Good morning from London.
This is Bloomberg Markets. Today I'm on Edward alongside Tom
Mackenzie with the cash trade just less than an hour away.
Here's what you need to know. Stocks rise after softer than expected
US jobs Data Revives Bets The Fed will cut rates this year.
The Israeli military says 100,000 civilians in Rafah are under evacuation
orders. Preparations for a ground invasion move
forward. This after Israel closed a humanitarian
crossing into Gaza following a barrage of rockets fired by Hamas blast.
Xi Jinping touches down in Paris to begin a three nation European tour as
French President Emmanuel Macron seeks to reset ties with Beijing.
With an eye, of course, on the geopolitics.
We check in on these markets. The US futures, after a very solid day
on Friday, looking to modest gains of a 10th of a percent.
So the gains coming through for the Nasdaq up 2% by the end of Friday.
The S&P get gains of a little over 1%. The context is you're still about 2% off
2.4% of those March records for US markets.
European futures also in the green. We continue to focus, of course, in the
currency space, euro dollar currently at 107 and on the central banks, of course,
a big week for the B 1 to 7 on euro dollar.
Not a lot of movement there. The Bloomberg dollar index up a 10th of
a percent. Markets today starts right now. Welcome to the program, everybody.
It's a bank holiday Monday here in the U.K., but it is a trading day as normal
in much of Europe and indeed much of the world, although we're a little light in
Asia session as well, because Japan is closed.
So we don't have treasuries trading right now.
Of course, futures are trading no cash, treasuries trading until around the
middle of the day, European time. So we'll look ahead to that.
We do have European markets outside of the U.K., though, trading today.
And so we'll get you set up for your trading day ahead.
And Tom, very nice to have you with me this morning as we do just that there's
there's a lot, as you mentioned there in your markets check.
There's a lot of geopolitics to focus in on.
And we'll certainly return to the Israel story, which seems to be developing very
quickly, very rapidly around Rafah. And we'll certainly get an update on
that shortly. And with that in mind geopolitically,
let's focus on the bigger macro picture, shall we, to start with where we've been
in terms of the jobs story. U.S.
stocks up on Friday, yields down. Of course, the market really quickly
jumping on this, what looks like Goldilocks set of of data around jobs.
That's exactly how Mohamed El-Erian characterized it, isn't it?
So 175,000, so well below the estimates. The estimates have been for 240,000 in
terms of nonfarm payrolls. They came in at 175,000.
The unemployment rate ticking up to 3.9%.
But as you know, and of course, the important is as well around the average
hourly earnings to see that wage impulse and whether or not that's going to lead
to that stickier services inflation. And that came in.
There's Lewis smallest increase that we've seen since June of 2021.
So again, it seems to all align for a positive, more positive scenario for
this Federal Reserve. Mark Cranford down from home life team
saying don't get heaviest gains in terms of pricing in too many cuts, but it
seems to build on that relative dovish ness that we got from Jay Powell on
Wednesday. Yeah, absolutely.
And that was the theme of the week really, wasn't it, That relative dovish,
just muted dovish is perhaps at the beginning of the week and then the
markets maybe did slightly look to get ahead of their skis at least by the end
of the week, given the softness in that labor market data.
So to come back to pricing in two cuts in 2024 from the Fed, but as you point
out, it wasn't just the jobs data that came in soft, it was that US services
data that also came in soft. But is it and it's interesting to think
about where we are on the overall data picture because I want a house, how long
it takes before we start getting worried.
On the other side of that Goldilocks story about the weakness in the US
economy, we looked at the City Surprises index and actually it's just ticked into
negative territory and it's been quite a rapid slow down into negative yet.
So at what point is the cheering around a softer labor market, as you say, start
to lead to handwringing that this is a labor market that's starting to crack?
And there have been some analysts suggesting that a number in terms of the
overall unemployment rate of plus 4%, 4.2%, 4.3% is when the concern really
comes through. And since the red flags for the Federal
Reserve And the other question is, to what extent is this a Fed now where the
bias is on the other part of its mandate, the bias has shifted from the
focus on inflation to the focus on the jobs market.
There may be some who would suggest that, given the softness we saw on
Friday, even as it's characterized as globally blocks maybe reemphasize, is
that if there are these two elements at play within the mandate, the emphasis
lies on the jobs scenario for the Federal Reserve.
It does, and that's the data side. We've also got, though, of course, the
issue in story to factor in. So even though we saw yields dropping,
we of course, are then, you know, there's a test of that yields drop,
isn't there coming. And that's the large amount of issues
that we're going to get, like 69 billion USD at least this week, which could cap
again the move lower any of that we've seen.
Exactly. So if yields are moving lower because
people are moving into treasuries, one expectation of a slower US economy.
Well, how does the the big supply of treasuries that's coming, how does that
push against that? So that's certainly something we focus
on. We've also seen some commentary coming
around to the Japanese story. So we'll certainly move back to that
story. And we're continuing to watch Dollar
yen, which is a153 91. And let's move on to the Middle East,
because as you were saying at the end of your last program, Tony, there's been a
lot of very quick developments happening in in Gaza.
We know that Israel is dropping flyers, asking eastern Rafah residents to move
out. We've
we've seen plenty of developments around the AIDS story.
Let's get all of the latest, shall we, on the Middle East and bring in
Bloomberg's Henry Meyer, who's watching all of these developments as they come
in. Henry, where shall we saw that start,
Shall we? At at the the most recent news flow?
Some focus then rightly, on Rafa and what's about to happen there.
And yes, good morning. Well, of course, this is the
announcement that a lot of people have been dreading.
1 million Palestinian civilians who are currently sheltering in Rafah, which is
the southernmost point of the Gaza Strip on the border with Egypt.
The United States as well, which has been making desperate efforts to try and
reach a cease fire agreement. And, of course, the families of
hostages, Israeli hostages who are kept in Gaza.
More than 130 of them, many of them dead already, but many still alive who have
been hoping for a deal, too, to free the hostages in return for Palestinian
prisoners. As you say, things are moving very fast.
What we have as of now is an announcement that 100,000 civilians have
been ordered to evacuate from Rafah. This doesn't mean that fighting will
start immediately, but it's a prelude to an offensive, clearly.
Henry, you touched on those cease fire negotiations.
They were taking place over the weekend in Cairo.
We are reporting that they look like they've stalled.
And then you have this new change on the ground that seems to be transpiring at a
pretty rapid clip. Is this potentially a ploy from Israel
to ramp up pressure on Hamas around those talks, or is this ultimately a
decision that Israel is moving forward with that attack that they have long
touted? Well, I mean, obviously time will tell.
But I mean, to be honest, it looks as though they've made a decision to go
ahead with the offensive, which would essentially, you know, suspend those
talks. Obviously, they there's no chance of
reaching a ceasefire in such conditions. Henry, thanks very much.
Thanks for the update. Henry Meyer with the latest on the
developments on the ground in the Middle East.
And all of that you would think would have an impact on what's going on in
energy markets. And so we looked at oil prices to Tony
for any reflection of tensions. What's interesting is that the oil price
was already moving higher this morning before we started to see Raffa mentioned
more intensively by by Israel. And we see oil prices up by half a
percent. 8341 is where we trade.
But this isn't just that geopolitics. It's also what the Saudis are doing with
pricing and raising their prices, sending oil to Asia, to those to those
key Asian buyers, of course, as you say, suggesting that they're relatively
comfortable in terms of the pricing, the output that currently is coming through
from Opec+. So that is absolutely an element within
the oil story. 8341, as you say, up 5/10 of a percent.
But this has added another layer to it because of course, when you look at the
conflict now that appears to be on the brink and Rafa, we have to tie in and
consider as well the reaction potentially from Houthi rebels, a
reaction, of course, from Tehran and of course, an eye on Hezbollah, as there
are also reports that Israel has hit targets deep inside Lebanon as well.
So all of these things coming together as potential risks, of course, for the
energy markets as we continue, of course, to take into account the
importance of that humanitarian crisis as well.
Again, one of over well over a million civilians sheltering in Rafah.
And again, this is a move that the US has suggested would be something they
would be opposed to. Yeah, certainly.
We'll watch for continued reaction from Western leaders.
We get. We're seeing Josep Borrell, the foreign
foreign policy voice out of Europe, saying that Israel still needs to grant
access to humanitarian aid. So criticizing the rockets that were
fired at one of those humanitarian aid crossings between Israel and Gaza, Gaza,
but saying that Israel still needs to grant access to humanitarian aid, not
rockets, of course, fired by Hamas. By Hamas.
They took account for that deadly rocket attack.
Yeah, exactly. And so we'll look for further, as you
point out, this this the scale to be seen of what happens in
Rafah, but it has been ahead of any movement has been flagged as something
that various Western countries don't want to see.
So we'll see how that develops. We'll look for reaction from the US,
from the UK as well. Although the UK is closed today, as I
mentioned, it is a bank holiday, a public holiday here in the UK, but that
hasn't stopped the politics from developing Friday over the weekend.
Plenty of politics to talk about. The Labour Party winning ten out of the
11 mayoral races that were being contested at the end of last week,
including winning in the in the Midlands, which was a seat that the
Conservatives were really looking to hold.
And now we brace for what could be another attempt to tack to the right to
take on the Reform Party. But yeah, absolutely.
So we heard from 12 of them and of course she was fired from her cabinet
position as she was speaking over the weekend, saying that you do need to take
that right turn from the prime minister, characterizing it was a paraphrase of
what she's been saying. But also she says this is a prime
minister that needs to return to those core conservative values.
But to your point around the Midlands and the hope from the Conservatives that
they would be able to hold on, of course, to the West Midlands and
Birmingham mayoral seat with Andy Street, it was very popular.
That didn't happen. Labour won and history coming out and
saying actually we need to be a moderate party and so on again underscores the
tensions at the heart of this Conservative party as they grapple with
that 20 basis point lead that Labour has over them and then the shellacking they
had in these elections. Yeah, once again, an identity crisis
meant for the Tories to deal with. The Conservatives will soon act,
particularly clinging to some analysis that came out of one pollster who was
making a translation from these local results into a national poll and saying
if the same was seen at the national level, then still concluding this is a
first for Sky News, this poll that Labour would be 32 seats short.
