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

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Speaker 1: DBAQ podcast, available every morning on Apple, Spotify or wherever

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Speaker 1: you listen. It's Monday, the thirteenth of January in London.

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Speaker 1: I'm Caroline Hepka.

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Speaker 2: And I'm Stephen Carroll. Coming up today, the UK's Chancellor,

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Speaker 2: Rachel Eves returns from China to a pound that's weakening

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Speaker 2: further at a fragile bond market still worried about the

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Speaker 2: government's fiscal plans.

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Speaker 1: Almost eight million people are facing fresh risks from the

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Speaker 1: Los Angeles wildfires, as officials say more high winds could

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Speaker 1: fan the flames burning California.

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Speaker 2: Plus succeeding in space, Amazon co founder Jeff Bezos tells

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Speaker 2: Bloomberg the rocket industry has room for multiple winners.

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Speaker 1: Let's start with a roundup of our top stories.

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Speaker 2: The UK's Chancellor Rachieves returns from China, promising her fiscal

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Speaker 2: rules are non negotiable. That's after fears over the UK's

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Speaker 2: rising inflation week. Growth in the government's spending plans pushed

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Speaker 2: yields on ten year guilds to their highest since two

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Speaker 2: thousand and eight. Amid a global bond rout Rachel Reeves

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Speaker 2: also doubled down on her government's aim of economic growth.

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Speaker 3: Growth is the number one mission of this labor government,

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Speaker 3: and to growth the economy, we need to help great

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Speaker 3: British businesses export around the world. And that's why I've

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Speaker 3: got with me a delegation of senior UK finance bosses

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Speaker 3: to unlock tangible benefits to help British businesses export and

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Speaker 3: trade with the second largest economy in the world, and

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Speaker 3: always doing that in the UK's national interest.

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Speaker 2: Reeves there speaking over the weekend in China. The Prime

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Speaker 2: Minister care Starmer is also trying to boost the UK's

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Speaker 2: growth prospect. He set to launch a new AI plan

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Speaker 2: later today, promising to integrate the new technology into public

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Speaker 2: services to make them more productive.

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Speaker 1: Now, traders in the options markets are preparing for the

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Speaker 1: pound to tumble after the UK sell off law next week.

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Speaker 1: Demand for pound options rose three hundred percent, surpassing level

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Speaker 1: seen during the Liz Truss episode and even the Brexit referendum.

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Speaker 1: The positioning comes ahead of UK inflation data out on Wednesday,

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Speaker 1: which colomists expect to see hitting a nine month high.

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Speaker 1: Right now, cable trading at one twenty one forty nine,

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Speaker 1: so the pound down half of one percent against the

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Speaker 1: US dollar.

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Speaker 2: Nearly eight million people in the Greater Los Angeles area

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Speaker 2: are being warned about further potential wildfires. The US National

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Speaker 2: Weather Service expects more dry, hot winds in the coming days.

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Speaker 2: That's going to limit firefighters from making progress on the

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Speaker 2: ongoing blazers and risks new wildfires starting. FEMA Administrator Deanna

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Speaker 2: Criswell says, the crisis is not over.

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Speaker 4: The biggest concern that I have right now is the

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Speaker 4: fact that we are still in such a dangerous situation.

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Speaker 4: The red flag warnings have been reissued, the winds are

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Speaker 4: coming back, and we still want to make sure that

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Speaker 4: people are in a safe place. And I know that

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Speaker 4: that's hard for so many because they want to get

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Speaker 4: back in. They want to see their home, they want

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Speaker 4: to see if there is anything left.

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Speaker 2: Dean Crosweld, they're speaking on ABC's this week. The fires

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Speaker 2: are the most devastating natural disaster to hit Los Angeles

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Speaker 2: in decades, with twenty four people now confirmed dead. The

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Speaker 2: economic costs, meanwhile, they are expected to rank among the

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Speaker 2: highest in modern US history.

