>> THIS IS "BLOOMBERG
SURVEILLANCE: EARLY EDITION" WITH FRANCINE LACQUA. FRANCINE:
GOOD MORNING AND WELCOME TO "BLOOMBERG SURVEILLANCE: EARLY
EDITION." I'M FRANCINE LACQUA IN LONDON.
SPANISH INFLATION SHOWS -- SLOWS MORE THAN FORECAST AS
ENERGY COSTS DROP. GERMAN CPI HITS LATER. THE FBI SEE TO SHORE UP
REGIONAL LENDERS. BLOOMBERG UNDERSTANDS REGULAR
LEADERS MAY TOPPLE -- MAY GET U.S.
BANKS TO PICK UP A BIGGER SHARE OF THAT.
SWISS REG LEADERS ARE SET TO HAVE ENCOURAGED UBS TO BRING
BACK SERGIO ARMANI TO ENSURE THE INTEGRATION OF CREDIT
SUISSE. A LOT OF FOCUS ON TECHNOLOGY
STOCKS. EUROPEAN STOCKS IN GENERAL
CLIMBING. CATCHING UP WITH A RALLY ON
WALL STREET YESTERDAY. THE TECH HEAVY NASDAQ IN A BULL
MARKET. BLOOMBERG HAS LEARNED THE FBI
MAY LEAN ON BIG BANKS TO HELP PAY $23 BILLION HIT IT FACES
FROM THE RECENT BANK FAILURES. WHAT DO WE KNOW ABOUT WHAT IT
WILL COST TO CONTAIN THESE RECENT FAILURES? >> THIS HAS KNOCKED OUT A FIFTH
OF THE FBI SEE THE POSITIVE FUND, AND -- THE FDIC FUND, AND
WHAT IS UP FOR DEBATE IS WHAT BANK THAT'S WHAT SHARE, AND THE
TIMING OF IT. THE SPECIAL ASSESSMENT THAT IS
BEING TALKED ABOUT WOULD PUT MORE ON THE BIGGEST BANKS THAN
MAKE IT SOONER THAN IF IT WAS DONE THROUGH REGULATOR
ASSESSMENTS. THERE IS PRECEDENCE FOR THAT
BUT THE BANKS ARE NOT ALWAYS BIG FANS OF A SHOCK HIT TO
THEIR FINANCES. FRANCINE: WHAT ELSE CAN YOU TELL US ABOUT
THE U.S. BANKING SYSTEM? U.S. BANKING CRISIS IS MOSTLY
SOLVABLE? >> THERE HAS BEEN A LOT OF
DISCUSSION ON CAPITOL HILL OF HOW THIS CAN BE AVOIDED GOING
FORWARD. I THINK THE CONSENSUS SEEMS TO
BE BUILDING AROUND LOWERING THAT THRESHOLD BESIDES THE BANK
THAT GETS SPECIAL ATTENTION OR EXTRA SCRUTINY.
IT IS ABOUT $250 BILLION AND THE TALK OF $100 OF A NEW LEVEL
WHEN THEY GET MORE SCRUTINIZED. FRANCINE:
ECB EXECUTIVE BOARD MEMBERS SAY EUROZONE BANKS HAVE NOT SEEN
THE LOSS OF DEPOSITS DESPITE THE RECENT CONCERNS. >> AT THE MOMENT THERE IS A LOT
OF UNCERTAINTY ABOUT WHAT THE FINANCIAL TURBULENCE MEANS FOR
US AT THE EURO AREA. I WOULD SAY AT THIS POINT IT
LOOKS THAT WE HAVE A SOMEWHAT SMALLER PROBLEM THAN WE ARE
SEEING IN THE U.S., SO AT LEAST SOFAR IT LOOKS AS IF OUR BANKS
ARE QUITE RESILIENT. FRANCINE: JOINING US NOW IS KATHARINE
NEISS, CHIEF EUROPEAN ECONOMIST, PGIM FIXED-INCOME. WHEN YOU LOOK AT THE DYNAMIC OF
INFLATION, MAYBE A SLOWDOWN FOR INFLATION BUT CORE INFLATION IS
VERY STICKY. DOES IT MEAN FOR WHAT THE ECB
DOES NEXT? KATHARINE: SO FAR THE INTERESTING THING IS
WE HAVE SEEN TURBULENCE COMING FROM THE U.S.
AND THE BANKING SECTOR, AND ALL OF THE CENTRAL BANKS I COVER IN
EUROPE EFFECTIVELY FOLLOWED THE SAME PLAYBOOK, AND RAISED
INTEREST RATES PRETTY MUCH AS THEY HAD BEEN SIGNALING WILL
BEFORE THE RECENT EVENTS. SINCE THEN WE DO NOT COULD A
SENSE THERE IS A LOT OF BUYERS REMORSE FROM THOSE CENTRAL
BANKS FOR HAVING DONE THAT. IF ANYTHING, THE DATAFLOW HAVE
GIVEN THEM MORE CONFIDENCE THAT WAS THE RIGHT DECISION.
IN THE U.K. WE SELL RETAIL SALES COMING IN
ROBUSTLY. SERVICES PMI AND THE EURO AREA
WENT FURTHER INTO EXPANSIONARY TERRITORY.
IT IS TOO SOON TO SAY WE CAN RULE OUT FURTHER INTEREST RATE
HIKES IN EUROPE. FRANCINE: WHAT IS YOUR TAKE ON WHAT WE
ARE SEEING ACROSS THE BOARD, AND MARKETS PRICING IN THE FED
CUT? >> THAT WAS BROUGHT ON BY THE
MINI BANKING CRISIS OVER THE LAST FEW WEEKS.
THAT HAS FADED AWAY, THOSE CUTS REMAIN IN TERMS OF BETS.
THIS IS THE DILEMMA MARKETS ARE FACING AT THE MOMENT. THERE IS A DESIRE TO BELIEVE A
SHIFT IN THE FED'S STRATEGY IS AROUND THE CORNER, BUT THE
HAWKISH MESSAGE WE HEARD FROM JAY POWELL EARLIER THIS MONTH
POUR COLD WATER OVER THAT. THEN COMES THE BANKING CRISIS,
AND TRADERS ARE, MAYBE THAT WOULD BE THE CATALYST TO GET
BACK TO THINKING ABOUT RATE CUTS.
IT IS A WHIPLASH MONTH MARKETS, THERE IS THE SIGN THAT DYNAMIC
WILL FADE ANYTIME SOON. IF IT IS NOT A BAKING CRISIS,
MARKETS WILL FIND SOMETHING ELSE TO WORRY ABOUT, MAYBE A
TURN IN THE ECONOMIC DATA. WE KEEP HEARING ABOUT SIGNS OF
A CREDIT CRUNCH. THERE IS ALWAYS A DANGER THEY
ARE INTO SOMETHING BIGGER. FRANCINE:
WHAT DOES IT MEAN FOR WHAT YOU WANT TO BE INVESTED IN?
WHAT DOES THE MARKET MISS PRICING RIGHT NOW? KATHARINE: I COMPLETELY AGREE WITH
KRISTINE'S VOLATILITY POINT. WHAT I WOULD SAY IS IMPORTANT
IN TERMS OF THE TAKE AWAY FROM THESE RECENT CENTRAL-BANK
DECISIONS TO GO AHEAD AND STICK WITH A RATE HIKING CYCLE IS
THAT THIS DOES NOT MEAN THEY ARE COMPLETE LEAGUE DURING
FINANCIAL STABILITY CONSIDERATIONS.
A BIG TAKE AWAY FROM THE GLOBAL FINANCIAL CRISIS FOR CENTRAL
BANKS WAS WE CANNOT DIVIDE AND CONQUER HERE.
AS A MONETARY AUTHORITY, FOCUS ON PRICE TO BELIEVE WITHOUT
CONSIDERATION FOR FINANCIAL STABILITY.
EQUALLY, SINCE THEN IT IS WELL UNDERSTOOD AMONG CENTRAL BANKS
THAT INTEREST RATES ARE TOO BLUNT OF AN INSTRUMENT TO LEAN
AGAINST THE WIND OF FINANCIAL STABILITY RISKS.
WE ARE IN A SITUATION SOMEWHERE IN THE MIDDLE, AND MOST OF THE
CENTRAL BANKS THAT I COVER HERE IN EUROPE DUE BY AND LARGE
EXPLICITLY ACKNOWLEDGE FINANCIAL STABILITY
CONSIDERATIONS IN THEIR FLEXIBLE INFLATION TARGETING
FRAMEWORKS. CONCRETELY, WHAT I THINK THAT
MEANS IS FROM HERE ON OUT, OTHER THINGS EQUAL, EXPECT A
SHALLOWER RATE HIKING PATH, AND 75 BASIS POINT HIKES ARE
PROBABLY A THING OF THE PAST. FRANCINE:
WHAT IS MISPRICED IN INCOME RIGHT NOW? KATHARINE: AS KRISTINE SAID, THERE IS A
LOT OF VOLATILITY. WE HAD A MAJOR CORRECTION LAST
YEAR. THAT CREATED A LOT OF PAIN ACROSS THE INDUSTRY, BUT IT HAS
ALSO CREATED A LOT OF VALUE. THE VOLATILITY ITSELF SPEAKS TO
A BOTTOM UP ASSESSMENT LOOKING FOR POCKETS OF VALUE IN THOSE
AREAS WHERE WE SEE THEM. FRANCINE:
WHEN YOU LOOK AT THE CREDIT CRUNCH, THIS IS THE MAIN WORRY,
WE HAVE SEEN FIGURES IN THE U.S., AND THIS WAS PRE-BANKING
CRISIS. IS THIS THE ONE THING REGULATORS AND POLICYMAKERS
WORRY ABOUT? KRISTINE: I THINK SO.
WE ARE INCREASINGLY SEEING REGULAR LEADERS AND AUTHORITIES
COMMENTING ON THIS. THE BANK OF ENGLAND
HIGHLIGHTING THE CREDIT CRUNCH OF ONE MAIN VULNERABILITY IN
THE U.K. AT THE MOMENT, AND THAT EXTENDS
TO A LOT OF DEVELOPED ECONOMY. CREDIT IS ALWAYS THE CANARY
THAT SINGS, EVERY TIME WE ARE ABOUT TO HIT A DOWNTURN -- THIS
IS WHAT WE SAW IN 2008. THAT IS WHY WE ARE WORRIED
ABOUT IT AGAIN. THIS IDEA OF FUNDING SEIZING UP
FOR SMALLER BUSINESSES, AND THAT WE ARE POTENTIALLY --
COULD POTENTIALLY SEE A RAFT OF BUSINESSES NOT EXISTING ANYMORE
BECAUSE THEY CANNOT AFFORD TO EXIST. THAT IS THE WORRY THAT
IS KIND OF WHAT WAS REVIVED WITH THE BANKING TURMOIL OVER
THE LAST COUPLE OF WEEKS. IT IS SUBBING THAT INVESTORS
ARE MORE HIGHLY TUNED TO COME ON NOW THAT WE HAVE SEEN THE
BANKING WOES, EVEN THOUGH THAT HAS FADED IN THE BACKGROUND.
