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Speaker 1: Good morning. It's Wednesday, the second August in London. This

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Speaker 1: is the Blueberg Daybreak You podcast. I'm Caroline hip Kittt and.

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Speaker 2: I'm Stephen Carroll. Coming up today, Fitch strips the United

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Speaker 2: States of its triple A credit rating.

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Speaker 1: Trump is indicted over efforts to overturn the twenty twenty election.

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Speaker 2: And a UK energy giant legally avoids returning hundreds of

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Speaker 2: millions of pounds to households.

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

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Speaker 2: The United States has been stripped of its triple A

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Speaker 2: credit rating by Fitch. The agency says the country's ballooning

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Speaker 2: fiscal deficits and an erosion of governance led it to

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Speaker 2: drop the grade for the world's largest economy to double

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Speaker 2: A plus. Pimco's head of Public Policy, Libby Cantrell, sums

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Speaker 2: up the reaction from many.

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Speaker 3: Investors We've been talking to our clients about is this

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Speaker 3: idea of the US being the cleanest dirty shirt, And

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Speaker 3: you know, maybe that we're not, let's say cleaning from

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Speaker 3: a fiscal perspective, but in terms of just the dollar

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Speaker 3: and its importance to the global market, it's still is

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Speaker 3: pretty unimpeachable. Pitches downgrade. Now, the standing pencoz.

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Speaker 2: Naby ConTroll says that while she's surprised by the timing

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Speaker 2: of the decision, the justification makes sense. The US at

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Speaker 2: burden has forecast EAS one hundred and eighteen percent of

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Speaker 2: GDP by twenty twenty five. That's more than two and

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Speaker 2: a half times higher than the median for triple eight

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Speaker 2: rated economies.

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Speaker 3: Well.

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Speaker 1: Officials in the Biden administration have strenuously objected to the

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Speaker 1: decision by Fitch as they seek to control the political

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Speaker 1: fallouts with more his Bloomberg's at Baxter.

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Speaker 4: The administration says stripping the US of its top tier

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Speaker 4: credit rating is not warranted, saying the US fiscal governance

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Speaker 4: practices are strong. It says Fish's decision does not change

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Speaker 4: what Americans, investors, and people all around the world already

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Speaker 4: know that treasury securities remain the world's pre eminence safe

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Speaker 4: and liquid asset. But this does come two months after

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Speaker 4: the bitter standoff on raising the debt limit and ahead

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Speaker 4: of the threat of no agreement on funding the government

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Speaker 4: going forward. In San Francisco, I'm at back Bloomberg Day

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Speaker 4: Break Europe.

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Speaker 1: And we'll be getting more on this story in just

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Speaker 1: a few minutes time with our market supporter Valerie Title.

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Speaker 2: Donald Trump is facing federal charges over his efforts to

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Speaker 2: overturn the twenty twenty presidential election. A grand jury indicted

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Speaker 2: the former president on four charges, including conspiracy to defraud

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Speaker 2: the United States and conspiracy against the right to vote.

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Speaker 2: Special Counsel Jacksmith says the allegations focus on the January

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Speaker 2: the sixth attack at the US Capitol.

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Speaker 5: It's described in the indictment it was fueled by lies.

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Speaker 5: Lies by the defendant, targeted and obstructing a bedrock function

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Speaker 5: of the US government, the nation's process of collecting, counting,

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Speaker 5: and certifying the results of the presidential election.

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Speaker 2: The indictment from Special Counsel Jacksmith is the third criminal

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Speaker 2: prosecutor in facing the former president, who denies wrongdoing. Trump

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Speaker 2: still leads polling to win the Republican nomination for the

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Speaker 2: twenty twenty four presidential election.

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Speaker 1: Now, a major hey energy producer managed to avoid returning

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Speaker 1: as much as six hundred and thirty nine million pounds

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Speaker 1: to consumers during the cost of living crisis. A Bloomberg

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Speaker 1: investigation has found that Drax turned its renewable power station

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Speaker 1: off in the energy crisis rather than pay back its subsidy.

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Speaker 1: Todd Gillespie wrote the story. He says the move is

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Speaker 1: the opposite of how the agreement with the government is

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Speaker 1: supposed to work.

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Speaker 6: The whole spirit of the contract was very much to

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Speaker 6: have this two way mechanism so that consumers weren't just

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Speaker 6: paying out constantly all the time, and that if the

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Speaker 6: market changed, companies would be able to support consumers in

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Speaker 6: the opposite direction. And indeed Drags his own CEO wrote

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Speaker 6: in an off head in the Time newspaper Times of

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Speaker 6: London newspaper earlier this year that the design of the

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Speaker 6: CFD was there to stayguard consumers from price spikes.

