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Speaker 1: This is Bloomberg daybak you up for this Friday, the

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Speaker 1: sixteenth of June in London.

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Speaker 2: Coming up today, focused on the job at hand. The

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Speaker 2: UK's deputy Prime minister tells Bloomberg Radio the government won't

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Speaker 2: be distracted by Johnson and the party gave report.

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Speaker 1: Setting up a September debate. The European Central Bank hikes

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Speaker 1: again as Lagarde says more work is needed.

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Speaker 2: Twenty percent down. Deutsche Bank warns of a big drop

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Speaker 2: in trading revenue plus.

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Speaker 1: A trajectory towards war. Henry Kissinger warns China and the

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Speaker 1: US are on a path towards conflict on Taiwan.

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Speaker 3: That's all straight ahead on Bloomberg Daybreak Europe. The business

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Speaker 3: news you need to start your day in just one

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Speaker 3: fifteen minute podcast on Apple, Spotify, the Bloomberg Business App

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Speaker 3: and everywhere you get your podcasts.

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Speaker 2: Good morning, I'm Stephen.

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Speaker 1: Carroll and I'm Caroline Hecker. Here are the stories that

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Speaker 1: we're following today.

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Speaker 2: Britain's deputy Prime minister says politicians need to focus on

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Speaker 2: delivering results instead of the drama in Westminster. A damning

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Speaker 2: report into his former leader Baris Johnson's conduct has reopened

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Speaker 2: bitter rifts inside the governing Conservative Party. Deputy Prime Minister

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Speaker 2: Oliver dad And told the Bloomberg UK Politics podcast he

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Speaker 2: has nothing to say to Boris Johnson. His message is

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Speaker 2: for business.

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Speaker 4: I can assure you the government remains absolutely focused on

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Speaker 4: the job at hand, that we have worked to bring

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Speaker 4: back that stability to the UK economy which people rely on,

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Speaker 4: and you have in the Prime Minister in the Transfer

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Speaker 4: indeed and Mere's Deputy Prime Minister. People that want to

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Speaker 4: ensure that stability, who get tech, who get the opportunities,

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Speaker 4: and are determined we seize them to drive the prosperity

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Speaker 4: of the nation.

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Speaker 2: You can hear that full interview with Oliver Dawden on

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Speaker 2: the UK Politics podcast. Will be voting on the party

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Speaker 2: gate Reports recommendations on Monday, with allies of Boris Johnson

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Speaker 2: accusing it of bias.

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Speaker 1: Investor's fears are mounting that economic damage are threatening to

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Speaker 1: overshadow the next round of rate hikes all but promised

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Speaker 1: by the Fed, ECB and others. The European Central Bank

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Speaker 1: joined the Federal Reserve by raising rates by twenty five

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Speaker 1: basis points on Thursday, and ECB President Christine Laguard says

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Speaker 1: she expects to go further.

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Speaker 4: It is very likely the case that we will continue

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Speaker 4: to increase rates in July, which probably doesn't come as

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Speaker 4: a big surprise to you, but that's what I'm telling you.

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Speaker 1: Leguard spoke after the Central Bank voted to lift rates

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Speaker 1: two three and a half percent, the highest level in

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Speaker 1: more than two decades. The Eurozone entered a mild recession

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Speaker 1: in the first quarter, with Christine Laguard warning that the

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Speaker 1: economy had stagnated and will remain weak in the short run.

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Speaker 2: In the United States, former Treasury Secretary Larry Summers is

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Speaker 2: warning the divided federal ross deserve could blow the central

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Speaker 2: Bank off course. Here's what he told Bloomberg's Wall Street

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Speaker 2: Week with David Weston.

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Speaker 5: I'm not sure I found the Fed's action a little

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Speaker 5: bit confusing. This meeting felt like it was driven as

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Speaker 5: much by the internal political dynamics of the FED as

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Speaker 5: by any consistent and coherent reading of the economic situation,

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Speaker 5: and that was a bit disturbing to me.

