WEBVTT - UK Growth Downgrade, Powell In No Rush & Germany Confronts Trump Tariffs

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. They say's the Bloomberg

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<v Speaker 1>Daybreak here at podcast, available every morning on Apple, Spotify

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<v Speaker 1>or wherever you listen. It's Wednesday, the twelfth of February

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<v Speaker 1>in London. I'm Stephen Carroll.

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<v Speaker 2>And I'm Lizzie Berden.

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<v Speaker 3>Coming up today, The Chancellor Rachel Reeves faces another growth

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<v Speaker 3>downgrade as British recession fears mount.

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<v Speaker 1>UK taxpayers face a one hundred and fifty billion pounds

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<v Speaker 1>bill for the Bank of England's quantitative easing program.

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<v Speaker 3>Plus Trump's tariffs and Germany's troubles collide in Hamburg. We'll

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<v Speaker 3>have a special report on how protectionism is playing out

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<v Speaker 3>in the key trading hub.

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<v Speaker 1>Let's start with a round up of our top stories.

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<v Speaker 3>The UK's Chancellor, Rachel Reeves, faces a new risk of

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<v Speaker 3>having to make spending cuts after the government's fiscal watchdog

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<v Speaker 3>downgraded its growth forecast. Blomerg has learned that the Office

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<v Speaker 3>for Budget Responsibilities first private report to the Treasury puts

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<v Speaker 3>the government on course to break its own fiscal rules

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<v Speaker 3>bogs James.

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<v Speaker 4>Wilcock, sources of told Bloomberg the latest OBR forecast leaves

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<v Speaker 4>the Chancellor facing a small deficit. The official report won't

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<v Speaker 4>be published until the twenty sixth of March and will

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<v Speaker 4>be updated before then, but the current numbers point to

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<v Speaker 4>weaker growth, adding weight to the view that the Chancellor

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<v Speaker 4>will need to raise government revenue in March if she

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<v Speaker 4>is to stick to her physical rules of covering day

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<v Speaker 4>to day spending with tax income. This is tomorrow's growth

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<v Speaker 4>data is expected to show the economy shrank in the

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<v Speaker 4>last three months of twenty twenty four. Economists expect that

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<v Speaker 4>GDP fell zero point one percent, following zero growth in

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<v Speaker 4>the third quarter. Now the OBI will adjust their forecast

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<v Speaker 4>in coming weeks to match the latest data, but so

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<v Speaker 4>far surveys are pointing to a slow start to twenty

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<v Speaker 4>twenty five.

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<v Speaker 2>In London. James Wilcock Bloomberg Radio.

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<v Speaker 1>Staying in the UK taxpayer as will end up paying

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<v Speaker 1>one hundred and fifty billion pounds due to lassers in

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<v Speaker 1>the Bank of England's quantitative easing program. The Central Bank

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<v Speaker 1>estimates that plans to sell its barn portfolio will leave

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<v Speaker 1>it with a whole the size of Britain's entire defense

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<v Speaker 1>budget for two and a half years. The net lass

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<v Speaker 1>is a purely financial measure and doesn't reflect the benefits

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<v Speaker 1>of QE and stabilizing growth and preventing mass unemployment.

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<v Speaker 3>And the Bank of England Governor Andrew Bailey is warning

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<v Speaker 3>against the dangers of multi manager head funds. Thus, as

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<v Speaker 3>the body ramps up its monitoring of non bank finance inmokes,

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<v Speaker 3>t BIO has more.

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<v Speaker 5>Ruthless hedge fund risk management policies pot a threat to

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<v Speaker 5>financial stability. That's according to Andrew Bailey, who said multi

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<v Speaker 5>manager funds deleverage rapidly in stress conditions, which can exaggerate

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<v Speaker 5>market moves in a speech yesterday, Whilst the practice allows

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<v Speaker 5>the firms also known as pod shops, to protect themselves,

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<v Speaker 5>the Bank of England governor highlighted its potential to create

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<v Speaker 5>risks to the financial system. The trend is partially responsible

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<v Speaker 5>for global regulators paying closer attention to rapid growth in

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<v Speaker 5>finance activity outside of banks. Recent research from the Bank

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<v Speaker 5>of England found hedge funds, asset managers and pension for

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<v Speaker 5>could be underprepared in times of crisis. In London, Tima

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<v Speaker 5>Adebayo Bloomberg Radio, one.

