'Bloomberg Surveillance: Early Edition' Full (03/01/23)

'Bloomberg Surveillance: Early Edition' Full (03/01/23)

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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. You're in London and here's what's coming up on today's program. Chinese manufacturing activity rises by the most in over a decade, spurring a rally in stocks and commodities. Bloomberg understands that U.S. businesses are poised to invest billions of dollars into Northern Ireland. The British prime minister is able to

gain political support for his new Brexit deal with the EU. Plus, results are in for Nigeria. The ruling party's bold new book is declared winner in the presidential election amid opposition protests.

But first thing is first. Let's check in on the markets. We're getting a boost because of what's going on in China and some of the optimism surrounding activity surrounding housing. And, of course, that has implications for national people's Congress.

That starts on Sunday with a possible new forecast for growth. Now, European stocks in higher narrowing because the recovery in China, but also better than expected. Overall sentiment for earnings, euro area, February, manufacturing PMI pretty much in line with expectations, forty eight point five. Preliminary, it was also forty eight point five. So it is in contraction territory because it's below 50. We had France a little bit softer than I

expected. We had Germany a little bit softer than expected. We also have the French central bank governor testifying in the S&P National over in France. And really the message there is we will deal with inflation.

He's expecting peak interest rates in September. All right. S&P futures getting some three tenths of a percent euro dollar on the back of those PMI, but really huge, huge repricing on the ECB peak expectations. And it started to happen yesterday and

then a crucial eighty four point one two. Let's also look at the European map to see if there's meaningful differences. Usually they're not. Sometimes there are two there. They're not that much between the footsie and the CAC.

Also the footsie, maybe. And they're all around four tenths of a percent higher between three tenths and six tenths of a percent higher. So factory data and the world's second largest economy has surged the most in a decade, beating analysts expectations, while China's official manufacturing PMI came in at fifty two point six from the month of February, well above the fifty point six estimate now. For more on all of this, we're joined by

Bloomberg's chief Asia economics correspondent. He's under current NDA. Good morning. Good afternoon. So what can we read from this?

This is a first. It's clean set of numbers that we have from China since reopening. It is. And it's a positive read on China's economy. It indicates actually recovery is going faster than expected and faster than the initial recovery when the pandemic broke out back in 2020. Like you mentioned, we had the PMI ISE today, Francine coming in fifty two point six, quite strong growth, broad based there on the services side with indications consumer spending, for example, but also a rebalancing with manufacturing strength. Also surprisingly picking up an increase in manufacturing employment as well. Also, for example, and on the housing

side with data suggesting that a housing sales increased on year for the first time since around the middle of 2000 and 21. So a broad sweep of numbers coming to serves outside of the economy, the manufacturing side of the economy, and a look at the housing side of the economy. And all told, the points to a pretty robust recovery and shows that China's exit from Covid era was somewhat on track. But we also have the National People's Congress. It starts on Sunday. What does the latest reading mean for

growth forecasts going forward? I think it has to be a good backdrop for when those officials do gather in Beijing, like you mentioned, it begins on Sunday. It's kind of a rubber stamp. Parliament sets a policy policy for the year ahead. There will be an economic growth target unveiled on Sunday. Economists are expecting that to come in at least 5 percent, probably over 5 percent, which is a pretty robust figure for China, given where a year ago many people were on. It will continue to mark down their forecasts for China and warning of longer term structural decline. But it seems we better mood music around activity indicators at the moment.

The authorities are focusing on growth. We know we're going to continue to support the economy. So I think for the near term at least, it does sound like the narrative around China's recovery, economic recovery will remain somewhat upbeat. All right.

Thank you, as ever, for your great analysis or indication there in Hong Kong. Joining us this morning now, Goldman Sachs shares fell yesterday as the bank hinted at further dismantling of its struggling consumer business during its Investor Day in New York. Bloomberg Sonali Basak was there for us. It was a highly anticipated Investor Day for Goldman Sachs here in New York, and management is looking to Goldman Sachs to point, oh, that is the investment bank and trading businesses supported by a 2.5 trillion dollar asset management behemoth. Now, this all comes after a pivot in the consumer business.

They've renamed that unit a platform services business, and they don't expect it to break even until 2025. That also comes in the middle of a tough economic environment. We spoke earlier to Goldman Sachs CEO and President John Waldron. This is what he had to say. Most of our clients are very concerned about the inflation, particularly corporate clients. They see it being more persistent in their businesses. The marketplace is a little bit more complacent. I would say on inflation in terms of how

the market trades inflation. That to me is a disconnect that has to get adjudicated over the course of the year. And we're obviously keeping a close eye on that. Of course, that could create challenges for some of the core businesses like capital markets and trading. But Goldman Sachs has been known to make

money from volatility in the past. Sonali Basak Bloomberg, New York. Sonali Basak Goldman's Investor Day in New York. Now let's get straight to the Bloomberg first 4 News hears we endurance.