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Speaker 2: Larry Summer's comments come after unanimous decision by FED policymakers

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Speaker 2: to pause rate hikes following fifteen months of tightening. However,

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Speaker 2: the former Treasury Secretary and others have been left scratching

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Speaker 2: their heads by the Central Bank's forward guidance, pausing hikes

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Speaker 2: while simultaneously boosting the growth forecast and flagging additional tightening.

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Speaker 1: Now, the Bank of Japan has held its stimulus in

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Speaker 1: place as it waits for more sustainable inflation. Bloomberg's Bland

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Speaker 1: Curtis has more on the story.

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Speaker 6: Governor Kazuo oh wait A left unchange the boj's negative

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Speaker 6: interest rate and yield curve control program. Yen immediately weakened

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Speaker 6: against the dollar. Not that there was much doubt to

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Speaker 6: any of this, as it was predicted by forty four

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Speaker 6: of forty seven economists we surveyed. Governor Luaida has said

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Speaker 6: the cost of prematurely tightening policy could damage Japan's nascent

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Speaker 6: inflation trend, and he's not willing to risk it. Still,

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Speaker 6: speculation rumbles on that a tweak may be coming in July.

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Speaker 6: Brian Curtis Slumberg Daybreak Europe.

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Speaker 2: Deutsche Bank expects trading revenues declined by as much as

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Speaker 2: twenty percent this quarter. The German lander joins Wall Street

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Speaker 2: firm's warning of weaker debt trading as interest rates near

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Speaker 2: their peak and economies weaken. Speaking at an investor conference

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Speaker 2: hosted by Goldman Sachs in Paris, Deutschebank's CFO James van

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Speaker 2: Moltkez says they're naturally going to have a step back

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Speaker 2: after an outstanding quarter last year. Deutsche Bank's German shares

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Speaker 2: extended losses after the comments.

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Speaker 1: The former US Act of State Henry Kissinja says that

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Speaker 1: a military conflict between China and Taiwani is probable if

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Speaker 1: things don't change. The former American diplomat and political theorist

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Speaker 1: sat down with Bloomberg's editor in chief John Micklethwaite to

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Speaker 1: discuss his life and career upon turning one hundred years old.

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Speaker 1: In a wide ranging conversation, he spoke of his concerns

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Speaker 1: regarding the future of Taiwan.

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Speaker 7: Well on the current trajictary of religion. I think some

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Speaker 7: military conflute is probable, but I also think the current

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Speaker 7: pradictory of religion must be older.

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Speaker 1: You can watch her that full conversation with the former

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Speaker 1: US Sector of State Henry Kissinger on Bloomberg TV at

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Speaker 1: midday on Saturday, or download it right now on the

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Speaker 1: Bloomberg Talks podcast available on Apple, Spotify or wherever you listen.

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Speaker 1: Those are our top stories.

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Speaker 2: An interesting story that caught my eye on the turneal

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Speaker 2: this morning, Caroline, to do with something perhaps a little

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Speaker 2: bit awry in the stock market in Indonesia. Mysterious one

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Speaker 2: thousand percent gains on some stocks are fueling calls for

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Speaker 2: tighter regulation in the market in Indonesia, known as deep

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Speaker 2: fried shares among local traders.

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Speaker 1: Yeah, this is the idea that there's a lot of

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Speaker 1: speculation and so it keeps those shares you know, hot, hot, hot,

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Speaker 1: and then kind of moving rapidly. Yeah, there is there

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Speaker 1: is concern. It's not uncommon in some Southeast Asian markets

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Speaker 1: for there to be very big swings, but Indonesia in particular,

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Speaker 1: So why the IMFs issued a warning too.

