Speaker 1: Good morning. It's Wednesday, the fourth of October in London.
Speaker 1: This is the Bloomberg Daybreak EUROP podcast. I'm Stephen Carroll.
Speaker 1: Coming up today, Rishi Sunac looks to both the Conservative
Speaker 1: Party agenda back on track as HS two dominates headlines.
Speaker 2: And I'm Caroline Hipkett at the Conservative Party conference in
Speaker 2: Manchester with the latest on what could be the Prime
Speaker 2: Minister's biggest speech of his political career.
Speaker 1: Plus a House divided Republican Kevin McCarthy is ousted as
Speaker 1: US Speaker by those and his own party. Let's start
Speaker 1: with a roundup of our top stories. The Prime Minister,
Speaker 1: Rishi Sunac is today expected to announce that part of
Speaker 1: Europe's biggest infrastructure project, HS two is being scrapped. It's
Speaker 1: understood that the Prime Minister will use his speech at
Speaker 1: today's Conservative Party conference to soften the blow, announcing that
Speaker 1: some of the savings will be used to boost other
Speaker 1: parts of the UK's transport network. But Labour's Greater Manchester
Speaker 1: Mayor Andy Burnham says the plan is a disgrace.
Speaker 3: Do not pull the plug on the North of England.
Speaker 3: Do not treat people here as second class citizens when
Speaker 3: it comes to transport because if you do do those things,
Speaker 3: people here will never forget.
Speaker 1: Burnham's criticism has been echoed by both the former Chancellor,
Speaker 1: George Osbourne and Conservative West Midlands mayor Andy Street, who
Speaker 1: had this to say when we asked him about the
Speaker 1: fact that costs of the project have spiraled to more
Speaker 1: than one hundred billion pounds.
Speaker 4: My argument is you do need to have ages too,
Speaker 4: so that's not really the question, is it. And of
Speaker 4: course what's been put to the Prime Minister is a
Speaker 4: proposal which is supported by private businesses, to say let
Speaker 4: us try to rethink the Lake to the North, but
Speaker 4: it is still needed to win the investment around the world.
Speaker 1: Those comments from Andy Street and others have helped to
Speaker 1: cast a long shadow over the annual Tory gathering, with
Speaker 1: HS two a core plank of previous Tory pledges to
Speaker 1: level up economic opportunities across the country. In the United States,
Speaker 1: Kevin McCarthy has been ousted as the House Speaker after
Speaker 1: the Republican hardliners revolted over his compromise with Democrats to
Speaker 1: avert at government shutdown. Goldman Sachs says the raises the
Speaker 1: risk of a government shut down next month. With his
Speaker 1: successor under even more pressure from those on the right
Speaker 1: of the party. The move ends a tumultuous nine months
Speaker 1: in the job for McCarthy, who says he won't run
Speaker 1: for the position again.
Speaker 3: I don't regret standing up for choosing governing over grievance.
Speaker 5: It is my responsibility, it is my job. I do
Speaker 5: not regret negotiating. Our government is designed to find compromise.
Speaker 5: I don't regret my efforts to build coalitions and find solutions.
Speaker 5: I was raised to solve problems, not create them.
Speaker 1: Despite McCarthy's lack of regret, the latest turmoil as fueled
Speaker 1: concerns about deepening dysfunction in Washington. The last time the
Speaker 1: House even voted on removing a speaker was in nineteen ten,
Speaker 1: and in that case, it survived the test. US job
Speaker 1: openings unexpectedly increase in August, fueled by white collar postings.
Speaker 1: The number of available positions increased to nine point six million,
Speaker 1: with hiring increasing while layoffs remained low. According to Jolts,
Speaker 1: the level of openings topped all estimates in a Bloomberg
Speaker 1: survey of economists. Treasury yields rose to multi year highs,
Speaker 1: and the SMP declined after the report. Polunteer, the data
Speaker 1: analysis firm founded by tech billionaire Peter Thiel, has emerged
Speaker 1: as the top pick for a major NHS data contract.
Speaker 1: The five year deal could be worth close to half
Speaker 1: a billion pounds and focuses on analyzing medical information. Volunteer's
Speaker 1: relationship with the NHS has been criticized by civil rights
Speaker 1: and patient advocacy groups who worry about data privacy and
Speaker 1: the firm's work with intelligence and defense agencies, and the
Speaker 1: billionaire investor. Ray Dalio says US China relations are close
Speaker 1: to breaking down. Speaking to Bloomberg's David Weston, the Bridgewater
Speaker 1: Associates founder warned of the risk of conflict between the
Speaker 1: world's two largest economies.
