'Bloomberg Surveillance: Early Edition' Full (12/23/22)

'Bloomberg Surveillance: Early Edition' Full (12/23/22)

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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 in London. Here's what's coming up on today's program. No holiday cheer. Global stock markets are mixed ahead of U.S. inflation data. Well, tech faces its worst December since the dot com bubble burst. Mark Gurman free bail.

Well, the RTX co-founder is released on a 250 million dollar bond insurer. He's unlikely to a trial behind bars. Plus, China's soaring Covid infections are keeping people home and causing a slump in travel and economic activity. So first things first. So let's check in on the markets now. We start the day a little bit higher than we went lower. And today, actually, we seem to be holding on some gains.

All of this excitement over the holiday period is also making me lose my voice. But that has been regained. I'm sure you know, a couple of things we're watching out for is, of course, the data over in the US again. Global stock markets today are a little bit mixed ahead of that U.S. inflation data. The U.S.

futures actually fluctuating a little bit. The moves, of course, come through after we saw U.S. session yesterday when a slump in U.S. technology stocks, but also more economic data validating the case for the rather Federal Reserve to keep hiking. Interest rates set a pretty downbeat tone for the moment. I would suggest we're actually trading sideways now. The number of Americans filing new

claims for unemployment benefits increased less than expected last week, pointing to a still tight labor market, while economic growth in the third quarter was firmer than previously estimated. We're now joined by NIKKEI and his partner at Foresight Group. So, Nick, great to have you on the program. Thank you so much for coming in. So, first of all, you're in the private equity space, right? So we talk markets, but what are you expecting from private markets in 2023? We haven't really seen the downbeat message that we heard in equities, but I wonder whether that's still to come. Yeah, I think private markets are actually operating slightly separately from public markets at the moment. I think there's obviously a lot of

expectation around what the Fed's going to do around interest rates and how that's going to land when the economy in America. But also, of course, around the world, central banks are having to react to what's happening with inflation. Clearly, we see inflation as the most important thing in global markets at the moment, both in terms of pace, but also its underlying drivers. So I think private markets are going to

respond to that in the course of 2023 as you get some of that data coming through. Certainly we'll talk about inflation in a second. But do you worry about a liquidity crunch or something happening, which, you know, we've seen maybe in 2022 in certain parts of the market? Could it impact and in fact, private market? Well, what we've seen in 2022. Thanks, but a good functioning of the markets. We haven't seen what we saw in 2020 where we saw really some sort of market failure. I think in 2022, liquidity has been good. And the companies that we've been buying

in public markets with our open ended funds, we've seen that they've been trading efficiently. So we're not concerned about that at the moment. So talk to me a little bit about inflation. If you look at inflation 2022, I mean, this was the big surprise. It took, frankly, almost everyone off guard. Unless you're like a genius of, I guess, economic analysis, could it come down as quickly as it came up? Well, I think that's the key question, isn't it? So everyone's really too hung up on peak inflation.

So where is inflation going to peak and are we coming down? I think the real question is now for central banks is are we going to get stuck on a ledge on the way down? So as we head down to policy target rates, all we're gonna get stuck halfway. And what are gonna be the drivers of that? Because very quickly, the Fed and other central banks could be out of options if that does happen. Yeah. Do you think that happens? I mean, I think I think it may be difficult for inflation to get back to policy rates without a very hard landing. So off base case at the moment is not a soft landing. There are growth outcomes where that's

possible. But for the moment, we think defensiveness is prudent, both within asset class allocations but also within your individual asset classes. So within equities, for example, we think that being defensive in your allocations and actually we don't think the growth versus value debate is a very helpful one at the moment. We think it's all about quality of earnings.

Yeah. How much will these companies be able to continue to continue to grow their earnings? Will they get paid by their counterparts? And actually, what is the runway for them in 23? So how difficult is it at the moment to kind of wade through the noise, to see the earnings growth potential? Also, given I mean, we tend to forget, but there's still this overhang of Covid locked down. So it's unclear when you pull that apart. What we're left with and I think the overhang of Covid locked on is compounded by this absolute addiction to free money that we've had over the last 10 years. So those two externality isn't just distortions are really going to be prevalent in the market in 2023.

I don't think that inflation is going to come down beyond sort of 4 or 5 percent in the next six months, and that could be problematic. But if you break it down and again, I know you say, look, you like the companies and equities that you know where they can pay dividend growth or pass on that inflation. I mean, apart from energy, what is it? Well, where we're looking is a real asset infrastructure.

So we're looking at. Companies that provide critical services to society, whether it's energy, whether it's education, transport. It's the kind of companies which are which enjoy long data, cash flows. Government backing, they are the ones that have inflation linkage mechanically embedded within their multi decade cash flows. Those are the ones I think will continue to be resilient in a very, very difficult environment. Twenty three NIKKEI. I mean, there is a school of thought or certainly I would go about I would say 20 percent of economists we speak to that say we could be surprised on the upside in terms of data ISE in terms of inflation, maybe not as aggressive as we thought it could be. Does that change everything from where

you want to be in the markets? Well, what we've seen as we've seen services, data, ex shelter coming down, but also shelter is coming down now as well. So I think we are going to see inflation coming down. I don't think it's going to plummet down from here. I think there are many factors that are still driving inflation, not least the energy crisis in Europe is that clearly that's a supply side shock that central bank policy can't impact. But we don't I don't think that we're going to be back at policy target rate anytime soon and definitely not without something big breaking.