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Speaker 1: Bloomberg's energy reporter Todd Gillespie. He added that although Drax

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Speaker 1: didn't break any laws, many former UK energy secretaries have

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Speaker 1: told him that they are unhappy with the firm's condom.

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Speaker 1: Durak said in a statement that it had acted responsibly

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Speaker 1: and that soaring biomass prices last year made it quote

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Speaker 1: uneconomical to operate their plant.

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Speaker 2: Much of the time that Bloomberg investigation comes as executives

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Speaker 2: from the UK's biggest energy companies are meeting the Energy

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Speaker 2: Secretary Grant shops later today to discuss accelerating power in

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Speaker 2: accelerating investment in renewable power. The talks expected to focus

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Speaker 2: on existing plans by the companies to invest more than

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Speaker 2: one hundred billion pounds. The government says it's looking at

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Speaker 2: home grown energy sources to enable Britain to be less

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Speaker 2: vulnerable to price volatility and disruption on international fossil fuel markets.

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Speaker 1: And finally, an all time high for the S and

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Speaker 1: P five hundred feels inevitable. According to JP Morgan's trading desk.

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Speaker 1: The team says that better economic growth and a pause

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Speaker 1: in the Fed's hiking cycle will push stocks to a

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Speaker 1: new high of four eight hundred, five thousand or even higher.

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Speaker 1: Speaking to Jonathan Ferrer on Bloomberg The Open, JP Morgan's

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Speaker 1: head of Global Investment Opportunities, Monica Decensos, broke down why

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Speaker 1: she's upgraded her outlook for US stocks.

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Speaker 7: You know, it's driven by, quite frankly, fundamentals for the

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Speaker 7: US economy that never turned out to be as bad

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Speaker 7: as people thought when they came into the year, and

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Speaker 7: it looks like, quite frankly, he was a consumers stronger

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Speaker 7: than we thought. And when you add that up with

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Speaker 7: reasonable valuations. Broadly speaking, you can see a scenario where

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Speaker 7: equities can still return six seven percent over the next twelve.

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Speaker 1: Months marka Decenso her view is at also with the

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Speaker 1: Bank's chief Global market stosh is Marka Kolonovitch. She says

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Speaker 1: that market is a suffering from a case of wishful thinking.

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Speaker 2: Wishful thinking. Well, I wonder is it wishful thinking we're

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Speaker 2: getting from the Prime Minister as well, who's deciding to

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Speaker 2: put more efforts into reviving Chess not considered a sport

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Speaker 2: in the UK, although Rishisnak wants to fund a national team.

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Speaker 2: He's got half a million pounds worth of funding earmarks

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Speaker 2: for the English Chess Federation. The idea is being able

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Speaker 2: to help them to get out and train more people

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Speaker 2: to in how to play chess because it's good for

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Speaker 2: metal acuity. Is this you know? Is this follow up

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Speaker 2: on his promise around mats?

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Speaker 1: Is this a yeah, I'd listen. I think it's really

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Speaker 1: quite interesting the ideas. He says, Yes, it's a great skill,

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Speaker 1: it's good to help people in terms of their thought processes.

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Speaker 1: It's very a good practice for children and actually the

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Speaker 1: UK used to do really, really well in the eighties

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Speaker 1: we were ranked second to the Soviet Union A look,

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Speaker 1: that's a long time ago. I think that it does

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Speaker 1: go with the idea of having mass which the Prime

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Speaker 1: Minister wants to see all children study up to the

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Speaker 1: age of eighteen in the UK, which they don't currently do.

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Speaker 1: I think it's great. Look, I helped a math team

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Speaker 1: in a primary school locally to me just a few

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Speaker 1: years ago, which was a huge lesson, frankly in how

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Speaker 1: to teach five, six, seven eight year olds how to

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Speaker 1: play chess and beat me most of the time. So

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Speaker 1: I think it was making really aging. But I think

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Speaker 1: it's it's a brilliant skill actually to have.

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Speaker 2: Yeah, and look, it's it's an interesting issue to choose

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Speaker 2: to focus on. I think those probably, as you say,

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Speaker 2: a lot of people would support it. The announcement that's

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Speaker 2: going to happen later will feature an oversized chess set

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Speaker 2: on ten Downing Streets Lana as well.

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Speaker 1: That's great, but surely the cry will go up what

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Speaker 1: about broader skills? You know, yes, it's great to focus

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Speaker 1: on on the brains of Britain and maybe a great

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Speaker 1: British chess revival, but what about other broader skills? For

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Speaker 1: UK workers.

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Speaker 2: Well indeed, Well, let's turn next to the decision by

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Speaker 2: Fitch Ratings Agency to downgrade the US credit rating from

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Speaker 2: Triple A to double A plus, criticizing ballooning fiscal deficate

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Speaker 2: deficits and what it referred to as an erosion of governance.

