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Speaker 1: Good morning.

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Speaker 2: It's Wednesday, the nineteenth of July in London. This is

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Speaker 2: the Bloomberg Daybreak podcast. I'm Caroline Hepga. Coming up today,

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Speaker 2: Tatar picks Britain for its new battery plant, and look

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Speaker 2: ahead to today's UK inflation data and the city offering

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Speaker 2: bankers a thirty percent jump in starting salaries. Let's start

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Speaker 2: with a roundup of our top stories. The UK is

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Speaker 2: poised to secure a commitment from Tatar to build a

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Speaker 2: gigafactory in Somerset. Bloomberg's un potells the story.

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Speaker 3: It's being hailed as a major win for Rishi Sunak

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Speaker 3: Jaguar Androver's owner Tata is planning to locate their electric

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Speaker 3: car battery factory in Britain. Sources are told Bloomberg a

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Speaker 3: deal is set to be announced later today. The plant

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Speaker 3: is expected to receive hundreds of millions of pounds in subsidies.

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Speaker 3: It comes as the UK has struggles to attract significant

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Speaker 3: auto industry investment in the aftermath of Brexit. In London,

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Speaker 3: I'm un in pots Bloomberg Daybreak Europe.

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Speaker 2: The number of profit warning is issued by UK listed

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Speaker 2: companies has risen for the seventh quarter in a row.

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Speaker 2: Companies listed on UK exchanges issued sixty six profit warnings

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Speaker 2: in the second quarter as surging inflation and rising interest

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Speaker 2: rates squeezed margins. According to a report by Ernst and

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Speaker 2: Young's strategy consulting arm Ey Parthenon, eighteen percent of UK

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Speaker 2: listed companies issued a profit warning in the last year alone,

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Speaker 2: excluding the pandemic. That is the highest level since two

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Speaker 2: thousand and eight. Meanwhile, Britain is bracing for inflation figures

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Speaker 2: that are expected to keep the pressure on the Bank

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Speaker 2: of England to raise interest rates again. Consumer price growth

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Speaker 2: is projected to fall from eight point seven percent in

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Speaker 2: May to eight point two percent in June. That's according

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Speaker 2: to a survey of economists by Bloomberg. That would be

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Speaker 2: its lowest level since March last year, but core inflation

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Speaker 2: is expected to remain at a thirty one year high

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Speaker 2: of seven point one percent. Bloomberg Economics, whose inflation four

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Speaker 2: cos for June are below the survey median of eight percent,

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Speaker 2: says that core inflation is going to be crucial. Another

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Speaker 2: upside surprise could tip the balance in favor of a

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Speaker 2: fifty basis point interest rate hike when the Bank of

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Speaker 2: England meets next week. To decide on its interest rate decision.

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Speaker 2: Now let's move on talk about Wall Street banks, because

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Speaker 2: the giants of the industry are finally seeing signs of

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Speaker 2: life in their capital markets businesses. Bank of America and

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Speaker 2: Morgan Stanley join JP Morgan and City Group in beating

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Speaker 2: analyst expectations for equity underwriting revenue in the second quarter.

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Speaker 2: Speaking to Bloomberg, Morgan Stanley's chairman and CEO, James Gorman

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Speaker 2: says that things are also looking up for investment banking.

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Speaker 4: I do believe it's bottomed. Every ceo I'm talking to

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Speaker 4: has tilted to a more forward looking pasture. So I

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Speaker 4: think deals will start getting done. Whether they happen in

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Speaker 4: the back half of this year, I'm not so sure.

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Speaker 4: It might be next year that comes will definitely be.

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Speaker 4: It will be during next year when we see it,

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Speaker 4: if not this year.

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Speaker 2: Second quarter profits at James Gorman's bank fell thirteen percent

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Speaker 2: to two point one eight billion dollars. That contrast with

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Speaker 2: rival Bank of America, which saw second quarter profits sort

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Speaker 2: revenue for fixed income at b OFA for currencies and

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Speaker 2: commodities trading two rows eighteen percent to two point eight

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Speaker 2: billion dollars. Microsoft shares hit an in Today Record on Tuesday,

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Speaker 2: after the software giant gave pricing details for its corporate

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Speaker 2: artificial intelligence products. Microsoft three six y five Copilot will

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Speaker 2: cost thirty dollars a month per person, on top of

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Speaker 2: what most business customers already pay. Bloomberg Intelligences Anni ag

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Speaker 2: Ranat says that the price is high, but he expects

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Speaker 2: firms to pay it at the.

