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Speaker 1: Good morning. It's Monday, the twenty third of October in London.

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Speaker 1: This is the Bloomberg Daybreak Europe podcast. I'm Stephen Carroll.

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Speaker 1: Coming up today. Israel could delay or alter its Gaza

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Speaker 1: ground invasion plans after the release of two American hostages.

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Speaker 1: Beijing rattles foreign businesses by detaining an executive and former

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Speaker 1: staff at the advertising joint WPP while starting investigations into

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Speaker 1: Apple supplier Fox Cohn. And then there were nine US

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Speaker 1: House Republicans widen the field to find a new speaker.

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Speaker 1: With lawmaking paralyzed, let's start with a roundup of our

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Speaker 1: top stories. Israel's ground invasion of Gaza could be delayed

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Speaker 1: or the plan altered while diplomatic efforts continue to secure

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Speaker 1: the release of hostages held by Hamas Bloomberg has learned,

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Speaker 1: the Israeli government is supporting the talks. An American woman

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Speaker 1: and her nineteen year old daughter was set free on

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Speaker 1: Friday after mediation by Katar. US Secretary of State Antoni

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Speaker 1: blink Un told NBC's Meet the Press program that Israel

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Speaker 1: should be already devising a strategy for what happens next

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Speaker 1: in Gaza.

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Speaker 2: Can't go back to the status quo. They can't go

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Speaker 2: back to the status quoe with Hamas being in a

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Speaker 2: position in terms of its governance of Gaza to repeat

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Speaker 2: what it did. At the same time, what I've heard

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Speaker 2: from the Israelis is absolutely no intent, no desire to

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Speaker 2: be running Gaza themselves.

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Speaker 1: B Lincoln, who met Israel's Work Cabinet last week, also

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Speaker 1: warned Iran backed groups that the US would respond decisively

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Speaker 1: if any American forces in the region were attacked. The

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Speaker 1: fears of escalation across the region comes as thousands of

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Speaker 1: Israeli Army reservists returned to the country. More than ten

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Speaker 1: thousand people have already traveled from the United States on

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Speaker 1: commercial and chartered flights. Record numbers have been called up

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Speaker 1: to prepare for a possible ground defensive into Gaza. On

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Speaker 1: the Palestinian side, Many like Hamdan Abu Spetan, are trying

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Speaker 1: to escape before the fighting starts.

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Speaker 3: My home is to strike the last night, and I

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Speaker 3: have injured in my hand and in my head. I

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Speaker 3: hope to the from my government and other Worstern countries.

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Speaker 3: There's a lot of Western citizen here. They care about us,

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Speaker 3: and they let us to cross the border to join

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Speaker 3: our family.

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Speaker 1: There Hamdan Abu Spetan is a dual US citizen, is

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Speaker 1: hoping to cross the border into Egypt if the Raffta

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Speaker 1: crossing reopens. A second convoy if humanitarian aid was allowed

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Speaker 1: to enter Gaza on Sunday, while the UN's World Food

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Speaker 1: Program says forty more trucks will be ready to cross

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Speaker 1: today if they're allowed. Chinese authorities have launched a number

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Speaker 1: of investigations that might shake the confidence of foreign companies.

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Speaker 1: Bloomberg's Brian Curtis has more from Hong Kong.

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Speaker 4: State media say regulators are conducting tax audits and reviewing

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Speaker 4: land use by Fox con Technology that's Apple's most important partner.

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Speaker 4: Fox khn's Howne High Precision says it's cooperating to complicate matters.

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Speaker 4: Fox Khann's chief Terry Go is running for president in Taiwan. Also,

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Speaker 4: sources say an executive and two former employees of ad

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Speaker 4: firm WPP have been arrested, and then AK reports so

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Speaker 4: worker at a Japanese medals trading company was detained back

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Speaker 4: in March. You Know Kong, Brian Curtis, Bloomberg Radio.

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Speaker 1: In the United States, House Republicans have set up a

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Speaker 1: nine man contest to elect a new speaker. President Biden's

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Speaker 1: one hundred and six billion dollar proposed aid to Ukraine

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Speaker 1: and Israel will be on pause until a replacement is found.

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Speaker 1: Ten term Republican Congressman Michael mccull put it in stark terms.

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Speaker 5: This is probably one of the most embarrassing things I've seen,

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Speaker 5: because if we don't have a Speaker of the House,

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Speaker 5: we can't govern.

