Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Speaker 1: Daybreak Europe podcast. Good morning, It's Wednesday, the twelfth of August.
Speaker 1: I'm Stephen Carroll in London. Coming up today the one
Speaker 1: hundred and fifty dollars oil risk. Doubts over a Hormoes
Speaker 1: deal push crude hire as Bloomberg Intelligence says a frozen
Speaker 1: conflict piles more pressure on prices. Europe's solar aligned power
Speaker 1: system braces for today's solar eclipse. Plus London's white collar exodus.
Speaker 1: Why ninety thousand bankers, lawyers and other professionals could be
Speaker 1: leaving the UK capital in the coming years. Let's start
Speaker 1: with the roundup of our top stories. Oil prices are
Speaker 1: continuing to grind higher. A skepticism grows over the prospects
Speaker 1: for a deal to restore energy flows through the Strait
Speaker 1: of Hormuz. Brett Cruise now trading above eighty nine dollars
Speaker 1: a barrel after jumping by around twelve percent over the
Speaker 1: past five sessions. Bloomberg Intelligence says a frozen US eround
Speaker 1: conflict is now the most plausible scenario. It warrants that
Speaker 1: that could push oil into a range of one hundred
Speaker 1: to one hundred and fifty dollars a barrel, with the
Speaker 1: upper end becoming increasingly possible as market buffers road No
Speaker 1: i'm ray Dan is a senior fellow at the Washington
Speaker 1: Institute for Near East Policy.
Speaker 2: It is unlikely that we're going to go back to
Speaker 2: the maritime arrangement that existed in the Strait of Home
Speaker 2: was before the Iran War. Iran has gained immense influence
Speaker 2: in the street. It will not let go of this
Speaker 2: leverage it has obtained easily.
Speaker 1: No i'm ray Dan's assessment comes as the latest US
Speaker 1: government forecast for oil supply disruption from the war to
Speaker 1: reach about six hundred thousand barrels a day until the
Speaker 1: end of next year. Adding to the squeeze rushes overseas,
Speaker 1: cruise shipments have fallen to their lowest since May, and
Speaker 1: it continued Ukrainian strikes from its oil infrastructure. Keith had
Speaker 1: five Russian refineries in the first week of August and
Speaker 1: another two in recent days. With the rise in oil
Speaker 1: prices comes as the US and both appear to be
Speaker 1: hardening their positions in negotiations over the Straight OFFEMUS. That's
Speaker 1: despite Pakistan's defense ministers, saying the two countries are close
Speaker 1: to some sort of arrangement. Former US Deputy Secretary of
Speaker 1: State Wendy Sherman is more skeptical.
Speaker 3: I wish I did share Pakistan's optimism, and I will
Speaker 3: hope that there is more reality to this.
Speaker 1: Than I think there is.
Speaker 4: We are definitely out.
Speaker 1: Of stalemate, Wendy Sherman speaking there. Her view comes as
Speaker 1: President Trump told reporters last night that he's in no
Speaker 1: rush to secure a deal and that the US is
Speaker 1: in a very good position along the conflict continues could
Speaker 1: also matter for the FED, with the Iran war adding
Speaker 1: to inflation pressures. Ahead of crucial US inflation data later today,
Speaker 1: Boston Fed President Susan Collins has told The Financial Times
Speaker 1: she could back a September rate ike if the data dictates,
Speaker 1: warning inflation remains too high. A split between the United
Speaker 1: States and Japan over Bank of Japan policy risks undermining
Speaker 1: their joint efforts to support the en. Japan's Prime Minister
Speaker 1: Sanae Atakichi is wary of raising interest rates too high,
Speaker 1: too fast, while US Treasury Secretary's got bestnces monetary tightening
Speaker 1: is crucial to supporting the currency. The EN has already
Speaker 1: given back some of the gains from the first coordinated
Speaker 1: US Japan intervention since nineteen ninety eight. Our Market's Live streates,
Speaker 1: as Mark Cranfield says, the boj's next move will be crucial, So.
Speaker 5: The BOJ speakers will really have a big sway on
Speaker 5: whether or not people get serious about a September rate hike.
