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

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Speaker 1: Daybake You At podcast, available every morning on Apple, Spotify

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Speaker 1: or wherever you listen. It's Thursday, the eleventh of April

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

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Speaker 2: And I'm Stephen Carroll. Coming up today. Counting down from

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Speaker 2: six traders wind back FED cut bets for the year

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Speaker 2: as focus moves to Lagarde and the ECB US.

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Speaker 1: Intelligence sources tell Bloomberg they expect an imminent missile strike

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Speaker 1: on Israel by Iran and its proxies.

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Speaker 2: Plus building momentum. UK surveyors say they're increasingly optimistic about

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Speaker 2: the outlook for property prices.

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

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Speaker 2: Investors are rapidly unwinding bets on how many rate cuts

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Speaker 2: they're expecting from the Federal Reserve this year after March

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Speaker 2: is hotter than expected inflation data. Traders now see the

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Speaker 2: Fed just cutting twice in twenty twenty four, with the

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Speaker 2: first reduction pushed back from June to September. Month on

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Speaker 2: month course, EPI rose by a faster than expected zero

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Speaker 2: point four percent last month. JP Morgan's chief Global strategist

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Speaker 2: David Kelly says the writings on the wall for cuts

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Speaker 2: in the coming months.

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Speaker 3: The sound that you heard there was the door slamming

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Speaker 3: on a June rate cut. That's gone. It's definitely more

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Speaker 3: inflation than fed once. I still think that they ought

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Speaker 3: to normalize rates over time. I'd be happy enough if

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Speaker 3: they started rates in June, but I think this means

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Speaker 3: that they won't.

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Speaker 2: David Kelly says his current base case is for two

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Speaker 2: cuts this year, one in September and one in December.

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Speaker 2: It was the third month in a row of higher

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Speaker 2: than expected underlying US inflation, and followed a strong month

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Speaker 2: of job creation in March. Benchmark tenure treasuries reacted to

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Speaker 2: the news, surging above four and a half percent for

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Speaker 2: the first time since November.

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Speaker 1: That US inflation surprise also has traders second guessing the

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Speaker 1: European Central Bank's rate path. The chance of a first

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Speaker 1: quarter point move in June has now fo all into

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Speaker 1: around eighty percent after being fully priced in just last week.

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Speaker 1: Speaking hours before that US CPI print, Goldman Sachs's chief

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Speaker 1: economist Yarysteath, may the case for what many still see

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Speaker 1: as a June cut by the ECB.

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Speaker 4: I think the cut and drowne is very likely, and

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Speaker 4: the debate now really is shifting towards the pace. We

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Speaker 4: have strong evidence that policy is restrictive. I think we

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Speaker 4: are gaining confidence that inflation is coming back to two percent.

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Speaker 1: Well, we'll have a better sense of whether Yarysten's view

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Speaker 1: is still the base case for many when the ECB

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Speaker 1: President Christine Legarde speaks later today. Your area officials are

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Speaker 1: expected to hold interest rates steady at today's meeting, but

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Speaker 1: have signaled readiness to start easing in the coming months.

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Speaker 2: Bloomberg Economics is upgraded its global economic growth forecast for

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Speaker 2: this year, with the warning that central bank rate cuts

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Speaker 2: may be delayed. Our economists are expecting expanison of two

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Speaker 2: point nine percent in twenty twenty four. That's slower than

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Speaker 2: last year, but better than they had forecast last December.

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Speaker 2: Advanced economies are seen ending the year with inflation around

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Speaker 2: two and a half percent. The UK is expected to

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Speaker 2: grow by zero point two percent this year, slightly lagging

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Speaker 2: the Euro Area's expected expansion of zero point five percent.