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Speaker 1: Now two oil markets where prices have hit a four

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Speaker 1: month high as fresh US sanctions against Russia's energy industry

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Speaker 1: threatened to limit global supplies. The outgoing Biden administration imposed

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Speaker 1: the most aggressive restrictions yet on Russian oil on Friday,

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Speaker 1: targeting large exporters, insurance companies, and more than one hundred

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Speaker 1: and fifty tankers Russia's so called shadow fleet. Following the move,

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Speaker 1: Brent advanced above eighty hundred dollars a bow after surging

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Speaker 1: almost four percent in the previous session, whilst WI crude

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Speaker 1: oil was near seventy eight dollars. The price increase may

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Speaker 1: present a challenge for central bankers if it leads to

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Speaker 1: stickier inflation, but the actual impact on crude flows remains uncertain.

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Speaker 2: Jamie diamond says tariffs can help resolve competition and security

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Speaker 2: issues if properly used. Speaking during an interview with CBS News,

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Speaker 2: the JP Morgan CEO added that he hasn't spoken with

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Speaker 2: US President elect Donald Trump about the measures to.

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Speaker 5: Me tariffs ar way, every tool proper used that can

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Speaker 5: help get some those isuans resolved, unfair competition nas security issues.

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Speaker 5: Like any tool, if it's misused, I can do damage.

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Speaker 2: Too, Jamie Diamond. There he also expressed continued concern about

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Speaker 2: the current geopolitical situation, repeating warnings that is it is

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Speaker 2: the most precarious situation since World War II, and offering

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Speaker 2: to help the incoming president's staff with policy matters. Trump

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Speaker 2: is due to take office on the twentieth of January,

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Speaker 2: has vowed to slap new charges on imports from US

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Speaker 2: adversaries such as China, as well as allies including Canada

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Speaker 2: and Mexico.

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Speaker 1: Billionaire Jeff Bezos says that the space industry has room

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Speaker 1: for multiple winners, including his own firm, Blue Origin and

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Speaker 1: rival SpaceX. Speaking to Bloomberg before his company's first orbital

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Speaker 1: rocket launch attempt, the Amazon founder express hope that NASA's

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Speaker 1: Artemis mission, which aims to send humans to the Moon,

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Speaker 1: will continue under Donald Trump. Blue Origin's new Glen rocket

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Speaker 1: is expected to launch this morning, the first of between

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Speaker 1: six and eight new Glen flights in twenty twenty five,

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Speaker 1: according to the company's CEO, Dave Limp. Bezos, who serves

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Speaker 1: as executive chair of Amazon, also said that working at

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Speaker 1: Blue Origin has become his full time job.

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Speaker 2: Those are your top stories on the markets we are

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Speaker 2: looking at the follow on from Friday's blowout US jobs report,

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Speaker 2: where we saw ten year Treasury eels ride seven basis

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Speaker 2: points to four point seven five percent. The S and

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Speaker 2: P five hundred finish down one and a half percent,

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Speaker 2: and futures are pointing lower again this morning. Markets slashing

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Speaker 2: FED rate cut pricing. The next cut from the Fed

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Speaker 2: isn't now expected until October, market prices only one more

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Speaker 2: cut left in this cycle. European stock futures are also

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Speaker 2: pointing lower this morning, down three tons for eurostoks fifty futures.

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Speaker 2: In Asia, we're seeing a sell off on equities continue there.

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Speaker 2: The MSCI Asia Pacific Index outside of Japan down one

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Speaker 2: point six percent. Oil prices rising one point eight percent

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Speaker 2: today eighty one dollars and sixteen cents on Brent crude.

