1
00:00:02,440 --> 00:00:07,280
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

2
00:00:10,360 --> 00:00:13,760
Speaker 2: This is the Bloomberg Daybreak youurate podcast, available every morning

3
00:00:13,760 --> 00:00:17,200
Speaker 2: on Apple, Spotify or wherever you listen. It's Thursday, the

4
00:00:17,360 --> 00:00:19,959
Speaker 2: ninth of January in London. I'm Stephen Carroll.

5
00:00:19,760 --> 00:00:23,200
Speaker 3: And I'm Lizzie Burden. Coming up today, risking a crisis.

6
00:00:23,320 --> 00:00:26,840
Speaker 3: UK bond yields continue to rise as long simmering worries

7
00:00:26,880 --> 00:00:28,639
Speaker 3: over the UK economy boil over.

8
00:00:28,920 --> 00:00:31,800
Speaker 2: Wildfire is tear through Los Angeles, killing at least five

9
00:00:31,880 --> 00:00:34,360
Speaker 2: people and forcing one hundred thousand to flee.

10
00:00:34,560 --> 00:00:38,320
Speaker 3: Plus is AI coming for your banking job? Exclusive research

11
00:00:38,360 --> 00:00:42,040
Speaker 3: from Bloomberg Intelligence finds two hundred thousand finance rolls could

12
00:00:42,159 --> 00:00:43,640
Speaker 3: go as profits saw.

13
00:00:43,920 --> 00:00:45,919
Speaker 2: Let's start with a roundup of our top stories.

14
00:00:46,040 --> 00:00:49,520
Speaker 3: UK markets are facing further turmoil today as guilt yields

15
00:00:49,600 --> 00:00:54,240
Speaker 3: rise again further after hitting multi decade highs. Meanwhile, the

16
00:00:54,240 --> 00:00:57,200
Speaker 3: pound has continued to be pummeled and equities of slumped.

17
00:00:57,520 --> 00:01:01,160
Speaker 3: Concerns over stubborn inflation, a ballued government debt, pal and

18
00:01:01,320 --> 00:01:04,360
Speaker 3: tepid growth of all hit a nerve in recent days,

19
00:01:04,400 --> 00:01:07,720
Speaker 3: with traders heaping pressure on the embattled labor government. He's

20
00:01:07,720 --> 00:01:10,440
Speaker 3: been vokes Managing editor for Effects and Rates, Rachel Evans,

21
00:01:10,840 --> 00:01:12,080
Speaker 3: these are issues.

22
00:01:11,680 --> 00:01:14,920
Speaker 1: That have been kind of lurking behind a sentiment on

23
00:01:15,240 --> 00:01:18,800
Speaker 1: UK assets for a while now, particularly since we had

24
00:01:18,840 --> 00:01:22,440
Speaker 1: the UK budget under the new Labor Party administration back

25
00:01:22,480 --> 00:01:26,480
Speaker 1: in October. People have been really getting growing concerned about

26
00:01:26,520 --> 00:01:28,759
Speaker 1: the amount of debt that they are looking to sell

27
00:01:29,000 --> 00:01:31,600
Speaker 1: in order to fund their spending plans. We've got two

28
00:01:31,720 --> 00:01:34,319
Speaker 1: hundred and ninety seven billion pounds worth of debt to

29
00:01:34,360 --> 00:01:37,200
Speaker 1: sell in this fiscal year, and those auctions are starting

30
00:01:37,240 --> 00:01:39,399
Speaker 1: to come through this week as the year gets underway.

31
00:01:39,520 --> 00:01:42,319
Speaker 1: So those seem to have really provided sort of a

32
00:01:42,400 --> 00:01:44,840
Speaker 1: reminder to investors that this is something that they need

33
00:01:44,880 --> 00:01:47,160
Speaker 1: to pay closer attention to, and I think that's really

34
00:01:47,200 --> 00:01:49,040
Speaker 1: why we're sort of starting to see this this more

35
00:01:49,120 --> 00:01:50,280
Speaker 1: dramatic move this.

36
00:01:50,320 --> 00:01:53,920
Speaker 3: Week, remokes Rachel Evans speaking there after, the ten year

37
00:01:53,960 --> 00:01:56,800
Speaker 3: guilt yield sword to its highest level since two thousand

38
00:01:56,880 --> 00:01:59,040
Speaker 3: and eight and the thirty year yielded its highest since

39
00:01:59,120 --> 00:02:02,720
Speaker 3: nineteen ninety eight. Right now, the ten year yield is

40
00:02:03,160 --> 00:02:06,279
Speaker 3: higher five basis points at four point eight four percent.

41
00:02:06,360 --> 00:02:09,680
Speaker 3: The pounds weeking for weakening further today, hitting its weakest

42
00:02:09,720 --> 00:02:13,119
Speaker 3: against the dollar since November twenty twenty three, the foot

43
00:02:13,160 --> 00:02:16,320
Speaker 3: seat two to fifty and excellumpt yesterday by almost two percent,

44
00:02:16,800 --> 00:02:19,640
Speaker 3: and right now you're looking at the foot seat two

45
00:02:19,520 --> 00:02:26,240
Speaker 3: point fifty currently trading weaker at by half of a percent.

46
00:02:27,360 --> 00:02:30,640
Speaker 2: The Chancellor, Rachel Reeves will prioritize spending cuts over tax

47
00:02:30,680 --> 00:02:34,200
Speaker 2: hikes of rising yields eliminate her fiscal headroom. Bloomberg has

48
00:02:34,240 --> 00:02:36,640
Speaker 2: learned the Chancellor will double down on her fiscal rules

49
00:02:36,680 --> 00:02:39,480
Speaker 2: in the coming weeks, hoping to reassure investors that she

50
00:02:39,520 --> 00:02:43,480
Speaker 2: would cut spending before touching taxes again. Bloomberg's James Wilcock

51
00:02:43,520 --> 00:02:44,200
Speaker 2: has more.

