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Speaker 1: This is Bloomberg Daymake you for this Wednesday, the third

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Speaker 1: of May in London coming up today.

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Speaker 2: More than a regional problem, smaller US lenders see values

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Speaker 2: tumble as volatility halts, trading.

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Speaker 1: Risk off Morgan Stanley and Ubs Save bombs are the

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Speaker 1: safe bet right now.

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Speaker 2: One and Done is the fad about to end. It's

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Speaker 2: hiking cycle, Phone of.

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Speaker 3: Fraud, Dyson's AI investments and ABM beds Hold my beer moments.

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Speaker 3: Those are the stories we're looking at in today's papers.

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Speaker 1: I'm James Walcock plus Carl i Can gets hit by Hindenburg,

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Speaker 1: the short seller of what leads to a ten billion

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Speaker 1: dollar drop in the investor's net worth.

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Speaker 4: That's all straight ahead on Bloomberg Daybreak Europe. The business

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Speaker 4: news you need to start your day in just one

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Speaker 4: fifteen minute podcast on Apple, Spotify, the Bloomberg Business App

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Speaker 4: and everywhere you get your podcasts.

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Speaker 5: Good morning. I'm Stephen Carroll.

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Speaker 1: And I'm Caroline Hecker. Here are the stories that we're

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Speaker 1: following today.

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Speaker 2: Let's start in the United States. Fears over the stability

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Speaker 2: of the US banking system have been reignited after trading

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Speaker 2: was halted in multiple regional lenders just Today, after Wall

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Speaker 2: Street breathed a sigh of relief over the rescue of

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Speaker 2: First Republic, volatility halted trading in PacWest Bancorp and Western

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Speaker 2: Alliance Bancorp. Both lenders saw their share price drop by

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Speaker 2: at least fifteen percent. PGMCO David Hunt says, we're only

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Speaker 2: starting to feel the fallout of the banking crisis.

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Speaker 6: We are actually just starting on the implications of the

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Speaker 6: banking crisis that we are now going to see a

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Speaker 6: increased regulation of banks, in particular focused on the regional

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Speaker 6: banks as you mentioned. We're also going to see the

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Speaker 6: result of that being a pullback in credit, which will

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Speaker 6: help of course non bank lenders, and we're going to

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Speaker 6: see more bank consolidation.

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Speaker 2: Well, that was the PGM CEO David speaking there. His

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Speaker 2: comments reflect a growing concern in the industry that the

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Speaker 2: recent turmoil in the banking sector has yet to run

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Speaker 2: its course.

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Speaker 3: Well.

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Speaker 1: A plunge in regional bank stocks will weigh on the

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Speaker 1: FED when they announced their latest rate decision late to day.

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Speaker 1: The US Central Bank is expected to deliver a twenty

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Speaker 1: five basis point interest rate increase, but signal a pause

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Speaker 1: in its aggressive hiking campaign. However, former Fed Bank of

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Speaker 1: Dallas president Robert Kaplan has told Bloomberg he believes that

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Speaker 1: that is the wrong move.

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Speaker 7: I would prefer to do what's called the hawkish pause,

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Speaker 7: not raise the signal that we're in a tightening stance,

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Speaker 7: because I actually think the banking situation may well be

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Speaker 7: more serious than we currently understand it.

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Speaker 1: Kaplan is not likely to get his wish, though, with

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Speaker 1: markets fully pricing in a quarter point hike. The decision

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Speaker 1: will be released at seven pm London time today, followed

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Speaker 1: thirty minutes later by chaired Your Own palspress conference.

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Speaker 2: UBS and Morgan Stanley say that while the debt market

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Speaker 2: is price based in the risk of a recession, the

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Speaker 2: stock market hasn't. Analysts that both banks argue that higher

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Speaker 2: rated bonds are a better hedge against a recession than stocks,

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Speaker 2: which they say are still relying on the FED navigating

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Speaker 2: a soft landing. Hartmut Issel, head of APAK Equity and

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Speaker 2: Credit at UBS Global Wealth Management, says the bank now

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Speaker 2: has raised bonds to its most preferred asset class and

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Speaker 2: lowered equities to their least preferred.