So how do you play the energy space? Is it through renewables because it gets accelerated or because we're seeing still so much usage of oil? That's the only place where we can really make money. Well, the way that we are looking at energy at the moment is we're looking at companies that build, operate, maintain assets that are going to survive and are going to be going to thrive in a decarbonising energy carbon ISE world. So we're looking at companies that benefit from the things like the ISE in the US where they're getting policy support, they're getting subsidies from governments to actually continue to offer and to deliver on their promises. So what do you do with China right now? It's an frankly, it's unclear. And always we thought, you know, we think about the people that are sick and that are also, frankly, dying at the moment in 3, 6 months.

How do we work ourselves through this? Very difficult. And clearly China's a big unknown. And for investors, that's a problem. How do you deal with that uncertainty? We think that mid 2023, there may be some sort of Covid unlocking in China to that would be positive for global markets if that happens in terms of commodity imports and then in terms of emerging markets that rely on those commodity exports. So we think that, you know, China is clearly very important in the landscape for 2023. We don't exactly know how how how the regime there is likely to unlock. But from what we're seeing, from we're hearing, it looks like mid 2023 might be possible.

Okay. Does that have an impact? I mean, I imagine this hasn't madcap impact, of course, on your dollar coal and therefore on emerging market exposure. Yeah, of course. I mean, the way that we think about the dollar is really everything to do with it has to do with the Fed's reaction to inflation. So that's our primary our primary input there. We do see a strong dollar persisting

throughout 2023 as the Fed is is forced to remain on the trajectory that they've indicated that they'll stay on. And it's amazing how the market refuses to listen to that. Ashley, how do you do it? It's the market. Why is market shares? Because you're too optimistic? Well, I think they just see peak inflation and think they'll temper. I think I think the market is expecting

a pretty serious pivot once we start to see some of the damage done to the labor market. Clearly, that's a lagging indicator. So it might take 3, 6, 9 months to get there. But once we start to see some of the some of the breaks that drone pilot is hoping to enforce on the market, I think that they're backing a shift in policy. So do you buy any bonds? No, we don't buy bonds.

It's just not right. Not well. It's not in our agreement at the moment. So we're equity investors and everything we buy is listed in public markets and our funds. But clearly, you know, the attractiveness of bonds compared to where they were months and years ago is potentially problematic for equity investors as well as allocators who can buy bonds and who want to buy bonds for the yield swing towards the asset class and away from equities reducing overall demand. All right, Nick, thanks so much for

coming on. Nick Scullion there, partner at Foresight Group. Now coming up at RTX, founder Sam Backman Freed makes his first appearance at a US court to face fraud charges over the collapse of RTX. The latest on that just ahead. This is Bloomberg.

Economics, finance, politics. This is Bloomberg Surveillance Early Edition and Francine Lacqua here in London. Now we are getting some moves that Tesla actually pre market, raising some 2 percent as Elon Musk has vowed to pass, selling shares I think for 18 months. It might be two years, but of course, we keep on following that story very, very closely. Premarket one point eight percent higher for Tesla. Now, Sandbank, when freed, was released on a 250 million dollar bail package after making his first U.S.

court appearance to face fraud charges over the collapse of RTX, the cryptocurrency exchange he co-founded. Let's get straight to the latest on this from Bloomberg's crypto senior editor, Anna Maria. And at first of all, I mean, the first I read the story, I came in this morning and I thought, wow, that's a lot of money.

Where is he getting the money from? So he last said he only had one hundred thousand dollars in his bank account, so we can say that it's not going to be 250 million. There's normally a mismatch between the bail package and how much you need to put in, how many assets need to put in to secure it. So I think it's going to be around 10 percent. It's also secured around on his equity

in his parents home, which is where he will be staying during spirit. So it's not it's eye catching, but it's not as big. It's going to put up as quite as much money.

It's not really this high because it isn't set for you to try to sort of run away. And it's interesting, again, that the lawyer was saying it's not you know, they don't consider him to be a flight risk. And the judge believed that to be the case because he's well known now. So it'd be harder for him to sort of make appear elsewhere without a non. So what information do we know is still coming in? What's the timeline out of all of this, Anna? He's going to appear in court again on January 3rd. He's not made a plea yet.

So, you know, there is his lieutenants we discovered yesterday guilty at our operating with authorities as Carolyn Allison was the CEO of Alameda Research Sister, the sister trading firm of RTX, which was at the heart of some sort of what was going on. And then the CTO of RTX, Gary Brand, who was also a co-founder. They also he also pled guilty. So from that, we learned a bit more about what was going on behind the scenes, which was essentially there was much that happened. But a fundamental part was that when it got into some financial trouble and when Terra collapsed in May, it couldn't meet some of its obligations with lenders. And so they started taking more, borrowing more from RTX.

So from RTX customers, essentially from the deposits there to cover those those losses. And so, you know that the crux of the case is that really a lot of the funds that were supposed to be RTX for because they were their customer funds were actually misappropriated and used by some Mark Gurman freed allegedly for his own personal use and then also to work for those sister trading house to trade against. And I thank you so much. Bloomberg's crypto senior editor there are not Herrera. Now, Guggenheim Partners chief investment officer Scott Maynard has died.

In a statement, the company says the 63 year old died after a heart attack during his regular workout. Here's a look back at his life and legacy. Scott miners climbed the corporate finance ladder to become a founding and managing partner at Guggenheim Partners, minored was regarded as one of the most respected voices on the fixed income market. Over the last decade and a much sought after guest by financial media, including Bloomberg Television, for his view on markets, miners first job was at Price Waterhouse, which gave him the opportunity to analyze hundreds of financial statements, something that benefited him later as CIO for Guggenheim while still in his early thirties. Miners became the global head of fixed

income at Credit Suisse, working for legendary investor Bob Diamond. Despite his incredible early success at the age of 37, Miner decided to move to L.A. with plans to retire. But in 2000, miners met members of the Guggenheim family and became one of the founders of Guggenheim Partners. In a statement, Guggenheim Partners CEO Mark Walter said Scott was a key innovator and thought leader who was instrumental in building Guggenheim Investments into the global business.