CREDIT WORRIES ARE HERE TO STAY FOR SOME TIME. FRANCINE:
THANK YOU SO MUCH, KATHARINE NEISS, CHIEF EUROPEAN
ECONOMIST, PGIM , WHO STAYS WITH US AND BLOOMBERG'S
KRISTINE AQUINO. WHENEVER INTEREST RATE RISES
SHARPLY, HISTORY NEVER REPEATS ITSELF. WE WILL GET BACK TO KATHARINE
AND ASK ABOUT BANKING CONTAGION ACROSS EUROPE. HE SPOKE TO MYSELF ON THE "IN
THE CITY" PODCAST. THAT IS THE NEW
EPISODE OUT TODAY. COMING UP, SWISS RE LEADERS
ENCOURAGED UPS'S MOVE TO BRING BACK SERGIO ARMANI AS CHIEF
EXECUTIVE. THIS IS BLOOMBERG. FRANCINE:
BLOOMBERG HAS LEARNED A SWISS RAG LEADERS HAVE ENCOURAGED
UPS'S DECISION TO BRING BACK A SMOOTH INTEGRATION OF CREDIT
SUISSE. THE UBS VETERAN WILL STEP DOWN
FROM HIS CHAIRMANSHIP AND RETAKE THE ROLE HE HELD FOR
NINE YEARS AFTER UBS. LET'S GO STRAIGHT TO ZURICH AND
THE SWISS BANKING REPORTER. GREAT TO HAVE YOU ON THE SHOW
TODAY. WHAT DO WE KNOW ABOUT HIM RETURNING? >> THIS IS HIS SECOND STATE AT
UBS, AND HE WAS CALLED BACK BECAUSE OF HIS EXTENSIVE
EXPERTISE. THIS IS REALLY THE
RESTRUCTURING THAT THEY CALLED BACK FOR THIS. HE HAS PREVIOUSLY HELPED WITH
ANOTHER RESTRUCTURING AND BRINGING UBS BACK ON TRACK.
HE HAS OVER A DECADE OF EXPERIENCE AT UBS.
THAT WILL HELP WITH THE TRANSITION. AND THE SCALE OF THE MERGER AND
INTEGRATION OF THESE BANKS. YOU NEED SOMEONE WITH
EXPERIENCE OF THAT MAGNITUDE, AND HE WAS THE RIGHT MAN FOR
THAT. HE HAS ALL THE EXPERIENCE, HE
KNOWS THE BANK INSIDE OUT. HE HAS THAT EXTERNAL
PERSPECTIVE BECAUSE HE STEPPED AWAY FOR A FEW YEARS, AND IT IS
GOOD TO LOOK AT IT FROM THE OUTSIDE.
HE WAS REALLY THE RIGHT MAN FOR THE JOB. FRANCINE: YESTERDAY WE BROKE THE NEWS,
THANKS TO OUR GREAT SOURCING AND REPORTING, IN ZURICH THAT
POLICYMAKERS WERE BEHIND THIS CHANGE. TELL US WHY. >>
THIS IS STILL UNDER DISCUSSION BUT THEY WERE DISCUSSIONS THAT
THE GOVERNMENT WAS INFLUENCING THE DECISION.
THE DECISION CAME FROM UBS'S MANAGEMENT AND THAT LATE-NIGHT
PHONE CALL. IT WAS UBS'S INITIATIVE BUT GOT
THE GREEN LIGHT FROM THE GOVERNMENT. FRANCINE: THANK YOU SO MUCH.
STILL WITH US IS KATHARINE NEISS , CHIEF EUROPEAN
ECONOMIST, PGIM . HOW MUCH DO YOU WORRY ABOUT THE
BANKING CRISIS BECOMING SOMETHING ELSE AND AFFECTING
THE EUROPEAN ECONOMY? KATHARINE: I THINK WE WILL ALWAYS WORRY
THESE THINGS HAVE A WAY OF TAKING ON A LIFE OF THEIR OWN. THERE ARE GOOD REASONS TO TAKE
SOME COMFORT THAT THE SITUATION IN EUROPE IS QUITE A BIT
DIFFERENT THAN WHAT WE HAVE SEEN ELSEWHERE.
FOR EXAMPLE, REGULATORY SUPERVISORY OVERSIGHT IN EUROPE
IS MUCH MORE CONSISTENTLY ACROSS THE BANKING SECTOR. THERE ARE FEWER CARVEOUTS,
DISCRETIONARY CARVEOUTS BASED ON THE SIZE OF THE BANK.
THE U.K. IS SEEN TO HAVE GOLDPLATED U.K. BANKS, AND THESE THINGS WILL
GET POLICYMAKERS SOME COMFORT. WHAT I WOULD SAY, HOWEVER, IN
THAT SCENARIO WHERE PERHAPS THE MARKET DOES MOVE ON FROM
TESTING OUT EUROPEAN BANKS, IT IS NOT CLEAR WE ARE COMPLETE HE
OUT OF THE WOODS YET HERE IN EUROPE.
-- COMPLETELY OUT OF THE WOODS YET HERE IN EUROPE. WHEN IT IS THE CASE TO SHIFT TO
SOVEREIGNS, THAT PUTS ITALY BACK INTO THE FRAY, AND ITALY,
ITALIAN BANKS IN PARTICULAR, ARE EXPOSED TO ITALIAN
SOVEREIGN BONDS. IF THIS RISK WERE TO
CRYSTALLIZE, WE COULD SEE THE ECB'S RESOLVE ON ITS USE OF THE
TRANSITION INSTRUMENT IT UNVEILED LAST YEAR COME INTO
FOCUS. FRANCINE: THE WEAKEST LINK IN THE BANKING
SECTOR IS ITALY, IS THERE ANYTHING THAT POLICYMAKERS OR
THE GOVERNMENT CAN DO NOW TO MAKE SURE THERE IS NO POSITION
OF TROUBLE? KATHARINE: TO CLARIFY MY POINT, IT WAS
THAT THE MARKET MAY SHIFT ITS FOCUS AWAY FROM BANKS AND TO
SOVEREIGNS. WHEN WE ARE THINKING ABOUT THAT
BANK-SOVEREIGN NEXUS, RATHER THAN POTENTIALLY THE BANKS
BEING THE TRIGGER IN EUROPE, WE COULD SEE THAT IT IS THE
SOVEREIGNS, IN WHICH CASE ITALY COMES INTO THE FRAME.
POLICYMAKERS IN EUROPE HAVE BEEN BUSY, THEY HAVE BEEN AT
WORK TRYING TO WEAKEN THESE LINKS WITHIN THE SOVEREIGN BANK
NEXUS. WE TALKED ALREADY ABOUT ADDITIONAL BUFFERS PUT IN PLACE
TO STINK THEM BANKS, TO WEAKEN THAT LINK FROM BANKS TO
SOVEREIGNS, AND WE HAVE SEEN WORK DONE BY POLICYMAKERS TO
WEAKEN THE LINK FROM SOVEREIGNS TO BANKS IN THE FORM OF
FLEXIBILITY AND THE INTRODUCTION OF THE TPI
INSTRUMENT. THESE HAVE BEEN UNTESTED, AND
WE CAN RULE OUT THAT IN THIS VOLATILE ENVIRONMENT, HUGE
UNCERTAINTY, THAT SOME OF THESE PARAMETERS COULD GET TESTED.
FRANCINE: THANK YOU SO MUCH, KATHARINE
NEISS, CHIEF EUROPEAN ECONOMIST, PGIM .
COMING UP, EUROPE PUTS ITS RACE DOWN TO SOURCE LITHIUM FOR
VEHICLES. MORE ON THAT, NEXT. FRANCINE: THIS WEEK GROUND WAS BROKEN, IN
THE LATEST RACE TO BUILD A EV SUPPLY CHAIN WITHIN THE
CONTINENT WHICH IMPORTS ALL OF ITS WITH THE THEM FROM ABROAD. WE ARE JOINED BY -- HOW DOES
THIS PROJECT FIT IN EUROPE'S INDUSTRIAL STRATEGY? >> WE LOOK AT ALL OF THE INPUTS
IN THIS EQUATION. LITHIUM IS IMPORTED FOR THE EU,
AND THE AUTO SECTOR IS GERMANY'S BIGGEST INDUSTRY. THEY WANT TO BAN THE SALE OF
COMBUSTION ENGINE VEHICLES BY 2035, AND THAT IS NOT FAR AWAY.
READ EUROPE NEEDS TO SECURE IT SUPPLY CHAIN.
PART OF THAT IS SECURING LITHIUM ROCKS.
THIS IS WHAT THE REFINERY WILL PROCESS.
OUT OF THAT YOU WILL GET LITHIUM HYDROXIDE.
THAT WILL GO INTO THE CARS. BY THE TIME IT IS FINISHED, IT
IS REACHING ITS FULL CAPACITY FOR 500,000 CAR BATTERIES.
40% OF ANNUAL OUTPUT GOES TO MERCEDES.
I ASKED THE CEO IF EUROPE IS TOO LATE. >> THIS IS DEFINITELY A RISK.
I'M VERY SURE, AND OUT OF PERSONAL MEETINGS, THAT
EUROPEAN POLITICIANS -- I SEE US IT CAN CHANGE IN THE
ATTITUDE HERE IN EUROPE SINCE THIS PROGRAM WAS PASSED.
THE ALARM SIGNS ARE HERE, THE POLITICIANS ARE WILLING TO ACT.
WE WILL SEE IN THE COMING WEEKS IF THEY WILL BE ABLE TO. OLIVER:
THE QUESTION IS, WILL THE ALARMS LOUD ENOUGH FOR EUROPE
TO RESPOND IN A BIG WAY TO CHINA, WHICH PROCESSES 70% OF
THE WORLD'S LITHIUM. THINK ABOUT CONCENTRATION RISKS
WE LEARN FROM RUSSIA, THIS IS AT THE FOREFRONT IN GERMANY.
FRANCINE: THANK YOU SO MUCH. I WANT TO SEE MORE OF THAT,
SHORTLY. LET'S GET THE FIRST WORD NEWS. >> BLOOMBERG HAS LEARNED THE
FEDERAL DEPOSIT INSURANCE CORPORATION MAY ASK BIG LENDERS
TO PAY EXTRA TO COVER THE COST OF RECENT BANK FAILURES.
OUR SOURCES SAY PART OF THE AGENCY'S SO-CALLED SPECIAL
ASSESSMENT WILL BE ANNOUNCED IN MAY. THE FDIC HAS SAID THAT IT
EXPECTS TO PAY CLOSE TO $23 BILLION TO COVER DEPOSITS OF
SVB AND SIGNATURE BANK. THE U.K. IS SET TO OUTLINE ITS STRATEGY
TO SPEED UP THE DEPLOYMENT OF RENEWABLE POWER AND CARBON
CAPTURE. IT IS BEING BILLED AS A RESPONSE
TO GREEN SUBSIDIES TO PRESIDENT BIDEN'S INFLATION REDUCTION ACT.