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Speaker 1: The cool chairs the House Foreign Affairs Committee, and added

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Speaker 1: it was dangerous to be paralyzed with so many conflicts

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Speaker 1: around the world. It's been twenty days since the Republican

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Speaker 1: Party ousted Kevin McCarthy. They will vote again tomorrow. Some

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Speaker 1: of Europe's biggest money managers say it's wrong to bet

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Speaker 1: the European Central Bank has finished hiking interest rates. Legal

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Speaker 1: in General and Vanguard see the Eurozone as one of

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Speaker 1: the most exposed to any conflict in the Middle East.

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Speaker 1: With the ECB deciding on rates this Thursday. Both trillion

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Speaker 1: dollar asset managers are closely watching for comments on the

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Speaker 1: region's exposure to energy prices, and here in the UK,

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Speaker 1: the Prime Minister Richie Sunac is reportedly weighing stamp duty

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Speaker 1: reductions and other tax cuts for top earners, senior Conservatives

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Speaker 1: of lobbying the Prime Minister for the measures to win

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Speaker 1: back voters after the party's latest by election defeats. It

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Speaker 1: comes as the ratings agency Moodies upgraded its UK credit

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Speaker 1: outlook to stable, in a boost to the Prime Minister.

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Speaker 1: With this, of course, in the week that we're going

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Speaker 1: to get the latest US GDP figures as well as

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Speaker 1: the latest rate decision from the European Central Bank. Thinking

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Speaker 1: though about the latest events at in the Middle East,

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Speaker 1: a column worth reading this morning from our Bloomberg opinion

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Speaker 1: columnist Martin Ivans, looking at how the situation in the

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Speaker 1: Middle East is playing out on the UK political front,

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Speaker 1: talking about how both Ritchie Sunak and Keir Starmer have

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Speaker 1: been approaching their commentary around the issue and the delicate

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Speaker 1: balance they both need to strike in doing so. It's

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Speaker 1: worth a read from Martin Ivans this morning if you're

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Speaker 1: looking for something that will give you a UK perspective.

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Speaker 1: As we're continuing to watch the latest developments in the

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Speaker 1: Middle East, We've been talking about our Bloomberg reporting over

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Speaker 1: the weekend that Israel could change or alter its plans

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Speaker 1: for a ground invasion of Gaza to allow talks to

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Speaker 1: take place over the release of the hostages continue to

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Speaker 1: be held in Gaza, more than two hundred people. This

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Speaker 1: as we had the release over the weekend of that

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Speaker 1: American mother and daughter from Chicago who had been held.

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Speaker 1: Those releases of course being welcomed a negotiation that had

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Speaker 1: been mediated by Katar. This as we've heard from the

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Speaker 1: US President Joe Biden and Israeli Prime Minister Benjaminnetta Yahoo

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Speaker 1: and their latest phone call pledging a continued flow of

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Speaker 1: critical assistance into Gaza. After a second convoy of humanitarian

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Speaker 1: aid was allowed through the Rafa crossing on Sunday, fourteen

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Speaker 1: trucks in that convoy. Let's go to Bloomberg's Oliver Crook

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Speaker 1: in Tel Aviv for more this morning. Good morning to you, Oliver.

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Speaker 1: What are the latest developments you can bring us this

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Speaker 1: Monday morning.

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Speaker 5: So it's really hard to know where to begin, really,

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Speaker 5: I mean, the two significant steps that we had over

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Speaker 5: the weekend was of course the hostage release and the

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Speaker 5: aid that was permitted to go into Gaza after a

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Speaker 5: great deal of back and forth and a great deal

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Speaker 5: of stop to start on the aid. But again, that

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Speaker 5: first convoy of only twenty trucks. That is seen as

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Speaker 5: less than five percent of what Gaza was getting before

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Speaker 5: the war even happened. And that is, of course before

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Speaker 5: the human terarian situation really severely devolved. In terms of hostages,

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Speaker 5: you know, to release there are some two hundreds still

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Speaker 5: unaccounted for. They don't know what their condition is. And

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Speaker 5: again I think on both of these counts, from the

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Speaker 5: gas inside and from the sort of Arab world side,

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Speaker 5: the AID needs to accelerate much more. There needs to

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Speaker 5: be a continued flow. There has been talk about getting

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Speaker 5: that operating, and from the hostage it's a similar situation.

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Speaker 5: They're going to need to see more than just two

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Speaker 5: every now and then. And again this will all shape

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Speaker 5: all inputs, and that very delicate equation and the question

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Speaker 5: of when will we see a ground offensive in Gaza,

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Speaker 5: a full ground offensive. There have been some incursions, but

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Speaker 5: a full ground offensive, and also what form will it take.