Speaker 6: US China relationship are in a number of areas on
Speaker 6: the brink of red lines, so, in other words, these
Speaker 6: irreconcilable differences, they're right on the.
Speaker 1: Brig Dahalio went on to say the breaking point would
Speaker 1: be if the United States comes out in favor of
Speaker 1: an independent Taiwan, that he said would be quote the
Speaker 1: equivalent of a declaration of war. Dahalio has long nurtured
Speaker 1: relations with Chinese officials and previously expressed admiration for some
Speaker 1: of Beijing's economic policies. Well, let's turn two politics here
Speaker 1: in the UK, Rishi Sunak facing one of the most
Speaker 1: important speeches of his career as Prime Minister at the
Speaker 1: Conservative Party conference. Later he needs to unite his supporters
Speaker 1: ahead of an election year after a party gathering overshadowed
Speaker 1: by questions over the Hyighth Chess two high speed rail link.
Speaker 1: Karlin Hepker's been following all the developments at the Conservative
Speaker 1: Party conference, he joins us from Manchester, Carl and great
Speaker 1: to have you. Good morning. What are the key things
Speaker 1: that Rishie Sinak is trying to achieve today?
Speaker 2: So Rigie Sunac took over from Prime Minister Liz Trust
Speaker 2: last year when the party was at historic lows in
Speaker 2: the polling. Remember, of course, the Bank of England had
Speaker 2: to intervene after Liz Trust's chancellor made a disastrous speech
Speaker 2: pledging unfunded tax cuts and that sent bondials spiking and
Speaker 2: there had to be Bank of England intervention to prop
Speaker 2: up the pensions industry. Richie Sunac took over. He has
Speaker 2: managed to stabilize the situation in the month since then
Speaker 2: with his Chancellor Jeremy hunt this speech, though, the Prime
Speaker 2: Minister needs to wow MPs and party activists here, not
Speaker 2: just deliver stability that we've seen in the last few months.
Speaker 2: Perhaps the sort of speech that we really have not
Speaker 2: seen from the Prime Minister so far. He must prepare
Speaker 2: the Conservatives for the next general election, which is expected
Speaker 2: to take place perhaps in the autumn of next year.
Speaker 2: Will he talk about his own personal story, not quite
Speaker 2: to riches, but certainly a big British success story, imagining
Speaker 2: to get into an elite private school, go to Oxford,
Speaker 2: then get into Goldman Sachs, become elected as an MP
Speaker 2: and make it all the way to Chancellor and then
Speaker 2: the first British Asian Prime minister that the country has
Speaker 2: ever seen. Will he talk about that? So far this
Speaker 2: Conservative Party conference has been pretty policy light, so big
Speaker 2: expectations for what we'll get from the Prime Minister today.
Speaker 1: What about the issue that has dominated so many of
Speaker 1: the conversations that you've been having there, Caroline, Are we
Speaker 1: any clearer now about what's going to happen over the
Speaker 1: HS two rail link?
Speaker 4: No?
Speaker 2: Not particularly The Prime Minister spent all of yesterday speaking
Speaker 2: to journalists. It has been the question that has dominated
Speaker 2: this party conference. We are in Manchester after all, and
Speaker 2: the rumor has been for weeks and months, several weeks
Speaker 2: at least, that there would be the potential of high
Speaker 2: speed rail to the connection from Birmingham to the city
Speaker 2: here in Manchester would be scrapped because of rising costs.
Speaker 2: The Prime Minister has meant Tuesday telly journalists that he
Speaker 2: has still not made up his mind on this issue,
Speaker 2: has not made a decision, even though holding a cabinet
Speaker 2: meeting it would seem during conference, which is also quite
Speaker 2: an extraordinary step. So will we get perhaps a decision
Speaker 2: on HS two It's possible as part of the Prime
Speaker 2: Minister's speech and what comes alongside that if the HS
Speaker 2: two rail line is scrapped or part of it is scrapped,
Speaker 2: will we hear about new transport projects in the north
Speaker 2: of England to try to sweeten that blow?
Speaker 1: Caroline, The question of party unity has been another continuing
Speaker 1: theme during this event as well. Is the party because
Speaker 1: of the discussions that you've been talking about over HS two,
Speaker 1: over tax cuts? Is the Conservative Party coming away less
Speaker 1: united from this conference than it went into us Ah.
Speaker 2: I'm not sure. It's hard to say whether it's less united.