52
00:02:44,440 --> 00:02:47,760
Speaker 4: The government will have an iron grip on the public finances.

53
00:02:47,960 --> 00:02:50,440
Speaker 4: That's what a rare public statement from the Treasury said

54
00:02:50,520 --> 00:02:54,000
Speaker 4: yesterday as bond yield swept higher. It's the same slogan

55
00:02:54,120 --> 00:02:57,120
Speaker 4: Rachel Reeves has used for years, pitching herself as the

56
00:02:57,160 --> 00:03:01,080
Speaker 4: alternative to conservative chaos. But the in guilts has brought

57
00:03:01,160 --> 00:03:05,880
Speaker 4: numerous unfavorable comparisons to the Trust mini budget saga. Now,

58
00:03:05,919 --> 00:03:09,440
Speaker 4: Reeves's autumn budget has left her with limited fiscal headroom

59
00:03:09,639 --> 00:03:13,240
Speaker 4: and a nerved UK business. A U KPMG report shows

60
00:03:13,320 --> 00:03:16,360
Speaker 4: hiring is falling at its fastest pace in sixteen months

61
00:03:16,520 --> 00:03:19,399
Speaker 4: as companies brace for Labour's passed tax hikes to come

62
00:03:19,480 --> 00:03:22,680
Speaker 4: into force. The question is what the Chancellor does next

63
00:03:22,800 --> 00:03:26,200
Speaker 4: with her own credibility at stake in London James Walcock,

64
00:03:26,280 --> 00:03:28,560
Speaker 4: Bloomberg Radio. The moves in.

65
00:03:28,639 --> 00:03:31,720
Speaker 3: UK markets have been exacerbated by similar worries bubbling up

66
00:03:31,760 --> 00:03:35,440
Speaker 3: elsewhere in the US about incoming President Donald Trump's tax

67
00:03:35,480 --> 00:03:39,000
Speaker 3: cut and tariff policies. The tenure Treasury yield rose as

68
00:03:39,040 --> 00:03:42,520
Speaker 3: high as seven point four point seventy three percent on Wednesday,

69
00:03:42,520 --> 00:03:45,160
Speaker 3: pushing it toward the five percent peak that was hit

70
00:03:45,200 --> 00:03:49,120
Speaker 3: in October twenty twenty three, before pulling back. Now the

71
00:03:49,120 --> 00:03:51,880
Speaker 3: strains have come into focus as the US government issues

72
00:03:51,920 --> 00:03:55,120
Speaker 3: a massive one hundred and nineteen billion dollars worth of

73
00:03:55,200 --> 00:03:58,080
Speaker 3: new debt this week, and speaking to CNBC, the US

74
00:03:58,120 --> 00:04:01,600
Speaker 3: Treasury Secretary Janet Yellen rosas for herview on this recent

75
00:04:01,640 --> 00:04:02,480
Speaker 3: spike and yields.

76
00:04:03,120 --> 00:04:07,520
Speaker 5: When we see strong data on the economy, continued strong

77
00:04:07,600 --> 00:04:12,040
Speaker 5: growth and strong job market, and some over the last

78
00:04:12,320 --> 00:04:16,960
Speaker 5: couple of days surprises to the upside on indicators of

79
00:04:17,080 --> 00:04:21,640
Speaker 5: the performance of the economy that suggests that the path

80
00:04:21,720 --> 00:04:24,640
Speaker 5: of interest rates going forward may be a little bit

81
00:04:24,760 --> 00:04:26,840
Speaker 5: higher than people expected.

82
00:04:27,760 --> 00:04:31,160
Speaker 3: US Treasury Secretory Janet Yellen, speaking there to CNBC as

83
00:04:31,200 --> 00:04:34,599
Speaker 3: the minutes of the latest FED meeting revealed officials adopted

84
00:04:34,600 --> 00:04:37,120
Speaker 3: a news stance on rate cutting in December due to

85
00:04:37,120 --> 00:04:40,679
Speaker 3: the elevated inflation risks. The FED cut its benchmark lending

86
00:04:40,720 --> 00:04:43,640
Speaker 3: rate by a quarter point at that meeting, with policymakers

87
00:04:43,640 --> 00:04:47,360
Speaker 3: suggesting the need for a careful approach would be needed

88
00:04:47,400 --> 00:04:48,520
Speaker 3: over the coming quarters.

89
00:04:49,320 --> 00:04:49,920
Speaker 6: You know the news.

90
00:04:50,000 --> 00:04:52,400
Speaker 2: US President Joe Biden has scrapped a planned trip to

91
00:04:52,520 --> 00:04:56,479
Speaker 2: Rome as Los Angeles faces its worst natural disaster in decades.

92
00:04:56,760 --> 00:04:59,520
Speaker 2: Wildfires have killed at least five people and forced more

93
00:04:59,520 --> 00:05:02,880
Speaker 2: than one hundred thousand others from their homes. James McDonald

94
00:05:03,000 --> 00:05:04,200
Speaker 2: is the city's chief of police.

95
00:05:04,520 --> 00:05:07,000
Speaker 7: This is the tragic time in our history here in

96
00:05:07,000 --> 00:05:10,960
Speaker 7: Los Angeles, but a time where we're really tested and

97
00:05:11,000 --> 00:05:13,400
Speaker 7: see who we really are. And it's critical that at

98
00:05:13,440 --> 00:05:16,479
Speaker 7: these times we be patient, that we come together, that

99
00:05:16,560 --> 00:05:18,520
Speaker 7: we focus on saving lives.

100
00:05:20,440 --> 00:05:23,440
Speaker 2: LA Police Chief James McDonald there. The offshore wins that

101
00:05:23,480 --> 00:05:26,360
Speaker 2: have fanned the flames with gusts above eighty miles per

102
00:05:26,400 --> 00:05:29,440
Speaker 2: hour are expected to last through today, with no rain

103
00:05:29,560 --> 00:05:31,200
Speaker 2: forecast over the coming days.

