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Speaker 1: Good morning. It's Tuesday, the nineteenth of December here in London.

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Speaker 1: This is the Blue Big Day Acurate podcast. I'm Caroline Hepgep.

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Speaker 1: Coming up today. Allies agree to send a naval task

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Speaker 1: force to protect commercial shipping in the Red Sea. The

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Speaker 1: Bank of Japan holds firm with the world's last negative

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Speaker 1: interest rate, and running out of time. Apple races to

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Speaker 1: tweak software ahead of a US ban on selling it Smartwatch.

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

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Speaker 1: Allies including the US, UK, France and Canada have agreed

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Speaker 1: to send a naval task force to the Red Sea

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Speaker 1: to counter attacks on ships in the region. On Monday,

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Speaker 1: BP and Equanor joined a number of global shipping giants

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Speaker 1: in pausing use of the trade corridor following a spate

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Speaker 1: of attacks by the Iran backed Huthi militants based in Yemen.

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Speaker 1: Speaking while on a trip to Israel, the US Defense

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Speaker 1: Secretary Lloyd Austin announced a plan dubbed Operation Prosperity Guardian

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Speaker 1: to address the threat.

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Speaker 2: These attacks are reckless, dangerous, and they violate international law,

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Speaker 2: and so we're taking action to build an international coalition

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Speaker 2: to address this threat. And I would remind you that

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Speaker 2: this is not just a US issue. This is an

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Speaker 2: international problem and it deserves an international response.

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Speaker 1: Lloyd Austin's intervention comes as Huthi militants attack more merchant

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Speaker 1: ships in the Red Sea in response to Israel's war

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Speaker 1: with Hamas in Gaza. The incidents threaten a route through

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Speaker 1: which twelve percent of seaborne commerce normally passes, including supplies

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Speaker 1: of LNG. The Bank of Japan is sticking with the

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Speaker 1: world's last negative interest rate. After Tuesday's meeting, the central

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Speaker 1: bank kept its short term rate at minus zero point

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Speaker 1: one percent, offering no guidance on when the policy might

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Speaker 1: be scrapped, but jessper Cool, expert director at Mona's Group,

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Speaker 1: says that a return to regular monetary policy might not

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Speaker 1: be far off.

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Speaker 3: The Bank of Japan continues to be very, very cautious here.

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Speaker 3: They don't want to go down in history as the

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Speaker 3: central bank that kills genuine prospects for an endogenous demand

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Speaker 3: recovery here in Japan. So we're still going to be

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Speaker 3: talking about this next month and the next couple of months.

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Speaker 3: I think that the course is set. That the normalization

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Speaker 3: of interest rates didn't come today, but it will come

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Speaker 3: in twenty twenty four.

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Speaker 1: Jessper Culver, speaking to Bloomberg, the Japanese yend we can

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Speaker 1: sharply in reaction to the news, reflecting disappointment from some

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Speaker 1: in the market who bet on a surprise boj hike.

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Speaker 1: Investors are still speculating that a Japanese rate increase is

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Speaker 1: coming sooner or later, with April seen as the most

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Speaker 1: likely option. Meanwhile, more Fed officials are pushing back against

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Speaker 1: market rate cut expectations. Three more FRMC members are suggesting

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Speaker 1: talk of decreases in early twenty twenty four is premature.

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Speaker 1: Bloomberg opinion columnists and former New York Fed President Bill

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Speaker 1: Dudley says that there is a risk that we don't

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Speaker 1: see monetary easing next year.

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Speaker 4: Well, the market may be getting a little bit ahead

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Speaker 4: of itself.

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Speaker 5: This is how Pal thinks the wall is going to evolve.

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Speaker 5: Paul thinks the phasily cutting rates in twenty twenty four, but.

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Speaker 6: As possible as the comic could be firmer for longer,

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Speaker 6: inflation could be more stubborn in the riekas might not

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Speaker 6: actually turn out to materialize.

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Speaker 1: Bill Dudley's words come as policymakers Louettamester and Mary Daily

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Speaker 1: said in separate interviews that markets were betting on a

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Speaker 1: pivot too early. Hey report due Friday will show how

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Speaker 1: the Fed's preferred measure of inflation fared in November. Now

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Speaker 1: to the US, Apple will stop selling the latest versions

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Speaker 1: of its smart watch there. The shock move is because

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Speaker 1: of a patent dispute with the medical tech firm Massimo.