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Speaker 2: Yeah, and it's something that this concerns about ten percent

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Speaker 2: of the total stocks listed in Indonesia, around eighty three

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Speaker 2: companies have seen their share prices swing by one thousand

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Speaker 2: percent from peak to trough, which is bigger than the

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Speaker 2: swings that we have seen in other neighboring markets, for example.

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Speaker 2: So that's why it's something that's caught the attention of

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Speaker 2: regulators and that warning. As you say, from the IMF

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Speaker 2: Investment Managers, also calling for regulators to step in to

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Speaker 2: see why those levels of volatility are so extreme in

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Speaker 2: that sector of the Indonesian market. On thousand percent swayings though,

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Speaker 2: you know, just a casual day in stock markets.

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Speaker 1: Well, look, if you're going to the thing is though,

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Speaker 1: if you've got a penny stocks or very cheap stocks

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Speaker 1: and a very in liquid market, one thousand percent is

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Speaker 1: not enough.

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Speaker 2: Vers Fine, fine, you did the matter.

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Speaker 3: Okay, Caroline, there we go.

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Speaker 1: All right, let's get more then. On our top interview

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Speaker 1: this morning, Deputy Prime Minister Oliver Dowd and speaking to

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Speaker 1: our UK correspondent Lizzie Burden at the Founder's Forum event

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Speaker 1: which is part of London Tech Week, and Lizzie joins

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Speaker 1: us Now Institutio. Great to have you on the program.

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Speaker 1: You were speaking to Oliver down just hours after the

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Speaker 1: publication of the party Gate report, which had some pretty

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Speaker 1: damning conclusions around the former Prime Minister Boris Johnson, so

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Speaker 1: obviously you had to put that question to him.

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Speaker 8: Yeah, it was obvious that Dan didn't want to talk

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Speaker 8: about Boris Johnson. Is frankly annoying for ministers that the

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Speaker 8: former Prime minister is destroy acting attention away from the

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Speaker 8: diligent government that Sunak's trying to present. And Dowden's also

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Speaker 8: in charge of the Cabinet Office, which has been in

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Speaker 8: this kind of briefing wark with Boris Johnson. So Dowden

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Speaker 8: said that it's for Parliament to decide on these matters

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Speaker 8: of ethics and standards. Conveniently, he said he'd spent the

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Speaker 8: morning campaigning, so he hadn't read the report in detail.

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Speaker 8: But his point was that he's focused on government and

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Speaker 8: he denied that all this mischief and scandal is leaving

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Speaker 8: ministers less time to engage with business.

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Speaker 4: You know.

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Speaker 8: Labor of course is getting on with it's smoked salmon

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Speaker 8: and scrambled eggs offensive, it says. And on Monday you'll

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Speaker 8: have MPs voting on whether to accept the party gate

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Speaker 8: inquiries finding that Johnson repeatedly misled politicians about these parties

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Speaker 8: in Downing Street. It's a high risk strategy, but it's

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Speaker 8: intended to remove this long shadow that Johnson's casting over

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Speaker 8: Sunax premiership.

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Speaker 2: Meanwhile, the government, of course, once we be focusing on

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Speaker 2: things like the economy. We've had a raft of economic

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Speaker 2: data in recent days, casting doubt on that key priority

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Speaker 2: the government has of having inflation by the end of

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Speaker 2: the year. What was Alra Dawden's view on that.

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Speaker 8: Well, he says that the government's going to stick to

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Speaker 8: its priority of harving inflation by the end of the year,

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Speaker 8: not just reducing it. As soon ac hinted at at

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Speaker 8: Prime Minister's questions, we didn't really hear him talking about

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Speaker 8: halving it. Take a listen to this.

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Speaker 4: Of course, we stick by the target that we set

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Speaker 4: for inflation when we announce those five priorities. But what

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Speaker 4: it does require is discipline from the government and that's why,

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Speaker 4: for example, in relation to some of the difficult decisions

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Speaker 4: we have to take in respect of public sector pay

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Speaker 4: and we are absolutely determined to bring inflation back down.