104
00:05:31,640 --> 00:05:34,880
Speaker 3: A new report from Bloomberg Intelligence is highlighting the potential

105
00:05:34,920 --> 00:05:39,080
Speaker 3: for artificial intelligence to transform the global banking system. As

106
00:05:39,160 --> 00:05:41,480
Speaker 3: many as two hundred thousand jobs could be at risk

107
00:05:41,520 --> 00:05:44,440
Speaker 3: from AI, according to a survey of technology leaders, who

108
00:05:44,480 --> 00:05:48,400
Speaker 3: forecast losing three percent of their workforces on average. Bloomberg's

109
00:05:48,400 --> 00:05:49,960
Speaker 3: tiwa Atabio has Moore.

110
00:05:50,720 --> 00:05:53,640
Speaker 6: Lenders could be in for a potential one hundred and

111
00:05:53,680 --> 00:05:57,200
Speaker 6: eighty billion dollar profit boost thanks to AI tools, but

112
00:05:57,240 --> 00:05:59,880
Speaker 6: the windfall may come at the expense of their workforce.

113
00:06:00,520 --> 00:06:04,080
Speaker 6: That's according to a survey of chief information and technology

114
00:06:04,120 --> 00:06:08,400
Speaker 6: offices conducted by Bloomberg Intelligence. Job cuts are expected over

115
00:06:08,440 --> 00:06:11,000
Speaker 6: the next three to five years, though the scale of

116
00:06:11,000 --> 00:06:15,560
Speaker 6: AI investments means overall net savings may take longer to materialize.

117
00:06:15,680 --> 00:06:18,880
Speaker 6: Productivity gains are set to be the most important driver

118
00:06:19,000 --> 00:06:22,760
Speaker 6: by far, with the potential to increase banking revenue by

119
00:06:22,800 --> 00:06:25,400
Speaker 6: one hundred and twenty to one hundred and seventy five

120
00:06:25,480 --> 00:06:29,880
Speaker 6: billion dollars. Banking analysts now see AI as a critical driver.

121
00:06:30,440 --> 00:06:34,240
Speaker 6: The report shows mentions of the technology in earnings transcripts

122
00:06:34,240 --> 00:06:37,640
Speaker 6: and presentations more than five times what they wear in

123
00:06:37,680 --> 00:06:41,760
Speaker 6: twenty twenty. During twenty twenty four in London, tiwa Adebayo

124
00:06:41,839 --> 00:06:43,240
Speaker 6: Bloomberg Radio.

125
00:06:43,480 --> 00:06:46,360
Speaker 2: China's consumer inflation rates slow to zero point one percent

126
00:06:46,440 --> 00:06:50,280
Speaker 2: in December, marking a fourth consecutive month of decline. It's

127
00:06:50,320 --> 00:06:53,080
Speaker 2: a setback for Beijing's efforts to stamp out deflation and

128
00:06:53,120 --> 00:06:58,160
Speaker 2: revive demand by stimulating the economy. Factory deflation also continued

129
00:06:58,160 --> 00:07:01,600
Speaker 2: for the twenty seventh month, but the core consumer price

130
00:07:01,640 --> 00:07:05,800
Speaker 2: index rows two point four percent, the highest level since July. Okay, well,

131
00:07:05,960 --> 00:07:08,960
Speaker 2: we are, of course laser focused on the moves that

132
00:07:08,960 --> 00:07:11,800
Speaker 2: we're seeing on UK markets today, which has really been

133
00:07:12,640 --> 00:07:15,600
Speaker 2: at the center of the storm of the global bond rought.

134
00:07:15,960 --> 00:07:18,320
Speaker 2: But just on a slightly lighter note, of course, always

135
00:07:18,320 --> 00:07:20,560
Speaker 2: worth reading John Author's every morning in his piece on

136
00:07:20,560 --> 00:07:24,200
Speaker 2: Bloomberg Opinion, but on a daylight today in particular, he's

137
00:07:24,200 --> 00:07:27,080
Speaker 2: talking about the mess on UK markets being far less

138
00:07:27,120 --> 00:07:29,320
Speaker 2: extreme than the Liz tros Many budget, but he says

139
00:07:29,360 --> 00:07:32,119
Speaker 2: needs urgent sorting. We'll get into that in a moment.

140
00:07:32,160 --> 00:07:34,600
Speaker 2: He also offers us a what he describes as a

141
00:07:34,600 --> 00:07:37,480
Speaker 2: cacophonous soundtrack to drown out the noise that we're seeing

142
00:07:37,760 --> 00:07:40,600
Speaker 2: on markets, which include Helter Skelter from the Beatles, which

143
00:07:40,880 --> 00:07:41,840
Speaker 2: was a good start to my day.

144
00:07:42,440 --> 00:07:45,400
Speaker 3: Well, we are watching those moves really closely, and the

145
00:07:45,480 --> 00:07:48,600
Speaker 3: rising government borrowing costs are also adding pressure on the Chancellor.

146
00:07:48,720 --> 00:07:52,480
Speaker 3: Rachel Reeves Bloomberg reporting that she'd actually consider spending cuts

147
00:07:52,560 --> 00:07:56,200
Speaker 3: over more tax rises if she runs out of fiscal headroom,

148
00:07:56,240 --> 00:07:59,560
Speaker 3: a rare intervention from the Treasury yesterday. Let's discuss now

149
00:07:59,560 --> 00:08:02,840
Speaker 3: with our UK economist Dan Hanson and our markets report

150
00:08:02,840 --> 00:08:05,480
Speaker 3: at Valerie Titel. Dan, I want to start with you

151
00:08:05,560 --> 00:08:08,520
Speaker 3: because we just heard that historical comparison, if we could

152
00:08:08,520 --> 00:08:12,000
Speaker 3: call his trust history now. But the former Bank of

153
00:08:12,000 --> 00:08:14,480
Speaker 3: Being that policy maker, Martin Wheel actually compared this to

154
00:08:14,640 --> 00:08:16,080
Speaker 3: nineteen seventy six.