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Speaker 1: In a moment, we're going to bring you more on

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Speaker 1: the UK's economic woes, which followed Rachel Reeves to China,

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Speaker 1: and talk you through the moves that we are seeing

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Speaker 1: in currency markets today with the pound weakening further. But

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Speaker 1: another story also caught my eye this morning. I was

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Speaker 1: reading Palmi Olson or Mark Zuckerberg and the announcement that

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Speaker 1: he made last week about the end of fact checking

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Speaker 1: on Facebook and Instagram. It was quite interesting because, of

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Speaker 1: course he left out a part that is of interest

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Speaker 1: to people in Europe because that issue of the end

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Speaker 1: of fact checking only applies in the US. The EU

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Speaker 1: is rolling out a law to target disinformation. So Parme's

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Speaker 1: titled her story the Splinternet, and it's all about how,

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Speaker 1: you know, what has been a fairly global Internet actually

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Speaker 1: may start to look very different whether you're sitting in

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Speaker 1: Europe or the US, and you know as to what.

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Speaker 2: You actually see, Yeah, and look at it. This feeds

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Speaker 2: into the broader gy of logical stories as well as that.

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Speaker 2: How will that more stringent regulation of big tech companies,

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Speaker 2: the lion's share of which are American is going to

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Speaker 2: play into the relationship that Donald Trump's going to have

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Speaker 2: with countries in the European Union.

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Speaker 1: Yeah, absolutely, so this you know, the so called Brussels

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Speaker 1: effect where you've had Brussels making rules for Internet companies

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Speaker 1: and then it's sort of cheaper to do that globally.

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Speaker 1: That may be coming an to an end. So it

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Speaker 1: is a kind of decoupling of the relations between the

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Speaker 1: US and European Internet users. This is Palmi Olson's argument

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Speaker 1: this morning.

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Speaker 2: Well, let's bring you more in our top story now

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Speaker 2: and the trip by the UK's Chancellor Rachel Reeves to China.

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Speaker 2: This is the government just trying to move on from

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Speaker 2: last week's bond rout, but we are seeing further market

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Speaker 2: pressure on the UK this morning with the weakening in sterling.

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Speaker 2: UK correspondent Lizzie Burden joins us. Now for more, Lizzie,

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Speaker 2: what did Rachel Reeves get out of this trip to China.

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Speaker 6: Well, so, the big number that they've been touting is

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Speaker 6: this six hundred million pounds worth of deals to the

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Speaker 6: British economy over the next five years, the estimated long

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Speaker 6: term benefits worth up to a billion pounds. You had

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Speaker 6: Reeves meeting with the Chinese Vice Premier lifting in Beijing,

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Speaker 6: officials agreeing to deepen the financial services links and lift

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Speaker 6: certain export barriers. So all of it feeding into this

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Speaker 6: top mission for the government, which is of course growth.

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Speaker 6: You heard the Chancellor talking about it there. But interestingly, Stephen,

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Speaker 6: we'd talked, haven't we, about whether it would be possible

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Speaker 6: to separate out trade and investment from this conversation about

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Speaker 6: broader geopolitical issues. Reeves chose not to make that split,

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Speaker 6: and actually the Treasury says that she raised concerns over

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Speaker 6: interference in the UK's national security, and about China's support

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Speaker 6: for Russia's defense industry, and about human rights issues as well.

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Speaker 6: For China's part, Beijing's really trying to shore up ties

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Speaker 6: with Washington's friends before Donald Trump comes back to the

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Speaker 6: White House. So you've seen President she on the charm

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Speaker 6: offensive with Japan, India and Australia, doing what he can

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Speaker 6: before another round of tariff was and this was the

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Speaker 6: latest example with the UK as well.

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Speaker 1: Okay, Reeves could not avoid so many questions about the

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Speaker 1: market term more here in the UK. What was her message?

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Speaker 6: Yeah, and of course she'd been under pressure to cancel

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Speaker 6: the trip. But the signal that she's trying to give

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Speaker 6: is that labor is focused on long term economic growth.

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Speaker 6: So her message was her fiscal rules are non negotiable,

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Speaker 6: which basically acknowledges that if she runs out of head

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Speaker 6: room where the fiscal watchdog, the Office for Budget Responsibility,

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Speaker 6: makes its estimate of that in March, she is either

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Speaker 6: going to have to raise taxes or cut spending, and

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Speaker 6: she's indicated to us that she would choose spending cuts.

