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

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

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Speaker 1: you listen. It's Wednesday, the eighth of January here in London.

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Speaker 1: I'm Caroline, Hepkip.

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Speaker 2: And I'm Stephen Carroll. Coming up today. Trump escalates his

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Speaker 2: threats against Allied nations, as the EU's new industry chief

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Speaker 2: tells Bloomberg, the block must be ready to defend itself.

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Speaker 1: UK government boring costs continue to rise as a global

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Speaker 1: debt sale frenzy draws yield hungry buyers.

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Speaker 2: Plus Shean Blasted, the chair of the UK's Business and

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Speaker 2: Trade Committee, says he has almost zero confidence in the

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Speaker 2: fashion retailer's supply chain.

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

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Speaker 2: US President elect Donald Trump has made several bold and

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Speaker 2: improbable statements as he detailed plans to seek control of Greenland, Canada,

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Speaker 2: and the Panama Canal. During a press conference, Trump was

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Speaker 2: if he would make clear he wasn't considering a military

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Speaker 2: confrontation to achieve his aims.

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Speaker 3: I can't assure you. You're talking about Panama and Greenland now,

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Speaker 3: I can't assure you on either of those two. But

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Speaker 3: I can say this, we need them for economic security.

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Speaker 3: The Panama Canal was built for a military.

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Speaker 4: I'm not going to commit to that now.

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Speaker 3: It might be that you'll have to do something. Look,

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Speaker 3: the Panama Canal is vital to our country.

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Speaker 2: World leaders have already responded to Trump's threats. Panama has

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Speaker 2: vowed not to give up the canal. Denmark says it

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Speaker 2: has no plans to seed control of Greenland as self

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Speaker 2: governing territory. Meanwhile, out going Canadian Prime Minister Justin Trudeau

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Speaker 2: posted on Acts that quote, there isn't a snowballs chance

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Speaker 2: in hell that Canada would become part of the United States.

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Speaker 1: Speaking at Mara Lago, Tom also once again called for

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Speaker 1: increased defense spending from NATO allies. The US president elect

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Speaker 1: says that members of the Alliance should commit to spending

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Speaker 1: more than double the current two percent target.

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Speaker 3: Well, I think NATO should have five percent.

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Speaker 5: Yeah, well, you can't do it it too.

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Speaker 3: I mean at two percent every country, if you're going

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Speaker 3: to have a country in a regular military, you're at

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Speaker 3: four percent. I think they should be. You know, they're

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Speaker 3: in dangerous charactor. I think you should be. They can

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Speaker 3: all afford it, but they should be at five percent,

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Speaker 3: not two percent.

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Speaker 1: Trump's prior threats to abandon NATO and Russia's invasion of

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Speaker 1: Ukraine have already driven many member countries to boost their

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Speaker 1: defense spending. NATO Sexuary General Mark Rutter has signaled that

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Speaker 1: the Alliance is likely to raise its target for defense

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Speaker 1: spending to at least three percent of GDP, but no

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Speaker 1: member of the Alliance currently spends five percent on defense.

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Speaker 1: That includes the United States.

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Speaker 2: Trump's willingness to threaten US allies comes as the ease

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Speaker 2: new industry chief tells Bloomberg the block must be prepared

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Speaker 2: to defend itself against protectionist trade measures from the US

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Speaker 2: and others. Speaking ahead of Trump's pras Con Friends, European

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Speaker 2: Commissioned Vice President Stefan warned the EU's era of complacency

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Speaker 2: on protectionism has ended.

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Speaker 6: We will have a plan to protect the steel sector

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Speaker 6: from global overcapacity while ensuring competitiveness. I'm prepared to explore

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Speaker 6: both defensive and offensive actions with my colleagues at the Commission.

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Speaker 6: This is a dialogue that we will have at the Commission.

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Speaker 6: I still hope to convince the next US administration that

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Speaker 6: we have everything to lose from a collective trade war.

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Speaker 2: Stefan there speaking through a translator. Before Trump's re election,

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Speaker 2: Bloomberg Villa, the EU had drawn up a list of

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Speaker 2: American goods that could target with retaliatory tariffs to respond

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Speaker 2: to any punitive trade measures from the incoming US administration.

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Speaker 1: Now too other news, the sister of Sam Altman has

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Speaker 1: accused the Open AI chief executive of sexually abusing her

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Speaker 1: for almost a decade. In a lawsuit filed in federal court.

