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

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Speaker 1: Day Bake You Up podcast, available every morning on Apple,

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Speaker 1: Spotify or wherever you listen. It's Monday, the fifth of

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Speaker 1: August in London. I'm Caroline HEPKIF and.

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Speaker 2: I'm Stephen Carroll. Coming up today. The global stock market

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Speaker 2: sell off deepens over US economic fears as traders bet

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Speaker 2: on aggressive action from the Federal Reserve.

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Speaker 1: Airlines suspend flights to Israel as the country and its

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Speaker 1: allies brace for retaliation from Iran.

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Speaker 2: Plus in the UK, Prime Minister Kirstarmer calls an emergency

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Speaker 2: security meeting after a weekend of riots in Britain.

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Speaker 3: Let's start with a round up of our top stories.

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Speaker 2: Global stocks are plunging on fears US economic outlook is

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Speaker 2: weakening rapidly and that the Fed has waited too long

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Speaker 2: to cut interest rates. Japan's topics hit a circuit breaker

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Speaker 2: after falling twenty percent from its peak, and it's set

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Speaker 2: for the worst three day decline since twenty eleven. Are

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Speaker 2: moving money into bonds and other havens after US jobs

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Speaker 2: data came in well below estimates. The head of Bloomberg's

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Speaker 2: Asia Markets Live team Garfields Renalds says bond prices imply

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Speaker 2: a severe recession on the horizon.

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Speaker 4: The last two times that the Fed cut rates by

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Speaker 4: fifty basis points at the start of a cutting cycle

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Speaker 4: was in two thousand and seven and in two thousand

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Speaker 4: and one. Very beginning of two thousand and one, those

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Speaker 4: were some very severe recessions that the US economy ran into.

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Speaker 4: That's the bursting of the dot com bubble and the

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Speaker 4: start of what ended up being the global financial crisis.

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Speaker 2: For Garfils Renals adds that bond traders have repeatedly misjudged

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Speaker 2: where interest rates have been headed since the end of

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Speaker 2: the pandemic.

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Speaker 1: Now swaps traders are fully pricing in four interest rate

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Speaker 1: cuts from the US Federal Reserve in twenty twenty four.

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Speaker 1: JP Morgan and City Group have revamped their forecast to

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Speaker 1: predict that policymakers will deliver a half point cut in September,

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Speaker 1: and the former Fed economists Claudia Sam has told Bloomberg

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Speaker 1: Radio that the data triggers her famous recession indicator, the

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Speaker 1: Sam Rule.

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Speaker 5: Way too much momentum in the unemployment read in recent months,

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Speaker 5: I mean four point three percent, So whether we are

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Speaker 5: at that moment of a recession or not. This is

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Speaker 5: your build into substantial weakening in the labor market.

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Speaker 1: Claudia sam There from SAM Consulting, reacting to the US

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Speaker 1: job's weakness on Bloomberg surveillance. Economists at Goldman Sachs now

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Speaker 1: put the chance of a US recession in the next

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Speaker 1: year at twenty five percent. That is up from fifteen percent.

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Speaker 2: Israelis bracing for a retaliation after the assassination of major

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Speaker 2: Hesbela and her mass officials. Airlines are suspending flights to

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Speaker 2: the country, and embassies are urging citizens to leave its

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Speaker 2: neighbor Elebanon. It comes as Axios reports, the US Secretary

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Speaker 2: of State Anthony Blincoln told g seven Counterparts an attack

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Speaker 2: by Iran and Hesbela could still in twenty four hours.

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Speaker 2: Prime Minister Benjaminettannia, who issued a warning to would be attackers.

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Speaker 6: Iran and its proxies seek to surround us with a

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Speaker 6: stranglehold of terror on seven fronts. Their visible aggression is insatiable,

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Speaker 6: but Israel is not helpless. We are determined to stand

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Speaker 6: against them on every front, in every arena far and near.

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Speaker 6: Anyone who mergeres our citizens, anyone who harms our country

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Speaker 6: will be held accountable. He will pay a very heavy price.

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Speaker 7: Lawyer or yo chalm Merchilldnaniahu.

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Speaker 2: Himself is under pressure as the US continues to press

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Speaker 2: for a ceasefire deal in Gaza.

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Speaker 1: Here in the UK, kirs Armer has called an emergency

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Speaker 1: security meeting following a spate of anti immigrant riots across

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Speaker 1: the country. Violence erupted in towns and cities including Liverpool,

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Speaker 1: Hull and Bristol after the far right falsely claimed a

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Speaker 1: Muslim migrant was responded for last week's knife attack in Southport,

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Speaker 1: which left three young girls dead. The Prime Minister has

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Speaker 1: vowed to find those responsible for rioting.