155
00:08:16,520 --> 00:08:17,440
Speaker 1: Is that more apped?

156
00:08:18,640 --> 00:08:19,880
Speaker 8: I don't think either of them are apped, to be

157
00:08:19,880 --> 00:08:22,640
Speaker 8: honest with you. Go on why, Because a lot of

158
00:08:22,640 --> 00:08:26,800
Speaker 8: this is globally driven. There is a UK there is

159
00:08:26,840 --> 00:08:29,760
Speaker 8: a UK component to it, but there is a massive

160
00:08:29,840 --> 00:08:33,880
Speaker 8: US component to it as well. The UK is getting

161
00:08:33,880 --> 00:08:36,280
Speaker 8: it worse than everyone else that we have to sort

162
00:08:36,280 --> 00:08:39,200
Speaker 8: of acknowledge that. And it sort of comes down to

163
00:08:39,200 --> 00:08:41,520
Speaker 8: three things. I think when you think about bond yields.

164
00:08:41,520 --> 00:08:43,960
Speaker 8: One is fiscal concerns and you've just spoken about that.

165
00:08:43,960 --> 00:08:48,679
Speaker 8: There inflation concerns, people are worried that the US and

166
00:08:48,800 --> 00:08:52,880
Speaker 8: UK have similar inflation problems, and there are growth concerns

167
00:08:52,920 --> 00:08:55,280
Speaker 8: in the UK as well. So it has that those

168
00:08:55,360 --> 00:09:00,600
Speaker 8: three issues, whereas the US has just fiscal concern and concern.

169
00:09:00,679 --> 00:09:04,480
Speaker 8: There's no gross concern there. In Europe there's no inflation concern,

170
00:09:04,800 --> 00:09:07,160
Speaker 8: but there is gross concern and fiscal concern. The UK's

171
00:09:07,160 --> 00:09:10,120
Speaker 8: got all three and that's why I think the UK

172
00:09:10,160 --> 00:09:12,600
Speaker 8: has probably been hit a little bit harder than everyone else.

173
00:09:12,640 --> 00:09:14,960
Speaker 8: But there I think the key point here is that

174
00:09:15,000 --> 00:09:19,040
Speaker 8: it's very much a global move and the UK, yes,

175
00:09:19,040 --> 00:09:20,839
Speaker 8: has got it a little bit harder than everyone else.

176
00:09:21,559 --> 00:09:25,040
Speaker 8: But that was absent, particularly in the trust episode, it

177
00:09:25,080 --> 00:09:27,600
Speaker 8: was completely absent. It was completely UK driven.

178
00:09:28,600 --> 00:09:30,480
Speaker 2: Well, let's bring in Valerie title at this point to

179
00:09:30,520 --> 00:09:32,520
Speaker 2: talk us through the magnitude of the moves that we've

180
00:09:32,559 --> 00:09:35,520
Speaker 2: seen on markets again today, to Dan's point, the moves

181
00:09:35,520 --> 00:09:38,160
Speaker 2: that we're seeing in UK assets bigger than those that

182
00:09:38,160 --> 00:09:41,079
Speaker 2: we're seeing elsewhere. The pound seven tenth weaker against the dollar,

183
00:09:41,160 --> 00:09:43,400
Speaker 2: the euros a tenth point percent weeker, just an example,

184
00:09:43,559 --> 00:09:46,520
Speaker 2: and Guilty holds a rising slightly more than what we're

185
00:09:46,520 --> 00:09:48,560
Speaker 2: seeing across the rest of the European bands based valery.

186
00:09:48,880 --> 00:09:51,120
Speaker 2: Where are we at this point at nine to eleven

187
00:09:52,720 --> 00:09:53,839
Speaker 2: on this Thursday morning.

188
00:09:53,960 --> 00:09:56,280
Speaker 9: Oh look, it seems like we're not going to have

189
00:09:56,320 --> 00:09:58,640
Speaker 9: as harry as a session as we did yesterday. But

190
00:09:58,800 --> 00:10:02,640
Speaker 9: that was quite a eye catching session to see those

191
00:10:02,679 --> 00:10:05,800
Speaker 9: thirty ye your guilts move at twelve basis points at

192
00:10:05,840 --> 00:10:08,000
Speaker 9: one time during the session, yields going higher with the

193
00:10:08,000 --> 00:10:10,960
Speaker 9: pound weakening. You know, I just heard what Dan Hansen

194
00:10:11,000 --> 00:10:13,880
Speaker 9: said about you know, it's hard to draw parallels to

195
00:10:13,920 --> 00:10:17,920
Speaker 9: Liz Trusts because maybe this isn't driven specifically by what's

196
00:10:17,920 --> 00:10:18,240
Speaker 9: going on.

197
00:10:18,240 --> 00:10:18,600
Speaker 4: In the UK.

198
00:10:18,720 --> 00:10:22,000
Speaker 9: But to me, you know, that's almost more worrying if

199
00:10:22,040 --> 00:10:25,200
Speaker 9: you say that this is globally driven, because UK has

200
00:10:25,360 --> 00:10:28,600
Speaker 9: less control over a situation like that. If yes, this

201
00:10:28,720 --> 00:10:31,080
Speaker 9: rise in yields is globally driven, driven by the rise

202
00:10:31,120 --> 00:10:34,080
Speaker 9: in treasury yields, you know, the UK government still has

203
00:10:34,120 --> 00:10:38,000
Speaker 9: a problem if treasury yields seem to find a base

204
00:10:38,040 --> 00:10:40,720
Speaker 9: at five percent, because they at least will What the

205
00:10:40,760 --> 00:10:43,320
Speaker 9: market concludes from the price action we've seen is that

206
00:10:43,640 --> 00:10:46,240
Speaker 9: they're going to have a hard time having a stable

207
00:10:46,280 --> 00:10:49,719
Speaker 9: fiscal trajectory with yields at five percent and growth at zero.

