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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: They say's the Bloomberg Daybreak Europe podcast, available every morning

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Speaker 2: on Apple, Spotify or wherever you listen. It's Tuesday, the

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Speaker 2: thirty first of December in London. I'm Stephen Carroll coming

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Speaker 2: up today. The US Treasury Department says hackers backed by

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Speaker 2: China gained access to its systems earlier this month. Europe

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Speaker 2: faces higher natural gas prices in the new year as

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Speaker 2: Russian supplies switch off and a coal snap looms. Plus

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Speaker 2: Arise Sir Nole, the former hspc CEO, is nighted in

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Speaker 2: the UK's New Year honors list, alongside London Mercedi Can

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Speaker 2: and Garrett's Southgate. Let's start with a end up of

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Speaker 2: our top stories. The US Treasury Department says it was

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Speaker 2: hacked earlier this month by Chinese backed cyber attackers. In

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Speaker 2: a letter to Congress, the Treasury said the major cyber

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Speaker 2: security incident led to unauthorized accessing of workstations and unclassified documents. Bloomberg,

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Speaker 2: grietor John Harney. The news is likely to further complicate

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Speaker 2: relations between Washington and Beijing.

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Speaker 3: The US China Releasis, which cover a best best scope

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Speaker 3: for issues and agendas, etc. Had been improving somewhat, but

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Speaker 3: this as a Trumpet administration is about to take office,

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Speaker 3: suggests that much much remains to be resolved.

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Speaker 2: Limberg editor John Harney says the hackers gained access via

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Speaker 2: a third party software provider, Beyond Trust, which has contracts

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Speaker 2: with the US Defense and Justice Departments. In a statement,

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Speaker 2: the Chinese Embassy in Washington called the claims smear attacks

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Speaker 2: against China without any factual basis. China's presidents as the

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Speaker 2: economy grew by about five percent this year, signaling Beijing

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Speaker 2: is on track to meet its official targets. It comes

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Speaker 2: as new data showed China's services activity expanding at the

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Speaker 2: fastest pace in nine months, while the manufacturing sector grew

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Speaker 2: for a third month in a row. The official non

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Speaker 2: manufacturing PMI for December rose to the slightly higher than

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Speaker 2: forecast figure of fifty two point two, while the matter

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Speaker 2: of factor reading came in at fifty point one. The

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Speaker 2: data adds to tentative signs at the world's second largest

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Speaker 2: economy is recovering after authorities announced a raft of stimulus

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Speaker 2: measures in late September. Russian natural gas flows to Europe

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Speaker 2: through Ukraine are due to stop today after a transit

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Speaker 2: agreement comes to an end. The continent is expected to

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Speaker 2: see increase demand for gas next month with colder than

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Speaker 2: usual temperatures and weaker wind levels. That'll add further strained

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Speaker 2: to reserves, which are already being depleted at a faster

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Speaker 2: than normal pace. European gas prices are up around forty

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Speaker 2: five percent this year. Germany's political leaders have criticized Elon

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Speaker 2: Musk for interfering in their election. Chancellor Olaf Schultz and

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Speaker 2: leaders of two other main parties attacked the billionaire for

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Speaker 2: his repeated public support of Germany's far out party, the AfD.

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Speaker 2: His German government spokesperson Christiann Hoffmann, speaking via translator, MS, it.

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Speaker 4: Is indeed the case that Elon Musk is trying to

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Speaker 4: influence the federal election through his statements. He's free to

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Speaker 4: express his opinion. One does not have to share this opinion.

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Speaker 3: Now.

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Speaker 4: I think it's good to point out once again in

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Speaker 4: principle that a voting recommendation is being made here for

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Speaker 4: a party that is being monitored by the Office for

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Speaker 4: the Protection of the Constitution on suspicion of being right

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Speaker 4: being extremist, and that has already been recognized as being

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Speaker 4: right being extremist in parts.

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Speaker 1: All right, it's entire in rites extremistic.

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Speaker 2: With less than two months until the election, the Conservative

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Speaker 2: CDU CSU alliance is a comfortable lead in opinion polls,

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Speaker 2: with the AfD in second place and Schultz's SPD party

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Speaker 2: in third. UK consumers are staying frugal, with spending barely

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Speaker 2: growing all year. Barkley's debit and credit card data show

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Speaker 2: spending on essentials increased by zero point nine percent, down

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Speaker 2: from amost four percent growth last year. Billbrook James Wilcock

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Speaker 2: has more, You've had.

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Speaker 5: A bad day finan This is a tight so you

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Speaker 5: treat yourself and buy something little to perk yourself up.