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Speaker 2: Our market supporter of Valerie titlers with us for more

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Speaker 2: on this story. And if it warrant that they may

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Speaker 2: cut the credit rating back in May, why has it

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Speaker 2: happened now after we saw the debt sailing row resolved

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Speaker 2: in June.

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Speaker 8: Yeah, a lot of eyebrows are being raised there because

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Speaker 8: you actually look at their decision in May to change

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Speaker 8: them to an outlook negative. They cited quite different things

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Speaker 8: than they did today in their decision to downgrade. But

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Speaker 8: go over the three things that they did cite today.

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Speaker 8: The first is expected fiscal deterioration, and they expect that

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Speaker 8: because they have the US heading into recession. Normally, in

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Speaker 8: a recession, your government accounts do deteriorate as growth slows.

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Speaker 8: The second being the high and growing debt burden. As

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Speaker 8: you mentioned, the US has two and a half times

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Speaker 8: the debt to GDP of the normal triple A median

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Speaker 8: in Fitch's ratings, and lastly the erosion of governments and

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Speaker 8: essentially the erosion of confidence in fiscal management, which they

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Speaker 8: cite the obvious the debt limits standoff that we had

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Speaker 8: earlier this year.

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Speaker 1: Yeah, I mean, look, we beatled off and had a

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Speaker 1: look at actually how many countries are triple A rated

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Speaker 1: across the three main rating agencies, So are only like

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Speaker 1: eleven in Australia and Switzerland, Canada also, So I think

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Speaker 1: it's it's kind of important in the global context in

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Speaker 1: terms of the critics then in the pushback, because Janet

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Speaker 1: Yellen and many others are critical of this, saying that

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Speaker 1: this doesn't reflect the reality of the US economy.

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Speaker 8: Yeah, a lot of criticism so far, which, to be honest,

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Speaker 8: is really not surprising from the US Treasury Secretary Janet Yellen.

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Speaker 8: She said she strongly disagrees with the Fitch's decision, and

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Speaker 8: she said the ratings move today is arbitrary and based

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Speaker 8: on outdated data. The White House said they strongly disagree

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Speaker 8: with the decision, saying the Biden administration has delivered the

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Speaker 8: strongest recovery of any major economy in the world out

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Speaker 8: of the pandemic. Former Treasury Secretary Larry Summers called it absurd,

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Speaker 8: and then the chief economic advisor for Alliance, Mohammad l. Aaryan,

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Speaker 8: who is a Bloomberg opinion columnist here, said it's much

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Speaker 8: more likely to be dismissed by markets than have a

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Speaker 8: lasting impact. And to his point, to Muhammad's point, if

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Speaker 8: we look at how the market is behaving this morning,

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Speaker 8: it is maybe telling you it's irrelevant. We are seeing

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Speaker 8: a to the equity rally, which has been very strong

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Speaker 8: of late, seeing s and P futures fall half a percent.

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Speaker 8: But if you look at those traditional haven assets, Swissy

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Speaker 8: for example, roughly unchanged stronger by one tenth of a percent.

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Speaker 8: Gold it's up slightly, it's up three tenths of a percent.

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Speaker 8: But even if we look at the treasury market, there's

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Speaker 8: really not any big safe haven move into treasuries like

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Speaker 8: we did see the last time they are downgraded. So

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Speaker 8: perhaps this will show us at the end of the

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Speaker 8: day that this Fitsch move is irrelevant when it comes

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Speaker 8: to the views of investors.

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Speaker 2: Yeah, I mean, it's somewhat as you say, of a

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Speaker 2: shrug in the market reaction as well, So we'll watch

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Speaker 2: to see how that plays out later on. The day

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Speaker 2: as well, but from now our market supporter Valerie Title,

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Speaker 2: thank you very much. Up next to new Deputy Governor

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Speaker 2: the BOE and lenders cut mortgage rates. Now the paper

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Speaker 2: review on blue Bird Daybreak Europe.

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Speaker 1: The news you need to know from today's papers basically

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Speaker 1: and Gahan's joined us. Now if I look through the newspapers,

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Speaker 1: let's start with this Guardian headline. Sarah Breden to be

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Speaker 1: the Deputy Governor of the Bank of England. Yeah, a

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Speaker 1: name well known on thread Needle Street at Lesliam.

