WEBVTT - Fed Higher For Longer, Yen Swings & Tesla Pulls Internships

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<v Speaker 1>This is the Blueberg Daybake You podcast, available every morning

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<v Speaker 1>on Apples, Spotify or wherever you listen. It's Thursday, the

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<v Speaker 1>second of May in London. I'm Caroline Hepkin.

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<v Speaker 2>And I'm Stephen Carroll. Coming up today, The Federal Reserve

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<v Speaker 2>chief Jerown Pal says he wants to see more evidence

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<v Speaker 2>inflation is cooling before moving to cut rates.

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<v Speaker 1>Traders push back against another suspected yen intervention by the

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<v Speaker 1>Japanese government.

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<v Speaker 2>Plus not working out Tesla Pull's internship offers as Musk

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<v Speaker 2>continues his drive to reduce headcount, Let's.

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<v Speaker 1>Start with a roundup of our top stories.

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<v Speaker 2>The Federal Reserve charge your Own Power has downplayed the

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<v Speaker 2>prospect of further rate hikes while keeping hopes alive for

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<v Speaker 2>a cut this year. The comments come after officials unanimously

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<v Speaker 2>decided to leave rates on hold following a slew of

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<v Speaker 2>data that pointed to lingering price pressures in the US economy.

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<v Speaker 2>Speaking after the policy announcement, Pal consider that the Fed

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<v Speaker 2>won't be able to reduce borrowing costs as soon as

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<v Speaker 2>previously forecast.

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<v Speaker 3>We do not expect that it will be appropriate to

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<v Speaker 3>reduce the target range for the Federal funds rate until

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<v Speaker 3>we have gained greater confidence that inflation is moving sustainably

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<v Speaker 3>toward two percent. So far this year, the data have

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<v Speaker 3>not given us that greater confidence. In particular, and as

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<v Speaker 3>I noted, earlier readings on inflation have come in above expectations,

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<v Speaker 3>it is likely that gaining such greater confidence will take

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<v Speaker 3>longer than previously expected.

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<v Speaker 2>During the press conference, Pile also gave clear guidance that

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<v Speaker 2>he expects the FAD to keep borrowing costs elevated for longer,

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<v Speaker 2>rather than raising them again.

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<v Speaker 3>I do think it's clear that policy is restrictive, and

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<v Speaker 3>we believe over time it will be sufficiently restrictive. That

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<v Speaker 3>will be a question that the data will have to answer.

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<v Speaker 3>I think it's unlikely that the next policy rate move

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<v Speaker 3>will be a hike.

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<v Speaker 2>Those remarks from Piles sooths investors who'd worried the Fed

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<v Speaker 2>might react more aggressively to signs that inflation progress has stalled. However,

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<v Speaker 2>three straight months of disappointing inflation figures have driven a

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<v Speaker 2>major repricing of interest rate xctations, with futures markets now

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<v Speaker 2>showing just one cost this year.

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<v Speaker 1>A surge in the Japanese and in late New York

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<v Speaker 1>trading has traders wondering if Japan is intervening in the

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<v Speaker 1>market again. The Can'tcy moved three percent to hit one

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<v Speaker 1>hundred and fifty three per dollar before weakening. Blueberg's rates

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<v Speaker 1>reporter Michael Wilson has been talking to traders who think

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<v Speaker 1>the state had a hand in the moves.

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<v Speaker 4>I spoke to a couple of chaps in New York

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<v Speaker 4>before they went home and that what they described at

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<v Speaker 4>what they saw was much like what happened on Monday.

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<v Speaker 4>And you know a situation where you know, Dollian would

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<v Speaker 4>say around one fifty five, seventy, just pick a number,

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<v Speaker 4>you know, suddenly office would come in, some of which

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<v Speaker 4>came from Japanese banks all the way like twenty points

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<v Speaker 4>through the level, at least ten points through the level. Now,

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<v Speaker 4>that's not typically how the Japanese banks, you know, clear

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<v Speaker 4>their business. It does seem predatory in terms of, you know,

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<v Speaker 4>the effect on the market.