It is today. It probably affected the way I looked at all investments going forward, which was not to just listen to the conventional wisdom of what everybody else was saying, but to take what they were saying and actually, you know, really in reality challenged. Economics, finance, politics. This is Bloomberg Surveillance early edition of Francine Lacqua here in London. Now, with a recent breakthrough, U.S. scientists were the first to generate a

nuclear fusion reaction that created more energy than it consumed. Now billionaires such as Jeff Bezos and Bill Gates are already investing in technology. We'll look at whether it's the answer to the world's clean energy needs and when it might be commercially available.

Guy Johnson reports. After more than 50 years of failure, scientists have taken a major step closer to achieving near limitless clean energy. On December the 5th. Researchers in California succeeded for the first time in generating more energy from a fusion reaction than it consumed. This fusion breakthrough will go down in

the history books. This shows it. It can be done, which is what has been a question can you get? Commercial viability is probably still decades away, but this new technology has huge potential. According to the Fusion Industry Association, each pound of fusion fuel could produce as much energy as 10 million pounds of coal. But what is fusion? Nuclear plants today use fission where an atom is split to produce energy.

Fusion does the opposite to atomic nuclei are combined to create a heavier atomic particle with the reaction giving off energy. It produces no nuclear waste or dangerous radiation. A disaster like Chernobyl isn't possible. Billionaires like Jeff Bezos, Bill Gates and Pete Teal are already investing, and startups have received almost 5 billion dollars in funding, with Bloomberg New Energy Finance predicting one billion dollars this year alone. But not everybody is a believer. Elon Musk, a co-founder of renewable company Solar City, has said that solar and wind costs are falling so fast that fusion energy will be a dinosaur by the time it's viable.

But for now, the breakthrough has sent a major jolt of excitement through the scientific community energy that surely won't go to waste. Bloomberg's Guy Johnson there on the future of nuclear fusion. Now let's get straight to the Bloomberg First World News.

Here's Liam Leon. Hi, Francine. The House committee investigating the January the 6th attack on the US capital has delivered a scathing report blaming, quote, one man, former President Donald Trump, for inciting violence in an attempt to hold onto power. 800 page report details. Trump's behind the scenes theory and his efforts to pressure state officials and the Justice Department to overturn the presidential election. Now, Bloomberg has learned that China plans to cut quarantine requirements for overseas travelers from next month.

Under the new rules, arrivals from abroad will only be subject to three days of monitoring. China currently requires travelers to quarantine at a hotel or other facilities for at least five days after their arrival and a once in a decade. Winter storm is battering much of the US with snow and also freezing temperatures. More than three and a half thousand flights have been canceled so far with those through Chicago and Denver. The worst affected, the American Automobile Association says more than one hundred and twelve million people plan to travel at least 50 miles at some point.

And that's over the holiday period. Inflation in Japan has further accelerated to the fastest pace and that since 1981. Consumer prices, excluding fresh fruit, climbed three point seven percent in November from a year ago, matching the estimates. The data may fuel speculation that the BMJ will surprise markets again with more policy tightening. Earlier in the New Year, global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and to analysts and more than one hundred and twenty countries. I'm the Aunt Karen's.

This is Bloomberg. Francine Leon, thank you so much. Less for Bloomberg. First World News. Now some of the movers that we need to watch out for again. It is quite thin volumes, but I love this story. First of all, Bavarian, Nordic really a must watch today and during an agreement, the U.S. Department of Defense for vaccine

development. The stock is getting some five point nine percent. You should probably talk about a very Nordic more than we do in general. Philips saying that tests on recalled products are showing the limit of the health risk. So that's also getting a boost at Philips, gaining some two point seven percent and then Sodexo down some four point one percent.

This is a huge paid one company that also feeds our troops abroad. Now, let's also take a look at some of the key things that we're watching out for today. We've already had an update on the Spanish economy with GDP numbers coming in.

As expected, 130 p.m., we get a fresh batch of U.S. data, including consumer income, home sales and durable goods. Later at 3 p.m. U.K. time, there's more data out of the U.S. with the latest release of the University of Michigan Consumer Sentiment Index. And then, of course, it's another day of strikes across Britain.

This time from Border Force officers. About 1000 of them are walking off the job today, creating potential travel chaos at airports around the country. Now coming up at fancy, setting up a new business in the new year. Well, we speak to the co-founder of Organic Chocolate Brands, bringing blacks on, starting out in downturn and the headwinds facing businesses in the current environment. That interview is up next.

And this is Bloomberg. No holiday cheer. Global stock markets are mixed ahead of US inflation data. Tech faces its worst December since the dot com bubble burst. Bank men freed bail. The FTSE co-founders released a 250 million dollar bond with a stipulation to live with his parents as he awaits trial. Plus, China's soaring Covid infections are keeping people home and causing a slump in travel and economic activity. Well, good morning, everyone, and

welcome to Bloomberg Surveillance Early Edition on Francine Lacqua here in London. Now, despite the current economic climate. Nearly one in three people in the UK have either started their own business or considered doing so in the last year.

That's according to new research by counting professional body 80. It's something that the Green Black's co-founder is no stranger to having set up the organic chocolate company during the early 90s economic downturn. Well, I'm very pleased to welcome Joe Fairly, co-founder of Green and Black joked. First of all, really congratulations on building this brand into one of the most recognizable chocolate names out there.