BUT AS THE MEASURES IN THE DRAFT DOCUMENT SEEN BY
BLOOMBERG SHOW, THERE IS LITTLE IN THE WAY OF ACTUAL SPENDING. IN A KEYNOTE SPEECH AT A FORM
THAT INCLUDED GLOBAL BUSINESS AND GOVERNMENT LEADERS, LI
EXPRESSED OPTIMISM ABOUT RECOVERY IN THE WORLD'S
SECOND-BIGGEST ECONOMY, AND ADDED THAT CHINA WILL CONTINUE
TO PURSUE STABILITY, EXPAND DOMESTIC DEMAND, OPEN THE
ECONOMY AND SAFEGUARD THE FINANCIAL SECTOR.
GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND AT BLOOMBERG QUICKTAKE,
POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN
MORE THAN 120 COUNTRIES. FRANCINE:
EUROPEAN STOCKS ARE CLIMBING, CATCHING UP WITH THE RALLY ON
WALL STREET YESTERDAY. LET'S LOOK AT WHAT IS HAPPENING
IN THESE INDICES IN EUROPE. EUROPEAN STOXX 600 GAINING 0.8%.
THE TECH HEAVY NASDAQ WENT INTO A BULL MARKET AMID A PEAK IN
INTEREST RATES IS NEAR. COMING UP, WE TAKE A LOOK AT
DEFENSE WITH THE FORMER RICH SPYMASTER, RICHARD DEAR LOVE. FRANCINE:
GOOD MORNING AND WELCOME TO "BLOOMBERG U.K."
WITH WAR IN UKRAINE AND HEATED DEBATE ABOUT THE THREAT OF
COMPANIES LIKE TIKTOK, WE DO A DEEP DIVE INTO BRITISH SECURITY
POLICY. WHAT ROLE DOES THE U.K. PLAY IN THE GLOBAL SECURITY
ORDER? AS ONE OF THE FOUNDING MEMBERS
OF NATO, THE U.K. CONTINUES TO PLAY A KEY ROLE,
SUPPORTING UKRAINE AFTER RUSSIA'S INVASION LAST YEAR.
UKRAINE HAS BEEN INSTRUMENTAL IN INTELLIGENCE SHARING. CRITICS SAID BREXIT COULD
DAMAGE THE SECURITY RELATIONSHIP WITH BRUSSELS. THE WINDSOR FRAMEWORK COULD
LEAD TO CLOSER TIES. THERE IS THE INTELLIGENCE
PARTNERSHIP BETWEEN THE U.K., THE U.S., CANADA, AUSTRALIA AND
NEW ZEALAND. AUKUS, A WIDE-RANGING SECURITY
PARTNERSHIP WILL SEE THE U.K. IN U.S.
PROVIDE AUSTRALIA WITH NUCLEAR POWERED SUMMARIES TO COUNTER
CHINESE NAVAL THREATS. RISHI SUNAK SAID CHINA OPPOSES
WHAT HE CALLED AN EPOCH DEFINING CHALLENGE TO THE
NATIONAL WORLD ORDER. 20 LIAM POUNDS A YEAR WILL BE
SPENT ON AI AND CYBERSECURITY. IN A MOMENT WE WILL SPEAK TO
SIR RICHARD DEARLOVE, WHO IS IN CHARGE OF MI SIX AND AT THE
HEART OF BRITISH SECRET INTELLIGENCE FOR NEARLY 40
YEARS, INCLUDING DURING THE INVASION OF IRAQ.
LET'S GET STRAIGHT TO OUR EXPERT PANEL. THANK YOU FOR JOINING US.
IF YOU LOOK AT SECURITY AROUND THE WORLD, THE WORLD HAS BECOME
MORE UNCERTAIN SINCE RUSSIAN INVASION OF UKRAINE. >> THE U.K.
IS EMBEDDED IN A LOT OF SECURITY ARCHITECTURE AROUND
THE WORLD. A KEY MEMBER OF NATO. THE AUKUS GROUPING WITH THE U.S.
AND AUSTRALIA WITH THE SUMMER RAINS AND SHARING OPERATIONS. SINCE BREXIT, THERE IS A SENSE
THAT SOME OF THAT COORDINATION HAS GONE IN THE U.K.
IS FINDING ITS OWN FUTURE WHEN IT COMES TO FOREIGN POLICY AND
SECURITY. HOW DOES THAT MEAN THE U.K.
RESPONDS TO GROWING GLOBAL THREATS NOT JUST RUSSIA WITH
ITS INVASION OF UKRAINE BUT THE GROWING INFLUENCE OF CHINA
GLOBALLY AND THE USE OF CYBERWAR GLOBALLY.
THE RISE OF OTHER NONSTATE ACTORS. THESE ARE FUN A MENTAL
CHALLENGES FOR THE U.K. TO THINK ABOUT, AND WHAT
ALLIANCES IT CAN HAVE TO JOIN UP WITH OTHER COUNTRIES TO
COUNTER THOSE. IT IS ALIGNING ITSELF WITH THE
U.S. AGAINST CHINA. IT HAS BEEN A STRONG CRITIC OF
RUSSIA FOR THE WAR IN UKRAINE, BUT WHAT ABOUT THE THREATS TO
THE U.K.? THERE IS NOT SEEM TO BE A LOT
OF STRATEGIC TEAM -- STRATEGIC THINKING ABOUT THAT. FRANCINE:
WHEN YOU LOOK AT THE THREATS LOOKING AT US AT THE MOMENT ON
THE BATTLEFIELD BUT CYBERSECURITY, IT IS THE NEXT
FRONTIER. HAVE THESE THREATS BECOME MORE
COMPLICATED, AND MORE INTUITIVE TO DEAL WITH? >> SURE, WITH THE RUSSIAN
INVASION OF UKRAINE, ONE OF THE THINGS THAT DID NOT HAPPEN IS A
MAJOR CYBERWAR ALONG WHAT WE HAVE SEEN IN THE PAST. OR WHAT
MANY PEOPLE FEAR. WHAT DID HAPPEN IS RUSSIA'S
INVASION SHOWED CYBER WEAPONS ARE A NATURAL COMPLEMENT TO
TRADITIONAL KINETIC MILITARY WEAPONS AND THE U.K.'S ROLE IN
THIS, THEY HAVE VAST INTELLIGENCE GATHERING DESPITE
BREXIT, AND THEY WILL PLAY A BIG ROLE IN THE FUTURE IN TERMS
OF GATHERING BIG DATA, SHARING DATA WITH ITS INTELLIGENCE
PARTNERS AND MILITARY PARTNERS. FRANCINE:
IS IT FROM STATE SPONSORED THREATS ARE PRIVATE? >> BOTH.
IN THE LAST DECADE THE TOOLS FOR CYBERATTACKS HAVE BECOME
DEMOCRATIZED. YOU HAVE CYBER HACKING CRIMINAL
GROUPS WHO HAVE ACCESS TO THE SAME TOOLS AND CYBER WEAPONS AS
NATIONSTATES. THE DIFFERENCE BETWEEN THEM HAS
BECOME BLURRED. WHETHER IT IS IN THE U.K., THE
U.S. OR THROUGHOUT EUROPE. FRANCINE:
YOU COVER THIS FROM A BUSINESS ANGLE. WHEN YOU LOOK AT DEFENSE SPENDING OVERALL, IT HAS
INCREASED ACROSS MAJOR WESTERN ECONOMIES.
DOES IT LOOK LIKE IN THE U.K.? >> IT IS DEFINITELY RAMPING UP
IN THE WAKE OF RUSSIA INVADING UKRAINE, AS WELL AS THE ONGOING
CONCERN ABOUT WHAT IS GOING ON FROM CHINA IN ASIA. THE U.K.
HAS INCREASED ITS BUDGET. WE ARE ALL AWARE GOT A
SIGNIFICANT POTENTIAL SPUR WHEN LIZ TRUSS CAME IN AND IT WAS
GOING TO BE 3% OF GDP, BUT IT HAS BEEN PULLED BACK.
THE 2% NUMBER SEEMS RIGHT. THAT IS INCREASING ELSEWHERE.
INTERESTING TO CONSIDER IS WHAT IS HAPPENING WITH THAT BUDGET
SPEND WITH RUSSIA-UKRAINE, VERSUS WHAT WOULD HAVE HAPPENED
IF THAT CONFLICT HAD NOT OCCURRED.
A LOT OF IT IS GOING TO MUNITIONS, REFILLING SUPPLY ON
THE GROUND. SOME BIGGER ISSUES LONGER-TERM
ARE MORE ORIENTED TOWARD AIR AND SEA AND CYBER, AND IS THERE
A DEFLECTION OF SOME OF THAT STRATEGIC SPEND BECAUSE YOU
HAVE TANKS AND MUNITIONS IN UKRAINE. FRANCINE:
OVERALL, IN THE U.K. WE THINK ABOUT LOCKHEED MARTIN
AND THE BIG COMPANIES BUT THE U.K.
HAS A LOT OF DEFENSE COMPANIES. >> THERE ARE.
IT IS A SIGNIFICANT EMPLOYER ACROSS THE U.K., A SIGNIFICANT
AMOUNT OF REVENUE. SOME OF THAT CERTAINLY IS
COMING FROM THE U.S. BUT IN THE U.K.
THANK BAE SYSTEMS AND ROLLS-ROYCE. THEY ARE CRITICAL. BAE IS IN AN INTERESTING
SITUATION BECAUSE NOT ONLY ARE THEY INVOLVED WITH EUROPEAN
PROGRAMS, LIKE THE TYPHOON FROM A PLANE, BUT THEY ARE A TIER
ONE DEFENSE SUPPLIER FOR THE U.S. INVOLVED ON SHIPS, PLANES,
TANKS, ETC., AND CERTAINLY NOW INVOLVED WITH THIS AUSTRALIAN
JD. FRANCINE: IF YOU LOOK AT INTELLIGENCE
SHARING, THIS IS ONE OF THE BIG TAKEAWAYS FROM RUSSIA'S
INVASION OF UKRAINE. THE U.S. AUTHORITIES LEAKED IT AND
PEOPLE KNEW ABOUT IT, AND IT HELPED THE POLITICIANS TO
PREPARE FOR IT. POST-BREXIT, WHAT DOES
INTELLIGENCE SHARING LOOK LIKE? >> THE INTELLIGENCE GROUPING IS
ROBUST. IT IS HIGHLY UNUSUAL TO SEE THE U.S.
RELEASING SO PUBLICLY THE INTELLIGENCE BEFORE IT WENT
INTO UKRAINE, AND AFTER THE INVASION HAPPENED.
THAT HAS BEEN UNUSUAL AND THAT INTELLIGENCE HAS BEEN SHARED
NOT JUST BETWEEN THE U.K. AND THE U.S. BUT THE U.S.
AND EUROPE. INTELLIGENCE SHOWING OPERATIONS
WITHIN EUROPE. THAT MACHINERY SEEMS TO BE
INTACT. DESPITE BREXIT, THERE IS A
SENSE THAT NEEDS TO CONTINUE HAPPENING EVEN IF THE U.K.
WANTS TO FORGE THEIR OWN PATH WHEN IT COMES TO FOREIGN POLICY
AND ITS OWN SECURITY ARCHITECTURE.