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Speaker 6: Now we'll see whether this message is enough to car

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Speaker 6: markets at the open. As you say, last week, we

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Speaker 6: had the ten year guiltiel that it's higher since two

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Speaker 6: thousand and eight, cable's been at its weakest since twenty

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Speaker 6: twenty three, and we report that traders in the options

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Speaker 6: market a brace for an eight percent fall on sterling,

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Speaker 6: some of them betting for it to fall below one

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Speaker 6: dollar twelve, which would be the weakest in more than

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Speaker 6: two years. So really interesting to watch UK markets in

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Speaker 6: particular this morning.

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Speaker 2: Okay, Busie Burden or UK correspondent, thank you very much. Well,

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Speaker 2: let's stick with the marker's reaction to what we're seeing

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Speaker 2: to the last week's global bond rag. Continuing further pressure

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Speaker 2: on sterling today and of course the blowout US jobs

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Speaker 2: report a key part of the moves that we saw

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Speaker 2: on Friday. Our market support of Valerie Titel is with us.

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Speaker 2: Now can you just talk us through as he mentioned it,

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Speaker 2: there some of the pressure on the pound being renewed

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Speaker 2: today on this question about what options traders are betting

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Speaker 2: on in terms of where sterling goes from here. We're

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Speaker 2: looking at a half a percent week or this morning.

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Speaker 2: What's going on.

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Speaker 7: It's very notable or at least interesting to me that

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Speaker 7: we're seeing such a weakness in cable to start the session.

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Speaker 7: You know, guilt markets don't open for another hour, but

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Speaker 7: it's looking like it could be another shaky day or

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Speaker 7: another shaky open for UK assets with this move in Sterling.

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Speaker 7: I do want to talk a little bit about what

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Speaker 7: we have been seeing in the FX market. We've been

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Speaker 7: seeing a big surge and option volume, which is it

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Speaker 7: eclipse the volume that we saw even around the Brexit

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Speaker 7: referendum and even around the liz Trust era and one

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Speaker 7: or two parts. Yes, you can say that the market

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Speaker 7: is bracing for further downside, but what the market is

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Speaker 7: really positioning for is the risk of another vall surge

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Speaker 7: kind of blow up that we did see around the

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Speaker 7: liz Trust the twenty two twenty twenty two moves. So

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Speaker 7: in some way, that spike in volatility and cable plummeting,

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Speaker 7: traders are just positioning for another thing like that. I

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Speaker 7: wouldn't necessarily say that they're calling for an eight percent slide.

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Speaker 7: They're just hedging their bets that we are getting closer

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Speaker 7: or maybe could be risking another volatility surge with cable

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Speaker 7: moving lower and guildhield spiking.

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Speaker 1: Yeah, and it's about the guiltiels that are so important,

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Speaker 1: but also in the global concepts. Friday's moves, I mean,

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Speaker 1: Bloembag Economics got it right in terms of the figure,

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Speaker 1: the expectations. It was a really strong month in terms

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Speaker 1: of US job creation. How did that impact on the

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Speaker 1: thinking around the FED, global interest rates and Macka moves.

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Speaker 7: We saw calls for FED cuts from Wall Street banks

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Speaker 7: being slashed. Frankly, Bank of America is now calling the

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Speaker 7: Fed's cutting cycle over. They are saying that rate cuts

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Speaker 7: are so twenty twenty four and they're moving the conversation

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Speaker 7: to hikes in twenty twenty five. We also had Goldman, Sacks, Barkley's,

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Speaker 7: JP Morgan all removing one cut from their calls for

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Speaker 7: FED cuts this year, and on the back of that,

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Speaker 7: you know, the market very much it reacted the same.

