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

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Speaker 2: This is the Bloomberg Daybreak Euroup podcast, available every morning

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

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Speaker 2: seventh of October in London. I'm Stephen Carroll coming up today.

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Speaker 2: One year on from the Hamas attack on Israel, the

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Speaker 2: Middle East teeters on the edge of an all out war.

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Speaker 2: Goldman goes all in on the China stock surge with

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Speaker 2: talk of a twenty percent rally, with JP Morgan and

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Speaker 2: others are more skeptical. Plus trying to change the political weather.

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Speaker 2: Keir Starmer outs his chief of staff as economic data

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Speaker 2: and sentiment point to storms on the horizon. Let's start

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Speaker 2: with a roundup of our top stories. Today marks one

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Speaker 2: year since Hamas launched an unprecedented attack on Israel, killing

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Speaker 2: one thousand to two hundred people and taking hundreds more

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Speaker 2: as hostages. Israel's subsequent military offensive in the Gaza Strip

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Speaker 2: has resulted in more than forty one one thousand deaths,

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Speaker 2: according to the local health ministry. Here on, Israel is

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Speaker 2: locked in a multi front conflict that many fear could

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Speaker 2: now escalate into an all out regional war. Speaking to

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Speaker 2: CBS's sixty minutes program. US Vice President Kamala Haras says

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Speaker 2: she won't stop pressuring Israel to end its military campaign

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Speaker 2: in the Middle East.

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Speaker 3: The work that we do diplomatically with the leadership of

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Speaker 3: Israel is an ongoing pursuit around making clear our principles,

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Speaker 3: which include the need for humanitarian aid, the need for

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Speaker 3: this war to end, the need for a deal to

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Speaker 3: be done which would release the hostages and create a ceasefire.

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Speaker 2: That CBS interview with Kamala Haras comes as Israel struck

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Speaker 2: more Hesbala targets in Lebanon over the weekend. According to

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Speaker 2: Lebanese officials, more than one thy five hundred people have

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Speaker 2: now been killed in Israeli air strikes in recent weeks,

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Speaker 2: with around a million people forced from their homes. The

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Speaker 2: region is now also waiting to see how Israel respond

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Speaker 2: to last week's Iranian missile barrage. The price of oil

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Speaker 2: opened the week of fraction lower as the market waits

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Speaker 2: to see how Israel will respond to Tehran for its

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Speaker 2: ballistic missile attack. After last week's big jump on fears

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Speaker 2: that Iran's oil supply could be targeted by Israel, Brent

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Speaker 2: slipped below seventy eight dollars a barrel in early trading

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Speaker 2: on Monday. Speaking on Friday, President Biden said he didn't

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Speaker 2: know when an Israeli response would come, but said quote,

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Speaker 2: I'd be thinking about other alternatives and striking oil fields.

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Speaker 2: The recent rally in Chinese shares is failing to convince

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Speaker 2: some global investors. Fund managers at JP Morgan and HSBC

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Speaker 2: are among those unconvinced by the surge in prices which

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Speaker 2: followed the announcement of more stimulus by Beijing. But Jonathan Pines,

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Speaker 2: portfolio manager at Federated Armies, sees potential.

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Speaker 4: We think it's a rapp licee to be now whether

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Speaker 4: or not the stimulus works on the very short term,

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Speaker 4: a guess could help things along. Based on our long

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Speaker 4: term sasion processes value. The value is there and that's

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Speaker 4: why we positives on Chinese entity.

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Speaker 2: Jonathan Pines from Federated Hermes there speaking to Bloomberg. Goldman

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Speaker 2: Sachs has also taken a bullish stance their strategy to

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Speaker 2: see the potential for Chinese equities to rise another fifteen

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Speaker 2: to twenty percent if authorities deliver on their policy announcements.

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Speaker 2: Chinese shares of skyrocketed since late September after a host

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Speaker 2: of economic stimulus news reinvigorated investor confidence. The Hangsang China

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Speaker 2: Enterprises Index has jumped by more than thirty five percent

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Speaker 2: over the past month, making it the best performer among

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Speaker 2: more than ninety global equity benchmarks tracked by Bloomberg. It's

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Speaker 2: been just one month since the European policy makers last

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Speaker 2: lowered borrowing costs. Now the European Center Bank could be

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Speaker 2: on the cusp of another cut this month. Bloomberg's Tiva

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Speaker 2: at a Bio has the story quite.