THERE IS A WRECK NATION IT IS IN THE INTEREST OF EVERYBODY TO
DO SO. HOW DOES THAT CHAZ LIKED OTHER
CHALLENGES? -- HOW DOES THAT TRANSLATE TO
OTHER CHALLENGES? THE CHALLENGE POLITICALLY
AROUND THE WORLD WILL BE A MULTIPOLAR EXISTENCE WITH U.S.
AND CHINA AS SUPERPOWERS. HOW DOES THAT INTELLIGENCE
SHARING TRANSLATE TO THAT? RIGHT NOW IT SEEMS ROBUST.
FRANCINE: WHO IS THE BIGGEST ALLY OF THE
U.K. IN TERMS OF INTELLIGENCE SHARING? I IMAGINE THE U.S. >> YOU WOULD HAVE TO SAY THAT
AND THERE IS A TRANSATLANTIC SPECIAL RELATIONSHIP BETWEEN
THE U.S. AND THE U.K., AND A FEW BUMPS
IN THE ROAD BUT SEEMS ON A GOOD TRACK AT THE MOMENT.
THE DEAL ON THE SUBMARINES POINTS TO THAT.
PROBABLY THE BIGGEST SECURITY ALLY AT THE MOMENT FOR THE U.K.
IS THE U.S. FRANCINE: WHEN YOU LOOK AT CYBERSECURITY,
WE THINK A LOT ABOUT STATE-SPONSORED ATTACKS AGAINST
GOVERNMENT WEBSITES OR PRIVATE WEBSITES. HOW IS THE U.K. TRYING TO COUNTERACT THESE
ATTACKS? THEY SEEM TO BE INVESTING A LOT
AND IT. >> THE CYBERSECURITY INDUSTRY
IS BIGGER THAN IT HAS EVER BEEN, A MULTIBILLION-DOLLAR
INDUSTRY EVERY YEAR, AND THAT INCLUDES THE U.K. THE U.K. AS A CENTRAL HUB FOR BANKING
AND FINANCIAL SERVICES, THAT IS ONE OF THE BIGGEST MARKETS FOR
CYBERSECURITY TECHNOLOGIES. BANKS BUY MORE CYBERSECURITY
TECHNOLOGIES THEN MOST INTEREST SHE'S. -- MOST INDUSTRIES. IN TERMS OF CONSUMPTION AND THE
NUMBER OF PEOPLE EMPLOYED IN THE U.K.
AND CYBER ROLES, THAT NUMBER IS PRETTY HIGH.
AS A RESULT OF THAT, WHAT YOU HAVE IS A LOT OF INTELLIGENCE
BEING GATHERED. AS A RESULT, THE U.K.
REMAINS AN IMPORTANT PARTNER FOR THE U.S.
AND EUROPE BECAUSE OF THAT. THEY SEE A LOT. FRANCINE:
THANK YOU, A FANTASTIC PANEL. COMING UP, MORE COVERAGE ON U.K.
SECURITIES. SIR RICHARD DEARLOVE JOINS US.
THIS IS BLOOMBERG. FRANCINE:
COME BACK TO OUR SPECIAL COVERAGE ON U.K.
SECURITY POLICY. DURING US NOW IS RICHARD
DEARLOVE. HE WAS AT THE HEART OF BRITISH
SECRET INTELLIGENCE FOR 40 YEARS. SIR RICHARD WAS THE COUNTRY'S
TOP SPY DURING THE INVASION OF IRAQ. HE JOINS US NOW. THANK YOU FOR JOINING US.
WHEN YOU LOOK AT INTELLIGENCE SHARING, HOW HAS THE WAR IN
UKRAINE AND BREXIT CHANGE THE PLACE OF THE U.K. IN THE WORLD?
RICHARD: IT IS IMPORTANT TO UNDERSTAND
BREXIT HAS NOT MADE A GREAT DEAL OF DIFFERENCE OF WHAT
HAPPENS IN EUROPE, BECAUSE THE POLICY OF THE U.K.
WAS REALLY TO MAKE SURE THE EUROPEAN COMMISSION DID NOT
HAVE MUCH PURCHASE ON ITS NATIONAL SECURITY POLICY.
AS A RESULT OF THAT -- I MEAN, LIFE HAS CONTINUED READY MUCH
AS IT WAS BEFORE AND AFTER. WHAT I WOULD SAY, UKRAINE HAS
ACTED AS A CATALYST, AND PROBABLY PUSHED THE U.K.
AGAIN TO THE FOREFRONT OF EUROPEAN SECURITY, PARTICULARLY
IN THE INTELLIGENCE FIELD. THE U.K. REMAINS THE PRIMARY INTELLIGENCE SECURITY POWER IN
THE CONTEXT, IT HAS PLAYED A MASSIVELY IMPORTANT ROLE IN THE
BUILDUP IN THE WAR IN UKRAINE, AND NOW IN TERMS OF HELPING THE
UKRAINIANS, AND PLAYING A CENTRAL ROLE IN THE ALLIANCE OF
NATIONS SUPPORTING UKRAINE. FRANCINE:
WHAT WOULD MAKE IT MORE PROMINENT?
IS THERE ANYTHING THE U.K. NEEDS TO DO WITH ITS ALLIES
BEYOND BILATERAL AGREEMENTS THAT WOULD GIVE IT MORE
PROMINENCE FOR INTELLIGENCE SHARING? RICHARD: I WOULD HAVE THOUGHT THE
SITUATION IS OPERATING AT AN OPTIMUM.
THE MISLEADING VIEW OF BREXIT IS THAT IT MIGHT HAVE CHANGED
THINGS BUT IT DID NOT CHANGE MUCH AT ALL BECAUSE THE U.K.
WAS CAREFUL NOT TO PUT U.K. EQUITY IN THE HANDS OF BRUSSELS.
IT WAS NOT A PUBLIC LEASE STATED POLICY BUT IT WAS CLEAR
THROUGHOUT THAT PERIOD THAT WE WERE NOT GOING TO ALLOW THE EU
MUCH SAY IN THOSE AREAS. IT WAS VERY DISCREET. FRANCINE:
FROM THE TIME YOU WERE HEAD OF MI SIX UNTIL NOW WHAT WAS THE
BIGGEST CHANGE IN TERMS OF DEFENSE AND SECURITY THREATS?
HAS IT MOVED TACTICALLY TO EVERYTHING ONLINE, CYBER
SECURITY THREATS? RICHARD: OBVIOUSLY THE TECHNOLOGY NOW
PLAYS A GREATER ROLE IN INTELLIGENCE COLLECTION AND
VULNERABILITIES. THAT IS QUITE OBVIOUS. CYBER BECOMES MORE PROMINENT
AND ANY TECHNICAL INTELLIGENCE CAPABILITY WOULD BE A MUCH
BIGGER DEAL. THE COLLECTION OF DATA, THE
ANALYSIS OF DATA, AND DURING MY CAREER I WAS IN THE FOOTHILLS
OF THOSE ISSUES. THOSE ARE NOW MOUNTAINS. IT IS IMPORTANT TO ACCEPT HUMAN
INTELLIGENCE SOURCES AND HUMAN INTELLIGENCE COLLECTION
PROBABLY STILL REMAINS A CORE ACTIVITY.
YOU HAVE TO LOOK AT THE BALANCE OF THOSE TWO ISSUES AND HOW
THOSE VARIOUS SOURCES ARE INTEGRATED. THE WORLD PROBABLY IS MORE
COMPLEX, AND THE OTHER THING ONE HAS TO ACKNOWLEDGE, THERE
IS MUCH MORE PUBLIC AWARENESS OF THE COLLECTION AGENCIES AND
CRISES. LOOK AT THE BUILDUP TO THE WAR
IN UKRAINE WHEN SENSITIVE INTELLIGENCE WAS PUBLICIZED
BEFORE THE INVASION HAPPENED. FRANCINE:
THAT WAS THE FIRST TIME I SAW ANYTHING LIKE THAT.
WHAT YOU THINK AT THE TIME? WE WERE TOLD THIS WAS TO
PREVENT VLADIMIR PUTIN FROM ATTACKING UKRAINE AND SAYING IT
WAS THEIR FAULT. RICHARD: THERE HAVE BEEN FAMOUS
HISTORICAL EXAMPLES. GO BACK TO CUBA AND THE CUBAN
CRISIS. IT WAS BEFORE MY CAREER STARTED.
THAT WAS A PRIME EXAMPLE. ANOTHER EXAMPLE, TOPICAL
BECAUSE IT IS THE 20TH ANNIVERSARY IS THE WAR IN IRAQ.
MISTAKES WERE MADE AND ONE ENDED UP IN A DIFFERENT
ANALYSIS AFTER IT HAPPENED. THERE HAVE BEEN OCCASIONS IN
INTERNATIONAL RELATIONS WERE TENSIONS HAVE BEEN FUSE, BUT
THIS WAS A PRIME EXAMPLE AND MAYBE ONE OF THE MOST
IMPRESSIVE WHERE THE U.S. AND U.K.
GOT THIS ABSOLUTELY RIGHT. FRANCINE:
HOW DO YOU EXPECT THE WAR IN UKRAINE TO END?
WILL VLADIMIR PUTIN BE DEPOSED, AND WHAT IS THE ROLE OF THE U.K.
IN THIS? RICHARD: IT IS FAR TOO EARLY TO SAY.
AT THE MOMENT WE HAVE A CONFLICT OF ATTRITION.
IF IT GOES BAD MILITARILY FOR THE RUSSIANS, THEN THINGS ARE
NOT GOING WELL FOR THEM, THEN THERE IS A FRAGILITY ABOUT
PUTIN'S SITUATION IN RUSSIA. ONE COULD POSSIBLY SEE THAT
INVOLVE SOME SORT OF COUP OR POLITICAL CHANGE IN MOSCOW.
I DO NOT THINK WE SHOULD RELY ON THAT AS A PREDICTION.
A LOT WILL DEPEND ON WHAT HAPPENS IN THE NEXT 6-8 MONTHS.
WE ARE ON THE CUSP OF A UKRAINIAN SPRING OFFENSIVE.
UKRAINE IS GOOD AT MISLEADING THE MEDIA INTO SAYING IT WILL
NOT HAPPEN NOW BUT ONE SHOULD ANTICIPATE SOMETHING DRAMATIC
WILL HAPPEN IN THE NEXT FEW MONTHS IN THE CONFLICT.
FRANCINE: IS IT CLEAR TO YOU IF CHINA IS
A FRIEND OR A FOE IN THIS CONFLICT TO THE WEST? RICHARD:
I THINK CHINA'S POSITION IS DELIBERATELY AMBIGUOUS.
OBVIOUSLY THERE IS AN ALLIANCE OF INTEREST AT THE MOMENT
BETWEEN RUSSIA AND CHINA, BUT CHINA IS AS IT WERE HANDLING THAT RELATIONSHIP WITH CAUTION,
AND CHINA WILL BE WONDERING WHERE THE ADVANTAGE IS IN THE
SITUATION FOR CHINA. WE HAVE SEEN IN BEIJING -- IT IS NOT THE EQUIVALENT OF THE
GATHERING ATTENDED BY A LOT OF WESTERN BUSINESSES -- SO WE
HAVE TO REALIZE CHINA'S ECONOMY IS INTERTWINED WITH THE WEST.