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Speaker 1: Now away from economics to geopolitics. The United States and

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Speaker 1: its allies believe Iran or its proxies will strike targets

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Speaker 1: in Israel imminently. Bloomberg has learned that intelligence sees the

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Speaker 1: targeting of government or military facilities as more a matter

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Speaker 1: of when, not if. Iran's threatened attack on Israel would

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Speaker 1: be retaliation for air strikes in Damascus last week that

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Speaker 1: killed senior Iranian military officials. President Biden says that Israel's security, however,

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Speaker 1: remains a US priority.

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Speaker 5: Our commitment to Israel's security against these threatch Moran and

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Speaker 5: as proxies is ironclad to be shading in iron clad.

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Speaker 5: We're going to do all we can to protect is

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Speaker 5: real security.

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Speaker 1: Despite the firm words on Iran, the US leader has

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Speaker 1: publicly grown more frustrated with Benjamin Etniaho's handling of the

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Speaker 1: war on Hamas.

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Speaker 2: Chinese inflation is stalling, putting pressure on the yuan and

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Speaker 2: threatening growth. The country's consumer prices have barely budged from

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Speaker 2: a year ago. Bloomberg's Brian Curtis has more from Hong Kong.

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Speaker 6: The CPI rose a tenth of a percent in March

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Speaker 6: from the prior year. The estimate was for a gain

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Speaker 6: of four tenths of a percent. In the meantime, producer

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Speaker 6: price is slumped even further, underscoring deflationary pressures in the

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Speaker 6: Chinese economy, Factory gate prices down two point eight percent

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Speaker 6: from a year earlier, extending a falling streak for the

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Speaker 6: eighteenth consecutive month. The price slowdown suggests that China may

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Speaker 6: not get much help from local consumers to meet the

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Speaker 6: government's growth targets in Hong Kong, Brian Curtis Spoomberg Radio here.

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Speaker 1: In the UK, property surveyors are the most stimistic about

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Speaker 1: bar demand that they've been in over a year. According

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Speaker 1: to a report from the Royal Institution of Chartered Surveyors,

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Speaker 1: UK home sales could see an upward surge over the

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Speaker 1: next few months as perspective home buyers bet on lower

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Speaker 1: interest rates. The supply of available properties is also increasing,

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Speaker 1: but the professional body is also warning that activity will

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Speaker 1: still be relatively limited due to high mortgage rates.

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Speaker 2: One of TAM's Water's key bondholders says any nationalization could

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Speaker 2: spark contagion risks for the whole sector. Britain's largest utility

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Speaker 2: company is still locked in crunch talks with its stakeholders

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Speaker 2: and the government. James Wilcock has more.

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Speaker 7: Sharon Shar says investment in UK infrastructure is at risk

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Speaker 7: if bondholders get a raw deal. The warning from the

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Speaker 7: senior fund manager at Royal London comes as a debate

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Speaker 7: rages behind closed doors between the regulator, shareholders, the government

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Speaker 7: and creditors the question who should take financial responsibility for

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Speaker 7: the utility giant's management and sixteen billion pounds of debt.

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Speaker 7: It's worth saying Shah as a fair bit on the line.

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Speaker 7: Thameswater bonds account for two percent of his Royal London

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Speaker 7: corporate bond portfolio, acording to the latest filing data on Bloomberg.

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Speaker 7: Thameswater declined to comment on Shah's interview, but his words

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Speaker 7: are a sign that holders of debt in the utility

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Speaker 7: are getting increasingly rattled about the likelihood of carrying the

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Speaker 7: can in London. James Orcock, Bloomberg Radio.

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Speaker 1: And those are our top stories this morning on the markets.

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Speaker 1: Right now, the MSCI Asia Pacific indexes down three tens

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Speaker 1: of one percent. Eurostox fifty futures are also nudging lower,

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Speaker 1: but it's the ten year treasury yield that is of

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Speaker 1: most note this morning ahead of the ECB rate decision.

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Speaker 1: US yields trading at four point five three percent those

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Speaker 1: are the markets pull.