Hi, Francine. At least 36 people have died in a train crash in northeastern Greece. The collision took place in the Tempe Valley when a passenger train traveling from Athens to test her low NIKKEI collided with a freight service. The train operator says 350 people were onboard. Rescue operations are continuing in what officials are calling very difficult conditions. But Lieutenant, who has been declared the winner of Nigeria's presidential elections. The ruling party candidate and ex

governor of Lagos State won 35 percent of the vote, beating the main opposition party, which took 28 percent. Tennessee will inherit a mountain of public debt, which grew seven fold during Mamadou Bahar raise eight year tenure. Some opposition parties playing the contest was flawed and many challenge the results in court. Now, U.K. Prime Minister Rishi, you say that has

been embarking on a push to win support for his post Brexit deal with the EU. A day after unveiling the agreement dubbed the Windsor Framework. So you did visit Northern Ireland in an effort to win the backing from the Democratic Unionist Party. The U.K. PM also addressed conservative employees at a meeting in Westminster. That was yesterday evening to Nick says the deal is a unique opportunity for Northern Ireland. India is bracing for a sweltering

weather already suffering its hottest February since 1981, as weather office says there's an enhanced possibility of heatwaves in most parts of the country. And that's over the next three months. The extreme weather poses a threat to wheat crops, which were forecast to actually reach a record this year. Global news powered by more than twenty seven hundred journalists and analysts and over one hundred and twenty countries.

I'm beyond Karen's. And this is Bloomberg, Francine Leon. Thanks so much. Coming up, we'll be hearing from a Tomiko co-founder, now managing partner of Unified Ventures, Metis Women. We'll be talking all things venture capital, a high tech and much, much more. That's a little bit later today. This is Bloomberg. Economics, finance, politics. This is Bloomberg Surveillance early

edition of Francine Lacqua here in London. Now strike China manufacturing data has pushed oil prices higher this morning. WTI posted its fourth straight months of losses in February. Now here with me to dive into the commodity space, Jeff Gray, Goldman Sachs global head of Commodities Research.

Jeff, I'm so happy to have in the studio we took like months to arrange this. And then you sat down, you set out the quantum space a little bit more boring than usual. Is that so much can happen? It is for the very short period. And I think this manufacturing data

coming out of China is some of those green shoots we need to see to get the full story ramp back up again in the current environment. We have oil inventories beginning to draw in June of this year and then metal inventories driving a little bit Sumer, April, May. But you need the micro to start to perform with inventory draws. And then you also have to be pretty comfortable that the macro gives you the green light again in the sense that there's a lot of fear of a strong dollar or a repeat of what we saw last year. So people become comfortable that you're not going to get the repeat of last year, which our base case is.

No, that core CPI will moderate. The Fed's not going to have to go on another rampage again. Moderates to what does a moderate to 4 percent or does it actually touch 3 percent? Because to get to 42 percent, they have to slam the cover for it for our view right now. We just needed to keep going. It's going down. And because I think for the one thing I learned last year to be long commodities, you need money to supply stable to growing. When money supply is going straight

down, oh, it's hard to be long commodities. So our base case is you get stable money supply, then you get the draw on the inventories. And that's going to be the recipe to get a much stronger finish to the year. I do want to go back that at the

beginning this year, our view was it was going to be a repeat of 0 7, meaning cooling us resurgent China and a recovery in Europe. You get those three together. That is like the Goldilocks scenario for CAC ISE because you get a weak dollar that gives you a tailwind against the strong Chinese fundamentals. And I think 50/50 that we get that now. I think it's 2017. It's a little a tune down version of it.

You know, are our returns for commodities. At the beginning, the year was 43 percent. Now it's 31. And actually in 2017, you got 30

percent. It was kind of a similar scenario, a U.S. that was bouncing in and out of growth and non growth, a Fed threatening to raise rates. And then you had China and Europe power ahead at the end of that year. And that's what really drove commodities.

Jeff, you give me an, I think, interview in the middle. I think it was in the middle of locked down where, you know, it's very Italian. Hands off. He said we're running out of everything, which is very true, has Covid. And actually, the one Ukraine changed the commodity complex forever. I'm not going to say forever, but is the situation tighter today than when we did that interview? Absolutely, yes. The big event last year was not Russia.

It was China. I mean, you've global oil demand contracted 2 percent in the fourth quarter of last year. That's a recession in my book. And that that created the spare capacity in oil, metals and everything in that manufacturing data that came out this morning says we're starting to reverse that.

So you can think about. We created new supply, not through investment, but through China contracting through lockdowns. Now, as China comes back, we're going to lose that that that spare capacity. I'm going to be back to the same problems we had before. But even much worse because we haven't invested.

So what, oil at 30 dollars more than here? I mean, are our base cases. You know, we get into the fourth quarter towards the end of the year, we get back above 100. But that a lot can change if you start to get the momentum. The other thing, too. Again, the investor participation in

this space is really low. So, you know, you haven't had me on here in quite some time because clients are not interested in this space like they were six, 12 months ago. It is they get interested in the space again. Then you get capital flows coming back in. It'll help them likely push the market higher. I mean, we don't really talk about peak oil anymore. Is that because it's been pushed back or

because we're uncertain, because we're going back to more fossil fuel usage? Actually, I heard the term peak oil applied to supply recently again. But I think that that, you know, the fact of the matter is that there is a lot of concerns around the inability to meet supply in places like Europe and particularly on the gas side, such that the energy security question is right back up there. And so energy security, reliability, affordability of energy are now all back on on on the agenda.

But I think your point that, you know, peak oil is not a mainstay. I think at this point, the the ability to get from one year to the next. Given how scarce supply is, is really the focus. And the markets have been trading that way. By the way, a commodity supercycle is not an upward trend in prices.

It's a sequence of spikes. And we're coming off the backside of one spike. I mean, you know, my confidence that we'll see another spike in the next 12 to 18 months is quite high and then it will change the public debate and we'll move. I think what happens is we saw gas in coal this last year. The upcoming one is likely to be in oil. I was I've talked to you, of course, about commodities, but also about crypto.