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Speaker 8: To those who feel targeted because of the color of

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Speaker 8: your skin or your faith, I know how frightening this

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Speaker 8: must be. I want you to know that this violent

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Speaker 8: mob do not represent our country and we will bring

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Speaker 8: them to justice.

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Speaker 1: Kis Starma speaking there. The weekend's unrest has been the

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Speaker 1: first big test of the UK's month old labor government.

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Speaker 1: Around one hundred and fifty arrests have been made in

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Speaker 1: what has been the country's worst rioting in over a decade.

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Speaker 2: Berkshire Hathaway has revealed it sold nearly half of its

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Speaker 2: position in Apple during the second quarter. It comes as

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Speaker 2: megacat piers including Microsoft, Amazon, and Alphabet of all tumbled

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Speaker 2: from record highs reached in early July. More now from

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Speaker 2: Bloomberg's Doug Kresner, the.

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Speaker 9: Move could be interpreted as a lack of conviction in

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Speaker 9: the Apple growth story. At the end of March, Berkshire's

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Speaker 9: POSI was worth roughly one hundred and forty billion dollars.

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Speaker 9: Then as of the end of June, it was worth

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Speaker 9: eighty four billion. Since twenty sixteen, when Berkshire first has

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Speaker 9: closed at stake, Apple shares have soared nearly nine hundred percent.

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Speaker 9: Even with the sale, Apple does remain Berkshire's largest single position.

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Speaker 9: If you're wondering about valuation, Apple's multiple is thirty three

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Speaker 9: times future profits. That's eleven points higher than the S

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Speaker 9: and P five hundred in New York. I'm Derek Prisoner Bloomberg.

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Speaker 1: Radio, and finally, Kamala Harris has held meetings with at

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Speaker 1: least three possible running mates as she gets closer to

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Speaker 1: picking her candidate for vice president. She met with the

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Speaker 1: Arizona Senator Mark Kelly, Pennsylvania Governor Josh Shapiro, and the

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Speaker 1: Minnesota Governor Tim Waltz. According to people familiar with her plans,

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Speaker 1: Harris's meetings concluded on Sunday evening, and the Democratic nominee

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Speaker 1: is expected to announce her decision in the coming days.

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Speaker 3: Those are our top stories.

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Speaker 1: So it's been really quite an extraordinary morning in terms

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Speaker 1: of the markets, looking at the moves in stocks. Let's

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Speaker 1: bring in one of our market Live strategists this morning

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Speaker 1: to discuss the sell off in stocks. This was sparked

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Speaker 1: by fears that the Federal Reserve is perhaps late to

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Speaker 1: easing its policy and bringing down interest rates after US

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Speaker 1: payrolls on Friday showed that there was much weaker job

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Speaker 1: creation in the US than had been expected. Joining us

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Speaker 1: this morning is Mary and Nikola, who joins us now

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Speaker 1: for more. Mary, just talk us through the scale of

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Speaker 1: what is happening on equity markets. It's been a very

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Speaker 1: sudden pivot.

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Speaker 7: Yeah, it's been a brutal morning this morning. The sell

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Speaker 7: off across Asia, with the topics down about ten percent

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Speaker 7: and then Cosby is down about seven percent. So the

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Speaker 7: broader market sell off, as you mentioned, has been precipitated

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Speaker 7: by that uptick in the unemployment rate. So fears of

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Speaker 7: a recession rather than a soft landing are really overtaking

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Speaker 7: that the current narrative, and you're seeing it with the

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Speaker 7: move towards haven assets, and that's sparking an increase in

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Speaker 7: volatility and just an indiscriminate sell off across equity markets.

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Speaker 7: Not to mention, also you have Japan. Japan's the external

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Speaker 7: headwinds and then a hawkish boj forcing the unwind of

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Speaker 7: carry trades. But that's also proving to be a bad

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Speaker 7: combination for Japan's equity markets.

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Speaker 2: Yeah, Treasuries, the rally that started on Friday continuing today

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Speaker 2: as well. We're now looking at two year yields down

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Speaker 2: another nine basis points this morning, below three point eight percent.

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Speaker 2: How much expectation is there now in markets that a

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Speaker 2: fifty basis points could come from the Fed. Yeah.