What kind of advice would you give to entrepreneurs that want to do something? But actually, the economic climate is very tough for them. I think that actually a tough economic climate is a really great opportunity for start ups because a lot of the big businesses are very nervous. They've got their finger on the pause button waiting to see which way the wind blows. And actually when you're a startup, you

can just literally, you know, you've got your goal. You keep powering forward and and you haven't got anything to compare the current trend to. So I see a lot of dynamism during recession times while the big guys are kind of twiddling their thumbs and going, oh, let's see how this pans out. So when you look at, you know, everything that's going on at the moment is green and black, actually, recession proof is chocolate in general, recession proof.

Do you have the same kind of inflationary pressures as other markets do? I think the great thing about chocolate is that it is a fairly low price treat and actually at times of recession we want to have those treats probably more than ever, a small treat as opposed to a big piece of clothing or something. So I think that chocolate is probably recession proof, but I do see that there is a strong trend towards the kind of chocolate that we pioneered and that we still make today, which is ethical, sustainable. You know, during the pandemic, people had a lot of time to think about what where they wanted to spend their money. And I think that that is only going to continue because we are going to be spending less.

We are going to be thinking more about what we spend it on. And I think that notwithstanding our cost of living crisis, we still want to make sure that our money is spent in a good way. You know, with heart. Does that change in a downturn? I mean, I'm not saying it changes, but actually, you know, you're high premium, top end chocolate brand. Will people still buy a chocolate brand that's fairer and better for society, but more expensive? If the recession hits, we're just over to quit.

I don't think that's expensive. I think there's a lot of chocolate out there for eight or twelve pounds. Now, that's actually the same size and the same the same cocoa content as ours, but doesn't have the sustainable credentials.

And there's just, you know, much, much more expensive. So I think we're in kind of, if you'll pardon the pun, a sweet spot. But, you know, I really do encourage would be business owners not to buy into the doom and gloom that is out there right now. You know, as you said, 80s study showed that one in three people want to start their own business. And there's actually, in fact, a brilliant Web site called in for me, Dot Co Dot UK that actually has a an e-book on there that people can download for free about how to start your business in 20 days. Now, you know, we're going to have a few

days off for Christmas. But if you were to restart on the twenty seventh of December, you know, by the middle of January, you could you could probably have something that was pretty much, you know, ready to get running. And I find that so exciting. No, it isn't a and it's an amazing brand. I'd like to say, you know, you say it's too good, but actually, I mean, I buy larger packs.

I've never quit. That's like if you don't like chocolate. Joe, this is maybe the problem. My problem anyway, when you see some of the inflationary pressures, what you worry about the most in 2023 is that the price of cocoa is at transport. Is it packaging? I think that obviously transport has gone up massively. You know, that the price of containers cetera is is off the scale compared to where it was a few years ago. And, you know, for smaller brands, that probably means prioritizing certain markets over others because it can be more expensive to ship less stuff. But and and yes, I mean, there's

inflation. But, you know, we have been here before. And what I would say to all business owners is keep the faith, you know, just take a lot of deep breaths, give yourself plenty of TLC, because I think it's very important to make sure that as a business owner and or a manager, you have the resilience, the personal resilience to kind of weather the storm that we're currently experiencing. It's so important when you've got a team that depends on you when you, you know, never mind your family, et cetera.

So, you know, I will be keeping my head down while powering forward. And I think the great thing about having a business that's been around for a few decades is, is, you know, what goes around comes around. And there will be an end to this. But as I say, you know, for those would

be startups, it I think it's a time of great opportunity. But it's hard. I mean, sometimes it's lonely at the top, especially if you have everything on your shoulders. So how do you build a team? Like, if you need advice, if you're going through a tough time as an entrepreneur, who do you speak to? And you know, what was your relationship like with the banks at the start? Well, the first 25 20000 for greener blacks came from me selling my flat to move in with my business partner. And literally I had 34 pounds left in

the bank after I after I bought two tons of the first consignment of green and blacks. So. So what I would say is that it's incredibly important to have your finger on the pulse of where your business is financially. You need a great accountant. And what I see often in business, you know, I was lucky my husband had been in business before I tapped into an existing distribution network that he had with his brand holder. But it's very hard for if it's one entrepreneur starting up on their own, it's very hard for you to be good at both the creative side and the financial side of the business. And that's where a trusted accountant

comes in, know a professional who can literally let you know at any moment of the day or night what your cash flow is, what your projections are, how much money you've got in the bank. And I know you can get your phone, but, you know, how much does that. How much is that really? So. And also, any bank that you are dealing with is going to want to know that you have that information right now. So, Joe, I mean, one of the other things I hear quite a lot from entrepreneurs are actually, you know, venture capitalists wanting to invest is that there is a concern in Europe and in the U.K.

that very good companies then don't become big quickly enough. And so there's, you know, the first mover advantage, if you have a brilliant idea, is squandered compared to some of the US. Do we need to be more like us companies? Like what's is there a UK advantage? I mean, I truly believe in that kind of first mover advantage for sure. I think that I've I've founded five different businesses now and they've all been the first of their kind. And I think that, you know, I have no interest in something that is a me too business.

But I do think that if you've got a good idea, you know, it's going to it's going to take a great deal of work to get it to a point where venture capitalists is ready to invest in it. It took us nine years. We sound like an overnight success, but venture capital came in after nine years. It would probably be quicker now because they are more interested in getting in earlier. But you know, that's where making sure that financially you're you know, you have everything in place if you want that investment to grow. Is incredibly important for sure. But, you know, any would be entrepreneur who wants to build a global brand.

It doesn't happen by magic. You have to roll up your sleeves. You probably have to make some sacrifices. And you do have to find a way of striking a personal balance whereby, you know, you're not running on empty while you're trying to build this. And Joe, again. What you know, if there is a young

entrepreneur or someone that's been thinking for a long time, open a business, what's the perfect mix? You start locally here in the UK and see what happens or you have to start trying to export quite quickly. To be sure that you have that brand recognition. I think you have to decide and you have to be strategic.