Speaker 2: I mean, it's certainly been an immensely difficult few years
Speaker 2: for the Conservatives, you know, chopping and changing prime ministers
Speaker 2: through Boris Johnson, you know, Theresa May, Boris Johnson, Liz
Speaker 2: Tras now Rishi Sunac. That's quite something, totally unprecedented really
Speaker 2: in British history. Frankly, having said that, we spoke for
Speaker 2: example to former Minister and member of the Treasury Select
Speaker 2: Committee Andrea led Some, you know, incredibly strong about how
Speaker 2: united the party is. But there are of course signs
Speaker 2: of division. You've got really open positioning for the leadership
Speaker 2: of the Tories. Were Rishi Sunac to lose the next
Speaker 2: general election, particularly, it would seem between Kemy Baide, not
Speaker 2: the Business Secretary, and the Home Secretary, Sella Bartherman. But
Speaker 2: the other thing to mention is that the thing that
Speaker 2: is more clear is that the US style culture wars,
Speaker 2: at least the language of those culture wars, does seem
Speaker 2: very present at this Conservative conference. The Home Sectuary Sweller
Speaker 2: Bravman got a standing ovation yesterday a speech talking about
Speaker 2: how toys were calling out the woke politics of labor.
Speaker 2: She talked about how politicians have been too squeamish about
Speaker 2: being smeared as racist in her words by not talking
Speaker 2: about migration. She talked about the hurricane of migrants that
Speaker 2: would becoming to the UK. She herself is of Indian origin,
Speaker 2: her parents migrated to the UK from East Africa. So
Speaker 2: that has been clear that the language is certainly ratcheting
Speaker 2: up with the science sectually. Michelle donnellan railing against woke
Speaker 2: scientists that got a lot of attention. So certainly some
Speaker 2: perhaps US style language and that does seem very divisive.
Speaker 1: Caroline, the questions around you mentioned they're the Conservative Party
Speaker 1: conference so far being quite light on policy. You've been
Speaker 1: speaking to a lot of the business groups over the
Speaker 1: past few days about what they want to see in
Speaker 1: terms of policy. I mean, one of the most notable absences,
Speaker 1: I suppose, given that we haven't had that many announcements.
Speaker 2: Well, they want long term thinking, they want delivery, and
Speaker 2: there is a level of frustration you can detect, and
Speaker 2: yet also the need to be even handed, you know,
Speaker 2: you think about the big business lobbies in the UK,
Speaker 2: the Confederation of British Industry we spoke to this week,
Speaker 2: one of the export associations we spoke to this week
Speaker 2: they are, they want to give everybody a fair hearing,
Speaker 2: but you can sense that there is a question mark
Speaker 2: about the tone of this conference, which is policy light
Speaker 2: and not that enthusiastic. It's not packed. People are walking
Speaker 2: around the floor here and we were sort of commenting
Speaker 2: yesterday that it's more the pace of a museum shop,
Speaker 2: it would seem, or perhaps you know, there's not the
Speaker 2: excitement that we are perhaps expecting from the Labor Party
Speaker 2: confidence at the weekend. But all all business people say,
Speaker 2: you know, they want policy, They want clarity in terms
Speaker 2: of policy, they don't want to see big changes, and
Speaker 2: they want industrial policy to be clear. Certainly the net
Speaker 2: zero issue is also why a lot of business.
Speaker 1: Leaders Yeah, and understandably, I think, given that idea of
Speaker 1: wanting policy certainty, which seems to have come up as
Speaker 1: a theme in many of the conversations that you've been
Speaker 1: having there at the Conservative Party conference. Caroline for now
Speaker 1: thank you very much. More from Caroline throughout the day
Speaker 1: on Bloomberg Radio and of course the Bloomberg UK Politics
Speaker 1: podcast as well, where you can hear some of the
Speaker 1: conversations that Caroline has been having with those business leaders,
Speaker 1: but also some of the leading Conservative MPs as well.
Speaker 1: Caroline for now, thank you very much. Let's turn to
Speaker 1: us politics now. The House Speaker Kevin McCarthy has been
Speaker 1: removed from his position after a rebellion by hardliners within
Speaker 1: his own Republican party, plunges Congress into an internal power
Speaker 1: struggle as it faces key deadlines on avoiding a government
Speaker 1: shutdown and approving more aid for Ukraine. Let's get more
Speaker 1: now from Bloomberg's Gill Desis on this story. Great to
Speaker 1: have you with us. Kevin McCarthy is gone from the position,
Speaker 1: says he won't run again. Who could replace him?