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Speaker 7: So if you look at market expectations, and granted it

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Speaker 7: has swung around quite aggressively over the past year, the

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Speaker 7: market is now pricing in nearly one hundred and twenty

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Speaker 7: five basis points of cuts by the end of the year,

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Speaker 7: and fifty as you mentioned, almost fully priced for the

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Speaker 7: September meeting. It's important to point out this rapid chain

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Speaker 7: because early at the start of July, we were just

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Speaker 7: at about forty five basis points of cuts for this

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Speaker 7: entire year, and it's impressive how much the narrative has

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Speaker 7: changed given what we've seen in the US data.

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Speaker 1: Yeah, absolutely, which is why it has raised And a

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Speaker 1: lot of our Bluemberg reporters have talked about is this illiquidity?

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Speaker 1: Is this an overshoot? Markets often do tend to do that.

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Speaker 1: What are the other asset classes that you're watching telling

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Speaker 1: us too, the yen, for example, bitcoin commodities.

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Speaker 7: Yeah, it's really about moving towards haven assets. So the

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Speaker 7: yen has strengthened as a result, same with the Swiss franc.

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Speaker 7: Even the dollar, even though the hard landing concerns are

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Speaker 7: coming from the US, the dollars gaining a bit as

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Speaker 7: a result of the concerns about this hard landing in

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Speaker 7: the US, which could obviously permeate to broader global markets.

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Speaker 7: So really, as well as the end strength has been

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Speaker 7: exceptionally important in terms of precipitating the unwind of carry trades.

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Speaker 7: We see it the Mexican peso and how much it's

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Speaker 7: weakened and it's going to continue in an environment of

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Speaker 7: heightened volatility.

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Speaker 2: Mary, what should we be looking out for is we

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Speaker 2: had towards the start of trading here in Europe, What

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Speaker 2: should traders be bracing themselves for or what is the

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Speaker 2: next big event that markets could see this volatility shifting.

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Speaker 7: Yeah, the way we're seeing in terms of how futures

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Speaker 7: are behaving, the euro European stocks don't look very insulated.

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Speaker 7: But really what's going to carry through or what's going

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Speaker 7: to really change the narrative is the ism services later today.

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Speaker 7: That will be critical for every data point because that's

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Speaker 7: going to be gleaned and the data will need to

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Speaker 7: prove whether or not this sell is in fact justified.

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Speaker 1: Okay, Mary, very interesting. Yeah, we're going to keep a

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Speaker 1: cross all the markets then today, aren't we, Mary Nicola?

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Speaker 1: Are joining us there from our Markets Live Strategy Team.

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Speaker 3: Olt is Mary Nicola.

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Speaker 2: Let's turn to the Middle East next, where Israel's bracing

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Speaker 2: for a possible attack by Iran and It's militias Hesbulah

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Speaker 2: and the Houthis in Yemen. In retaliation for the assassinations

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Speaker 2: of hes Bulah and Hamas officials. US President Joe Biden

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Speaker 2: is convening his National security team along with the Vice

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Speaker 2: President Kamala Harris to discuss this. Rama. News director at

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Speaker 2: Rasland Mathson is with us in studio this morning for

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Speaker 2: more ras What do we know about what is Israel

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Speaker 2: preparing for?

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Speaker 10: Well, that's the question. They're actually preparing for any kind

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Speaker 10: of eventuality. We know that they're scrambling GPS, which is

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Speaker 10: pretty standard when they just want to, you know, when

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Speaker 10: they're anticipating some kind of action. We know they're issuing

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Speaker 10: cabinet members with satellite phones. We know that lots of

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Speaker 10: countries are warning their citizens to avoid Lebanon, for example,

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Speaker 10: which is another sign that the concern is this is

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Speaker 10: this could be a multi pronged retaliation from Iran. It

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Speaker 10: might not just be Aroun with some kind of direct

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Speaker 10: strike on Israel, but also using its proxies. Again Hezbla,

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Speaker 10: Hamas and the huthis for something that they can sort

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Speaker 10: of say, look, we've done something quite drastic in response

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Speaker 10: to the killing that happened last week in Tehran of

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Speaker 10: the senior Hamas official, because they need to show something

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Speaker 10: for it, and that's exactly what Israel is preparing for

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Speaker 10: the possibility it's going to be a multifaceted strike at

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Speaker 10: some point from Iran expected perhaps in the next twenty

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Speaker 10: four to forty eight hours.

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Speaker 3: Talk to us about the US.