I think the biggest mistake we made at the beginning was actually exporting to too many small markets too quickly because each one of them proved to be as much work as, you know, selling two containers of chocolate to America. And, you know, that's as much that's as much work as sending a quart of a pallet to Estonia. So and I believe it is one of the best starting points for any business is to put yourself in your customer's shoes.

And all of my businesses have been founded on maybe slightly arrogant principle that if I need something and it's not out there, the chances are that lots of other people feel the same way, too. That way you can tap into your instincts. You can tap into your insights. You need a focus group. You know, if you can't find something, there's probably a business opportunity that. I love that joke. Thank you so much, Joe Fairley there, co-founder of Green and Blacks, joining us this morning. Coming up, how has this year fared for UK stocks? We'll discuss the winners and losers.

That's coming up next. And this. Economics, finance, politics. This is Bloomberg Surveillance early edition of Francine Lacqua. Here in London now, UK stocks have had a wild ride this year, but some have fared better than others to tell us who sunk and who swam. We're joined by our stocks reporter, Joe

Easton. So, Joe, clearly been a tough year for UK stock markets broadly, which are some of the individual worst performers that stand out to you. Right. So a lot of these companies have really exposed to the high interest rates. They've got big debt loads and they've struggled to keep up those financing measures throughout this year. So some of the stocks we've got on the screen here, we're looking at whether spoons is a good example.

Not only do they have quite a big debt load, but they're also facing this squeeze on both demand and also margins. The cost of keeping beer, cold cooking, that's all coming up. Given the energy price increase, they've been hit quite severely. Moon peg, like birthday cards are pretty recession proof, but the gifting business is not so recession proof. People do tend to trade down when you go into recession, buy cheaper gifts. They've also been hit by a strike as well.

That might explain why I've had so few Christmas cards this year. Maybe not. And also synergies down the bottom. This was one of the best performers. In 2020, it rose around 2500 percent on a Covid-19 drug. However, in March, they announced that

actually this drug doesn't work and the stocks sank and is now down around 93 percent. So clearly some individual names to keep an eye on, but also the ones that are exposed to the high interest rates are really the ones that have been hurt the most. I'm terrible, Joe. I printed cards, Christmas cards and

haven't sent them yet. How about the most impressive winners of the year? Sounds quite organized to me, I think from. But I think some of the best winners this year. Yeah, they're quite surprising, really. Red Balfour Beatty on the screen here now.

Most of the UK construction companies are really down a lot because they're exposed to the property market, the housing property market, which has really tanked. Balfour Beatty though they're building the high speed to project, which will link London to Manchester, not might not be ready until 2033. So something to look forward to. But they're also expanding the Hong Kong airport as well. So just an idea how they're diversifying away from the main UK house buildings May Group. We spoke about earlier a bit of a

strange one. They run photo booths all around train stations and airports when you need a new passport. You go down there and try to look nice for a photo. There's been a big boom in passport demand over the past year.

Around 10 million Britons have renewed their passports after the Covid restrictions were removed. So photo may now known as may group up around 80 percent, a pretty good return for those investors. DOSA, which are the stocks that you think could be attractive in 2023? Yes. So I do think we could see a bit of a rebound in some of the domestic sectors. So the home builders, the banks and also the retailers. But there's some really good specific

names to look out for. So I think W H Smith, very well-known company that was absolutely flying before the pandemic, but then was hit by the travel restrictions and that had a lot of their sales around the airports and train stations still well below pre pandemic levels. And some investors are getting more excited about that one. Now that could come up. Jim Group, I know we'll all be thinking

about the gym in January after we vet Joe over Christmas. That's at the lower end of the pricing points. So people are looking to cut back on their costs.

But if you're at the lower end of the market like gym group, they might be able to maintain their membership numbers. And then finally, restaurant group and they own Wagga Mama and also some of the other chains like Frankie and Benny's, they've been hit hard by the recession, fears, people cutting back on their spending going out. But as I mentioned to you earlier, I do love a Katsu Curry.

So that to me is one of my favourite stocks out there at the moment. There you go to Eastern, singlehandedly supporting Matt Miller. Thank you so much. With the very latest in stocks to watch for next year and how tech for valuations have taken a beating this year is expensive growth stocks lose favour with investors.

This has also hit London based female focused health tech company LV, which has suffered a big drop in growth this year. Bloomberg's Tom Mackenzie spoke with the chief executive officer, Tanya Bowler, about the challenges that the business has been facing. Definitely slightly reduced expectations on growth. So having gone from, to be honest, around SEK 100 percent year on year growth this year we're looking about 25 percent. How well capitalized are you? How challenging is the funding environment? Well, I'll be honest, it has definitely been difficult this year. You know, I think overnight investors

have really moved away from anything with the discretionary spend, the fast LV, one of our key channels. Also is health insurance, particularly the US. So that's very repeatable and unpredictable income. So we've managed to weather that storm. Luckily, we have a group of investors who that support us for the long term. Okay. And you mentioned the supply chain challenges. Are we at a point now where those have

been addressed or are we back to kind of pre pandemic levels in terms of supply chain efficiency or they're still areas that are holding back the business? Yeah, that's true. I wouldn't say there's there's full efficiency across the supply chains in general within consumer electronics. We have at least seen a real switch from that obviously being a real supply issue within Asia, particularly components some manufacturer.