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Speaker 2: In a moment, we'll be digging into the latest four

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Speaker 2: Central banking ahead of today's ECB decision and thus hotter

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Speaker 2: than expected US inflation print. Also bringing you more details

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Speaker 2: on Bloomberg's reporting of a possible escalation in the Middle East,

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Speaker 2: the imminent threat of Iranian missile or drone strikes on Israel.

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Speaker 2: Our Israeli or Chief Ethan Browner will be with us

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Speaker 2: with the details of that. But another story that caught

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Speaker 2: our eye this morning we're thinking about the job's outlook.

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Speaker 2: Is McKinzie starting hundreds of job cuts here in the UK.

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Speaker 1: Yeah, so three hundred and sixty jobs to go. WHYLI

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Speaker 1: client demand is slowing down. There was a big consultancy

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Speaker 1: boom in the pandemic, if you remember. Now McKinsey though

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Speaker 1: cutting headcount, but at least in a fairly narrow field.

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Speaker 1: It's the experts, the specialist technical sort advisors, so not

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Speaker 1: the kind of mainstream consultants who are going. And of

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Speaker 1: course McKinsey has tens of thousands of employees, but it's

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Speaker 1: still quite a significant number.

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Speaker 2: Yeah, it's certainly very interesting to keep an eye on

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Speaker 2: what's happening in that sector. Let's get back though to

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Speaker 2: our top stories, and traders have paired bets on ECB

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Speaker 2: interest rate cuts after US core consumer price inflation beat

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Speaker 2: expectations for a third month in a row. For the

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Speaker 2: chance of a first quarter point move in June fell

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Speaker 2: to about eighty percent, there says, bonds across Asia fell sharply.

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Speaker 6: Today.

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Speaker 2: US treasuries a recovering slightly, but the tenure yield still

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Speaker 2: up by eighteen basis points over four and a half percent.

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Speaker 2: Joining us now from more details has Beenberg opinion columnists

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Speaker 2: Daniel mass Down. Great to have you with us on

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Speaker 2: the program this Morning's the stakes for the EASYB have

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Speaker 2: gone up. Can Europe before to delay rate cuts?

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Speaker 8: I'm not sure they can afford not to proceed, Let's

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Speaker 8: put it that way. Unlike the situation the Federal Reserve,

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Speaker 8: you've had numerous ECB policy makers handicapping specific months quite openly,

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Speaker 8: like June. Two other points to make. One is that

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Speaker 8: the European the Eurozone economy is in far weaker shape

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Speaker 8: than the United States, which is just showing great resilience

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Speaker 8: contrary to what people predicted for large parts of last year. Okay,

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Speaker 8: there is no US recession, there's no sign of it imminently.

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Speaker 8: Big economies within the Eurozone like Germany have had a

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Speaker 8: tougher time, so that really strengthens the case for an

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Speaker 8: ECB cut from an activity point of view. And Thirdly,

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Speaker 8: they've talked so much about June and they always say, well,

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Speaker 8: you know, we make our decisions independently, we don't just

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Speaker 8: react to what's going on in the US. Well, okay,

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Speaker 8: so go ahead and cut in June.

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Speaker 1: Well, the other question is can the ECB then deliver

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Speaker 1: multiple cuts, because that's the other view of the markets

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Speaker 1: here in Europe is that there should be multiple cuts

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Speaker 1: on the ECB, and the Fed now is only pricing too.

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Speaker 8: A lot of this stuff is at the margin. So

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Speaker 8: let's just game out a potential ECB reduction in June,

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Speaker 8: and let's say there's another in September and another in

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Speaker 8: November or December. That would be three. If the scenario

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Speaker 8: now is the FED does too, there's not such a

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Speaker 8: large divergence there. It's not like at this point the

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Speaker 8: Fed's going to resume hiking and the ECB is going

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Speaker 8: to be cutting. That is a situation without a lot

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Speaker 8: of precedent. I don't see that happening.