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Speaker 5: Probably is how easy be Governing Council member Francois villo

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Speaker 5: A du Guetu described the likelihood that he and his

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Speaker 5: colleagues will vote to slash interest rates this month. Speaking

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Speaker 5: to an Italian newspaper, the Bank of France chiefs cited

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Speaker 5: market inflation expectations below even the ECB's own forecast. He

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Speaker 5: warned that policymakers must now be careful not to undershoot

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Speaker 5: their inflation target by maintaining restrictive monetary policy too long.

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Speaker 5: In recent weeks, expectations for a rate cut at the

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Speaker 5: October seventeenth decision have gone from near zero to almost

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Speaker 5: certain investors are now pricing in around ninety percent chance

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Speaker 5: of a reduction this month. In London tewa Adabaio Bloomberg.

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Speaker 2: Radio new k salaries are rising at the weakest pace

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Speaker 2: in three years, with companies spooked by the coming Halloween budget.

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Speaker 2: Data from the Recruitment and Employment Confederation shows both pay

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Speaker 2: and hiring weakening. It adds to confidence surveys showing that

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Speaker 2: Chancellor of Rachel Reeve's repeated fiscal warnings have been so

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Speaker 2: successful she's turned her budget into a make or break

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Speaker 2: moment for the economy. And Kao Starmer is ousted his

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Speaker 2: chief of staff Sue Gray, less than one hundred days

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Speaker 2: into his administration. The change follows weeks of internal infighting

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Speaker 2: and mounting criticism of Starmer's political operation. James Wilcock has

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Speaker 2: the story, it's.

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Speaker 6: A rule of politics that advisers should be managing the headlines,

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Speaker 6: not in them. Weeks of stories about a power struggle

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Speaker 6: at the top of government, unhappy junior aids, and a

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Speaker 6: bad transition into power all pointed to the Chief of

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Speaker 6: staff Sue Gray. So now barely three months into the

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Speaker 6: new government's term, Gray is gone, But the question many

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Speaker 6: in labor are asking is why did their operation run

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Speaker 6: into difficulties so quickly and does this reset mark the

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Speaker 6: end of Starmer's woes or the beginning? In London? James Wilcock,

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Speaker 6: Bloomberg Radio.

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Speaker 2: Let's go straight to the middle. Least A year on

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Speaker 2: from the Hamas attack on the seventh of October, Israel

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Speaker 2: is locked in a multi front war with no clear end.

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Speaker 2: This weekend saw a new defensive in northern Gaza and

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Speaker 2: further as and Hesbela targets and be route Ploombrook's Paul Wallace.

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Speaker 2: It leads our team covering economics and government to them

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Speaker 2: at least joins us now for more, Paul, Good morning.

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Speaker 2: Israel stepping up its ground and air offensive and northern

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Speaker 2: Gaza over the weekend. What's the latest that we've heard

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Speaker 2: from there?

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Speaker 7: A year on from the October seventh attacks by Hamas

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Speaker 7: Or is engaged in fighting in several on several fronts

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Speaker 7: in southern Lebanon. Its troops seem to be moving deeper

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Speaker 7: into the country. They now reports that troops are several

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Speaker 7: kilometers into southern Lebanon. It's still unclear whether they're holding

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Speaker 7: positions or just sort of doing short raids at the moment,

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Speaker 7: and then going back to the Israeli border. And it's

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Speaker 7: still unclear just how many soldiers are in Lebanon, but

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Speaker 7: certainly there's quite heavy fight in several villages and areas

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Speaker 7: as idea if forces come up against heswel As troops.

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Speaker 7: And as you mentioned, there've been sort of an uptick

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Speaker 7: of Israeli strikes on Gaza in the last twenty four hours.

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Speaker 7: The Israeli military says that Hamas has launched miss on

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Speaker 7: some other attacks at Israeli positions at the Rougher border

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Speaker 7: crossing in other areas. So Israel is saying it's stepping

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Speaker 7: up those strikes to sort of thwart those and to

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Speaker 7: thwart what it expects Hamas to do.