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Speaker 4: That's core to the stability of the United Kingdom and

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Speaker 4: its core to making sure that we have the prosperity

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Speaker 4: going forward.

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Speaker 8: But the trouble is, as the recent data have shown

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Speaker 8: inflation sticky growths anemic, and we get more inflation data

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Speaker 8: next week. We also have a Bank of England decision

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Speaker 8: on Thursday. The job's data suggests that more hikes are needed.

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Speaker 8: That's what markets reckon are coming and that increases the

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Speaker 8: risk of a recession for the UK later on.

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Speaker 1: Yeah, although can I just point out, as Mervin King said,

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Speaker 1: it's not wise, in his words, to promise to cut

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Speaker 1: inflation in half, given that the government has little control

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Speaker 1: over prices. That is the job of the Bank of England.

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Speaker 1: So you know King's argument. You can take credit afterwards,

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Speaker 1: but you can't really promise it if it's not your role.

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Speaker 8: And it's one thing to not make the problem worse,

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Speaker 8: it's another thing to make it your number one priority

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Speaker 8: to harve it by the end.

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Speaker 3: Of the year. Yeah.

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Speaker 1: Also, the Deputy Prime Minister, Oliver Dowden was there actually

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Speaker 1: to speak to tech leaders. This is part of the

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Speaker 1: UK's broader efforts to pitch itself as a good place

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Speaker 1: for the sector to do business. Of course it's we said,

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Speaker 1: it's part of London Tech Week. That's the whole aim

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Speaker 1: of this. How did he do that?

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Speaker 5: Yeah?

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Speaker 8: Ask whether he have a muses about whether the civil

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Speaker 8: service should be run by a R. He said he

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Speaker 8: wonders whether civil servants have a muse about politicians running

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Speaker 8: being run by AI instead. But overall he's very optimistic

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Speaker 8: about tech and I thought it was interesting as the

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Speaker 8: former Digital and Culture and Sports Minister. You know that

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Speaker 8: he has all this experience about it and he wants

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Speaker 8: to emphasize the opportunities over the risks. We often talk

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Speaker 8: about how Starma and Sunac have been sounding similar in

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Speaker 8: the balance between the two. Darden was keen to throw

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Speaker 8: his weight on the benefits and opportunities side.

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Speaker 4: Take to listen, AI is the one technology where I think,

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Speaker 4: actually genuinely we could get more for less in the

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Speaker 4: next ten years. In health, in education, we could massively

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Speaker 4: improve outputs whilst not increasing input. That's the opportunity for

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Speaker 4: us that we have minimal, sensible, proportionate regulation and then

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Speaker 4: we just really support innovation in this space and have

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Speaker 4: that freedom and we've got the fundamentals in place for

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Speaker 4: us to be able to do that.

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Speaker 8: So he really wanted to emphasize that Richie Sunac's a

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Speaker 8: tech bro his words, not mine, and that he really

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Speaker 8: gets it. And he announced for the first time that

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Speaker 8: the Global AI Summit that's going to be hosted in

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Speaker 8: London will take place in December. Previously was expected to

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Speaker 8: be in the autumn, but now we know that it'll

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Speaker 8: be in the final month of the year.

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Speaker 2: Okay, Lizzie Burden, thank you very much. For now we

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Speaker 2: can hear that full interview with Oliver Daden on Today's

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Speaker 2: UK Politics podcast.

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Speaker 1: Now, the Bank of England the Bank of Japan whither

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Speaker 1: has held rates as expected, but its decision caps off

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Speaker 1: a week of central bank moves that have set up

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Speaker 1: markets for more monetary tightening in the months to come.

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Speaker 1: Our market's Report of Value title joins us this more

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Speaker 1: for what has been a huge week on the Bank

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Speaker 1: of Japan. First of all, no surprises, but what are

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Speaker 1: markets focused on?

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Speaker 6: Big week?

