaker 8: the markets are now pricing in almost six or rate

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Speaker 8: cuts by the Bank of England next year as they

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Speaker 8: look at the pace of disinflation. Is that your base

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Speaker 8: case as well?

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Speaker 3: Well?

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Speaker 2: Chancellors never comment on interest rate movements the reasons that

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Speaker 2: you'll understand, Lisa, But what I will say is that

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Speaker 2: I think people will start feeling more optimistic about their

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Speaker 2: own family finances when they can see interest rates on

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Speaker 2: a downward trajectory. And the best thing I can do

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Speaker 2: is to support the Bank of England in their efforts

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Speaker 2: to bring down inflation.

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Speaker 7: And that's what I'll continue to do.

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Speaker 8: And if inflation goes down, does they give you more

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Speaker 8: headroom to cut taxes?

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Speaker 2: Well, if the interest payments go down, then potentially that.

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Speaker 7: Gives me more headroom.

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Speaker 2: And I could use that in lots of different ways,

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Speaker 2: but I would never use it in a way that

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Speaker 2: compromise the battle against inflation.

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Speaker 1: So that was the Chancellor Jeremy Hunt there speaking to

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Speaker 1: my colleague Lisa A. Bram Of. It's very interesting fools

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Speaker 1: under so much pressure to deliver tax cuts of course

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Speaker 1: next year. Some argue perhaps that has more implications around

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Speaker 1: the general election, maybe what it could mean for the

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Speaker 1: Labor Party. That was Jeremy Hunt then and our interview

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Speaker 1: with him, so really great to speak to the UK

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Speaker 1: Chancellor of course, very important. The shift away from cars

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Speaker 1: from dirty combustion engines is running into a new hurdle.

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Speaker 1: Drivers apparently don't want to buy used electric vehicles and

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Speaker 1: that is undermining the market for new ones too. Joining

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Speaker 1: me now from Berlin is our EMEA Automotive industry editor

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Speaker 1: Stepan Nikola. Good morning, Stefan. I didn't understand this story

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Speaker 1: until you wrote about it. Why are we seeing such

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Speaker 1: a big difference in prices for used electric vehicles versus

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Speaker 1: combustion engine cars.

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Speaker 9: Yeah, it's really a combination of several things. One, if

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Speaker 9: you buy a used car, you're not benefiting from the

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Speaker 9: kind of subsidies that help sell new electric cars. And

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Speaker 9: then you know, this technology is sort of rapidly developing,

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Speaker 9: and customers are sort of hesitant to buy a used

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Speaker 9: car that may be obsolete in a year or two

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Speaker 9: because batteries develop and charging times get faster. And then

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Speaker 9: there's still customers are still really unhappy with charging infrastructure,

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Speaker 9: which especially in Europe isn't yet up to par So

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Speaker 9: those are a few reasons why evs are sitting on

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Speaker 9: the shelves, so to speak, and that's why their prices

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Speaker 9: are dropping. And that really is a problem for the entire.

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Speaker 1: Market absolutely, So what is the fallout of that then

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Speaker 1: and the implications for the industry, I mean, yeah, what

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Speaker 1: does it mean really if reticence so reticent?

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Speaker 7: Right?

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Speaker 9: So, especially in Europe, most new cars are sold via leases,

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Speaker 9: and companies, the automakers that we all know and also

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Speaker 9: the car dealership financed these transactions and and if you know,

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Speaker 9: if the lease runs out in two to three years,

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Speaker 9: they recoup some of their money by you know, reselling

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Speaker 9: them on this secondhand market. And when when residual values

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Speaker 9: of evs are so low, some of these companies are

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Speaker 9: losing money because they've expected to sell them for more.

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Speaker 9: So yeah, and this is already leading to some rental

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Speaker 9: car firms, for example, dropping certain electric models from their fleet.

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Speaker 7: Sixth which is your's biggest.

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Speaker 9: Car rental firm, is phasing out Tesla's because their residual

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Speaker 9: value has dropped so much. We know that Tesla has

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Speaker 9: made price cuts over the past year, significant price cuts.

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Speaker 9: So you know, they had expected, these firms have expected

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Speaker 9: to resell them for you know, a decent amount of money,

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Speaker 9: but now they're getting very little money for these cars,

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Speaker 9: and that's why they're they're dropping them from their fleets.

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Speaker 1: Look, environmental purists, Stefan would say, you know, it's quite

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Speaker 1: strange for the world to be responding to climate change

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Speaker 1: by getting rid of combustion engines and simply building a

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Speaker 1: whole massive new fleet of electric vehicles. And especially now

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Speaker 1: if then the secondary market is so challenged, what are

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Speaker 1: the options in terms though specifically of that secondary market,

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Speaker 1: and what can the companies do about this that the

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Speaker 1: values are have slumped so much.

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Speaker 9: Right, Yeah, I mean they're really in a pickle, to

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Speaker 9: be honest. They you know, some of these companies can

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Speaker 9: can sort of funnel these cars into mobility offerings like

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Speaker 9: right sharing startups or you know other sort of offerers,

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Speaker 9: you know, sort of mobility offerings, but there really is

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Speaker 9: limited demand from these businesses. So you know, when when

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Speaker 9: you have a combustion car that you can't really sell

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Speaker 9: because it's old or sort of it's in a poor

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Speaker 9: state these days, and often ends up in Africa, which

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Speaker 9: you know is part of that market, and that market

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Speaker 9: obviously is largely shot to electric cars because Africa still

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Speaker 9: hasn't a viable charging infrastructure, so that at this point

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Speaker 9: there really isn't much what these companies can do that

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Speaker 9: The hope is down the road.

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Speaker 7: You know, some of.

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Speaker 9: These cars can be you know, recycled in a way,

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Speaker 9: taking out the battery and recycling the batteries and maybe

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Speaker 9: resell the battery for energy storage projects.

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Speaker 7: But at this very.

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Speaker 9: Moment, with the technology developing so fast, yeah, these companies

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Speaker 9: aren't kind of a pickle.

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