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Speaker 2: Today, we are looking at fighting on two fronts there

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Speaker 2: for Israel. Of course, we're also still waiting to see

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Speaker 2: how Israel will decide to respond to the ballistic missile

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Speaker 2: barrage from Iran last week too. I mean, how much

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Speaker 2: does all of this tell us about what's changed across

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Speaker 2: the Mid least over the past year, as really it's

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Speaker 2: been you know, an enormous amount that has happened in

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Speaker 2: that time.

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Speaker 7: Exactly, And I think as horrific as October the seventh

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Speaker 7: last year was. I don't think there was anybody or

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Speaker 7: many people that would have predicted that, you know, a

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Speaker 7: year on, Israel would be fighting in Lebanon, it would

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Speaker 7: be regularly striking Syria, it would be facing attacks from

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Speaker 7: militias in Iraq from the Huthis, two very very dangerous

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Speaker 7: attacks from the Huthies, you know. I remember when the

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Speaker 7: Huthis first started saying they would attack Israel. It was

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Speaker 7: seen as a bit of a joke, given how far

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Speaker 7: away they were in their capabilities, and then obviously the

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Speaker 7: direct at tax from Iran. I mean, all of this,

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Speaker 7: and none of it really seems to have an end

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Speaker 7: in sight. If you look at Garza, yes, Hamas has

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Speaker 7: been so degraded as a military force, and its ability

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Speaker 7: to sort of harm Israel with missile attacks has been hit.

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Speaker 7: And maybe it's lost half its fighters in the war

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Speaker 7: against Israel, but it's still able to act as a

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Speaker 7: force of sorts, and it doesn't seem like Israel has

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Speaker 7: any plan to move its troops out of Garza anytime soon.

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Speaker 7: In Lebanon, there are plenty of concerns even among Israelis

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Speaker 7: that this just won't be a short incursion that inevitably

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Speaker 7: the idea forget bogged down and sucked in for months

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Speaker 7: and months, if not even long, And then yeah, we

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Speaker 7: have to see how things pan out with Iran. And

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Speaker 7: the most immediate thing is just what Israel does with

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Speaker 7: its retaliation against the Islamic Republic for that missile attack

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Speaker 7: last week. So there's so much going on here. Israel

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Speaker 7: says it's not stretched by any means militarily. Israel says

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Speaker 7: it's prepared and capable of taking on its enemies on

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Speaker 7: multiple fronts. But certainly there multiple crises that not just

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Speaker 7: the country but the Middle East is facing right now.

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Speaker 2: And of course, at the same time, the human toll

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Speaker 2: has been absolutely enormous. You know, we're talking about the

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Speaker 2: Hamas attack that happened a year ago and then more

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Speaker 2: than forty thousand people dead in Gaza, fifteen hundred people

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Speaker 2: dead in Lebanon, That too, is also very much in

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Speaker 2: focus today.

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Speaker 7: Exactly, it's a horrific toll, and is Grim is at

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Speaker 7: grim as it is to say that that toll is

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Speaker 7: just going to keep rising over the next few weeks.

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Speaker 7: There's just little to suggest that there's going to be

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Speaker 7: a truce or a ceasefire in Gaza in the immediate future,

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Speaker 7: or in Lebanon.

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Speaker 2: Another aspect of everything that's changed over the past year, Paul,

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Speaker 2: I wonder how much of that has to do with

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Speaker 2: diminished US influence as well. We heard there from Kamala

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Speaker 2: Harris a moment ago talking about how she would pressure

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Speaker 2: Israel to end its military campaign if she wins the

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Speaker 2: election in November. Is the US playing a less important,

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Speaker 2: less strategic role in the Middle East now than it

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Speaker 2: was a year ago.

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Speaker 7: It's an extremely interesting question. I think that's something historians

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Speaker 7: are going to pour over in the years and decades

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Speaker 7: to come. On the one hand, I think this crisis

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Speaker 7: starting from October the seventh Sossius owes the importance of

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Speaker 7: the US in many ways. It's been the only world

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Speaker 7: power that's been important as far as Israel is concerned,

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Speaker 7: and as far as many other regional states are concerned.

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Speaker 7: I mean, China is absolutely nowhere, Russia hasn't featured, and

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Speaker 7: you could largely say the same thing about European states.