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<v Speaker 1>Wilson says that we'll only know for sure when the

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<v Speaker 1>government confirms any FX action. Looking ahead, the likelihood of

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<v Speaker 1>sharp moves in the market during a looming four day

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<v Speaker 1>holiday in Japan and also London markets being closed on

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<v Speaker 1>Monday may also have been a concern for Japan's currency officials.

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<v Speaker 2>Standard Charters has reported adjusted pre tax profit of two

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<v Speaker 2>point one three billion dollars for the first three months

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<v Speaker 2>of twenty twenty four, beating analyst expectations. That's a twenty

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<v Speaker 2>five percent increase on last year's number. The banks on

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<v Speaker 2>increased income from corporate and investment banking alongside its wealth

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<v Speaker 2>and retail divisions.

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<v Speaker 1>The Federal Reserve and other top us regulators plan on

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<v Speaker 1>finalizing bank capital rules despite strong pushback from the sector.

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<v Speaker 1>Bloomberg's Banking regulation reporter Katanga Johnson says that there had

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<v Speaker 1>been talk of scrapping the plan.

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<v Speaker 5>Whilst we have been waiting. After regulators said in March

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<v Speaker 5>that they would make broad material changes to the plan.

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<v Speaker 5>They waited to see whether that meant withdrawing it, scrapping

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<v Speaker 5>it all together and putting a new one forward. Agencies

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<v Speaker 5>will not be scrapping their plan. Instead, they'll be making changes,

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<v Speaker 5>including in particular market risk and what that particular gapital

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<v Speaker 5>requirement would be. But the discussions are still ongoing and

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<v Speaker 5>it could be finalized as soon as August. At least

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<v Speaker 5>some corners of Washington are pushing for.

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<v Speaker 1>That Johnson adds that this comes in spite of a

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<v Speaker 1>FIC lobbying campaign form of the financial world. Under the

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<v Speaker 1>old proposal, the largest US banks would face about a

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<v Speaker 1>nineteen percent increase in how much capital they must hold

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<v Speaker 1>in order to buffer themselves against losses. US administrative law

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<v Speaker 1>requires any changes don't stray too significantly from what was

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<v Speaker 1>originally planned.

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<v Speaker 2>Voters in England and Wales had to the polls today

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<v Speaker 2>for local elections that could give clues as to the

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<v Speaker 2>performance of political parties in the upcoming general election. Polling

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<v Speaker 2>stations are open from seven am to ten pm, with

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<v Speaker 2>elections in one hundred and seven local authorities and ten

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<v Speaker 2>mayoral races taking place. Results of our expectors start coming

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<v Speaker 2>in early on Friday morning, with the count in some

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<v Speaker 2>areas continuing through to Sunday.

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<v Speaker 1>The UK is beating the odds and attracting growing foreign

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<v Speaker 1>direct investment that as its European peers see a decline

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<v Speaker 1>in new externally funded projects. Bloombergs Tea Adebayo has the details.

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<v Speaker 6>Foreign direct investment is stalling across Europe. The number of

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<v Speaker 6>projects is down fourteen percent from its twenty seventeen peak.

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<v Speaker 6>That's according to consultancy firm Ey, who say the figures

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<v Speaker 6>should act as a wake up call for the region.

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<v Speaker 6>But the UK, it seems, is bucking the trend, attracting

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<v Speaker 6>nine hundred and eighty five FDI projects in twenty twenty three,

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<v Speaker 6>six percent more than the year before. That number puts

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<v Speaker 6>the country second in the European Foreign Investment League tables,

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<v Speaker 6>behind France. A sharp increase in software and IT investment

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<v Speaker 6>in London could be behind the boost in London. Do

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<v Speaker 6>you add a Bayo Boomberg Radio.

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<v Speaker 2>And Tesla is rescinding internship offers just weeks before candidates

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<v Speaker 2>are due to start. It comes as the firm goes

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<v Speaker 2>through a series of sweeping job cuts and acted by

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<v Speaker 2>CEO Elon Musk. Provoking internships isn't likely to save Tesla

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<v Speaker 2>a lot of money. According to Glassdoor, the automaker typically

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<v Speaker 2>offers eighteen dollars to twenty eight dollars an hour for

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<v Speaker 2>the positions. Now, in a moment, we'll dig into what

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<v Speaker 2>we heard from the Fed charge your own Powell at

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<v Speaker 2>yesterday's meeting, plus look at the latest moves that we've

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<v Speaker 2>seen in the Yen. But the story that caught our

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<v Speaker 2>eye this morning very close to my heart about restaurant bookings.