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Speaker 4: End of the day.

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Speaker 5: This is a company that's coming up with products we're

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Speaker 5: before then anybody else is trying to figure out their strategy.

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Speaker 5: So I think this just shows that Microsoft is well

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Speaker 5: aheaded in this game compared to the other software Windows.

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Speaker 5: And it's not just the Office suite. I mean, this

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Speaker 5: really has direct impact on their cloud business.

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Speaker 2: Annie Agrana says Blmberg Intelligence expects the subscription costs to

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Speaker 2: come down as AI technology development ramps up. And finally,

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Speaker 2: a US soldier has been detained in North Korea after

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Speaker 2: crossing over the heavily armed border. It's reported that the

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Speaker 2: twenty three year old intentionally traveled from South Korea in

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Speaker 2: an apparent effort to escape being sent home after being

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Speaker 2: charged with assault. The US Defense actually Lloyd Austin says

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Speaker 2: that he is concerned about the man's welfare.

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Speaker 6: We're closely monitoring and investigating the situation and working to

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Speaker 6: notify the soldiers next to ken In engaging to address.

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Speaker 2: A sense of it that was the US defense actually,

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Speaker 2: Lloyd Austin. Many of the Americans detained in North Korea

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Speaker 2: have been sentenced to years of hard labor, but typically

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Speaker 2: released several months later. Those are a few of our

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Speaker 2: top stories and for you this morning. This also called

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Speaker 2: ARI though the Hong Kong Talent War. It apparently means

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Speaker 2: a thirty percent jump in pay. Certainly in the financial

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Speaker 2: and tech sphere, there's been an exodus of talent really

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Speaker 2: from Hong Kong, so it means that starting salaries for

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Speaker 2: new recoup roots have really gone up. Banks, insurers, wealth

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Speaker 2: managers all facing staff shortages there. The pandemic and the

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Speaker 2: crackdown on civil liberties prompted thousands of residents to leave

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Speaker 2: Hong Kong in recent years. But then apparently there has

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Speaker 2: been a change. The border reopening with China's given industry

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Speaker 2: in Hong Kong a big boost. And actually you've seen

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Speaker 2: the jobless rate go down to a four year low.

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Speaker 2: So if you look at the latest data from Willis

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Speaker 2: Towers Watson. They say that financial services in particular saw

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Speaker 2: a four point eight percent average salary increase in twenty

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Speaker 2: twenty three. But as I say, pay very much focused

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Speaker 2: on this darting salaries pay in Hong Kong typically higher

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Speaker 2: than in rival Singapore. So that's where you can see

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Speaker 2: the big pay bumps in Hong Kong right now. A

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Speaker 2: good story then on the Bloomberg terminal. Let's also, though,

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Speaker 2: turn our attention to perhaps the lead story in the

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Speaker 2: UK today. Tatar has chosen Britain for its new gigafactory.

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Speaker 2: It's a much needed win for the Prime Minister is

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Speaker 2: she's soon at The UK has only one other large

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Speaker 2: scale battery plant, and that is Nissans in Sunderland, the

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Speaker 2: makers of another British vault collapsed if you remember in January.

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Speaker 2: Now the news comes right as the Prime Minister's approval

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Speaker 2: rating hits a new low. And it's our very own

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Speaker 2: James Walcock, who joins me this morning in studio on

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Speaker 2: a story that you've been tracking very closely. What do

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Speaker 2: we know so far about the idea of this new

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Speaker 2: factory being built here?

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Speaker 6: Well, Carol, we know that the UK government and Tata

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Speaker 6: are set to announce a commitment to build this gigafactory. Now,

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Speaker 6: the future of car production is these live scale battery plants.

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Speaker 6: You can't build cars without them, and increasingly with large

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Speaker 6: export tower. To look at the EU UK sort of

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Speaker 6: post brexit deal, you need to have at least forty

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Speaker 6: five percent of the materials and components of the cart

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Speaker 6: source in out of the UK or the EU to

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Speaker 6: be able to export it, and batteries are a large

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Speaker 6: and expensive part of that deal. The EU has twenty

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Speaker 6: five of these giga factories under construction and it was

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Speaker 6: a big fear for the UK government they were falling behind.

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Speaker 6: This announcement that may be supported by we expect hundreds

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Speaker 6: of millions of pounds in subsidy, is a massive win.