208
00:10:49,880 --> 00:10:52,760
Speaker 9: So it's almost more concerning maybe if you point to

209
00:10:52,920 --> 00:10:56,640
Speaker 9: global factors causing this sell off, because frankly, Rachel Reeves

210
00:10:56,720 --> 00:10:58,480
Speaker 9: can't do anything about treasure yields.

211
00:10:58,320 --> 00:11:00,319
Speaker 3: So don put that to you. What does the guilt

212
00:11:00,320 --> 00:11:02,839
Speaker 3: market want from Rachel Reeves? I think the reason that

213
00:11:02,880 --> 00:11:05,440
Speaker 3: Martin Wheel was drawing the comparison with nineteen seventy six

214
00:11:05,559 --> 00:11:09,520
Speaker 3: was because then the answer was austerity. She's told us

215
00:11:09,559 --> 00:11:12,600
Speaker 3: that she'd pick spending cuts over tax rises, but would

216
00:11:12,760 --> 00:11:16,280
Speaker 3: quote unquote efficiency savings cut the mustard for the bond market.

217
00:11:16,360 --> 00:11:19,280
Speaker 8: Yeah, I mean that's exactly what the market wants, is austerity,

218
00:11:20,480 --> 00:11:24,000
Speaker 8: because I think I think for me at least, I

219
00:11:24,040 --> 00:11:26,960
Speaker 8: can't speak for all market participants clearly, but for me,

220
00:11:27,040 --> 00:11:29,960
Speaker 8: I think the concern, the biggest concern is around growth

221
00:11:30,440 --> 00:11:35,480
Speaker 8: and around the obr's optimism, around the gross outlook and

222
00:11:35,520 --> 00:11:37,040
Speaker 8: the fact that but.

223
00:11:37,040 --> 00:11:38,440
Speaker 3: What austerity would weigh on growth?

224
00:11:38,440 --> 00:11:39,199
Speaker 2: Wouldn't it.

225
00:11:40,520 --> 00:11:42,840
Speaker 8: Not in the medium term? Because the Bank of England

226
00:11:42,960 --> 00:11:43,640
Speaker 8: responds to it.

227
00:11:46,120 --> 00:11:48,720
Speaker 2: Dan, When you look at the picture now, I mean,

228
00:11:49,000 --> 00:11:51,040
Speaker 2: how what is you were thinking in terms of the

229
00:11:51,080 --> 00:11:55,440
Speaker 2: fiscal headroom? And where this what number is Rachel Reeves

230
00:11:55,520 --> 00:11:57,719
Speaker 2: is likely to be looking at in two months time?

231
00:11:57,840 --> 00:11:59,400
Speaker 2: Or is it just simply too far away to be

232
00:11:59,400 --> 00:12:00,800
Speaker 2: making those sort of calculations.

233
00:12:00,920 --> 00:12:03,320
Speaker 8: I mean, we've had to go this morning, so oh god,

234
00:12:03,400 --> 00:12:07,319
Speaker 8: that's convenient. It's I don't know if that was it.

235
00:12:07,400 --> 00:12:09,600
Speaker 8: You were just sending me out there, Stephen, but.

236
00:12:10,480 --> 00:12:11,840
Speaker 2: I just intuited us.

237
00:12:11,920 --> 00:12:14,480
Speaker 8: Yeah, of course, of course, no, we've yeah, we've run

238
00:12:14,520 --> 00:12:18,400
Speaker 8: the numbers. And she had headroom of against her fiscal target,

239
00:12:18,760 --> 00:12:22,439
Speaker 8: which was to have tax receipts exceeding day to day

240
00:12:22,440 --> 00:12:25,800
Speaker 8: government spending five in five years time, which is twenty

241
00:12:25,840 --> 00:12:29,199
Speaker 8: twenty nine to thirty so a surtplus on the current

242
00:12:29,240 --> 00:12:33,080
Speaker 8: budget in the sort of economics parlance that she had

243
00:12:33,160 --> 00:12:36,080
Speaker 8: nine point nine billion pounds. The rise in interest rates

244
00:12:36,679 --> 00:12:39,960
Speaker 8: will increase spending by twelve billion pounds, so she's missing

245
00:12:39,960 --> 00:12:43,040
Speaker 8: her fiscal target. Now we think based on the move

246
00:12:43,080 --> 00:12:44,960
Speaker 8: in yields alone. Of course, there's a lot that goes

247
00:12:44,960 --> 00:12:48,720
Speaker 8: into an OBR forecast. Gilt yields are one element of it.

248
00:12:48,920 --> 00:12:53,679
Speaker 8: But I think the likelihood of them making a massive

249
00:12:53,760 --> 00:12:57,319
Speaker 8: change to their economic outlook or a massive judgment, I

250
00:12:57,320 --> 00:12:59,679
Speaker 8: should say about the economic outlooks so soon after the

251
00:12:59,720 --> 00:13:03,240
Speaker 8: autom and budget would be quite surprising. So a big

252
00:13:03,280 --> 00:13:05,720
Speaker 8: growth downgrade or the like would be quite surprising for

253
00:13:05,760 --> 00:13:09,079
Speaker 8: them to do that in so shortly after the autumn statement.