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Speaker 1: Anne Altman alleges that her brother use them manipulated her

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Speaker 1: while they were growing up in Missouri in the late

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Speaker 1: nineteen nineties and early two thousands, and Altman has previously

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Speaker 1: claimed on social media that Sam Aortman abused her. In

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Speaker 1: a statement on behalf of himself, his mother, and his brothers,

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Speaker 1: Sam Altman called the claims quote utterly untrue, adding that

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Speaker 1: quote this situation causes immense pain to our entire family.

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Speaker 2: Governments and companies are flooding the debt market, raising one

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Speaker 2: hundred and eighty four billion dollars in the first few

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Speaker 2: days of the year. Bonds all around the world are

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Speaker 2: being issued at a record pace as issuers take advantage

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Speaker 2: of cam markets before Trump's inauguration. The level of supply

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Speaker 2: has led some to worry about countries like the UK,

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Speaker 2: which saw its long term borrowing costs at the highest

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Speaker 2: level since nineteen ninety eight. On Tuesday, Procminnian columnist Marcus

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Speaker 2: Ashworth says he thinks Chancellor Rachel Reeves will get away

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Speaker 2: with us.

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Speaker 7: We expect next year they'll probably issue a further ten

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Speaker 7: percent more guilts, so something like three hundred and thirty billion.

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Speaker 7: There's a lot of pressure on the investors in guilt market.

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Speaker 7: They are getting paid for it, though so in some senses,

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Speaker 7: if the banking were to cut illustrates more than perhaps

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Speaker 7: the market's currently brighting only two cuts, the banking is

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Speaker 7: trying desperately to tell the market could be four ubs

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Speaker 7: a saint could be as much as six.

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Speaker 2: Ashworth warned that much of Europe's debt markets depended on

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Speaker 2: the mood music from the United States. The UK and

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Speaker 2: US governments are issuing nearly thirty billion dollars worth of

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Speaker 2: death later today.

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Speaker 1: The UK's Business and Trade Committee says that it has

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Speaker 1: almost zero confidence in she In's supply chain, with allegations

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Speaker 1: of human rights abuses in China's cotton producing region of

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Speaker 1: shin Jiang. Here is how the committee's chair, Liam Burne

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Speaker 1: ended a public hearing with the Fashion giants EMEA lawyer

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Speaker 1: after asking ten times if she In sources cotton from China.

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Speaker 8: For a company which is seeking to float on the

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Speaker 8: London Stock Exchange. The Committee has been been pretty horrified

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Speaker 8: by the lack of evidence that you have provided today.

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Speaker 8: You've given us almost zero confidence in the integrity of

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Speaker 8: your supply chains. You can't even tell us what your

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Speaker 8: products are made from. You can't tell us much about

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Speaker 8: the conditions which workers have to work in, and the

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Speaker 8: reluctance to answer basic questions has frankly bordered on contempt

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Speaker 8: of the committee.

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Speaker 1: Burn a Labour MP, was referring to press reports that

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Speaker 1: Shean has filed papers to potentially list in London. Bloomberg

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Speaker 1: has reported Shean's IPO would potentially be worth fifty billion pounds,

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Speaker 1: London's largest ever. Shean's lawyer, Yinanju, said the online retailer

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Speaker 1: is compliant with all relevant UK laws, but declined to

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Speaker 1: answer questions about its working practices.

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Speaker 2: JP Morgan Chase is getting ready to tell it staff

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Speaker 2: the era of work from home is over. Bloomberg has

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Speaker 2: learned that America's largest bank is set to make working

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Speaker 2: from the office five days a week mandator in the

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Speaker 2: coming weeks. Bloomberg's senior finance reporter Sree Natarajan says it

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Speaker 2: likely comes from the top.

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Speaker 9: It's very fair to assume Jamie Diamonds on board. It does.

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Speaker 9: Anyone on board is Jamie Diamond. Everyone else has to

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Speaker 9: fall in line. But all the sense we're getting unless

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Speaker 9: plans follow our last minute is sometime in the next

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Speaker 9: few weeks, and then we could do. You could very

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Speaker 9: well SEEGP moment come out and say they want everyone

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Speaker 9: back in office five days a week.

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Speaker 2: Natarajan adds it's part of a broader cultural move in

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Speaker 2: the US, with some of Trump's top team attacking federal

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Speaker 2: officials for working from home. Wall Street firms have diverged

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Speaker 2: on their work from home policies as executives remain split

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Speaker 2: on how flexible employees arrangements should be.