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Speaker 1: The French bank BNP Paribat has reported a jump in

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Speaker 1: fixed income trading up by nine percent to one point

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Speaker 1: nine to one billion euros in the first quarter. The

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Speaker 1: bank's Global Banking division, which houses its capital markets and

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Speaker 1: advisory businesses, also saw revenue jump by sixteen percent, helped

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Speaker 1: by higher interest rates that allowed to offset declines in

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Speaker 1: equities trading. The bank completed the disposal of its Bank

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Speaker 1: of the West subsidiary, which also helped to lift net

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Speaker 1: income by almost three billion euros in the quarter, even

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Speaker 1: as costs row and the end of cheap central bank

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Speaker 1: funding for lenders weighed on revenue.

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Speaker 2: UK regulators are proposing significant changes to stock listing rules

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Speaker 2: in a bid to make London more attractive as a

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Speaker 2: trading hub. Bloomberg, dew and Parts has more.

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Speaker 8: The choice of a New York listing for British tech

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Speaker 8: giant Arm was something of a wake up call for

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Speaker 8: the city after a drop off in London listings. The

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Speaker 8: Financial Conduct Authority now wants to redraw its rules, including

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Speaker 8: removing mandatory shareholder votes on acquisitions. The plans will make

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Speaker 8: it easier for companies also to have two classes of shares,

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Speaker 8: a structure favoured by some entrepreneurs who want to keep

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Speaker 8: control of their companies. The changes are still under consultation

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Speaker 8: as the proposed reforms would shrink investor protections, but the

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Speaker 8: plans do start wider debate around the risks the UK

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Speaker 8: will take to stimulate growth in London. I'm une parts

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Speaker 8: Bloomberg day Break.

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Speaker 1: Europe Activists and versa. Carl i Can has found himself

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Speaker 1: on the receiving end of some sharp criticism. Hindenberg Research

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Speaker 1: disclosed a s short call against i Can's investment firm

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Speaker 1: and said that it found evidence of inflated valuations for

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Speaker 1: some of its assets. Shares of i Can Enterprises closed

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Speaker 1: down twenty percent. Bloomberg calculates that i Can's fortune sank

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Speaker 1: by ten billion dollars, whilst he dropped from fifty eighth

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Speaker 1: the richest person to one hundred and nineteenth on Bloomberg's

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Speaker 1: Billionaires Index. In a statement, i Can called the Hindenburg

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Speaker 1: report self serving and intended solely to generate profits on

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Speaker 1: Hindenburg's short position.

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Speaker 2: Those are our top stories on the program this morning. Interesting,

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Speaker 2: so much interesting, so many interesting stories on the Bloomberg

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Speaker 2: terminal this morning. Are big take report today looking at

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Speaker 2: Saudi Arabia. Really interesting that as we've seen challenges facing

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Speaker 2: the financial community elsewhere in the world. Banking jobs and

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Speaker 2: salaries are surging in Saudi Arabia, and this is part

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Speaker 2: of the pay boom being driven by Crown Prince Muhammad

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Speaker 2: Bill Salmon, who is keen to push the financial powerhouse

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Speaker 2: element of Saudi Arabia. So banks, they're also the public

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Speaker 2: investment fund hiring at a breakneck speed, recruiting staff from abroad,

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Speaker 2: you know, looking to try and push the expansion of

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Speaker 2: financial sector in Saudi Arabia. So that's a place where

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Speaker 2: salaries are being pushed higher.

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Speaker 1: Yeah, look Sadura repin not a country known for underpaying

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Speaker 1: you know, staff that they perhaps bring in from abroad.

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Speaker 1: But Rihann apparently is really the place to be in

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Speaker 1: terms of kind of banking jobs and growth in the

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Speaker 1: financial services. I mean, we were just hearing from Nick

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Speaker 1: Candy earlier this week, the big UK property developer, about

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Speaker 1: how you know, it's the kind of boom city at

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Speaker 1: least the Middle East is the place to be. There's

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Speaker 1: also though a very interesting piece but it's quite serious.

