'Bloomberg Surveillance: Early Edition' Full (12/19/22)

'Bloomberg Surveillance: Early Edition' Full (12/19/22)

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This is Bloomberg Surveillance early edition with Francine Lacqua. Good morning, everyone, and welcome to Bloomberg Surveillance early edition of Francine Lacqua here in London. Here's what's coming up on today's program. Well, back to business. China's top leaders will focus on spurring growth in 2023, seeking to revive the economy following three years of strict Covid curve.

Well, Asian stocks start the week lower. Plus, breaking the deadlock. EU ministers meet to discuss a gas price cap that's almost a third lower than the original proposal. And the beautiful game. Argentina wins a World Cup after defeating France in a nail biting final. A dramatic end to a controversial tournament for hosts Qatar.

So we have plenty of stories we want to get to. But first of all, let's get to the markets. Now you can see the VIX index. It's not that much or not as elevated as some market participants were saying. It could be getting some one tenth of a

percent. The picture across the board for European stocks is still one of games. Global stocks actually attempted. There's a recovery from two weeks of losses sparked by concerns that the continued policy tightening, especially by the Fed and the U.S. and other central banks, would trigger an economic recession and therefore would hit companies profits. For the moment, we're holding strong,

getting some four tenths of a percent. The other story, of course, is the yield on U.S. treasuries edging higher than yet. Look at yen one thirty five point nine zero. We are expecting a hawkish pivot. We have a couple of guests said, look, this will come, but it won't come tomorrow. We do have a BMJ decision. Could probably come as Kuroda steps down

in April. We await to have more news about the agreement between the central bank and the government. The picture across the board, you can see the footsie getting some four tenths of a percent similar gains for the DAX and the CAC. Now, this is a picture for data coming out of the EU. I think we have German December Ifo business confidence that's coming out.

And that index is coming at eighty eight point six instead of the eighty seven point five figures. So it's a touch below estimates. Also, the prospect of further Fed rate hikes triggering a recession is fuelling market caution that's reduced investor appetite for riskier assets, which has sent equities actually lower in the long term. We're joined by Janet Moy, head of market analysis at Brewin Dolphin. And our markets reporter, Justine Elliot.

So thank you both for joining us, Christina. Talk us through what we'll see in terms of volatility as we head into 2023. Yeah, I think for investors, there are really two big questions here. One is that, you know, where is the Fed going next? And I think what we've heard from them last week is that they're, you know, very far from pivoting. If markets even expected that. And on the other hand, if we do kind of stay on this tightening path, what does that mean for economic growth and specifically for equities? What does that mean for earnings? And so I think investors are really in a bind here because it can feel like either of those outcomes, you know, it's probably not great for CAC folios. Yes, absolutely.

Janet? Is that your take as well, if you look at the constructive wonder, markets actually start being constructive? Hi, good morning, Francine. Thanks for having me. Yeah. We we don't say that it is time to get village. Yes, we think that though, probably a buy opportunity for equity sometime in 2023.

I believe warming up to bonds because, you know, the Fed will keep hiking, but it is ultimately the peak of that hiking cycle. And we think that the Fed will pass afterwards rates kind of probably a 20, 24 story. But also all bonds look more attractive than equities because new use available, which are not available, you know, years ago. So as investors, we are warming up to bonds. We prefer sovereign bonds at this stage because of the recession risk next year. And so we we. So that's what overall allocations set up for five forms of equity next year.

But that will be a vital journey for equities next year. So it is this is 2023 the year we're actually equities and bonds will work in tandem like they used to in the past. He has all this year, bones haven't actually really as a portfolio diversify, which is actually quite rare in history. So what we think is next year. As I said, we are warming up to bonds. We think that bonds with perform better

than formality. That's because we are seeing the peak in U.S. interest rates and that we think that bond yields will peak and then fall next year. So bonds will act as a portfolio the of the fire again. So we think that the bonds equity correlation will weaken next year, which we would see if it's safe for investors. Justine, I.

How do you look at. I know there's a lot of talk. We've been promised a hawkish stance in the past, which we never got. Is this going to finally come to a head? Because we're almost at the end of the term for Governor Kuroda. I think he steps down in April. Yeah, I think that's a great question. I mean, obviously, the Bank of Japan has never had to worry as much about inflation, and that's part of the reason why it's never hard to kind of tighten as much as, you know, other central banks have. And I think, you know, another aspect to this is, you know, what is going to happen to dollar strength, because we did see a little bit more in that direction after that Fed meeting last week. But at the same time, you know, if bond

yields are peaking, as Janet mentioned, that maybe, perhaps we're finally at the end of that cycle, because certainly by a lot of fundamental pressure, the dollar strength looks overstretched, can look overstretch at this point. So, Janet, what do you with? What do you do with the end right now? Yes, I'll leave this year that the movement, again, has been pretty extreme stretched. It's just been I have mentioned and we think that, you know, it has been years of this extremely loose monetary policy that the field has been working as well as developed markets.

The central banks have normalized. The DOJ is like a way like it. So we think that there has to be a point where things get that extreme and get illustrates there has to be appointed reversal, anything that could be sometime next year. As you mentioned earlier, that that could be a point where the government steps out and then we can see a bit more pivot in that the energy policy towards a bit more hawkish. Dan, the other thing that actually caught my eye in some of the things that you sent over is your appetite, I think, for four guilts. So is this now the time to add guilt? And what kind of where? Which part of the yield curve do you buy? Yes, right, we are warming up to gills, we have fought already during the mini budget volatility when you become very, very attractive. So now we are waiting for the opportunity because we think that you will perform better because, well, UK spacing, particularly bad economic situation is going to recession. And we think that basically investors

other underweight games at the moment. We think that there will be more inflows coming from investors and we think that we are interested in the 7 to 10 year maturity of gifts. And although S.K., we think that that will be better opportunity next year because the Michael Bloomberg is still high. But it is going to see headwinds in

hiking further because of the UK economic situation for very weak housing market. So we think that we are approaching that point of peak use used, but probably not at this moment. Right now. Probably sometime early next year. We're watching very closely the next one to two months.

