Speaker 1: Bloomberg Audio Studios, podcasts, radio news. They say's the Bloomberg
Speaker 1: Daybreak here at podcast, available every morning on Apple, Spotify
Speaker 1: or wherever you listen. It's Wednesday, the twelfth of February
Speaker 1: in London. I'm Stephen Carroll.
Speaker 2: And I'm Lizzie Berden.
Speaker 3: Coming up today, The Chancellor Rachel Reeves faces another growth
Speaker 3: downgrade as British recession fears mount.
Speaker 1: UK taxpayers face a one hundred and fifty billion pounds
Speaker 1: bill for the Bank of England's quantitative easing program.
Speaker 3: Plus Trump's tariffs and Germany's troubles collide in Hamburg. We'll
Speaker 3: have a special report on how protectionism is playing out
Speaker 3: in the key trading hub.
Speaker 1: Let's start with a round up of our top stories.
Speaker 3: The UK's Chancellor, Rachel Reeves, faces a new risk of
Speaker 3: having to make spending cuts after the government's fiscal watchdog
Speaker 3: downgraded its growth forecast. Blomerg has learned that the Office
Speaker 3: for Budget Responsibilities first private report to the Treasury puts
Speaker 3: the government on course to break its own fiscal rules
Speaker 3: bogs James.
Speaker 4: Wilcock, sources of told Bloomberg the latest OBR forecast leaves
Speaker 4: the Chancellor facing a small deficit. The official report won't
Speaker 4: be published until the twenty sixth of March and will
Speaker 4: be updated before then, but the current numbers point to
Speaker 4: weaker growth, adding weight to the view that the Chancellor
Speaker 4: will need to raise government revenue in March if she
Speaker 4: is to stick to her physical rules of covering day
Speaker 4: to day spending with tax income. This is tomorrow's growth
Speaker 4: data is expected to show the economy shrank in the
Speaker 4: last three months of twenty twenty four. Economists expect that
Speaker 4: GDP fell zero point one percent, following zero growth in
Speaker 4: the third quarter. Now the OBI will adjust their forecast
Speaker 4: in coming weeks to match the latest data, but so
Speaker 4: far surveys are pointing to a slow start to twenty
Speaker 4: twenty five.
Speaker 2: In London. James Wilcock Bloomberg Radio.
Speaker 1: Staying in the UK taxpayer as will end up paying
Speaker 1: one hundred and fifty billion pounds due to lassers in
Speaker 1: the Bank of England's quantitative easing program. The Central Bank
Speaker 1: estimates that plans to sell its barn portfolio will leave
Speaker 1: it with a whole the size of Britain's entire defense
Speaker 1: budget for two and a half years. The net lass
Speaker 1: is a purely financial measure and doesn't reflect the benefits
Speaker 1: of QE and stabilizing growth and preventing mass unemployment.
Speaker 3: And the Bank of England Governor Andrew Bailey is warning
Speaker 3: against the dangers of multi manager head funds. Thus, as
Speaker 3: the body ramps up its monitoring of non bank finance inmokes,
Speaker 3: t BIO has more.
Speaker 5: Ruthless hedge fund risk management policies pot a threat to
Speaker 5: financial stability. That's according to Andrew Bailey, who said multi
Speaker 5: manager funds deleverage rapidly in stress conditions, which can exaggerate
Speaker 5: market moves in a speech yesterday, Whilst the practice allows
Speaker 5: the firms also known as pod shops, to protect themselves,
Speaker 5: the Bank of England governor highlighted its potential to create
Speaker 5: risks to the financial system. The trend is partially responsible
Speaker 5: for global regulators paying closer attention to rapid growth in
Speaker 5: finance activity outside of banks. Recent research from the Bank
Speaker 5: of England found hedge funds, asset managers and pension for
Speaker 5: could be underprepared in times of crisis. In London, Tima
Speaker 5: Adebayo Bloomberg Radio, one.
Speaker 1: Of the world's most successful multi strategy hedge fund founders,
Speaker 1: Ken Griffin, has criticized Donald Trump's approach to tariffs. Speaking
Speaker 1: at the UBS Financial Services Conference in Miami, the Citadel
Speaker 1: CEO said the US president's trade plans dull the country's
Speaker 1: competitive edge and breed mistrust amongst allies. But there was
Speaker 1: praise for Elon Musk's efforts to cut government spending, which
Speaker 1: Griffin said he was grateful for.
Speaker 6: This is a man who slept on the floor of
Speaker 6: his factory to make sure testils got produced. He will
Speaker 6: do what it takes to win. We want people who
Speaker 6: are in Washington who will do what it takes to
Speaker 6: help the American taxpayer and the American people win.