Now, that is not a conclusion that a lot of other politicians have reached with
the Conservative Party for obvious reasons, are jumping on that one.
All this points out that people vote very differently in local elections to
to the to the national polls. And then the Telegraph going on to say
that autumn is now when we expect to see a vote.
The split, the plans for summer, which were never really plans, but we've had
rumours about they have been shelved and now it seems switching back, we're back
to, to the autumn. Yeah.
Really interesting. So pushing back the time frame according
to that reporting to the autumn to give themselves more time.
But again, it seems like, as you say, that may be another familiar line of
attack from the Conservatives is that this is a Labour Party that will have to
do a coalition agreement with quote unquote dangerous parties like the SNP
and the Greens is is potentially in a line of attack that the Conservatives
will start to pursue. It is and one that Labour will push back
on days out very loudly. Right.
Let's tell you what's coming up this week.
We've got plenty to focus in on. As we mentioned in our headlines, the
Chinese leader, Xi Jinping, is in France today and will be in Europe throughout
the week. He'll also be visiting Hungary and
Serbia later this week. We'll get earnings from Aramco, from BP.
So plenty on the oil watch. Disney and UBS also in focus on
Wednesday, we'll get earnings from Toyota and Uber in the auto space then.
AAM we also get the US ten year note auction we were mentioning that they
large amounts of supply coming and we had the Bank of England rate decision on
Thursday Friday we get UK GDP and IAG earnings from the aviation sector.
So I mean she in Europe is obviously going to be one of the big sort of set
piece events that we're going to be following this week.
We have a guest later on in the program to talk about its significance.
Yes. Touching down, meeting the French prime
minister and both Macron and Xi Jinping putting out editorials, columns over the
weekend in various French newspapers outlining what they hope to get out of
this. Really important, of course, for Xi
Jinping. Macron saying he wants a reset with
China, but it's Caroline Connan, of course, when on the ground in Paris,
like Macron is also having to be framed, at least hemmed in to some extent by
what Brussels and wider Europe is thinking about in terms of that
relationship. That, of course, has become far more
tense with a shift in the view within Brussels as to how aggressive to go on
that relationship pushing back on the trade front.
And our guest, he's coming up at 830 London time, actually takes that view
and runs with it and say for that reason, it's significant that Ursula von
der Leyen is going to be meeting at these meetings with Macron.
So allowing that European voice to come through because it is at the European
level that we've seen a lot of that tension play out, whether it's
investigations, subsidy investigations into EVs, into parts of the renewable
energy space, I mean, medical parts. There are plenty of areas of context,
whether this visit focuses on those or whether this visit manages to focus on
some of the areas that Europe would like China's support on, like the Middle
East, like war in Ukraine. That's also going to be interesting to
see. Certainly, President Xi Jinping will be
looking for quite an quite win win collaboration on areas like climate
change. That will be a focus for him, renewable
energy. But as you say, this is a remarkable
shift in the last few years from Europe in terms of how they position around
China. It wasn't that long ago that China and
Europe had cobbled together a joint investment plan, an investment agreement
that then they ended up ripping up. That was only a few years ago.
So the shift has been pretty remarkable. Yeah, the shift is remarkable.
And then so so that's going to be part of our programming today.
We'll also, of course, dive into the UK conversations this week because the Bank
of England is coming up just later on this week, on Thursday.
So we'll look ahead to reading the dovish dovish from the hawkish.
When it comes to the bank, I think Bailey has been sounding a little bit
more dovish, doesn't he? Can they align with the views around the
ECB? Maybe they can go in June, maybe they
have to hold a little bit longer. So that's the crucial Bank of England
Central bank story for us, of course. Coming up then, as we've been
discussing, China's Xi Jinping touching down then in the French capital for his
first EU trip in five years, the first one in five years.
We take a look at what he's aiming to achieve.
Plus, Warren Buffett says Apple will remain Berkshire's largest investment
despite his sale of a large chunk of his holding.
We get the latest from the company's annual meeting.
If you have any questions, of course, of your own for our guests, send them to us
on IBD Plus to go. This is Bloomberg. This couldn't have been scripted better.
This report runs the tables for a good report, a Goldilocks report that will
please the Fed and please the markets. This is a good report across the board
for validating what we heard from Jay Powell on Wednesday.
People were starting to be concerned that we needed more hawkishness than the
Fed. We did not get it on Wednesday.
We got a more muted version of what's going on.
And I think that this data is starting to prove that out.
Now we're pricing in two cuts for the year.
I think that's about right. People were looking for a little bit of
a slowdown because they don't want to have to think about rates staying high
for much, much longer. And they don't want to think about a
hike. They want to start thinking about
easing. This puts that back on the table.
You've already seen those odds go higher this morning.
I think the Fed would like to get a cut or two in this year.
And today opened the door or for them to try to get that done.
Bloomberg TV. Guess they're weighing in on the latest
US jobs data and its implications for Fed policy.
Let's get another perspective. Sam Eaton joins us, the chief economist
at Bank of Lombard, and he's with us this morning.
We're very pleased to have you with us. Sammy.
Thank you for being with us. So in the wake of that pretty dovish
week last week, dovish from the Fed, a dovish jobs report at the end of last
week, you expect three rate cuts from the Fed kiss.
Did you have that expectation going into last week?
If so, you must be pleased to see that jobs report on Friday.
Absolutely. We we you know, we fully understand that
we're a bit of an outlier here. And we were expecting to remove a cut
from us, you know, So we were waiting for polls to invalidate the idea
of of, you know, potentially a cut very soon.
But, you know, there he goes. And he basically says everything that we
wanted to hear talking about, you know, wages, productivity, the fact that
inflation might get back get back into this disinflationary trend.
So there is a very narrow path. We understand it's a narrow path, but
there is a narrow path for a July cut. And, you know, we're going to get three
inflation reports before the July FOMC. We obviously got already a payrolls
report. We get two more.
So there is plenty of data to be judge and jury of what might eventually happen
in July. And there is this narrow path for a cut
if and that's a big if. But if we start to see inflation getting
back into easing mode. Hmm.
How weak would the US economic data story have to get Sami to justify a cut
in July? I think it's more about inflation than
it's about economic activity. I mean, this is the story of 2023.
We've seen inflation come down pretty materially without significant growth
weakness. So growth can actually be okay.
What's important is that inflation gets closer to target.
It doesn't have to be at target, but it needs to be closer to target.
Well, within a, you know, around 2.5, perhaps north of 2.5 range, but close to
there when it comes to this year. Let's hope that the wedge with CPI
narrows a bit and we get CPI below 3%. But the key here and this is why we were
happy with the payrolls on Friday, the key here is wage dynamics.
And they seem to indicate that will be we'll be able to see lower inflation in
the months to come. And so is this then a fed with a mandate
When they're looking at the mandate, the priority, the emphasis now is going to
be on the jobs component rather than inflation.
Is that where the pivot, at least the needle has swung?
Well, that was a very interesting answer by Bode.
Right, which is as inflation gets back closer to target, the second part of the
mandate basically becomes visible again, Right.
When inflation is is much higher. That's the only thing you focus on.
But with inflation coming closer to target and let's not pretend that
inflation is in the high fourth or high five, it's I mean, PCE is at 2.7, right?
So we're we're far closer to target. Inflation has come down a lot, although
it's still too high for comfort.
It is closer enough to target for employment to become key again.
And very clearly there is an estimate. We hear the Fed will react more weakness
in unemployment. Then they will react to stickiness in
inflation for sure. Okay.
Projecting out to the end of this year then, Sam and you giving us a view on
inflation broadly, what what is your outlook for this for this US economy?
I think it's a moderately healthy environment.
Domestic demand is is relatively resilient.
I mean, this is the story in the U.S., right?
The labor market and particularly wages is driving spending.
There is spending on services. And that spending on services is
obviously supporting services inflation. I think that that reality will hold
somewhat. We don't expect a huge deterioration in
the labor market. And as we don't, there is no reason to
be particularly fearful of what happens to consumption.
And if consumption is okay, the US economy will be okay.
So we do believe the US economy will be okay.
But in a context where, you know, as supply shocks recede and as demand gets
back in line, there is no reason to fear a significant rebound in inflation.
So we do expect moderately healthy economic conditions for the rest of the
year. Hmm.
Yeah, we will see about those supply shocks then.
Sammy. If they do recede, we just get some
lines coming out this morning from Maersk, the shipping business saying the
effects of the situation, the Red Sea widening.
So we'll continue, of course, to watch what's happening there.
If I could pivot to what's going on in the U.K., Simon, we get a Bank of
England rate decision, of course, this week.
We've heard some quite dovish commentary from the Bank of England's Bailey saying
the strong evidence that inflation is receding.
But not all members of the MPC sounding that selfishness.
Other voices maybe a little bit more hawkish.
What's your expectation for the messaging this week?
I think the situation is much simpler for the Bank of England as for the ECB,
by the way, and even easier for the Swiss National Bank than it is for the
Fed. I mean, very clearly on this side of the
Atlantic, inflation has come down a lot. There is less demand pressure than we
have on on on the U.S., of course. And now you're right, supply pressure
can come back and and come against the strategy of of central banks in Europe.
But when we think about the U.K., when we look at current inflation numbers,
when we look at labour market data, it does open the possibility of a cut in
June. Next Thursday, we do expect more empty
members to be in favor of a cut. And if indeed inflation continues to
come down very positively, as it has in the past few months, there is no reason
for the Bank of England to hold a cut in in June.
So as for the ECB, things are much easier on this side of the Atlantic and
clearly we're on in for cuts here. Okay, so send me the sequencing.
See that you see that from those three central major central banks this June
and June for the ECB a be away and potentially July from the Fed, which
suggests that there isn't that significant divergence amongst the
central banks in terms of when they when they cut rates.