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Speaker 1: I KNOWO, so a few of our top stories for

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Speaker 1: you this morning. Looking at the markets, the masci Asia

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Speaker 1: Pacific indexes down six tenths of one percent. You also

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Speaker 1: have sell off on the hang saying down by almost

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Speaker 1: one full percentage point. There has been a major move,

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Speaker 1: of course in bond markets, treasury yields jumping yesterday, ten

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Speaker 1: year yields rising five points. We saw significant losses for

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Speaker 1: UK guilt yields, ten year guilt yields rising seven basis

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Speaker 1: points at one moment. In terms of stop futures, then,

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Speaker 1: for where we stand this morning, US SOP futures are

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Speaker 1: high at SMPF have found it, I mean futures up

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Speaker 1: three tens, USS futures down two tens of one percent,

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Speaker 1: the dollar flat at the moment, and the Euro currently

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Speaker 1: trading at one sports zero three five seven. Those are

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Speaker 1: the markets.

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Speaker 2: In a moment, we'll bring you the latest on Donald

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Speaker 2: Trump and Elon Musk's various interventions on the world stage,

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Speaker 2: plus the demand for global debt as UK bond yields

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Speaker 2: continue to rise. But another story that we've been reading

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Speaker 2: this morning is from our opinion columnist Dave Lee. You

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Speaker 2: covers tech in the US, and he's been writing about

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Speaker 2: that video published by Mark Zuckerberg yesterday in which he

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Speaker 2: announced that they are dropping their their fact checking and

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Speaker 2: verification team. This is a big shift from the world's

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Speaker 2: biggest social media company and the Dave Lee's view is

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Speaker 2: essentially that fact checking was always just a PR five

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Speaker 2: leaf from Meta, and that Zuckerberg is a software engineer.

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Speaker 2: It never really believed in it, even amount the time

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Speaker 2: that he was announcing it being set up. And in

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Speaker 2: response to the huge criticism the platform faced in twenty sixteen.

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Speaker 1: Yeah, absolutely, And the pieces a really interesting one and

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Speaker 1: I think gives us good insight into what's happening in

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Speaker 1: Menlo Park, what's happening across Silicon Valley, Davely writing about

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Speaker 1: how we're seeing Silicon Valley above all sort of performance,

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Speaker 1: kind of backlash against the accountability that we've seen in

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Speaker 1: the Biden era, and also around the kind of journalism

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Speaker 1: and the reporting around accountability on these platforms. Because I

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Speaker 1: think it's a really interesting piece. But even though Zuckerberg

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Speaker 1: is perhaps giving the impression of supporting Trump and his allies,

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Speaker 1: that maybe it's not quite so simple as that, maybe

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Speaker 1: Zuckerberg is not fundamentally changing actually his position, at least

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Speaker 1: as far as Davely sees it. Have a look at

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Speaker 1: that piece on the terminal.

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Speaker 2: Well, let's bring you more in in our top story,

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Speaker 2: and the comments made in Donald Trump's press conference yesterday

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Speaker 2: threats again Canada, Greenland and Panama. These statements coming as

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Speaker 2: Bloomberg has been reporting on how Elon Musk has been

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Speaker 2: exerting his influence over politics here in Europe. Joining US

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Speaker 2: Now to discuss Blomberg Senior editor Alan Crawford, Alan, good morning.

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Speaker 2: The phrase that was used for Donald Trump's first term

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Speaker 2: was to take him seriously, but not literally. How seriously

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Speaker 2: should we take this idea espoused by Donald Trump yesterday

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Speaker 2: of US territorial expansion.

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Speaker 10: We're used to elements of his undiplomatic language, but I mean,

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Speaker 10: this is unprecedented. I mean, it's very hard to ignore

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Speaker 10: these claims, but it puts world leaders in an extremely

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Speaker 10: difficult position.

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Speaker 4: I mean, how do they respond?

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Speaker 10: It's frankly unprecedented and very complex grown for them to trade.

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Speaker 1: The idea of economic or military coercion against US allies

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Speaker 1: is absolutely remarkable. Did we learn anything more concrete about

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Speaker 1: trade tariffs, which is one tool that we know that

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Speaker 1: the President elect Trump wants to use.

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Speaker 4: Well, it's certainly true that he has been consistent in

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Speaker 4: warning of his intention to implement these tariffs that as

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Speaker 4: we've seen, these are something in the order twenty five

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Speaker 4: percent on the US's neighbors Mexico and Canada, as much

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Speaker 4: as sixty percent on China. He's threatened.

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Speaker 10: I mean, frankly, who really knows what the level may be.

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Speaker 10: But there's no doubt that he has in the past

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Speaker 10: enacted tariffs and he will do so in short order,

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Speaker 10: and it looks very much. I mean, it's no secret

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Speaker 10: that he wants to use these to exert pressure on governments,

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Speaker 10: and he's convinced that it will work.

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Speaker 2: You've been reporting this morning about Elon Musk ramping up

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Speaker 2: his criticism and attacks of the UK and German governments,

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Speaker 2: latching onto far right but also criticizing their economic competence.