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Speaker 6: It's like to bring jobs back to the country and

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Speaker 6: it's also like to support the UK in this global

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Speaker 6: fight to be kind of on shoring advanced manufacturing and

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Speaker 6: I remind you at advanced manufacturing is one of the

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Speaker 6: chances of five areas for growth. This has all the

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Speaker 6: hallmarks of the things that Richie Sunac has touted and

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Speaker 6: has pledged to make Britain industrial powerhouse. It's also I

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Speaker 6: hesitate to add a designated Enterprise zone the zone that's

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Speaker 6: being bought, which is an area that Richie Sunac introduced

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Speaker 6: that has a special tax breaks for businesses to invest.

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Speaker 6: So it has all the kind of positives that the

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Speaker 6: government has been selling about its business strategy and approach.

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Speaker 2: Yeah, and of course we have talked a lot in

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Speaker 2: recent months about the negative news around the economy and

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Speaker 2: the kind of uncertainty politically in the UK for many months.

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Speaker 2: So is this just an unquestionable win then for the UK.

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Speaker 6: Well, Labor would point out that the big question mark

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Speaker 6: is quite how much government subsidy is being promised here,

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Speaker 6: and we yet to find out when the government formally

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Speaker 6: announced it, but as I said, it's expected to be

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Speaker 6: in the hundreds of millions of pounds. Now they would

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Speaker 6: say that we, Labor would promise eight giga factories. The

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Speaker 6: UK government currently had plans for just the two, but

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Speaker 6: hopefully more in the works. And they would also add

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Speaker 6: that if you were trying to support more at that

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Speaker 6: level of subsidy, it would be quite difficult to sustain

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Speaker 6: in such a tight public funding. It also is saying

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Speaker 6: that if you go back to the nineteen fifties, Britain

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Speaker 6: used to be the world's second biggest automatical nineteen fifty.

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Speaker 6: I know, I'm just going to do with the comparison

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Speaker 6: though it's now eighteenth. So one gigafactory does not reverse

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Speaker 6: an entire secular trend in and of itself overnight. And

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Speaker 6: I can point to say BMW who say shifted production

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Speaker 6: to China last year for their electric minis. So it's

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Speaker 6: not one bit of good news, doesn't reverse an entire trend,

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Speaker 6: but it is still a very good announcement from the

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Speaker 6: government today.

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Speaker 2: Yeah, hang on a second, I'd add to that though,

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Speaker 2: that you've skipped all over the whole bit, which is

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Speaker 2: Margaret Thatcher. Her major drive was to build a British

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Speaker 2: car exporting business and that was immensely successful and pre Brexit,

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Speaker 2: you know, we were churning out We were a million,

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Speaker 2: two million vehicles a year. It was a very very

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Speaker 2: significant player in Europe here in the UK. Now, does

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Speaker 2: it mean then this could be a comeback for UK automotive.

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Speaker 2: I mean we speak regularly to the SMMT. They've been

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Speaker 2: you know, talk about these issues for at least a

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Speaker 2: year or two years very intensively. So is this a

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Speaker 2: comeback potentially, I.

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Speaker 6: Mean the things with advanced manufacturer. The trend that seems

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Speaker 6: to be emerging globally is everything starts with stability and

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Speaker 6: network effects. If you can get the supply change and

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Speaker 6: the infrastructure there. Companies want to cut down their supply change,

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Speaker 6: They want to cut down the amount of think time

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Speaker 6: components have to move around. So it is a step

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Speaker 6: in the right direction in a global fight for subsidies

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Speaker 6: that you are seeing the US and Europe devoting large

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Speaker 6: amounts of money, time and attention to winning these kinds

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Speaker 6: of companies over and the UK government say will very

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Speaker 6: like to be pointing out the fact that the company

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Speaker 6: that Tartar chose the UK over Spain in a victory

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Speaker 6: for both over another European country, as a sign that

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Speaker 6: they have been able to convince a business to locate

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Speaker 6: in the UK despite Brexit, despite negativity, despite fears around inflation.

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Speaker 6: Nevertheless they persevered.

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Speaker 2: Yeah, no, absolutely, I think it's a really interesting story

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Speaker 2: that you were brought to Bloomberg first yesterday. A lot

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Speaker 2: of interest in this idea that we could get this

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Speaker 2: battery factory in Somerset in the southwest of England, rather than,

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Speaker 2: as you say, in space a lot of expectations also

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Speaker 2: that we might get a big announcement from the Prime ministers.