Speaker 1: Ken Griffin's comments, comm as Democrats have questioned the Tesla
Speaker 1: CEO's unprecedented influence on the US government despite not being
Speaker 1: an elected official.
Speaker 6: Well.
Speaker 3: President Trump has directed agencies to comply with orders for
Speaker 3: job cuts led by Elon Musk's so called Department of
Speaker 3: Government Efficiency. A White House fact sheet seen by Bloomberg
Speaker 3: shows that agencies will be permitted to hire no more
Speaker 3: than one employee for every four that leave. Musk meanwhile,
Speaker 3: made a rare appearance in the Oval Office to defend
Speaker 3: his approach, which is involved obtaining access to sensitive computer
Speaker 3: systems and employee data.
Speaker 7: Your tax dollars need to be spent wisely the things
Speaker 7: that matter to the people. I mean these things like
Speaker 7: it's just common sense. It's not draconian or radical. I
Speaker 7: think it's really just saying, best look at each of
Speaker 7: these expenditures and say, is this actually in the best
Speaker 7: interest in the people. And if it is, it's proved.
Speaker 7: But i's not, we should.
Speaker 4: Think about it.
Speaker 3: Elon Musk also used the address to increase his attacks
Speaker 3: on federal officials and judges that he says a stalling
Speaker 3: progress in cost cutting, calling for impeachment and accusing some
Speaker 3: of being corrupt and activist.
Speaker 1: Federal Reserve charge around Powell says the Central Bank doesn't
Speaker 1: need to rush to adjust interest rates. Speaking to the
Speaker 1: Senate Banking Committee, Power reiterated his belief that policy makers
Speaker 1: could be patient before lowering borrowing costs further.
Speaker 8: As the economy evolves, we will adjust our policy stamps
Speaker 8: in a manner that best promotes our maximum employment and
Speaker 8: price stability goals. If the economy remains strong and inflation
Speaker 8: does not continue to move sustainably towards two percent, we
Speaker 8: can maintain policy restrained for longer. It's a labor market
Speaker 8: we're to weaken unexpectedly, or inflation were to fall more
Speaker 8: quickly than anticipated, we can use policy accordingly.
Speaker 1: Bontels climbed after Jerome Powell's comments, but moves in rate
Speaker 1: bets where more muted markets are pricing, and around thirty
Speaker 1: three basis points of cuts in twenty twenty five, with
Speaker 1: the next move not expected until September.
Speaker 2: Well, those are you top stories this morning? On the markets?
Speaker 3: The stock six hundred is higher a quarter of a percent,
Speaker 3: the foot CE one hundred is flat to the upside,
Speaker 3: and SMP E MENI futures are flat to the downside.
Speaker 1: In a moment, we'll bring you more on the gloomy
Speaker 1: outlook for the UK economy, plus a view from Germany's
Speaker 1: biggest port of the rising trade tensions with the US.
Speaker 1: But in the story I've been reading this morning, Lizzie,
Speaker 1: I don't know if you are a catastrophist, if you
Speaker 1: are always for the worst.
Speaker 3: Stephen, how many mornings have we anchored together?
Speaker 2: Do you not know that I am a catastrophist?
Speaker 1: Well, I mean I was trying to give you an
Speaker 1: out there, but fine, I think you'd really enjoy JP
Speaker 1: Spinato from Blimber Opinion's latest article about this, The title
Speaker 1: is I Just found my nuclear war hide away. He's
Speaker 1: talking about Mendoza and Argentina, which he points out, I mean,
Speaker 1: it sounds bleak, but actually it's a very nice piece
Speaker 1: about all of the things that Mendoza has going for it.
Speaker 1: And it's not just the wine, by the way. He
Speaker 1: also talks about the fact that it's got mineral wealth,
Speaker 1: renewable energy. The wine does come at feature, though I
Speaker 1: will admit it's also got mentioned in starred restaurants and skiing,
Speaker 1: so really something for everyone. And Jp writes that in
Speaker 1: the piece, which I mean, he obviously takes much longer
Speaker 1: to make the argument about the successes of this particular
Speaker 1: region and the strengths that it has as well, but
Speaker 1: he says that if the nuclear ballion goes up, that's
Speaker 1: where he hopes to be.
Speaker 3: I can vouch for this, having been to Argentina recently.
Speaker 3: You can find me on a horse World goes to
Speaker 3: pot I shall be there myself.
Speaker 1: Julie noted, let's turn back to matters closer to home now,
Speaker 1: the UK's fiscal challenges. Sources telling Bloomberg the preliminary forecast
Speaker 1: presented to the Chancellor from the Budget Watchdog, so downgrade
Speaker 1: to growth, leaving Rachel Reeves at risk of breaking her
Speaker 1: own budget rules. This ahead of the latest update on
Speaker 1: UK GDP, which we're going to get tomorrow Bloomberg survey
Speaker 1: of economists expecting to see a contraction of zero point
Speaker 1: one percent. Our Politics and economics reporter Lucy Weis joins
Speaker 1: us now for more.