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<v Speaker 1>Of the world's most successful multi strategy hedge fund founders,

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<v Speaker 1>Ken Griffin, has criticized Donald Trump's approach to tariffs. Speaking

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<v Speaker 1>at the UBS Financial Services Conference in Miami, the Citadel

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<v Speaker 1>CEO said the US president's trade plans dull the country's

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<v Speaker 1>competitive edge and breed mistrust amongst allies. But there was

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<v Speaker 1>praise for Elon Musk's efforts to cut government spending, which

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<v Speaker 1>Griffin said he was grateful for.

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<v Speaker 6>This is a man who slept on the floor of

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<v Speaker 6>his factory to make sure testils got produced. He will

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<v Speaker 6>do what it takes to win. We want people who

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<v Speaker 6>are in Washington who will do what it takes to

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<v Speaker 6>help the American taxpayer and the American people win.

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<v Speaker 1>Ken Griffin's comments, comm as Democrats have questioned the Tesla

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<v Speaker 1>CEO's unprecedented influence on the US government despite not being

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<v Speaker 1>an elected official.

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<v Speaker 6>Well.

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<v Speaker 3>President Trump has directed agencies to comply with orders for

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<v Speaker 3>job cuts led by Elon Musk's so called Department of

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<v Speaker 3>Government Efficiency. A White House fact sheet seen by Bloomberg

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<v Speaker 3>shows that agencies will be permitted to hire no more

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<v Speaker 3>than one employee for every four that leave. Musk meanwhile,

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<v Speaker 3>made a rare appearance in the Oval Office to defend

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<v Speaker 3>his approach, which is involved obtaining access to sensitive computer

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<v Speaker 3>systems and employee data.

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<v Speaker 7>Your tax dollars need to be spent wisely the things

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<v Speaker 7>that matter to the people. I mean these things like

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<v Speaker 7>it's just common sense. It's not draconian or radical. I

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<v Speaker 7>think it's really just saying, best look at each of

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<v Speaker 7>these expenditures and say, is this actually in the best

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<v Speaker 7>interest in the people. And if it is, it's proved.

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<v Speaker 7>But i's not, we should.

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<v Speaker 4>Think about it.

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<v Speaker 3>Elon Musk also used the address to increase his attacks

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<v Speaker 3>on federal officials and judges that he says a stalling

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<v Speaker 3>progress in cost cutting, calling for impeachment and accusing some

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<v Speaker 3>of being corrupt and activist.

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<v Speaker 1>Federal Reserve charge around Powell says the Central Bank doesn't

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<v Speaker 1>need to rush to adjust interest rates. Speaking to the

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<v Speaker 1>Senate Banking Committee, Power reiterated his belief that policy makers

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<v Speaker 1>could be patient before lowering borrowing costs further.

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<v Speaker 8>As the economy evolves, we will adjust our policy stamps

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<v Speaker 8>in a manner that best promotes our maximum employment and

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<v Speaker 8>price stability goals. If the economy remains strong and inflation

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<v Speaker 8>does not continue to move sustainably towards two percent, we

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<v Speaker 8>can maintain policy restrained for longer. It's a labor market

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<v Speaker 8>we're to weaken unexpectedly, or inflation were to fall more

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<v Speaker 8>quickly than anticipated, we can use policy accordingly.

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<v Speaker 1>Bontels climbed after Jerome Powell's comments, but moves in rate

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<v Speaker 1>bets where more muted markets are pricing, and around thirty

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<v Speaker 1>three basis points of cuts in twenty twenty five, with

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<v Speaker 1>the next move not expected until September.

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<v Speaker 2>Well, those are you top stories this morning? On the markets?

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<v Speaker 3>The stock six hundred is higher a quarter of a percent,

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<v Speaker 3>the foot CE one hundred is flat to the upside,

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<v Speaker 3>and SMP E MENI futures are flat to the downside.