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<v Speaker 2>If you think things in London are bad and how

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<v Speaker 2>foreign advance, you have to try and book to get

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<v Speaker 2>a place in a restaurant. Our opinion columnist Harod try

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<v Speaker 2>One has been writing about the latest phenomenon in New York,

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<v Speaker 2>which is a secondary market for bookings where people are

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<v Speaker 2>paying to get spots at top eteries that other people

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<v Speaker 2>have already booked. You make the booking and then you

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<v Speaker 2>resell it.

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<v Speaker 1>So you have to be like a ticket master.

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<v Speaker 2>Or out there online trying to get your place in

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<v Speaker 2>the restaurant. But Howard's pointed to system that's used at

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<v Speaker 2>some high end restaurants in Japan, which he says could

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<v Speaker 2>provide inspirations for others. And this is no first time bookings,

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<v Speaker 2>So if you want to get in, you have to

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<v Speaker 2>either be a regular or be invited by a regular.

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<v Speaker 2>And if you pass muster on your first visit as

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<v Speaker 2>a guest of somebody who they know and like, then

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<v Speaker 2>you may be invited to book yourself for your return visit.

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<v Speaker 2>So the idea is for the restaurants they get a

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<v Speaker 2>regular clientele. For those who go there, you know, they

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<v Speaker 2>get to they know what the food is and then

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<v Speaker 2>the chef and the diners are all happy. That's the

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<v Speaker 2>idea anyway, But Howard points out that's not really in

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<v Speaker 2>line with the Western ideal of perpetual growth and the

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<v Speaker 2>magic escalator of scalability. But it could work for those

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<v Speaker 2>who want to keep themselves off the radar. There's a

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<v Speaker 2>great story in the piece, which I won't spoil, about

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<v Speaker 2>Howard's trip to a restaurant called Sugita and Tokyo, one

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<v Speaker 2>of those regular only places. Whether or not he gets

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<v Speaker 2>invited back, you'll have to read the piece to find out.

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<v Speaker 1>How does one pass muster in a restaurant these days?

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<v Speaker 1>Not quite sure. I think London's still obsessed with the

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<v Speaker 1>celebrity chef. In fact, I've I've put a table on

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<v Speaker 1>Saturday night for one such day.

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<v Speaker 5>There we go.

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<v Speaker 1>Read that story on the Blueberg Tournament. A bit of

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<v Speaker 1>fun for you this morning. Let's get on though, with

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<v Speaker 1>the business of things out of the US yesterday, gaining

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<v Speaker 1>confidence that inflation is falling towards the target will take

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<v Speaker 1>longer than previously expected. That was the message from Jeroam Power,

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<v Speaker 1>who signaled rates will remain higher for longer, but that

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<v Speaker 1>a hike is unlikely to be the Fed's next move.

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<v Speaker 1>Blueberg's TV anchor Kritti Gupta is with us this morning

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<v Speaker 1>to go over everything that we heard about yesterday from

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<v Speaker 1>the Fed on the rate path. Was this meeting what

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<v Speaker 1>you described as nothing Burger, keeping that kind of restauranting theme.

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<v Speaker 7>I appreciate that you called it nothing burger.

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<v Speaker 5>I love when Fritz to do that.

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<v Speaker 7>Yes, in that the cuts or if you say, the

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<v Speaker 7>rate decision didn't actually move right. They kept a rate steady,

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<v Speaker 7>so that made a lot of sense. It also reiterated

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<v Speaker 7>this idea that hikes are not in the near future

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<v Speaker 7>for the Federal Reserve, and I think that was kind

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<v Speaker 7>of the changing point for a lot of this press conference,

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<v Speaker 7>simply because the expectation going into the conference, as we

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<v Speaker 7>know and as we discussed twenty four hours ago, was

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<v Speaker 7>simply that there may be a case for a hike.