I mean, does the implosion in certain crypto give you an indication of what you thought all along? I think when we look at the crypto, it's I like to liken it more like any other duration asset, you know, unprofitable tack, tack. You know, growth is, by the way, clean energy falls within that, like, you know, green hydrogen. It's stuff that's not profitable today, but has a story way out in the future.

They got crushed because of the fact that, hey, interest rates are higher and we move into short duration, not long duration. And that killed everything that was long duration commodity. By way, I say commodities are boring. Let's remind you, oil's still at eighty five. Copper is at ninety one hundred. So that the commodity space has still got good returns there.

We had great returns last year. We expect good returns this year. But that's what you expect in a high interest rate environment. Another way to say what what is a commodity supercycle. It's nothing other that capex cycle. Look at metals prices versus global copper. I know. But is there a day? I mean, and I know they're there.

You know, like we've we had actually the energy executive yesterday for an exclusive conversation. I mean, they're getting so much back to shareholders through dividends and share buybacks. Is there a danger of that once again over the next 10 years are going to be under invested there, under invested today? Is that a good thing or a bad thing if we're going through a green transition? It is a bad thing because it creates commodity shortages today. We aren't going to get the green for 10 or 15 years from now.

It's it's it's like that's long duration oil, short duration. And we're not investing in the short duration stuff, only the long duration. But if we're investing, then it basically keeps fossil fuels alive for longer. I mean, it's it's almost like a philosophical debate. What do you think? Let me point this out by not investing in in natural gas.

We ended up with higher emissions today. And the reason why is because what do low income households do? They turn to the lowest cost, shortest cycle fuel, which is wooden coal. Let me remind you. Wood emits five times what coal does and coal emits two times what gas does. So this is a strategic policy mistake in the making that we did over the last 10 years. Are we doing the same for the next 10

years? We'll see. What. I mean, when we start to see high commodity prices, they get. I think when we look at the lack of

investment in the space, it's not because of ESG concerns, it's because it's a history of bad returns. Business Remember, this sector destroyed more wealth than any other sector known to mankind. I mean, the US ENP sector destroyed 54 cents on every dollar over the previous 10 years. That was a big reason why they are getting money. Second reason we are 130 about eleven months ago and we were 78 the other day. That volatility is unacceptable for most investors. And then a third I would put as ESG, but

I was asking a you know, a a CIO recently been in the business forever. And she said to me and she goes, people will buy commodities the day that the three year moving average of the Sharpe ratio exceeds that of the NASDAQ and everything else, because then they go, hey, we're behind. This is where it probably sometime in the next 12, 18 months are hitting that. Okay, that's great. I'm going to get it up.

I hope in the next hour. And then Jeff call. You have to come back. Jeff Kurumi Mori, Goldman Sachs global head of commodities with a robust conversation of the commodity complex coming up where she soon like playing the waiting game while Northern Ireland's peace studies his new post Brexit Trade Deal.

But investors are playing close attention as well. So we find out why next. This is goodbye. Economics, finance, politics. This is Bloomberg Surveillance early edition of Francine Lacqua here in London. Now, U.S. businesses could be set to invest

billions of dollars into Northern Ireland if the deal on post Brexit trading arrangements brings political stability to the region. Well, Prime Minister really soon held what he called Northern Ireland's quite unique access to markets. Northern Ireland is in the unbelievably special position, unique position in the entire world. European continent in having privileged access not just to the UK home market, which is enormous. Fifth biggest in the world, but also the European Union's single market. If you guys get this sorted, then we want to invest in Northern Ireland because nowhere else does not exist.

It's like the world's most exciting economic zone. Now for more on all of this, we're joined by Bloomberg UK correspondent Lizzie Burdon. Lizzie, great to have you on the program. So what are economists saying about the Windsor framework? I'm still baffled by Rishi Sood Hoke. They're pointing out the privileged position of big and both the seats raring to go. He's guys, this is great. If only we'd realise this in 2016. The economists are debating this

furiously. The economic impact of the Windsor framework. We spoke to Karen Ward. Terry Hunt, the chancellor's economic adviser, about this. And she said that it's going to reduce uncertainty, boost business investment and boost growth. And really see DAX himself has been touting the economic benefits of the deal. But actually, there was a note from James Smith, IAG yesterday where he pointed out that according to Bank of England survey data, actually business isn't the big reason why people out businesses aren't investing and that decisions will be more steered by energy prices as things move forward.

So what does it mean going forward? When does this actually get passed through? We know that the unionists are behind the deal. While we're still waiting for their legal eagles to comb through the text and the European Research Group of Tory Brexit has hired a team to do that. And we might get more clues at prime minister's questions later today. Any questions from IRG members or DP members put to the prime minister later, but acknowledge that he might dungarees on this investment question scoop on the terminal from Alex Wakeman.

Allan Milligan today saying that there's billions ready to invest in Northern Ireland from America if they can get a deal over the line. It reminds me of Bill Clinton in the run up to the Good Friday Agreement, trying to use business investment as an incentive to get a deal on the table. Lizzie, thanks so much. Lizzie Borden there with the very latest on the deal. Now we'll also be covering all things UK every week on Thursday. Nine thirty a.m. U.K. time and half an hour special coming up,

but we'll be hearing from managing partner and founder of Low Fire Ventures with Yes, London. We'll have a conversation on all things venture capital, a high tech and much more. This is Bloomberg. Chinese manufacturing activity rises by the most in over a decade, spurring a rally in stocks and commodities. Bloomberg understands that U.S. businesses are poised to invest billions of dollars into Ireland if the British prime minister is able to gain political support for his new threat to deal with the EU. Plus, results are in.