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Speaker 9: Yes, indeed, Carolina is a well known name and she

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Speaker 9: is a BOE insider, so lots of knowledge and the

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Speaker 9: Bank will have the largest ever number of women on

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Speaker 9: the rate setting Monetary Policy Committee after the appointment of

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Speaker 9: Sarah Breden. Now she'll be appointed in November for five

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Speaker 9: years and the Chancellor Jeremy Hunt, announcer BOE insider, would

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Speaker 9: become the Deputy Governor for Financial Stability and she'll chair

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Speaker 9: a lot of it in the absence of the Governor

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Speaker 9: Andrew Bailey. Caroline and the Cambridge University graduate is going

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Speaker 9: to be joining three other women on the nine member MPC,

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Speaker 9: so that she'll be joining Swatty Dingra, Catherine Mann and

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Speaker 9: Meghan Green. In her role, she'll be in charge of

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Speaker 9: the bank's cryptocurrency policy and also broader concerns about the

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Speaker 9: stability of the banking and a financial sector. And it's

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Speaker 9: also just important to note that this story comes out

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Speaker 9: ahead of the Bank of England poised to raise interest

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Speaker 9: rates tomorrow to a fifteen year high, and it's a

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Speaker 9: little bit of what we can expect ahead of tomorrow.

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Speaker 9: But this is also interesting really because since the NPC's

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Speaker 9: creation in nineteen ninety seven, you know, there's not been

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Speaker 9: so many women deciding UK interest rate policy. But be

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Speaker 9: an article does say we don't know exactly what her

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Speaker 9: stance is right now. She won't be involved tomorrow, but

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Speaker 9: she will be joining in November.

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Speaker 7: Yeah.

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Speaker 1: Look, what's critical is where she lies in terms of

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Speaker 1: the dove hawk split. And actually it seems to be

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Speaker 1: that some market participants don't think that she's going to

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Speaker 1: affect the balance. She will be in place though for

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Speaker 1: a five year term. She led the response to Northern Rock,

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Speaker 1: so I think also her kind of her huge policy

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Speaker 1: experience is quite important too.

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Speaker 9: But yeah, very interesting, and like I said, she moved

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Speaker 9: up through the thanks so her knowledge is vast ley.

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Speaker 2: And let's go to the flantal times.

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Speaker 9: Next.

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Speaker 2: Three large UK lenders cut mortgage rates as inflation outlook improves.

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Speaker 9: Well Steven, this move is really offering some further relief

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Speaker 9: to homeowners who are still facing these higher borrowing costs

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Speaker 9: in the wake of last year's mini budget and also

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Speaker 9: the cost of living crisis that we are facing. So

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Speaker 9: nat West, Halifax and Virgin Money have cut the interest

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Speaker 9: rates on some of their mortgage products by nearly half

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Speaker 9: a percent as competition heats up to offer borrowers better

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Speaker 9: rates a foster than expect to drop an inflation data

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Speaker 9: in June has actually helped stabilize UK financial markets and

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Speaker 9: also reassure lenders that Britain is over the worst of

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Speaker 9: these rising prices. Data released on Monday also showed that

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Speaker 9: UK mortgage approvals did rise back in June. So there

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Speaker 9: we are. We're having some positive news on the mortgage front. Reach.

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Speaker 1: Yeah. No, that's very interesting, isn't it. After the nationwide

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Speaker 1: survey we're talking about yesterday the fastest for since like

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Speaker 1: two thousand and nine in home prices across the UK.

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Speaker 1: How much will our change and mortgagerates help so often

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Speaker 1: that the Times lastly, electric vehicle targets could stall investments.

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Speaker 1: As Kemy bade knock, this is a big one for

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Speaker 1: UK policy, isn't it.

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Speaker 9: Yeah, it's a huge one for UK policy. And Richie

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Speaker 9: Snak's been facing this mounting pressure from Tory MPs on

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Speaker 9: the right of the party to push back a ban

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Speaker 9: on the sale of new petrol and diesel cars from

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Speaker 9: twenty thirty to twenty thirty five. And there's a warning

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Speaker 9: from the Business and Trade Secretary Kemy bab Knog that

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Speaker 9: the electric vehicle targets could really damage investment. So from

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Speaker 9: next year the government is planning to find car makers

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Speaker 9: unless a fifth of new vehicles sold produces zero emissions. Now,

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Speaker 9: big companies that employ thousands of people, like Toyota and

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Speaker 9: Ford are asking for this deadline to be changed. They

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Speaker 9: concerned that this is going to be very challenging for this.

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Speaker 9: Another threat to this comes amid mounting concern about whether

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Speaker 9: Britain has this sufficient infrastructure for electric cars. And in

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Speaker 9: this piece, it's really interesting because the chief executive of

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Speaker 9: Moto Hospitality basically says yes, they are putting chargers in

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Speaker 9: motorway service stations, but the problem is they don't have

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Speaker 9: the power to supply them, and this is where the

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Speaker 9: problem is coming in.

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Speaker 2: stories making news from London to Wall Street and beyond.

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