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Speaker 7: But at the same time, there's been a huge criticism

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Speaker 7: of the Biden administration within the US and even beyond,

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Speaker 7: for failing to be able to sort of direct the

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Speaker 7: Nettennohu government in the direction at once. I mean, Biden

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Speaker 7: wanted a cease far in Gaza a long time ago,

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Speaker 7: and I think if he leaves office in January with

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Speaker 7: the war still going on, that will be a huge

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Speaker 7: personal disappointment to him and something that will taint his legacy.

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Speaker 7: But he simply hasn't been able to sort of sway

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Speaker 7: netto who all that much. Of course, Hamas has played

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Speaker 7: a big role in in the fame to achieve a

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Speaker 7: truce in Godz. But certainly I think some people will

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Speaker 7: look at this as a sort of watershed moment in

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Speaker 7: how the US is sort of the only outside power

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Speaker 7: that really matters in the Middle East, but at the

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Speaker 7: same time it's losing its influence very very quickly.

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Speaker 2: Okay, Paul, thank you very much for joining us this morning.

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Speaker 2: That's Paul Wallace there, who leads our team covering economics

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Speaker 2: and government in the Middle East. Well, Friday's US jobs

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Speaker 2: report stronger than expected, showing payroll growth and somewhat up

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Speaker 2: bending how markets are viewing the path ahead for the

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Speaker 2: Federal Reserve. Our market support of Valerie Titala is with

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Speaker 2: me in studio for more Valerie. This was interesting because

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Speaker 2: the number sort of appeared to have caught quite a

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Speaker 2: lot of people by surprise, and now the talk of

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Speaker 2: no landing is back on the table.

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Speaker 8: Don't you love markets? They go one way, they swing

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Speaker 8: the other way aggressively. So yes, that payroll report on Friday,

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Speaker 8: surprise many out there in the market. This hope for

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Speaker 8: a fifty base point cut all but erased when it

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Speaker 8: comes to the market pricing in two yields on the

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Speaker 8: week they jumped thirty six basis points. That's one of

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Speaker 8: the biggest moves in the front end since two thousand

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Speaker 8: and eight. It really it catches some of those massive

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Speaker 8: moves that we saw back in twenty twenty one. In

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Speaker 8: twenty twenty two, it really paired right up with that.

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Speaker 8: With that kind of move, The other thing that really

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Speaker 8: caught my I Steven is the twos tens treasury curve

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Speaker 8: is now three basis points away from reinverting. From inverting

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Speaker 8: once again, we have to take a step back and

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Speaker 8: think about what this no landing risk could be. We

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Speaker 8: could potentially have a FED that goes from a fifty

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Speaker 8: basis point cut to a twenty five and then maybe

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Speaker 8: in December they pause and they skip and they hold

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Speaker 8: rates you know, at near five percent for maybe a

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Speaker 8: few months to come, and that could have a big,

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Speaker 8: you know, ramification for the globe.

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Speaker 2: Talk to us how we should be thinking about this

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Speaker 2: from a European perspective as well, because of course, as

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Speaker 2: we know that what happens in the FED does matter

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Speaker 2: to the rest of the global economy too.

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Speaker 8: Yes it does. So if the FED ease is less,

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Speaker 8: it potentially gives other global central banks less room to ease,

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Speaker 8: but it gives it has other ramifications. We need to

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Speaker 8: think about France, for example, who's got a budget that

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Speaker 8: they're announcing on Thursday. There have been worries about this

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Speaker 8: global about this debt pile that the French is the

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Speaker 8: nation has. If for instance, we get the FED on hold,

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Speaker 8: there's just less room for global yields to rally, and

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Speaker 8: the France yield trades it a spread to treasury. So

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Speaker 8: if treasuries don't go lower and yield, France could be

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Speaker 8: grappling with a higher cost of debt for the next

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Speaker 8: foreseeable future. And that's going to cause a lot of

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Speaker 8: people to worry. You know, we already had our eye

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Speaker 8: on this French budget, but even more so, I think

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Speaker 8: there's gonna be a bit more pressure, you know, think

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Speaker 8: about the UK, who's also releasing a budget at the

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Speaker 8: end of this month. There's gonna be a bit more

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Speaker 8: pressure in those indebted nations and corporates.

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