Speaker 5: But it probably needs September and October to come back
Speaker 5: to back for people to really get behind the.
Speaker 1: In in Spoomberg's Mark Cranfield expectations are building for another
Speaker 1: BOJ rate hike in September or October. Is the EN
Speaker 1: again near one sixty to the dollar? Core We've shares
Speaker 1: have surged after booming AI demand bolstered the company's sales growth.
Speaker 1: The computing provider raised its outlook to a range of
Speaker 1: twelve point four billion dollars to thirteen point two billion
Speaker 1: dollars for the full year after revenue more than doubled
Speaker 1: in the second quarter. Galoria, head of technology research at
Speaker 1: DA Davidson, says the results are an encouraging step for
Speaker 1: the firm.
Speaker 4: It's incrementally positive.
Speaker 6: There is still a really big question about whether we
Speaker 6: even need neo clouds Whether they're a good business. At
Speaker 6: the base of it is are they getting a good
Speaker 6: enough return on investment to pay for the very expensive
Speaker 6: capital that they have to borrow? And I think that
Speaker 6: what investors are seeing today they took a small step
Speaker 6: in the right direction.
Speaker 1: Ja Davidson's Gloria There Core We've shares rose by more
Speaker 1: than fifteen percent, and after hours trading after the report
Speaker 1: was released, they had been up twenty six percent this
Speaker 1: year through the close. The business, which serves customers like OpenAI,
Speaker 1: Meta and Microsoft, has borrowed tens of billions of dollars
Speaker 1: and is spending heavily on AI chips and data centers
Speaker 1: to meet demand. A German airport has been disrupted by
Speaker 1: a rogue drone, adding to a string of recent incidents.
Speaker 1: Overs Regional Airport was closed for two hours yesterday morning
Speaker 1: after a drone was sighted. Germany's airports have been plagued
Speaker 1: by a series of such events, with one device laden
Speaker 1: with explosives found near a Ukrainian plane last week. Dershpiegel
Speaker 1: has reported that an internal police report isn't ruling out
Speaker 1: foreign involvement. Europe's power grades are preparing for a rare
Speaker 1: solar eclipse later today, which will temporarily cut generation across
Speaker 1: the continent. If skies are clear, solar output good fall
Speaker 1: by about nine point seven gigawatts, with gas, hydroelectric and
Speaker 1: nuclear generation available to cover the shortfall. But for most
Speaker 1: of us, the eclipse will be less about managing power
Speaker 1: supplies and more about the spectacle. Stephen Price, chair of
Speaker 1: the Bristol Astronomical Society, describes what might be in store.
Speaker 7: The light goes dim, silvery kind of a light, not
Speaker 7: like a sunset or sunrise, quite different. Temmet dropped very slightly,
Speaker 7: and also the birds of their singing, they stopped singing.
Speaker 4: So the effect on the crowd is one really all.
Speaker 1: Stephen Price on the eclipse which will fully cover the
Speaker 1: sun in northern Spain and Iceland. In the UK, about
Speaker 1: ninety six percent of the sun will be covered by
Speaker 1: the moon in parts of Cornwall. And those are your
Speaker 1: top stories on the markets this morning. The Mscish Pacific
Speaker 1: Index up by seven tenths of one percent. We have
Speaker 1: got the Cospian sold by three point six percent as well,
Speaker 1: a boosts to s k Heinex and Samsung Electronics shares.
Speaker 1: Eurostok's fifty features are down by a tenth of one
Speaker 1: percent this morning. Forty one hundred fatures are two tenths lower.
Speaker 1: Oil prices eighty nine dollars fifty one for Brent crude
Speaker 1: higher on the day. Natural gas prices arising as well,
Speaker 1: although lower than where they were this time yesterday. The
Speaker 1: Dutch GTF bench markup by one point eight percent, and
Speaker 1: the Japanese NIST training at one hundred and fifty nine
Speaker 1: forty three against the dollar. Well in a moment will
Speaker 1: bring you more on those oil prices grinding higher, plus
Speaker 1: y recruiters see thousands of lawyer and banker jobs moving
Speaker 1: out of London. But another story that caught her eye
Speaker 1: this morning on how best to measure the weakness of
Speaker 1: the en, andnother story that we've been tracking on markets
Speaker 1: as well. Move over the Big Mac index, you now
Speaker 1: need the Katsu Curry Index. Luckily Jeff You from bny
Speaker 1: Mel and a regular here in Boomberg Radio, has created it.
