Putin Power Play | Bloomberg Surveillance: Early Edition' Full (02/23/23)

Putin Power Play | Bloomberg Surveillance: Early Edition' Full (02/23/23)

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This is Bloomberg Surveillance early edition with Francine Lacqua. Well, good morning, everyone, and welcome to Bloomberg Surveillance early edition of Francine Lacqua here in London. Now we have two special guests on today's show. Later this hour, we'll be speaking to the NATO secretary general, Jens Stoltenberg, as we approach one year since Russia's invasion of Ukraine will also discuss U.S. China tensions and Russia's suspension of a nuclear arms treaty. That interview at 9:00 a.m.

London time. But first, our next guest runs one of the largest investment management firms in the world. Brookfield has more. It has nearly or has more than 800 billion dollars in assets under management.

Based in Toronto, the firm has become a major global player in alternative asset manager investments, especially since spinning off 25 percent of Brookfield Asset Management last December. So for a lengthy and robust conversation, I am delighted to be joined by the Brookfield Asset Management Chief Executive Officer. He's in his flat. Bruce, so good to finally speak to you in person and here in London. Talk to me about how fund raising and go when you look at markets, when you look at some of the pitfalls in the economy, inflation.

How is it feeling out there? You know, I would say we raised one hundred billion last year. We'll probably raise one hundred billion this year. And and the difference is many of our things today, many things we do, our backbone, global infrastructure, and these are what people want to. They're benefiting or they're positively

disposed to inflation in infrastructure and renewables in private credit. And these are products that people want to own. So there's money still flowing in in significant ways.

There are there are some areas of the business which money isn't flowing in as robustly. Good news is we're not in most of those in technology. The biggest one that people are having effects with. So, of course, you have to get one thing right in terms of capital allocation. That's inflation, which is why infrastructure is a great place to be right now.

Where do you see capital being deployed specifically in infrastructure? There's always a timeline problem, right, of how long these projects take. Look, these are these are incredible assets. And the interesting thing is, 20 years ago, when we talked to clients about putting infrastructure into portfolios, it was they looked at it and said they didn't really understand what it is. After 20 years of showing resiliency

growth and now through this period, Covid, where they weren't really affected and now being the positive effects with inflation, people are allocating a lot of capital to them. But it goes all across the spectrum from pipelines of telecom towers to toll roads to all forms of infrastructure that we invest in around the world. And it has really become a great investment class. Is there a part of the world where actually this will really come up even more or it's a better investment to be present now in infrastructure? I would say that the biggest portion of the world today is in the United States, its largest economy. That's where you find the most opportunities always.

But the emerging markets where you pick them selectively are also a great place to invest. For example, we have a large telecom tower business in India where we own 160000 towers, which span the whole country and it's incredible investment. And so the build out of the backbone of the global economy continues in all these markets.

But one must be careful with these type of investments, because when you look at infrastructure in the U.S. and we talk about inflation day in, day out, about whether we can avoid recession, where the Fed actually crushes the economy to get to 2 percent. Are you fairly confident that everything you're invested in the US is, if not recession proof, certainly something that you can manage? Yes, the answer is yes. We will manage them all. We've been doing this a long time and we've come through cycles before. And this one this one is, I think, going to be relatively muted on the recessionary side.

But one has to be careful. And, you know, you've never got it. Nothing's ever perfect in investing. You make you make small mistakes along the way. You learn. You learn that way. And I'd say that the US economy is coming through this. Well, the good news is interest rates have gone up dramatically. Right.

And we've seen the worst of it, like the worst has come out. All hasn't transmitted through the economy yet, and that's happening. But the worst of the medicine has been dealt out. And and I and I think we're just seeing the effects coming through now.

So I'm surprised actually, given the leverage that we're seeing, that there are not more companies either going bust or some kind of second round effect. Look, we had the financial crisis at the banks through the financial crisis and the housing issues in the United States were dealt with in a very positive way by the regulators and by the system. And as a result of that, we entered into this period as a system in pretty good shape. And I think we all learned a lot through that period, those periods. And and therefore, we don't we haven't seen many big issues. So I think it's very clear where you want to be invested in terms of themes.

Right. We talked about infrastructure. You also focus on globalization. You focus on energy, securities and others. How does these themes how do you how do you play them? You don't look, our playbook is pretty simple. We buy great assets in great places and

invest for the long term. And those big themes of decarbonisation in the world d globalization just moving things back and digitalization, everyone's phone is receiving enormous amounts of information today and not many people stop to think, how did I get that information? Somebody had to build the backbone and it used to be we were building gas connections to houses and we still do. And we were building electricity connections to office buildings. Today it's we're building the backbone, the towers, the data warehouses, the fibre to the home and all this backbone behind what comes onto your phone or your computer.

And so you see opportunities there because maybe other parts of the market focus on that, on the new technology, on the A.I. And so that looks expensive. Where is the backbone? The pipeline, as it were, is something that you still see value in. It's just different. We're just different.

We own the backbone of the economy. We don't. We're not early stage venture investors. We are in a small way. But we're not we're not that type of investor.

We put enormous amounts of money in the backbone of the economy. These are 10, 10, 20, 30 billion dollars investments, and they're very large. And and that's significant. Now, A.I. is benefiting all of these. When you think about it, the amount of storage capacity, therefore, to come to your phone, the amount of storage capacity is enormous. So the use and the capacity that we have to build for data warehouses for the fibre to the home, for the the telecom towers, the amount of data that's stored on it is dramatically different than what it was before. So all of these things are just

increasing exponentially the capacity required, which means that more money needs to go into infrastructure. So talk to me. Also did globalization. I was particularly interested in the same because this touches everything. It touches how we play with China. It touches on some of the emerging markets. Like how much more on shoring do you see in the wallet? There's two things going on. International companies are are moving some of their supply chain to other countries.

