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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Day Bat podcast, available every morning on Apple, Spotify or

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Speaker 1: wherever you listen. It's Friday, the fourteenth of June. Here

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Speaker 1: in London. I'm Caroline Hepka.

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Speaker 2: And I'm Lizzie Burden. Coming up today, the Bank of

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Speaker 2: Japan pushes back plans to cut its bond buying program.

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Speaker 2: As the central Bank keeps rates on hold.

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Speaker 1: French bonds tumble has spreads hit their widest level since

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Speaker 1: twenty seventy.

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Speaker 2: Plus a farage factor. A new poll puts the right

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Speaker 2: wing Reform Party overtaking the Conservatives in the UK for

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Speaker 2: the first time.

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Speaker 1: Let's start with a roundup of our top stories.

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Speaker 2: The Bank of Japan has taken another step to normalization

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Speaker 2: of its ultra loose monetary policy, but the approach has

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Speaker 2: led to some uncertainty. Bloomberg's Brian Curtis has more.

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Speaker 3: The Bank of Japan has decided to reduce its bond purchases,

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Speaker 3: but it has left the market guessing as to the amount.

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Speaker 3: It will not specify amount until the next meeting in July.

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Speaker 3: The decision led to selling of the yen as investors

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Speaker 3: were primed for details. At this meeting, the BOJ stood

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Speaker 3: pat on other policies. It kept the overnight call rate

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Speaker 3: between zero and zero point one percent. The NIQUE posted

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Speaker 3: modest gains. Brian Curtis Bloomberg Radio.

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Speaker 1: French bonds have continued to tumble as Marine le Penn's

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Speaker 1: far right National Rally Party leads polls ahead of legislative

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Speaker 1: elections later this month. The spread between French and German

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Speaker 1: tenure years widened to close at seventy basis points yesterday.

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Speaker 1: That's the most since twenty seventeen. Concerns that Lepenn would

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Speaker 1: usher in looser fiscal policies a driving the market reaction.

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Speaker 1: The National Rallies plans in the twenty twenty two presidential

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Speaker 1: election would have cost one hundred and twenty billion euros

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Speaker 1: a year, according to a think tank close to Immenue

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Speaker 1: and Macon. Meanwhile, France's left leaning political parties sealed an

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Speaker 1: alliance on Thursday evening to join forces in that upcoming vote.

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Speaker 1: Polls suggest that that group can win the second biggest

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Speaker 1: block behind La Penn.

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Speaker 2: Here in the UK, Nigel Farag's Reform UK Party has

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Speaker 2: overtaken the Conservatives in a new opinion poll for the

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Speaker 2: first time twenty days ahead of the general election. The

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Speaker 2: yug of survey gives the right wing party nineteen percent

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Speaker 2: of the vote share, behind Kirstarmer's Labor which leads with

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Speaker 2: thirty seven percent, and one point ahead of the Tory Party,

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Speaker 2: which is on eighteen percent. Speaking during a party leader's

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Speaker 2: debate on ITV last night, Faraje criticized Prime Minister Rishisu

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Speaker 2: Nak's party.

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Speaker 4: I don't believe a single word that you say and

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Speaker 4: as being a labor enabler, we are now ahead of

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Speaker 4: you in the national Okay, thank you, A vote for

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Speaker 4: you is actually now a vote for Labour.

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Speaker 2: Reform leader UK Reform UK leader Nigel Farage speaking there.

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Speaker 2: Most other opinion pollsters still place the Conservative Party in

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Speaker 2: second place, but show Reform UK gaining ground well.

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Speaker 1: Sticking with UK politics, the Labor Party released their party manifesto,

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Speaker 1: kiss Starmer's plans for government focused on economic growth and

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Speaker 1: domestic security. Speaking at the party's official launch event, the

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Speaker 1: Labor leader says his party presents a new opportunity.

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Speaker 5: Today. We can turn the page.

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Speaker 4: Today, we can lay a new foundation of stability, and

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Speaker 4: on that foundation we can start to rebuild Britain.

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Speaker 1: Labour's Kiss Starmer speaking there. Included in the party's pitch

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Speaker 1: for government is a plan to raise taxes on private

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Speaker 1: equity fund managers by treating carried interest as income, a

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Speaker 1: change that Labour says will raise five hundred and sixty

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Speaker 1: five million pounds a year.