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Speaker 2: They maybe he'll even go to one of these factories

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Speaker 2: to make that announcement, as you say, considered to be

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Speaker 2: quite a big win for the UK. Bloomberg's James Walcock

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Speaker 2: reporting this morning. Thank you so much. Let's bring in

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Speaker 2: one of our big interviews though.

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Speaker 1: Now.

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Speaker 2: Morgod Stanley's CEO James Gorman says that the worst is

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Speaker 2: over for the banking industry. Despite falling short of analyst

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Speaker 2: expectations on earnings, the bank stock jumped on the positive sentiment.

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Speaker 2: Tuesday's move ranks amongst the best earnings day moves for

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Speaker 2: the bank over the past decade. Bloomberg's on Early Bassak

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Speaker 2: sat down with Gorman to ask him about the results.

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Speaker 4: The fundamentals are really strong, our capital ratios. I mean,

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Speaker 4: we'll see when all the banks report. We're closed to

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Speaker 4: the end of the major banks, but I'm pretty sure

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Speaker 4: we've got the highest capital levels of any bank, any

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Speaker 4: major bank in the US. The new money numbers your

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Speaker 4: reference are obviously evidence of growth, and now dividend is

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Speaker 4: four percent or close to it. So combination of really

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Speaker 4: high conservative capital levels, obvious organic growth within a couple

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Speaker 4: of core businesses, and very high dividend yield for what

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Speaker 4: we do. I think the investors sensibly look past what's

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Speaker 4: been going on in the market recently. You know, IPO

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Speaker 4: activities obviously down, m and A activities down, some of

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Speaker 4: the fixed income trading was a little more muted. None

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Speaker 4: of that matters, right, strategically, that doesn't matter. That's a

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Speaker 4: point in time market sentiment that will change. Deals will

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Speaker 4: get done, companies will go public, people will trade. So

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Speaker 4: I think the market sensibly looked at the big picture

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Speaker 4: items and said, yeah, the rest of the stuff will

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Speaker 4: just come, and that's why we're trading the way we're trading.

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Speaker 4: It was a great clean quarter.

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Speaker 1: When you look at investment banking, trading, advisory, when do

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Speaker 1: they come back and how robust will that activity be?

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Speaker 4: Well, I think I don't know when exactly. I do

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Speaker 4: believe it's bottomed. And we were just talking before we

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Speaker 4: got on air. You know, I've been to in the

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Speaker 4: last couple of months, Australia, Japan, Saudi France, England, Ampstin

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Speaker 4: I mean, and all over the US, and every CEO

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Speaker 4: I'm talking to has tilted to a more forward looking posture,

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Speaker 4: So I think deals will start getting done. Whether they

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Speaker 4: happen in the back half of this year, I'm not

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Speaker 4: so sure. It might be, it might be next year

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Speaker 4: that it comes to It will definitely be. It will

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Speaker 4: be during next year when we see it, if not

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Speaker 4: this year.

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Speaker 1: James, what does all of this mean for headcount? You've

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Speaker 1: booked more than three hundred million dollar cost tied to

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Speaker 1: severance packages, but it seems like headcount is starting to stabilize.

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Speaker 1: Do you think that a rebound in some of this

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Speaker 1: activity means that you could bring more people on or

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Speaker 1: do you still see more cuts in some areas?

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Speaker 4: Not really. I mean, we laid off about eighteen hundred

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Speaker 4: people last December, and we knew that was an optimistic view,

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Speaker 4: and I said to the team, if by April things

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Speaker 4: haven't turned, we'll have to, unfortunately do it again, and

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Speaker 4: we ended up laying off another three and a half

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Speaker 4: thousand people. Now, against that backtrop we've had attrition I

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Speaker 4: think is running almost fifty percent what historical rates are.

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Speaker 4: We've got eighty three thousand employees. We bought two huge companies,

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Speaker 4: Eat Trade and EAT Advance, and we guaranteed everybody their

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Speaker 4: job during COVID, so headcount was, if you will, artificially high.

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Speaker 4: I regarded this as bringing us back to what the

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Speaker 4: normal run rate should be. I don't think we're going

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Speaker 4: to add to that. I mean, one of the beauties

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Speaker 4: of this business, it's very scale driven. If you do

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Speaker 4: a few more trades, you don't need more people to

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Speaker 4: do it for the same client. So no, I think

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Speaker 4: we're about right with headcount right now. But obviously you

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Speaker 4: know we're we're We've got fiducial responsibility, shareholders deliver returns,

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Speaker 4: and we watched that carefulip.

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