OK. Thank you, Janet, for that. Just, you know, we also have some quite well, quite a lot of data out of the US, including the University of Michigan, which I think it used to be one of the favorite indicators by some Fed officials. What are you expecting? Yeah, I think we have a big week for us economic data coming up, and I think it's going to be pretty important for investors because they've been on the lookout for signs of slowdown, because I think, you know, what we've seen so far, as you know, the U.S. economy seems to have held up pretty well, but there is usually a lag effect from monetary tightening. And so the question here is, you know, when do we start seeing these giant signs show up? And at this time in DAX could also be a sign that inflation is indeed rolling over. But then there will now be a whole new set of concerns for investors. Janet, what's your take on when you look

at the Fed officials, but also where you expect the terminal rate, will it pick up 5 percent or do you think I'll go higher? I mean, taking the faithful out of what the Fed officials are saying and the dog fight. I mean, funds rate will go to 5 over 5 percent, a little bit over 5 percent. I think it's not about the debate of the peak rate anymore. I think there's clear sign of economic weakness. There is you know, it takes time for DAX

latest rate increase to take impacts on the economy and on core inflation. So we think you'll find it's probably about right. I think the debate is probably whether the Fed will cox next year, which the market continue to be very optimistic on that.

So we've got rate cuts is probably a 2024 story. And as such, markets do off this day and probably it's not right. Right now, the time to buy equities is foolish. So you're not expecting a rate cut next year. You're expecting, what, early 20 24 from the Fed? Yeah. Yeah. That's okay. Because we think that, you know,

automotive free. Okay. The economy will go into recession, but it's going to be a mild recession. So the Fed will still be worried about inflation, which I mean is slowed down, but it's still way above target. OK, Janet, thanks so much, gentlemen. They're head of market analysis at Brown Dolphin and Bloomberg's just do not leak. Now, coming up, we'll have plenty more, of course, on energy. You energy ministers attempt to break a deadlock over a proposed gas price cap that as Germany opens its first LNG terminal. All the latest on the EU's energy crisis

next. And this is Mubarak. Germany is the engine of Europe. Public goods and engine without any gas. We're here in the harbor, a villa on top of the floating LNG tanker that has just arrived. That will serve as the terminal to its

liquefied natural gas. Germany is extremely dependent on natural gas for manufacturing, heating homes, generating electricity and its chemical sector. They used to get more than half of it piped directly from Russia. This ship converts compressed LNG into gas and it's a major step forward into filling that gap from Russia. The ship has arrived from Spain, carrying LNG from Nigeria.

The temperatures outside really underscore the urgency here for natural gas. They got this done in 10 months. The chancellor inaugurated this weekend and the gas starts flowing. This facility alone can deliver more than 8 percent of Germany's consumption. Six more like it are on the way. And that will provide infrastructure to

cover a third of Germany's consumption. But that doesn't answer the big question. The infrastructure is necessary, but where would they get the actual LNG itself? With Russian taps turned off. It's a fiercely competitive market and cargoes go to the highest bidder. Plus, if China reopens, you could have the world's second biggest economy back at the energy table with a big appetite. Oliver Crook, Bloomberg News Ville. Helm Sovereign Germany.

Well, let's get more now on the energy situation with Oliver Crook in films Heaven and Maria Tadeo, who's at the EU Council building in Brussels. Maria, let's start with you. EU energy ministers meeting now in Brussels where they're trying to break a deadlock over a proposal to cap gas prices. What's the latest? Yes, Francine, and the meeting is now under way.

All of the energy ministers of the European Union represented now under way having this meeting and this is seen really as make or break today. It really is a last ditch effort to get a deal done before the end of the year. And the pressure, Francine, it's immense because the clock is ticking. We have a few days left before the Christmas break. And of course, there's also the political pressure playing into this European leaders on Thursday last week when they met here in Brussels.

They were very specific and very vocal. Those back and forth over the price cap can not continue. There needs to be a deal today. The price gap has been the biggest sticking point.

But we should also stress that this is a comprehensive package that also includes things like joint purchases of gas. So this is Brussels. Nothing is agreed until everything is agreed. And they hope today, or at least the hope is that today will be the day. So if it comes down to the price point for the price cap, what kind of figure could we actually agree on? And Francine, bottom line that that is the situation, it comes down to that number because we have been told repeatedly 90 percent of this package of this comprehensive market intervention for energy is done. The issue is the price cap. Now to take everyone back. Remember, the European Commission came

out with an initial proposal set at two hundred seventy five euros megawatt hour for two weeks before this price cap would be triggered. That was seen as too high and not aggressive enough. That number now has been brought down by the Czech presidency, which holds the rotating presidency of the European Union to one hundred and eighty eight euros megawatt hours for three days. So the range is big.

We have seen significant moves. The question is whether one hundred and eighty eight will do the trick for this deal to finally go through the finish line. Thank you, Maria. Let's also get straight Tolliver crooked. Oliver, what's the situation? I mean, that's the situation.