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Speaker 2: Tesla investors have backed a fifty six billion dollar pay

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Speaker 2: deal for CEO Elon Musk, along plans to move the

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Speaker 2: company's state of incorporation to Texas. Shareholder support for the

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Speaker 2: plans was announced during the firm's annual general meeting on Thursday,

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Speaker 2: to applause from attendees.

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Speaker 6: Our stockholders have approved the ratification of the one hundred

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Speaker 6: percent performance based stock option award to Elon Musk.

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Speaker 1: That was approved by stockholders in twenty eighteen.

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Speaker 2: Brendan Earhart Tesla General Council speaking there. Despite showing seventy

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Speaker 2: three percent of investors are in favor of the move,

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Speaker 2: the pay vote is only advisory and doesn't guarantee Musk

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Speaker 2: will receive the package. A Delaware judge nullified the twenty

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Speaker 2: eighteen compensation plan in January. Tesla's expected to appeal if

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Speaker 2: that fails. Moving Tesla's legal home to Texas would allow

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Speaker 2: the Board to revive a pay award.

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Speaker 1: Euro's twenty twenty four begins with Scotland looking to cause

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Speaker 1: a shock against hosts Germany in the opening match of

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Speaker 1: the tournament tonight. The three time champions haven't lost to

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Speaker 1: the Scots since nineteen ninety nine and beat them in

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Speaker 1: the previous two meetings at major tournaments. So ending on

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Speaker 1: some sporting news this morning, now in a moment we

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Speaker 1: will be talking about the Bank of Japan decision, which

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Speaker 1: was quite a surprise to markets. Most of them had

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Speaker 1: had been expecting that we would hear about the bond

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Speaker 1: buying pullback from the BOJ today. At least half of

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Speaker 1: economist surveyed by Bloomberg. The G seven summit's also taking

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Speaker 1: place in Italy. But of course you were yesterday. I

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Speaker 1: spot from social media had a big business event in

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Speaker 1: the UK in Oxfordshire. It looked lovely and leafy and green.

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Speaker 1: Who did you talk to?

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Speaker 2: Yeah, I was at Soho Farmhouse for Founders Forum. It's

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Speaker 2: the flagship event of Founders for a bit. I have

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Speaker 2: to say it's an incredible gathering of people. Quite a

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Speaker 2: nice reprieve actually from covering the general election Caroline, I

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Speaker 2: was my first guest on stage was an AI robot artist,

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Speaker 2: who I would have to say had more charisma in

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Speaker 2: her little finger than all of the politicians. But take

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Speaker 2: care there, But it was we had just a really

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Speaker 2: interesting message coming out of the guests on my stage.

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Speaker 2: We had that AI robot artist. Then we had Deepak Chopper,

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Speaker 2: you might know as one of the gurus of our century,

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Speaker 2: you know, lots of podcasts and books, really synonymous with meditation,

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Speaker 2: and he was really optimistic about AI actually, And then

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Speaker 2: I heard from lots of different investors and founders across

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Speaker 2: the spectrum of tech this message that AI is going

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Speaker 2: to be a tide that lifts all boats across industries.

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Speaker 2: But once that's happened, it all comes back to human creativity,

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Speaker 2: and Deepak Chopper's message was creativity is the path to happiness.

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Speaker 2: So I'm feeling very zen this morning, Caroline.

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Speaker 1: Oh, lovely stuff sounds great. Well, yes, And the AI

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Speaker 1: sort of optimism, whether the UK can deliver on that

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Speaker 1: will be one of the major challenges in terms of

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Speaker 1: in terms of the post selection world. I mean, I

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Speaker 1: think it's also interesting that JP Morgan yesterday we're talking

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Speaker 1: about how AI It's not just about investing in the

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Speaker 1: direct AI companies, it's now about the reader cross into

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Speaker 1: those first dot it's basically early adopting companies and whether

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Speaker 1: you know their ship, I still do well, JP Morgan

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Speaker 1: saying effectively, yes, that was very interesting, but nice to

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Speaker 1: hear that you were out and about and speaking to

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Speaker 1: interesting and important business guests. Let's also turn our attention

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Speaker 1: though to the bond markets, of course, because whilst you

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Speaker 1: were out yesterday, the big bond market stories really hit,

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Speaker 1: didn't they. Two of them this morning, the Bank of

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Speaker 1: Japan putting off reducing its bond buying until July. And

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Speaker 1: then also we had the big spike in yield differenships

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Speaker 1: between France and Germany given the concerns about Marine le

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Speaker 1: Penz national rally winning power in the French elections. Joining

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Speaker 1: us now to discuss this is Garfield Reynolds, our Market's

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Speaker 1: Live Asia team leader. Garfield. Really good to speak to

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Speaker 1: you this morning.