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Speaker 1: But I sort of wanted to talk about it because

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Speaker 1: Bloomberg Shitty Wren has a piece about investing in China. Basically,

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Speaker 1: she's saying that it's quite a different picture if you

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Speaker 1: are an overseas investor in China, unless you have a

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Speaker 1: huge number of trust How did analyst native Chinese investing

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Speaker 1: in China, says Shudy Reren from thousands of miles away,

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Speaker 1: is increasingly a losing trade. Why because Chinese becoming more

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Speaker 1: secretive and getting access to information if you're an overseas

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Speaker 1: investor or just even for the sort of generalized information

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Speaker 1: that's not kind of politically related, is becoming more difficult.

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Speaker 1: So Shirley has a long read about this on the

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Speaker 1: Boombag terminel that I thought was absolutely fascinating. How you know,

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Speaker 1: long term investors are sort of sitting on the sidelines

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Speaker 1: even though China has reopened.

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Speaker 2: Yeah, definitely something worth reading this morning. Let's turn back

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Speaker 2: though to our top stories around the turmoil in the

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Speaker 2: regional banking sector in the US. Despite the takeover First

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Speaker 2: Republic by JP Morgan, we saw more pressure on regional

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Speaker 2: banks yesterday, shares and the likes of PacWest Bankcort plunging

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Speaker 2: by twenty eight percent to a record low. Our market

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Speaker 2: supporter of Valerie Title joins us now from more Valerie,

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Speaker 2: Why did this kick off?

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Speaker 9: Again, what an afternoon session yesterday. Risk just took a

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Speaker 9: dive in the afternoon summer, pointing to the weak jolt

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Speaker 9: stata we got around three pm yesterday the fact that

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Speaker 9: the debt ceiling X date was moved up to June. First,

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Speaker 9: another risk off event, and then most importantly, the FDIC

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Speaker 9: and their report that came out on Monday really just

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Speaker 9: gave us little context on deposit insurance and guarantees that

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Speaker 9: they could possibly expand. And the reason why that's important

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Speaker 9: is because that would help these regional lenders with their

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Speaker 9: liquidity issues by making their deposit base more stable. Now,

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Speaker 9: regardless of what the culprit was, I think it shows

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Speaker 9: us that the vulnerabilities of these regional lenders are still

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Speaker 9: there right Their exposure to commercial real estate is notable.

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Speaker 9: Eighty percent of the commercial real estate loans are held

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Speaker 9: in small banks in the US. They're underwater on their

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Speaker 9: loan portfolios, most of those being long term mortgages. They

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Speaker 9: cannot afford a five percent cost of funding, which is

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Speaker 9: going to be made even worse today when the FEDS

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Speaker 9: sends another twenty five basis point hike and they're still

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Speaker 9: suffering with this deposit base instability. All of these factors

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Speaker 9: really don't change until the FED actually cuts rates, not

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Speaker 9: just signals they're going to cut rates, but actually cuts rates.

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Speaker 9: And I think that's more and more what the market

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Speaker 9: is getting a hold of that these regional these issues

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Speaker 9: with these regional lenders are not going to go away

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Speaker 9: anytime soon.

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Speaker 1: Okay, So if they're not going to go away, how

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Speaker 1: does the termial end. I mean, you had multiple trading

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Speaker 1: stoppages yesterday, I'm cutting interest rates. That's not for months, potentially.

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Speaker 9: Months or maybe a year if you believe what the

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Speaker 9: FED is telling us, right, So a lot of what

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Speaker 9: this can cause is further consolidation of these regional lenders

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Speaker 9: into the big too big to fail institutions. But if

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Speaker 9: they play from JP Morgan's playbook around First Republic, they're

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Speaker 9: going to sit on the sidelines and wait for the

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Speaker 9: FDIC to put them into receivership and then mop up

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Speaker 9: the loan portfolios they want at these auctions and share

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Speaker 9: some of the losses with the government. So I think

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Speaker 9: that precedent that JP Morgan's set with First Republic is

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Speaker 9: kind of worrying the rest of the rest of the

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Speaker 9: market at the moment because that that implies a lot

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Speaker 9: of losses that the FDIC would have to take on

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Speaker 9: if all of these regional lenders do play onto that

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Speaker 9: same playbook. And instead of it being a you know,

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Speaker 9: very quick SBB collapse, were are set up for months

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Speaker 9: and months of these banks struggling and then eventually going under.