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Speaker 5: That's how Barkleys see the u UK economy in twenty

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Speaker 5: twenty four. Their data shows people cutting back on both

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Speaker 5: essential spending on items like food, but also big ticket

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Speaker 5: purchases and buying little luxuries to cheer themselves up. Labour's

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Speaker 5: challenge is how to get these cautious consumers who are

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Speaker 5: now setting well more than the historical average spending again

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Speaker 5: in London. James Wilcock, Bloomberg Radio.

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Speaker 2: Former HSPC CEO Noel Quinn and the boss of Rolls,

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Speaker 2: Royce warren't East, have been knighted in the UK's New

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Speaker 2: Year Honors list. Others recognized include London Mayor Sadiq Khan

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Speaker 2: and former England manager Gareth Southgate. Well known broadcasters also featured,

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Speaker 2: with Stephen fry awards a knighthood for his services to

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Speaker 2: mental health.

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Speaker 6: It's obviously delightful and one says all the things that

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Speaker 6: other people say, like you. My mother, who is ninety two,

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Speaker 6: is obviously completely thrilled and as any parent I suppose

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Speaker 6: would be, and that's a lovely thing.

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Speaker 2: Stephen Frye there. The highest award in this year's list

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Speaker 2: went to the Nobel Prize winning now Casuroi Shaguru, author

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Speaker 2: of The Remains the Day and Never Let Me Go.

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Speaker 2: He was made a Companion of Honor and organizers of

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Speaker 2: London's New Year z fireworks display say they're closely monitoring

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Speaker 2: the weather conditions. That's after Edinburgh's Hogmanet street party and

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Speaker 2: fireworks were canceled due to concerns over extreme weather. They're

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Speaker 2: Alan Thompson from Unique Assembly, which runs the festivities, says

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Speaker 2: they didn't take the decision lightly.

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Speaker 7: We've had two cancelations previously in the last thirty years,

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Speaker 7: so it's not a regular occurrence, but it does happen.

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Speaker 7: But yeah, people understand because we want to keep them safe,

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Speaker 7: but they can still enjoy Edinburgh that new year.

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Speaker 2: Alan Thompson speaking there is the UK's Met Office as

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Speaker 2: issued weather warnings for wind, rain and snow across much

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Speaker 2: of the country. Those are your top stories on the markets.

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Speaker 2: Forty one hundred fatures are down a quarter of one percent.

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Speaker 2: Can't current features are a tenth of one percent lower.

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Speaker 2: Cs I three hundred Index of Chinese shares finishing down

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Speaker 2: one point six percent. Brank Crew this morning nine tenths

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Speaker 2: hire at seventy four dollars and sixty five cents. In

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Speaker 2: a moment, we'll bring you more on the major cybersecurity

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Speaker 2: breach at the US Treasury that's been blamed on China,

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Speaker 2: plus the looming deadline for Russian natural gas supplies to Europe.

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Speaker 2: But I wanted to mention another story I've been reading

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Speaker 2: this morning from opinion columnist in Tokyo, garod Redy. He's

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Speaker 2: been writing about the Japanese word of the Year, an

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Speaker 2: announcement we usually get at this time of year. That's

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Speaker 2: when a panel of Japanese writers, commentators, and celebrities pick

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Speaker 2: a buzzword or phrase that has been introduced into the lexicon.

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Speaker 2: Pastrunners have included insta bay describing something that looks good

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Speaker 2: for your Instagram, or santaku the practice of acting on

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Speaker 2: orders yet to be given. This year's choice, though, has

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Speaker 2: been somewhat controversial, catching many including Groad by surprise. It's

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Speaker 2: called futuhodo, and it's the abbreviation of a TV show

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Speaker 2: title that translates as extremely inappropriate. It's about a time

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Speaker 2: traveling teacher from an era before political correctness, but many

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Speaker 2: people in Japan have never heard of it, and the

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Speaker 2: Internet is up in arms. As you might imagine, Growed

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Speaker 2: has a great silverary of that controversy, but he also

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Speaker 2: offers his own suggestion for the word of the year.

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Speaker 6: Out in.

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Speaker 2: It's a word that's long since been used to describe

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Speaker 2: a vehicle rolling over, but has in recent years been

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Speaker 2: adopted online in a self deprecating manner to describe the

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Speaker 2: type of shock that might cause you to say fallout

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Speaker 2: of your chair. In surprise, Growth Rights. The twenty twenty

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Speaker 2: four was full of events that caused US two out

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Speaker 2: in Let's hope for fewer in twenty twenty five. You

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Speaker 2: can read the full piece Bloomberg dot Com Forward Slash

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Speaker 2: Opinion that's bringing more details now in our top story

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Speaker 2: and the hacking of the US Treasury Department by Chinese

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Speaker 2: state sp sponsored actor, our senior editor Bill Ferries joins

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Speaker 2: us now for more. Bill, what do we know about

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Speaker 2: this cyber attack?