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Speaker 1: Then they've sent defensive reinforcements to Israel again, they have

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Speaker 1: press for a ceasefar deal over Gulza. This is potentially

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Speaker 1: one of the moments that the world was most dreading,

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Speaker 1: wasn't it.

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Speaker 10: Well, that's right, and the US has been a long

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Speaker 10: running ally of Israel, including militarily. They send them a

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Speaker 10: lot of equipment, including for the Iron Dome missile shield,

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Speaker 10: which is very important for Israel, but also just using

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Speaker 10: their presence in military bases around the region, using their

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Speaker 10: warships in the area, to try and to create that

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Speaker 10: atmosphere of calm and to lean on these proxy groups

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Speaker 10: not to over extend themselves. So we've seen, for example,

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Speaker 10: the US patrolling quite heavily in the Red Sea for

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Speaker 10: months now amid the hoothy attacks on shipping in the area,

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Speaker 10: so very visible presence from the US. We know that's

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Speaker 10: picking up. We know that the US sends Israel, as

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Speaker 10: I said, military equipment that's mostly for Israel to be

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Speaker 10: able to defend itself. One of the things the US

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Speaker 10: says is they don't want Israel using those weapons, for example,

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Speaker 10: against people inside Gaza.

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Speaker 2: What does this mean for efforts I suppose from other

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Speaker 2: G seven countries and what sort of other diplomatic pressure

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Speaker 2: could could be exerted.

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Speaker 10: Well, it's interesting because the diplomatic pressure also needs to

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Speaker 10: be on Iran and not just on Israel. We're seeing,

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Speaker 10: of course, the phone conversation that was had again between

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Speaker 10: Joe Biden and Benjamin Netanyahire. We see the G seven

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Speaker 10: convening and urging calm, including on Israel. But you can

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Speaker 10: imagine there are back channels going on. We know the

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Speaker 10: US has them, we know they're active, and they've been

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Speaker 10: going on throughout the conflict inside Gaza involving Israel and

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Speaker 10: Hamas can imagine that those conversations are quite active at

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Speaker 10: the moment again to try and restrain Iran in its

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Speaker 10: own response. But we're this sort of era where you

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Speaker 10: get one country doing something, another retaliating, the other country

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Speaker 10: retaliating again. So you need a run to do something

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Speaker 10: that allows it to say, look, we've responded, we're done.

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Speaker 10: But Israel then doesn't feel the need to respond again

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Speaker 10: in turn aggressively. Otherwise we're in a cycle that's just

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Speaker 10: escalating and that's the concern that the tit for tat

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Speaker 10: picks up to the point at some point things tip over,

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Speaker 10: whether people want it or not, inadvertently quite possibly into

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Speaker 10: that broader conflict.

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Speaker 3: Okay, wells, thank you so much for being with us.

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Speaker 1: That has been BUGSYMEA News director Roslyn Matheson then on

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Speaker 1: a key story this morning, Israel bracing for a possible

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Speaker 1: attack by Iran.

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Speaker 2: Here in the UK, the Prime Minister has called an

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Speaker 2: emergency security meeting in a bid to calm anti immigrant

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Speaker 2: protests that took place in towns and cities around the

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Speaker 2: UK over the weekend. Kostarm are blaming disorder and what

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Speaker 2: he called far right thuggery are reported. Tea Adebio is

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Speaker 2: with us for more and now t we could just

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Speaker 2: bring us up to date about what happened over the weekend.

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Speaker 11: Well, it's been England's worst rioting in over a decade.

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Speaker 11: Just as a reminder, this all started following an attack

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Speaker 11: in Southport last week that left three young girls dead,

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Speaker 11: and there was an online misinformation campaign that had claimed

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Speaker 11: a Muslim migrant was responsible. We now know that the

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Speaker 11: perpetrator was in fact born in the UK, and so

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Speaker 11: over the weekend. We've seen this violence continue and really

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Speaker 11: escalate in towns and cities including Rotherham, Blackpool and Bristol,

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Speaker 11: and there has been a broader anti immigrant sentiment to

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Speaker 11: this violence. So, for example, in Rotherham there were rioters

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Speaker 11: on Sunday who attacked a hotel that they believed was

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Speaker 11: housing asylum seekers. They started a fire and injured around

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Speaker 11: a dozen police officers. A similar thing also happened in

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Speaker 11: Hull where demonstrators actually gathered outside a hotel again they

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Speaker 11: thought asylum seekers were there. A number of windows were

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Speaker 11: smashed and bottles and actually in videos uploaded to social media,

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Speaker 11: many of the rioters can be heard chanting stop the boats,

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Speaker 11: obviously a slogan that has been used by politicians in

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Speaker 11: this country with regards to controlling the migrant crisis and

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Speaker 11: asylum seekers. So far, around one hundred and fifty arrests

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Speaker 11: have been made, so it's been really a difficult and

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Speaker 11: frightening time for many in those communities.