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Speaker 5: What about the broader kind of ripples through markets?

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Speaker 1: Though?

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Speaker 2: Though this wasn't just about regional banks. Yesterday, we saw

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Speaker 2: big moves elsewhere in markets too.

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Speaker 9: Most notably oil took a major dive down five percent.

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Speaker 9: And that's really telling as the recession trade is here, right,

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Speaker 9: the not only do these regional banks struggle, but then

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Speaker 9: the credit impulse, the credit availabilability to the US economy falls,

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Speaker 9: and because of that, you know, demand falls, we enter

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Speaker 9: a recession. You don't need energy anymore. So I think

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Speaker 9: that even the move and commodities, the move and treasuries

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Speaker 9: was really worrying yesterday. And look, the FED meets today.

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Speaker 9: They're going to get asked about these moves in the

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Speaker 9: market yesterday, and it will be very very telling the

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Speaker 9: way they handle it.

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Speaker 1: So I'll say this lie. So even a Rod the

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Speaker 1: baseball star, is saying, you've got one hundred thousand dollars.

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Speaker 1: You need to stick it into te Pails. I mean,

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Speaker 1: you know, not to dismiss him, because he's obviously a

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Speaker 1: long time investor himself and has made a great deal

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Speaker 1: of money. But you know everybody's talking about its bonds,

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Speaker 1: not equities.

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Speaker 9: Yeah, and look, that's just going to make the deposit

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Speaker 9: base of these regional lenders even more instable. As soon

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Speaker 9: as the FED hikes twenty five basis points and that

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Speaker 9: gets effective in the market reflected into these money market funds,

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Speaker 9: deposits are going to leave, especially those ones that are

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Speaker 9: uninsured now that they seem to get no help from

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Speaker 9: the FDICE. So the higher the Fed hikes, and let's

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Speaker 9: say today is their last one, hopefully that rate will

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Speaker 9: keep pulling deposits out of the US banking system until

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Speaker 9: they cut, which, if you believe them at their word,

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Speaker 9: is not going to be for a fair few months

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Speaker 9: from now.

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Speaker 2: Okay, Valerie Titel, our market supporter, thank you very much

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Speaker 2: for that. Up next phone of fraud, Dyson's AI investments

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Speaker 2: and ab inbvs hold my beer moment.

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Speaker 4: Now the paper review on blue Bird Daybreak Europe. The

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Speaker 4: news you need to know from today's papers had Bloombergs.

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Speaker 1: James Wilcock joins US Now for a look through what's

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Speaker 1: in the newspapers. A number of newspapers covering the UK

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Speaker 1: government's new national fraud strategy. What's it about, James?

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Speaker 3: So Carolyn is can publish later today And there are

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Speaker 3: a range of takeaways. The Times talking about how cold

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Speaker 3: calling will be banned for all financial products as they've

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Speaker 3: seen this sort of boom in insurance and cryptocurrency schemes

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Speaker 3: used against elderly people. The government is going to try

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Speaker 3: and stop all kinds of promotional calls to anyone sort

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Speaker 3: of From the UK writers take this line of two

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Speaker 3: thirds abroad, a fraud in Britain starts overseas.

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Speaker 5: And what is interesting that some of the ft points

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Speaker 5: out is this.

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Speaker 3: Boost is only four hundred people in terms of new

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Speaker 3: police officers, and fraud is forty percent of sort of

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Speaker 3: the amount of crime in the UK to one percent

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Speaker 3: of the police force. So what really is going to

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Speaker 3: be happening here is a big crackdown on telecoms and

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Speaker 3: ministers are apparently going to announce a voluntary agreement with

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Speaker 3: the tech industry where platforms will be pledging to take

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Speaker 3: a more proactive approach into reducing online frauds. So it's

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Speaker 3: going to be a lot of putting the burden on

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Speaker 3: tech firms to be interfering with your telecoms.

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Speaker 2: Okay, James, let's go to The Times next and news

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Speaker 2: from Dyson about their two point seventy five billion pounds

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Speaker 2: AI investment plan.