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<v Speaker 7>J Powell doing a very good job of throwing cold

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<v Speaker 7>water on that, saying if the bars even higher, that

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<v Speaker 7>policy rates are still very restrictive. That hasn't eroded the

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<v Speaker 7>ability of the tool itself. And that's a really important

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<v Speaker 7>piece of the equation because one of the arguments that

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<v Speaker 7>was made in terms of a hike was that maybe

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<v Speaker 7>things aren't restrictive enough because the US economy is outperforming.

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<v Speaker 7>That being said, what got really interesting was the really

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<v Speaker 7>really nerdy piece of QT, and I think that is

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<v Speaker 7>I found the most fascinating part because of some of

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<v Speaker 7>the analysis that came out after Basically they're halting the

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<v Speaker 7>pace of QT the runoff essentially, which means that it's

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<v Speaker 7>not quite q E, but it has more of a

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<v Speaker 7>less hawkish effect than it did previously. Obviously, I love

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<v Speaker 7>what Alberto Gallo or Andromeda Capital said. He says, keeping

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<v Speaker 7>front end rates high while tapering QT is like pulling

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<v Speaker 7>the handbrake while pushing the accelerator pedal, So essentially moving

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<v Speaker 7>kind of the two year yield, which you have seen

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<v Speaker 7>move in response to kind of this hawkishness and this

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<v Speaker 7>resilience in the data, while still kind of creating that

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<v Speaker 7>liquidity and that easing in the back end of the curve.

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<v Speaker 7>What it does is kind of manipulate the way the

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<v Speaker 7>curve moves to some extent, kind of jawbone to guide

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<v Speaker 7>markets where they want to go. That's a pretty big

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<v Speaker 7>deal when we're talking about whether or not these are

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<v Speaker 7>early signs of this kind of more easier monetary policy

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<v Speaker 7>that is coming down the road. When it comes to

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<v Speaker 7>the actual rate cut, though, that seems me moved further

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<v Speaker 7>and further.

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<v Speaker 2>Oh so the question of how do you send a

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<v Speaker 2>segment to the markets without sending a segment on interest rates?

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<v Speaker 2>Essentially is what the Fed appears to have don't have?

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<v Speaker 2>What do the markets look at next?

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<v Speaker 7>Then the next data point payrolls, I suppose on Friday.

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<v Speaker 7>What's important to keep about this? Keep about about this idea.

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<v Speaker 7>I'm gonna get my words right this morning. But basically

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<v Speaker 7>what you need to keep in mind here is that

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<v Speaker 7>basically the cuts are now one cut is now priced

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<v Speaker 7>in forward December. So one of the key pieces here

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<v Speaker 7>is that does the Fed kind of back themselves into

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<v Speaker 7>a corner because they are still sticking to this narrative

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<v Speaker 7>that the inflationary trend is not an acceleration of inflation.

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<v Speaker 7>It is still on the kind of paths of deceleration. However,

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<v Speaker 7>they are saying it's taking longer and longer to get

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<v Speaker 7>to that two percent inflation target, and that's where the

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<v Speaker 7>concern lies. Where do cuts then go into twenty twenty

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<v Speaker 7>five that meets with election risk to what extent does

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<v Speaker 7>payrolls even matter if the FED is going to be

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<v Speaker 7>sticking to that easier policy.

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<v Speaker 1>Yeah, okay, so that's on the FED. The other story

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<v Speaker 1>that was of interest, and we gave you a little

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<v Speaker 1>snippet of it around the rules for bank capital, which

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<v Speaker 1>has been a huge deal on Wall Street, and it

0:11:36.440 --> 0:11:39.319
<v Speaker 1>looks like the whole plans are not going to be scrapped.

0:11:39.720 --> 0:11:42.000
<v Speaker 1>There's still going to be a drive basically for the

0:11:42.000 --> 0:11:45.760
<v Speaker 1>banks to hold more capital, especially the kind of larger banks.

0:11:46.559 --> 0:11:49.800
<v Speaker 1>You know, thoughts on that and when we're going to

0:11:49.800 --> 0:11:50.800
<v Speaker 1>get the decision as well.