Speaker 1: He argues the index it's a better international price comparison
Speaker 1: for how the retreat of the yen feels in Japan.
Speaker 1: It's trading, as we said, just close to a one
Speaker 1: to sixty against the dollar, not quite there this morning.
Speaker 1: But if you're reflected in purchasing power of curry dishes,
Speaker 1: by Jeff's measure of the dollar should buy just around
Speaker 1: sixty two yen. That suggests the foreign exchange market significantly
Speaker 1: undervaluing the currency. If he used the Big Mac Index,
Speaker 1: it's around eighty yen now. He uses prices and data
Speaker 1: from the world's biggest curry rice chain, coco Ichibanya for
Speaker 1: his measurements. He says that if the price of a
Speaker 1: katsu curry or a bowl of raman becomes prohibitive in Japan,
Speaker 1: it will probably lead to growing calls for a policy change,
Speaker 1: and if the goal is to bring purchasing power in
Speaker 1: line with high income countries, the index shows that the
Speaker 1: en needs to be a lot stronger. Great trying to
Speaker 1: be thinking about kats who curry. I got to visit
Speaker 1: one of my favorite places for it in London yesterday.
Speaker 1: Ten of cats who near Angel In case you wanted
Speaker 1: a recommendation, I've also had the Toyota curry at the
Speaker 1: Toyota factory in Nagoya, which where the rice comes in
Speaker 1: the shape of a car. So those are my my
Speaker 1: Katsu curry facts for you this morning. Let's bring you
Speaker 1: more now on the pressure on oil prices. As the
Speaker 1: global benchmark Brent crude hovers close to ninety dollars a barrel,
Speaker 1: or oil trading reporter Wrongway now joins us now for
Speaker 1: more Wrongway, we've seen Brent gain some twelve percent over
Speaker 1: the past five seconds. What does this tell us about
Speaker 1: how traders are reading the latest Iran war headlines? This
Speaker 1: has been burg intelligence. Now these price is going as
Speaker 1: high as one hundred and fifty dollars is being increasingly plausible.
Speaker 8: Right, So the current brand prices is essentially a very
Speaker 8: clear reflection of how the markets, how trade us are
Speaker 8: actually digesting and viewing the disruption at the Street of
Speaker 8: moves as a result of this conflict. Now, like you
Speaker 8: rightfully mentioned, Brent has climbed to above around ninety dollars
Speaker 8: a barrel, and it's the six consecutive day of gains.
Speaker 8: And that comes even as oil prices have been reacting
Speaker 8: to headlines in the past couple of days, and we
Speaker 8: are constantly flip flopping between signs of optimism as well
Speaker 8: as signs of perhaps increasing signs of risks. That shows
Speaker 8: that perhaps the conflict could be on track for escalation.
Speaker 8: Let's just take this morning, for instance, the market here
Speaker 8: in Asia opened on comments from Pakistan that both sides
Speaker 8: are close to some sort of arrangement to work out
Speaker 8: a deal, and Trump's comments latest comments quickly switched out
Speaker 8: such optimism or such hopes with comments like we totally
Speaker 8: control hormus and other comments, including the fact that he
Speaker 8: is saying that he still doesn't trust Iran. Now, primarily
Speaker 8: this price rareue, we're saying it's still being driven by
Speaker 8: supply risk sentiments.
Speaker 4: It's really not a demand story.
Speaker 8: Everything that's happening at the street, it's all about supply.
Speaker 8: Let's take the latest estimates from the USIE, for instance,
Speaker 8: they're estimating that the homeless disruptions is probably it's affecting
Speaker 8: about roughly six hundred thousand barrels per day, and they
Speaker 8: expect such disruptions or rather such an impact oil flows
Speaker 8: tour possist through and twenty twenty seven, and pretty much
Speaker 8: the testament to the fact that how this conflict could
Speaker 8: result in lasting I would say, lasting impacts or damages
Speaker 8: to the oil market or the oil landscape as a whole.