To what extent will the PEO and ECB to what extent does this open the door for
sequential cuts or whether they come through with a cut and then pause, see
how things are? Just how much caution will there be in
terms of the sequencing going forward? Well, it's a very good question.
I mean, the economic outlook is pretty decent in Europe as well.
It was a very hard 2023, but with inflation coming down below the level of
wages, you know, you get some form of rising real income and budgeting power
again, which will allow for a better and improved outlook in 2024 versus 2023.
So the growth picture is decent. Inflation is coming down and the idea is
not to go for a full rate cutting cycle. This is a recalibration of monetary
policy simply because inflation came down a lot.
When you bring interest rates at those levels, because inflation is close to
10%, when inflation goes to, you know, south of 3%, you need to recalibrate
policy somewhat. So it's more that we expect a couple of
cuts and and then they will settle to to a more neutral level.
Sammy, thank thanks so much for your time.
Sammy Jo, chief economist at Bank Lombardo, joining us this morning on
this Monday morning to talk us through his thinking, post the jobs report.
We'll bring you coverage of the Bank of England's rate decision and Andrew
Bailey's news conference on Bloomberg TV this Thursday, 12:00 UK time.
This is back. Sadiq Khan has been duly elected as
mayor of London for an historic third term in the capital
for Labour's Sadiq Khan, adding to a weekend of woe for the Prime Minister,
Rishi Sunak, the results of England's local election show that the Labour
Party is on course to win the next general election, expected to be held
later this year. The Conservatives lost over 470 council
seats across England. Labour gained over 180 under the 11
regional mayors up for election. Ten victorious candidates.
Will labour the one chink of light for the Prime Minister?
The conservative mayor of Tees Valley, Ben Houchen, clung on, but down in
Brexit, backing Blackpool South, another defeat for the government's.
The parliamentary by election there seeing the only Westminster seat up for
grabs going to Labour. This was the last major test of public
opinion before a general election which has to be held within nine months.
But so far here in Westminster the threat of a co-ordinated move to oust
the Prime Minister seems to have receded.
Instead, his right wing party critics signalling they want Sunak's to own
these losses and the larger one that's expected to come.
Labour have been maintaining this 20 point lead and ever since Rishi Sunak,
the third Prime Minister of this Parliament, came into office.
There's nothing he's done that's been able to move that lead.
In fact, if anything, things have got slightly worse.
It wasn't all plain sailing for the Labour Party though.
Signs The Opposition is losing support among some communities because of its
stance over the conflict in Gaza. Rishi Sunak insists that he is
soldiering on. These results, though, suggest the
public is hungry for change. Okay.
Bloomberg's Alex Morgan reporting on the latest election woes for the
Conservative Party. Let's get more detail on this and
analysis and bring you bring in Bloomberg's news director in the
immediate region, Ross Matheson. Ross,
that package outlines just how challenging this moment is for the prime
Minister. Rishi Sunak tonight, the election
results that we've seen over the last three days or so to the general
election, we know as can be called this year, very, very likely to be called
this year, and how that could change the thinking around that key vote.
Well, it's always a bit difficult to extrapolate directly from a local
election to a national election. People can vote one way in a local
election for certain candidates and then vote different in a national election.
But there is a bit of a read through that we can clearly see here, which is
that people are turning away from the Tories in general and they're not just
all turning towards Labour either. They've been turning to some of the
other parties on the left, so they don't seem that impressed with either of the
major parties. But certainly there's a strong message
that, you know, after many, many years in office that what the Tories have done
bad on the economy at home, be it the policy over Brexit and overseas, that
there is a sort of a sense of frustration, exhaustion, really on the
part of the electorate, and that's got to be a significant cause for concern
for Rishi Sunak going into a national election later this year.
Yeah, and one of the reasons why it's difficult to take those local results
and then sort of extrapolate what happens at the national level is because
of all of those parties that get a lot more of a look in at the local elections
than than they would maybe on the national stage.
So with that in mind, it's interesting that some of the loudest voices from the
Tory party over the weekend have been talking about the need to tack to the
right to take on reform, sort of ignoring the threats from other left
parties. But anyway, this tack to the right, we
could get more on that this week than it seems in terms of immigration and the
like. Well, that's right.
It's interesting to see that pressure on Suge Knight to move even further to the
right to differentiate the Tories from all the parties on the left, where it
seems like a lot of the undecided voters or the voters who are moving between a
bunch of smaller parties are really on the left and possibly, you know, voters
there still up for grabs for the Tories, but instead they've made the decision,
it seems to tack to the right, as you were saying, and that's going to be
statements, comments, particularly around immigration, perhaps curbing
legal immigration further, you know, just limiting the number of workers
coming in. Of course, that, you know, argues the
point about Brexit, which is that as we found out, we do need foreign labour to
come and do certain things and they've been shortages of that in the economy.
But that seems to be a point that they're going to press him to make,
which is to curb immigration further from Europe and also perhaps to really
pull out of the European Year. The Court On Human Rights in Europe.
Yeah, So that's something we'll watch for.
Then we'll also be watching for the parties to respond to the latest
developments in Gaza. Ross And I know that, you know, you'll
be following this as well, but we have seen news lines about imminent activity
in Rafah, of course, in the last in the last well, just last hours, the Labour
Party, as we heard from Alex Morgan in that package earlier on, the Labour
Party has struggled to to get the right note to suit all of its supporters here
on this subject. Well, that's right.
And in fact it's a long running challenge for the Labour to get their
messaging right when it comes to issues in the Middle East and particularly
again most recently around Gaza. And we saw some signs that they did lead
voters as a result of this in the local elections.
And it's been a real challenge for Keir Starmer, you know, not just with the
external messaging, but to manage the mood within his own party on it and all
the different factions in his party, some who want a very aggressively pope,
pro-Palestinian stance, others who are more cautious and so on.
And so it's really got the party tying itself in knots.
And so if we do see indeed an offensive in Rafah in the coming days, we see
Israel make good on that threat to go in there to that enclave in the south of of
Gaza. That's really going to be a difficult
one for the messaging for labour. And we can see that being a real issue
for them into the national election also.
Yeah, of course we're seeing a similar issue as the Biden administration in the
US as well in terms of that anger around around US support for Israel in of
what's going on in Gaza within some communities at least when we step back
and look at what's happening in Europe in terms of some of the political
trends. I just what you what MALONEY Of course,
in Italy on the right, you've got the Spanish socialists facing a challenge,
very precarious coalition at play in Spain.
You've got, of course, the National Front and the strength that's being
shown in France, a challenge for Macron. You got the European elections later in
Europe and of course, you've got their swing, it seems, to the left leaning,
moderate, left leaning party in the Labour Party in the UK.
And that, of course, could transpire later this year.
What is there is a broader narrative, a broader theme that we can take from some
of these political shifts in in Europe, all these very idiosyncratic stories.
Well, it's interesting because you do see some parties going left, some going
right, voters going left and vote is going right.
And really what it all is about is being populist.
It can be populist on the left and on the right.
But what you're trying to do is capture, you know, and really ride what you think
voters are feeling and responding to that and really tapping into that.
And you can see people doing that, but moving very much further to the left and
very much further to the right, whether it be here where a lot of parties in the
center, they're really kind of clustering.
In the center and very hard to tell them apart.
You had center left, center right and not much difference in between.
Now what we're seeing is a lot of daylight between these parties and
people going in either direction to try and capture voters.
So you do see those parties on the far right still being resurgent in some
places. We might see that come up again in the
European parliamentary elections. But you also see these parties very much
on the hard left. Well, thanks very much.
Thanks for bringing us the latest, being business director for the AMEA region,
Roslyn Matheson, with the latest developments in UK politics.
Let's take a broader look at the political space in Europe this week.
And we go to France, where the Chinese president, Xi Jinping, is in Paris as he
kicks off a three nation trip to Europe. His first visit to the region in five
years. And it's aimed at stabilizing ties in
the face of mounting trade tensions. Geopolitical scene is also likely to get
a look in. Bloomberg's Caroline Connan joins us
from Paris with details. Lee, what does the French president hope
then to achieve during this this visit from the Chinese?
There is a charm offensive here going on, of course, and Michael wants to be
the voice of the EU when it comes to trade relations and rebalancing this
trade relationship with China. But remember, one year ago.
Exactly. Merkel was also on a trip to China, and
you had President Xi who invited him to the Guangdong residence where his father
used to be a governor. So Macron wants to kind of return to the
same symbol, and he's going to have a very intimate personal touch during the
trip, taking Xi Jinping to the pier in the mountains in the southwest of
France, where he used to spend time as a child.
So there is reciprocity in the symbols. Of course, Macron is also looking for
reciprocity when it comes to the trade relationship with China.
And for that, he's invited Ursula von der Leyen's, EU Commission president
this morning to take part in the talks. We've a she during this trilateral
meeting this morning. And of course, finally, France also has
some economic interest because, of course, France also wants some Chinese
investments in France. They are looking for some investments in
the battery sector. We could see some announcement later
today. Tony, what are the key messages then
that we expect to hear from Macron on trade with China?
And is Macron going to stick to the script when it comes to Europe or is he
going to carve his own path? Over the weekend.
He's already done an interview saying he's calling for a reset of economic
ties with China. Of course, France is being hurt as well
by the Chinese flooding the European markets with cheap electric vehicles.
There are thousands of them waiting in Belgium ports to flood the European
markets. And as you know, the EU has started a
probe into subsidies to these Chinese EV vehicles coming to Europe.
Of course, there is also the cognac probe, which is directly targeting
France because France represents 99% of the cognac market.
That was a reaction from China after the EU probe into the sector.
And for Xi Jinping, you know, the interesting thing is this trip he's
chosen to visit France, Serbia, Hungary, which are basically three European
countries that he sees are more receptive to the Chinese message,
perhaps a better attentive EU than the Germans, for example, because Merkel has
taken a more pragmatic approach of trying to include China in the global
trade discussions. And thinking about what else these two
want to get out of this trip. There are of course, there is the
business side and the investment theme looms large.
Chinese investments in Europe has sometimes met with mixed reception.
