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Speaker 1: Good morning. It's Thursday, the seventh of December in London.

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

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Speaker 1: Coming up today, the CEOs of Wall streets biggest banks

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Speaker 1: come together to attack plans for new regulations. US senators

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Speaker 1: leave Ukraine funding in limbo, fanning fears over Washington's commitment

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Speaker 1: to support Kiev. And two months ago Egypt looked like

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Speaker 1: a country on the brink of financial collapse, but the

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Speaker 1: Israel Hamas conflict is giving the world new reasons to

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Speaker 1: come to its rescue. We have a special report. Let's

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Speaker 1: start with a round up though of our top stories.

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Speaker 1: The heads of Wall Street's biggest banks have come out

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Speaker 1: swinging against Washington's plans to force them to set aside

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Speaker 1: more cash. Regulators want big US lenders to increase their

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Speaker 1: capital cushions by almost twenty percent, but speaking to the

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Speaker 1: Senate Banking Committee, CEOs insisted their institutions are safe and

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Speaker 1: argued customers will be forced to foot the bill if

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Speaker 1: tougher rules are enacted. JP Morgan's Jamie Diamond says the

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Speaker 1: move would be counterproduction.

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Speaker 2: The rule would have predictable and harmful outcomes to the economy, markets,

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Speaker 2: business of all sizes, and American households. In ways the

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Speaker 2: Federal Reserve is not studied, contemplated, or shared. Mortgages and

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Speaker 2: small business loans be more expensive and harder to access,

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Speaker 2: particularly for low to moderate income borrows, as costs for

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Speaker 2: originating and securitizing loans rise. Savings for retirement or college

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Speaker 2: will yield lower returns as cost rise for asset managed

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Speaker 2: money market funds and pension funds. Government infrastructure projects will

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Speaker 2: become more expensive as capital requires for market activities more

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Speaker 2: than double, translating into higher costs to build hospitals, bridges,

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Speaker 2: and roads. From beverage companies that need to manage aluminum

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Speaker 2: costs to farms that need to protect against environmental risks.

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Speaker 2: If the cost of hedging these risks increases, everything from

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Speaker 2: the canna, soda to meat products will be impacted.

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Speaker 1: Diamond sentiment is shared by others who testified, including the

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Speaker 1: CEOs of Citigroup, Goldman Sachs, and Morgan Stanley. The FED

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Speaker 1: and other regulators argue that changes would help to avoid

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Speaker 1: turmoils such as this year's regional banking mount down. US

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Speaker 1: enitors have failed to come to an agreement on a

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Speaker 1: financial aid package for Ukraine. Bloomberg's At Baxter has the story.

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Speaker 3: It's back to the drawing board, not even making it

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Speaker 3: for a floor vote with the issue border funding for

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Speaker 3: the GOP. President Biden says they have to get something done.

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Speaker 4: This cannot wait. Congress needs to pass supplemental funding for

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Speaker 4: Ukraine before they break for the holiday. Resource as simple

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Speaker 4: as that. Frank, I think it's stunning that we've gotten

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Speaker 4: to this point in the first place.

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Speaker 3: Now the US headship more aid to Ukraine, but says

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Speaker 3: it could be the last without more funding, Ed Baxter

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Speaker 3: Bloomberg Radio.

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Speaker 1: President Biden's budget director warrened earlier this week that the

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Speaker 1: US will run out of resources to assist Ukraine by

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Speaker 1: the end of the year without another aid package. In

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Speaker 1: the Middle East, Israeli forces say they are encircling the

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Speaker 1: home of top Hamas leader Yahya Sinhwar. The state's military

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Speaker 1: is continuing its push into southern Gaza as international condemnation grows.

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Speaker 1: The UN Chief Antonio Guteris has forced a Security Council

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Speaker 1: debate on the issue. Here's his spokesperson, stef Andrew Jarek.

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Speaker 5: Given the scale of the loss of human life in Gaza,

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Speaker 5: and in Israel in such a short amount of time.