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Speaker 1: Massimo says that it invented a blogged oxygen sensor, a

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Speaker 1: feature that was added to the Apple Watch models in

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Speaker 1: twenty twenty. Managing partner AD deep Water Asset Management Gene

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Speaker 1: Monster says it is a symbolic blow.

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Speaker 7: Five percent of their total revenue comes from Watch. It's

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Speaker 7: growing at call it ten to fifteen percent year every year,

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Speaker 7: which is much faster than the iPhone, which is basically

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Speaker 7: flatish year on year. And most importantly is Watch is

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Speaker 7: kind of central to Apple's health and wellness initiatives. This

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Speaker 7: device in innovating around the watch like this oxygen censor

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Speaker 7: is an important part of that story.

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Speaker 1: Monster adds that he expects the tech gant to find

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Speaker 1: a workaround without damaging its bottom line in the long run,

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Speaker 1: but that hasn't stopped shares in Apple falling in trading now.

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Speaker 1: Nippon Steel says that the one hundred and forty two

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Speaker 1: percent premium that it is prepared to pay for US

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Speaker 1: steel is value for money. The Japanese firm announced the

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Speaker 1: offer yesterday and says that it is confident that the

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Speaker 1: deal will get the green light from regulators, But Bloomberg

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Speaker 1: Opinion's industrial columnist Brook Sutherland says that she's not so sure.

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Speaker 4: We already had some comments from politicians, you know, back

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Speaker 4: in August when this prospect of ideal was being talked about,

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Speaker 4: the number of politicians that we do not want to

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Speaker 4: see US steels sold to a foreign company. And obviously

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Speaker 4: that is the announcement that we're getting today, and so

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Speaker 4: it's going to be interesting to see what happens with

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Speaker 4: this now. I will say, I mean, there's been a

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Speaker 4: number of foreign companies making investments in the US, spurred

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Speaker 4: by the incentives included in the Chips Act, included in

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Speaker 4: the IRA those have been cheered by the Biden administration.

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Speaker 4: And from a practical standpoint, if jobs are being created

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Speaker 4: and factories are being built, does it really matter if

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Speaker 4: it's a US company or a US subsidiary of a

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Speaker 4: company that's based in a country that's a strong US ally.

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Speaker 4: Maybe not, but politics can be very prickly.

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Speaker 1: That was but in Big Opinion columnists Brooks Sutherland now,

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Speaker 1: if approved, Nippon's fourteen point one billion dollar acquisition, would

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Speaker 1: create the world's second biggest steel producer, with plants stretching

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Speaker 1: from Osaka to Pennsylvania. A government rescue fund started by

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Speaker 1: Rishi Sunak to invest in startup companies in the UK

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Speaker 1: has lost nearly three hundred million pounds. Alongside COVID loans,

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Speaker 1: it adds up to an expensive bill for Britain's pandemic

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Speaker 1: business support. Bloemberg's yew And Potts has more on the story.

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Speaker 8: The government's Future Fund began as a way to support

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Speaker 8: small firms during the pandemic, the brainchild of a fresh

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Speaker 8: faced chancellor called Rishi Sunak.

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Speaker 9: Our plan for prosperity is to unleash the power of business.

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Speaker 9: Businesses need support to start up, grow and export. So

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Speaker 9: today I provide one hundred and thirty million pounds of

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Speaker 9: new funding to extend startup loans two hundred million pounds

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Speaker 9: for the British Business Bank.

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Speaker 8: The then Chancellor expanded the scheme investing more than one

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Speaker 8: point one billion pounds of taxpayer money into an eclectic

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Speaker 8: group of companies, including a lower league football club, a

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Speaker 8: sex party firm, and a company making cannabis products. Figures

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Speaker 8: now show that a quarter of that money has been

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Speaker 8: lost as some of the investments go sour. In addition

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Speaker 8: to the eleven billion pounds the government says it will

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Speaker 8: never recover in COVID loans, the PM will be hoping

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Speaker 8: that some of this investment firm's bets eventually pay off.

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Speaker 8: In London, you and pots Bloomberg Radio.

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Speaker 1: So that's on one issue. The Prime Minister, though, also

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Speaker 1: faces questions from senior NPS on his record later today,

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Speaker 1: where She Sunak is expected to be asked about the

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Speaker 1: economy and also foreign affairs in the wide ranging Liaison Committee.