Sometimes it's very welcome and sometimes people ask questions about it.
What's the theme going to be this week, Caroline?
Yes, they are. There is already some Chinese
investments in the EV sector in France. But of course, Merkel is looking for
much more for, you know, the size of investments that he use.
So, for example, we've Hungary, because Viktor Orban, of course, is
welcoming some Chinese investments already.
There was a €7 billion Chinese EV factory announced in Hungary.
And there's also going to be some Chinese investments in in a new EV
factory in Hungary. That's going to be the biggest in
Europe. So a merkel is not looking to do exactly
the same as Viktor Orban, of course, but also taking some interest in the Chinese
investments. But at the same time, he has to be very
careful, because you heard from the German chancellor, Olaf Scholz, when he
travelled to China last month that there is this overcapacity of Chinese products
in the European market. So he has to really it's going to be a
balancing act between looking for Chinese investments in France and being
the voice of the EU. Carney Is there any sense at all that
Macron could do anything to curtail President Xi and China's China's support
for for Russia? This is really what President Macron has
been trying to do over the past year, really.
There's been a lot of meetings between French and Chinese diplomats behind the
scenes. Merkel really believes that Xi Jinping
can be a key mediator in the war in Ukraine because of Beijing's influence
over Vladimir Putin, even though Beijing, of course, has always claimed
its neutrality in this conflict. And interestingly, this week is going to
coincide with the inauguration of Vladimir Putin for his fifth term.
So we will see if there is a phone call between Xi Jinping and Vladimir Putin
during this European trip. Thank you very much.
Caroline Caroline Connan joining us there from Paris with the latest on she
in in Europe on all the geopolitical concerns.
Of course, we're closely monitoring what's happening in Gaza today.
We've had lines coming out about Rafah and the activities taking place there.
Israel, we now understand, has struck the Rafah area from which projectiles
were launched. So this in reference to the Hamas
projectiles that were fired at one of the border crossings between Israel and
Gaza over the weekend. So Israel saying they're taking action
in retaliation for that. This was overnight and this is where the
projectile that hit Kerem Shalom, that was that crossing that I mentioned.
Also happening overnight, the Israeli Israeli Defense minister Galanter said
that there was no alternative but to go into this operation or start this
operation in Rafah. We know that the US Secretary of
Defense, Lloyd Austin, had been very concerned about the evacuation of
Palestinians before any activity took place.
So we will continue to monitor response from the West to the current action
being taken by Israel. Coming up on this program, we will get
back to some of the corporate news that is crossing to bring back Seminole this
morning office to bail out the French tech giant ramp up with a fresh
bid from some of its bondholders. In fact, they received a few beers.
We'll take a look at that and some of the other stocks to watch.
That's next. This is my back. Craig It's also about access to the
game. And yeah, there needs to be the
streaming distribution channels. How are you looking at that?
We are looking at that right now. Exactly.
You're looking at it any way you look. Yeah, absolutely we are.
Give us a sense of who you're in talks with in terms of distribution, in terms
of streaming, because there are opinions out there suggesting that perhaps people
are not really tuning in and watching live.
How do you respond? What's the definition of tuning in?
Turning on the TV and turning on Channel 44 and say, okay, I'm going to watch the
next four and a half hours. That's tuning in, right?
But to an 18 year old, to a 25 year old tuning in, maybe 12 seconds on the
phone. Okay.
Well, let me see this then. I'm gonna go back and do that and then
I'll come back over here to another 14 seconds on this for you.
That, to me, is tuning in. That's to me is a market that's
enormously wealthy. Right.
And enormously influential in the direction where
you're going. So, look, we are talking to
corporations. I'm not going to give you the names of
those corporations, of course, but we just did a great partnership with
Google. The reality right now is that there is a
great divide in pro golf. PGA and live negotiations are ongoing.
This is a decision imminent, you think? I mean, from your perspective, how are
you looking at it? Is it important that there is a merger
or not? Look, I'm just going to answer the CEO
of Live. My boss told me live is not going to go
anywhere. You know, it'll be well and truly
in operation, running well past his death.
He's a young guy, so he's asked me just to stay focused and
deliver live. Live as a standalone entity.
He's invested billions of dollars into this, and we're starting to see the
creation of an hour away. But this.
So we're going to stay focused on it. As the live golf CEO, Greg Norman.
The full exclusive interview on Live Golf's plans for the future will run in
the next edition of Latitude with Haslinda Amin that's airing in June.
Let's go from the golf to the markets and get to our markets live.
Executive editor Mark Cudmore. He's not on a golf course.
He's here in the office with us well, in Singapore remotely with us.
Very nice to have you with us, Mark. Let's talk about these markets in a
couple of minutes. And we had a couple of guests on last
week talking positively about Chinese stocks in a way that maybe European
guests haven't done for a little while. How excited are you by Chinese stocks
these days? Very as you're not probably surprised to
hear. Look, this is a theme that I was early
on. You know, I talked about it last year
about being bullish on Chinese stocks. It was the wrong time.
It does feel like the narrative is changing as there's a couple of dynamics
here. First of all, we know that so much
foreign flows have come out. The world is underexposed.
The story, this story, if it can turn around and some of the drivers are the
fact that the government is providing multi-pronged support, its monetary
support, fiscal support, it is providing reform.
And ultimately these stocks are just valued extremely cheaply.
And I think you're potentially getting a narrative here where people are going to
be slow to buy this bullish narrative, given all the kind of the policy twists
and turns from Xi Jinping over the last number of years, given the the
occasional crackdown on the private sector, it's not where the museum is
going to suddenly run away rampant. But you've just got a story which is so
discounted that with a number of positives coming in and a national team
of buying stocks, it is much easier to start buying a very discounted asset.
Okay. Okay.
So Mark is positive on Chinese stocks. We take that message loud and clear from
China to the US and Treasuries. We saw, of course, the textbook market
reaction to a weaker than expected jobs report.
We saw yields coming down at the short end on Friday.
We now look ahead, though, to a lot of issuance coming this week.
What do you expect that to play out? Yeah.
Look, I think the big dynamics the next couple of months is steepening of the US
yield curve. So I think that the dovish reaction
function of the Fed and the jobs report will help to put a cap on front end
yields in the US. But ultimately all that supply is going
to add to the upward pressure on the long end.
And he said that technically the short end yields broke that broke their
uptrend, that long end yields didn't. And you're seeing in a return to term
premium, as we do worry about that kind of that supply that is ongoing.
So I think steepening is going to be dynamic.
We'll see. We might eventually, in the next couple
of months, see the end to the longest ever recorded yield curve inversion.
Okay, Mark, thank you very much. Sharing that monkeys live.
Executive editor Mark Cutmore with us to talk about the markets in a couple of
minutes. And you can find plenty on these markets
from market. The rest of the markets live team
globally, of course live you go is the function to use on the Bloomberg
terminal. Okay.
Let's check in with stocks to watch. Of course, the first 100 UK stocks
closed for a bank holiday as a number of interesting corporate stories to monitor
and stock stories as we lead up to the opening, of course, in Europe.
Murdoch coming out some really interesting lines.
The shipping companies saying the shipping industry's capacity will be
reduced 15 to 20% in the second quarter for Asia to Europe shipments because of
the rerouting, of course, around and away from those who think attack.
Some are saying that they are using 40% more fuel per journey and charter rates
are currently three times higher and often fixed for five years.
The stock, by the way, is down 12% over the last 12 months or so.
We have to wonder as well whether that tension exacerbates on the back of what
we're seeing in Gaza and in Rafah right now.
So the lines coming through from Merck in terms of the shipping impacts from
this crisis. Yeah, absolutely.
And really interesting to see whether the market takes that as new
information, more detail on what we heard from them just very recently in
that earnings report or whether this is, you know, is it is it just more
information, just more detail or is it a sort of a change in tack as far as the
guidance is concerned? Let's go to Atlas.
This, of course, is the French tech company much embattled because of its
plight of late? Well, it's received a number of bids.
It's received offers to help bail out the company.
That will frame the discussion with stakeholders around its restructuring.
We understand it's received a number of bids from bondholders from Bain Capital
is not going to pursue that one with Bain Capital, also from Daniel
Kaczynski's EP Equity investment and from one point.
So there's plenty of voices at play here.
This is going to result, we understand, in significant new equity issuance,
whoever gets their hold at their hands on this business and dilution for
shareholders. So we continue to focus in on that.
They have got some interim financing with bondholders and is still in talks
with the French government. Okay.
Really important technology story when it comes to France.
And we continue to monitor that stories that could be on the move, of course, at
the open, but also the chip makers as well as semiconductors.
A couple of events coming through, a couple of factors to bear in mind.
One is what's happening with Foxconn or Hon.
Hai, which is reporting a 19% jump in sales.
And this is a company that gets more than half of its revenue from Apple.
So suggesting that demand for Apple products is still there.
By the way, they still get a lot of demand as well from the picture.
They're trying to diversify there. And then you've got the lower rates, low
yields environment, which could also prove supportive for the tech sector in
Europe. So semiconductors on the back of the
story out of Foxconn or Hon. Hai, and of course that lower yield
environment expectations that maybe you could get two cuts this year.
So maybe a lift for the semiconductor story.
Yeah. Okay.
We'll keep an eye on the stocks in that sector then.
We are, broadly speaking, expecting to see a bit of a bounce at the start of
the European trading day. Just remembering what happened during
Friday session. We were stronger across European equity
markets in response to that jobs report out of the United States.
So to some large degree we factor that in, but we could see some strong
performance still today. US futures point modestly higher for the
start of the US trading day. We'll be back with the European Open
next. This is Bring Back. Welcome back to markets today.
Few minutes to go until the sounds of cash equities trading.
It's on. We've got European equity market futures
tracking a little higher. We are of course, is at the UK market
this morning though trading in London because it's a public holiday.