Asia has now ramped up to meet that demand, but we're still seeing a lot of inefficiencies. I want to focus a little bit on the U.K. before we let you go. The regulatory environment here. You were successful London based European tech company with your roots in the UK. What more can this government be doing to support business businesses like yours? I think it needs the support at every different level. You know, we have a really vibrant ecosystem here in the UK. We have a lot of experience in terms of both now on the investor side and the other side, the table at times, entrepreneurs, entrepreneurs themselves.

We need more entrepreneurs to choose London as that place their businesses. So, for example, entrepreneurs tax relief that has been cut. I would suggest that needs to be there as an incentive so that entrepreneurs are choosing London, either Paris or Berlin. After that, obviously we need top talent. And for that we need to be looking again at the immigration and allowing the tech that we know. We need the tech town to come into this country. And 30, I'd say in terms of trade, we

need. We are a British company. We're exporting. We need the UK government to be looking increasingly at those export barriers that we're all facing now as British businesses. So that's a nod to Brexit, the Brexit

effects. And that is a negative that is a drag on on your business. Absolutely. Yeah. Brexit has impacts on all UK businesses who export into Europe has also just increased paperwork and bureaucracy in terms of how we can export is what is obviously increased taxes. Are you able to quantify the Brexit effect on your business? We haven't been able to quantify it for us.

So essentially our main markets where the UK and the US and then we had plans to get into Europe with everything has been happening at VIX. It just makes us relook at those plans and make different decisions. Okay. Final question.

The UK chancellor has said he wants to turn the UK into the next Silicon Valley. In your view, sitting here as an entrepreneur in London, is that realistic as an aspiration? Absolutely. We did our fund raiser last year. It was the largest fund raise for tech beat anything in the US as well. And that just shows the level of commitment, investment and passion here in the UK. Well, that was Tanya Bowler, the chief executive officer of UK based health tech company LV. Coming up, it's been a wild year defined by lightning, fast inflation, a war in Europe and recession anxiety. Look back at some of the biggest moments

of 2022. That's coming up next. And this is Bloomberg. So twenty twenty two was quite the year. Here's Bloomberg's two minute roundup. In January, the Federal Reserve laid the groundwork to raise rates to tackle the fastest inflation in a generation. Adding to global inflationary pressures, Russia's invasion of Ukraine. The attack began in late February and

dominated headlines from the destruction on the ground to U.S. sanctions on Russian banks and oligarchs by March. Attention zeroed in on the specific threats that Russia posed restricting the flow of natural gas to Europe and attacks near a nuclear power plant in Ukraine. Corporate drama started to pick up in April when Elon Musk made a 43 billion dollar offer to take Twitter private, while Netflix reported a loss in subscribers and changed a strategy to embrace advertising. The theme in May. Market mayhem as the Fed boosted the size of its rate hike to half a percentage point, sending U.S. stocks to 13 month lows while a single

trader at Citigroup made a mistake that sparked a flash crash in European stocks. Recession fears took root in June. Half the headlines of Bloomberg's 10 most read stories that month featured the R word, another R word row after the Supreme Court overturned Roe v. Wade. Geopolitics were the big stories over the summer. The killing of former Japanese Prime Minister Shinzo Abe and Nancy Pelosi defying China when she visited Taiwan.

The UK lost its longest serving monarch in September. Two weeks later, the new prime minister unveiled unfunded tax cuts that cause the pound to crash in October. Credit Suisse became a mean stock, setting new lows. Some retail investors bet the bank would go bust while Xi Jinping consolidated his power, adding more loyalists to China's leadership. Crypto winter arrived in November when

FTSE collapsed, destabilising the industry, and by December, a bankers were tallying up the costs from slumping markets sparked by the Fed's rate hike campaign. Their wallets will take a hit as Wall Street firms prepare to slash year end bonuses. Well, that was quick take Scarlet Fu. Reliving some of the biggest Bloomberg

headlines from last 12 months. Now let's get straight to Bloomberg Business Flash. Here's Leon here in Thailand. Hi. Francine FTSE, co-founder Sandbank, I'm afraid, has been released on a two hundred and fifty million dollar bail package after his first U.S. court appearance on fraud charges.

A prosecutor calls that one of the largest pretrial bonds in U.S. history. The package includes a personal bond secured by his parents house in California, where he is required to stay. His next court appearance is scheduled

for January the 3rd. Now, BHP is to stand trial in the UK over a 2015 dam collapse in Brazil that killed 19 people. A judge set a trial date for April 20 24 to hear the claim on behalf of around 400000 litigants seeking an estimated 10 billion pounds, according to the firm representing the claimants. It will be the largest group action in

English civil court history. Elon Musk says he's not planning to sell any Tesla shares for at least 18 months. Speaking on Twitter spaces, Musk also said he favors a share buyback once the company is more confident in the direction of the economy. The Tesla CEO is offloaded almost 40 billion dollars worth of stock this year.

Now, that was mostly to fund his purchase of Twitter. And that to Bloomberg Business Flash. Brianna, thanks so much. Bloomberg Surveillance EARLY EDITION continues in NIKKEI Matt Miller in New York at Ludlow is here in London. And this is Bloomberg.

Our baseline is that the U.S. economy to avoid recession. We're going to go into a vey sort of below potential growth rate scenario. The recession is delayed primarily because of the lags, the effects of monetary tightening on the economy. The worse the economy is now due to better, the market can be because the Fed will aim to lower rates even before renewed expectations. This is Bloomberg Surveillance early

edition with Anna Edwards, Matt Miller and Kailey Leinz. It is 5:00 a.m. in New York, 10 a.m. in London, 6:00 p.m. in Hong Kong. These are our top stories on Christmas Eve Eve.