IT IS NOT A COLD WAR SITUATION. CHINA WILL PLAY ITS CARDS
CAREFULLY. DESPITE THE EXPRESSIONS OF
FRIENDSHIP DURING XI JINPING'S VISIT TO MOSCOW, ONE CAN SEE
THERE IS CAUTION. FRANCINE: THANK YOU SO MUCH, SIR RICHARD
DEARLOVE STAYS WITH US, AND WE WILL TALK ABOUT THE NEW THREATS
OUT THERE. FRANCINE:
WHATCOM BACK TO OUR SPECIAL COVERAGE OF U.K.
SECURITY POLICY. SIR RICHARD DEARLOVE, FORMER
HEAD OF MI6. IT STILL WITH US. WHEN YOU LOOK AT NONSTATE
ACTORS IN THE THREATS THEY POSE, IS THERE A NEW THREATS
EMERGING WE HAVE NOT THOUGHT ABOUT YET? RICHARD:
I WOULD NOT SAY THERE IS A NEW THREAT EMERGING BUT ONE SHOULD
APPRECIATE SERIOUSNESS ORGANIZATIONS WHICH ARE NOT
NATIONSTATES, OR AS IT WERE, CAN MOUNT THREATS AND CREATE
PROBLEMS. WE ARE ALL FAMILIAR WITH TERRORIST ORGANIZATIONS,
BOTH BEFORE BUT PARTICULARLY SINCE 9/11, THEY ARE VERY
SOPHISTICATED CRIMINAL ORGANIZATIONS WHICH OPERATE
LIKABLE -- LIKE GLOBAL BUSINESSES PARTICULARLY IN
AREAS LIKE THE DRUGS TRADE, PEOPLE TRAFFICKING.
WE ARE FAMILIAR WITH THOSE TYPES OF PROBLEMS AND
DIFFICULTIES IN DEALING WITH THEM.
THERE ARE IMPORTANT PLAYERS. ONE OF THE ASPECTS OF THE
TECHNOLOGY THAT MAKES OUR LIVES SO EXCITING AND CONVENIENT IS
THIS SAME TECHNOLOGY THAT CAN BE USED TO SUPPORT THE
ASPIRATIONS OF PEOPLE ORGANIZATIONS.
-- OF EVIL ORGANIZATIONS. FRANCINE:
WOULD YOU CONSIDER TIKTOK EVIL? IT HAS BEEN BANNED FROM DEVICES.
RICHARD: IT HAS BEEN BANNED FROM OFFICIAL MEDICATIONS.
THE THREAT OF TIKTOK AND SIMILAR BUSINESSES BASED IN
CHINA IS THEIR ABILITY TO COLLECT DATA, AND THE FACT THAT
THAT DATA REMAINS ON SERVERS INSIDE CHINA.
WE ARE AWARE OF CHINESE LEGISLATION, IF THE CHINESE
ADMINISTRATION SAYS TO A COMPANY, JUMP, THE RESPONSES,
HOW HIGH? THEY CANNOT SAY NO. WE REALIZE IN THIS COMPLEX,
TECHNOLOGICAL WORLD THAT WE LIVE IN -- THE QUOTATION I HAVE
HEARD IS DATA IS POWER, DATA CAN BE USED IN MANY PLATED
FASHION. -- IN MANIPULATIVE FASHION.
THE ENTHUSIASM OF OUR YOUTH FOR TIKTOK IS UNSETTLING BECAUSE
THEY DO NOT UNDERSTAND THE SECURITY IMPLICATIONS THAT LIE
BEHIND IT. FRANCINE: DO YOU SEE THIS AS ONE OF THE
BIGGEST THREATS AS THE WORLD BECOMES MORE POLARIZED AND
BIFURCATED? RICHARD: IF OUR COMPETITIVE RELATIONSHIP
WITH CHINA TURNS INTO SOMETHING MUCH MORE SERIOUS, THAN WE HAVE
EMPOWERED CHINA THROUGH A CERTAIN DEGREE OF NEGLIGENCE BY
LETTING CHINA ACQUIRE A LOT OF DATA.
IT COULD BE A POWERFUL WEAPON IF USED AGAINST US.
ONE HAS TO UNDERSTAND CHINA HAS AN OLD TERRIER MOTIVE --
ULTERIOR MOTIVE. FRANCINE: >> AT THE MOMENT, THERE IS A
LOT OF UNCERTAINTY ABOUT WHAT THE FINANCIAL TURBULENCE MEANS
PERIOD --. >> THE RISK OF AND SOVEREIGNTY
IS LESS SEVERE HERE IN EUROPE -- >> THIS IS AN INDUSTRY WERE
AMERICAN BIG BANKS NEED THE FINANCIAL SYSTEM.
WE ARE GETTING MORE STABILITY. BARRING ANY SHOCKS, GUESSES IT
WILL BE FINE. ANNOUNCER: THIS IS "BLOOMBERG
SURVEILLANCE: EARLY EDITION," WITH ANNA EDWARDS AND MATT
MILLER. ANNA: IT IS 10:00 A.M.
IN LONDON, 5:00 A.M. IN NEW YORK, AND 6:00 P.M.
IN HONG KONG. BIG U.S.
BANKS MAY HAVE TO PAY UP. FTI SEE FACES AROUND $20
BILLION --WITH THE BURDEN TO LARGER LENDERS. INFLATION IN SPAIN FALLS TO
ALMOST HALF. THE ECB DECIDES HOW MUCH TO
RAISE INTEREST RATES. WELCOME TO "BLOOMBERG
SURVEILLANCE: EARLY EDITION." I AM ANNA EDWARDS IN LONDON
WITH MATT MILLER IN NEW YORK. LATER WE WILL GET PT DATA OUT
OF THE U.S. IT SEEMS RETRO TO FOCUS BACK ON
INFLATION AFTER THE TURMOIL IN THE BANKING SECTOR. MATT: IT SHOULD GIVE US A LIFT.
NOT THAT WE NEED IT. WE ALREADY HAVE ACHIEVED A
REENTRY INTO THE BULL MARKET FOR THE NASDAQ 100.
I WILL SHOW YOU THAT ANY MOMENT. FIRST, LOOK AT WHAT IS GOING ON.
S&P FUTURES ARE UP. ALMOST 2% ON THE NASDAQ. 10 YEAR YIELD RISING A LITTLE
BIT AS INVESTORS LET GO OF SOME OF THAT DEBT.
A COUPLE BASIS POINTS FROM WHERE WE WERE AT THIS POINT.
THE DOLLAR INDEX CONTINUES TO DECLINE.
THAT IS A REAL TAILWIND FOR RISK ASSETS.
STRONG DOLLAR TENDS TO HOLD US BACK.
WEAKER DOLLAR NOT ONLY GOOD FOR U.S. STOCKS BUT ALSO INDEXES. I MIX CRUDE IS RIGHT NOW RISING
YOU HAVE SOME INTERESTING STORIES IN THE OIL PATCH. FIRST OFF, -- ARE A LOT MORE
EXPENSIVE. I MIXED FRUIT IS SEEM TO BE DOWN
AS BREAD IS SEEN AS BEING MORE POPULAR.
THAT COULD BE INTERESTING. TAKE A LOOK AT THE NASDAQ 100.
SINCE THE LOWS OF DECEMBER, NOW UP 20%.
THAT IS WHAT WE MEAN WHEN WE SAY A TECHNICAL BULL MARKET.
INVESTORS REALLY HAVE BEEN GETTING BEHIND GLOBAL TECH
STOCKS. WE WILL TALK WITH A COUPLE
MARKET GUESTS ABOUT THAT. I KNOW YOU HAVE BEEN TALKING
ABOUT THAT AS WELL. THIS IS ONE MORE MARKET VOTING
WITH THEIR FEET IN TERMS OF GETTING BEHIND AND SUPPORTING
LOCAL TECH. ANNA: SOME SAY IT MIGHT BE A BULL
MARKET BUT IS JUST JUST A RALLY. A RALLY IN TECH STOCKS WE SAW
IN THE MIDDLE OF 2000. THAT MIGHT BE MEMORY LANE TO GO
DOWN. BUT MARKETS LOOK LIKE RIGHT NOW.
PICKING UP ON THAT POSITIVE CONTINUING YESTERDAY.
GOING THROUGH EUROPEAN MARKETS. MOST ARE IN POSITIVE SCENES.
THIS IS THE GERMAN TWO YEAR YIELD.
WE HAVE QUITE A FLUCTUATING PICTURE WHEN IT COMES TO THE
YIELD STORY YOUR THIRD WE HAVE SEEN RESPONSE TO THE GERMAN
INFLATION DATA. BUILDING A PICTURE TOWARDS THE
NATIONAL LEVEL WHICH COMES IN EARLY AFTERNOON IN TIME.
IT CERTAINLY MOVING IN THE RIGHT DIRECTION.
COMING DOWN QUITE SUBSTANTIALLY FROM THE LAST MONTH PERIOD THAT
IS WITH THE DATA FOR THE REGIONS HAS BEEN SAYING.
BOND MARKETS HAVE BEEN JUMPING ON THAT STORY.
THE EURO HAS BEEN SHOWING TRENDS. THAT IS ACTUALLY THE DOMINANT
THING, MAYBE IS ACTUALLY UNDERLINING SOME OF THE DETAIL
AIRED HEADLINE INFLATION MIGHT BE MOVING IN THE RIGHT
DIRECTION IN EUROPE BUT THE CORE REMAINS PRETTY STICKY. THEY ARE GETTING SUBSIDIES AND
SUPPORT FOR THE WORK IN THE UNITED STATES. SIMILAR ON THE WAY THEY CAPTURE
CARBON ON THAT FRONT. H&M IS UP 14% TODAY.
A REAL CONTRAST TO THE RETAIL SECTOR. TODAY, H&M POSTING A SURPRISE
PROFIT PERIOD ALSO, TO DO WITH TAKING ACTION ON THAT. MATT: INVENTORY OVERHANG, GETTING RID
OF THAT WAS ALSO PART OF THAT LULULEMON STORY YESTERDAY.