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Speaker 5: The Secretary General has today delivered a letter to the

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Speaker 5: President of the Security Council invoking Article ninety nine of

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Speaker 5: the Charter of the United Nations. In the letter, which

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Speaker 5: has been shared with you, the Secretary General urges the

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Speaker 5: members of the Security Council to press to avert a

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Speaker 5: humanitarian catastrophe, and he appeals for a humanitarian ceasefire to

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Speaker 5: be declared.

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Speaker 1: It's the first time the UN has used these powers

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Speaker 1: since the nineteen seventies. Israel has responded by saying Guteris

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Speaker 1: had reached a new moral low. The Chinese president, Cheating

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Speaker 1: Paying has told European Union leaders that the two side

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Speaker 1: should step up cooperation and quote enhance political mutual trust.

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Speaker 1: European Commission President our Slavander Lyin and europe Canceled President

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Speaker 1: char Mischaller meeting President Shei for the first time in

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Speaker 1: four years. Trade as top of their agendas after the

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Speaker 1: block's investigation into subsidies for Chinese electric vehicles and flamed tensions.

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Speaker 1: Yence escolland his president of the European Union Chamber of

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Speaker 1: Commerce in China. He says he's seen encouraging science from

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Speaker 1: Beijing ahead of this summit.

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Speaker 6: Beijing has moved a bit in the way that it

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Speaker 6: engages with the rest of the world. So just a

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Speaker 6: week ago, how six countries here on the five EU

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Speaker 6: countries were granted fifteen days visa free traveled to China.

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Speaker 6: We saw in August the twenty four measures coming out.

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Speaker 6: It's positive and it's something that would help to restore

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Speaker 6: a little bit off the confidence amongst businesses.

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Speaker 1: Yence Escullin's positive tone comes as Italy announced that it's

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Speaker 1: exiting China's Belton Road Initiative, dealing a fresh blow to

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Speaker 1: Beijing's ambitions. Foreign Minister Antonio says that the pact hasn't

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Speaker 1: produced the desired effects and is no longer a priority

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Speaker 1: ital He joined the initiative in twenty nineteen and was

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Speaker 1: the only G seven to do so. China's imports unexpectedly

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Speaker 1: shrank in November from a year ago, raising concerns about

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Speaker 1: economic recovery. Reimburg's Brian Curtis has more from Hong Kong.

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Speaker 7: Imports declined six tenths of a percent from a period

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Speaker 7: still hit by COVID last year. Ouch It was much

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Speaker 7: worse than a forecast for a gain of three point

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Speaker 7: nine percent. It suggests that domestic demand is simply not recovering.

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Speaker 7: Exports meantime rose zero point five percent. That was slightly

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Speaker 7: better than the estimate of no change, but the data

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Speaker 7: will no doubt stoke concerns about China's economic recovery. This

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Speaker 7: is normally a good period seasonally, as exports jump ahead

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Speaker 7: of the holiday season, not this time in Hong Kong

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Speaker 7: Brian Curtis Bloomberg Radio.

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Speaker 1: Here in the UK, the Immigration Minister Robert jenreck As

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Speaker 1: quest just hours after the government's new deportation plan was published.

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Speaker 1: The former sinak Alli says the draft law didn't go

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Speaker 1: far enough. On Secretary James Cleverly defended the bill in Parliament.

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Speaker 8: People will only stop coming here illegally when they know

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Speaker 8: that they cannot stay here and that they will be

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Speaker 8: detained and quickly removed to a safe third country. It

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Speaker 8: is only by breaking the cycle that we will remove

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Speaker 8: the incentive.

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Speaker 1: Cleverly's new immigration bill was aimed at settling a Conservative

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Speaker 1: Party rebellion on the issue. Prime Minister Rishi Sunak told

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Speaker 1: his backbenchers last night it was time to quote unite

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Speaker 1: or die and the Bank of England governor has stepped

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Speaker 1: up warnings over hedge funds shorting US treasury futures, saying

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Speaker 1: they're risking significant market volatility. Andrew Bailey is warning an

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Speaker 1: increase in the so called basis trade, or investors seek

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Speaker 1: to exploit price differences between futures and bonds.