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Speaker 5: Yeah. Hi.

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Speaker 1: In terms of the Bank of Japan going very very

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Speaker 1: slowly when it comes to normalizing their policy, why.

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Speaker 5: Well, the Bank of Japan remains extremely concerned not to

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Speaker 5: set off major turmoil in its bond markets. You're given

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Speaker 5: it owns more than half of the bond market. It's

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Speaker 5: spent so much money on keeping conditions loose, and while

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Speaker 5: of the acknowledges that it needs to turn towards tighter conditions,

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Speaker 5: it's not willing to do that rapidly. It also, excuse me,

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Speaker 5: it also remains very concerned. There have been signs that

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Speaker 5: inflation is slowing down from where it is, and the

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Speaker 5: official language is it's not confident that inflation is going

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Speaker 5: to remain sustainably above the two percent a year target

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Speaker 5: that it has set. So both of those reasons mean

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Speaker 5: that it's acting cautiously. There's also, you know, an institutional

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Speaker 5: bias against you acting too soon before it's totally sure

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Speaker 5: that it has ultimately, irrevocably broken of the deflationary mindset

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Speaker 5: that had hold of Japan for generations.

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Speaker 2: So the boj and weight and c mode. I'm looking

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Speaker 2: at the yen at one five to eight per dollar,

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Speaker 2: Is this a catalyst for further weakening?

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Speaker 5: Definitely? I mean the end has has only had only

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Speaker 5: risen that before this by about two percent against the dollar.

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Speaker 5: Since Japan spend a record amount at the beginning of

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Speaker 5: this month, actually beginning beginning of last month, in fact

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Speaker 5: intervening to prop up the end, so that propping up

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Speaker 5: the end has not really done much. And even with

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Speaker 5: US yields declining this week because of softer CPI, the

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Speaker 5: fact that the Fed has made it clear it's some

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Speaker 5: way away from cutting and that it would be a

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Speaker 5: reluctant rate cutter this year anyway, that was already maintaining

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Speaker 5: pressure on the en. Now there's more pre sure on

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Speaker 5: the end. You know, it's back. The dollar generate is

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Speaker 5: back of BARB one hundred and fifty eight. It was

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Speaker 5: one hundred and sixty when they intervened last time. So

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Speaker 5: at the very least, traders are going to be on

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Speaker 5: the lookout for any science that the Ministry of Finance

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Speaker 5: might tell the boj to step in to defend Japan's

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Speaker 5: currency once more.

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Speaker 1: Meanwhile, here in europe Garfield, the snap election called by

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Speaker 1: Immanue and macoin France is unleashed this real wave of

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Speaker 1: concerns in bond markets, especially why are they so worried

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Speaker 1: about a Marine Lapenn national rally win in the kind

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Speaker 1: of parliamentary votes.

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Speaker 5: Well, the basic reason they're worried there is that Lapenn's

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Speaker 5: party is seen as being likely to push for more

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Speaker 5: spending for a much looser fiscal setting. And remember, even

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Speaker 5: before the European elections and what followed, we had S

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Speaker 5: and P saying they didn't like what was going on

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Speaker 5: with France's debt metrics. We had concerns that Macron, with

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Speaker 5: his existing parliamentary setup, was tending towards more fiscal spending.

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Speaker 5: So there was a concern there already that France's budget

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Speaker 5: was not in great shape. That has been exacerbated massively

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Speaker 5: by both the potential that lit Pen parties could win,

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Speaker 5: also the potential that if they don't win, if Macron's

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Speaker 5: parties retain control of the government, they're still going to

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Speaker 5: feel under pressure to be more populist, to open the

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Speaker 5: public purse strings.

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Speaker 2: And so you settle something for us, would you? Is

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Speaker 2: Lemaire's warning of eliz trous scenario overblown?

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Speaker 5: Possibly? I mean, one of the things that made the

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Speaker 5: list trust scenario so extraordinary was that it came to

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Speaker 5: some extent out of a blue sky. So you know,

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Speaker 5: we've already had a pretty strong jump in French yields,

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Speaker 5: especially your relative to booms, which is the best way

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Speaker 5: of measuring what's going on in European bond markets. So

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Speaker 5: we've already had a lot of pain there. It would

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Speaker 5: be hard to see if that hasn't set off, you know,

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Speaker 5: major turmoil, you know, pension funds dumping, that sort of

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Speaker 5: thing that reduces the chances that you would get more.