THAT SEEMS TO BE A THEME AMONG THE MORE ACCESS FOR RETAILERS. NASDAQ INDEX, MORE THAN 20%
ABOVE ITS SEPTEMBER CLOSING LOW. A THRESHOLD CONSIDERED TO BE
THE STAR OF THE MARKET. JOINING US NOW FOR MORE IS
BLUEBIRDS DANI BURGER. WE HAVE BEEN SAYING THAT BUYING
THE DIP CAN REALLY PAY OFF FOR INVESTORS WILLING TO TAKE THAT
RISK. DANI: THE EQUITY MARKET SEEMS TO
CONTINUE TO FIGHT GRAVITY DESPITE THE FACT THAT WE NOW
HAVE MARKET PRICING IT WOULD SUGGEST RECESSION OR SOMETHING
BAD. THE FACT THAT WE ARE STILL WORRIED ABOUT INFLATION AND
HAVE GONE THROUGH A BANKING CRISIS, THE S&P STILL SAY SPEND
AROUND THAT LEVEL. THE FACT THAT YOU CAN KEEP BUYING THE DIP AND IT IS MAKING
MONEY, MEANS IT CAN KEEP HEADING HIGHER. DATA HAS BEEN FOLLOWED BY .3%
GAINS. IF THAT IS CONTINUED, THAT WILL
BE THE BEST YEAR FOR DIP BUYING. IT IS ALL THESE RISKY THINGS
THAT HAVEN'T BEEN UP, TECH, AS YOU HAVE BEEN MENTIONING, THOSE
SHORTS HAVE BEEN KILLED. IT IS EVENT THE MORE RISKY
STOCKS. I HAVE A CHART OF THE MOST
LEVERAGED COMPANIES. EVEN THOSE HAVE STARTED TO COME
BACK. DIP BUYING IS WORKING. UNTIL THAT PSYCHOLOGY CHANGES,
WE MIGHT SEE IT HANG ON. ANNA: IT IS INTERESTING TO SEE THE
FED NARRATIVE. A STORY EARLIER SUGGESTED THAT
ABOUT JEROME POWELL. I ASKED MYSELF IF HE WAS TRYING
TO CONTINUE SOMETHING NEW OR IF THIS IS JUST THE SENSITIVE
RESPONSE. HE SAID, I REFER YOU TO WHAT I
PREVIOUSLY SAID AIRED -- I PREVIOUSLY SAID. DANI:
THAT SEEMS LIKE SUCH A POWELL ANSWER. IT SHOWS THAT THEY DO NOT GET
ANYTHING DIFFERENT FROM JAY POWELL THAN WE DO.
THIS WAS A REPRESENTATIVE FROM OKLAHOMA TALKING ABOUT A
MEETING THEY HAD. HE SAID, LOOK AT THE DOT PLOT.
WE ARE GOING TO GET TO 5.1% WHICH INDICATES ONE MORE RATE
HIKE. IT COMES BACK TO MARKET PRICING
AND CUTS. POWELL KEEPS SAYING THAT IS NOT
THEIR BASE CASE THE IT AND HIS PRESSER.
THERE IS STILL THIS MARKET DISCONNECT. MATT:
THEY CONTINUE TO TELL MARKETS NOT TO COUNT ON CUTS.
THANK YOU SO MUCH. DANI BURGER TALKING TO US ABOUT
BUYING THE DIP. LET'S GET OVER TO EUROPE.
THE PRESIDENT IS GIVING A SPEECH ON EU CHINA RELATIONS. WE ARE JOINED BY BLOOMBERG'S
EUROPEAN CORRESPONDENT MARIA TADEO. WHAT IS ON THE LINE AND HOW IS
THIS INCREDIBLY IMPORTANT EU CHINA RELATION? MARIA:
THIS IS THE SPEECH THAT EVERYONE IS PAYING ATTENTION TO.
IT IS SEEN AS PERHAPS THE ROADMAP TO HOW TO DEAL WITH
CHINA. THE SEEMS TO BE A VERY COMPLEX
BUT ALSO DIFFICULT RELATIONSHIP. YOU REPORTED ON THIS FOR MANY
YEARS. I JUST DID A PANEL WHO TOLD ME
THEY CANNOT FULLY CUT OFF ECONOMIC TIES WITH CHINA BUT
THEY ARE GOING TO TAKE RISKS. THEY HAVE TO MEET WITH THEM ON
CLIMATE AND ON TOP OF THAT THERE IS THE SECURITY ASSET. SPEAKING AS WE SPEAK, I KNOW
YOU ALSO FOCUS ON THE WAR IN UKRAINE AND RUSSIA.
THERE IS DISAPPOINTMENT FROM A NUMBER OF OFFICIALS WITH THIS
IDEA THAT THE PRESIDENT IS NOT DOING ENOUGH TO REIN IN
VLADIMIR PUTIN. HE WENT TO RUSSIA FOR THREE
DAYS IN THE NEXT THING WAS AN ANNOUNCEMENT THAT THEY WERE
GOING TO PUT TECHNICAL NUCLEAR WEAPONS THERE.
THIS IDEA THEY COULD HAVE ESCALATED SIMPLY HAS NOT
MANIFESTED. CHINA IS NOT DOING ENOUGH.
THE TIMING IS ALSO VERY IMPORTANT.
SHE WILL BE GOING TO CHINA ACCOMPANIED BY THE FRESH
PRESIDENT. THE MESSAGE THEY WANT TO SEND
IS THAT THIS IS A RELATIONSHIP THAT WILL NOW BE DONE WITH THE
EU, NOT THE FRENCH OR COUNTRIES. ANNA:
THAT IS THE GEOPOLITICS ON THE MORNING.
WE HAVE INFLATION DATA OUT OF SPAIN.
WE HAVE SEEN DATA TOWARDS THE NATIONAL NUMBER. HERE'S OCEAN -- EUROZONE
INFLATION DATA LATER THIS WEEK. THIS CAME IN BELOW ESTIMATES.
HE DROPPED FROM SIX MONTHS TO 3.3%.
CORE REMAINS PRETTY STICKY. MARIA: YES. YOU HAVE SPANISH INFLATION.
THIS IS A DATA POINT I KNOW VERY WELL.
WHEN YOU LOOK AT SMASH INFLATION, YOU HAVE THE
DIFFERENCE BETWEEN HEADLINE INFLATION AND CORE HEADLINE
INFLATION, SOON AS ENERGY GOES DOWN IT WILL IMMEDIATELY GO
DOWN. THAT IS ESSENTIALLY WHAT WE
HAVE TODAY. WHAT SHOWS IS THAT IT IS STILL
STICKY. IT IS NOT COMING DOWN. WHAT I WOULD SEE IS AT THE WAY
IT GETS MEASURED IS SLIGHTLY DIFFERENT.
MAYBE THE DEFINITION IS DIFFERENT. OVERALL, WHAT IT SHOWS ON THE
BIGGER PICTURE IS THAT THE BANK HAS SAID THAT THEY DO NOT SEE A
TRADE-OFF BETWEEN PRICE STABILITY AND FINANCIAL
STABILITY. AS SOON AS THE CONVERSATION
COMES DOWN, YOU ARE BACK TO THAT HIKE. NEXT DICTATION OF THE TIME WILL
BE ANOTHER INCREASE, THE QUESTION IS, HOW BIG? ANNA:
THANK YOU VERY MUCH. FAST-CHANGING DATA PICTURE.
OVER TO THE BANKING SECTOR. EXPECTING MOST U.S.
BANKS -- LAINEY ON THE AFTEREFFECTS.
IN EUROPE, AN EXECUTIVE BOARD MEMBER SAYS THAT BANKS HAVE NOT
SEEN A LOT OF -- A LOSS IN DEPOSITS DESPITE THE FINANCIAL
STABILITY CONCERNS. >> THERE IS A LOT OF
UNCERTAINTY ABOUT WHAT IT MEANS. OVERALL, I WOULD SAY AT THIS
POINT IT LOOKS THAT WE HAVE A SOMEWHAT SMALLER PROBLEM THAN
WE ARE SEEING IN THE U.S.. SO FAR, IT LOOKS AS IF OUR
BANKS ARE ACTUALLY QUITE RESILIENT. ANNA:
JOINING US NOW IS MICHAEL MOORE. THAT IS AN INTERESTING CONTRAST
ACROSS ATLANTIC. THAT REALLY HELPED CUT THROUGH
NATIONAL HEADLINES. IS SHE RIGHT TO POINT TO THIS
DIFFERENCE? >> YES, WE HAVE NOT.
SOME OF HIS -- SOME OF IT IS A STRUCTURAL DIFFERENCE FOR
EUROPEANS. THEY HAVE NOT HAD THESE BIG
INVESTMENT BOOKS, HAVE NOT GOTTEN HIT QUITE BY THE RATES
THERE. THIS IS ONE WHERE THE BANKS
HAVE FARED BETTER. THERE ARE STILL SOME HEADWINDS
THAT THEY ARE FACING BUT THOSE ARE ON THE EARNINGS FRONT THAN
THE OUTFLOWS. MATT: BIG STORY IS THAT THE FBI SEE
WANT TO PLUG THIS $23 BILLION HOLE AFTER THE COLLAPSE AND IT
IS GOING TO PUT THAT TAX ON BIG BANKS MORE THAN COMMITTEE BANKS.
THAT IS A VERY POLITICAL STORY. >> YES.
THERE IS PRECEDENT FOR THESE TYPES OF ASSESSMENTS.
THEY TEND TO LEAN ON BIGGER BANKS BECAUSE OF HIGHER
PROFITABILITY BUT ALSO IT IS MORE POLITICALLY PALATABLE. THE BANKS -- THE BANKING
INDUSTRY WILL HAVE TO PAY TO BUILD THIS DEPOSIT FIND A UP.
IT IS MORE ABOUT WHO SHARES IN IT AND THE TIMING. MATT:
THANK YOU VERY MUCH. LOOM WORKS MICHAEL MOORE
TALKING TO US ABOUT BANKS ON BOTH SIDES OF THE ATLANTIC.
LET'S TAKE A LOOK AT SOME OF THE STOCKS WE ARE WATCHING IN
THE PREMARKET. RESTORATION HARDWARE IS ONE I
HAVE MY ON. MAYBE SOME PEOPLE REFER TO IT
AS OUR H. DOWN 7% IN THE MARKETS AFTER
MISSING ESTIMATES. IT ALSO GIVES A DISAPPOINTING
OUTLOOK FOR THE FISCAL FIRST QUARTER MISSING ON ITS REVENUE
FORECASTS AS WELL AS OPERATING MARGINS PERIOD THINGS DO NOT
LOOK NEARLY AS GOOD. WE HAVE CRUISE LINES GAINING
ACROSS THE BOARD. IN THE PREMARKET, THEY ARE
CONTINUING TO RISE. NORWEGIAN CRUISE LINE, ALL UP
ON AND MOST UPGRADES OVER THE PAST FEW DAYS. REPORTS FROM WELLS FARGO AS
WELL AS SUSQUEHANNA. CRUISE LINES HAVE BEEN ON A
ROLL AND THEY CONTINUE TO RISE. I WANT TO TALK TO YOU ABOUT A
PENNY STOCK. THEY MAKE ELECTRIC CARS WHICH I
FIND A LITTLE BIT EXCITING. YESTERDAY, THEY FINALLY STARTED
PRODUCTION. OF COURSE, IT IS ONLY A $.44
STOCK BUT IT IS UP 25%. NOTHING TO SNIFF AT.
YOU'RE STILL MAKING A LOT OF MONEY.
I WANT TO TALK ABOUT SCHWAB. IT IS A STOCK THAT PEOPLE ARE
WATCHING. NOT AS MANY UNINSURED DEPOSITS
BUT CLIENTS ARE PULLING CASH OUT OF THE LOW INTEREST RATE
THINKING CAPS AT TWICE THE RATE ANTICIPATED. YOU ARE NOT GETTING PAID BY
HOLDING CASH THERE, WHAT WOULD YOU NOT PUT YOUR MONEY
SOMEWHERE ELSE THAT PAYS MORE WHERE YOU WILL GET TWO OR THREE
TIMES AS MUCH. OUTFLOWS IN THE U.S.