Among the biggest losers this month is Tesla. Elon Musk says he doesn't plan to sell shares of the Eevee maker for two years, although he's gone back on similar pledges at least twice this year. Tech bulls, by the way, face their worst December since the dot.com bubble burst two decades ago. And today's P C E deflator could make things worse. Plus, bank men freed out on bail. The FTSE co-founder was released on a two hundred million dollar bond. One of the biggest in U.S.

history. Welcome to Bloomberg Surveillance the early edition. ISE Matt Miller in New York at Ludlow is with us out of London today. Anna Edwards and Kaylee lines are off on some well-deserved vacation time. Ed, what do you see in terms of the market setup for this, the last trading day before Christmas? Yeah, I think we couch what's going on with thin volumes around Christmas Eve, Eve, as you put it. You know, there is some anxiety in the

U.S. session Thursday that spilled over into Asia. It's a story about good economic data out of the US and forcing the idea that the Fed will stay the course in its fight against inflation and continue with its outlook of raising rates for the MSCI Asia Pacific down 1 percent. It's dropped in seven of the eight lost eight sessions. Particular pain as well in the Chinese

tech sector where we're seeing some of that kind of selling reflected of those higher multiple stocks that are rate sensitive in the US that carry through throughout the Asian session. Inflation in Japan came in hottest since the 1980s. It kind of reinforced this idea that the DOJ is set for this hawkish pivot. Earlier in the week has been the top story for markets to be a reset the upper band for yields to 50 basis points. And there's this idea that actually they'll now go a little bit further in light of that inflation print in Europe.

OK, we're treading water, Matt. I know that you would rather be in Jamaica than here with me on the show right now. But Europe kind of feels similar. This and green on the screen and continental and Western European markets muted gains, thin volumes. You look at, for example, the stocks, Europe, six hundred. Yet there's some weakness in tech as well and some underperformance when it comes to areas like consumer discretionary.

We've made a few attempts this week to kind of rebound, particularly those rate sensitive stocks. I put the FTSE 100 up that were kind of modestly higher as we have been a week, three tenths of one percent. We're focused on strike action here in the UK, although there's no real read through to what that means for corporate Britain. And then yields. There's some movement in yields, right? I think that we're still kind of make sense of economic data. The focus of PCH will be huge throughout the day.

It's interesting because it is an important day to print, even though again, Christmas Eve. Eve, happy Christmas. Yes. Merry Christmas to you as well. Yeah. I mean, P.S., the core PCI e deflator is what the Fed supposedly cares about the most. And we're expecting a reading of four point six percent today.

Let's take a look what's going on in U.S. markets right now. Futures are very little changed on the S&P after a sizable drop yesterday. We're down about one and a half percent yesterday on concerns about the Fed and how quickly it would raise interest rates. You see investors selling, though, the

10 year bond right now. So the yield rising 2 basis points to three sixty nine, eighty six. Getting back up there a little bit and that makes crude also continues to climb right now. Seventy nine fifteen. So really about the same level as we were 24 hours ago. And we looked at this ad yesterday, we were just under 80 dollars a barrel for WTI.

But there are more questions about the reopening in China. Does that drive crude prices higher or are the Covid infections so bad that the demand just really isn't going to be there? That's a debate, I think, in the market right now. And then Bitcoin, you know, maybe I'll stop showing this in the new year if it continues to hold at this level. There doesn't seem to be any movement in Bitcoin outside of the FTSE story. Not a lot of drama in the O.G.

crypto world. And of course, we're going to talk about the RTX story. But Bitcoin really is a separate issue. Global stocks, stocks saw their biggest weekly outflow on record this week. That's according to Barclays strategist Emmanuel Cao. Bloomberg's Valerie title has the numbers and the reasons for us. Valerie. Thanks, Matt.

Yes, you're right. Forty two billion was pulled from equity markets on the week ending December 21st. So that encapsulates this week after we had the hawkish ECB meeting, the Fed meeting as well. Forty two billion was pulled down.

90 percent of that came from U.S. equities. I've got a chart here which is showing the S&P 500 and the NASDAQ index. They've had a dismal performance in December, especially the NASDAQ. We're now only two and a half percent away from the year to date lows.

Matt, how depressing for December. Santa clearly isn't deliver, does it? Santa clearly didn't deliver. My theory is that he was distracted by the World Cup, but I got the one thing that can maybe have stocks end and end the end the week, end the year. On a more positive note, the core P.C. inflation number that you were talking about, the attention is really going to be on the core number month on month. Matt, it's going to the consensus at the moment is four point to anything lower than that, I think would boy stocks at the end of this week and possibly into the few trading days we have next week.

All right. Thanks to Bloomberg's battery tight. So you got a flight to catch, haven't you? You better get going. Elon Musk says he is done selling Tesla stock, at least for now. The CEO is offloaded almost 40 billion dollars of stock this year, mostly to fund his purchase of Twitter.

He made comments on a Twitter Spaces audio conference yesterday. I'm not selling any stock for, I don't know. I caught a minimum 18 to 24 months, so you can count on me like that knows no stock sales, probably item twenty five at twenty five or something. Joining us now, Bloomberg Global Autos editor Craig Trudeau, Dallas, exciting as he was my editor, have quite a long time as well. We're modestly higher now in premarket. Eight tenths of one percent snaps, five

days of losses on Tesla. My point is investors like what they heard. What did he, Eli must say? I think they liked what they heard. But to Matt's point earlier, this is a case of maybe third time's the charm, right. Where he said at least he said twice now before yesterday that he was done selling and then he went on to sell more.

So he he at first in April sold eight point five billion in August, six point nine billion. Both of those times when he made his first statements that I'm done. And then he sold four billion more in November and three point six billion more this month. So I think that may help explain a little bit why, you know, we saw a positive reaction last night and maybe some of that coming down.