Speaker 2: Lucy, good morning.
Speaker 1: There are several updates in this OBR forecast to come,
Speaker 1: but what do we know about what the Chancellor has
Speaker 1: been told?
Speaker 9: Yeah, so this is the first update that we've had
Speaker 9: so far, and at the moment it's all under wraps,
Speaker 9: so we know very limited amounts about it. But what
Speaker 9: we do know is the Office for Budget Responsibility has
Speaker 9: downgraded its growth forecast and that's causing a real problem
Speaker 9: for Rachel Reeves because that means that she's going to
Speaker 9: be scrambling to meet her budgetary rules at the moment.
Speaker 9: At the moment, if we take these if we were
Speaker 9: to take these forecasts as the as the ultimate one,
Speaker 9: she'd have a small deficit when the actual report is delivered.
Speaker 9: But we've got two more updates until the final report
Speaker 9: is delivered in March, so that gives hopefully a bit
Speaker 9: of time for things to improve a little bit. You know,
Speaker 9: Rachel Ruths could could you know, adapt some policies to
Speaker 9: make the outlook of a little bit better, you know,
Speaker 9: market conditions might improve a.
Speaker 2: Little bit more.
Speaker 9: So, Yeah, we've got we've got a few things still
Speaker 9: in flux until March.
Speaker 2: So that's the optimistic view, Lucy.
Speaker 3: But you know, the words iron clad and non negotiable
Speaker 3: are often uttered by the Chancellor about her fiscal rules.
Speaker 3: What's she going to have to do if she has
Speaker 3: run out of headroom?
Speaker 9: Well, exactly, this is the response that we've had from
Speaker 9: the Treasury when we put this story to them last night.
Speaker 9: You know, they have reiterated Rachel Reeves's words that the
Speaker 9: government's commitment to fiscal rules and sound public finances is
Speaker 9: non negotiable.
Speaker 2: But I mean, you know, it does.
Speaker 9: Leave Rachel Reeves in a really tough position because the
Speaker 9: moment we've either got she's either able to well, she's
Speaker 9: promised that she's not going to raise taxes anymore, so
Speaker 9: that leaves her looking at welfare cuts, or that leaves
Speaker 9: her looking at other public services cuts. So you know,
Speaker 9: if she if she really wants to, you know, kind
Speaker 9: of hit the measure that she's promised her own her
Speaker 9: own rules, then that's what's open to her.
Speaker 1: Yeah, indeed, I mean that's going to be some very
Speaker 1: difficult decisions to be made by the Chancellor if she
Speaker 1: is presented with this dilemma as well. One of the
Speaker 1: other factors that, of course we're thinking about more broadly
Speaker 1: is the uncertainty over trade. And you've been reporting on
Speaker 1: how the UK is trying to avoid Trump's trade tariffs.
Speaker 9: Yeah, I mean, that's still very much in flux at
Speaker 9: the moment. Obviously, we don't know whether Trump is going
Speaker 9: to levy the UK with any tariffs.
Speaker 2: At the moment, we've managed to.
Speaker 9: Escape relatively under touched. You know, we've seen him threatened,
Speaker 9: Canada threatened, Mexico, threaten, the EU even and it's although
Speaker 9: we haven't seen any sort of direct measures proposed against
Speaker 9: the e UK other than you know, around around the
Speaker 9: steel which is pretty universal. The UK is kind of
Speaker 9: very much at the whims of whatever happens to anyone else. Obviously,
Speaker 9: the EU is our largest trading partner, the US is
Speaker 9: our largest single country, trading partner. So any trade war,
Speaker 9: any tip for tat spat that happens between the EU
Speaker 9: and the US, we're going to get caught up in
Speaker 9: the middle of that, especially Northern Ireland as well. Obviously
Speaker 9: Northern Irelands post Brexit has this kind of very unique
Speaker 9: position of being you know, effectively still part of the
Speaker 9: EU Single Market, but you know, still part of the
Speaker 9: UK internal market as well, and there's you know, if
Speaker 9: there is a sort of tit for tat trade war
Speaker 9: with the EU, it's very uncertain as to how Northern
Speaker 9: Ireland will fit into that position.
Speaker 3: Yeah, I was in Brussels last week and listening to
Speaker 3: the UK's Man for the EU, Nick Thomas Simmons, talking
Speaker 3: about the need for ruthless pragmatism. But you know, many
Speaker 3: people asking why not go the whole hog and do
Speaker 3: some go some way to revert seeing Brexit if you're
Speaker 3: really serious about growth.
Speaker 2: But that question exactly.