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Speaker 9: And we looks like we've survived it for now. No

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Speaker 9: surprises from the Bank of Japan. Thank god. They sand

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Speaker 9: pat and maintain their easing policies. They kept rates unchanged

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Speaker 9: and kept on with their yield curve control. The market

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Speaker 9: was really looking for any subtle hints that a tightening

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Speaker 9: cycle could be near, any change in language on their

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Speaker 9: view of inflation. We really didn't get that today. The

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Speaker 9: Bank of Japan maintained their view that inflation will slow

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Speaker 9: over the coming months, and that's the big reason why

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Speaker 9: they stand by this easy policy.

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Speaker 2: Okay, let's turn to the ECB next hiking twenty five

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Speaker 2: basis points as expected, What did you take away from

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Speaker 2: the comments we heard from Christine Legard?

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Speaker 9: She was undeniably hawkish. It was a clear message from

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Speaker 9: the ECB, unlike the confusing one many people are talking

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Speaker 9: about we got from the Fed two days ago. They

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Speaker 9: hiked by twenty five basis points. But not only that,

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Speaker 9: she backed it up with a hawkish press conference, saying

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Speaker 9: that they she gave no hints at least that the

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Speaker 9: ECB was near the end. They still have ground to cover.

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Speaker 9: These underlying price pressures are still remaining strong, and she's

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Speaker 9: talked about wages and core inflation on that matter, and

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Speaker 9: mostly most importantly, they're very likely to raise those rates

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Speaker 9: again in July. Money markets reacted to this hawkish press conference.

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Speaker 9: It's implying an almost eighty percent probability the ECB hikes

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Speaker 9: two more times and hits four percent by October.

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Speaker 1: Okay, so the Fed and the ECB diverging. Then, was

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Speaker 1: the strength of the year and the fact the strengthening

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Speaker 1: of the euro really a preview of Multi Cup.

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Speaker 9: Yeah, the market reaction was really about dollar weakness. Yesterday,

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Speaker 9: on the back of this hawkash press conference from the ECB,

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Speaker 9: the euro had one of its best days in months

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Speaker 9: up over one percent. And you can see that dichotomy

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Speaker 9: also happening in the fixed income market, treasuries rallying while

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Speaker 9: you had German yields moving higher. At one point in

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Speaker 9: the day, the German two year yield was almost fifteen

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Speaker 9: basis points higher. All down to this hawkish narrative that

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Speaker 9: Leguard came out singing with, and you know, it showed

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Speaker 9: such a blatant contrast to the way Leguard came out

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Speaker 9: hawkish versus the Fed. Even though yes, they did raise

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Speaker 9: their guidance for the terminal rate, they didn't back it

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Speaker 9: up with any hawkish language and that made it very

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Speaker 9: apparent yesterday when we compared the two. It all happened

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Speaker 9: to play out in the FX market the dollar weekend

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Speaker 9: and a euro strengthened by over one percent.

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Speaker 2: Faleri, Is there a broader point that to be made

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Speaker 2: this week from central bank decisions that all the central

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Speaker 2: banks did what we expected them to do. Is this

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Speaker 2: a period of no surprises?

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Speaker 9: You know, I don't think so. And because we're nearing

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Speaker 9: the end of the cycle and communication for central banks

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Speaker 9: on where that just where that influx is going to

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Speaker 9: be is always going to be very tricky. So you know,

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Speaker 9: it was clear that there were no surprises on the

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Speaker 9: rate decisions, but there was a lot of surprises based

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Speaker 9: on the communication, based on what they told us in

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Speaker 9: the press conference. And I don't think that theme is

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Speaker 9: going by anytime soon. I think you're gonna see a

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Speaker 9: lot more nuance in the way that central banks maybe

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Speaker 9: continue these hiking cycles, but then try to hint in

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Speaker 9: some manner that the end could be near.

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

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Speaker 2: stories making news from London to Wall Street and beyond.

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