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Speaker 2: Let's talk about that data print from the UAS that's

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Speaker 2: sort of upsased there, well, psyclic ups at the applicrus

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Speaker 2: on where things go next gets upset. You tell us why.

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Speaker 8: Look, it appeared as though inflation was slowly but steadily

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Speaker 8: coming down. That descent appears to be somewhat stalled, at

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Speaker 8: least from an optics perspective. If you were mindful to

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Speaker 8: push for a reduction in June, it makes your job

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Speaker 8: that much harder. Now. Now, look, it's important to remember

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Speaker 8: this is not the end of the world. The Fed's

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Speaker 8: target of two percent inflation over time comes from PCE

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Speaker 8: different indicator. PCE has come down dramatically to around two

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Speaker 8: point five percent from more than seven percent during inflation's peak.

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Speaker 8: So there has been some real success here, but we're

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Speaker 8: just sort of seemed to be bumping along this flow

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Speaker 8: that's proving pretty resistant. I also suspect part of j.

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Speaker 8: Powell's challenges is how they've talked about rate cuts. You know,

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Speaker 8: so if you look at the last couple of times

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Speaker 8: that interest rates have come down, so in twenty nineteen

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Speaker 8: was more of a mid cycle adjustment, but they came

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Speaker 8: down dramatically in two thousand and eight, they came down

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Speaker 8: dramatically in twenty twenty. So when people think of cuts,

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Speaker 8: they think of a weak economy. So that's not what

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Speaker 8: we have in the US. So I keep going back

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Speaker 8: to a remark which Pal's made at his last couple

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Speaker 8: of press conferences, which is, quote, we are well into

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Speaker 8: restrictive territory unquote. So policy can still be restrictive, but

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Speaker 8: ease up a little if you believe we are well

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Speaker 8: into restrictive territory. And I think this is where the

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Speaker 8: communications problems start to come in.

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Speaker 1: Yeah, Daniel, thank you so much for being with us.

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Speaker 1: A Bloomberg opinion commist, Daniel Moss then on the stakes

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Speaker 1: for the ECB, and of course his conclusions from the

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Speaker 1: USCPI report yesterday.

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Speaker 2: Next to a significant piece of Bloomberg reporting this morning.

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Speaker 2: The US and its allies believe major Iranian missilo drone

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Speaker 2: strikes against Israel may be imminent. This is according to

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Speaker 2: people familiar with intelligence reports. On Wednesday, Around's Supreme leader

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Speaker 2: Ia tala Ali Komeni vowed to punish Israel for an

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Speaker 2: attack on Syria, while the Israeli Foreign Minister is our

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Speaker 2: Cat's respond to that his country would respond if attacked

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Speaker 2: by joining US. Now for more details, Bloomberg Israel Bureau

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Speaker 2: Chief Ethan Bronner, Ethan, this would be a significant escalation

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Speaker 2: in the war in the Middle East. What has Bloomberg

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Speaker 2: learned in this reporting?

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Speaker 9: Bloomberg has learned that the US its intelligence services have

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Speaker 9: come upon some fairly strong indication that Iran plans to

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Speaker 9: do something serious against Israel very soon, and the Israelis,

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Speaker 9: of course have been saying that as well. This is

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Speaker 9: in retaliation for an attack that is presumed to have

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Speaker 9: been done by Israel about ten days ago in Damascus

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Speaker 9: on a diplomatic compound in which seven people were killed.

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Speaker 9: The key point there is that the two of the

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Speaker 9: people were revolutionary guard commanders, as to say, Iranian commanders

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Speaker 9: of militias in Lebanon in Syria, so that by itself

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Speaker 9: you could say that that was where the escalation began.

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Speaker 9: And the Iranians have said aloud they're going to come

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Speaker 9: back at Israel. So everyone is kind of waiting.

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Speaker 1: Yes, so waiting put it into context for us though,

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Speaker 1: why now, why this escalation?