0:11:50.880 --> 0:11:53.920
<v Speaker 7>Yeah, one of those pieces of significance here is these

0:11:54.000 --> 0:11:56.319
<v Speaker 7>kind of reserve ratios that were initially going to be

0:11:56.360 --> 0:11:59.319
<v Speaker 7>bumped up. Was initially a move in response to the

0:11:59.360 --> 0:12:01.520
<v Speaker 7>Silicon Valley bank story, and it was this idea that

0:12:01.960 --> 0:12:05.120
<v Speaker 7>you needed more capital to prevent bank runs, to prevent

0:12:06.280 --> 0:12:08.880
<v Speaker 7>basically these big losses you sar kind of the Archagos

0:12:08.920 --> 0:12:11.280
<v Speaker 7>deal with Credit Suisse involved as well. So there are

0:12:11.280 --> 0:12:13.160
<v Speaker 7>a lot of concerns around the fact that some of

0:12:13.160 --> 0:12:16.280
<v Speaker 7>the big banks could have some sort of GFC two

0:12:16.360 --> 0:12:19.520
<v Speaker 7>point zero kind of moment. The issue with that, though,

0:12:19.559 --> 0:12:22.360
<v Speaker 7>is that is also essentially restrictive policy because it means

0:12:22.440 --> 0:12:24.880
<v Speaker 7>less lending ability into the rest of the economy. The

0:12:24.920 --> 0:12:26.440
<v Speaker 7>fact that they're pulling back on that and they're not

0:12:26.480 --> 0:12:29.920
<v Speaker 7>making as stringent of those rules is also a positive.

0:12:29.920 --> 0:12:33.120
<v Speaker 7>It's stimulative and therefore kind of in that easing camp. However,

0:12:33.480 --> 0:12:35.720
<v Speaker 7>that could change going into twenty twenty five again because

0:12:35.720 --> 0:12:37.840
<v Speaker 7>they're going to be reevaluating the story and the banks.

0:12:37.920 --> 0:12:40.880
<v Speaker 7>Jamie Diamond in particular has come across a lot of pushback,

0:12:40.960 --> 0:12:44.400
<v Speaker 7>especially on Congress, in terms of just how secure they

0:12:44.400 --> 0:12:46.360
<v Speaker 7>are in terms of that cushion that they need.

0:12:46.960 --> 0:12:49.280
<v Speaker 2>Okay, Christy goope to thank you very much, Bimberg TV

0:12:49.360 --> 0:12:50.720
<v Speaker 2>anchor bringing its details.

0:12:51.880 --> 0:12:55.520
<v Speaker 1>Now, we've had another suspected currency intervention by Japanese authorities,

0:12:55.760 --> 0:12:59.960
<v Speaker 1>saw the yen strengthen suddenly before then facing further selling pressure.

0:13:00.040 --> 0:13:03.160
<v Speaker 1>Our executive editor for Asian Markets, Paul Dobson joins us

0:13:03.160 --> 0:13:05.800
<v Speaker 1>now for more, just take us through the scale of

0:13:05.800 --> 0:13:07.719
<v Speaker 1>the moves that we've seen in the Japanese Yeah, and

0:13:07.760 --> 0:13:09.920
<v Speaker 1>I mean it's the dope fight. The third issue, isn't it?

0:13:10.760 --> 0:13:13.000
<v Speaker 8>Well a little bit, although the currency market seems pretty

0:13:13.000 --> 0:13:16.480
<v Speaker 8>willing to take the Japanese authorities on to a certain extent,

0:13:16.720 --> 0:13:19.760
<v Speaker 8>but what we saw in the last few minutes of

0:13:19.840 --> 0:13:23.240
<v Speaker 8>the New York trading session was quite a pronounced move

0:13:23.600 --> 0:13:27.800
<v Speaker 8>again stronger for the yen, about a five yen move,

0:13:27.960 --> 0:13:31.960
<v Speaker 8>which is typically the sort of impact and scale and

0:13:32.040 --> 0:13:34.920
<v Speaker 8>scope of change that you would see with an intervention

0:13:35.080 --> 0:13:38.000
<v Speaker 8>by those authorities looking to give it a little bit