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<v Speaker 1>In a moment, we'll bring you more on the gloomy

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<v Speaker 1>outlook for the UK economy, plus a view from Germany's

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<v Speaker 1>biggest port of the rising trade tensions with the US.

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<v Speaker 1>But in the story I've been reading this morning, Lizzie,

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<v Speaker 1>I don't know if you are a catastrophist, if you

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<v Speaker 1>are always for the worst.

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<v Speaker 3>Stephen, how many mornings have we anchored together?

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<v Speaker 2>Do you not know that I am a catastrophist?

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<v Speaker 1>Well, I mean I was trying to give you an

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<v Speaker 1>out there, but fine, I think you'd really enjoy JP

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<v Speaker 1>Spinato from Blimber Opinion's latest article about this, The title

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<v Speaker 1>is I Just found my nuclear war hide away. He's

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<v Speaker 1>talking about Mendoza and Argentina, which he points out, I mean,

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<v Speaker 1>it sounds bleak, but actually it's a very nice piece

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<v Speaker 1>about all of the things that Mendoza has going for it.

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<v Speaker 1>And it's not just the wine, by the way. He

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<v Speaker 1>also talks about the fact that it's got mineral wealth,

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<v Speaker 1>renewable energy. The wine does come at feature, though I

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<v Speaker 1>will admit it's also got mentioned in starred restaurants and skiing,

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<v Speaker 1>so really something for everyone. And Jp writes that in

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<v Speaker 1>the piece, which I mean, he obviously takes much longer

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<v Speaker 1>to make the argument about the successes of this particular

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<v Speaker 1>region and the strengths that it has as well, but

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<v Speaker 1>he says that if the nuclear ballion goes up, that's

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<v Speaker 1>where he hopes to be.

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<v Speaker 3>I can vouch for this, having been to Argentina recently.

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<v Speaker 3>You can find me on a horse World goes to

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<v Speaker 3>pot I shall be there myself.

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<v Speaker 1>Julie noted, let's turn back to matters closer to home now,

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<v Speaker 1>the UK's fiscal challenges. Sources telling Bloomberg the preliminary forecast

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<v Speaker 1>presented to the Chancellor from the Budget Watchdog, so downgrade

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<v Speaker 1>to growth, leaving Rachel Reeves at risk of breaking her

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<v Speaker 1>own budget rules. This ahead of the latest update on

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<v Speaker 1>UK GDP, which we're going to get tomorrow Bloomberg survey

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<v Speaker 1>of economists expecting to see a contraction of zero point

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<v Speaker 1>one percent. Our Politics and economics reporter Lucy Weis joins

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<v Speaker 1>us now for more.

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<v Speaker 2>Lucy, good morning.

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<v Speaker 1>There are several updates in this OBR forecast to come,

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<v Speaker 1>but what do we know about what the Chancellor has

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<v Speaker 1>been told?

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<v Speaker 9>Yeah, so this is the first update that we've had

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<v Speaker 9>so far, and at the moment it's all under wraps,

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<v Speaker 9>so we know very limited amounts about it. But what

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<v Speaker 9>we do know is the Office for Budget Responsibility has

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<v Speaker 9>downgraded its growth forecast and that's causing a real problem

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<v Speaker 9>for Rachel Reeves because that means that she's going to

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<v Speaker 9>be scrambling to meet her budgetary rules at the moment.

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<v Speaker 9>At the moment, if we take these if we were

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<v Speaker 9>to take these forecasts as the as the ultimate one,

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<v Speaker 9>she'd have a small deficit when the actual report is delivered.

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<v Speaker 9>But we've got two more updates until the final report

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<v Speaker 9>is delivered in March, so that gives hopefully a bit

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<v Speaker 9>of time for things to improve a little bit. You know,

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<v Speaker 9>Rachel Ruths could could you know, adapt some policies to

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<v Speaker 9>make the outlook of a little bit better, you know,

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<v Speaker 9>market conditions might improve a.

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<v Speaker 2>Little bit more.

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<v Speaker 9>So, Yeah, we've got we've got a few things still

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<v Speaker 9>in flux until March.

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<v Speaker 2>So that's the optimistic view, Lucy.