254
00:13:10,120 --> 00:13:11,800
Speaker 8: So I think, you know this movie yields will we

255
00:13:11,920 --> 00:13:15,319
Speaker 8: have the biggest bearing on what they say. And as

256
00:13:15,320 --> 00:13:18,000
Speaker 8: I say, as things stand, it looks like she's going

257
00:13:18,000 --> 00:13:20,280
Speaker 8: to miss the target. And going back to what Lizzie said,

258
00:13:20,760 --> 00:13:23,160
Speaker 8: it seems like she's going to lean on spending rather

259
00:13:23,240 --> 00:13:26,760
Speaker 8: than tax to deal with it. I think a really

260
00:13:26,760 --> 00:13:30,360
Speaker 8: interesting point here, going to the Bloomberg story yesterday, is

261
00:13:30,679 --> 00:13:32,920
Speaker 8: if she does decide to cut day to day spending.

262
00:13:33,880 --> 00:13:36,439
Speaker 8: Everyone knows that the path of day to day spending

263
00:13:36,559 --> 00:13:40,320
Speaker 8: is already extremely tight, So if she decides to cut

264
00:13:40,360 --> 00:13:44,080
Speaker 8: spending even further for departments, I think there's a question

265
00:13:44,080 --> 00:13:48,760
Speaker 8: about credibility about fiscal plan then, And because it's just

266
00:13:48,760 --> 00:13:51,400
Speaker 8: not possible or feasible to go to your point Lizzie

267
00:13:51,400 --> 00:13:54,920
Speaker 8: about efficiency savings to continue to ask departments to make

268
00:13:54,960 --> 00:13:57,800
Speaker 8: these sort of efficiency savings, So I think there is

269
00:13:58,559 --> 00:14:02,880
Speaker 8: some risk around that strategy. I'm surprised that that was

270
00:14:02,920 --> 00:14:06,400
Speaker 8: the line that came out of the Treasury, though obviously

271
00:14:06,440 --> 00:14:08,920
Speaker 8: they felt like they needed to say something. I think

272
00:14:08,920 --> 00:14:11,720
Speaker 8: it's probably more likely they or they'll do some element

273
00:14:11,760 --> 00:14:14,120
Speaker 8: of benefit cuts to benefits as well, But obviously there's

274
00:14:14,200 --> 00:14:19,440
Speaker 8: huge political challenges with that. But actually that's probably if

275
00:14:19,440 --> 00:14:24,640
Speaker 8: you're thinking about markets, that's probably a safer bet. Obviously,

276
00:14:24,640 --> 00:14:28,200
Speaker 8: if you're thinking about politics day to day, government spending

277
00:14:28,280 --> 00:14:30,080
Speaker 8: is an easier self exactly.

278
00:14:30,360 --> 00:14:34,640
Speaker 3: And imagine the headlines if Rachel Reeves is returning to austerity.

279
00:14:34,720 --> 00:14:38,160
Speaker 3: Imagine the queue at the Treasury of all the ministers

280
00:14:38,520 --> 00:14:41,960
Speaker 3: when their budgets are being ripped up and she's having

281
00:14:42,000 --> 00:14:45,320
Speaker 3: to make them cancel their plans and all these new

282
00:14:45,400 --> 00:14:47,080
Speaker 3: MP's worrying about their seats.

283
00:14:47,120 --> 00:14:49,600
Speaker 2: But what's the alternative of people's morgage rates are going

284
00:14:49,640 --> 00:14:52,240
Speaker 2: up dramatically at the same time, so, I mean, their

285
00:14:52,280 --> 00:14:55,040
Speaker 2: political choices still to remain. But if we're thinking about

286
00:14:55,080 --> 00:14:58,320
Speaker 2: where the markets go from here, you know, does it

287
00:14:58,360 --> 00:15:00,960
Speaker 2: look like now that, at least on the global basis,

288
00:15:01,000 --> 00:15:03,480
Speaker 2: are things in a pause. If we're thinking about, for example,

289
00:15:03,480 --> 00:15:06,640
Speaker 2: the US jobs report tomorrow or what the global backdrop

290
00:15:06,680 --> 00:15:09,240
Speaker 2: to they say is we're talking about the effect being

291
00:15:09,280 --> 00:15:12,320
Speaker 2: amplified in the UK. But you know, given that there

292
00:15:12,360 --> 00:15:14,200
Speaker 2: is there is a global element to this, what should

293
00:15:14,200 --> 00:15:15,160
Speaker 2: we be thinking about next?

294
00:15:15,400 --> 00:15:19,520
Speaker 9: Well, I think I think we should say that because

295
00:15:19,640 --> 00:15:22,320
Speaker 9: of what Dan's been talking about, the growth differentials in

296
00:15:22,360 --> 00:15:26,920
Speaker 9: between the UK and the US, it's really exacerbated the

297
00:15:26,960 --> 00:15:30,400
Speaker 9: problem because you know, for one reason, treasury yields are

298
00:15:30,440 --> 00:15:32,280
Speaker 9: rising and you could see that it was almost a

299
00:15:32,320 --> 00:15:36,560
Speaker 9: good thing, right, They're positive about growth in the US,

300
00:15:36,600 --> 00:15:41,160
Speaker 9: and in some way that is just sucking all the

301
00:15:41,200 --> 00:15:44,600
Speaker 9: international capital into the US, which is leaving you know,

302
00:15:44,640 --> 00:15:47,200
Speaker 9: countries who are more in a perilous position, like the UK,

303
00:15:47,680 --> 00:15:50,800
Speaker 9: like France, you know, needing to fight on the global

304
00:15:50,840 --> 00:15:54,560
Speaker 9: scale for funds to fund the deficit that they're running.