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Speaker 8: Well, it seems that on December eighth, Treasury was told

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Speaker 8: by this third party software provider, Beyond Trust, that a

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Speaker 8: hacker had gotten access to this cloud system that is

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Speaker 8: used to provide technical support to the Treasury Department. The

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Speaker 8: determination was that it was a state sponsored hacker, that

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Speaker 8: it was ultimately China behind this, and that the hackers

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Speaker 8: may have had access to some workstations at the Treasury

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Speaker 8: Department and may have accessed some unclassified documents. That said

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Speaker 8: that this designation major cybersecurity attack. That's something Treasury uses

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Speaker 8: when it is a state sponsored actor. But it doesn't

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Speaker 8: sound like it was really the worst case scenario that

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Speaker 8: you can imagine for a hack of the Treasury Department.

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Speaker 2: This is the latest in a series of stories that

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Speaker 2: we've heard though about China's hacking and espionage capabilities. How

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Speaker 2: does it compare to other hacks.

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Speaker 8: Well, the really big one that's looming now in the

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Speaker 8: intelligence agency's minds is this salt Typhoon hack of nine

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Speaker 8: US telecom companies. That one is one where hackers appeared

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Speaker 8: to have been in place for months, accessing all kinds

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Speaker 8: of data about Americans phone calls and even getting a

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Speaker 8: chance to hack in or attempt to hack into the

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Speaker 8: phones of then presidential candidate Donald Trump, his vice presidential

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Speaker 8: candidate JD. Vance, as well as Kamala Harris's team. So

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Speaker 8: that seems to be a much deeper one. There are

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Speaker 8: reports that aspects of that hack have continued, that the

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Speaker 8: intelligence agencies haven't been able in the phone companies, haven't

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Speaker 8: been able to get those hackers out of the system yet.

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Speaker 8: That is a kind of the kind of attack that

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Speaker 8: I think is probably much more worrying at this point,

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Speaker 8: even with the news of this latest attack on the

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Speaker 8: Treasury Department.

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Speaker 2: What does all of this mean for US China relations

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Speaker 2: as we count down to Donald Trump taking office.

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Speaker 8: Well, you know, it's been a tense relationship. There's been

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Speaker 8: a little bit of an improvement in that in the

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Speaker 8: last couple months, but it was always going to be

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Speaker 8: a very tense relationship heading into the Trump presidency. Of

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Speaker 8: course he's promised a wide range of tariffs on Chinese goods.

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Speaker 8: Then again, Donald Trump will take this as he wants to.

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Speaker 8: If there's a way for him to make what he

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Speaker 8: thinks is a good deal and overlook some things, I

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Speaker 8: think he'll take advantage of that if he needs. It's

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Speaker 8: a reason to come down harder on China than he

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Speaker 8: had planned than. This plays right into that. He of

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Speaker 8: course has a lot of very hawkish advisors when it

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Speaker 8: comes to China, but he also has Elon Musk who

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Speaker 8: has a very strong working relationship with Beijing with his

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Speaker 8: Tesla factories. So how this plays out is really something

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Speaker 8: we're not going to know very well until after January twentieth.

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Speaker 2: Bill, what about concerns about the security of US government departments?

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Speaker 2: Beyond Trust was a contractor for several departments. Is this

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Speaker 2: something that is going to be an issue in focus?

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Speaker 8: Absolutely? You know, it's only just a few years ago

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Speaker 8: you were talking about government agencies having very antiquated systems

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Speaker 8: for cybersecurity. That all started to get improved. I think

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Speaker 8: after the twenty sixteen election, when there was Russian hacking

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Speaker 8: of the DNC, and there were other major hacks of

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Speaker 8: government agencies, including the Office of Personnel Management. So there's

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Speaker 8: been an improvement, but this is going to raise questions

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Speaker 8: about whether the US is moving fast enough to bolster

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Speaker 8: its defenses against China and countries like Russia in Iran.