Speaker 1: Yeah, I mean, it does really complicate the situation and
Speaker 1: as you say, the hardening rhetoric from the US and
Speaker 1: around doesn't give any great optimism that we're going to
Speaker 1: see an increase in traffic de the Strait of Hormones.
Speaker 1: But what is exactly happening in that waterway today? And also,
Speaker 1: of course we're watching the moves in the Red Sea
Speaker 1: as well.
Speaker 8: Well, maybe let's talk about the Strait of Hormones since
Speaker 8: it was the first waterway that was effectively largely affected
Speaker 8: during the onset of this conflict earlier this year. So
Speaker 8: as of now, the Street of Hormones, it remains effectively
Speaker 8: close to normal commercial traffic. But of course, like what
Speaker 8: we have talked about earlier in the program, when there's
Speaker 8: money to be made, there will be actors who are
Speaker 8: willing to take the risk and allow some flows to
Speaker 8: work out and of course earn a quick but through
Speaker 8: of course mediating or arranging for the use to allow
Speaker 8: some of these barrels of oil to continue exiting the Gulf.
Speaker 8: And of course that also includes other OPEC producers like
Speaker 8: what we've mentioned earlier, such as Saudi Arabia UAE.
Speaker 4: With various forms of workarounds.
Speaker 8: So essentially, even though traffic has been I would say,
Speaker 8: by and large, commercial traffic through the Strait of Hormones
Speaker 8: is still officially close because of the risks of attacks
Speaker 8: to tankers as a result of this conflict, that is
Speaker 8: still in flux, but there will be actors, there will
Speaker 8: be tankers that would be willing to take the risk
Speaker 8: for the chance to earn higher profits during the war,
Speaker 8: and that as a result has helped to cap some
Speaker 8: of the gains in oil. So if we recall much
Speaker 8: earlier in the conflict, much perhaps in the first month
Speaker 8: of the war, we have seen prices very often breaking
Speaker 8: past one hundred dollars mark, and as the conflicts, as
Speaker 8: the conflict continues to persist, more and more players have
Speaker 8: started to adapt to this. We can essentially call this
Speaker 8: a new normal, and they started the price in various
Speaker 8: factors such as additional vessels required to do ship the
Speaker 8: ship transfers to allow the safe passage of oil or
Speaker 8: oil barrows to be brought out from the Gulf, as
Speaker 8: well as many various other workarounds such as pipelines and
Speaker 8: all these various avenues are being tapped on as the
Speaker 8: conflict continues to persist, and that has kind of helped
Speaker 8: put a cap on the oil prize gains. Of course,
Speaker 8: the second waterway they gonna be talking about the rat
Speaker 8: Sea route. Uh, the risks that occurred in that waterway,
Speaker 8: it's far more I would say, it's a bit more
Speaker 8: recent compared to the Strait of Hormos.
Speaker 4: It's kind of like a recent development.
Speaker 8: In the past month or so, we have seen perhaps
Speaker 8: a lot of we'll see the treads from Hooties.
Speaker 4: UH that has threatened that this root. And what's important
Speaker 4: about the rad Sea root is that it's UH.
Speaker 8: It's a very important waterway for players such as Saudi
Speaker 8: Arabia to draw out oil through the state pipeline we
Speaker 8: talked about earlier. So the oil that cannot come out
Speaker 8: through the Strait of Hormones, some of them it's been
Speaker 8: routed through a pipeline over to a pod that can
Speaker 8: be removed and transit through the raat Sea and continue
Speaker 8: to be brought to its bias in Asia. And when
Speaker 8: the Hooties threatened, that essentially clipped, uh, I would say,
Speaker 8: partially clipped the wings of Saudi's but very quickly, like
Speaker 8: I mentioned earlier, the market continuously looks to adapt.
Speaker 4: And very quickly we have seen.
Speaker 8: A third workaround through Egypt that was being touted, and
Speaker 8: it seems like it's going to be a vicious cycle.