For Nigeria, the ruling party's bullets removal is declared winner in the presidential election amid opposition protests. Good morning, everyone, and welcome to Bloomberg Surveillance early edition of Francine Lacqua here in London. Now one fire ventures describes itself as a next generation venture capital fund focused on opportunities in Europe. The fund is especially keen on investments that utilize A.I.

to transform healthcare, fintech and gaming. Well, joining us now is Moon Fire Ventures founder and managing partner. Yes. Yes.

Thanks so much for coming in. You always make me start, you know, smarter on some of these quirky A.I. consequences. But now A.I. is all anyone is talking about. Yes. What does it change in terms of, first of all, how easy it is for you to find deals, but also the perception of A.I. going forward? Yeah.

So it's interesting. You know, like everybody is obviously very excited about what's happening in excited or scared. Speak. I agree. I agree. So it's a little bit of both. And it will change our world and it is changing our industries across the board. I would say what we're looking at right

now is very kind of similar to what happened in the sort of change from one Web 1.0 to mobile. So it is a big transformation that we're looking at moving into this world of A.I., but it's not like it's something new. You know, like the work that we've been

doing in this space has been happening since the 1970s, right into the 80s and 90s. Great fundamental work was happening. Now people like Geoff Hinton, Josh Banjo, who are doing amazing things. But what really has made it come into the consciousness, I think, and why everybody is getting so excited is because really what chat GP 23 was able to do and, you know, five days a million people started using this. And so then everybody got quite excited that, hey, look, how can this change my product? How can I look at the world a little bit differently? But what I would say, it is very much an incremental improvement. And there's actually three things that make that make that happen, which I'm happy to talk about. Yeah, I was going to ask Kevin, first of all, because we speak to Wall Street bankers and for the moment they band it. Is there is there a part of the business

that it won't disrupt, even if you look at how we look at advertising? And you go on a Web site and you search for something, you know, we start all using this kind of a I like chap, DPD, and they need to rethink their models. Yeah, I do. I mean, look, I think you're right. I think we ought to sort of slow down a little bit. You know, in terms of like I said, this has been incremental.

It's happening change by change. And we need to make these models stronger and stronger. And that's hard to do. There's a lot of science required to get there, even to get even further. But what it's done today, it's already enhanced a lot. And let you say everybody, you know, people are using it all over the place.

But I think at the end of the day, you need to be good at what you do to be able to use that technology in the right way. But does it change the consumer? And I want to go into your three points that are industries that you're looking at as a consumer. Do I have very different experience with how I buy things? I look at things. I even see my GP because of something

like that. Well, look, it's already happening. When I jump on and watch Netflix, you know, I get choices. Those choices are made by machine learning. The same thing with Amazon. I get choices.

They're predicting what I might like now. I don't always like those choices at the moment. By the way, I kind of think they're all doing a good deal.

I thought I was like, wait, who are they? Who are they looking to like? What's the algorithm like? What do they think of me? Because sometimes I'm like, really? But anyhow. But those. But they're gonna get better and better. And when they do. So it's a bit like, you know, they make perfect cup of coffee three out of four times once they make a perfect cup of coffee.

Closer to four out of four times, it's magic. And I think that's what's going to change things for consumers. And that's why founders today and people building tech businesses are like, OK, this actually might materially change my relationship with my consumer. OK, so what are you looking at? I mean, you're three things. They're basically three industries that you're looking at and how that will change. But I would also say before that, though, there's also, I believe, three things that really need to progress in terms of science. So the first one is we need to continue

to improve these algorithms. That's really, really hard. That takes time. And that's data. Right? It stayed on chips. Well, so, yes, there's this component of that. So the next part is compute. Right, which is really, like you say,

the chips and the hardware, but also the software, the cloud, you know, in terms of that working well. And if we don't make progress on the hardware, we're not going to be able to make the progress that we want in terms of achieving perfection. And then there's data and there's also people wanting to or letting you have access to data. So governments are regulating, of course, you can have access to everything. And then there's companies that might start doing it. And so data the new oil and they're like, hey, hold on a minute, you can't use my data.

So those two things are inhibiting it. But to me, just to give an example, you know us ourselves. Moon fire, we're using this. We have for machine learning engineers. That's what we're founded on. We are data driven B.S. And we're using these models to help us find and look and help our portfolio companies. And that's really, really exciting to us.

But also, if we look at some of our companies, you know, we had this one company, electric car, super exciting business working a sort of mobile entertainment, gaming, entertainment business and the cost. Their production has just dropped up, dropped and dropped dramatically. So you think of a Netflix one episode maybe can cost eight million dollars.

They're building a whole series for twelve thousand dollars. Then they deploy. That happened. Exactly. Well, so and then they deploy the technology and it goes down to like a few dollars.

So essentially the creative aspect of what they're doing is becoming so much cheaper. And so they're utilizing all of these different technologies to produce what the new series, which is dark mode. And it was it was done by them. And for them they said it was it was faster. It was cheaper. And the final thing is it was better. They thought it was actually scarier than they would have done themselves. Is there anything that this will not

disrupt? And I don't know what you know what that means, but the you know, we all suspect deep mind is going to change. So the way we look at biochemistry, I mean, everything is changing because of A.I.. Yes. What happens to emotional intelligence actually, between humans? Well, that's what I'm saying to you. I think human beings are working together with technology. I think we have to you know, we have to

understand that that the that you're still going to need that human input. And the fact is also the technology is making us think better. We're making us smarter and look at angles that we didn't think of exactly. Like they said, it made for four for an electric car, made their product better. So they came with outcomes that they wouldn't have thought of themselves. So I do think it is pretty broadly based.