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Speaker 3: I never thought I'd think about this, Stephen, But what

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Speaker 3: is the vacuum of the future looking like?

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Speaker 5: And can it do it? Can it know when to clean?

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Speaker 3: No, that's genuinely what they want. They want to install

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Speaker 3: AI and sort of talk about how your vacuum can

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Speaker 3: tell how dirty your floor would be, talk about the

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Speaker 3: air quality in your room and then tell you when

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Speaker 3: you might need to vacuum or tell you how dirty

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Speaker 3: your house gets. And they're putting in two point seventy

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Speaker 3: five billion pound into research in this new software as

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Speaker 3: a sort of marker of that. They had fifty software

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Speaker 3: developments ten years ago that's now six hundred. And what

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Speaker 3: is also fascinating there was where they are going because

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Speaker 3: if this sort of vacuum in the future is going

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Speaker 3: to be built, well, one hundred million pounds of coins

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Speaker 3: of the Times will be in Bristol in Britain, but

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Speaker 3: quite a large amount. The most significant part will be

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Speaker 3: in Singapore, where Dyson moved the company's headquarters back in

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Speaker 3: twenty nineteen, and also where the largest factory is being

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Speaker 3: built in terms of electronic batteries and sort of a

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Speaker 3: big new kind of investment there. So this story is

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Speaker 3: also about how Britain is part of that future, but

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Speaker 3: a smaller part.

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Speaker 1: I mean, can I call it a token, you know,

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Speaker 1: versus the huge I mean massive. There's an image actually

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Speaker 1: on the Bloomberg terminal about the massive warehouse style investment

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Speaker 1: that is going to take place in Singapore where they're

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Speaker 1: going to manufacture all of this stuff.

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Speaker 2: Yeah, I'm sorry, I can't get past the idea that

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Speaker 2: my vacuum clearer will be telling me judging me essentially

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Speaker 2: for now to having Hoover more recently enough, just shows

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Speaker 2: you how take away different, right, So only judging if

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Speaker 2: you haven't James, Yeah, well exactly, And I take that

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Speaker 2: your tone is very pointed, right, So let's go to

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Speaker 2: the Wall Street Journal next, James covering the fallout from

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Speaker 2: an ad campaign from ab InBev the Superity have gone wrong. Yes,

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Speaker 2: I mean, and this is a fascinating story about how

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Speaker 2: the political sensitivities of marketing at the moment, especially in America.

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Speaker 2: Earlier this year, bud Lights distributors were optimistic. They planned

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Speaker 2: on increasing their marketing spending fivefold after cutting it during

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Speaker 2: the pandemic. And then there was a backlash after they

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Speaker 2: gave some beers with they faced onto Dylan mulvaney. She's

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Speaker 2: a trans woman with ten million followers and a billion

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Speaker 2: views on TikTok writing. Media such as Fox News picked

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Speaker 2: up the story and encouraged a boycott, and several Budweather factories.

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Speaker 3: Even received bomb threats and response. Now today the Wall

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Speaker 3: Street Journal is pointing out that retail store sales fell

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Speaker 3: twenty one percent for bud Light compared with a year earlier,

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Speaker 3: and rivals jumped twenty one percent of the same amount.

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Speaker 3: And so now they're detailing how AB and BEV are

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Speaker 3: doing damage control and moving out free cases of bud Light.

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Speaker 3: But they warn that some of the distributors talking to

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Speaker 3: Wall Street journals say that this is a two sided

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Speaker 3: risk because now I'm going to use this quote. One

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Speaker 3: distributor told the journal, I lost my Cowboy bars, and

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Speaker 3: now I could lose my gay bars too, so it

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Speaker 3: sort of all points. There's very difficult sensitivity of leading

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Speaker 3: these kind of social issues in corporate marketing.

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Speaker 5: This is Bloomberg Daybreak Europe.

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Speaker 2: You're morning brief on the stories making news from London

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Speaker 5: I'm Caroline Hepka and I'm Stephen Carroll.

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Speaker 2: Join us again tomorrow morning for all the news you

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Speaker 2: Break Europe