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Speaker 4: Yeah.

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Speaker 1: Absolutely, and there will be a meeting of the Prime

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Speaker 1: Minister today being organized. In terms of the response, we've

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Speaker 1: heard from Kistam, We've also heard from the Home Secretary.

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Speaker 11: Yeah, the government does seem to be operating a sort

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Speaker 11: of two pronged response to this at the moment. They're

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Speaker 11: both emphasizing that the people responsible will be punished eventually,

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Speaker 11: but they're also focusing on the matter at hand, which

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Speaker 11: is safeguarding those vulnerable in the communities. And it's been

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Speaker 11: really a first big test for this government, which remember

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Speaker 11: is only a month old. Kist Arma, the Prime Minister,

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Speaker 11: a former Director of Public Prosecutions. He's very focused on

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Speaker 11: bringing those responsible to justice. He's promised that those engaged

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Speaker 11: in what he's describing as far right thuggery will face

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Speaker 11: the full force of the law. But he's also called

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Speaker 11: an emergency security meeting in a bid to really quell

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Speaker 11: the unrest that's happening at the moment. There are worries

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Speaker 11: that further rallies are planned in terms of the security

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Speaker 11: for targeted communities. We've also, as you mentioned her, from

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Speaker 11: the Home Secretary of VC Cooper, and she's announced that

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Speaker 11: additional measures will be put in place to protect mosques

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Speaker 11: and she's pledged the full backing of the police in

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Speaker 11: dealing with this unrest. The government have really been consistent

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Speaker 11: in this message of sort of retribution and deterrence, though

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Speaker 11: the VAT Cooper has also said on x that anyone

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Speaker 11: that gets involved in criminal disorder will have to pay

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Speaker 11: the price. So security forces too are echoing this message.

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Speaker 11: We've heard from high up officials in the police that

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Speaker 11: they will do whatever it takes to make sure that

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Speaker 11: those responsible will get through the court system. So it's

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Speaker 11: really a message of deterrence and of retribution that we're

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Speaker 11: here so far, Tima.

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Speaker 2: One of the things that's been considered in this response

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Speaker 2: is holding emergency court sittings through the night. That's something

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Speaker 2: last seen in twenty eleven during the riots that you

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Speaker 2: mentioned earlier, which was you know, these incidences of violence

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Speaker 2: being compared to those as the worst since that date.

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Speaker 2: How closely can we compare these two incidents, So.

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Speaker 11: At this stage we can't say that these riots have

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Speaker 11: been as severe as what took place in London in

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Speaker 11: twenty eleven. In our Bloomberg reporting, we've coated Cassie Rowland,

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Speaker 11: who is a senior researcher at the Institute for Government,

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Speaker 11: and she says this situation is not yet a crisis

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Speaker 11: and if we really look at the numbers back in

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Speaker 11: London in twenty eleven, there were five one hundred and

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Speaker 11: seventy five offenses recorded by the police and almost four

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Speaker 11: thousand people arrested by the time we reached early September.

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Speaker 11: Comparing that to these riots so far, we've seen just

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Speaker 11: about one hundred and fifty arrests, so not quite on

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Speaker 11: the same scale, but interestingly, the role of social media

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Speaker 11: in perpetuating disinformation seems to be slightly similar. So back

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Speaker 11: in twenty eleven, Scotland jar's Deputy Assistant Commissioner said that

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Speaker 11: social media and other methods were used in the organization

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Speaker 11: of the twenty eleven riots, and also in regards to

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Speaker 11: the riots that took place in London, there was some

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Speaker 11: social media conversation and postings about further incidents happening across

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Speaker 11: the country, with people posting on Twitter saying that things

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Speaker 11: would happen in other cities, and this sort of disinformation

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Speaker 11: was criticized at the time, and we're seeing a similar

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Speaker 11: thing happening with these riots taking place now, a number

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Speaker 11: of post fueling further violence. So we'll see what happens

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Speaker 11: with these posts on social media and how they're eventually

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Speaker 11: dealt with by the relevant authorities too.

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