To be honest, I think every industry is going to have a component of it, just like the Internet has had. Just like Mobile has had. Yes, it will really create better quality jobs. I think so, because sometimes we have this monotonous work that we don't want to do. So for actually, if you're a junior banker, even if you're looking in science, you know, or you're working in healthcare and you're, you know, reviewing images. But, you know, we know the machines can do this very fast and do it 24/7.

And actually, they can probably narrow it down. So you're like, OK, we'll you. These are the ones that I really need to look at, these ones. I need to spend time and I need to be thinking about things that are really important so you can spend the time doing that rather than feeling rushed, trying to get things done that are very manual and boring. 70S. What does it actually mean for some of the companies that you're trying to to invest in? So there's gaming.

Is there? Is there some are there opportunities actually in this given you're for engineers and algorithms? Yeah. Yeah. So for us, you know, we're able to see a lot more companies in terms of that we review. We look at over two million companies per year. That's not possible with eight people and two people who are sort of on the investment side so we can do a lot more work and then we can actually help our companies a lot more because we can actually provide them with data and information that we pull from from from everywhere. In terms of giving them insights, in terms of what they should be doing. But similarly, our companies are doing

the same thing and creating magical product products. Do you and this is very Bloomberg Surveillance love data and we analyze data and all we do. But is is there any point where you meet a founder and you said the data is telling me that this is not going to work. But I think it will. And if you look at how a lot of the big ones got started, whether luxury or Facebook. Absolutely at the time didn't make

sense. But how do you override the machine learning? What was Will? That's the other thing you like for us. It's not like the machines making the decision. We're making a decision where they're helping us, helping us become better. They're making us more bionic.

But the end of the day, it's the human mind that makes the ultimate decisions. And so they go just so far. But the thing is, what we're doing is we're not necessarily doing sharpshooting in terms of our technology, finding the exact solution. What we're doing is, let's say there's a forest and we're getting rid of a lot of the trees and we're focusing on the ones that are OK. Those are the ones we should be paying attention on, because that's the hard thing in this world. As you know, we have so much information, so much data out there and we get lost in it. And so the work, again, that this world

does is helps you to auto summarize a lot of things. And that's really powerful in gaming. Does it change the way that it can grow? So, I mean, are we looking at multiples basically in terms of revenue, but also the growth of the market? Because of the powerful A.I.

behind it? Well, I think that gaming is one of those few markets. It keeps on growing. So it is already huge and it will become the main form of sort of media entertainment. But yes, what is really, really cool is that now that you basically potentially content production is reduced dramatically, maybe by 99 percent, you can actually have infinite content. And so you can suddenly create worlds. So it's an extraordinary, you know, the changes that are happening. Yes. Thanks so much, as always, for joining us.

Once you live with their live fire ventures and managing partner and founder joining us on, well, venture capitalism and tech. Now, coming up next, we're joined by took up with the JP Morgan's head of EMEA PSG, Anthony Green Economy. That's come back and we'll discuss the challenges facing the green tech. Could it catch the exclusive interview next. This is Bloomberg. Economics, finance, politics. This is Bloomberg Surveillance of the

additional Francine Lacqua here. And now the transition to a green low carbon economy will require a big pivot from investors towards clean, green, clean and green technologies. JP Morgan's Clean Tech Startup Conference in London is trying to facilitate that switch. Now the event is focused on supporting and scaling up private high growth companies. Well, joining us now for an exclusive

conversation is Stockholm, JP Morgan's head of EMEA, ESG and Green Economy Investment Banking. Chuck, I thank you so much, as always, for joining us. When you look at the two current actually trends in deploying capital and green, you have the GOP in the US pushing back and then you have the IRS a you're really trying to go for it for green technologies. Which one of these trends will prevail in the end? Well, I think ultimately we have a big challenge society to reconfigure the way that our economies are operating towards a net zero world. And the companies that we've bought

together, we've got over 30 companies that have raised in aggregate around seven billion dollars over the last few years and are going on to the next chapter in their journey of development are absolutely going to be key to that. They straddle all the different green economy verticals, not just low carbon energy. Carbon capture and storage, but also sustainable food, alternative proteins, fusion and so forth. And that's all going to be fundamental because although obviously funding this, Francine, is absolutely crucial, which is where a bank like JP Morgan comes in and we're committed to financing and facilitating two and a half trillion dollars through to 2030 to deliver against the UN Sustainable Development Goals. But we need this technology.

So we've got the technology at the moment that will get us on a path to that zero well by 2030, but it from 2030 to 2050. You know, the final straight, as it were, some of that technology hasn't even been invented yet. So that's the challenge that we've got so people can have. I don't know if there'll be short term political arguments around these things, of course. But actually, the bigger existential challenge we have as a society is right in front of us. And these companies are absolutely key to meeting that challenge. But how does it impact, I guess, you

know, Wall Street's firms narrative about green investing? And actually, how does the ISE impact JP Morgan specifically? Well, I think the U.S. Inflation Reduction Act overall is a very welcome development. And we're already seeing a lot more plans coming forward to invest in the various different green economy verticals, obviously, particularly in the United States. Now, other blocs like the European Union, for example, are working out what they've got in place, the package of support measures for their businesses here. Is there a gap between what the U.S. has put in place and what they've got in place? And how do they feel that now, given that, you know, it's quite challenging because of the risk profile of some of these early stage companies to raise funding? Clearly, the public sector governments are going to have a role. And if the U.S.

