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

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Speaker 1: Daybreak Youate podcast, available every morning on Apple, Spotify or

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Speaker 1: wherever you listen. It's Tuesday, the first of October here

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

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Speaker 2: I'm Stephen Carroll. Coming up today, Israel sends troops into Lebanon.

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Speaker 2: We have the latest on what's being described as targeted

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Speaker 2: ground raids.

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Speaker 1: Jerome Powell says the FED will lower rates over time

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Speaker 1: and insists that the US economy is on solid footing.

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Speaker 2: Plus that sinking feeling optimism in the UK economy drops

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Speaker 2: to its lowest level since the Liz Trust many budgets.

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

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Speaker 1: Israel has begun what it's calling targeted ground raids in

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Speaker 1: southern Lebanon. The decision to send troops into the country,

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Speaker 1: even in a limited capacity, is a major escalation in

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Speaker 1: Israel's campaign to weaken hez bull at the Iran backed group.

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Speaker 1: Speaking yesterday, when reports began to emerge of a possible

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Speaker 1: ground operation, President Biden offered this response.

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Speaker 3: I'm more aware than you might know, and I'm comfortable

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Speaker 3: with them stopping.

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Speaker 4: We should have a ceasefire now.

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Speaker 1: However, President Biden's call for truce is unlikely to be heeded,

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Speaker 1: with Israel's Prime Minister Benjamin Letnya, who looking to capitalize

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Speaker 1: on Hezbola's apparent weakness following weeks of attacks and the

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Speaker 1: killing of its leader Hassan Nasuala. Before the limited ground incursion,

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Speaker 1: Israeli airstrikes on Lebanon in the past two weeks had

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Speaker 1: killed at least one thousand people and force hundreds of

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Speaker 1: thousands from their homes, according to local officials.

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Speaker 2: The picture on the ground is still unclear, but Lebanese

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Speaker 2: media reporting that Israel has struck the largest Palestinian refugee

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Speaker 2: camp near the country's southern city of Saidan elsewhere. Syria's

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Speaker 2: state run Sana news agency says fighter jets and drones

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Speaker 2: also targeted a number of points in its capital, Damascus.

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Speaker 2: It described those as coming from hostile targets, which is

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Speaker 2: usually a reference to Israel. Paul Wallace, who leads our

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Speaker 2: Middle East Economic and coverage, says Israel insists the action

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Speaker 2: has been targeted.

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Speaker 5: It wasn't inevitable, but it seemed increasingly inevitable in the

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Speaker 5: last few days given what Israel was doing with it,

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Speaker 5: says strikes into Lebanon. So far, the Israeli military is

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Speaker 5: emphasizing that these are limited raids, that describing them as

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Speaker 5: limited ground raids. In the very south of Lebanon.

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Speaker 2: Bloueberg's Paul Wallace speaking there. The fear that events could

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Speaker 2: spiral into a wider regional conflict were reinforced overnight after

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Speaker 2: the US announced plans to deploy a few thousand more

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Speaker 2: troops to the Middle East to bolster Israel's defense and

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Speaker 2: to deter Iran. Bloomberg understands that the extra forces will

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Speaker 2: mostly be fighter jets, squadrons, and units already in the

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Speaker 2: region that were due to rotate away.

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Speaker 1: Jerome Powell has said that FED policymakers are not in

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Speaker 1: a hurry to lower interest rates, while reiterating that the

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Speaker 1: US economy remains on solid footing. His remarks pushed swaps

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Speaker 1: traders to rain in bets for hefty rate cuts this year.

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Speaker 3: Looking forward, if the economy evolves broadly as expected, policy

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Speaker 3: will move over time toward a more neutral stance. But

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Speaker 3: we are not on any preset course. The risks are

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Speaker 3: two sided, and we will continue to make our decisions.

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Speaker 6: Meeting by meeting.

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Speaker 1: Joan Powell, speaking there at the NABE Policy Conference, Looking ahead,

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Speaker 1: Friday's US jobs report for September may prove to be

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Speaker 1: pivotal in shedding light on the Fed's rate path. Rafael

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Speaker 1: Bostik told Reuters that he is open to another fifty

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Speaker 1: basis point cut in November if the labor market weakens.

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Speaker 2: Christine Laguarde says the European Central Bank is becoming more

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Speaker 2: optimistic about getting inflation under control. Speaking during a European

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Speaker 2: Parliament hearing, the ECB president indicated that policymakers will reflect

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Speaker 2: on the progress when voting on monetary policy, but the.

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Speaker 6: Latest developments strengthen our confidence that inflation will return to

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Speaker 6: target in a timely manner. We will take that in

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Speaker 6: to account in our next monetary policy meeting in October.