305
00:15:54,600 --> 00:15:57,040
Speaker 9: And you know, if they do cut the deficit, maybe

306
00:15:57,080 --> 00:15:59,600
Speaker 9: that does, you know, help them because they're not necessarily

307
00:15:59,800 --> 00:16:02,160
Speaker 9: in need of a larger fund, you know, and need

308
00:16:02,160 --> 00:16:04,840
Speaker 9: to issue as many as many guilts. But the problem

309
00:16:04,880 --> 00:16:07,640
Speaker 9: still remains as well, as long as you know, the

310
00:16:07,720 --> 00:16:11,760
Speaker 9: UK is sorry, the US is on this positive growth trajectory,

311
00:16:11,800 --> 00:16:15,040
Speaker 9: and remember that can change. You know, We've seen you know,

312
00:16:15,080 --> 00:16:17,120
Speaker 9: the US economy turn around sharply. It's just at the

313
00:16:17,160 --> 00:16:22,120
Speaker 9: moment everyone seems to have boosted their outlook for US growth,

314
00:16:22,160 --> 00:16:26,040
Speaker 9: and that makes this growth differential around the world, you know,

315
00:16:26,640 --> 00:16:28,640
Speaker 9: you know, extremely eye catching. The last time we had

316
00:16:28,680 --> 00:16:31,360
Speaker 9: this rise in US yields and Treasury yields was back

317
00:16:31,400 --> 00:16:35,200
Speaker 9: in the later end of twenty twenty three, where we

318
00:16:35,200 --> 00:16:38,160
Speaker 9: were concerned about global growth as a whole, you know,

319
00:16:38,200 --> 00:16:41,440
Speaker 9: the US economy turning around and global growth. Whereas right

320
00:16:41,440 --> 00:16:44,640
Speaker 9: now we have this such differential that all the capital

321
00:16:44,840 --> 00:16:46,320
Speaker 9: is going into the US market, It's going to the

322
00:16:46,400 --> 00:16:50,800
Speaker 9: US equity market. It's really pulling in all this international capital,

323
00:16:50,840 --> 00:16:55,160
Speaker 9: you know, the deregulation year. Yeah, yes, yes, for what's

324
00:16:55,200 --> 00:16:57,600
Speaker 9: been piling into the US equity market, I would say so.

325
00:16:57,720 --> 00:16:59,880
Speaker 9: And it just, you know, the outperformance of the US

326
00:17:00,200 --> 00:17:03,840
Speaker 9: leaves other countries that aren't performing as well a bit

327
00:17:03,880 --> 00:17:07,359
Speaker 9: more you know, uh, naked in their in their clothes,

328
00:17:07,359 --> 00:17:09,240
Speaker 9: if that makes sense, a little bit more bare, you know,

329
00:17:09,320 --> 00:17:12,480
Speaker 9: as the as the tide gets pulled out. So I

330
00:17:12,480 --> 00:17:14,800
Speaker 9: do think the trajectory of the US economy doesn't mean

331
00:17:14,800 --> 00:17:17,080
Speaker 9: a lot for what's developing here in the UK.

332
00:17:17,160 --> 00:17:20,720
Speaker 3: What a picture you paint for US? Valerie Dan, I

333
00:17:20,720 --> 00:17:22,520
Speaker 3: want to ask you, because you used to work at

334
00:17:22,560 --> 00:17:26,000
Speaker 3: the Treasury, if you were advising Rachel Reeves today, would

335
00:17:26,000 --> 00:17:29,399
Speaker 3: you say that she needs to make an intervention, a

336
00:17:29,480 --> 00:17:33,520
Speaker 3: verbal intervention before the close if the market moves continue

337
00:17:33,760 --> 00:17:35,399
Speaker 3: like she did after the budget.

338
00:17:36,359 --> 00:17:38,680
Speaker 8: You're just trying to get interview, aren't you listening? So yes,

339
00:17:42,200 --> 00:17:45,040
Speaker 8: there's always the trade off with making an intervention like that,

340
00:17:45,119 --> 00:17:50,359
Speaker 8: between panic you're sort of acknowledging the panic and you

341
00:17:50,400 --> 00:17:53,399
Speaker 8: are there is sort of this is a this is

342
00:17:53,440 --> 00:17:56,400
Speaker 8: a move, as Valerie sort of talks at at length

343
00:17:56,480 --> 00:17:59,760
Speaker 8: there that is globally driven and markets move all the time,

344
00:18:00,400 --> 00:18:02,600
Speaker 8: and as I say, there is a UK specific component

345
00:18:02,640 --> 00:18:04,360
Speaker 8: to it, a little bit more of a UK premium,

346
00:18:04,400 --> 00:18:07,359
Speaker 8: but it's nothing like what we saw, going back to

347
00:18:07,440 --> 00:18:10,719
Speaker 8: the first question about what we saw during the trust period.

348
00:18:10,840 --> 00:18:17,320
Speaker 8: So I probably would say, I know there's news out

349
00:18:17,359 --> 00:18:19,200
Speaker 8: that she's going to give a speech later in the month.

350
00:18:20,359 --> 00:18:22,119
Speaker 2: I think when she gets back from Beijing.

351
00:18:22,200 --> 00:18:25,520
Speaker 8: She gets back from Beijing, I think i'd be surprised,

352
00:18:25,760 --> 00:18:28,160
Speaker 8: And if I was advising her, I'd say probably probably don't.

353
00:18:28,240 --> 00:18:32,440
Speaker 8: I'd probably say go to Beijing. And that's no offense

354
00:18:32,480 --> 00:18:34,280
Speaker 8: to you, Lizzie. I'm not saying don't talk to Lizzie Burden.

355
00:18:34,320 --> 00:18:37,240
Speaker 3: Oh will remind you that the guilt moves reversed last

356
00:18:37,240 --> 00:18:38,119
Speaker 3: time she spoke to me.

357
00:18:38,240 --> 00:18:42,040
Speaker 2: Da, look at the question I actually wanted to ask

358
00:18:42,040 --> 00:18:44,080
Speaker 2: you both, no comment at what level? I'm just moving

359
00:18:44,160 --> 00:18:46,720
Speaker 2: right off from us. The question I want to ask

360
00:18:46,760 --> 00:18:49,520
Speaker 2: you both as we wrap up this conversation is at

361
00:18:49,560 --> 00:18:52,280
Speaker 2: what level do we panic? I hear from I hear

362
00:18:52,320 --> 00:18:53,800
Speaker 2: from both of you that you know we're we're in

363
00:18:53,840 --> 00:18:56,480
Speaker 2: a global context and we're looking at accelerated moves here.