But we are expecting to see a little bit more upside from European stocks,
probably still casting our minds back to Friday and the gains we saw post the
European close over on Wall Street. So dovish commentary, relatively dovish,
of course, from Japan on Wednesday and then followed up, as you say, by those
nonfarm payrolls coming in softer than expected, wages also increasing less
than expected and unemployment ticking up to 3.9% and yields dropping as well.
And so you saw that gain of around 2% for the Nasdaq, 1.4% also for the S&P
still below the March records. But again, the upside, you did see gains
for the week for U.S. stocks.
Yeah, absolutely. So that dovish ness in the language from
the Fed and in the data on the job side and on the services side, all being
taken as positive risk gone for stocks in the United States.
And we got some of that in Europe on Friday with social media stocks going a
lot higher. We saw two thirds of stocks actually in
Europe closed in positive territory during Friday session.
But we look for a bit more of that this morning.
So European stock futures do suggest we'll be up by around 3/10 of 1%.
And U.S. futures continue to point a little bit
higher, but only a 10th of a percent or so.
We've got a number of individual stock names to keep an eye on.
We talked about a few of them just before the break, Tom.
One of them is Maersk, one of them is ASOS.
But there's also this layer of geopolitics that we continue to keep an
eye on because of the humanitarian side of it, of course, but also because of
what it's doing to markets and oil prices tacking high.
So we watch companies like Total over in France, of course, because the big
energy companies will not be trading on the footsie 100%, as you say, Brent, at
83, 60, up close to 8/10 of a percent. So there has been that move higher in
oil. In fact, the broader commodities space
is up so far in the session. Yeah, absolutely.
And just as we've been doing this program, we've seen a tick higher in oil
up by 8/10 of 1% on Brent at 8361. So that's the commodities space and
that's the geopolitics we bring you. Then the start of the European trading
session without London so lacking volume, perhaps in terms of the European
trading day. So no trading in London.
We get no trading on the LME as well. And Brent closes early.
So there are various things to keep in mind as a result of London being absent
today. But we do have other European equity
markets trading this morning and so we can get a sense of where we are there.
The government yet to open. It looks as if the Xetra DAX is keeping
up its end of the bargain, up by 2/10 of 1% this morning.
I think we all the camels up by 2/10 of a percent as well.
So modest gains then some across these European equity markets.
Yet the footsie met currently up 4/10 of a percent.
So as you say, green on the screen, at least for now, with the caveats, Of
course, on a sector basis, not a big surprise that energy so far is the
leading gainer across your sectors, adding close to 6/10 of a percent.
Again, the geopolitics, but also the price increase from the Saudis to their
Asian customers as well around oil. And as Anna was reflecting on Brent, up
around 8/10 of a percent and WTI in similar territory.
So energy getting left also is also gaining as well, 5/10 of a percent.
We're watching, of course, the meetings between Xi Jinping and Macron.
They have not met yet, but Xi Jinping is on the ground in France on a day, by the
way, where the French are looking to come to a deal with their auto industry
around ramping up the output of electric vehicles.
So autos is also gaining as a sector on the down side, retail and utilities,
health care is flat, retail down 3/10 percent, utilities also flat.
But broadly, most sectors apart from those three or four currently in
positive territory energy, autos, insurance and tech also getting a lift
up 4/10 of a percent. Yeah, tech you would expect that to go
higher with theses about rate cuts coming sooner than we had previously
anticipated. There's been quite a lot of volatility,
of course, in that sector as a result. And one of the reasons why we saw tech
outperformance and the Nasdaq outperforming during Friday's session,
no doubt in terms of some of the individual names that we're watching,
we're looking at Metamask seems to have opened a little to open positively up by
7/10 of 1%. So perhaps the market not reading too
much into these capacity cuts, perhaps also focusing on the way that, yes,
we're seeing continuing tensions in the Middle East and that's having a
continued impact on the mask business Asia to Europe.
But perhaps the market focuses instead on what this does to pricing.
Because when we spoke to the CEO of Mass just last week, he was talking about,
you know, this this this tension, this geopolitical tension does have positives
for business like this, where we've seen that 40% more fuel on these journeys as
they have to go round Africa. But they're able to the charter rates
are currently three times higher, often fixed for five years.
So in terms of pricing, this does does produce some positives.
Yes. So do they benefit, as you say, from
that reduced capacity? Again, 15 to 20% for the broader sector.
Is that a lift for mask a longer term as they struggle, of course, with the
challenges around the red. See on the tech story then and just
breaking it down for you are getting that upside for the sector is modest,
but you're seeing gains for the likes of Prosource, which of course is the has
has a significant chunk or stake in Tencent over in China, but also in the
semi space. We played this prior to the open E
Semiconductor and ASML, of course the maker of that lithography equipment
gaining around 4/10 of a percent. B Semiconductor currently up 7% because,
as I was saying, expectations. That you could get to rate cuts, but
also maybe the lift as well in terms of the optimism coming through from the
sales numbers from Foxconn, the maker, of course, of Apple iPhones and what it
tells us about demand for some of that hardware.
Okay. Let's go to some what from some of the
micro stories we're covering this morning to the big macro picture.
Of course, last week was a pretty dovish week, dominated by that dovish
commentary at the beginning of the week. From all the middle of the week, sorry,
by from from Jerome Powell, and then by the tough business of that jobs report
on Friday. There are still concerns in some
quarters, though, about the inflation fight.
Let's hear Austan Goolsbee reflecting on first quarter inflation.
He is, of course, Chicago Fed president. We hit a bump for sure at the start of
the year on the inflation front. And now everybody's just got to take a
step back and try to figure out, is that a sign that the economy's overheating or
is that a sign of some other thing? Chicago Fed President Austan Goolsbee
speaking to Bloomberg TV on Friday and thinking about the trajectory for the US
economy. The data certainly giving some people
reason to describe the US as back to Goldilocks.
Let's talk to Alicia Maharaj, Multi-Asset Solutions strategist at Jp
morgan Asset Management with us this morning.
Good. Thank you for joining us.
I mean, Goldilocks, the soft landing, is that your base case still for the US
economy? Good morning.
Thanks for having me on. I will.
Base case is for rebalancing in the sense that we see growth moderating
through this year. Inflation remains on this bumpy pathway,
but we have to acknowledge that the spot inflation rate is is higher than we have
thought before. And so we expecting persistent inflation
this year. What does this mean, though?
We still expect the Federal Reserve to be cutting once or twice in in 2024.
I think the uncertainty is what happens after that.
But I think the data flow in the last week, as you mentioned, is supportive of
this idea of that rebalancing, of that moderation in growth.
It's too hard to put too much weight on one data point.
But the idea that we are seeing some rebalancing in the labor market, I'd say
our confidence in that has risen, which in a way supports this thesis that you
can see an extension of the economic cycle.
And so fish go with all of that in mind. That's your base case for the US
economy. I wonder what that looks like in terms
of asset allocation. I was looking at in detail of what
Warren Buffett is up to at Berkshire Hathaway, and he's certainly sitting on
a big pile of cash and some people interpreting that as a call on equity
markets and suggesting, well, if Buffett doesn't want to put money to work in
equities, then, you know, maybe that gives others reason to pause.
What's your asset allocation at this point?
Our current views are pretty positive on risk assets.
We still like high quality companies in the US large cap space and I think
earnings season that has kicked off in the last few weeks has given us more
confidence in that view. What I would say though is that we are
being selective in how we express that view.
As you say, beating the hurdle of cash rates is pretty high.
We do see policy rates and cash rates coming down over the next few months,
but but essentially terminal rates will be higher.
And so the risk reward of taking risk is is is different to what it was when when
interest rates were at policy, rates were zero.
That doesn't prevent us from owning risk assets like equities and credit markets,
but it does mean being more selective of where that is, whether that is
expressed. Okay, So you want to be selective even
as you're relatively constructive still on equity.
At what point what would you need to see to turn to turn constructive on small
caps, to have the confidence to kind of push down into some of the riskier parts
of the equity markets? Yeah, that's something we've discussed
for a while. We can see reasons why you'll have a
short squeeze or you'd have technical rebounds in small caps relative to large
cap markets. But to be fundamentally positive on
small cap, we would either have to see a reset of the cycles or going back
from a mid to late cycle environment more to early cycle, or secondly, a
sharper fall in interest rates. And either of those scenarios look very
unlikely, let's say, over the next 12 months.
And so that preference for high cash flow generative markets is still our our
main position. But I would say we are incrementally
adding cyclicality. We've had a positive view on Japan for a
while and increasingly looking at the euro area equity market as a as a source
of playing cyclical exposure. I'd say small cap is what is much lower
down that list. Interesting.
So how how would you fund that exposure to Europe with that fund come through by
settling down on the US. You're in terms of your regional bias at
this point. Yeah.
So what we've done recently is reducing some of our fixed income or duration or
duration exposure, and that that would be one source of funding.
The other is parts of emerging markets as well as a reallocation from parts of
the U.S. So you're right, there is a there is a
question about how much weight to hold in the U.S.
but I think that still remains a core component of our asset allocation.
The choices for Europe over M Japan and potentially reducing our our core fixed
income. So I'd say that, you know, the
conviction in that has changed in the last week where we've had that
disinflation or that moderation in growth narrative building and that would
support areas like the euro area. Saskia, can I ask you about M&A as a
theme? It's been absent for such a long time,
but there are lots of voices now talking very tentatively about the return of
capital markets activity. And I wonder what that means in terms of
an M&A boom and how investible that kind of seed might be.
I know at the Milken Conference over in California, this is going to be
something that's talked about quite a bit.
Do you give that much thought? It definitely is something that's come
onto our radar. As you mentioned, we're starting to see
a pickup in M&A activity, especially in the U.S.
and you could argue that that's positive for parts of of the smaller mid-cap
components of the U.S. equity market.
We would say that this is also a healthy sign for where we are in the economic
cycle. So looking at it from a top down macro
perspective, this is another indication that we're in that mid-cycle phase where
you will see more, more consolidation. I think it's it's in the entirety more
supportive of that positive pro risk stance.
But how it's impacting our day to day asset allocation, I'd say that that's
more more from a top down perspective rather than securities selection.