Brussels. There, of course, direct linkages to where you are. And what are those implications, of course, for Germany? So the debate in Brussels actually creates a lot of angst here in Germany, as you can see from this. This shit behind me, the virtue of this ship, is that it can accept cargoes from all over the planet, which is a great thing when you're trying to cut your dependents from from Russian gas. However, by that same token, those ships

can be rerouted with just a single phone call. So if that cop comes in too low for Germany, the fear is that they will be outbid for what is already an extremely tight market for LNG and a very competitive one. Germany is more dependent on gas and many of its new European neighbours. Plus, it has deep pockets and is willing to spend for that gas. So all of this is creating a lot of

anxiety here in Germany, and that is really where it why they've stood in opposition and been very, very cautious towards any conversation on the gas price cap. Ali, thanks so much. Bloomberg's Oliver Crooks are in films hidden in Germany at Maria Tadeo in Brussels. Now, coming up, we'll also talk to the U.K. shadow work and Pensions Secretary Jonathan Ashworth. We'll discuss the state of the U.K. economy, including the barrage of strikes seen this year alone.

That's coming up shortly. And this is Bloomberg. We have clear signs that demand exceeds supply in our economy and our labor market. We're going to go until the job is well and truly gone, which is 2 percent on average inflation. We're going to have to do what's necessary, again, sufficiently restrictive to bring inflation down. We're going to happen rates up ongoing prices from the current rate to above 5 percent and hold there for some time in order to get inflation back down to 2 percent. And that's what we're all about doing right now.

Fed officials are reiterating the need for higher rates. There, of course, will have a full roundup of what markets are expecting. We do have some important data points a little bit later on this week in the US, including that Michigan sentiment. That is on Friday. Now let's get straight to the Bloomberg. First were news. Here's Leon here. Hi, Leon.

Francine, good morning and thank you. Media reports say the number of Covid deaths in Beijing's funeral homes is surging, raising concerns that China is hiding data on the latest wave of the virus. Staff at a local crematorium told the Financial Times they'd seen at least 30 Covid victims. The country of one point four billion people says just eleven people have died with the virus over the past month. Now the EU has reached an agreement to expand its flagship carbon market, extending emissions trading to heating, road transport and shipping.

Under a provisional deal, the bloc will also accelerate the pace at which some companies are obligated to reduce pollution. Separately, the UK has signed an agreement with the group, including the European Commission, to develop offshore renewable energy projects in the North Sea. Zambia's president says the nation is trying to reach sustainable debt levels without damaging key components of the economy or, quote, rocking the boat. In an interview with Bloomberg TV, he encouraged predators to reach an agreement as quickly as possible.

We certainly expect progress because that's the way it should be, because there's an understanding that the process will run to a point where we are now, where we can quickly and work through to was signing a memorandum of understanding. For us to do that, we have to make progress on the issues around what is the quantum of debt that is sustainable. No messy has finally added the World Cup to his trophy list as Argentina beat France in a gripping World Cup final. Argentina letter to Gold Lead slept late in the second half with methe anthem backpay each going on to score an extra time to make it three. All the four to penalty shootout broke.

Francis hopes of retaining the cup to an end. Returning it to South America after 36 years of absence. Cable news 24 hours a day on air and on Bloomberg Quicktake. Powered by more than twenty seven hundred journalists sent to analysts and more than one hundred and twenty countries and me and guarantees.

This is Bloomberg Francine Lacqua. Thank you so much. Now, these are some of the movers in today's trading session. So we look at individual stocks. First of all, Porsche actually joining Germany's main equity benchmark. This is as they replace the sporting goods maker Puma. Now, Porsche has more or less a market

value of around 96 billion euros. It did become Europe's most valuable automaker this year when its market cap even overtook that of the parent company, fought back in just a few days after the initial public offering in late September. The picture of her Porsche today getting some four point three percent. The other story watching out front, of course, this is really the World Cup because we need to talk about the World Cup and Lionel Messi as much as we can. Wow, what a final. Lot of people tweeting, saying, I wish I could watch it back. It was so good. I did us scrambling to keep up with the

man for jerseys featuring the Argentine football star Lionel Messi. That was ahead of the FIFA World Cup final. So just imagine what the story is like today. And then the other story that we're watching out for is, of course, AstraZeneca. Now, the pharmaceutical giant's drug infancy, we understand, did not achieve a statistically, statistically significant overall survival compared to chemotherapy and a key Phase 3 trial on patients with lung cancer. And so we're seeing a bit of pressure

for AstraZeneca and of course, a lot of disappointment, I imagine, from a lot of people that are sick right now. But AstraZeneca down four tenths of a percent to overall market indices, holding strong, gaining some five tenths of a percent. The big story, of course, is what happening in Japan with the possible hawkish tilt from the Bank of Japan.

We'll have plenty more, of course, on the market action throughout the day. Coming up, we also focus on the U.K. markets, cautious as the Fed maintains its hawkish rates outlook. We'll have plenty more on that shortly. And this is Bloomberg. Welcome back. Now, these are your top stories today. We, of course, focus on the markets. The markets left, right and center as we

also await for some data out of the US. Back to business. China's top leaders will focus on spurring growth in 2023, seeking to revive the economy following three years of strict Covid curbs. Asian stocks start the week lower. Breaking the deadlock.

EU ministers meet to discuss a gas price cap that's almost a third lower than the original proposal. Plus, the beautiful game. Argentina wins a World Cup after defeating France in a nail biting final. A dramatic end to a controversial tournament for host Qatar. Good morning, everyone, and welcome to Bloomberg Surveillance EARLY EDITION. I'm Francine Lacqua here in London. Now, the prospect of further Fed rate

hikes triggering a recession is fueling market caution. The dollar fell as investors cut long bets while weighing the Fed's outlook on monetary policy. While we're joined by Hannah Smith, vice president for State Street's ETF business.