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Speaker 5: The IDEF has left it sort of all options open,

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Speaker 5: all options on the table as this has been evolving.

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Speaker 1: Yeah, Oliver, we were reporting over the weekend that Israel

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Speaker 1: could delay or alter those plans for a ground invasion

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Speaker 1: to allow for those diplomatic efforts to take place. The

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Speaker 1: goal to secure the release of this hostage is still

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Speaker 1: being held in Gaza. What more where can you tell

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Speaker 1: us about it?

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Speaker 5: Boss Well, I think that's an interesting question of hostages

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Speaker 5: for the Israelis, who in the past have sort of

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Speaker 5: done everything that they can in their power to get

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Speaker 5: their people back and will release a lot of prisoners

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Speaker 5: and have done so historically in the past. Of course,

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Speaker 5: with this attack there are a number at least of

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Speaker 5: people who were released that were involved in it, and

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Speaker 5: now the Israelis the question is how do they balance

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Speaker 5: that with the imperative that they feel that they need

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Speaker 5: to dismantle Hamas as the number one priority, and how

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Speaker 5: does that play into the hostage question. I think that's

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Speaker 5: a very very challenging question to answer, and I suspect

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Speaker 5: and again it's one of the most opaque parts of

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Speaker 5: what has been a very opaque story, is how the

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Speaker 5: hostage negotiations are. I think there was a little bit

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Speaker 5: of surprise to see any released over the weekend, and that,

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Speaker 5: of course, in part largely due to the Qatari diplomatic efforts.

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Speaker 1: We also had Israel's Prime Minister over the weekend saying

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Speaker 1: that Hasbala risks dragging Lebanon into a wider regional war

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Speaker 1: after more cross border there over the weekend. What have

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Speaker 1: we heard from that border since then?

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Speaker 5: Yeah, from the updates that we get from the IDF,

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Speaker 5: which are fairly plentiful in terms of what their military

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Speaker 5: activity is, you've been seeing more and more references to

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Speaker 5: things that have been going on in the border with Lebanon.

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Speaker 5: So that's fire in either directions, that's targets, that's some

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Speaker 5: casualties as well. We've also had the Israelis evacuating a

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Speaker 5: huge amount of civilian population that live on the border

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Speaker 5: with Lebanon. We have more than sixty thousand already. There

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Speaker 5: are fourteen additional communities in addition to that that are

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Speaker 5: also being evacuated yesterday and today. And it's interesting, you know,

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Speaker 5: having been here now for two weeks, sin staying in

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Speaker 5: a hotel where you meet a number of people when

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Speaker 5: I was first here that came from the south that

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Speaker 5: were evacuated from the south, and now you meet more

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Speaker 5: and more people coming from the north, and you I

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Speaker 5: talk to the hotel management that they're almost full, in

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Speaker 5: large part because of the people that are now being

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Speaker 5: evacuated from the Lebanese border.

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Speaker 1: You talked of about the humanitarian efforts to get aid

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Speaker 1: into Gaza, fourteen trucks and that second convoy that went

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Speaker 1: in yesterday. What are the prospects for getting more of

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Speaker 1: that much needed aid into Gaza, So.

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Speaker 5: We hear that. You know, again, it was important to

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Speaker 5: set a precedent, right was to get the initial trucks in,

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Speaker 5: and there was a lot of debate about what kind

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Speaker 5: of aid would be allowed to enter, right so the

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Speaker 5: Israelis were for a long time pushing back against fuel,

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Speaker 5: for example, saying that that would be used in the

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Speaker 5: war efforts. So now that there is a precedent that

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Speaker 5: has been set, and there's perhaps inspections that then perhaps

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Speaker 5: that opens the window for a more continuous flow. But

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Speaker 5: again it's very hard to say with total certainty what

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Speaker 5: this is going to look like. But they have both said,

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Speaker 5: the Israelis and also at the beast of the United States,

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Speaker 5: who has pushed for this, that there needs to be

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Speaker 5: a continuous flow, and that they seem open to that prospect. Again,

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Speaker 5: these are all very subject to change and the realities

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Speaker 5: on the ground evolve.