Speaker 8: If more routes are being threatened, oil producers will be
Speaker 8: incentivized to look for more solutions and continue, allowing some
Speaker 8: flows to take place. Of course, if you take a
Speaker 8: step back, by and large, despite all these workarounds, oil
Speaker 8: flows are largely curtailed as a result of this war.
Speaker 1: And of course, another big factor that's affecting the markets
Speaker 1: too is what's happening in the war in Ukraine and
Speaker 1: Ukraine's attacks on Russian energy infrastructure as well, particularly oil refineries.
Speaker 1: How is that affecting global markets.
Speaker 8: It's pretty much if you view both conflicts together, it's
Speaker 8: essentially a double whammy. But I would say the specifics
Speaker 8: of the markets or the segments of the markets being affected,
Speaker 8: it's kind of different. So when we talked about the
Speaker 8: earlier US irun con flick, it was very much a
Speaker 8: cold oil story, and much of the flows being impacted
Speaker 8: would be oil being produced in the Middle East coming
Speaker 8: out to major buyers such as those in Asia. However,
Speaker 8: when we look at the Russian story, a lot more
Speaker 8: of the beneficiaries of Russian oil products would be found
Speaker 8: actually in Europe and as a result already I would
Speaker 8: say it's on the west of Swiss and of course
Speaker 8: with the recent attacks, which of course have been scaling
Speaker 8: up in the recent weeks as well, that has largely
Speaker 8: impacted the markets for oil products such as gas oil
Speaker 8: and gasoline. This damage is actually pretty severe in the
Speaker 8: recent weeks. Let's take the most recent example for instance,
Speaker 8: it is the damage is so severe that Russia, one
Speaker 8: of the major oil product producers, it has actually begun
Speaker 8: starting to import oil products like gasoline from producers like India,
Speaker 8: and based on our reporting, this has happened for the
Speaker 8: first time ever. It's really a clar cut example of
Speaker 8: how desperate things are for Russian for the Russian producers,
Speaker 8: that a producing nation is actually resulting to importing from
Speaker 8: other producers. And that is pretty much the clearest sign
Speaker 8: of the damaged the extent of damage that Russia has
Speaker 8: of taken as a result of these cumulative strikes.
Speaker 1: Yeah, and as you say, compounding these issues in these
Speaker 1: two conflicts. Wrong Way Now or Oil Trading Reporter, thank
Speaker 1: you very much for bringing us through the details of
Speaker 1: all of those trands that are pushing oil prices higher.
Speaker 1: As we're watching brank crude approach that ninety dollars a
Speaker 1: barrel mark. Stay with us. More from Bloomberg Daybreak Europe
Speaker 1: coming up after this. Now in the UK, the Prime
Speaker 1: Minister's push to drive economic growth in areas outside of
Speaker 1: London could see some ninety thousand jobs move away from
Speaker 1: the capital over the next five years. For more details
Speaker 1: on the analysis and the recruitment firm, Robert Walters our
Speaker 1: UKA Politics. James Wilcock is with me now.
Speaker 4: James.
Speaker 1: First of all, what does the data from Robert Walter's show.
Speaker 9: So Steven Robert Walters are projecting these jobs are going
Speaker 9: to be going to the likes of Manchester, the Midlands
Speaker 9: and New Yorkshire. Now they put us down to a
Speaker 9: number of reasons. It's really expensive to live in London
Speaker 9: and so working from home means shifting outside London makes
Speaker 9: a lot of sense for some people. If you look
Speaker 9: at like Deloitte Goldman in the Bank of England, a
Speaker 9: lot of big organizations have already pre Andy Burnham been
Speaker 9: setting up offices outside of London. And then it has
Speaker 9: to be said they say that Andy Burnham's agenda and
Speaker 9: helping to rebounce power away from London is going to
Speaker 9: play a big factor.
Speaker 2: Now.