Hannah, thank you so much for joining us. We thought that there'd be a bit of a risk reversal, but actually, could we get a Santa rally if you look at European stocks are gaining in today's trading session? Yeah, definitely. I think there's now some more reassert assurance that we have may have reached peak rates. And so we saw actually last week in the ETF space, we saw 1 billion going into European fixed income. So there's definitely appetite within the space there and also within emerging markets. We're also seeing appetite there. Seven hundred and fifty million inflows into the space.

So investors are definitely a little bit more risk appetite. Yeah. What do you expect for 2023? Of course, what we saw in the last couple of weeks was a lot of risk aversion because if central banks like that it in a recession which will hurt corporate profits. Yeah, I think in 2023, we're expecting

peak rates to have been reached in most of the developed markets. And then I think that will give us a bit more clarity. Obviously, the also the story around China reopening has been quite positive. And so we have seen flows now into emerging markets. I think the catalyst we were waiting for was China reopening and also peak rate.

So now we are seeing a greater appetite of investors to maybe take a more risk within their portfolios. And as 2023 the year, we're we're going to see equities move in tandem with bonds. It's an interesting question. Obviously, 2022 has been unprecedented in terms of the correlation that we've seen with fixed income and equities. But equities are still very expensive. If we look at the P E ratios on the S&P,

it's around seventeen point five, which is above the 20 year highs that we've seen. And so when we're looking at opportunities, equities at the moment aren't screaming great value. Is there anywhere in the world where they scream, if not great value, some value? I think emerging markets, though, valuations are very attractive, have they, as they have been for some time.

And what we're now seeing is that, as I mentioned earlier, with this China reopening, it provides further to support. So we are seeing investors want to go back in. If we look at the returns last month within emerging markets, it was 12 percent just within one month, and that's five times more than the US and 2 2 times more than Europe. So there's definitely opportunity there. And so in terms of, you know, your base case, what happens to dollar? I think we've never I've rarely seen the split on what market participants say.

Yeah. Dollars. Interesting. I think we saw it peak in September is the highest level since 2002, but since then it's dropped 9 percent. So when you look at the dollar, I think that some of the support mechanisms that were holding it up, such as higher rates versus the other economies as well as China, concerns around China and also the growth dynamics were really supportive of the dollar. It's likely that we're going to see those come off now with in 2023. So I think we'll see kind of less

strength supporting the currency. Tom Keene. We're like Shell very we're going around the world in like 60 seconds. What happened to the UK next year? I mean, we're seeing so, you know, there's a month of misery with strikes. We're not a hundred percent sure. How have we settled on pay? Does it what does it take for investors to come back into certain parts of the UK assets? Yeah, I think the UK is really interesting because the stock market is quite dislocated from what goes on within the within the economy. And so what we see within the UK is it has high exposure to energy, which is obviously perform relatively well given the supply chain constraints.

In addition, it's very defensive. We have high exposure to consumer staples. Also, a lot of companies generate their revenues overseas. So a falling sterling is beneficial. So we have seen it perform relatively well.

But as I mentioned, that's not necessarily a reflection of what we're seeing going on within the wider UK economy. I mean, are there any ETF flows into some the smaller companies? I guess you make a difference between the footsie one hundred and 250, which is much more exposed to domestic issues. Yeah, definitely. So I think that the flows into UK have been quite mixed. I think that for the smaller companies they are a little bit more exposed to what we're seeing within the UK economy. So those flows haven't been as strong as what we've seen in the Footsie. One hundred, for example. OK. Yeah.

I mean, we've been promised a hawkish view for such a long time. Many participants are not believing it, but we're also coming coming to almost to the end of the Kuroda era. Yeah, I think Japan actually, if we look at Japan as a whole, it's actually performed really well and we're now seeing profit taking. Within within Japanese equities, obviously, the weaker yen had actually been supportive because a lot of companies generate their revenues overseas and 47 percent of revenues come overseas. So it will be interesting to see how that plays out. Now that we may not see such a weak yen

within within the market. I mean, I've heard this before that actually yen and B OJ could be the big story of 2010 3. But does it have a read across for other nations that either border it or certainly do a lot of trade with it? I think that when we look at Japan, I think it has been underrated for quite a long time. Japan is always the place which looks undervalued and under owns. And so we have always been quite positive on Japan just because the valuations are attractive. The weekend has been supportive, but I think it will be interesting to see now how that plays out.

And it does feel that investors are starting to like it. We have seen some flows. So I think it's one to watch in and 2023 as to how that plays out. I know we mentioned also the Fed, but are there any leading indicators that you're watching out front or. We have University of Michigan on Friday, which I think is to be one of Jay Powells favorite indicators. But now we have housing. Does it? Is there a danger of actually terminal rate that we're expecting for the Fed, which is around five point to five, could shift significantly? Yeah, I think that's the biggest concern for investors right now. Obviously, we saw weaker data, weaker

inflation data come out of the US, which was positive for the market as there had been at this location so long between expectations and the data that we were seeing. But I think 2023, we're really expecting that we are going to see peak rates and that is obviously a result of inflation coming under control. So I think it's obviously a leading indicator for the rest of the world. What we see in terms of inflation coming out of the US and we do expect that that will start to turn positive in terms of that connection between the data that we're expecting and also rates that we see from the central banks. Did you watch the football final yesterday? Of course.

I think commiserations, first of all, to my husband, who's half French. We'll need like two weeks to get over it. It's amazing when you look at the first play, it was an incredible, incredible game. Then you look at the fundamentals in Argentina having a hundred percent inflation like you do. I mean, is there any read across for I don't know.