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Speaker 2: Christine Leguard, speaking there, her strongest hint yet of possible

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Speaker 2: momentum gathering among officials for ACOT. After the speech, traders

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Speaker 2: added slightly to bets on a quarter point interest rate

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Speaker 2: reduction from the ECB in October, with money markets implying

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Speaker 2: an eighty five percent chance of such a move.

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Speaker 1: In the UK, business chiefs are the most pessimistic they

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Speaker 1: have been about the economy since the aftermath of Liz

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Speaker 1: Trust's many budget. That's according to a study by the

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Speaker 1: Institute of Directors, which says that fears about potential tax

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Speaker 1: increases and workplace regulation contributed to the drop in its

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Speaker 1: monthly Economic confidence Index thirty eight percent. Fewer respondents said

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Speaker 1: that they were optimistic about the economy in September than

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Speaker 1: in July, in the aftermath of the Labor Party's general

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Speaker 1: election victory. The banking policymaker Meghan Green says that there

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Speaker 1: is uncertainty about the condition of the economy, and I.

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Speaker 7: Would say that different NPC members are believe, you know,

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Speaker 7: put different probabilities and risks on different states of the world.

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Speaker 7: But actually the last vote that we had was an

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Speaker 7: eight one split. Eight out of nine of us voted

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Speaker 7: to hold rates where they are, and so we could

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Speaker 7: have different views of where we are but still make

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Speaker 7: the same policy decisions in the short term.

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Speaker 1: Megan Green this speaking also at the NAB conference in Nashville.

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Speaker 1: The survey also shows investment intentions at a four year low,

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Speaker 1: but Anna Leech, chief economist at the IOD, said that

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Speaker 1: the government could boost growth by clarifying its own plans

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Speaker 1: the chance that Rachel Reeves will deliver her budget on

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Speaker 1: the thirtieth of October, having said that she needs to

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Speaker 1: fill a twenty two billion pound fiscal hole.

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Speaker 2: And in the United States, ports along the eastern Gulf

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Speaker 2: coasts have been shut down as dock workers strike for

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Speaker 2: the first time in nearly five decades. The action comes

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Speaker 2: after the International long Shoreman Association's efforts to secure higher

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Speaker 2: wages and softened language on automation in their Andy YU

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Speaker 2: Can't tract failed before the current agreement expired. The ocean

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Speaker 2: carriers and Terminal operator is represented by the US Maritime Alliance,

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Speaker 2: have accused the union of refusing to negotiate since it

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Speaker 2: called off talks in June. Jp Morgan estimates that the

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Speaker 2: cost of the walkout, would started just after midnight Eastern time,

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Speaker 2: will be between three point eight and four point five

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Speaker 2: billion dollars a day. In the moment, we'll bring you

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Speaker 2: more on what's happening on the Israel Lebanon border, plus

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Speaker 2: dig into the latest commentary from top central bankers. But

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Speaker 2: just one more event that we're keeping an our eye

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Speaker 2: on today, and that's the budget in Ireland. A very

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Speaker 2: different conversation being had around the budget in Ireland versus

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Speaker 2: what we're hearing in the UK. He mentioned the fiscal

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Speaker 2: hole the Chancellor Rachel Reeves has had to do and

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Speaker 2: the warning of tough choices ahead. Ireland is unusual among

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Speaker 2: European countries, and that it has a budget surplus. They're

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Speaker 2: talking about a giveaway budget, huge corporate tax receipts. Of course,

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Speaker 2: lots of warnings around the instability of that money to come,

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Speaker 2: but there are expectations is going to be increases in

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Speaker 2: welfare payments and student grants. Voters who are thinking about

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Speaker 2: an election that's going to happen in February to be

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Speaker 2: thinking too, though, But any big announcements around housing a

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Speaker 2: chronic issue facing the Irish economy as well. We'll also

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Speaker 2: be listening out to see if there's any hints as

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Speaker 2: to what the Irish government might do with that fourteen

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Speaker 2: billion euros that's getting as a tax settlement for Mapple

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Speaker 2: after the recent European court ruling. So I want to

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Speaker 2: watch later on.

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Speaker 1: Yeah, okay, that's an interesting pointer. Thank you for that, Stephen.

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Speaker 1: Now let's bring you the latest on the events in

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Speaker 1: the Middle East where Israel has begun what it is

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Speaker 1: calling targeted ground raids in southern Lebanon. Joining US now

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Speaker 1: is our Israel Bureau Chief and senior editor Ethan Barona

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Speaker 1: govoning Ethan far How far into Lebanon? Is Israel targeting

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Speaker 1: these ground raids? What do we know about what is happening?