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Speaker 1: Okay, Oliver Crook and Tel Aviv, thank you. Very much

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Speaker 1: for bringing us up to date with the latest on

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Speaker 1: that story, which you continue to monitor for developments. Well,

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Speaker 1: let's go next to a story from China where an

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Speaker 1: executive and two former employees of the advertising giant WPP

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Speaker 1: have been arrested. This is State media reported that regulators

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Speaker 1: are conducting tax audits and reviewing land use by Fox KHN,

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Speaker 1: the Taiwanese company that makes the majority of iPhones at

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Speaker 1: factories in China. Our chief North Asia correspondent, Steven Angel

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Speaker 1: joins us. Now for more, Stephen, good to have you

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Speaker 1: with us. What more can you tell us about these arrests?

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Speaker 6: Well, more broadly speaking, obviously, this sends another chill to

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Speaker 6: an already shaky confidence for foreign companies trying to reassess

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Speaker 6: whether they, after three years of COVID controls, go back

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Speaker 6: and invest in China. And there have been of course

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Speaker 6: back in May that you know, crackdown on consultancy firms

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Speaker 6: that sent a chill through Bain and Company and a

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Speaker 6: number of different international consultancy firms you know, all on

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Speaker 6: the suspicion of anti espionage crackdown. So this is just

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Speaker 6: yet another page in this chill that has been spreading

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Speaker 6: through the Chinese or the foreign business community in China. Now.

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Speaker 6: In regard to WPP, of course, as you just mentioned,

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Speaker 6: one of the world's largest advertising groups, founded by Sir

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Speaker 6: Martin Sorel, who ran it for thirty three years, he

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Speaker 6: has been a big proponent of doing business in China.

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Speaker 6: Obviously he's not with a company anymore. But what we're

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Speaker 6: hearing from sources is that these arrests involved an executive

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Speaker 6: there in China, as well as two former employees of

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Speaker 6: WPP that are evolved again reportedly with wpp's Group M

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Speaker 6: Media Training division, and included a police raid on offices

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Speaker 6: in Shanghai. And it's just on top of other reports

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Speaker 6: that we've been getting from some Japanese firms as well.

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Speaker 6: Maybe there was an executive of a mining company that

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Speaker 6: was detained back in March, but we're just hearing about

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Speaker 6: it according to the Nick now. And also this month,

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Speaker 6: a court in China formally charged a pharmaceutical executive Chinese

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Speaker 6: company Estellas Pharma on suspicion of espionage. So this does

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Speaker 6: not go very far to help China's efforts to attract

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Speaker 6: foreign business and foreign confidence. But again it's these are

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Speaker 6: reports right now and We can't completely substantiate it until

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Speaker 6: we hear directly from the Chinese government, which we rarely

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Speaker 6: do on these kind of investigations.

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Speaker 1: Okay. And at the same time, we've had the announcement

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Speaker 1: of these new audits and reviews around fox Con that

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Speaker 1: very important of course iPhone manufacturer as well. Put this

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Speaker 1: all together for Stephen, how do these developments face in

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Speaker 1: with Beijing's attempts to signal support for the private sector.

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Speaker 6: Yeah, this is a tough one too, because we just

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Speaker 6: don't know the nature of these investigations. What we're hearing.

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Speaker 6: We're hearing from the company. For one, that's a Hohnhai Precision,

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Speaker 6: which is the listed company in Taiwan. Fox Con is

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Speaker 6: their brand, if you will, the big iPhone city in

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Speaker 6: Jungjo in the middle of China. Most of the world's

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Speaker 6: iPhones are made there in Honan Province, and you know,

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Speaker 6: the company essentially says, yes, we're complying with authorities and

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Speaker 6: these investigations, but they didn't specify the details, nor has

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Speaker 6: state media. We only have the details coming from the

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Speaker 6: Global Times, which is essentially a mouthpiece of the Chinese government,

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Speaker 6: and they're saying that Fox Kong subsidiaries are being investigated

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Speaker 6: by tax authorities in China in Guangdong Province as well

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Speaker 6: as Juangsu Province, plus natural resources officials. I don't know

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Speaker 6: what those are exactly, but they're supposedly according to state media,

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Speaker 6: looking into Fox Khan's land use in Hunan Province and

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Speaker 6: Hubei Province. And I just mentioned Jungjo that is Hunan Province,

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Speaker 6: so that potentially impacts the world's biggest factory making iPhones.

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Speaker 6: I'm not say saying it's going to impact production, but

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Speaker 6: there's uncertainty and that's why the stock today in Taiwan

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Speaker 6: as well as in affiliates. Shares in Shanghai are trading

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Speaker 6: significantly lower.

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