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Speaker 2: Okay, Bill Ferries, thank you very much for joining us

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Speaker 2: our senior editor there with details of that story around

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Speaker 2: the hacking of the US Treasury Department. Now, Russian gas

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Speaker 2: flows to the rest of Europe are due to stop

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Speaker 2: at midnight as a deal which allowed gas to be

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Speaker 2: transported through Ukraine expires. Slovakia's prime ministers called on the

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Speaker 2: EU to intervene to prolong the agreement. His country remains

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Speaker 2: highly dependent on supplies from Russia. We're looking at European

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Speaker 2: gas prices forty five percent higher this year and concerns

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Speaker 2: coming in the next few months as well around how

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Speaker 2: colder weather and a lack of supply from wind power

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Speaker 2: might expect affect the energy mix in the early months

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Speaker 2: of twenty twenty five. Let's bring in Steven Schaptchinsky, who

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Speaker 2: leads our team of energy reporters in Asia for more Stephen,

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Speaker 2: just bring us up to date how important a supplier

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Speaker 2: is Russia to Europe. Now almost three years since the

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Speaker 2: full scale and the Ukraine begun, and many countries have

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Speaker 2: worked to phase out the use of Russian gas.

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Speaker 9: Yeah, I mean, before the war in Ukraine began, Russia

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Speaker 9: was the largest supplier of gas to Europe. Now that

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Speaker 9: has changed quite significantly. Other supply routes, other contracts have

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Speaker 9: been curbed significantly. Nordstream is no longer viable route for

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Speaker 9: gas into Europe, so that's totally off as well. Other

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Speaker 9: buyers have moved to shift away. That being said, there

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Speaker 9: is still gas flowing, particularly as you mentioned through Ukraine.

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Speaker 9: Fifteen billion cubic meters a year moves through those Ukrainian

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Speaker 9: pipelines to Europe. And while that is set to end

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Speaker 9: at the end of the month or today, rather, it

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Speaker 9: doesn't represent enough in a way that it could lead

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Speaker 9: to shortages in Europe in the near term, but it

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Speaker 9: does lead to price pressure. It could increase the price

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Speaker 9: of gas or electricity in Europe because now European buyers

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Speaker 9: will still need to find alternative supply, and more often

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Speaker 9: than not that will be liquified natural gas, which will

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Speaker 9: be pricier than the gas that they were getting via

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Speaker 9: this pipes from Russia.

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Speaker 2: Is there any times the transit dale actually gets extended.

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Speaker 9: The time, you know, the clock is ticking, they is

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Speaker 9: quite unlikely they can get something done now. And the

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Speaker 9: reason why I say that is both one. Putin had

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Speaker 9: given up some public comments just over the last few

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Speaker 9: days saying that it's too difficult to complete a deal

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Speaker 9: this quickly. At the same time, Ukraine's Lensky has said

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Speaker 9: that he doesn't want Russia to profit off of the

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Speaker 9: gas transiting their borders. So with both of those leaders

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Speaker 9: saying that the deal is unlikely to be done, it

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Speaker 9: isn't looking like it can happen. It can be pulled

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Speaker 9: together now, there are alternatives that could occur over the

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Speaker 9: next few weeks and months. There's a chance that they

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Speaker 9: could get another supply, maybe not rushing gas, but another

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Speaker 9: source of gas through those pipes. Maybe they could come

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Speaker 9: to an agreement if there is some sort of ceasefire

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Speaker 9: that Trump has been pushing in the conflict in Ukraine.

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Speaker 9: But at this moment, an extension of this deal does

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Speaker 9: seem quite unlikely.

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Speaker 2: Okay, so a lot of uncertainty about that. Add to that.

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Speaker 2: Then the other factors involved colder weather expected in January

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Speaker 2: and also a lack of wind power. What does that

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Speaker 2: mean for the outlook for prices in the coming months.

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Speaker 9: I mean the gas market is finally balanced, right. There

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Speaker 9: is enough storage to avoid shortages that will curtail gas

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Speaker 9: to industries or households, But there could be price spikes

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Speaker 9: if there is a sudden increase in demand. Now, gas

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Speaker 9: demand peaks in the winter when it's used for heating,

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Speaker 9: so if there is really cold weather, folks will have

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Speaker 9: to use the gas to heat their homes. If there's

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Speaker 9: no wind, that means that there will be less renewable

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Speaker 9: energy output, where again you to depend more on gas

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Speaker 9: for power generation. So those things combined does increase the

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Speaker 9: demand for gas. That could increase the amount of gas

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Speaker 9: that is taken out of storage, therefore making gas more

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Speaker 9: expensive in the spot market as traders look at how

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Speaker 9: they're going to refill it later this year. So that

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Speaker 9: is one element that could be bullish as well. The

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Speaker 9: market will be carefully watching the ramp up of US

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Speaker 9: L and G exports. There are two projects that are

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Speaker 9: ramping up output, one in Louisiana and one in Texas.

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Speaker 9: And depending on how quickly they can ramp that up,

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Speaker 9: that could be more supply into the market.

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