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Speaker 8: We don't know on an enormous amount. We're due for

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Speaker 8: a briefing later today by the military, and even then

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Speaker 8: I'm not sure we'll get that level of detail. My

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Speaker 8: instinct is that it's something in the five to ten

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Speaker 8: kilometer range that they're going in. That's where a lot

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Speaker 8: of short range HISZBOLA sites are located and which they

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Speaker 8: want to quote unquote clean out in order to make

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Speaker 8: it possible eventually to bring their residence back to their

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Speaker 8: homes in the north. That's the goal.

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Speaker 2: How significant an escalation is this when we're thinking about

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Speaker 2: almost a year of far being exchanged across this border.

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Speaker 8: Well, it's a very significant increase in activity, there's no

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Speaker 8: question about that. I mean, ground troops are always another

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Speaker 8: whole level of involvement. Israel has gone on and off

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Speaker 8: over the last twenty five years. Of course, began in

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Speaker 8: seventy eight, and then there was a major invasion in

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Speaker 8: eighty two, which it stayed for eighteen years. Then, of

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Speaker 8: course it was the six War that lasted just over

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Speaker 8: a month. Look, I think that all of that experience

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Speaker 8: in theory will inform their desire not to stay for

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Speaker 8: too long, and not to go in too deep, and

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Speaker 8: not to run the risk of losing soldiers to captivity

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Speaker 8: and so on. But obviously the concern is over mission

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Speaker 8: creep and over what is actually awaiting them. They did

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Speaker 8: send in commandos before over the last weeks to see

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Speaker 8: what they're facing, so in theory they have a clearer idea.

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Speaker 1: Diplomatic efforts seem very distant then, from the realities on

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Speaker 1: the ground. The Netnyahu government, though, doesn't seem to be

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Speaker 1: heeding US calls and hasn't seemed to you know, repeatedly.

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Speaker 8: Why not, Well, obviously they are of a distinct sense

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Speaker 8: of what the goal is. I think that for the

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Speaker 8: United States and for most of much of the world,

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Speaker 8: calm is the goal. Israel doesn't see comm as the goal.

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Speaker 8: Israel sees pushing Hisibellah back as its goal. It doesn't

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Speaker 8: believe that that's doable the via diplomacy. I'll remind you

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Speaker 8: that after the six War, there was Resolution seventeen oh

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Speaker 8: one unanimously adopted by the Security Council and agreed to

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Speaker 8: by Hisbela and the Lebanese government, which involved Hisbela disarming

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Speaker 8: and going back thirty kilometers from the Israeli border. None

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Speaker 8: of that happened. That was a diplomatic operation that didn't

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Speaker 8: produce results. That's how Israel views it, that it has

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Speaker 8: to do it by force.

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Speaker 2: What are the risks of a form of retaliation for

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Speaker 2: this sort of these ground raids. I mean, we haven't

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Speaker 2: heard much from Iran in recent days.

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Speaker 8: Yes, well, that's of course the massive question in terms

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Speaker 8: of whether there'll be a true regional war, whether this

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Speaker 8: will really spin out of control. I mean, these are

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Speaker 8: the great mysteries of the last few weeks. That until

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Speaker 8: two or three weeks ago, we believed that Hisbelah was

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Speaker 8: capable of shooting thousands of long range precise missiles at Israel,

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Speaker 8: including a Tel Aviv over a period of weeks, and

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Speaker 8: we have seen one in total. Now, obviously Israel took

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Speaker 8: out their command and control people through exploding pagers and

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Speaker 8: walkie talkies, and then they took out a couple of

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Speaker 8: thousand launcher sites, and they've done enormous damage to Hisbelah.

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Speaker 8: But you know, it's very difficult to assess whether there's

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Speaker 8: some stuff in waiting that's going to come back at

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Speaker 8: Israel or whether it's actually unable to react. And the

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Speaker 8: same is true of what Iran is able to do.

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Speaker 8: I think these are the great mysteries. I don't know

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Speaker 8: how to answer that.

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Speaker 1: Yeah, enormous questions. What should we be thinking about? Then

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Speaker 1: today you mentioned the briefing the enormous human toll. Also,

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Speaker 1: of course, yeah, we have to.

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Speaker 8: Say, look, yes, I mean there are many, many hundreds

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Speaker 8: of people dead and many more wounded in Lebanon. Lebanon

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Speaker 8: is terrible situation. They are bearing the brunt of this.

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Speaker 8: They're sort of between the squeeze between his Bela and Israel,

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Speaker 8: and it's terribly sad. There's that human toll. But the

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Speaker 8: larger geopolitical and diplomatic questions are the ones we need

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Speaker 8: to watch. What will be his Bela's response, what will

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Speaker 8: be Around's response, How deep will Israel go in? How

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Speaker 8: long will this last? Those are the questions you pose,

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Speaker 8: and those are the right questions. And that's why we

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Speaker 8: all have jobs, because we don't know the answers in advance.