I think it's a great it's a great question. And I did see a lot of conversations around the back of that. But I guess maybe now there'll be a bigger focus given the given the World Cup and people looking at what the policies may be. Thank you. So tell us about their vice president

for Safe Streets ETF business. And thank you also for all of your interviews. This year, we'll see you in 2023. Now we're just getting some breaking news out of South Africa. The ruling party, the ANC, has re-elected Cyril Ramaphosa as party president. Now, we also will get round our Valerie title. Of course, our markets editor has her

eye on exactly what's happening to ramp strengthening, I think some 2.5 percent on Mr. Ramaphosa being re-elected as ANC president. Coming up, the UK braces for the most disruptive week of strikes yet. Don't miss our exclusive interview with Jonathan Ashworth. He's a U.K. shadow work and pensions secretary. That's coming up next.

And this is. Economics, finance, politics. This is Bloomberg Surveillance early edition of Francine Lacqua here in London. Let's focus on the U.K. and of course, Britain's bracing for the

most disruptive week of industrial action yet. Nurses, ambulance workers, postal staff and border guards are all striking this week with millions of people's Christmas travel plans set to be thrown into disarray by another round of railway walkouts. It adds to the headache for the UK labor market, which has lost more than half a million people since the start of the pandemic. Joining us now is Bloomberg's UK correspondent, Lizzie Borden. And we're also joined by a great guest. But, Lizzie.

I mean, the problem is basically the missing workers. It is. And this is really the big question mark in the UK economy. It's consequential because employers are having to dangle a bigger wage packets to bring in the staff that's pushing into the double digit inflation. But workers aren't benefiting from the pay growth. Now, there's been a list of reasons

suggested for why these workers are missing pandemic savings, long Covid NHS backlogs and a new reason was suggested by the Treasury Select Committee last week. In a cross-party report, they said that because all their cost of living benefits were rushed out inadvertently, they might be dis incentivizing work. Now the Work and Pensions Secretary, Mal Stride is looking into this in his stride review on labour market inactivity. I want to know what the opposition Labour Party's view is on. So we're joined now by Jonathan Ashworth, Labour's shadow work and pensions secretary.

Jonathan, thanks so much for being with us. Well, I really want to know is do you agree with the Treasury Select Committee chair, Harriet Baldwin, that there are people who can work but are choosing not to? There are definitely more people in this country who can work. We've got employment at a lower level than it was pre pandemic. And I think out of the G7 countries

where one of the few to have regained our pre pandemic employment rates, and when you drill down into the data, we've got two and a half million out of work for reasons of long term sickness. That's a 20 year high in the United Kingdom. We've got this great silver exodus, if you like, of the over 50s who have left the labor market and if some of the people who are short term unemployed looking for work on universal credit.

You know, the Treasury Select Committee is correct in as much as there'll be some who are getting the cost of living and living payment. Yeah. If they go a pound over the threshold, they'll lose a significant amount because of the cost of living payment. But that is a temporary phenomenon because the cost of living payments will not last forever. What are some of the more significant barriers to moving into work at the huge cost of childcare in this in this country? Housing costs, transport links, but also our employment support regime through our job centres is not giving people the the coaching, the retraining opportunities, the detailed personalised support that it really needs to do. And that is something that I am focused

on and I want to reform the system. Well, economists say that one of the reasons for labour market activity in the UK is Brexit. Your leader says that he wants to be the party of business, that Labour's all about growth. Would you have softer ties on EU migration? No, we're not proposing to change the.

That we would have a points based system for immigration. But look at the data. That's one point seven million people who say they are inactive, but who would want to go back to work according to their own survey. Plus, we've got one point two million people short term unemployed. So that's a pool of 3 million people who want to work in this country, but are not going the right levels of support to return to the labour market. We've got to change that.

It's unclear to me, actually, why that is is this long term sickness? Because it's NHS waiting lists. Yes. This is this because it's long Covid and actually world the cost of living crisis and takes people back sooner than maybe they should. Well, that's a really great question. So when you drill down into the data, there is no question that the 7 million on the waiting list, the 400000 waiting beyond a year for treatment, whether that's a knee operation, a shoulder operation that is definitely pushing some of the over 50s out of the labour market, a growing burden of it is also mental health conditions and people not able to get the right levels of support. But here's the thing.

There have been pilot projects across the country where we've put employment advisers in mental health services and it's actually helped people return to work. And one of the things that I would do if I was a secretary state is that rather than trying to fix all this, but from behind my desk in Whitehall, I would devolve budgets to local areas and ask local areas to work closely with the NHS, work closely with local services to give people support. Would you give nurses a pay raise? Well, most people say we've got to negotiate or the government has to negotiate with nurses. The nurses are the strikes.

The industrial action we're seeing United Kingdom is a symptom of 12 years of mediocre growth. Failing to make our economy more productive is why wages have been squeezed. People who actually were better off in real terms under the last Labour government. Which we weren't governments since 2010. So these symptoms are a reflection of that.

We've now got inflation when you get 10 percent, which means the cost of everything is going up, as you know. And that's why nurses are taking industrial action. But it's incumbent upon you sooner. And his team of ministers to negotiate with those NHS staff to find a resolution, because we don't want to see these strikes go ahead this week. So it's not just the silver exodus of older people leaving the workforce. It's also 16 to 35 year olds. And we're in a cost of living crisis. What bigger incentive could you possibly have to get into work other than the need to survive? Well, I mean, I think being in work is important anyway. It's important for your sense of

well-being. I think it's important for your for your contribution that you can make this society in the sense of inclusiveness in society. But it's got to be in your economic interests as well. And for many, it isn't. And that's because wages have been squeezed. It's because things like childcare, so it's so expensive. Many people find that they would be worse off because of childcare costs.