Hmm. We're getting a reminder today of the
geopolitical risks given the news flow out of Gaza and what's happening,
particularly in Rafah. We're seeing energy prices up, oil
prices up, up $0.07 percent, 8357, Brent, 7871 on WTI.
How do you how do you hedge around around these risks?
How you factoring this crisis into your adjustments on the portfolio?
I'd say that this point about heightened geopolitical risk has been with us for a
while and it has become more in focus recently.
The main channel through which it affects our macro economic view and then
our asset allocation is through our oil prices and commodity markets.
And as you mentioned, this thesis of having an elevated risk premium in oil
oil markets is one we believe in too. And so you expect this
the support for the energy sector. So, you know, increasingly we've been
looking at sector allocations within our asset allocation, and one of them is a
positive view on the energy space within equity markets.
We see that both as a view, but also as you mentioned, it could also be a hedge
against certain geopolitical risks. It's not very easy for us to express
this directly in portfolios given the the size of of our sector allocations.
So it also means that our appetite to take risk in general is is modestly
moderated based on heightened geopolitical tensions.
Thank you so much for your time. Maharaj Multi-Asset Solutions strategist
at Jp morgan Asset Management. And on that point, he was just making
about energy and risk premium in the oil price.
Oil prices up by 7/10 of a percent today, 8353.
And energy stocks, the best performing sector this morning.
So that's really where a lot of the action is.
Energy stocks are much higher, substantially higher this morning.
But let's bring you the the sensational sex, the cool sex, some of the big names
across Europe and how they're moving modestly higher seems to be the theme of
the morning. And you see there's a bit of divergence
there. LVMH is pretty flat over in Paris, as is
Schneider Electric. But Nestlé is gaining ASML gains, Novo
Nordisk gains. And actually, that's interesting because
at the end of last week, we saw a lot of concern about competitive threats to
Novo Nordisk coming from the US in particular.
And that was an area of weakness for European stocks as a result.
So that's what the sensational stocks are doing this morning.
And since the wider movers story then, Tom, we've got Atlas in Focus and this
is a business that we had been reporting was certainly going to receive one bid
and it turns out it was seeds, a number of beds.
And so as a result of that, we see the stock is up by 3.8%.
It was halted at the start of trade, but actually it's now higher.
It received one bid from it from Daniel Kritsky and his team.
It also received a bid from Bain Capital.
It also received a bid from David. He's one point and they're not going
forward with the Bain Capital bid, but that's certainly putting some positivity
under that tech stock in Paris. Yes, Seems like Atlas has some
optionality at this point in terms of addressing some of those debt needs and
funding needs on the European shipping story as well, some lines crossing that
we march around from Moller-maersk around the potential increase, of
course, in prices rates of course, but also the energy costs coming through as
a result of not being able to access that key Red Sea route.
And of course, we continue to monitor the unfolding geopolitical tensions
right now when it comes to Israel, Gaza and Rafah, but a reminder of how this
conflict has ruptured or at least added significant strains, strains to those
shipping supply chains, a one of words not moving a great deal in the session
as we speak, just down a 10th of a percent.
How about Lloyd? Of course, currently up about a 10th of
a percent and a Nagel currently gaining 4/10 of a percent.
So just checking in on that sector on the chip story as well, semiconductors.
Now we have some optimism in Conn's in terms of the sales numbers that came
through from Foxconn to Hon Hai. Sales up close to 20% is a key
manufacturer, of course, for the iPhone. Apple getting more than half its revenue
from that company, but also have the right story.
So markets are putting two rate cuts on the table right now on the back of
softer jobs data. And so a bit of optimism coming through
for the tech sector. You're seeing a modest rate across to
the likes of ASML and Infineon, SD Micro over in France, not reflecting that they
are currently down a 10th of a percent. Okay.
Coming up on the program, we mentioned earlier, Warren Buffett has been active
over the weekend heading for $200 billion.
Warren Buffett's cash pile hits a record high.
We'll discuss that and all the takeaways from the back to Hathaway AGM.
That's coming up next. This is going back. Welcome back.
This is market. Today we are 17, 18 minutes into the
European trading session. This Monday, of course, it's a bank
holiday here in the UK, but you strip out the footsie.
100 European stocks added 2/10 of a percent.
So some modest gains coming through. We have some data crossing from Spain in
terms of services. PMI coming in above the estimates, 56.2.
So what about the level of expansion well above that 50 level?
The survey had seen 55.7. The actual number, 56.2 on a composite
basis. Also model S, the above the estimates,
55.7, suggesting that at least on services and composite, the pair are
looking relatively healthy for Spain. Let's go to the story around Berkshire
Hathaway then, of course, holding their annual meeting over the weekend, giving
shareholders a glimpse of how the Cannes will operate without Charlie Munger, of
course, passed away last year, but also outlining the holdings, of course,
around companies like Apple and what they're going to do with that cash pile.
Let's bring in at this point Bloomberg's deals.
Reporter Manuel by Gary Manuel. Why why is buffett let's start on the
Apple question then. They've downsized their holdings, but
Buffett kind of reiterated his fondness for this company.
Why is he such a strong believer in a company that many would say is facing a
number of challenges at this point? Yeah.
Tom, I mean, as you well said, I mean, it's still a
huge hole in that he's guarding our ball.
I mean, and he reduce it by like, just like shockingly about $40 billion.
I mean, still remains the largest investment by Buffett and he's still a
strong believer in the company. He highlighted how despite the sell
down, you know, he believes Apple is is one of the greatest companies and even
better than other fantastic companies like Coca-Cola or American Express, for
instance. And he mentioned the iPhone being one of
the greatest inventions in history, perhaps.
So I mean, he's being, you know, believer in the company.
I mean, the Apple itself has faced quite a few challenges here in China.
For instance, sales have slumped recently.
The stock has been whirring slightly down so far this year, they had a $2
billion anti-trust fine as well, among other issues.
Right. But but the company is still steadily,
you know, is strong and he believes in the future of the company.
So it remains to be seen how the holding will pair over the coming quarters.
Keep in mind that the sell down started already a quarter before this one, but
it's been a bit more accentuated in these past quarter.
Okay. So he's keen to point out his positive
views on Apple even having reduced exposure to ways he's, broadly speaking,
been building up a really big cash pile as well.
Why is Warren Buffett, once Berkshire Hathaway holding all this cash right
now? I mean, it's the size of some European
economies, this cash pile, Manuel. Yeah, definitely.
And I mean, it's a whopping 90 billion, roughly speaking.
I mean, it's approaching fast, the 200 billion mark.
It's incredible. But he seems quite comfortable holding
all that amount of cash. I mean, part of it has to do with the
lack of sizable deals. He he's done
big deals in the past through mergers and acquisitions.
We haven't seen a big one from him in a while.
At the same time, there is also they're more kind of like, you know, structural
things happening like high interest rates.
There is a lot of uncertainty whether or not they will come down later in the
year. Also, inflation remains pretty high and
the geopolitics globally with the stock market maybe being quite wobbly, he
feels quite comfortable holding into all this cash for now.
Okay. And we'll get a take on whether that has
broader implications, what you read into that for equities.
We'll get a take for the markets likes seem a little bit later on in the
program on that front. Manuel thank you very much.
Been big deals. Reporter manuel back.
All right. Now another sector that warren buffett
watches closely is of course, the energy space.
He has holdings in Occidental Petroleum and so he will find it interesting that
the oil price is up by 7/10 of 1%. And Tom, this is for a couple of
reasons, isn't it? There's the geopolitics which hasn't
necessarily played out as as it could have done last week.
There was a lot of expectation that maybe some kind of a truce could be
reached, at least in the short term. That hasn't transpired in Cairo.
So there's that side of things. When you overlay on top of that what the
Saudis are doing on pricing. Yeah, exactly.
So the Saudis increasing pricing to their key Asian, Asian customers.
And then of course, the risk is that if this is a prelude to attack on Rafa,
then what the broader regional response is to that.
And so how you start to price that into these markets as of course, we continue
to focus on the humanitarian angle of this.
But again, Brent, up 7/10 of a percent, 8356.
Let's get more than the detail around what's happening to these energy markets
and the geopolitical threats into it with Anthony de Paola in Dubai.
Anthony, what is your take on some of the factors feeding into the oil moves
today? What we should be watching for in the
kind of the hours and days ahead? Yeah, good morning, Tom.
Well, this game today comes after that, that steep drop off last week.
That was a pretty consistent slide to a two to a weekly low last week.
And that's because a lot of that heat are from the geopolitical geopolitical
situation was taken out of the market last week.
You guys mentioned the truce talks, which seem to be going positive
positively. The last week at the beginning of the
week, there was also some talk about a potential defense pact between the U.S.
and Saudi that would also include ties with Israel if the Gaza war ended there.
So that was some positive news on that geopolitical front.
And we've seen roughly a 5 to 0 swing around these
kind of geopolitical issues. A lot of people would say that that
doesn't really price in the real risk that is there.
But but we did see that then again come out this week.
So that's why we're seeing now a little bit of gain this week.
And we've got that that geopolitical situation that we're balancing against
all those fundamentals that are feeding into the market.
Tom Jackson And what we hear about Saudi Arabia and their pricing for Asian
customers then, Anthony, what does that tell us about the trajectory for oil
prices? Is that the kind of development that
typically has a long impact, or do we just sort of bounce off that news?
Well, these things will make the oil more expensive for the consumers, more
expensive for the refiners. That that's a fact that's been factoring
into inflation, which is which has been a drag on the economy generally so far.
But what it does really is, is it's a show that the Saudis are confident that
there's enough demand for their oil, that they're able to charge that higher
price. What that also does is potentially it
puts fewer of those Saudi barrels into the market.
As we know, the Opec+ countries are cutting supply to tighten that market.
So really what they're trying to get is fewer barrels in there, higher price for
it. That increases the cost to refiners,
which which cuts down on their margins. That also will increase the cost of
those fuels going to those final markets.
But we are seeing also some concerns about the enduring demand in China and
some of the fuel demand. So that's also a factor that's weighing
on that. Okay.