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<v Speaker 3>But you know, the words iron clad and non negotiable

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<v Speaker 3>are often uttered by the Chancellor about her fiscal rules.

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<v Speaker 3>What's she going to have to do if she has

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<v Speaker 3>run out of headroom?

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<v Speaker 9>Well, exactly, this is the response that we've had from

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<v Speaker 9>the Treasury when we put this story to them last night.

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<v Speaker 9>You know, they have reiterated Rachel Reeves's words that the

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<v Speaker 9>government's commitment to fiscal rules and sound public finances is

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<v Speaker 9>non negotiable.

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<v Speaker 2>But I mean, you know, it does.

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<v Speaker 9>Leave Rachel Reeves in a really tough position because the

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<v Speaker 9>moment we've either got she's either able to well, she's

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<v Speaker 9>promised that she's not going to raise taxes anymore, so

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<v Speaker 9>that leaves her looking at welfare cuts, or that leaves

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<v Speaker 9>her looking at other public services cuts. So you know,

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<v Speaker 9>if she if she really wants to, you know, kind

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<v Speaker 9>of hit the measure that she's promised her own her

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<v Speaker 9>own rules, then that's what's open to her.

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<v Speaker 1>Yeah, indeed, I mean that's going to be some very

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<v Speaker 1>difficult decisions to be made by the Chancellor if she

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<v Speaker 1>is presented with this dilemma as well. One of the

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<v Speaker 1>other factors that, of course we're thinking about more broadly

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<v Speaker 1>is the uncertainty over trade. And you've been reporting on

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<v Speaker 1>how the UK is trying to avoid Trump's trade tariffs.

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<v Speaker 9>Yeah, I mean, that's still very much in flux at

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<v Speaker 9>the moment. Obviously, we don't know whether Trump is going

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<v Speaker 9>to levy the UK with any tariffs.

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<v Speaker 2>At the moment, we've managed to.

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<v Speaker 9>Escape relatively under touched. You know, we've seen him threatened,

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<v Speaker 9>Canada threatened, Mexico, threaten, the EU even and it's although

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<v Speaker 9>we haven't seen any sort of direct measures proposed against

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<v Speaker 9>the e UK other than you know, around around the

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<v Speaker 9>steel which is pretty universal. The UK is kind of

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<v Speaker 9>very much at the whims of whatever happens to anyone else. Obviously,

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<v Speaker 9>the EU is our largest trading partner, the US is

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<v Speaker 9>our largest single country, trading partner. So any trade war,

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<v Speaker 9>any tip for tat spat that happens between the EU

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<v Speaker 9>and the US, we're going to get caught up in

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<v Speaker 9>the middle of that, especially Northern Ireland as well. Obviously

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<v Speaker 9>Northern Irelands post Brexit has this kind of very unique

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<v Speaker 9>position of being you know, effectively still part of the

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<v Speaker 9>EU Single Market, but you know, still part of the

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<v Speaker 9>UK internal market as well, and there's you know, if

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<v Speaker 9>there is a sort of tit for tat trade war

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<v Speaker 9>with the EU, it's very uncertain as to how Northern

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<v Speaker 9>Ireland will fit into that position.

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<v Speaker 3>Yeah, I was in Brussels last week and listening to

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<v Speaker 3>the UK's Man for the EU, Nick Thomas Simmons, talking

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<v Speaker 3>about the need for ruthless pragmatism. But you know, many

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<v Speaker 3>people asking why not go the whole hog and do

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<v Speaker 3>some go some way to revert seeing Brexit if you're

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<v Speaker 3>really serious about growth.

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<v Speaker 2>But that question exactly.

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<v Speaker 3>Yeah, Rachel Reeves, as she keeps a close eye on

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<v Speaker 3>these numbers from the Office for Budget Responsibility. Really great

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<v Speaker 3>that we've managed to get our hands on a preview

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<v Speaker 3>of the estimate that she would have privately seen.

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<v Speaker 2>Lucy White.

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<v Speaker 3>Great to have you with us our UK Politics and

0:11:20.080 --> 0:11:20.839
<v Speaker 3>Economics reporter.