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Speaker 2: How seriously do political leaders in Europe need to take

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Speaker 2: this sort of criticism from Alan Musk.

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Speaker 10: They're working on eggshells here because they, frankly don't know.

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Speaker 10: They don't know to what degree he has Trump's ear.

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Speaker 10: Of course, we know that Elil Musk is very close,

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Speaker 10: that he supported Trump's campaign, that he's frequently at mar Lago,

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Speaker 10: that he has this proposed informal position outside the administration,

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Speaker 10: advising on efficiency. But I mean, frankly, the comments that

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Speaker 10: you're making he's making that these are personal insults at

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Speaker 10: the Chancellor of Germany, that the.

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Speaker 4: UK Prime minister. And it's really exceptionally delicate then, so

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Speaker 4: you've seen leaders they're saying that.

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Speaker 10: They try not to refer to Musk by name when

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Speaker 10: they say that this.

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Speaker 4: Is you know, beyond the line, or that it's you know, even.

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Speaker 10: Billionaires have they you know, they're subject to freedom of speech,

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Speaker 10: but they can also be wrong.

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Speaker 4: So it's very very delicate and difficult for world leaders.

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Speaker 1: Yeah, and the calling I Love Schultz a fool and

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Speaker 1: the German president a tyrant for example, calling for the

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Speaker 1: prime minister here in the UK to be jailed, those

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Speaker 1: are very strong, you know, accusations. What do you think

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Speaker 1: my Musk's impact be on European politics, given that, of

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Speaker 1: course Germany is holding an election next month.

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Speaker 4: Yeah, I mean it's it's very unclear.

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Speaker 10: So far, there doesn't seem to be any impact whatsoever

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Speaker 10: in the pools.

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Speaker 4: This could backfire.

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Speaker 10: Remember that Musk has group's only Tesla Giga factories they

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Speaker 10: call it, producing cars electric vehicles just outside Berlin. There

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Speaker 10: have been there has been talk of some kind of boycott.

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Speaker 10: You know, who knows whether that will actually come to it.

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Speaker 10: In I think but it's and in the case of

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Speaker 10: the UK, there isn't an election due until twenty twenty nine, so.

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Speaker 5: It really seems kind of un likely.

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Speaker 10: That he can bring about any change, which begs the

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Speaker 10: question why he's doing this.

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Speaker 2: Okay, Alan Crawford, I've SEENI your editor, Thank you very

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Speaker 2: much for joining us. The details of that story, and

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Speaker 2: you can read more details of us on Bloomberg dot

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Speaker 2: com and on the terminal.

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Speaker 1: Now, the UK's long term boring costs have searched to

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Speaker 1: their highest level in more than twenty five years, raising

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Speaker 1: the prospect that chances of Rachel Reeves may need to

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Speaker 1: raise taxes again. This is the government is ramping up

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Speaker 1: borrowing to invest in public services. Our managing editor for

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Speaker 1: e FX and Rates, Rachel Levins, joins us now for

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Speaker 1: more on this. Rachel, good morning. Put the moves that

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Speaker 1: we have seen in the last couple of days in

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Speaker 1: context for us, Why have yields climb to these levels now?

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Speaker 1: And the big question could they go higher?

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Speaker 4: Yes?

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Speaker 11: I think those two broad things that are really going

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Speaker 11: on here.

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Speaker 5: You have to look around the world.

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Speaker 11: There is a global sort of bond route going on

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Speaker 11: at the moment, particularly driven by what's going on in

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Speaker 11: the US. You know, there, we obviously have kind of

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Speaker 11: an incoming administration, Donald Trump, as we were just talking about,

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Speaker 11: who's really sort of expected to kind of boost the

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Speaker 11: outlook for more inflation. We're expecting more spending. We're expecting

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Speaker 11: sort of tax cuts and deregulation. So there's a lot

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Speaker 11: of fiscal concerns as we kind of start the year

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Speaker 11: generally sort of setting the tone for markets. But then

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Speaker 11: we come to the UK and these have also been

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Speaker 11: issues here, so it's really kind of ringing true. I

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Speaker 11: think with investors that we need to take another look

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Speaker 11: at whether debt is sustainable and whether it's sustainable at

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Speaker 11: the yields that the government is currently paying.

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Speaker 2: Because of course, the last time that we did see

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Speaker 2: yields this high, least with thirty year, the UK's stat

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Speaker 2: pile was significantly smaller. What does borrowing at these levels

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Speaker 2: mean for the public finances? And is rachel is going

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Speaker 2: to have to raise taxes?