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Speaker 5: Then again, if we did get a Lapen victory and

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Speaker 5: they did really push hard on the fiscal front, that

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Speaker 5: there would be the potential for at least some short

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Speaker 5: term turmoil and you know, and some spikes in yields.

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Speaker 5: It's quite possible that the bond market, so to speak,

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Speaker 5: would signal it's very strong disapproval. It all then gets

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Speaker 5: down to just how bad it get. That depends on

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Speaker 5: whether there are any hidden dangers. The way that turned out,

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Speaker 5: there were in the British bond market, where you remember

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Speaker 5: the problem was that pensions who had gone very long,

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Speaker 5: long duration effectively suddenly found that they were caught out

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Speaker 5: and they had to liquidate positions. That's the sort of

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Speaker 5: thing that we kind of don't know until you know,

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Speaker 5: we get more of a stress test from the political front,

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Speaker 5: we don't know whether anything like that is waiting for

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Speaker 5: us in France's bond market.

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Speaker 1: Okay, Garfield, thank you so much for being with us

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Speaker 1: this morning. That is our market's Live Asia team leader

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Speaker 1: Garfield Reynolds taking us through the bond market story. Let's

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Speaker 1: turn quickly to the G seven leaders though in Apulia

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Speaker 1: in Italy for their annual summit yesterday, they agreed to

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Speaker 1: a deal that will use profits generated by frozen Russian

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Speaker 1: sovereign assets to provide an upfront loan to Ukraine. Joining

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Speaker 1: us now for more on the deal and also what

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Speaker 1: we expect on day Tuesday. Ploebag's you correspondent at large,

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Speaker 1: Roberta now Deli, Good morning, Alberta. I mean the significance

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Speaker 1: in terms of the funds for Ukraine from sees Russian assets.

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Speaker 1: Does it move forwards quickly? It's been discussed for months.

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Speaker 6: It should so the leaders, yes, they reached disagreement and

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Speaker 6: as part of that pledge they want to see money

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Speaker 6: flowing to Ukraine by the end of this year, and

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Speaker 6: so it's once they were able to sort out and

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Speaker 6: iron out the details, the implementation should be fairly quick

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Speaker 6: from now on.

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Speaker 2: We were just talking to Garfield Reynolds about Emmanuel mccorn's

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Speaker 2: decision to call us anap election, angering G seven leaders

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Speaker 2: and the effect on the bond market. But I wonder

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Speaker 2: whether the French president's fallen out of favor. What's the

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Speaker 2: sense on the ground there, Alberto.

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Speaker 6: I think the main word is there's a bit of puddlements.

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Speaker 6: Like I've spoken to quite a few officials here, and

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Speaker 6: the one question everyone was why. It's not clear why

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Speaker 6: President Macron has decided to call this election, And everyone

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Speaker 6: I've spoken to sees it as a very risky move

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Speaker 6: and the rationale and the reasons for doing it are

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Speaker 6: unclear really, and it hasn't really emerged. What is the

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Speaker 6: upside in having called this election?

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Speaker 1: Mind you, it's not as if the G seven are

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Speaker 1: short of leaders under pressure? Is she sun? Like Olaf

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Speaker 1: Schultzer there justin does the agenda today a word on migration?

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Speaker 1: That's the theme, isn't it?

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Speaker 2: Yes?

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Speaker 6: Migration obviously is a very big issue in Italy, which

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Speaker 6: is hosting the summit, but also elsewhere in Europe, especially

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Speaker 6: as we saw in the recent European election results of

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Speaker 6: this big shift to the right. So much of the

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Speaker 6: focus will indeed be on migration. It will be also

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Speaker 6: on developing infrastructure, energy plans with African countries, food, Securities

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Speaker 6: of Food Security initiative which is going to be unveiled

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Speaker 6: also with African countries and there are lots of wholes.

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Speaker 6: So today is a day where the G seven leaders,

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Speaker 6: we'll meet with leaders of other countries including Africa.

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Speaker 7: This is Bloomberg Daybreak Europe, your morning brief on the

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Speaker 7: stories making news from London to Wall Street and beyond.

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Speaker 1: I'm Caroline Hepka and.

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