That is absolute madness. But it's also people who can't return to work because they have caring responsibilities beyond children. Many of these over fifties are now caring for the partner of a mom or a dad who've got Alzheimer's or had a stroke. If they have flexible work options, they would return to work. But how do you square that circle? So if it's childcare that you need do not need to increase immigration, so you have some kind of, you know, child support system.

Well, we need to increase childcare provision. So one of the policies that Labour have announced is that we would open breakfast clubs across the country so parents can drop their children off at 8:00 and then get to work. We don't have a cohesive childcare service in this country, in fact. And the cost of childcare for some people, childcare cost more the rent. That's absolute madness.

And it prohibits people from returning to the labour market. Jonathan, just going back to the strikes, if I'm a public sector worker, if I'm a nurse and leave at the party of union, supposedly won't commit to an inflation busting pay rise. What's the point of voting for you? Because we want to negotiate with NHS staff and we've got nothing but praise for staff. I mean, they got us through our darkest days since the war. But we would negotiate and we would give a fair pay settlement to NHS staff through negotiation, but we'd do other things as well. No NHS staff would be working with their fingers to the bone. They're absolutely exhausted because

there's so few of them were short of around 40000 nurses and midwives. So one of the things that we have said we would do is get rid of the non John Tucker status and use the proceeds from that tax change to expand places. So we've got monies so small midwives, more paramedics in the NHS, but on the pay. Would you give them what they're asking

for? No, but we would negotiate. I mean, we've said we're just reaching out to the health secretary said we. 19 percent is unaffordable, but we would sit down and have a serious negotiation, a no negotiation relation. I understand.

But inflation is so high. Right. And we talk about this every day. At some point, if they ask for it for an increase, leave everything else to us. Like, would you give them that money? We would negotiate. Has to be through negotiation and negotiation. It just isn't about pay rates. It's also about terms and conditions. It's also about safe staffing

arrangements. So these are the things that should be brought to the table and we would engage in a meaningful negotiation on those fronts. All right, Jonathan Ashworth, thanks so much. The UK Shadow Work and Pensions Secretary and of course, thank you to Lizzie Borden, who brought us this great interview. Now let's get straight to the Bloomberg

business flash. Here's the Hungarians. Hi, Leon. Hi, Francine. Sam Backman Freight is said to be planning to drop his fight against extradition to the US. Sources tell Bloomberg that the disgraced FTSE co-founder is expected to tell a court this week that he won't fight the request. He's currently being held in a prison in the Bahamas. He denies knowingly committing fraud or breaking the law. Elon Musk is asking users whether he

should step down from running Twitter. With two hours left and some 15 million votes cast. Fifty seven percent of participants in the online vote have so far said that he should. The billionaire owner of Twitter says he will abide by the results of the poll over the past week. Musk has come under fire for banning multiple accounts, including those of some prominent journalists. China's top leaders say they plan to focus on boosting the economy next year, hinting at business friendly policies at the Central Economic Work Conference.

She and other senior officials pledged to revive consumption and support the private sector and marked a shift from recent years. Economists say policymakers are unlikely to target GDP growth of at least 5 percent in 2023. Intel will reportedly delay construction of its planned German chip plant in a blow to Europe's semiconductor ambitions. Local media reports that Intel is seeking more government subsidies as costs for the mega plant and Magda Berg have jumped to 20 billion euros. The chip maker says much has changed since first and. Hang Seng plans for the plant, which was

actually earlier this year. And that's your Bloomberg business flash frenzy. Thanks so much. Coming up, magic messy. We discuss Argentina's win at the World

Cup final and what the tournament means for a host nation, Qatar. That's coming up next. And this is. Economics, finance, politics. This is Bloomberg Surveillance early edition of Francine Lacqua here in London. Now we're just getting some breaking news out of South Africa. It has South Africa's ANC ruling party has re-elected Thrill Ram oppose that party president. It's also elected Mr.

Marshall Teel as a party deputy president. Of course, he was on this very program just two weeks ago supporting President Ramaphosa. On to other things and guitar. Lionel Messi has finally added the World Cup to his trophy list after Argentina beat France on penalties and one of the greatest finals in the tournament's history. Now joining us now is Bloomberg Simone Foxman endorsement. You were at the final.

I can't even begin to imagine the level of excitement that was in the stadium. What was it like? It was really thrilling for seniors, certainly my first World Cup final and everyone on the edge of their seat when France was coming back and looked like it would make up that to nothing deficit. And then going into extra time and finally, penalty kicks. The vast majority of the fans were Argentine supporters. They were very loud through the duration of the tournament. And many of them were wearing that blue and white shirt manufactured by Adidas, for which the company says it is very low stock around the world. So he wrote this morning that this World

Cup stands the risk of turning Doha into the Gulf's, well, one of the most conspicuous white elephants. What do you mean by that? Well, the country has invested more than 300 billion dollars, according to Bloomberg intelligence analysts, in trying to build infrastructure, a new metro system expanding its airport and the like to try and boost the non oil economy. But what the concern is now is that there were already residential and office buildings that were empty ahead of this World Cup. There are going to be 14 to 15000 new

hotel rooms in the market and occupancy rates were sitting below 60 percent. So a lot of the analysts and investors that I've spoken to say is the government is going to need to do something. Either they're going to need to put more money into the non oil economy or they're going to need to change their laws in order to try and encourage tourists, businesses to come here on a more a more regular basis to try and bring more people here, because otherwise the population is going to decline. And, you know, money alone is not enough to get people in the hotel rooms, in buildings and running their businesses from another. Thank you so much.