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Speaker 11: Well, it's clearly getting pretty expensive to borrow. I mean,

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Speaker 11: we're definitely looking at kind of a higher burden in

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Speaker 11: order order to kind of service debt when we are

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Speaker 11: at a yield like these, So they need to find

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Speaker 11: more money basically, so they need to have either more

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Speaker 11: coming in or less going out, and that kind of

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Speaker 11: brings them back to sort of the debate that they

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Speaker 11: had prior to the budget. You know, you either need

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Speaker 11: to be looking at cuts to reduce your outgoings or

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Speaker 11: you need to be looking at taking in more through

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Speaker 11: taxes or getting more through borrowing. They've obviously sort of

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Speaker 11: set some very you know, strict guidelines for themselves via

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Speaker 11: their manifesto or what they want to increase in terms

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Speaker 11: of tax and how they want to be thinking about

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Speaker 11: sort of the different sorts of public services that they

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Speaker 11: can offer. But there is very limited room as well

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Speaker 11: on the borrowing side. You know, we're already borrowing two

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Speaker 11: hundred and ninety seven billion pounds this fiscal year, and

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Speaker 11: you know, the budget announcement and back in October prompted

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Speaker 11: sort of a little mini tantrum in the guilt market

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Speaker 11: around that figure, even though it had been.

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Speaker 5: To be honest, really widely flagged.

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Speaker 11: So we are sort of starting to push up against

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Speaker 11: the limits of what the bond market will accept, which

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Speaker 11: does then beg the question of where else do you

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Speaker 11: find the money?

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Speaker 1: Yeah, indeed, at what level?

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Speaker 4: Though?

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Speaker 1: Does this actually become a kind of crisis I suppose

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Speaker 1: for government, for the Chancellor.

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Speaker 11: We're already back when we look at the charts to

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Speaker 11: the levels we saw under Liz Trust. You know, that

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Speaker 11: was obviously a bona fide guilt crisis. But I think

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Speaker 11: we need to look at kind of the severity of

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Speaker 11: the move. We'd be much more gradual, and this has

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Speaker 11: been much more a kind of story of yields around

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Speaker 11: the world rising rather than the UK being out of

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Speaker 11: sync with the rest of the world. So I think

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Speaker 11: that's going to be the key to watch to what

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Speaker 11: degree is the UK kind of moving out of line

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Speaker 11: from its other peers. We had an auction yesterday. It

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Speaker 11: went reasonably well. It was still oversubscribed, albeit less than

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Speaker 11: some other auctions in the past, and it priced pretty

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Speaker 11: much in line with where yields have been.

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Speaker 5: We've got another one today in another four.

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Speaker 11: Hundred, sorry four point twenty five billion of debt being sold.

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Speaker 11: You know, it's the job of the government to find

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Speaker 11: a level at which those auctions go through, so we

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Speaker 11: won't necessarily see those issues start to show up immediately,

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Speaker 11: but it's definitely going to be something that you know,

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Speaker 11: if yields continue creeping higher, and we're not yet back

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Speaker 11: to kind of the cycle peaks that we saw in

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Speaker 11: the US kind of a year or so ago.

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Speaker 5: You know, we really could see kind of the pressure

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Speaker 5: being ramped up in the UK.

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Speaker 2: Is there a level that which a lack of demand

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Speaker 2: becomes an issue in these upcoming sales your reference the

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Speaker 2: auction taking place later today.

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Speaker 11: Yes, but I think, I mean, this is the sort

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Speaker 11: of thing where you know, the the debt management office

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Speaker 11: their job is really to come into the market and

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Speaker 11: see what level will work. You know, you can get

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Speaker 11: a full on bio strike where where you know, we

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Speaker 11: don't see any bids coming in or enough bids coming in,

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Speaker 11: and that comes real issue.

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Speaker 5: But those are very very.

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Speaker 11: Rare, And I think a useful sort of comparison to

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Speaker 11: look at is if you know, we look across sort

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Speaker 11: of the English channel to France. France has had no

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Speaker 11: real problems with its auctions despite all of the political

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Speaker 11: issues over the last six months. So it takes a

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Speaker 11: lot for auctions to become problematic because there's still a

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Speaker 11: lot of different reasons why investors will want to kind

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Speaker 11: of buy guilt, you know, they fit into their plans

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Speaker 11: that they're running.

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Speaker 5: They need to replace securities that are maturing.

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Speaker 11: So for those auctions to really grow into a whole,

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Speaker 11: we need to see something a bit more substantive and

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Speaker 11: than we've seen this far.

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Speaker 2: This is Bloomberg Daybreak Europe, your morning brief on the

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