The other reason that I would definitely be looking at what the stock does today is just, you know, the sort of downbeat view that he offered on the economy. He said, you know, he does expect an intense recession in 2023 and even likened it to being perhaps similar to 2009. So obviously that's that's quite a serious statement for him to be making. And so it may be a case of a little bit of positive, but also some negative mix in last night. Does anything good happen anymore when Elon Musk talks? I feel like he's become such a pariah. I wonder if it rubs off in a negative

way on the auto brand. I mean, is it gonna become uncool to drive a Tesla now? I think that even is a concern on the part of some of his biggest fans, and you heard it even come across on the Twitter spaces last night. There was one of his his big fans referred to the idea that he had a daughter who is trans and was was really concerned about, you know, his, you know, jokey tweets about pronouns.

We've also just seen this more than just anecdotal. We've seen this come across in consumer surveys and attempts to really get, you know, arms around, you know, what this is doing to the Tesla brand. And, you know, before all of the events of the last few months, you know, this was the case where, you know, Yuan was was cited as a reason that people, you know, didn't have have particularly fond feelings about the brand. So he can both be there, their biggest proponent. A big, you know, to his credit reason for why the stock was valued as highly as it was. But also, he's been, you know, their biggest enemy and a headwind as a player.

All right, Craig, thanks very much for joining us. Greg, true down there are global auto czar talking to us about Elon Musk, Tesla and Twitter. Now, Sam Backman Freed was released on bail after making his first U.S. court appearance here in New York. The terms include a 250 million dollar bond secured by his parents house in California, which must be an awesome house. Let's get more with Bloomberg's crypto reporter, Katie Greifeld. So massive bond and what kind of palatial estate do they live in? The mind runs wild. There usually is a mismatch between, you

know, huge bonds just such as this and what the actual equity being pledges. I mean, 250 million dollars. I'm sure there's houses like that in California. But the house that we're talking about here, his parents house, it's around 10 percent of that figure deal. They live in a twenty five million dollar house.

I'd like to see it. So, I mean, we'll see what comes of this, what comes of the play. But we know that the terms of this bail package is that he has to stay in the house with his parents. He also has to submit to electronic monitoring. So we'll see what happens here. But that is the news of the day of the yesterday. In addition to the fact that we saw

those former insiders, Caroline Allison and Gary Wang flipping, cooperating with prosecutors, what that means for the eventual plea that bank been freed enters ISE, probably the storyline to watch. Now. We shouldn't make light of what's happening. Obviously, he's charged and indicted on some serious counts, but he does join this kind of group, select group of people. His Bond matches Tom Barracks.

He was acquitted last month of those charges that he was trying to influence U.S. policy on behalf of the UAE and less than Robert does. He posted a three billion dollar bond. He's the real estate. But he was also charged with murder. So slightly different. The serious side of this case he is. We want to know what's going to happen to SPF for the days and weeks ahead, because we were kind of my neatly following his travel from the Bahamas to New York. What is the process for him from now on?

So just to put some that into context, that's important perspective. You have 250 million dollars. That's one of the largest pre tort trial bonds in U.S. history is in terms of what happens.

Now, again, we're waiting for a plea. The next court appearance scheduled for Sam Pinkman freed is on January 3rd. We're not sure again what plea he will enter. But again, Ellison and Wang did plead guilty to fraud charges, conspiracy to commit money laundering. And they are cooperating with prosecutors, bank and free throughout his media tour before he was actually arrested just eleven days ago was that this wasn't intentional fraud. It was more just gross mismanagement of

the company. But again, with those two cooperating, it's hard to get more inner circle than those two. That case is a little bit harder to make now. All right, Katie, thanks very much for joining us.

Katie Greifeld here at the latest on FTSE X and F, SB F, I guess now we're just calling him Sam Backman for you to be more formal. Coming up, Roger Hallam, Vanguard, head of Global Rage, joins us as we see bond yields climb just a little bit. Have we hit did we see the peak in 2020, too? What are we expecting for twenty twenty three and the impact of continued strikes on the U.K. economy. Sandra Horsfield, Investec economist, joins us to talk about what it means for the economy already in a difficult position when nurses and rail workers and border force go on strike. This is Bloomberg.

This is Bloomberg Surveillance Early Edition. I'm Ed Ludlow in London. My mate Matt Miller over in New York. China's soaring Covid infections are keeping people home and causing a slump in travel and economic activity. The Covid wave has hit even more misery on the global economy, which, according to Bloomberg Economics, is set to experience one of its worst years in three decades.

Joining us now, Jamie Rusch, chief European economist for Bloomberg EAC a nomics. Jamie, you've got the enviable job of telling us what happens to the global economy in 2023. Take it away. It's hard enough watching that. No. That little clip on 20 22, it was

exhausting, isn't it? I think so. What we're looking at China. Absolutely right. On the impacts of the the unlocking on Chinese activity and the spread of the virus. It's just a reminder that the spread of the virus clearly has a big impact as well as Covid restrictions do. But I think for China, at least, we're expecting the growth is going to pick up pretty fast over 2023, up to 5 percent next year instead of 3 this year.

And largely that's driven by Covid restrictions being lifted. I think the if you look at the rest of the world, though, we are going to be slowing down fast. You know, the monetary policy tightening that we saw in 2022, we're going to be seeing the impact of that in 2023. And that explains why we are expecting the global economy to pace really, really weak growth, weaker since 1993 to exclude some of the crisis years. Jamie, what does that mean for rates after the worst year for rates? I guess on record we're gonna be looking at what can we expect next year? Well, I think so we're looking at inflation being pretty sick globally, and that's one of the things that we learned through the course of the year, was that it's not just the US experiencing a demand led inflationa

2022-12-26 16:56

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