Of course, that was our Simone Foxman in Doha. Now that is it for the Bloomberg Surveillance early edition. We have Anna Edwards in New York. Dani Burger in London. We'll have a full roundup of what exactly is going on in the markets. This is Bloomberg. Right now, we're trying to move our policy in a way to get back to price stability. But in a way that minimizes the pain of

the journey. We're going to go until the job is well and truly done, which is 2 percent on average inflation. I am getting increasingly confident that we're getting closer to that point, but obviously we have to watch the data. This is Bloomberg Surveillance early edition with Anna Edwards, Matt Miller and Kailey Leinz. It's 10:00 a.m. in London, 5:00 a.m.

in New York and 6:00 p.m. in Hong Kong. Our top stories today. Coping with Covid, trying to look to jumpstart an economy battered by Covid zero restrictions. Meanwhile, there's suspicion that Beijing is hiding the real number of deaths from the latest outbreak. Millions respond to after Elon Musk

asked Twitter users whether he should step down as CEO. Most of them say he should. And euphoria. In Argentina, a country battered by sky high inflation and political uncertainty celebrates a World Cup victory for the ages. Welcome to Bloomberg Surveillance Early Edition.

I'm Dani Burger in London with Anna Edwards in New York this week. Both Matt Miller and Kailey Leinz will be hosting the U.S. clothes show later today, so they are off. Anna, there is some wonderful irony to the fact that I, the American still here in London, and you've traveled to New York to the land of soccer.

But maybe this just means you and I will be less distracted by football this morning. Yeah. Just justice may be done. Very good to see you here from New York. Yeah, I'm here for some pretty holiday cheer. I think that's that's the reason I'm going with my visit. Danny, let's have a look of what's been going on through the Asia session then and into the U.S. sessions.

Set you up for the trading day ahead. This is what we see through Asia MSCI Asia Pacific under some pressure. Cautious trading through the Asia session down by two tenths of 1 percent. We have the Chinese equity market here.

The CSI 300 down one and a half percent. We've got to focus a renewed focus on the economy from the Chinese. That economic conference taking place over the weekend. But that's not enough to counter the gloom and concern around Covid case rising and probably possibly desk counts as well. So that particular index down by one and

a half percent. Then we come to the Japanese assets down and we got the Japanese five year yield in here. We have the yield going higher and the dollar has the yen. Sorry, has been actually quite volatile in this morning session as we've been pricing in the ebb and flow of a particular story around the yield curve in Japan and the BMJ, the relationship between the governments and monetary policy. Will there be more flexibility from the government for monetary policy to be conducted differently? Does that mean any kind of step away from yield curve control? That's what the market was assuming after it saw reports that suggested that. But then government officials pouring a little bit of cold water on those reports.

Well, we've still seen quite a bit of movement in Japanese assets. In the meantime, let's have a look at where we are in the US picture. Then U.S. futures point a little higher.

But this after a lot of focus on negativity last week. And this despite the fact that we got that inflation print out of the US coming in better than had been anticipated, running lower on inflation. But still, the Fed story dominates the ECB story. The global central banking story dominates and that put pressure on equities at the end of last week. We looked at bounce a little bit on that

this morning, up by three tenths of 1 percent. Still a few hours to go until the stocks of U.S. trade, of course. This is the yield on the US 10 year. Will it be a year for bonds next year? We'll get into that conversation a little bit later on. Given if we all going to be dominated by recession phase, how good might that be for fixed income? This is the WTI price. Seventy four dollars and 90 cents. I focus on the SPDR, the U.S. wanting to refill the Strategic

Petroleum Reserve. That's faults of the part of the conversation. Also a focus on the Chinese growth narrative as well. We've got the finance going in here. Danny, normally we have Matt talks about bitcoin, but we put the US going in because there's been some reporting over the last few days that perhaps this coin bouncing a little bass. Maybe that underscores a little bit of reprieve for the crypto sector after the drama. That, of course, we saw on RTX. What do you see on the Europe story this

morning? I gotta say, it's similar to what you saw in American stocks. And but I'm just not sure how much we can really trust this rally, how much we can read into it. Essentially, every single index in Western Europe is heading higher this morning. Nearly every sector is also moving higher. It's led by energy. Should be no surprise considering of that oil price you were just showing energy stocks moving higher by about two and a half percent. But again, it is the end of the year. There's often weird rebalancing things

happening at the end of the year. And last week was just so negative. The worst stock, the worst week for European stocks since November. After that, very hawkish Christine Lagarde and the rest of the ECB.

So on a headline basis, we're up about half a percent for the euro stocks. Six hundred and yields are moving even higher in Europe than they are in the U.S. It is a clear underperformance that started with the ECB meeting last week and continues today. German 10 year yields. Those are up by 4 basis points on the

front end of the curve. German yields are the highest since 2008. Now that shrinking differential between European bonds and U.S. bond yields means that we're getting

support to the euro. Generally, it's a down day for the dollar, but the euro versus the dollar is appreciating about four tenths of one percent. We're currently at 1 0 6 26. The other currency to track is the South African rand that's also advancing against the dollar. This is not just a dollar weak story where the dollar is declining by about two and a third percent. The ANC has re-elected Cyril Ramaphosa to head their party there, of course, the ruling party currently of South Africa. There was a lot of concern about whether CEO Ramaphosa would stay around.