So China China is a factor as well for these for these energy markets.
How do we expect what is the expectation?
What does recent history tell us about how the markets will balance the
geopolitical concerns and that opec+ policy?
Yeah, I think we're going to keep seeing this this push and pull in the market
where that kind of that that 5 to 0 swing goes around when we see new
geopolitical developments. But the Saudi cuts, the opec+ cuts
largely by the Saudis are going to keep that market tight as long as those cuts
remain in place. And they will be clearly carefully
watching that market to see. When it is time for them to ease some
oil. Back in the markets now, we're seeing a
lot of traders expecting those cuts to continue into the second half at the
start of the year. We were looking at kind of a half year
of those cuts and then those easing in the second half.
Now, we still might see that later in the year, but but the expectation is
that we've got this slightly weaker, slightly more concerning market.
So we're going to keep those cuts in place that keeps oil off the market,
keeps markets tight. So looking for a swing in prices towards
the end of the year. And of course, the real question mark is
that that geopolitical issue which which can cause big price swings in the market
to an end. Anthony, thank you very much.
Bloomberg reporter Anthony De Palma joining us there with the latest on oil
markets. Well, back to some of the geopolitics
and global trade next. Coming up, China's Xi Jinping touches
down in Paris for his first EU trip in five years.
We take a look at what he's aiming to achieve.
That conversation next. This is been taken. Welcome back.
This is markets today. We are 30 minutes late into the European
trading day. To what is happening in France now with
the focus, of course, on the visit by Chinese president Xi Jinping in Paris,
landing Paris as he kicks off a three nation trip to Europe.
His first visit to the region in five years is aimed at stabilizing ties in
the face of mounting trade tensions. Let's get more from Bloomberg's Caroline
Connan who's on the ground for us in Paris and Andrea Dudek in Prague.
Caroline, let's start with you. What does the French hope to get out of
this visit? You know, there is clearly a charm
offensive going on here because remember, one year ago.
Exactly, Merkel was himself in China receiving all the military honors, all
the lavish ceremony, and then he was taken to the southern Chinese province
of Guangzhou, where he had the ceremony of tea with Xi Jinping.
Merkel is also going to give Xi Jinping the big welcome military parade state
dinner at the Elysee Palace tonight. But also a personal touch, taking him to
the Peabody Mountains in the south west of France tomorrow, where he spent time
as a child. All these, of course, not hiding the
issues, especially the trade tensions that we have seen between the EU and
China recently. As you know, the EU has opened a flurry
of probes into the market, into the procurement for medical devices.
So Macron said he wants to do a reset of these economic ties with China, and he
hopes that a President Xi Jinping will be receptive as he is going to represent
the EU. Yes, well, he is.
But he's also going to have Ursula von der Leyen alongside, I understand,
Caroline. And so how is this trip going to be able
to reset that relationship around China, around trade between Europe and China?
So he's talking about this adjournment or this reset.
But of course, the main issue is with the sector.
You have thousands, tens of thousands of cheap, easy cars parked in Belgium ports
waiting to be sold to the European markets.
That is something that the president of the EU Commission, Ursula von der Leyen,
does not want to see. She's had a much firmer tone than
Emmanuel Macron when it comes to trade policy.
But his policies and rebalancing these trade a relationship with China.
So she is going to be here this morning trying to get the firm message from the
EU balance a little bit, the tone with Emmanuel Macron.
So there's going to be a trilateral meeting this morning.
But of course, the French president also wants some more Chinese investments in
France. We may see some announcement with Airbus
and some Chinese airlines. We're also expecting a something from
President Xi about the battery sector in France.
All of this, of course, to try and balance this trade relationship with
China. Okay.
So that's the France component when it comes to President Bush's visit to
Europe and try to bring you in at this point, then what is the rationale?
What does it tell us about the Chinese president's priorities that he's
visiting Serbia and Hungary on this trip?
Well, if Chinese president is looking for a warm welcome, then Hungary and
Serbia definitely have to be on his map because these two countries, one is an
EU member, one is aspiring to become a member of the European Union, have been
as welcoming as they can to an influx of Chinese investments that we have seen in
the last five years. And both President Voce in Serbia and
Prime Minister Orban in Hungary have played a hugely.
But they see a successful balancing act of being on the good side with the EU or
being in the EU and yet welcoming investments from China and Russia.
Yes. Tell us more about these Chinese
investments into Eastern Europe then, Andrea.
Over the last few years and how they've been received.
They've been received very positively by leadership, by locals.
China has invested over 5 billion directly into these two nations.
Most of it has gone to Hungary, where China is building huge EV battery
plants. And in Serbia, it has transformed the
troubled copper mining industry and the steel industry.
Chinese investors are also building an upgrade to a rail link that connects the
two capitals of Hungary and Serbia, which is seen as a huge sign of belief.
It's a huge infrastructure project and those are always positively welcomed by
locals that can also see the presence of China, how it's working.
And it raises questions for some people, especially in Serbia, which is trying to
become a member of the European Union. But do they actually need to become
members? And, you know, if they see these
benefits already taking place and there are more jobs and people are better off
and they can take nice trains, you know, do they still need to meet conditions
that the EU wants them to? Okay.
Bloomberg's counting on us in Paris and Andrea Dudek in Prague.
Thank you very much indeed, indeed, for the detail around President Xi's visit,
of course, starting off in France and then moving on to Hungary and Serbia and
the priorities for the French president, for the Chinese president, I should say,
and his and his counterparts in France and elsewhere in Europe.
Let's get more data, more analysis that and bring in who certainly McCallum and
now director of the European Center for International Political Economy, who
said Thanks. Thanks for staying with us.
Thanks for joining us. I should say.
In terms of your take and what can be achieved at a time when the European
Union is also, of course, launching this investigation, this probe, as we've been
discussing, into into Chinese Chinese events, that is as a major headwind.
Which parts of this relationship can be reset, as Macron would like to see, at
least when it comes to Brussels and Beijing?
Well, first of all, I don't think we should look at it as just another Europe
China summit focusing on business and registering complaints over trade
frictions and trade surplus. It's also actually a meeting between two
permanent members of the EU and also in a very, very unstable world situation.
And perhaps the only bridge between the east or west where the common interest
in stabilizing the situation in Middle Eastern Ukraine.
So, of course, there are some business elements, but the number one agenda item
is probably trying to see how the leaders talk about
how they see the world, not least given the very events of 2024 we have still
ahead of us with the EU enlargement. We have also managing the U.S., which is
also going to be a very central theme with other member elections.
So of course there is an incentive from both sides to
try to get some of the worst frictions out of the way because you want to keep
a policy space in case you are going into a much more, let's say,
unstable future in 2025. Okay.
So the primacy of the geopolitics versus the trade, at least at this point when
it comes to the meeting between Xi Jinping, a macron, and von der Leyen, of
course, from from the EU when it comes to expectations in Beijing that maybe
France and potentially others within Europe can be something of a
counterweight to the US. How valid is that as an aspiration, or
is that ship sales? Well,
I think, Leon, the Chinese investors and Chinese government to take on Europe is
a little bit schizophrenic in a way, because first of all, it is seen as a
secondary market. The primary one being the United States.
Europe contains much less market potential, but it is also the only
advanced market they have access to. In other words, there are still a lot of
areas, for example, in aerospace. We have heard about the Airbus Chinese
airlines orders, about 300 Airbus A320 aircraft
last year, and they are actually looking to sign even more contracts perhaps
already today. And in a number of areas in capital
goods as well as machinery, but also things like consumer goods and
agriculture. Europe is a number one supplier to the
Chinese market that keeps the Chinese inflation down and the food prices down.
So it is a kind of a two way street where the European leaders, primarily
from the alliance, we are heard, who will be staying on for another five
years, which Chinese, of course, are very, very concerned about.
And our precedence is largely underwritten by the French President
Macron, because, of course, Germany is governed by the the opponent of both
presidents on the right and the socialist of the Greens.
So to take it of the big picture, I think there will be minor Chinese EU
deals and notably China also want to have actually they are not so interested
in selling to Europe. They are actually more keen to have
investment and cash from European, the capital rich multinationals, and they
want the Europeans to invest more into China.
And there's already talks about another factory being set up and potentially
even parts of the Airbus aircraft being built in China.
Hmm. So good morning.
Back to some of the geopolitics that you mentioned as being
on the agenda. What do you think the Chinese response
will be if European leaders say once again, just as I've said many times to
China, please use your influence to ask President Putin in Russia to change
course, to to dial back his military activity in Ukraine.
How does China respond to that kind of play?
Well, there has been quite a bit of diplomacy in this area, perhaps hidden
away from, well, both other powers, but also from the
media and where they have been trying to play a constructive role.
But Beijing is, of course, severely limited.
How I actually like to explain the situation is perhaps Beijing is a little
bit embarrassed, of course, by Russia given the the outcomes that we've seen.
But their influence is actually quite limited in a way.
Let's say Europe's ability to control George W Bush was quite limited under
the Iraq wars. And so, in other words, I think it is
it is perhaps a game that China needs to play, where they have to retain good
relationship outwards towards Russia. But at the same time, they are starting
to see a cease fire as soon as possible. We know that market externalities that
affect the Chinese market far more than the others.
China is not that resilient, especially when it comes to food prices and energy
prices. And of course, at the same time, in the
process, they would like to make sure that the US led world order is broken
up. In other words, that there are
alternative routes where, well, economies like Russia can actually
survive, potentially fearing their own war in the future for the China.
Okay. So that said, they may continue to
reiterate their stance that they want peace talks to take place, but in a way
that Western governments wouldn't, wouldn't agree to because of the sort of
lacking conditions attached. What about enlisting Chinese support in
the Middle East? What would that look like?
Is that in any way possible? Well, China, of course, play a similar
indirect role in Iran. And Iran is definitely also part of that
alternative network that wants to avoid sanctions and also want to have a more a
multipolar world, which is not U.S. led.
And I guess that in a sense, also a lot of Iran's energy export is going to
China in effect. So both sides, it could play a.