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Speaker 8: We have to report this out.

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Speaker 2: Okay, Ethan, thanks very much for bringing us the latest

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Speaker 2: this morning from Israeli Israel BIA chief and senior editor

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Speaker 2: Ethan Browner.

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Speaker 1: Now the Federal Reserve Chair, says that the US Central

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Speaker 1: Bank is not in a hurry to lower interest rates, again,

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Speaker 1: underlining that policymakers will focus on the economic data. Jerown

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Speaker 1: Powells comments contrast with those from the ECB President Christine

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Speaker 1: la Garde, who hinted at an October interest rate cut

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Speaker 1: in comments the European Parliament joining us now to discuss

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Speaker 1: is our executive editor for Asia Markets, Paul Dobson, Paul,

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Speaker 1: good morning. In terms of your own Pale, did he

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Speaker 1: say anything that in terms of dispelling the idea that

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Speaker 1: there are rate cuts to come, there seem to be

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Speaker 1: rashing back in terms of the fifty basis point idea.

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Speaker 4: Yeah, good morning, Caroline. I think that that would be

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Speaker 4: the way to interpret it. Nobody thinks that the Fed

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Speaker 4: won't cut again in November. It's all about the scale

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Speaker 4: of the cut. Having started lowering interest rates with a

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Speaker 4: fifty basis point move in September, so people are asking

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Speaker 4: themselves whether that will be followed up by another Lodge

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Speaker 4: siteble cut of fifty basis points or a twenty five.

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Speaker 4: The tone that Powell took was maybe a little bit

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Speaker 4: of a surprise to the market and maybe just that

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Speaker 4: little bit more hawkish than we had been expecting, perhaps,

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Speaker 4: as you said, sort of talking about robust labor market

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Speaker 4: even as inflation starts to come down as the FED

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Speaker 4: would like it. And so the net result of that

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Speaker 4: was it pushed up short term US interest rates somewhat

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Speaker 4: had people pairing those bets a little bit on how

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Speaker 4: aggressive the Fed might be with that in mind, or

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Speaker 4: keeping that in mind, at least, the market is still

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Speaker 4: sort of on the fence here and maybe more leaning

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Speaker 4: towards the idea that at some point this year there

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Speaker 4: will be a second cut of that magnitude.

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Speaker 2: Okay, so slightly different matter we were getting from Christine

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Speaker 2: Laguard from the ECB when she spoke to the European

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Speaker 2: Parliament yesterday as well. She, on the other hand, is

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Speaker 2: sort of encouraging the idea that there could be a

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Speaker 2: rate cut to come in October.

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Speaker 6: Yeah.

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Speaker 4: I think that's the takeaway the market took from Christine

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Speaker 4: Laguard's comments giving a little bit more confidence in the

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Speaker 4: idea that inflation or is slowing at a faster pace,

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Speaker 4: If that makes sense. I think the third legard that's

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Speaker 4: a better message to be presenting than oh, dear, the

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Speaker 4: economy doesn't look very good, which is something that she

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Speaker 4: sort of said a little bit kind of in between

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Speaker 4: the lines as well. So at least confidence on inflation

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Speaker 4: means that the ECB can get on with lowering interest rates,

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Speaker 4: and if she can corral the large number of policymakers

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Speaker 4: helping her make that decision, then we could get another

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Speaker 4: one as soon as this month.

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Speaker 1: In terms of what the shifting rake cup bets so

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Speaker 1: mean for Asia, also quite big moves in terms of

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Speaker 1: Japan stocks and the yen.

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Speaker 4: Yeah, so I think you know, the most important way

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Speaker 4: that those two play out is obviously in the Euro

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Speaker 4: against the dollar, or in the relative interest rates on

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Speaker 4: German and US securities. US yields rows relative to Germany's

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Speaker 4: and so that gave the euro some support. But also

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Speaker 4: the idea that the Fed might not be quite so

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Speaker 4: aggressive in its interest rates is supportive for the US

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Speaker 4: dollar against Asian currencies, which have been on this very

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Speaker 4: big tear on the idea that the FED is cutting

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Speaker 4: and that will ease some of the pressure on markets

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Speaker 4: over here. So we've seen a little bit of knee

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Speaker 4: jerk weakness across Asia's FX markets today. I think the

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Speaker 4: longer term trajectory, it's hard to say that this is

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Speaker 4: a major turning point. That trend has been pretty well

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Speaker 4: established with the first day in a new quarter of

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Speaker 4: trading after very strong rally as well.

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