Speaker 9: Look, it's important to note that London is colossal. Four
Speaker 9: point nine million people are employed living in Greater London,
Speaker 9: so ninety thousand versus four point nine million, it's still
Speaker 9: less than two percent moving out. But last year was
Speaker 9: the first year the city's population fell since the nineteen
Speaker 9: eighties barring the pandemic, and so there is it seems
Speaker 9: a bit of a trend to moving income, commerce, productivity
Speaker 9: outside of London. One caveat I will say, though, in
Speaker 9: sort of Robert Walters's report is they say that senior
Speaker 9: managers are still sticking around the capitol. It's often the
Speaker 9: junior staff who are being hired elsewhere.
Speaker 1: So where it is likely to benefit then from these
Speaker 1: jobs moving And what does it mean for the Prime
Speaker 1: Minister's ambition for growth in every postcode.
Speaker 9: I think one thing that's going to be quite interesting
Speaker 9: to watch play out is all cities is areas. There
Speaker 9: are big transport links to the areas where you can
Speaker 9: still have kind of large agglomeration effects. And in terms
Speaker 9: of this idea of growth in every postcode, Robert Walters
Speaker 9: do expect that say nine billion pounds or so of
Speaker 9: employers spending are going to be moving these regional areas
Speaker 9: like Manchester and Leeds and Birmingham all over the next
Speaker 9: five years. Now this is interesting because although we haven't
Speaker 9: yet seen the detail of what is in this devolution
Speaker 9: agenda that's supposed to come an autumn in a white paper,
Speaker 9: the big flagship promise is that a mayors are going
Speaker 9: to get shares of local income tax and business rates.
Speaker 9: And this is important because the UK is one of
Speaker 9: the most fisically centralized countries in the OECD. Only five
Speaker 9: percent of taxes and twenty percent of spendingcases are controlled locally,
Speaker 9: and so if mayors have more money to play with,
Speaker 9: they are incentivized to grow more and therefore they get
Speaker 9: a bigger take of the sort of tax. So the
Speaker 9: idea behind a lot of this is you can therefore
Speaker 9: incentivize growth. Some of the problems even with this, how
Speaker 9: quickly is it all going to come about? I mean,
Speaker 9: currently mayors have two percent of all the staff in
Speaker 9: Whitehall and less than one percent of all of Whitehall's budget.
Speaker 9: By law, they are only allocated one political advisor per mayor.
Speaker 9: So the idea that they are going to be given
Speaker 9: loads of resources sture. Some mayors will do very well,
Speaker 9: some mayors will do very badly. And they'll be regions
Speaker 9: that do well and there'll be some regions that do badly.
Speaker 9: How does the state then equalize that for poorer areas.
Speaker 9: These are all sort of the nitty gritty details that
Speaker 9: we are yet to see from this government. But you know,
Speaker 9: the idea and the idea of some jobs moving is
Speaker 9: certainly I promise someone.
Speaker 1: What does all of this then mean for London, which
Speaker 1: is still the economic engine of the UK.
Speaker 9: Right and that is going to change any big way soon.
Speaker 9: I think one thing that's interesting to note when we
Speaker 9: come back to this recruitment data is smaller and mid
Speaker 9: sized businesses, the kind of new startups that the UK
Speaker 9: prize itself.
Speaker 4: They're now being started elsewhere.
Speaker 9: The costs of doing business are much much much higher
Speaker 9: in London, and so London has the big giants playing
Speaker 9: in And if you've listened to Chancellor John Healey recently,
Speaker 9: the cost of doing business is one of his new
Speaker 9: favorite phrases and one we're likely to hear a lot
Speaker 9: more about how that impacts London is although London is
Speaker 9: still going to be seen as this big growth engine
Speaker 9: a lot of the UK policy makers now are very
Speaker 9: much invested in creating other growth engines around the UK.
Speaker 9: In the long run, that will be better for London
Speaker 9: because it will be and there are many different places
Speaker 9: where growth is coming from, where taxes are coming from.
Speaker 9: In the short run, so much wealth is based in
Speaker 9: London that it is going to mean that London is
Speaker 9: the obvious target for any kind of big tax raising
Speaker 9: measures or other ways to raise revenue to get these
Speaker 9: other councils, these other malities going.
Speaker 1: Thanks for listening to Bloomberg Daybreak Europe.
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