364
00:18:56,600 --> 00:18:59,200
Speaker 2: You know, Okay, ten year guilt sills are now at

365
00:18:59,200 --> 00:19:02,679
Speaker 2: four point eight three percent. At what point do we

366
00:19:02,760 --> 00:19:05,120
Speaker 2: need to say that this is actually our crisis?

367
00:19:05,160 --> 00:19:07,360
Speaker 9: I mean, I start panicking. If you see a massive

368
00:19:07,480 --> 00:19:09,680
Speaker 9: spike in gold, I think that's the tell.

369
00:19:10,880 --> 00:19:11,080
Speaker 6: Dan.

370
00:19:11,680 --> 00:19:14,199
Speaker 8: I think a more precipitous fall and Sterling is the

371
00:19:14,200 --> 00:19:15,520
Speaker 8: one to watch for me.

372
00:19:16,480 --> 00:19:18,159
Speaker 2: I know what sort of magnitude I mean. I mean,

373
00:19:18,160 --> 00:19:22,960
Speaker 2: I I ask you to point numbers.

374
00:19:19,920 --> 00:19:24,679
Speaker 8: That I'm not. If you just see a sharp, a

375
00:19:24,800 --> 00:19:27,040
Speaker 8: very very sharp move, that's I think it's the scale

376
00:19:27,080 --> 00:19:28,800
Speaker 8: and the speed of the move. I mean, if you

377
00:19:28,800 --> 00:19:30,399
Speaker 8: think about going back to trust, and I know we

378
00:19:30,480 --> 00:19:34,400
Speaker 8: keep talking about it, but that period I'm if I'm right,

379
00:19:34,440 --> 00:19:36,560
Speaker 8: I think I'm right over sort of a four three

380
00:19:36,640 --> 00:19:39,840
Speaker 8: or four day period, thirty year gilt went up one

381
00:19:39,920 --> 00:19:42,800
Speaker 8: hundred and twenty basis points. Yeah, I mean that is

382
00:19:43,520 --> 00:19:44,760
Speaker 8: if you put that in the context of what we've

383
00:19:44,760 --> 00:19:47,919
Speaker 8: seen over the past few days, it dwarfs that. So,

384
00:19:48,880 --> 00:19:51,320
Speaker 8: you know, it's that sort of thing that you because

385
00:19:51,320 --> 00:19:52,960
Speaker 8: what that is telling you is that there is an

386
00:19:53,000 --> 00:19:55,199
Speaker 8: amplifier in the system, which in that case was the

387
00:19:55,280 --> 00:19:56,600
Speaker 8: LDI crisis.

388
00:19:58,440 --> 00:20:01,639
Speaker 2: So he isn't present just time around because those issues

389
00:20:01,640 --> 00:20:02,840
Speaker 2: have been addressed.

390
00:20:02,840 --> 00:20:06,399
Speaker 8: Exactly on that issue, yes, but you know, always with

391
00:20:06,440 --> 00:20:10,720
Speaker 8: the case with financial stability, there are pockets of stress

392
00:20:10,920 --> 00:20:13,280
Speaker 8: everywhere and it's impossible to keep an eye on every

393
00:20:13,320 --> 00:20:15,120
Speaker 8: single one of them, and these things do pop up.

394
00:20:15,240 --> 00:20:18,800
Speaker 8: So I think it's it's about watching the speed and

395
00:20:18,840 --> 00:20:20,600
Speaker 8: the scale of the move and I think this morning,

396
00:20:21,040 --> 00:20:23,359
Speaker 8: the fact that we've had, you know, a little bit

397
00:20:23,400 --> 00:20:26,160
Speaker 8: of stabilization, as Valerie pointed to as well, I think

398
00:20:26,200 --> 00:20:28,760
Speaker 8: that's you know, that's you know, we're not in a

399
00:20:28,760 --> 00:20:32,080
Speaker 8: great place, but you know it hasn't got materially worse again.

400
00:20:32,359 --> 00:20:34,199
Speaker 8: So that's sort of if we're going to take a

401
00:20:34,200 --> 00:20:36,760
Speaker 8: silver lining and possibly end on a slightly more positive

402
00:20:36,760 --> 00:20:38,560
Speaker 8: note that that might be it, at least of the

403
00:20:38,600 --> 00:20:39,040
Speaker 8: time being.

404
00:20:40,119 --> 00:20:42,679
Speaker 2: This is Bloomberg Daybreak Europe. You're a morning brief on

405
00:20:42,760 --> 00:20:45,960
Speaker 2: the stories making news from London to Wall Streets and beyond.

406
00:20:46,240 --> 00:20:49,399
Speaker 10: Look for us on your podcast speed every morning, on Apple,

407
00:20:49,560 --> 00:20:52,240
Speaker 10: Spotify and anywhere else you get your podcasts.

408
00:20:52,280 --> 00:20:55,320
Speaker 2: You can also listen live each morning on London Dab Radio,

409
00:20:55,359 --> 00:20:58,040
Speaker 2: the Bloomberg Business app, and Bloomberg dot Com.

410
00:20:58,080 --> 00:21:00,880
Speaker 10: Our flagship New York station, is also available on your

411
00:21:00,880 --> 00:21:05,600
Speaker 10: Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.

412
00:21:05,840 --> 00:21:07,160
Speaker 10: I'm Caroline Hepka and.

413
00:21:07,080 --> 00:21:09,760
Speaker 2: I'm Stephen Carol. Join us again tomorrow morning for all

414
00:21:09,760 --> 00:21:12,200
Speaker 2: the news you need to start your day right here

415
00:21:12,240 --> 00:21:15,920
Speaker 2: on Bloomberg Daybreak Europe