Inflation Reduction Act is going to help kind of spur that kind of investment, then that is a good thing. It's quite interesting, actually, when you look at what's happening in the private market. So the companies that we've bought together today, this is all private capital because there has been a gap between where greenhouse gas emissions have been coming from and certainly in the venture private capital space where the money has been going. So those sectors that make up 85 percent of greenhouse gas emissions in 2021 attracted around 39 percent of climate tech investment that's gone up. So that's now around

40 percent in 2022 and we hope will be higher in 2023. So though there are challenges here. But in spite of market conditions, there's a lot of interest from investors in this space. And when you look at, of course, the company that you know, the companies that you convened, what do they tell you about European efforts to make up for the Inflation Reduction Act? Is there anything in Europe that actually they tell you is a good thing? And could you, I guess, temper some of the the the lack of Europe being as as forceful than the U.S. on this? Well, I think I think the first thing is that we still need to see the detail of the implementation of the U.S. Inflation Reduction Act. And so there is no doubt that the EU

domiciled companies are looking closely at what's on offer there. Definitely what they hear sounds attractive, but the detail is going to be very important, I think, from the point of view, particularly of the EU. At the moment, there is this audit process going on to see what is already in place and actually the EU with the fit for 55 package.

And the in the year the EU green industrial industrial strategy at bringing about these things are already providing support and they're working out well. What is not there that might be provided in the US Inflation Reduction Act. But of course, in the short term, one of the easiest measures to implement is relaxing, which they are doing temporarily. The EU state aid rules to facilitate better fiscal support here. And I think at the end of the day, that is what companies in Europe will be looking at is what are you going to do? What's what's it going to look like at the moment, that's not entirely clear. Tucker, as always, thank you so much for joining us on Bloomberg Technology there. JP Morgan's pleasure.

Thank you for having me. ESG and Green Economy Investment banking. Coming up, we'll have plenty more on some breaking news, including universe. So, you know, power has we understand you, chief executive. This is a huge energy giant. So, of course, that has had its fair share of trials and tribulations. They have named Michael Lewis as the new chief executive.

This is sweet is Sweden's biggest, of course, one of the biggest Nordic nuclear plants. Now, Santander pledged to return a bigger share of earnings to investors as they joined the race with other European lenders to lure shareholders after years of subpar returns. Now Spain's largest lender plans to pay out 50 percent of profits over the next three years. It's also announced a buyback program and financial targets. While Santander executive chair and a

button said she expects the bank's valuation to improve as interest rates rise and the lender pledges to return a bigger share of profit to investors. Well, she spoke to us in an exclusive conversation. Success is delivering on what you commit and we deliver on the 2019 Investor Day plans. In spite of Covid, the war in Ukraine, no inflation and this is really important. And so that gives us a huge confidence that the model works, that our customer focus in market on global scale and diversification actually providing good returns for shareholders. And this is an acceleration of that delivery. And this is really what matters in what

we said today and how much of this is thanks to rising interest rates because of the European Central Bank and the global economy and how much of this is delivery and strategy. And that's a great question. So will you. I will say it today, more than half is actually because we are improving every year and we're going to do much more in the next four years, improving our operating model. And the some of it is, of course, tailwinds. You know, it's not healthy to have an economy with negative interest rates if you're a saver and you get nothing. And European banks did not charge you.

And we are retail commercial bank. So we suffered more than most. And we're giving mortgages out of 10 basis points. That was a year ago. And so, yes, some of it is state once. Yes. But it's a normalization of interest rates. It's a normalization of how the system

should work. And more than half is what we are actually delivering in terms of a better operating model. Are you confident overall about the economy, the world economy? I know you were confident four weeks ago when we spoke to you on earnings. Are things actually even looking better than they were back then? Well, I've been saying this for months, not just last week.

I've been saying that the strength of demand is so high. And the key number for us as a retail commercial bank is employment. And we are continuing to see very strong improvement. Now, that's gonna change how fast? I don't know. You know, there's not a painless way of cutting inflation. And so the question is how high a price to pay? And we have a lot of experience in managing and inflation countries, not just now, but for years.

And so the sooner you cut inflation, the better. But you do have to take some P R interview with the Santander executive chair and obtain. Coming up, we'll dive deeper in the Nigerian election results and what it means for Africa's biggest economy. That's coming up next. And this is Bloomberg Daybreak.

Economics, finance, politics. This is Bloomberg Surveillance early edition on Francine Lacqua here in London. Now Bullets new ball has won Nigeria's presidential election. The ruling party candidate, an ex governor of Lagos State, when 35 percent of the vote beating the main opposition party, which took 28 percent. However, the result may be challenged in courts, with some opposition parties claiming that the contest was flawed. Well, Bloomberg Extra offers up a saga, just came back from Lagos, Nigeria, and she joins us with the very latest.

First of all, John, good morning. Great work and great reporting there on the ground. So what did you learn? First of all, this is contested. Like what happens next? Yeah, I mean, I think the biggest question is going to be what these opposition parties do. Yesterday on Tuesday, we did hear from

them and they were already protesting the results as it stood. And so they have 21 days now to really see it go to court and file whether or not they are going to appeal this ruling. And what we heard from bullets, Nuba, who is the president elect at this point in time? He said, you know, in his mind, it was a free and fair election, but it was encouraging people to go to court if they are going to dispute this election result and not take it to the streets at this point. I mean, are there worries that actually

this turns into violent demonstrations there? There could be. And it's because I think when you when you look at Nigeria as a whole, there's a lot of frustrations on the ground. There's a lot of issues with the local currency, with the gas, with the economy as a whole, with unemployment and with a lot of young people. And just going back to the president elect, he appealed to the young people this morning when he accepted the presidency.