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Speaker 1: It comes as the Leader is likely to achieve only

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Speaker 1: one of his five stated pledges made at the start

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Speaker 1: of this year. Well, it's festive season. If you hadn't

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Speaker 1: noticed here in the UK, if you stayed up late

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Speaker 1: last night as I did, to find the perfect gift

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Speaker 1: for that impossible person in your life. But I consult

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Speaker 1: the Bloomberg Gift Guide. Yes, it's a lighter note that

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Speaker 1: I'm bringing to you this morning. They have a focus

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Speaker 1: on food and wine gifts in the season of goodwill,

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Speaker 1: good wine, and if you're in the UK, as our

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Speaker 1: Bloomberg writer points out, a Panatoni obsession, Bloomberg writers have

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Speaker 1: the list of the most bling and unusual festive gifts,

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Speaker 1: including a fourteen thousand dollars so taipan made of sterling silver.

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Speaker 1: Other gifts not quite so pricey Portuguese olive oil or

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Speaker 1: just buy the book John Bonnet is the French. The

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Speaker 1: new French wine doubles as a coffee table tome, so

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Speaker 1: if you can't drink it, you can read about it.

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Speaker 1: So that Bloomberg pursuits a little bit of festive season

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Speaker 1: chip for you there if you want to read about

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Speaker 1: it on the Bloomberg terminal. Now to our top story,

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Speaker 1: Shipping in the Red Sea is grinding to a halt

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Speaker 1: as attacks linked to the war in Gaza by Iran

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Speaker 1: backed Huthy's worsen Joining me now this morning to discuss this.

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Speaker 1: Bloomberg's trades are Brendan Murray. Good morning, Brendan, thanks so

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Speaker 1: much for being with me. We'd just like to start

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Speaker 1: by understanding a bit more about the nature of the

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Speaker 1: attacks and their frequency, which do seem to have been

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Speaker 1: going up, that's right.

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Speaker 6: So they seem to be a combination of threats of

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Speaker 6: attacks and actual attacks themselves. And we've even seen the

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Speaker 6: case of one maritime vessel was boarded by some of

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Speaker 6: these rebels on helicopters. So in the past few days

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Speaker 6: we've seen a marked increase in the kinds of ships

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Speaker 6: that they're attacking.

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Speaker 2: They're not just.

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Speaker 6: Going after ships that have an Israeli port as its

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Speaker 6: next destination. They seem to be going after pretty much

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Speaker 6: any any big target that's sailing by. So definitely a

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Speaker 6: threat to this key the lifeblood of the global economy,

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Speaker 6: really global trade.

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Speaker 1: Yeah, absolutely, So what exactly does the naval task force

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Speaker 1: then look like, Because we mentioned in our top stories

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Speaker 1: the US, the UK, Canada, France are setting up this

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Speaker 1: task force to try to counter the attacks.

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Speaker 6: What does that mean, Well, it sounds to us like

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Speaker 6: they're going to provide some sort of protective cover to

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Speaker 6: the ships as they're passing through. Now, whether that means

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Speaker 6: escorts or just some sort of defensive posture to make

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Speaker 6: sure that the rebels can't get close enough to fire

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Speaker 6: on these ships.

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Speaker 2: As yet to be seen.

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Speaker 6: But there's a there's a real delicate balance here between

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Speaker 6: defending ships that are going by and and offensive kinds

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Speaker 6: of maneuvers that that uh, you know, target these rebels

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Speaker 6: on on on land. So it's going to be a

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Speaker 6: delicate balancing act for the for these military, for these navies,

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Speaker 6: uh to try to try to pull this off in

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Speaker 6: the coming weeks.

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Speaker 1: Brenton, your trades are how is this affecting global trade?

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Speaker 6: Well, it's thrown a wrench in works. Initially we've seen

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Speaker 6: ships diverted around the southern tip of Africa. That takes

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Speaker 6: an extra two weeks almost if you're a score ship

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Speaker 6: that's coming from Asia to say northern Europe or the

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Speaker 6: east coast of the United States. So it's just it's

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Speaker 6: going to slow deliveries down. It's going to make things

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Speaker 6: more expensive. The insurance premiums for these ships are going up,

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Speaker 6: so they're just going to pass those on to the

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Speaker 6: walmarts of the world, the retailers of the world, which

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Speaker 6: in turn we'll get passed on to consumers.