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Speaker 9: There are now larger imbalances in the market for derivatives

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Speaker 9: on US government debt, a core asset in the global

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Speaker 9: financial system. These imbalances involve the leverage positions of asset

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Speaker 9: managers and hedge funds, and they could result in significant

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Speaker 9: market volatility in the into the shock.

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Speaker 1: Bailey's report calculates the net short position in the treasury

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Speaker 1: futures market has risen to eight hundred billion dollars from

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Speaker 1: about six hundred and fifty billion in July. It's a

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Speaker 1: concern for the Bank of England because many of the

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Speaker 1: hedge funds playing the basis trade are active in British

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Speaker 1: guilt markets too. And in a moment, we'll be talking

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Speaker 1: about the upcoming elections in Egypt. But another story that

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Speaker 1: caught my eye this morning. It's about McDonald's moving into AI.

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Speaker 1: The fast food giant has asked Google to build it

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Speaker 1: a chatbot for its staff to help with training and

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Speaker 1: operation of equipment. It's called ask Pickles, which may provide

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Speaker 1: some confusion in the kitchen, I think, but McDonald's sees

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Speaker 1: it as being useful for things like ordering supplies. The

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Speaker 1: data may also help to improve efficiency. The fast food

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Speaker 1: giant says. This is as McDonald's is also announcing another

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Speaker 1: move to set up a new cafe and it's words

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Speaker 1: a small format beverage led concept which it will leave

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Speaker 1: it to serve customizable drinks like a churo frappe.

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Speaker 3: It's a pilot project now, but.

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Speaker 1: Could it be a chance for the fast giants try

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Speaker 1: and arrival Starbucks at the chief executive of McDonald's saying

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Speaker 1: they shouldn't get too excited about cosmics. Small imprint so far,

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Speaker 1: but an interesting development there from the fastviewed giants. Let's

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Speaker 1: get more now about what the head of Wall Street's

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Speaker 1: biggest banks told the US Senate Banking Committee about planned

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Speaker 1: changes to regulation of their industry. The CEOs pushed back

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Speaker 1: on implementation of the Basil three rules, which would require

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Speaker 1: them to set aside bigger capital cushions. Let's take a

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Speaker 1: listen to some of what they said, starting with Brian

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Speaker 1: moyinhan from Bank of America.

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Speaker 2: We had ten years to do this and it is

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Speaker 2: shocking to media. Was sitting after ten years and we're

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Speaker 2: talking about what you're going to do for small business,

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Speaker 2: and we have to analyze it today. It has much

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Speaker 2: more an impact than people saying additional increases are wholly unnecessary.

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Speaker 1: Almost every element of the Basil three endgame proposal would

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Speaker 1: mate lending and other financial activities more expensive.

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Speaker 6: As it stands, the proposals would increase the cost of

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Speaker 6: capital and barring across the economy.

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Speaker 9: As the cost of debt goes up.

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Speaker 6: It certainly can create volatility and our funding treasuries that

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Speaker 6: can create volatility in the treasury market.

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Speaker 2: It'll particularly diminish mortgages for lower income people.

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Speaker 5: Ultimately punitive to economic growth and doesn't strike the right

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Speaker 5: cost benefit analysis.

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Speaker 2: It was not thoughtfully done. I'm not sure was shared

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Speaker 2: fully among all the regulators. This should be we looked at.

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Speaker 1: It's the first and last voice he heard. There was

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Speaker 1: Jamie Diamond from JP Morgan in there as well, Brian

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Speaker 1: moynahan from Bank of America, Jane Fraser from City, David

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Speaker 1: Solomon from Goldman Sachs and James Gorman from Morgan Stanley.

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Speaker 1: Let's get more details now from our finance reporter, Charlie Wells. Charlie,

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Speaker 1: good morning. What exactly were these bank CEOs laying out

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Speaker 1: their opposition to.

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Speaker 10: Well, they were laying out with some fighting words, weren't they, steven?

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Speaker 10: And really this was about the Basel three end game.