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<v Speaker 2>We thank you well.

0:11:22.280 --> 0:11:24.400
<v Speaker 1>We're still waiting for details of how the EU plans

0:11:24.440 --> 0:11:27.360
<v Speaker 1>to respond to Donald Trump's tariffs on steel and aluminium,

0:11:27.360 --> 0:11:30.800
<v Speaker 1>after Brussels promised it would hit back. The escalating trade

0:11:30.800 --> 0:11:34.440
<v Speaker 1>tensions are adding to uncertainty in Europe. From Germans, Germany's

0:11:34.480 --> 0:11:36.640
<v Speaker 1>federal election, which is taking place in less than two

0:11:36.640 --> 0:11:39.520
<v Speaker 1>weeks time. Now, our senior editor Alan Crawford joins us

0:11:39.600 --> 0:11:43.600
<v Speaker 1>for more from Berlin. Alan, you've been reporting from the

0:11:43.640 --> 0:11:45.800
<v Speaker 1>German port of Hamburg. It's one of the most important

0:11:45.920 --> 0:11:49.200
<v Speaker 1>trading points in the EU. How worried are people there

0:11:49.240 --> 0:11:50.640
<v Speaker 1>about the risk of a trade war?

0:11:50.960 --> 0:11:53.840
<v Speaker 10>Good morning. Well, this mood there is really one offul

0:11:53.840 --> 0:11:58.760
<v Speaker 10>trepidation that people, companies, businesses, the port itself are all

0:11:58.800 --> 0:12:01.240
<v Speaker 10>stealing themselves for what is to come.

0:12:02.040 --> 0:12:03.560
<v Speaker 2>When I was up there last.

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<v Speaker 10>Week and everybody really was saying that it's virtually impossible

0:12:08.880 --> 0:12:13.560
<v Speaker 10>to calculate what is the media impact. I mean, this

0:12:13.679 --> 0:12:17.719
<v Speaker 10>is a port that's been in existence for eight centuries,

0:12:17.760 --> 0:12:20.360
<v Speaker 10>that they're used to the ups and downs, all sorts

0:12:20.360 --> 0:12:24.680
<v Speaker 10>of turbulence. But what the agree on is that any

0:12:25.240 --> 0:12:29.239
<v Speaker 10>kind of impact on global trade is bad for business.

0:12:29.800 --> 0:12:32.959
<v Speaker 3>And what's the risk to Germany from an escalation of

0:12:33.000 --> 0:12:34.640
<v Speaker 3>this trade dispute with the US.

0:12:34.640 --> 0:12:36.720
<v Speaker 2>What are the numbers kind of look like? Allen, good morning.

0:12:36.760 --> 0:12:40.760
<v Speaker 10>By the way, Hey, good bar and Lizzie. Yeah, I mean,

0:12:40.880 --> 0:12:44.680
<v Speaker 10>Germany is despite the flood of bad news that's been

0:12:44.840 --> 0:12:47.000
<v Speaker 10>coming through in terms of the economy, it still is

0:12:47.080 --> 0:12:50.160
<v Speaker 10>the world's number three economy after the US and China,

0:12:50.760 --> 0:12:54.760
<v Speaker 10>and it's a manufacturing based economy. They live and die

0:12:54.800 --> 0:12:58.000
<v Speaker 10>in terms of exports, two thirds of which go through

0:12:58.040 --> 0:13:03.240
<v Speaker 10>the port of Hamburg. So they're concerned both about Trump's

0:13:03.280 --> 0:13:09.240
<v Speaker 10>tariffs and of course any retaliation and really this broader

0:13:09.480 --> 0:13:14.560
<v Speaker 10>idea that the world is becoming more inward looking, protectionism

0:13:14.640 --> 0:13:18.040
<v Speaker 10>is rising, and all of that can potentially affect global trade.

0:13:19.440 --> 0:13:22.360
<v Speaker 1>Of course, this is all playing out while Germany's election

0:13:22.480 --> 0:13:26.240
<v Speaker 1>campaign is coming towards its conclusion, with the election on

0:13:26.240 --> 0:13:29.400
<v Speaker 1>Sunday of next week. Economic issues have been central to

0:13:29.440 --> 0:13:33.040
<v Speaker 1>that debate as well. How are these issues playing into

0:13:33.080 --> 0:13:34.200
<v Speaker 1>the campaign in Germany?