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Speaker 1: Ultimately, how much slack is that in the system to

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Speaker 1: absorb sort of much longer trade routes. I remember, you know,

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Speaker 1: when we covered the ever Given, which was a big

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Speaker 1: ship that effectively got grounded in the area, and that

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Speaker 1: created huge difficulties. How much slack is there in the

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Speaker 1: system right now to be able to absorb longer trade routes.

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Speaker 2: That's right.

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Speaker 6: So the ever Given was grounded in the Suez Canal

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Speaker 6: during probably the worst time it could have when the

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Speaker 6: whole shipping industry was stretched to maximum capacity. That's definitely

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Speaker 6: not the case now. Ships are not running full of cargo,

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Speaker 6: the global economy has softened, the pandemic disruptions have subsided

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Speaker 6: of freight rates are way down, and there is some

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Speaker 6: slack in the system to kind of absorb this, uh,

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Speaker 6: these disruptions. So if there is a silver lining, uh this,

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Speaker 6: If there ever was a time for a capacity shock

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Speaker 6: like this, uh this, this would be a good time

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Speaker 6: to to have it. That's not to say the shipping

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Speaker 6: companies aren't going to feel it, uh, and they the

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Speaker 6: stocks of most publicly traded shipping companies have rallied in

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Speaker 6: the past few days because this will this will help

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Speaker 6: their bottom line. They'll be able to charge more for

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Speaker 6: goods being shipped around the world. But still, it's it's

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Speaker 6: it's something that we need to keep an eye on it.

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Speaker 6: Whether this is a short term thing that's that's that

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Speaker 6: that takes a week or two to resolve, or are

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Speaker 6: we looking at dealing with this for the next several months.

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Speaker 6: We don't know yet, but uh, there's a lot riding

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Speaker 6: on whether this is a short term or long term problem.

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Speaker 1: Yeah, what have you seen in terms of those freight rates?

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Speaker 1: Has that been an immediate reaction?

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Speaker 2: There has been.

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Speaker 6: These great rates are posted about once a week. There's

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Speaker 6: obviously spot rates that you can see day to day.

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Speaker 6: The rates from Asia to Europe have spiked higher in

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Speaker 6: the past week. So reacting to these capacity disruptions, capacity

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Speaker 6: constraints that we're going to see those if they're if

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Speaker 6: they last long enough, could could ripple to other trade routes,

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Speaker 6: So you know US transpecific, US Asia Transpacific routes. We

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Speaker 6: could see those ultimately affected, but as of yet, it's

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Speaker 6: isolated to that sort of Asia sort of westbound to

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Speaker 6: Europe and US those routes.

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Speaker 1: In terms of the houthy rappers themselves and the attacks,

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Speaker 1: are they attacking and targeting ships connected to the war

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Speaker 1: and guards, So that was that that was seemed to

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Speaker 1: be the stated aim, but it also the shippers are

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Speaker 1: concerned that it's not just Israeli linked ship anymore. What's

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Speaker 1: your view on on the sort of risk to the

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Speaker 1: ships and that are trying to traverse this route.

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Speaker 2: That's right.

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Speaker 6: It started out the threats from the from the rebels

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Speaker 6: started out saying if you were if you have any

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Speaker 6: Israeli connection, if you're if your owner is is has

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Speaker 6: Israeli connections, then we'll target you and and and ships

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Speaker 6: that weren't associated with Israel past freely. That was the

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Speaker 6: initial uh kind of threat that they that they released publicly.

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Speaker 6: But we've definitely seen but that changed in the past

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Speaker 6: say three or four days. They just started going after

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Speaker 6: every ship, whether it had an Israeli link or not.

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Speaker 6: So you've seen companies like Maersk, you know, the number

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Speaker 6: two container shipping company, you know it's it's it was

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Speaker 6: fired upon. In recent days, MSc, the big the biggest

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Speaker 6: container line you know, also targeted. So the connection between

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Speaker 6: Israel and these ships started out being very direct. Now

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Speaker 6: it's just there is no there is no distinction to

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Speaker 6: be made that every ship is a target.

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Speaker 1: I am absolutely oil trading there its highest closed in

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Speaker 1: more than two weeks on the back of that because

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Speaker 1: of the concerns about, for example, moving liquefied natural gas tankers.

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Speaker 1: Thank you so much, Brendan for being with us and

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Speaker 1: for discussing this, the threats in the Red Sea to

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Speaker 1: shipping and the task force that has been set up

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Speaker 1: by allies to try to counter that. That was Bloomberg's

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Speaker 1: trades are Brendan Murray.

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