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Speaker 7: We now are pricing the next full cut not until

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Speaker 7: October this year, and the market is very much settled

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Speaker 7: on just one cut left from the FED this year,

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Speaker 7: and that has you know, again, if you tie this

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Speaker 7: all to what's going on here in the UK, that's

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Speaker 7: boosted the dollar, which is also you know, another headwind

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Speaker 7: you know for the cable currency here and if we

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Speaker 7: look at even what's just happened overnight, Bloomberg Dollar Index

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Speaker 7: hit another fresh two year high. It's now risen nearly

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Speaker 7: nine percent since that Trump trade, since that tariff narrative

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Speaker 7: really took the market's attention back in September. So it's becoming,

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Speaker 7: you know, our currency, your problem when it comes to

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Speaker 7: the dollar story, and you can even tie that into

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Speaker 7: what's going on in the treasury market too. The US

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Speaker 7: is saying, hey, it's our deficit, our treasury market your problem.

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Speaker 7: The US economy can do okay with five percent yields,

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Speaker 7: but it's going to become a headache to those economies

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Speaker 7: globally who don't have the positive growth behind it that

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Speaker 7: the US does.

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Speaker 2: We're looking ahead into this week. We've got US inflation data,

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Speaker 2: We've also got UK inflation data as well. If we're

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Speaker 2: thinking about the outlook for both the FAD and the

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Speaker 2: Bank of England, I mean, what should we be saying

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Speaker 2: about the expectations around the data for this week.

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Speaker 7: Look in terms of what to expect this week, Yes,

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Speaker 7: we do have those CPI figures out from the US

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Speaker 7: and the UK, but I think the bigger narrative and

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Speaker 7: the bigger risk out there is more leaks from the

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Speaker 7: Trump administration about their tariff policy. We're now seven days

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Speaker 7: away from inauguration day, and there was a big thought

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Speaker 7: out there that we would get more leaked about where

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Speaker 7: Trump intends to go with his tariffs. What is he

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Speaker 7: intending on moving on first the tax policy or being

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Speaker 7: tough on tariffs. We haven't really gotten a clear picture

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Speaker 7: from the Trump administration or from his team on what

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Speaker 7: they're deciding to do first. So I do think the

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Speaker 7: market might be a bit vulnerable to trading off of

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Speaker 7: headlines around any further leaks from terror from the Trump administration.

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Speaker 1: Yeah, it does seem to be that that uncertainty around

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Speaker 1: US policy is really becoming heightened in markets, with just

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Speaker 1: so many scenarios being thought about, and that's actually quite

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Speaker 1: quite difficult in terms of the oil markets. This morning though,

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Speaker 1: the outgoing Biden administration quite interestingly rolling out the most

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Speaker 1: sort of severe sanctions against Russian oil exports that we've seen.

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Speaker 1: What's that doing to markets and how do we think

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Speaker 1: about that?

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Speaker 7: Well, the last two sessions Friday session and then again

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Speaker 7: overnight has seen a near three percent jump in oil

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Speaker 7: even from the beginning of the year has risen eight

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Speaker 7: percent plus depending on which Brent or WTI you're looking at.

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Speaker 7: But there's a bit of skepticism out there on whether

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Speaker 7: these sanctions are going to stand place for a long

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Speaker 7: time or whether this is just a last ditch hope

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Speaker 7: from the Biden administration to push forward tougher sete actions

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Speaker 7: on Russia. We do know that Trump has called for

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Speaker 7: an end to the Ukraine War. He wants a peace

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Speaker 7: decision to happen, to happen quickly, and he's threatened, I guess,

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Speaker 7: to do that as soon as he can out of

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Speaker 7: the gates. He's even gone to the effect of inviting

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Speaker 7: Putin tomorrow lago. So I think the long term look

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Speaker 7: on these sanctions is that maybe they won't be this

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Speaker 7: tough in the future. This is just a temporary hope,

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Speaker 7: our last ditch attempt from the Biden administration to penalize

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Speaker 7: a Russian energy experts.

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