0:13:35.480 --> 0:13:40.760
<v Speaker 10>Well, Hamburg is somewhat unusual in that it consistently tops

0:13:40.840 --> 0:13:45.240
<v Speaker 10>the ranks of the highest GDP per capita of Germany's

0:13:45.240 --> 0:13:50.800
<v Speaker 10>sixteen states, so it's frankly wealthy. At the same time,

0:13:50.960 --> 0:13:53.200
<v Speaker 10>it's also one of the reasons I went there was

0:13:53.200 --> 0:13:58.160
<v Speaker 10>that it's Olaf Schultz, the Chancellor's hometown. It's a bastion

0:13:58.320 --> 0:14:03.280
<v Speaker 10>of support for his Social Democrats party and interestingly, the

0:14:03.720 --> 0:14:07.200
<v Speaker 10>far right AfD party that we talk about that's running

0:14:07.240 --> 0:14:11.560
<v Speaker 10>second nationally, it's nowhere in Hamburg, and so it's a

0:14:11.559 --> 0:14:14.440
<v Speaker 10>bit of an anomaly in that sense. But everybody agrees

0:14:14.520 --> 0:14:17.079
<v Speaker 10>there that Germany as a whole needs to raise its

0:14:17.120 --> 0:14:21.680
<v Speaker 10>competitive competitiveness. That's the single biggest issue for all of

0:14:21.720 --> 0:14:23.520
<v Speaker 10>these businesses going into this election.

0:14:23.960 --> 0:14:25.520
<v Speaker 2>I mean, for anyone who's not following the.

0:14:25.480 --> 0:14:28.760
<v Speaker 3>German election blue black, Blue, or hasn't started yet, alan

0:14:28.920 --> 0:14:31.640
<v Speaker 3>how much of a factor is it in whoever's going

0:14:31.680 --> 0:14:34.320
<v Speaker 3>to be successful that they can tell a positive story

0:14:34.320 --> 0:14:37.840
<v Speaker 3>about the German economy, that they can present a realistic

0:14:37.880 --> 0:14:40.680
<v Speaker 3>way of dealing with Donald Trump when it comes to

0:14:40.720 --> 0:14:42.880
<v Speaker 3>the tariff war between the US and the EU.

0:14:44.560 --> 0:14:46.200
<v Speaker 2>That is actually a very good point.

0:14:46.240 --> 0:14:50.200
<v Speaker 10>It's exceptionally difficult for exactly these reasons that we're talking

0:14:50.200 --> 0:14:53.000
<v Speaker 10>about that we can see on show in Hamburg, that

0:14:53.640 --> 0:14:57.720
<v Speaker 10>there's a limited amount that any government in a country

0:14:57.760 --> 0:15:01.440
<v Speaker 10>like Germany, or indeed any other country in Europe or

0:15:01.520 --> 0:15:03.240
<v Speaker 10>much of the rest of the world can do when

0:15:03.280 --> 0:15:07.520
<v Speaker 10>they're faced with a global trade war that's instigated by

0:15:07.560 --> 0:15:10.760
<v Speaker 10>the world's number one economy. So that there is this

0:15:10.960 --> 0:15:15.560
<v Speaker 10>sense that Germany, as an export dependent country, is really

0:15:15.680 --> 0:15:19.640
<v Speaker 10>stuck in the middle between the US and potentially China

0:15:19.800 --> 0:15:22.560
<v Speaker 10>and that and this is some of the fear that

0:15:22.920 --> 0:15:26.080
<v Speaker 10>the next German government of whichever hu it is, may

0:15:26.200 --> 0:15:30.760
<v Speaker 10>not be able to immediately rapidly enough tackle the issues

0:15:30.800 --> 0:15:31.200
<v Speaker 10>at hand.

0:15:33.120 --> 0:15:35.840
<v Speaker 1>This is Bloomberg Daybreak Europe, your morning brief on the

0:15:35.920 --> 0:15:38.960
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