Considering there was the scandal about the theft of stolen money in a couch, a very odd story, but investors might be comforted by the fact and that's your real oppose. That, at least for now, is sticking around and continue can continue to chase his reforms. OK, we'll certainly focus in on that. Let's get back to the Chinese growth story then, Danny. Starting in China, the government says

it will focus on boosting the economy next year at the Communist Party's annual central economic conference. China's President Xi Jingping and other senior officials hinted at business friendly policies and further support for the property market while likely scaling back fiscal stimulus. Bloomberg's James Maiga joins us now in Beijing for more. And let's focus on the things we've heard from the work conference then, James, and a focus on the economy. How substantial is this? The Chinese economy did not do well this year.

Exports are now falling. Domestic consumption is very weak. The property market has slumped now for 50 and more than 15 months. And so this this renewed focus on the domestic economy is really what is needed the government to say that they're looking to boost private spending. They're looking to obviously help

housing developers and help the housing market. And they're also looking to pull back on some of the overregulation of the tech sector, which had really damaged the value of the tech companies. But also, you know, a lot of those companies are shedding jobs. So, you know, these are these is sort of the the sounds or these are the sort of the comments that people were looking for from the conference on the policies going forward next year or what they could hope to see when the actual details those policies were announced in March. I mean, the question now is how effective is that going to be? Can the government really boost private consumption without massive injections of income support for Chinese people who've seen their incomes damaged quite substantially over the last few years because of the lockdowns, because of the slump in various services sector and other parts of the economy? It's unclear whether the government can turn that around quickly in 2023. James, also seems to be some skepticism about numbers have covered in China, be cases or deaths themselves trying to solve hasn't recorded a definite Covid since December 4th, despite reports of hospitals filling up.

How should we be thinking about these figures from these Covid reports coming from China? That's changed a little bit. They reported a two whole deaths over the weekend, which just underscores the point you're making that the numbers that they're reporting about cases and the numbers they're reporting about deaths are completely out of proportion to where they should be. Considering the size of the outbreak, obviously cases it relies on testing. China is no testing like it was. And that what happened in many other countries as people move from PCR testing to the rapid antigen tests, they don't report those.

And so testing numbers on in case numbers honestly have no relation to the outbreak. But we should be seeing hundreds of deaths now. Considering the numbers of cases that are happening in Beijing and other cities, that's just not the case. Now, whether that's a concerted effort by the government to downplay a cover up those tests that people are afraid of the outbreak, whether that's doctors who are overwhelmed, that are just putting down, you know, pneumonia on a death certificate instead of signing it to Covid or what the reason for that is the numbers that you're seeing out of China on the very, very limited numbers of deaths are just unbelievable. If you look at the population of Australia is about the same size as Beijing.

And when that country when Australia reopened from Covid 0 in 2021, you saw hundreds of desert deaths. At some point we're seeing, as I just said, you saw two deaths over the weekend. You've only had two deaths in Beijing in the last three weeks. That's just unbelievable. OK, James, thank you very much, ISE Bloomberg's James Major reporting from Beijing. Now from China, let's talk about the tech story.

And Elon Musk is asking Twitter users whether he should step down as CEO of the social media site. Millions of votes have been cast in the poll. About 57 percent of those so far say Musk should quit. He's been under fire for a number of policy changes at Twitter. Alix Steel Bloomberg Quicktake joins us now for more. And of course, Alex, you followed up

that poll by basically saying no one wants the job. Who can actually keep Twitter alive? What's the actual likelihood that Musk would step down? Well, I think if he says he's going to, it seems there's a good chance he will. He's made lots of comments like be careful what you wish for. I suspect that it's not the whole story.

Don't forget, this follows off the back of several things that happened just last week. Firstly, Tesla had its worst weekend in, I think, to three years. It lost just in the course of the week, 16 percent of its market capitalization. He's at the same time seeking new investors in Twitter. So you wonder whether this and this is all speculation. Of course, there's an external pressures

here. Whether the independent directors, such as independent as they are, it's says they're sort of saying, please don't be as distracted as you are right now. Secondly, whether he's going out seeking new investors and those investors are saying we will not invest in it, if you ask the guitar is where he was over the weekend a possibility he was in Castle, photographed in a box at the football World Cup final with Jared Kushner, interestingly enough. So lots of conversations visibly that he's having with other people. That has happened in the past where he has put stuff out to a poll and then it subsequently be reported that this was all a decision he had taken. Yeah, it does seem an incredible way to run a business, to ask Twitter followers at Twitter to decide these things.

Really, it doesn't it? I mean, in terms of normal business practice is do you get a sense that this is really about Tesla, Alex, and the fact that he's been so distracted by all the things and we've all seen what's happened to the Tesla share price? I mean, I don't think it's any one factor that is probably one of a raft of other factors, Tesla is down significantly since he took over Twitter. I think in the order of 40, 44, 0 percent, while the market remains broadly flat, that is, of course the source of the majority of his wealth. So any troubles that Tesla has subsequently will affect his ability to continue funding Twitter. If you know the value of his equity stake there is diminished. So it is a big consideration. Don't forget, though, Twitter is using losing a huge number of advertisers.

One has to wonder whether, therefore, others who invest in Twitter. As you might in name, be the owner. But there are plenty of other interested parties there, whether they're starting to ask these questions. And you just wonder whether other businesses that maybe haven't decided they'll quit the advertising platform, whether how they would view such a move to ask Twitter users whether the boss should resign seems quite incredible. Bloomberg Sir Alex Brand, thank you very much for the update on the Twitter story. Now, World Cup fever is over, at least for another four years. Lionel Messi finally adding the World

Cup to his trophy list. It's a long drive in, of course. Argentina beat France on penalties in one of the greatest finals in the tournament's history. Joining us now is Simone Foxman in Doha. Well, it certainly wasn't boring. So, I mean, I saw Argentina fans and French and France fans out in force here in New York yesterday. You were at the final itself. You were there on the ground.

2022-12-22 05:55

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