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Speaker 6: Now?

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Speaker 1: Why the acuteness of it?

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Speaker 9: Well, I mean, this of course all goes back to

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Speaker 9: the October seventh attack by Hamas, another Iranian backed, armed

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Speaker 9: and funded militia. Hamas attacked Israel in October seventh, and

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Speaker 9: the result of that was that several hundred thousand Israeli

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Speaker 9: is both in the south along the border with Gaza

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Speaker 9: and in the north along the border with Lebanon, abandoned

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Speaker 9: their homes and Israel feels that it can't let allow

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Speaker 9: them to go back until something is done quote unquote

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Speaker 9: about the militias that are on its borders. And so

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Speaker 9: the problem is there's been a lot of tit for

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Speaker 9: tat for the last six months between Israel and Hisbola. Again,

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Speaker 9: all of this is Iranian directed and helped on the

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Speaker 9: other side, and so Israel also has been saying, you know,

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Speaker 9: we're going to go after the head of this octopus,

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Speaker 9: not just its tentacles, and that's when it attacked the

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Speaker 9: Revolutionary Guard guys. So you know, there is a sense

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Speaker 9: in Israel that it is facing an existential struggle that

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Speaker 9: if it can't allow its people to live within its borders,

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Speaker 9: then it is not performing the task that the State

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Speaker 9: of Israel promises its citizens. So it's fairly hawkish. We

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Speaker 9: also have a very hawkish government here, and Iran is

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Speaker 9: also playing a very delicate game here, so you know,

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Speaker 9: we'll see, we'll see where it goes. But it doesn't

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Speaker 9: look like either country wants a regional war, but of

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Speaker 9: course not wanting and happening or not the same thing.

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Speaker 2: What does the US do in this scenario if a

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Speaker 2: shadow war breaks into an open conflict, can it be

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Speaker 2: de escalated?

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Speaker 9: Well, that's a great question. Let's start with what the

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Speaker 9: US is doing. Now. What it's doing is saying out

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Speaker 9: loud to the world and to Iran, stand shoulder to

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Speaker 9: shoulder with Israel. If Iran were to attack Israel, we

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Speaker 9: would view that as an attack on us. At the

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Speaker 9: same time, Israel, Sorry, American diplomats are making the rounds

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Speaker 9: by phone and otherwise in the region to get people

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Speaker 9: to talk to the Iranians to tell them to stop. Now,

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Speaker 9: if there is an attack, it'll depend on what the

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Speaker 9: attack is. I mean, if there's an attack on the

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Speaker 9: state of Israel with missiles or drones. Israel says it's

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Speaker 9: going to retaliate against Iran on its territory, and I

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Speaker 9: think the Americans would be playing a role, that's what

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Speaker 9: they've said. So now would that lead to a genuine

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Speaker 9: regional war.

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Speaker 1: Who knows Israel in the mean while seems to be

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Speaker 1: pausing the offensive on Rapha for now. What is the

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Speaker 1: situation with girls at the moment? Ethan?

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Speaker 9: So yes, we're in a pause moment. They pulled out

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Speaker 9: most of their combat troops the beginning of this week.

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Speaker 9: They repeatedly asserting that the war or cannot end until

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Speaker 9: they have invaded Rafa, where they say four hamaspittalions are ensconced.

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Speaker 9: But what's what we're waiting for is an attempt at

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Speaker 9: a deal between Hamas and Israel for some kind of

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Speaker 9: six week pause or ceasefire now. Yesterday, in addition to

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Speaker 9: these intelligence reports, there was an Israeli hit on the

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Speaker 9: three adult sons of Smelhania, a major leader of Ramas.

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Speaker 9: So it's not like there's a massive de escalation going

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Speaker 9: on there either. There is still a lot of tit

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Speaker 9: for tat and a lot of reason for concern, and

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Speaker 9: oil of course did go up yesterday.

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