Speaker 7: So there's a few names in mind, Stephen, as we
Speaker 7: kind of reached this very unprecedented in historical situation, first
Speaker 7: of all, remember that essentially Congress is kind of calling
Speaker 7: for resos at this point, will reconvene in October eleventh
Speaker 7: and ultimately decide who maybe neesked I think the front
Speaker 7: runner at this point is the second ranking Republican in
Speaker 7: the House, that Steve Scalase of Louisiana. At this point,
Speaker 7: he's got the backing of Matt Gates, who's ultimately the
Speaker 7: rep who called this vote to oust McCarthy in the
Speaker 7: first place. Scleas is pretty popular, but also kind of
Speaker 7: comes from more of that establishment line of thought that
Speaker 7: might not be something that's necessarily desired in an incredibly
Speaker 7: politically tumultuous environment where McCarthy was ultimately ousted with the
Speaker 7: help of a lot of very Republican hardliners who weren't
Speaker 7: happy with the government shutdown deal, just the stop gap
Speaker 7: deal that he made with Democrats over the weekend. The
Speaker 7: other thing that's a challenge for Scalise is that he's
Speaker 7: currently receiving some pretty serious medical treatment at this point.
Speaker 7: Gates has said that that shouldn't preclude him, but ultimately,
Speaker 7: you know, it's just a consideration among some of the
Speaker 7: other options. Here. You've got a GOP whip, Tom Emmer,
Speaker 7: he's from Minnesota. And then you've also got Alistaphonics. She's
Speaker 7: a representative from New York who is the GOP's fourth
Speaker 7: in command. She's a pretty big, full throated Donald Trump loyalist,
Speaker 7: though I'm not sure how well that's going to play
Speaker 7: with some in the Republican Party who are a bit
Speaker 7: more moderate than you see a lot of these hardliners here.
Speaker 7: But I think the bottom line here, Stephen, is that
Speaker 7: this is an incredibly open race.
Speaker 1: Which, of course, you know, leads us to think, what's
Speaker 1: happening to policymaking in the meantime is as Congress now
Speaker 1: focuses on electing the speaker.
Speaker 7: Yeah, I mean, I think that at this point, Stephen,
Speaker 7: it's pretty obvious that it's going to be very, very
Speaker 7: difficult to get a lot done. It already was pretty
Speaker 7: difficult to get a lot done. I think that, you know,
Speaker 7: even when you had temporary deal to avert an immediate
Speaker 7: government shut down over the weekend that was came it
Speaker 7: as I think a little bit of a surprise to some,
Speaker 7: but ultimately we only have until November seventeenth to actually
Speaker 7: get another deal done, and I'm not really sure how
Speaker 7: likely that's going to be, especially when whoever the new
Speaker 7: House speaker coming in is they're going to be under
Speaker 7: even more pressure, especially from these Republican hardliners, to avoid
Speaker 7: making any sort of deals that offer up more funding
Speaker 7: for Ukraine, for example, one of the big points of
Speaker 7: those sticking points of contention that they have with Republicans
Speaker 7: or excuse me, with Democrats. So I think that at
Speaker 7: this point it is going to be very difficult to
Speaker 7: see any kind of a big shift in governance.
Speaker 1: Of course, the looming deadlines that the US government are
Speaker 1: going to be facing is the potential of another shutdown
Speaker 1: only just over a month away.
Speaker 7: Yes, it's really coming up very very soon. I think
Speaker 7: that at this point we're going to have to see whether,
Speaker 7: you know, we actually get somebody in place who's going
Speaker 7: to be able to strike some of those deals. I mean,
Speaker 7: even if you look at McCarthy who was able to
Speaker 7: strike a deal with Democrats over the averting the government
Speaker 7: shutdown in the short term, it's ultimately Democrats who joined
Speaker 7: in with the Republican hardliners who oust him from his speakership.
Speaker 7: So it's yes, it's a very very tricky line to watch,
Speaker 7: especially as they said, when it comes down to matters
Speaker 7: over funding in Ukraine, which could be a very much
Speaker 7: a sticking point for whatever spending package is ultimately passed.
Speaker 7: But I think it's just it's a long road to go,
Speaker 7: and I think it's going to be a really really
Speaker 7: long six weeks or so before we get to that
Speaker 7: next deadline November seventeenth.