He said, I want you to be with me. But what we did hear from the Labour Party candidate, Peter Obi, was that he was actually galvanizing a lot of young people. So there's a lot of frustration on the ground that it's sort of business as usual, especially considering the turmoil that we've seen over the past few years in Nigeria.

The ruling party is again going to be leading this economy. So does the ruling party and the new president elect. Can he fix the economy given his mandate? And does it but does that also just need to wait until the election is settled? Well, a lot of investors, based on sort of the market reaction we're seeing is are hoping that he's able to do something, at least in the short term, to some of these reforms, in particular fuel subsidies, which have cost the economy much of their revenue. And so he's really hoping that, excuse

me, the investment community is really hoping that he can come in. But he's going to have to unify. Yeah, he's going to have to unify these parties, unify the country to move forward. John, thanks so much. Jennifer Salazar there with the very latest on Nigeria. Don't forget also hearing a little bit later on, I'm looking forward to this interview, the Bundesbank president.

You're not going to have that interview. 130 p.m. London time. Thirty in New York. And this is. U.S. companies in China, frankly, are exhausted after three years of government, zero.

The economy in many way remains under pressure, especially the Chinese consumer. I think the new government coming in, they may need some time to figure out how to run this machine. The majority of companies say they're going to stay in China, but they are challenged. This is Bloomberg Surveillance early edition with Anna Edwards and Matt Miller.

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. China bounces back. New economic data shows signs of a stronger recovery following the end of KPC restrictions in Nigeria. The ruling party's candidate has been declared the winner of the presidential election. Bola Tinubu will face a deepening fiscal crisis and widespread shortages of foreign currency and gasoline. And investors aren't buying what Goldman

Sachs is selling. Shares fell off. Goldman executives offered a glossy portray to the firm's prospects. Questions remain about the troubled consumer units. Welcome to Bloomberg Surveillance Early Edition. I'm Anna Edwards in London with Matt Miller in New York. Matt, a lot to talk about from the micro to the macro, but starting with the macro, the China picture, an incredible return resurgence of growth.

It seems that head of I guess I'm out of the U.S. later. Yeah, absolutely. I mean, yesterday we were worried about Xi's leave leadership, in which way he was going to take the country. Today, it looks like the country is

doing just fine and that's helping futures to rise. Here in the US, we're looking at only slight gains, about two tenths of 1 percent after the slight drop drop, about the same amount that we saw yesterday in the last trading day of February. Of course, today we're kicking off large. So at least we're getting off on the right foot here.

We do see the U.S. 10 year yield rising. But again, it's exactly the same level as it was twenty four hours ago. So there's been a little bit of roller coaster action. It was up and back down. Now we're gaining three basis points,

but still at three ninety four ninety four. So just shy of 4 percent. A little bit of a tailwind in terms of the dollar coming off about four tenths of one percent.

We're at 12 forty nine. We had been around twelve fifty three but we're still over one hundred points shy of the peak and maybe that's that the dollar is going to weaken our start are going to start to make money today. They've been wrong for while most of the month, bitcoin itself up a two point six percent, but still under twenty four thousand.

So twenty three thousand seven hundred and fifty seven. It's been a little bit lackluster in the trade after it approached twenty five thousand and has now come back down a bit. But with dollar weakness, you often tend to get bitcoin strength as well as with futures strength. Let's take a look at what's going on in Asia, because that's where the China data really shines. As you might expect, the overall index, the broader index of one and a half percent of the Hang Seng gaining more than 4 percent in today's session or overnight. And it's pretty, pretty remarkable

strength leading through to a weaker dollar, a stronger U.N.. You see that here in the CNN, actually offshore trade and then the dollar also weaker against the Japanese yen. Right now, you can buy one hundred and thirty four hundred thirty five eighty six in terms of dollars to yen. What do you see in Europe? Yeah.

The picture in Europe then certainly being supported by what we saw in China. Big question, how much does that China's strength? We did cross into Europe and the US and the global narrative. Well, it's interesting that we did see a bit of a pickup from a negative features picture for Europe and in the US actually on the back of that, China's ISE. So although we're not running away with ourselves with enthusiasm for the Chinese data and some people saw this coming. It does. You do get a sense that perhaps these underpinning the gains and offsetting managing to offset some of the concerns around higher interest rates. So we're kind of half and half. It says the sector is going higher, sex

is getting lower here in Europe. But overall, monkeys aren't getting a little bit higher this morning. One sector that really left what we had out of China, that was basic resources. So this plays well for London, up by just shy of 3 percent on the basic resources equity sector. All funds go. This is an investment platform business and they were the subject of a potential takeover offer from Euronext.

Well, Euronext has pulled that. And as a result, the stock down by thirteen point four percent. The euro is up by is up this morning, up by seven tenths of 1 percent. It's a broad dollar weakness story. With waste gone in other assets, we see dollar selling and that is playing well for the yen, the pound, the euro, all kinds of things. In particular, the Chinese currency going higher against the US dollar. But there's also a European concern around inflation here.

Also worth noting that we've seen Italy fall through advice. OP is 2020 21 and 2022 twenty deficit estimates. I was just checking whether that had done anything to add the Italian BTC market. Didn't seem to be moving it too much from. We'll keep an eye on that.