ARE A REAL ISSUE. ANNA: CERTAINLY SOMETHING TO WATCH.
IN THE U.S. CONTEXT, TALKING ABOUT THE ROLE
THE MONEY MARKET PLAYS. COMING OUT THE CASH COMING UP
ON THE PROGRAM, WE TALKED TO SEBASTIAN RAEDLER. THE VALUE OF THOSE STOCKS AS
COMPARED TO THE REST OF THE STOCKS.
AND WE WILL TALK TO ANNEKA TREON . THIS IS BLOOMBERG. ♪ MATT: WELCOME TO "BLOOMBERG
SURVEILLANCE: EARLY EDITION." I AM MATT MILLER IN NEW YORK
WITH ANNA EDWARDS IN LONDON. YOU WERE TALKING ABOUT THE RATE
THAT BANKS PAY VERSUS MONEY MARKETS.
WE WERE BOTH TALKING ABOUT THAT AT THE END OF THE LAST LOCK.
I SAW THIS CHART EARLIER. I DON'T KNOW HELPED US PUT IT
TOGETHER BUT IT IS A NATION -- A FASCINATING LOOK AT THE DATA
HERE. REWARDING INVESTORS WERE KEEPING THEIR MONEY THERE.
THE INTEREST RATE IS LESS THAN HALF A PERCENT IN TERMS OF THE
AVERAGE OF WHAT YOU GET ON BANKS SAVINGS ACCOUNTS. MEANWHILE, MONEY MARKET RATES
ARE 4.7%. SO MUCH MORE. THAT IS WHAT YOU SEE THESE
DEPOSITS FLOWING OUT OF U.S. INKS ACCOUNTS -- U.S.
BANK ACCOUNTS. JOINING US NOW IS OUR BLOOMBERG
MARKETS LIVE EDITOR. THIS IS ONE OF THE CONCERNS,
ONE OF THE BIG STORIES AND I WONDER IF BANKS WILL HAVE TO
MAKE THIS DELTA UP OR IF WE WILL SEE MONEY MARKET RATES
COME DOWN. >> ABSOLUTELY. ONE THING IT REALLY DOES
HIGHLIGHT -- WE WILL GET DATA LATER TONIGHT SO WE WILL HAVE
SOME INSIGHT ON WHAT THAT LOOKS LIKE IN THE AFTERMATH. I THINK WHAT IT DOES, IT SHOWS
US THE FED EXTENDING ITS BALANCE SHEET TO ACCOMMODATE
THESE CONCERNS THAT COULD UNWIND QUANTITATIVE TIGHTENING.
BAKING STOCKS DO NOT HAVE THE SCOPE TO DO VERY WELL, RELATIVE
TO TECH WHICH IS LIKELY TO DO VERY WELL WHEN WE SEE THE FED
EXPENDING -- EXPANDING ITS BALANCE SHEET.
I KNOW THE FED HAS PUSHED BACK ON THAT. MONEY MARKETS ARE STILL
CONVINCED THAT THE FED WILL CUT RATES SOMETIME THIS YEAR.
THAT IS A STARK CONTRAST TO WHAT WE HAVE SEEN JUST LACKS --
JUST LAST MONTH. ANNA: THANK YOU FOR JOINING US. FOR MORE MARKET ANALYSIS
INCLUDING THAT STORY, MLIV <GO> IS THE BUTTON.
THIS IS BLOOMBERG. ANNA: WELCOME TO "BLOOMBERG
SURVEILLANCE: EARLY EDITION." COMING UP, WE WILL SPEAK TO
SEBASTIAN RAEDLER ABOUT AMERICAN GLOBAL RESEARCH.
WHAT DOES HE MAKE OF THE RALLY WE SEE IN TECH, HOW ROBUST IS
THE BANK SECTOR AND LUXURY STOCKS, AND IF HIS FOCUS IS ON
CREDIT CONDITIONS. WE WILL GET TO ALL ABOUT. ANNA: THIS IS "BLOOMBERG
SURVEILLANCE: EARLY EDITION." REVERSALS HAVE DIP BIAS ON THE
BREAK OF A HISTORIC YEAR. BANKS MAY HAVE TO PAY UP,
ALMOST $20 MILLION IN COST. INFLATION RATE IN SPAIN FALLS
BY ALMOST HALF. BUT THE PRESSURE THAT THAT IS
CAUSING PROBLEMS AS IT DECIDES WITH HOW MUCH TO RAISE INTEREST
RATES. I AM ANNA EDWARDS IN LONDON
WITH MATT MILLER IN NEW YORK. SOME GOOD SIGNS BUT WARNING
SIGNS AS WELL. MATT: THE BASE EFFECT THIS TIME LAST
YEAR WERE STRONG. AS A RESULT, WE HAVE SEEN LOWER
INFLATION THAN HAD BEEN ANTICIPATED. WE WILL BRING YOU THAT DATA
WHEN WE GET IT. SOME OF THE BIG DATA TOMORROW
AS WELL TOMORROW. S&P FUTURES ARE UP OR 10TH OF A
PERCENT -- ARE UP .4%. WHITE 5% ON THE S&P 500.
ALMOST 2% ON THE NASDAQ. THE NASDAQ IS ALMOST IN BULL
MARKET TERRITORY. IT IS A GREAT QUARTER FOR TECH
STOCKS, BOOSTED BY THOSE BUYING GLOBAL TECH WHEN THEY ARE
GETTING OUT OF BANK SHARES. YOU ALSO HAVE INTEREST RATES
RISING BECAUSE INVESTORS ARE GETTING OUT OF THE PERCEIVED
SAFETY OF GOVERNMENT DATA. THAT ALSO PROVIDES SOME
COMPETITION. HE CONTINUES TO COME DOWN. IF THIS WAS A SAFE HAVEN TRADE,
IT WOULD BE GAINING LIKE IT WAS LAST YEAR. THERE STILL BUYING ASSETS.
THE OUTLOOK MIGHT BE A LITTLE BIT BEARISH BECAUSE IS -- IT IS
A LITTLE MORE EXPENSIVE. EVEN THOUGH IT COULD REPLACE
BREAD. RESTORATION HARDWARE IS ONE
THAT MISSED ON ITS FOURTH-QUARTER RESULTS, MISSED
WITH OUTLOOK AND DISAPPOINTING ANALYSTS WITH ITS FIRST QUARTER
AND 2024 OUTLOOKS. MISSING ON REVENUE AND
OPERATION -- OPERATING. CARNIVAL, THE BIGGEST PREMARKET
GAINER IN THE GROUP YOU ALSO HAVE ROYAL AND CARNIVAL CRUISE
LINES. FARADAY FUTURE AND ELECTRIC,
COOL LOOKING, NICHE CARS. IT IS A PENNY STOCK BUT IS
GAINING BIG PERIOD PENNY WATCH IS ONE WE ARE WATCHING. TWICE THE RATE. WHAT DO YOU SEE IN TERMS OF
EUROPEAN TRADE? EUROPEAN STOCKS ARE UP SHY OF
JUST 1%. CONTINUING TO GAINS WE HAVE
SEEN EARLY ON. HEAVY SELLING WHICH WE SAW IN
THE BANK SECTOR. THIS IS THE EURO, MAY BE
DOMINANT RISK ON TEAM. THIS IN THE DRIVER SEAT HERE.
VARIOUS REGIONS AT THE SPANISH AND NATIONAL NUMBER.
WE HAVE SEEN A LITTLE BIT OF WEAKNESS COME THROUGH YOUR ON
YEAR. ENERGY BUSINESS IN THE U.K.
WITH SOME THINGS HAPPENING THROUGH THE U.K.
PROGRAMS THAT WOULD HAVE BEEN AROUND CARBON CAPTURE. INTERESTING CONTRAST BETWEEN
THE TWO STORIES THERE. RETAIL AND SWEDEN COUNTERING
THE NEGATIVITY FROM YESTERDAY. THAT WAS A DOWN WEIGHT WITH
EUROPEAN STOCKS MORE GENERALLY. SECONDHAND MARKET.
THAT IS ALSO ON TOP OF INVENTORY ISSUES. MATT:
THAT HAS BEEN A PROBLEM. LULULEMON YESTERDAY HAD A HUGE
POP ON THAT. LET'S TALK ABOUT THE BROADER
EQUITY PICTURE. SEBASTIAN RAEDLER THANK YOU FOR
JOINING US. THIS IS REALLY A RISK RALLY WE
ARE SEEING. A BOUNCE BACK A FEARS. SEBASTIAN:
I THINK BANKING CONCERNS MIGHT BE BEHIND US. THERE WILL BE A MACROECONOMIC
WHICH WILL TAKE 10 MONTHS FOR THE INTEREST IN COMPLETION. AS A CONSEQUENCE, WE THINK
THERE IS ANOTHER SET OFF TO THINK WILL BE A DOWNSIDE UNTIL
THE THIRD QUARTER. ANNA:
DOES THAT MEAN ALL THE PAY IS IN THE EQUITY MARKETS?
HAVE YOU SEEN ANOTHER LETDOWN? SEBASTIAN:
IT IS STILL VERY TIGHT. A LOT OF OUR INVESTORS ARE
SCRATCHING THEIR HEADS. U.S.
GROWTH IS STILL ON 50 PERCENT. IT TAKES TIME FOR IT TO FEED
THROUGH ITS GROWTH. ANNA: IN EUROPE, WE FOCUS ON A NUMBER
OF SECTORS THAT HAVE A REAL RESIDENCE IN EUROPE.
ONE OF THOSE IS LUXURY. THIS SHOWS THAT LUXURY STOCKS
ARE AT A RECORD PREMIUM TO THE BROADER MARKET. WE HAVE SEEN A LOT OF
ENTHUSIASM . WHAT DO YOU MAKE OF THAT SECTOR
IN THE EUROPEAN CONTEXT? SEBASTIAN: LOOKS VERY HIGH.
WE ARE RESPECTFUL OF THE CHINA REOPENING.
THE PERSPECTIVE IS, WHAT WILL BE THE MAIN MACRO STORY?
CHINA REOPENING ON THE POSITIVE SIDE OR THE FALLOUT FROM THE
DETERIORATE -- DETERIORATING CREDIT SIDE?
WE DO NOT WANT TO HAVE ANY CYCLICALITY IN OUR PORTFOLIO. OUR BIAS IS MORE TOWARDS THE
DOWNSIDE BECAUSE SO MUCH GETS PRICED IN AT A TIME WHEN THE
BOUNDARIES WILL BECOME VISIBLE. MATT:
LET YOU THINK ABOUT EARNINGS? EVERYONE IS FOCUSED ON STOMACH
FAILURES BUT ALSO INFLATION AND MACRO POLICY. WHEN IT COMES TO EARNINGS, ART
STOCKS VALUED RIGHT? ARE WE OVERLOOKING THAT?
SEBASTIAN: DON'T THINK OF PRICING A
RECESSION. THE EASY WAY TO LOOK AT IT IS
THIS THE EARNING FORECAST REFLECT WHAT IS LIKELY GOING TO
HAPPEN? WE SEE AROUND 20% DOWN OR
EUROPEAN EQUITIES. THIS WILL COME ONCE THE GROWTH
IS FULLY VISIBLE. RISK PREMIUMS ARE VERY HIGH. MATT:
EARLY YEAR LOOK LIKE EVERYONE WANT TO GO OVERSEAS.