Speaker 1: Okay, Jill Desis, thank you very much for bringing us
Speaker 1: the late US on that story around US politics. Bridgewater
Speaker 1: Associates founder Ray Dalio says cash is a good investment
Speaker 1: of the moment, and that he doesn't want to own
Speaker 1: bonds right now. He's told Bloomberg that firms that really
Speaker 1: know how to use artificial intelligence will do well. Ray
Speaker 1: Dalio has been speaking to Bloomberg's David Weston at the
Speaker 1: Greenwich Economic Forum.
Speaker 6: The US China relationship relations are in a number of areas.
Speaker 5: On the brink of red lines.
Speaker 6: So in other words, these irreconcilable differences, they're right on
Speaker 6: the brig So if I was to take let's say
Speaker 6: the Taiwan issue, it's an irreconcilable issue and so on.
Speaker 5: It's right at the line.
Speaker 6: The breaking point is if the United States said we
Speaker 6: are in favor of the independence of Taiwan, that's the
Speaker 6: equivalent of a declaration of war. And because of our
Speaker 6: political issues that are now internally, you're going to be
Speaker 6: likely to push that, because of the fact that many
Speaker 6: in Congress and so on would say, we will defend
Speaker 6: Taiwan and world cost then we will give them this,
Speaker 6: and you could even cross that line. It's my point
Speaker 6: is it's right at the edge. That's that we have
Speaker 6: a chips issue, and we have a technology and sanctions issue.
Speaker 5: The reason in World War two war.
Speaker 6: With Japan you had the cutting off of the oil
Speaker 6: and then the sanctioning them taking their payments. So you
Speaker 6: have a somewhat similar situation. Chips is like oil back then,
Speaker 6: and it's a very very very delicate issue. You have
Speaker 6: the geopolitical issue which also is manifest in each of
Speaker 6: them and so on, supporting the supporting Ukraine, and other
Speaker 6: geopolitical issues which are also right at the edge.
Speaker 5: Neither country wants to go to war.
Speaker 6: Everybody's afraid of what that war would be like because
Speaker 6: it would be devastating economically and politically.
Speaker 5: So you will see sort of the postponing.
Speaker 6: These issues will remain and probably intensify over the next
Speaker 6: five to ten years.
Speaker 5: But they will be at that edge.
Speaker 6: So you're going to see in November there will be
Speaker 6: in San Francisco the APAC Conference and you will see
Speaker 6: presidentcy get together with President Biden. But we have a
Speaker 6: political situation, and so that's it. In China, they are
Speaker 6: also dealing with a number of big problems. As we're
Speaker 6: dealing with our problems, they're dealing with their problems. Those
Speaker 6: problems are first the debt problem, that has now been
Speaker 6: allowed to pass through the into the system, meaning you
Speaker 6: have real estate, and real estate counts for about seventy
Speaker 6: percent of savings. People put their money in real estate
Speaker 6: and about twenty percent of their economy. And there was
Speaker 6: a bubble, and then that's passing through and that goes
Speaker 6: down to local governments that we're living on debt and
Speaker 6: also land sales for real estate purchases, and so that's
Speaker 6: a structural issue. They need to do a debt restructuring,
Speaker 6: and debt restructuring is a very difficult thing to do.
Speaker 6: They can do it, but it's also very politically impactful
Speaker 6: because those who are you determine whoever's making these decisions
Speaker 6: determines who's wealth and how they divide the pie. So
Speaker 6: you have that going on, you have a move to
Speaker 6: what president she calls the hundred year storm on the horizon.
Speaker 6: In other words, he believes there's one hundred year storm
Speaker 6: on the horizon. That's the sort of things that we're
Speaker 6: now talking about. And with that one hundred year storm
Speaker 6: on the horizon, you.
Speaker 5: Have a very.
Speaker 6: Autocratic in other words, if you don't behave well, you'll
Speaker 6: lose your head and so on, and that kind of environment,
Speaker 6: which by the way, in war periods and so on,
Speaker 6: has been what most countries have moved toward or something,
Speaker 6: and so that's having an effect on the economy. We
Speaker 6: have the US China conflict itself, which is affecting what
Speaker 6: companies do. Do I want to be in China or
Speaker 6: do I want to be in Vietnam. That's one of
Speaker 6: the things that's benefiting neutral countries, so they think, okay,
Speaker 6: if the Acion countries, India and other places can be
Speaker 6: a beneficiary of that, where do I want to be?
Speaker 6: But that's also hurting them. And then of course that
Speaker 6: we have a world economy which is relatively slow moving.
Speaker 5: That affects their exports. So they're going through a very
Speaker 5: difficult period.
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