0:13:38.040 --> 0:13:40.920
<v Speaker 8>of a boost. Based on that, the evidence suggests that

0:13:41.080 --> 0:13:44.439
<v Speaker 8>it's a second intervention by the authorities this week, a

0:13:44.559 --> 0:13:47.679
<v Speaker 8>second attempt to stop the yen from continuing with this

0:13:47.800 --> 0:13:50.760
<v Speaker 8>weakening path. The problem that they face is almost immediately

0:13:51.040 --> 0:13:54.080
<v Speaker 8>once that was over, the weakening began again, and we

0:13:54.120 --> 0:13:56.640
<v Speaker 8>already you know, took back at about one percent of

0:13:56.679 --> 0:13:59.719
<v Speaker 8>those advances that we saw in those last minutes of

0:13:59.720 --> 0:14:02.480
<v Speaker 8>the New York session, And so it points to this

0:14:02.600 --> 0:14:05.400
<v Speaker 8>idea that still the trend is very much for a

0:14:05.440 --> 0:14:08.920
<v Speaker 8>week again, and so the impact or the influence that

0:14:08.960 --> 0:14:12.120
<v Speaker 8>the authorities can have is is going to be tested

0:14:12.120 --> 0:14:13.120
<v Speaker 8>at the very least.

0:14:13.400 --> 0:14:15.840
<v Speaker 2>Does that is that likely to put them off doing

0:14:15.880 --> 0:14:18.160
<v Speaker 2>it again? Though, Paul, I mean, could we see further

0:14:18.240 --> 0:14:21.240
<v Speaker 2>interventions like this? Of course, they haven't officially confirmed it,

0:14:21.320 --> 0:14:24.960
<v Speaker 2>Japan's top currency official telling us that he had nothing

0:14:25.000 --> 0:14:26.600
<v Speaker 2>to say about whether they'd intervened.

0:14:27.280 --> 0:14:29.400
<v Speaker 8>Quite right, they haven't confirmed it, although a lot of

0:14:29.400 --> 0:14:32.600
<v Speaker 8>the data, including a look at the current account that's

0:14:32.600 --> 0:14:37.120
<v Speaker 8>published about the Bank of Japan, points in that direction. No,

0:14:37.400 --> 0:14:39.120
<v Speaker 8>I don't think that it's going to deter them from

0:14:39.200 --> 0:14:41.040
<v Speaker 8>doing it. Now that they've started, it makes it much

0:14:41.040 --> 0:14:43.000
<v Speaker 8>more likely that they're going to continue on this path

0:14:43.080 --> 0:14:45.440
<v Speaker 8>until they get the message across. Even if all they

0:14:45.440 --> 0:14:48.160
<v Speaker 8>can hope is to slow the pace of depreciation of

0:14:48.200 --> 0:14:51.240
<v Speaker 8>the yen, that's still probably a good reason to get

0:14:51.280 --> 0:14:54.600
<v Speaker 8>involved at this point, to try to keep the market

0:14:54.640 --> 0:14:56.840
<v Speaker 8>guessing a little bit, which is part of the reason

0:14:56.840 --> 0:14:59.600
<v Speaker 8>why there isn't any kind of admission of what the

0:14:59.680 --> 0:15:02.720
<v Speaker 8>action looks like, keep the market guessing, keep traders a

0:15:02.760 --> 0:15:05.160
<v Speaker 8>little bit nervous. What they really want, more than anything

0:15:05.200 --> 0:15:08.120
<v Speaker 8>else is to avoid speculative trading. As they put it,

0:15:08.200 --> 0:15:11.320
<v Speaker 8>too much money being pushed on a speculative basis against

0:15:11.360 --> 0:15:14.880
<v Speaker 8>the general sharp moves in the currency over a short

0:15:14.920 --> 0:15:19.640
<v Speaker 8>period of time to destabilize our financial markets or destabilized

0:15:19.680 --> 0:15:20.800
<v Speaker 8>price expectations.

0:15:21.440 --> 0:15:24.160
<v Speaker 2>This is Bloomberg Daybreak Europe, your morning brief on the

0:15:24.240 --> 0:15:27.280
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