Speaker 3: Yeah, Rachel Reeves, as she keeps a close eye on
Speaker 3: these numbers from the Office for Budget Responsibility. Really great
Speaker 3: that we've managed to get our hands on a preview
Speaker 3: of the estimate that she would have privately seen.
Speaker 2: Lucy White.
Speaker 3: Great to have you with us our UK Politics and
Speaker 3: Economics reporter.
Speaker 2: We thank you well.
Speaker 1: We're still waiting for details of how the EU plans
Speaker 1: to respond to Donald Trump's tariffs on steel and aluminium,
Speaker 1: after Brussels promised it would hit back. The escalating trade
Speaker 1: tensions are adding to uncertainty in Europe. From Germans, Germany's
Speaker 1: federal election, which is taking place in less than two
Speaker 1: weeks time. Now, our senior editor Alan Crawford joins us
Speaker 1: for more from Berlin. Alan, you've been reporting from the
Speaker 1: German port of Hamburg. It's one of the most important
Speaker 1: trading points in the EU. How worried are people there
Speaker 1: about the risk of a trade war?
Speaker 10: Good morning. Well, this mood there is really one offul
Speaker 10: trepidation that people, companies, businesses, the port itself are all
Speaker 10: stealing themselves for what is to come.
Speaker 2: When I was up there last.
Speaker 10: Week and everybody really was saying that it's virtually impossible
Speaker 10: to calculate what is the media impact. I mean, this
Speaker 10: is a port that's been in existence for eight centuries,
Speaker 10: that they're used to the ups and downs, all sorts
Speaker 10: of turbulence. But what the agree on is that any
Speaker 10: kind of impact on global trade is bad for business.
Speaker 3: And what's the risk to Germany from an escalation of
Speaker 3: this trade dispute with the US.
Speaker 2: What are the numbers kind of look like? Allen, good morning.
Speaker 10: By the way, Hey, good bar and Lizzie. Yeah, I mean,
Speaker 10: Germany is despite the flood of bad news that's been
Speaker 10: coming through in terms of the economy, it still is
Speaker 10: the world's number three economy after the US and China,
Speaker 10: and it's a manufacturing based economy. They live and die
Speaker 10: in terms of exports, two thirds of which go through
Speaker 10: the port of Hamburg. So they're concerned both about Trump's
Speaker 10: tariffs and of course any retaliation and really this broader
Speaker 10: idea that the world is becoming more inward looking, protectionism
Speaker 10: is rising, and all of that can potentially affect global trade.
Speaker 1: Of course, this is all playing out while Germany's election
Speaker 1: campaign is coming towards its conclusion, with the election on
Speaker 1: Sunday of next week. Economic issues have been central to
Speaker 1: that debate as well. How are these issues playing into
Speaker 1: the campaign in Germany?
Speaker 10: Well, Hamburg is somewhat unusual in that it consistently tops
Speaker 10: the ranks of the highest GDP per capita of Germany's
Speaker 10: sixteen states, so it's frankly wealthy. At the same time,
Speaker 10: it's also one of the reasons I went there was
Speaker 10: that it's Olaf Schultz, the Chancellor's hometown. It's a bastion
Speaker 10: of support for his Social Democrats party and interestingly, the
Speaker 10: far right AfD party that we talk about that's running
Speaker 10: second nationally, it's nowhere in Hamburg, and so it's a
Speaker 10: bit of an anomaly in that sense. But everybody agrees
Speaker 10: there that Germany as a whole needs to raise its
Speaker 10: competitive competitiveness. That's the single biggest issue for all of
Speaker 10: these businesses going into this election.
Speaker 2: I mean, for anyone who's not following the.
Speaker 3: German election blue black, Blue, or hasn't started yet, alan
Speaker 3: how much of a factor is it in whoever's going
Speaker 3: to be successful that they can tell a positive story
Speaker 3: about the German economy, that they can present a realistic
Speaker 3: way of dealing with Donald Trump when it comes to
Speaker 3: the tariff war between the US and the EU.
Speaker 2: That is actually a very good point.
Speaker 10: It's exceptionally difficult for exactly these reasons that we're talking
Speaker 10: about that we can see on show in Hamburg, that
Speaker 10: there's a limited amount that any government in a country
Speaker 10: like Germany, or indeed any other country in Europe or
Speaker 10: much of the rest of the world can do when
Speaker 10: they're faced with a global trade war that's instigated by
Speaker 10: the world's number one economy. So that there is this
Speaker 10: sense that Germany, as an export dependent country, is really
Speaker 10: stuck in the middle between the US and potentially China
Speaker 10: and that and this is some of the fear that
Speaker 10: the next German government of whichever hu it is, may
Speaker 10: not be able to immediately rapidly enough tackle the issues
Speaker 10: at hand.
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