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Speaker 10: So this is an international overhaul that goes back to

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Speaker 10: the financial crisis of two thousand and eight, and really

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Speaker 10: it's about trying to make sure that banks have enough

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Speaker 10: capital so that they can avoid any liquidity issues if

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Speaker 10: there is some sort of crunch that comes ahead. And

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Speaker 10: let's remember this year that regulators, banks and Americans got

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Speaker 10: a really stark reminder of how important liquidity is with

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Speaker 10: the meltdowns of mid sized banks. But it's important to note,

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Speaker 10: you know, how stridently opposed these CEOs are to this

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Speaker 10: set of regulations, and this set of regulations is big.

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Speaker 10: So the proposal was one thousand and eighty seven pages.

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Speaker 10: It was unveiled in July, and I think the goal

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Speaker 10: for these CEOs is to kill off this regulation. And

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Speaker 10: if they can't kill it off, they at least wanted

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Speaker 10: to lay it.

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Speaker 1: Was it unusual to see CEOs who are usually rivals

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Speaker 1: be so united on an issue.

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Speaker 7: It was striking.

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Speaker 10: And I mean, look, they are rivals, and everything from

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Speaker 10: you know, league tables to earnings per share, those issues

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Speaker 10: are meticulously compared. And yes, I think what we have

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Speaker 10: noted over the past few months has been this really

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Speaker 10: intense lobbying campaign against Basil three. You know, they've run

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Speaker 10: radio ads, they've run spots in the financial press, they

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Speaker 10: even ran a Super Bowl ad. And I think the

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Speaker 10: goal here and you know, let's see how easy it

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Speaker 10: is is to try to convince the American public that

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Speaker 10: these could be damaging for first these regulations could be

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Speaker 10: damaging for first time home buyers, for underrepresented minorities, for

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Speaker 10: the American economy written large. But that might be a

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Speaker 10: difficult task because you know, after the financial crisis, big

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Speaker 10: banks did have such a toxic reputation across the United States.

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Speaker 10: And I think that's why we're seeing such a you know,

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Speaker 10: kind of emotional appeal that we heard yesterday in Congress,

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Speaker 10: but also in this United lobbying front that they've had

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Speaker 10: over the past few months.

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Speaker 1: But did they find a sympathetic audience then from the

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Speaker 1: Senators they were speaking to.

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Speaker 10: It was striking. You know, each year Congress requires these

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Speaker 10: the heads of these big banks to come in and testify,

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Speaker 10: and it has tended to be a very, you know,

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Speaker 10: kind of fiery set of exchanges. And I think at

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Speaker 10: least this time, certainly on the Republican side and even

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Speaker 10: from some Democrats, there was a slight kind of warmer,

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Speaker 10: if at least, you know, less fiery tone between you know,

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Speaker 10: the politicians on one side and the bankers on the other.

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Speaker 10: But look, I mean it kind of did divide down

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Speaker 10: party lines, with Republicans a little bit more sympathetic people

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Speaker 10: like Shrod Brown, the Senate Banking Committee chairman, on very

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Speaker 10: much the other side, talking about how these rules, there's

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Speaker 10: nothing in these rules that would stop these large banks

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Speaker 10: from making loans to working families and small businesses, and

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Speaker 10: that's the line that a lot of these banks have

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Speaker 10: tried to push. Democrats tried to push back.

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Speaker 1: On that, Charlie briefly. The hearing touched on other issues too,

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Speaker 1: including the subject of cryptocurrencies.

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Speaker 10: This was one of the most notable moments, and Elizabeth Warren,

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Speaker 10: the Senator from Massachusetts who has made, you know, a

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Speaker 10: name for herself, blasting banks, blasting bankruptcy policy. She and

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Speaker 10: Jamie Diamond of JP Morgan were actually on the same

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Speaker 10: page about cryptocurrency, especially in regards to rules over moneylaws.

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Speaker 10: You know, Elizabeth Warren even got Jamie Diamond effectively to

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Speaker 10: say that he would shut down the crypto industry if

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Speaker 10: he had a government role. So that was a rare

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Speaker 10: moment of a cord between those two sides.