DO YOU STILL HAVE ABOUT MOMENTUM? SEBASTIAN: WE HAVE SEEN THE FIRST PULLBACK.
WE THINK THAT WILL CONTINUE FOR TWO REASONS
IT WILL DEPEND ON THE GROWTH PICTURE AND THE INFLATION
PICTURE. THE MAIN IN OUR VIEW HAS
ALREADY DIMINISHED. VALUE UNDERPERFORMS GROWTH AND
EUROPE UNDERPERFORMS THE U.S. WHICH IS THE GROWTH REGION.
SICKLE PLAY -- CYCLICAL PLAY TENDS TO UNDER GROW.
THAT IS NOT GOOD FOR THE PERFORMANCE. ANNA:
THANK YOU VERY MUCH. SEBASTIAN RAEDLER, BANK OF
AMERICA GLOBAL RESEARCH. COMING UP, WE TALKED TO ANNEKA
TREON FROM THEN LEN SHOT KEMPEN. ANNA: THIS IS "BLOOMBERG
SURVEILLANCE: EARLY EDITION." LATER TODAY, AN INTERVIEW WITH CITY TREE -- CITIGROUP CHIEF
U.S. ECONOMIST. THIS IS BLOOMBERG. ♪
ANNA: THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION."
I AM ANNA EDWARDS WITH KRITI GUPTA AND MATT MILLER.
SPANISH --I AM ANNA EDWARDS IN LONDON WITH MATT MILLER IN NEW
YORK. UNDER PRESSURES UNDERSCORE THE PRESSURE FOR BANKS AS THEY LOOK
AT INTEREST RATES. WE WILL GET INFLATION DATA OUT
OF EUROPE AS A WHOLE. JOINING US NOW IS ANNEKA TREON.
OUT OF VAN LANSCHOT KEMPEN. SEEING THAT SPANISH NUMBER,
SEEING THE INFLATION DATA DROP FEELS GOOD I SUPPOSE.
YOU HAVE BEEN LOOKING TO THIS FOR SO LONG. HOW LONG BEFORE THE ECB HAS TO
KEEP HIKING? ANNEKA: THE ECB IS WORKING VERY HARD. THE ISSUE IS THE ECB HAS TO GO
FORWARD AND IF IS NOT DRASTIC ENOUGH, CB HAS TO CATCH UP
LATER ON. IT IS INDEED A TRICKY ONE. ANNA:
HOW MUCH MORE HIKING LIES AHEAD? IF THE DOTS ARE POINTING TO ONE
MORE HIKE , IF THAT IS WHAT WE EXPECT
STATESIDE, HOW MUCH MORE CAN WE EXPECT? ANNEKA:
THERE ARE TWO THINGS THAT WE ARE CONCERNED ABOUT.
WE THINK THE MARKET IS GETTING A BIT AHEAD OF ITSELF. SECOND OF ALL, RATE HIKES INTO
NEW INTO THE REAL ECONOMY AND ACCIDENTS HAPPENING, THOSE ARE
CONCERNING. WE THINK THE ECB HAS TO DO
ANOTHER HIKE. AS LONG AS CORE INFLATION REMAINS STUBBORNLY HIGH AND
STICKY, IT WILL BE TOO EARLY FOR THE ECB TO TURN DOVISH WORD
-- DOVISH. MATT: WHAT ABOUT THE ECB?
BY THE WAY GOOD MORNING, THANK YOU FOR JOINING US.
WHAT ABOUT THE FED? WE HAVE SEEN THE YIELD CURVE
INVERSION COME IN QUITE A BIT. WE HAVE SEEN FINANCIAL
CONDITIONS TIGHTENING A LOT AFTER THESE BANK FAILURES. ARE THEY READY TO STOP OR EVEN
PIVOT? ANNEKA: IF YOU LOOK AT THE DATA,
ECONOMIC DATA HAS BEEN A MORE RESILIENT. IT IS PRETTY SOLID.
THE ISSUE IS THAT YES THE FED HAS TO FOCUS ON INFLATION
THE DUAL MANDATE. THERE ALSO FOCUSED ON FINANCIAL
MARKET STABILITY. THEY ARE POSITIVES WHEN THE
BANK STARTS TO COLLAPSE. ESSENTIALLY THE OXYGEN IS BEING
PULLED OUT. IT IS ABOUT MONEY GROWTH
WEAKENING, CREDIT BOTH SLOWING, MONETARY POLICY. TO PUT IT ALL TOGETHER, THERE
IS ONE MORE ROUND TO GO. MATT: WE WERE TALKING ABOUT THIS
YESTERDAY ON BLUEBIRD RADIO. WHERE I THINK IS FASCINATING IS THAT THE BAILOUT HAPPENED
-- THE PEOPLE MORE THAN 3 MILLION BEL DOUBT IN DEPOSITS
-- DOES THAT CREATE REAL MORAL HAZARD, DOES THAT CONCERN YOU
FOR THE FUTURE? WHY WOULD IVAN CARE, WHAT WOULD
IT LOOK AT MIGHT BALANCE SHEET? I KNOW I WILL GET SAVED. ANNEKA:
I FULLY AGREE. IT IS MORE PHILOSOPHICAL.
WHERE IS THE ROLE OF BANK IN A WORKING SOCIETY AND TO WHAT
EXTENT IS THERE UTILITY? POLICYMAKERS HAVE TO PROTECT
DEPOSITORS OR BANKS, COMMERCIAL ENTITIES. BY DEFINITION, ASSETS ARE
SOMEWHAT RISKY AND THEN YOU HAVE ISSUES.
IT BECOMES QUITE EIGHT PHILOSOPHICAL TOPIC. AT ONE POINT THEY STOPPED
RELYING ON THE FED INPUTS, STOP PUTTING THEIR HAND THERE.
DON'T MIND IF THE RECESSION COMES.
WE ARE THERE TO HELP PROTECT ALL DEPOSITORS.
EVEN THE BIG ONES. ANNA: GOING BACK TO WHERE THAT MEANS
RATES GO. HIS ARGUMENT IS THAT THE FED
WILL START CUTTING RATES SOONER THAN EXPECTED. DO YOU EXPECT MORE IN THE
MARKETS EVEN IF THAT IS NOT THE BASE CASE? ANNEKA:
THE PROBLEM IS THAT WE GET INTO ALL SORTS OF SEMANTICS.
TO BE EXPECT INFLATION WILL COME DOWN? YES WE DO. IT IS BASED EFFECTS, ALL ABOUT
COMPARISON LEVELS. IT IS THE FED GOING TO START
CUTTING RATES? THAT DEPENDS ON CERTAIN
CRITERIA. THE ANSWER IS NO. DEPENDS ON OTHER FACTORS AND
WHETHER OR NOT THAT CONTINUES TO BE STRONG. THE MARKETS ARE ALREADY PRICING
THIS IN. ANNA: THANK YOU VERY MUCH.
ANNEKA TREON FROM VAN LANSCHOT KEMPEN.
THANK YOU FOR JOINING US. MORE ON EUROPE'S RACE TO BUILD
UP THEIR EV INDUSTRY AND THAT INCLUDES THE SUPPLY CHAIN.
THIS IS BLOOMBERG. ♪ ANNA: THIS IS "BLOOMBERG
SURVEILLANCE: EARLY EDITION." I AM ANNA EDWARDS IN LONDON
WITH MATT MILLER IN NEW YORK. THE EUROPEAN COMMISSION
PRESIDENT HAS BEEN SPEAKING IN BRUSSELS AHEAD OF HER VISIT TO
CHINA. WE ARE JOINED BY BLOOMBERG'S
OLIVER. HOW IS SHE LOOKING TO OPEN
COMMUTE OCCASIONS WITH CHINA? IT IS CLEAR THAT IT WILL BE
CRUCIAL. >> SOME OF THE HEADLINES COMING FROM THE SPEECHES WILL BE FROM
DIALOGUE BUT A LOT OF THE SPEECH WAS FROM DIALOGUE. ON THE NATION, IT HAS CLOSED
OUT. IT SAYS IT IS CLEAR THAT IT IS
SYSTEMICALLY TO PUT CHINA AT THE CENTER.
THEY HAVE TURNED A PAGE ON OPEN TRADE AND HAVE MOVED TOWARDS
CLOSING UP AND SECURITY. THE BIGGEST RISKS TO EUROPE ARE
IN MILITARY AND THESE ARE PARTICULARLY TRUE OF RAW
MATERIALS. IF YOU TALK ABOUT NOT DECOUPLING BUT DE-RISKING. THAT IS BECAUSE YOU HAVE A MUCH
FURTHER DEVELOPED RAW MATERIAL POLICY.
THEIR COMPANIES ARE WAY AHEAD, PARTICULARLY ON REFINING. MATT:
IS NOT ABOUT WHERE THE MATERIALS ARE LOCATED BUT WHO
HAS THE CAPACITY. NO ONE ELSE HAS REALLY INVESTED
IN THIS. PAINT THE PICTURE FOR US AS TO
HOW SUPPORTIVE AND WHERE ELSE WE ARE SEEING CAPACITY BEING
PUT IN? >> YOU HAVE ONE REFINER IN ALL
OF EUROPE. NOW, YOU HAVE ALL OF THESE
COMPANIES RUSHING IN. THEY ARE HERE EAST OF BERLIN.
IT WILL BE A HUGE AMOUNT OF APPETITE FOR LITHIUM.
THIS IS WHAT THEY WILL PROCESS. IT IS WHAT WILL GO INTO
BATTERIES. BUT THIS COMES INTO ACTION AND
FULLY OPERATIONAL, THEY HAVE 8% SHARE GOING STRAIGHT TO
MERCEDES. I SPOKE TO THE CEO EARLIER. ARE THEY AT RISK OF PERMANENTLY
STAYING BEHIND? >> THIS IS DEFINITELY A RISK
AND I AM VERY SURE THAT EUROPEAN POLITICIANS ARE SYSTEM
-- SYSTEMATIC. I SEE A CHANGE IN EUROPE. POLITICIANS ARE WILLING TO ACT.
NOW WE WILL SEE IN THE COMING WEEKS IF WE ARE ABLE TO. >> SO THIS IS FROM THE
INFLATION ACT. ARE THEY LOUD ENOUGH FOR EUROPE
TO MOVE FAST ENOUGH TO MOVE QUICKLY? ANNA:
THANK YOU VERY MUCH, OLIVER. VERY TIMELY.
TALKING ABOUT RELIANCE COMING THROUGH FROM CHINA AND THE
IMPORTANCE OF THAT. WE WILL CONTINUE TO FOCUS ON
THAT AND BRING YOU COVERAGE. THAT IS IT FOR THE EARLY
EDITION. "BLOOMBERG: SURVEILLANCE,"
IS NEXT. WE HAVE A REALLY BIG DROP IN
INFLATION. REGIONAL INFLATION AS WELL. WE WILL ALSO GET PCE DATA.
THIS IS BLOOMBERG.