Broadly speaking, we're seeing the euro going higher. We're seeing yields going higher. We had already seen the Italian heel story pushing higher, along with France, along with Germany. Also, we've got the French and the Spanish states yesterday on inflation. Those came to a halt. North Rhine Westphalia came in hot today. The rest of Germany looks a little bit

more mixed, but we certainly see some yield pressure continuing here for European markets then. That's all right. We are getting headlines across from the Bundesbank right now is one to bring you these ahead of our interview later on today with York. Nagl. He said that he supports a more rapid reversal of the European Central Bank's bond buying to help tackle inflation. He said after the steps that looks necessary for March, further significant interest rate steps might be necessary afterwards as well.

So we're going to bring you Maria today. Oh, she is live at the German Central Bank. And, of course, Nogoa, those comments about what the ECB does, the broader European Central Bank. We're going to hear from him in an interview later on today as well. Let's get back, though, to China. The economy there is showing signs of a stronger rebound after Covid restrictions were abandoned.

Manufacturing posted its biggest improvement in more than a decade last month. For more, we're joined now by Bloomberg's chief Asia economics correspondent and a current so and a what can we read from this and how how much can we read into these numbers? Are they legit? Well, it's the first kind of decent reading we're getting on the post. Covid Chinese economy. A good set of numbers pretty much across the board.

PMI coming in fifty two point six. Like you mentioning, their strongest know over 10 odd years, strength across the board within the components, manufacturing, employment, increasing services, clean back on the back of a rebound in consumer. That's to be expected. But the industrial side of it showing improvement to better than expected. In fact, I'm that's hinting at a rebalancing of recovery in China's economy. Also had, by the way, a data on the housing market today showing home sales increasing for the first time since back around mid 2021. So when you take it all together, it

suggests that China's economy is recovering at a faster clip than anticipated. It's actually rebounding at a faster clip than it did back after the original lock down and to 2020. And it's certainly setting good mood, mood music for the officials when they gather in Beijing from Sunday, ornaments for National People's Congress. That will basically set out economic policy for the rest of the year. So, yes, question marks over the always around the transparency around his data and of course, how long this rebound will last. But for now, at least, it suggests that the reopening has been positive.

Yeah, absolutely. So a really interesting take on what we hadn't he has done to the economy. And this will no doubt feature as parts of the National People's Congress meetings that are set to take place over the weekend and beyond that end. Any clues in these states? If so, what we should expect from the NPC? Well, it's as good a mood, mood, mood music as they could have asked for going into it. A lot of economists are expecting the

official to set a target of around at least 5 percent, if not higher. The messaging from the official sector has been all about growth in the economy this year, support for the economy. There's no hint of pulling back on that. That seems to be focus. There is there are other agendas going on, of course, in terms of an ongoing consolidation of power under President Xi Jinping. But the overall narrative is one of support for the economy. It's expected to be a better year, and that's probably going to be the message coming out of National People's Congress during next week. And so thanks very much, windbags, to

come in with the latest on China. So that ripples through global markets. Let's get to some politics. Bola Tinubu has won Nigeria's presidential election. The ruling All Progressives Congress Party got over 65 percent of the vote, with Tinubu set to inherit one hundred and sixty seven billion dollars worth of public debt. When he takes over in late May, however, the election result may be challenged in court, with some opposition parties claiming the contest was in some way flawed. Bloomberg's Africa correspondent Jennifer ISE SJ has just returned from Lagos and she joins us now here on sets in London. Jen, we saw that in Lagos covering these

events. These results have been many days coming. Write down the results for us. Yeah. And I think the biggest thing to note at this point in time that this has really been the most competitive race that we have seen in terms of the presidency since their introduction of multiparty democracy in Nigeria back in 1999. So the fact that we did see the ruling party that APC win this election or be declared as the victor, we did also see two very close races between the introduction of the Labor Party, which was Peter Obi, who you can see there put up a pretty good race.

And what we heard from these two opposing the opposition parties is that they didn't feel that this was a legitimate race. They didn't feel like the counting was fair and they might take it to court. As you mentioned, but significant in that this was really the first time we saw this competition. Also significant that we saw voter turnout really low, the lowest in a number of years. So a lot of things that people are pointing out is not. How is that possible, Jen, considering all the problems Nigerians face? We heard that they had difficulty removing any kind of cash from their own bank accounts. Wouldn't that push them out to the polls

to vote for anyone else then who was incumbent? I mean, you would think so, Matt. I mean, I think that's a fair assessment. But on the flip side, that also caused a lot of frustration for people even getting to the polls.

I mean, being there on the ground, there was no cash, not enough cash for people to even pay for gas if there was gas to get to the polls. And so the fact that there were 93 million registered voters, only eighty seven million people actually picked up their ballots. But based on the count, it was under 30 million that actually voted. And so from a lot of young people's perspective, the people that I spoke to, they're frustrated by this government. They were frustrated and hoping to see a new regime come in and step up, considering all the frustrations that they've heard. But earlier this morning, when Bullet

Tinubu was declared the victor, he actually appealed to young people to get on board with him, despite the challenges with the currency and with fuel and hoping that he can potentially show them a brighter future for themselves. But honestly, a lot of promises at this point in time. Investors are really looking to see what actually goes into practice to turn things around. All right. Incredibly important as the biggest economy in Africa. Jennifer, thanks very much for your reporting. Bloomberg's Jen Davis saga.

There she was on the ground in Lagos. Now she's back in London. Let's get back to the world

2023-03-04 01:15

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