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Speaker 1: Charlie Wells, our finance reporter, Thank you very much. Let's

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Speaker 1: go to Egypt next, where voters go to the polls

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Speaker 1: on Sunday for a three day election that President Abdolphatta

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Speaker 1: LCCI is almost certain to win as the country wrestles

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Speaker 1: with its worst economic crisis in years. Joining us now

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Speaker 1: for more is our Cairo based economy reporter Merat Magdi Merrat,

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Speaker 1: Good morning to you. What are the issues at the

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Speaker 1: forefront of voters' minds?

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Speaker 11: So almost all Egyptians are now struggling to cope with

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Speaker 11: the high coast of living. You know, the country has

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Speaker 11: to valued its currency three times since early last year,

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Speaker 11: and your inflation now is over thirty five percent, which

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Speaker 11: is a record. A kilo a peck of one kilo

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Speaker 11: sugar for example, has doubled this year. A couple of

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Speaker 11: weeks ago, I visit is so had in Upper Egypt,

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Speaker 11: our house of Cairo, where about sixty percent of people

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Speaker 11: are living under publicy line. And you know, people there

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Speaker 11: told me they can't now afford what they called the

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Speaker 11: poor man food, such as rice and pasta sugar. But

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Speaker 11: almost everyone has been affected across the country. In Cairo

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Speaker 11: and exactly, for example, the biggest two cities, you can

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Speaker 11: see the middle classes struggling to cope with the prices

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Speaker 11: of some important goods, not only luxury stuff, but also

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Speaker 11: some other important items.

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Speaker 1: I was wondering if we could talk a little bit

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Speaker 1: about how this happened. How did Egypt's economy get into

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Speaker 1: this shape.

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Speaker 11: That's a good question. The assorty has been relying on

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Speaker 11: volatile hot money for years. And you know, Egypt was

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Speaker 11: once a dollar for portfolio investors who both its treasure

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Speaker 11: builds and bonds because it operates one of the words

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Speaker 11: Hoi's return and kept the boundies taper. But due to

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Speaker 11: the combination of first COVID pandemic and then the Russia

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Speaker 11: vision of Ukraine, investor pulled more than twenty billion dollars

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Speaker 11: from the Egyptian market. It's a big money and the

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Speaker 11: ward also sent input bills storing and you know, Egypt

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Speaker 11: is one of the world's biggest wheed buyers and a

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Speaker 11: lot of that came from Ukraine and Russia. And at

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Speaker 11: the same time, authorities has been spending billions of dollars

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Speaker 11: on infrastructure and megaprojects. Another important factor is that each

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Speaker 11: a policy of supporting the bound that they was keen

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Speaker 11: to keep the bound stable to attract like I mentioned,

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Speaker 11: portfolio investors, and that happened even when the country was

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Speaker 11: experienced a shortage importnt currency.

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Speaker 1: How has the war between Israel and Hamas and Gaza

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Speaker 1: changed things for Egypt?

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Speaker 11: The war has revived Egypt's dramatic role in the region.

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Speaker 11: It reminded the way that Egypt is too big to fail.

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Speaker 11: It's the only gateway for aid to reach Gaza, and

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Speaker 11: it's a key player in hostage talks that allowed a

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Speaker 11: choose after six weeks of fighting. Now many people expect

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Speaker 11: the international community would be more willing to support Egypt financially.

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Speaker 11: And it's not only about how the world view Egypt's

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Speaker 11: road in the conflict, but also about how many Egyptians

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Speaker 11: appreciate ceasy efforts to get it into Gaza and his

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Speaker 11: refusal to accept mess relocation of Palestinian into Egypt. You

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Speaker 11: know this would a plan floated earlier, and it would

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Speaker 11: read the risk Palestinians would never be allowed back to

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Speaker 11: their home land, and it would also bring fm US

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Speaker 11: into each of plant. You can easily feel how is

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Speaker 11: sits a popularity increased across multiple revision in the country

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Speaker 11: after the war.

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Speaker 1: This is Bloomberg day Break Europe, your morning brief on

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