Both Europe and China could play a constructive role even in this regard.
But let's face it, although both China and Europe are.
Well, France, as a member of the permanent Security Council of the U.N.,
they don't necessarily hold all the letters and they have no influence on
the both sides of the conflict. We are looking at a very extensive
onshore conflict between Israel and Iran here.
So I think that while even the economic toll that the
Europe and China could use could be fairly limited.
Okay. Oh, certainly.
Nakayama, European Center for International Political Economy director
with some of the context around this visit by President Xi Jinping to the
first 1 to 5 years, of course. Next, we're going to dive back into the
markets and keep you up to date on what is driving some of the moves in the
equity markets. Modest gains currently across the
European benchmark Stoxx 600 up 2/10 of a percent.
This is window. This is Marcus today.
We're 46 minutes, 47 minutes into the European trading day.
This without the UK today. So no trading here in London.
Elsewhere across Europe, we see modest gains coming through.
We can't get runs up a 10th of a percent.
The Xetra DAX up a 10th or two. Let us check in on the markets with
Bloomberg's ben round from the Markets Live blog.
You can talk us through some of the top stories that we're focused on this
morning. And then very nice to have you with us.
Let's go to the post market reaction to the NDP's.
Of course, we saw that. We see the sorry risk on suddenly things
look more Goldilocks once again don't like the US economy.
Give us your view specifically on what happens with treasuries, because really
interested in this large amount of issuance we're going to get this week
and how that's going to come up against the sort of dovish dynamics that we saw
in the Treasury market last week morning.
And I guess we got that Goldilocks kind of narrative from the nonfarm payrolls
report. What that means for yields in the short
term is that, you know, if you look at the two year rate, it's going to go down
to four, seven, eight. We are not too far off those levels.
I wrote pretty much the same thing on Friday before the data that yields will
converge to 478. And that's what seems to be happening.
That would be a level that would multi equilibrium rate for the two year
because that would be consistent by my calculations with two rate cuts.
The markets are pricing 48 basis points of rate cuts from the Fed this year,
which if this kind of narrative continues with the
with the economy, with the jobs market, I think that is possible.
So 478 would be the rate for the two year
is also, of course, a big week for the body.
The decision coming on Thursday. Fine.
As you look ahead to that, is this the Bank of England that can kind of chart
its own course now? Do you expect that message to come
through from Andrew Bailey and Co on Thursday?
The Bank of England is very keen to send home the message that, look, inflation
in the UK is very different to inflation in the U.S.
So they have been pivoting for some point
for some point of time to towards rate cuts.
Whether or not inflation will afford the scope for them to get there is a
different thing. The crucial metric that the U.S.
is watching will be the April inflation data.
They are pinning a lot on the data point to show that inflation is converging to
2%. If that happens, yes, the U.S.
will get some headroom. But the point is what happens to
inflation after the April print is the question.
I expect a touch and go around in terms of inflation, meaning it may kind of
bottom around those levels, but then it's not going to stay there.
And that's the key message for the. So if you think about it over the beyond
the short term, the headroom for the BOJ isn't a whole lot to cut from here.
Mm hmm. Okay.
So that's the view in the Bank of England that will be topical later on
this week. We've also had over the weekend these
developments from Berkshire Hathaway. Then I know you can watch this at the
micro level or you can try and read the macro signals in is and here we have
Berkshire Hathaway sitting on a cash pile that is frankly the size of a
European economy equal to the GDP of a sort of modest sized European country.
Do we take from that that they don't have a very positive view on stocks they
can't find opportunities to invest in? What do you what do you think of, as
they say, this development? Absolutely nailed it.
And I mean, that's exactly the view that Warren Buffett has been touting over the
weekend. He spoke to shareholders and he said
that, look, we want to deploy a lot of money, but with very little risk.
And investors seem to be forgetting the latter part about very, very little risk
when they are investing successively at higher levels in U.S.
stocks. If you look at the S&P to surge more
than 30% in the past year, if you look at the Nasdaq, it's done almost 50% in
the past one and a half years. I mean, those are kind of very lofty
valuations, promising a lot. But, you know, it's not based on you
don't invest based on a promise. You do invest based on performance.
And that's the message from Berkshire Hathaway, its cash growing cash bail
that investors shouldn't forget. Forget about valuations.
Okay. Don't forget those valuations.
The key message coming through, of course, from Warren Buffett at that
annual meeting. Bloomberg minutes.
Ben Ram, thank you very much indeed. On the equity market ramifications of
what we've been hearing, of course, from Berkshire Hathaway and Warren Buffett.
Meanwhile, of course, Ben touching on, giving us a preview and setting us up
for that key meeting from the Bank of England.
And we're going to bring you coverage of the body rate decision is on Thursday,
of course, and Andrew Bailey's news conference on Bloomberg TV.
It is this Thursday. That's from 12 p.m.
UK time. Let's get back to the issuance story in
the US then, because this caught my eye, this Treasury chart showing just how
much the US Treasury is set to issue this week.
And again, it's something that then touched on something and touched on at
the top of the show, which is in an environment where towards the end of
last week, particularly on the back of the meeting that came through from the
Fed on Wednesday, and then of course, softer jobs data, you saw a significant
move, particularly into the front end of the Treasury curve with yields coming
down. But to what extent that move is capped
by the fact that this is a Treasury that is issuing significant amounts of
treasuries and notes into these markets and to what extent the market can absorb
that. So just this week alone, $67 billion
combined of ten and 30 year Treasury securities, but also 58 billion of three
year notes as well on them. So a bit of a test of that lower yield
story that was certainly taking hold and re grounding itself re-emerging last
week as we saw some dovish comments from Powell.
And then that's a pretty dovish print in terms of the jobs report on Friday.
So that's the story around Treasuries. Interesting to think about where we are
on the eurozone economy as well. We've had a number of guests this
morning, or at least one stands out as suggesting they're considering loading
up more on European stocks. And interesting to see some of the data
outperforming this morning. And this is not new information
necessarily, but an update of what we already knew about some of the trends
developing in the European economy or recovery maybe.
But the French PMI data on the services side coming in higher than had been
expected at 51.3. And that takes the composite to just
over 50, which is, you know, hadn't been expected.
We were expecting to be at 49.9. And these sort of strengths, these
tentative signs of strength in the eurozone economy, Really interesting to
watch as we wait to see whether we get that rate cuts in June.
Much telegraphed, much, much looked ahead to, I suppose, for European
investors. And how much of this is a change in
terms of the narrative around us versus Europe?
If you have a more constructive, fundamental story when it comes to
Europe and the growth picture looking a little stronger in Europe and inflation
continuing to head in the right direction, we continue to hear that from
ECB officials. They're pretty confident that inflation
is on track versus what we're seeing in the US, where arguably things are a
little a little soft on the economic side from a higher base, but also
inflation stickier and to what extent that becomes a narrative later this
year? Yes, And we heard from the ECB's line.
He was talking to a paper, I think, over in in Spain saying don't exaggerate the
impact of that ECB Fed divergence. So we took those lines in mind as we
think about as we think about that and views on that differ, of course.
Lesley, what else is coming up then today we have all this week, in fact, we
have the Chinese leader, Xi Jinping, in France today.
He extends, of course, his trip across Europe, in particular to Eastern Europe
later on this week. Tuesday, we get earnings, including from
Aramco and BP. We get Disney and UBS earnings that day
as well. That's tomorrow.
Then on Wednesday, we'll have earnings from Toyota and Uber in the sort of
transport space arm. Also reporting in the US, we get that
ten year note auction that we were just discussing.
We also get a rate decision from the Bank of England and on Friday, UK, Q1,
GDP and earnings out of IAG. So interesting that a veteran doesn't
think that the Bank of England has much room to manoeuvre.
We've had slightly differing sort of sentiment coming through from from Bank
of England officials that we see with some sort of quite dovish lines coming
through from the Bank of England Governor Andrew Bailey perhaps talking
about what he expects to see on inflation, but other voices sounding a
little bit more hawkish perhaps. Yeah.
Andrew Bailey making clear at the IMF that the inflation dynamics in Europe
and included the UK within that bucket are very different to the inflation
dynamics in the US. But yes, he does.
To your point, he has to deal with that with the Hawks, of course, the NPC, who
up until the most recent meeting, we're still two of them at least calling for
an increase in rates they held at the last meeting.
Of course, they've reduced their hold. But to what extent those particular
members, Dempsey, are going to be needed to be convinced further that inflation
is indeed it is. It did head in the right direction here
in the UK as maybe the GDP data out later this week as well is going to show
that we are out of recession. Yeah, absolutely.
So look, waiting for that UK GDP data we've got January and February.
So just going to add in the March number.
So we'll get that clarity on that recession story that you mentioned.
And interesting that we spoke to Sam Mitchell earlier on in the programme and
he was saying, you know, to that point about some ba ba MPC members really
quite recently calling for rate hikes, he says more and more of them are going
to be lining up for cuts and he's expecting that the UK looks a bit more
like the ECB doesn't, it looks more like Europe rather than the Fed which comes
later with its cutting. Yeah, if you have to push them into arms
which to be say the ECB, June Bowie, June and then the Fed coming through in
July potentially with three cuts from the Fed meets with the caveats but that
was his view It's potentially three cuts at this point as the market's priced in
to. Yeah, I think yes, exactly that the base
case for markets is that we get less on all fronts and later than his estimate.
But anyway interesting to get his views and interesting that he had a good week
last week because his view around the Fed was reinforced by the weakness or
softness, I suppose, of the jobs creation numbers out of the United
States. That is it for markets today.
The pulse is up next. Of course, in terms of where we are on
European stock story, we're up by a 10th of a percent.
No London. It is a public holiday today here in
London. So we don't have any trading.
That means we won't get LME trading as well.
Brent trading ends early, but we do see a higher oil price and that is putting
upward pressure on stocks. So those stocks open in the rest of
Europe, of course, and trading. And we do see energy is one of the
biggest gaining sectors this morning, up by 7/10 of 1%.
The is next they is that.