And I'd say India is one where there's no doubt international companies are serious now. But putting more manufacturing capacity there put on sophisticated supply chains for health care, pharmaceuticals and semiconductors and products like that. There's enormous amount of money being invested and going to be invested. We just we announced last year of a transaction with Intel where we're building with them or we own half their plant in Arizona. And this a 30 plus billion dollar plant. So it's a very significant restoring of semiconductor chips.

Is India still a good opportunity? I know you were one of the earliest. I think investors are the most prominent investors. You don't have exposure to Adani, but does it change the psyche of investing in India? You know, I look, I I'd say we were always careful when we went to India. We built out.

We spent a lot of time building out our own people in our own business. And we're in the market. And that's given us a great advantage to invest on our own. And so we're still we've done extremely well over the years. We have a great franchise there. We're still putting money into the market.

And I'd say when we're normally when capital is less freely available, it's better for us than the type investing that we do, because the entry point where you invest is often really important and less capital available means less people are chasing it. Therefore, opportunities are better. And so you see that. Do you see opportunities in the next twelve months? Yes. Yes. It looks like the next 12 months are gonna be an excellent investing environment.

A lot of people are negative. That means it's a great environment to invest. So we're going to continue to be putting money to work in this environment. How much money?

It's riskier also. You know, it's less risky. It seems it always. This is why it always seems like it's more risky. It's actually less risky.

You know, just to make the point. Equities are down. Equity markets are down, which means that if you invest a dollar, it's over the longer term. It's less risky. Fixed income is down, meaning its rates are higher. Therefore, the probability of losing money is a lot less. Bitcoin is down. Now that I'm investing in bitcoins,

growth, stocks are down. So everything has been has come down in the markets. And that is that that's that that means that the returns going forward will be better.

Therefore, the risk is less. Now, it doesn't feel that way. It often feels be. It feels a little bit hot out just. And that's that's what's that's why it's a good market to invest in. All right. Bruce, don't go anywhere. Visit. We'll be back for our exclusive

conversation with Brookfield Asset Management chief executive Bruce Flat. I'll also ask him if he's investing more or less money in China. That's coming up shortly. And this is Bloomberg.

Economics, finance, politics. This is Bloomberg Surveillance of the addition of Francine Lacqua here. Now we're back with Brookfield Asset Management chief executive officer Bruce Flint. Bruce, thanks so much, first of all, for sticking around. No, you explained to me that given some of retrenchment in markets, actually good opportunities for you in Brookfield.

What does it mean for companies that you want either one to IPO or put out there? I know there are questions about what you do with some UK assets, including Central Park. Yeah, look, are our investments around the world. We last year for perspective, we raised one hundred billion. We invested fifty five billion. We sold thirty five billion of assets. Is a vast business or always buying

things? We're sometimes selling things. And the UK, we have a 60 billion dollar business. We have a lot of infrastructure. Renewables, real estate.

And from time to time we look at taking an IPO is really just a possible sale of an asset on block. It could go to somebody else or it could go into the markets. I wouldn't say the markets on an eye for an IPO are attractive today, just given valuations in the market.

So you would wait for a more attractive market or would it make maybe you'll sell to somebody else, you'd sell it in the private markets? Member price and value are two different things. Value is what the assets worth in price is what it trades out in the market today. It's better to be buying in the public markets than it is to be selling because prices often today, just given the volatility, we've just talked about it. Prices often lower than value.

Therefore, it's probably better to sell it in the private markets if you're going to sell it or you just wait. Yeah. Are. Are you looking to sell Central Park? You know, we if we look we've owned it quite a long time. It's in a it's in a fund which has and a lifeline and it still has a long time to go. So sometime in next five or seven years, we'll sell it at ISE at an opportune time. It's doing really, really well as a business, as many we don't know.

But everyone in the UK, no. Central Park says it's a phenomenal place to go and have a holiday. And it's been a very it's been an amazing business even through Covid and now it's doing really well. How do you look at China? So are you deploying capital in China again? It's been quite a roller coaster, actually, for the economy for the last two years. Yeah, I look after our business. We invest for clients.

And some clients don't want to be investing in China and some have a very strong interest in investing in China. And therefore, we're still investing for those clients in China and not for the others. And it just depends on what it is. We have a big team in Shanghai and we continue to invest for the clients in China and in Asia and others that want to be investing in China. So where our business is very different

than if you if you own an industrial business and you're trading over a border and you have to make decisions. So we take our balance sheet and invest. This is a different, different decision for us. He's talking about real estate. So there are defaults on two loans. I don't know what that means for how you see real estate in various parts of the world and the level of distress you're seeing in those. Yeah, I would say that there's a real tale of two cities.

Firstly, anything that that's gone on with us, it's just regular business. It's a small and not relevant to the overall business. We have a vast business and everything's financed nonrecourse.

Therefore, it's not really relevant to the overall business. More importantly, what's going on in the world is there's this and it always happens the best of the best and the worst. The worst, the best of the best today is really, really good.

For example, in New York, our office buildings were leasing Manhattan West, for example. It's a big office complex on the west side of Manhattan. Rents are 50 percent higher than they were pre Covid. We're ninety seven percent leased. We just leased one full building up of two and a quarter million square feet.

We did three million square feet of leasing last year. So the high quality space is very sought after by companies because they want to bring their people back and have new engaging space. And so that's that's what's going on. Is that Canary Wharf? I mean, do you have anything similar in the UK or is it a little bit more touching, which is just up the street from where we are here? We just built 100 bishops gate. It's 100 percent leased. Rents are way higher than we thought we'd rent at.

We're leasing up Leaden Hall, up street from that. Rents are very high. So great space is achieving great rents in Dubai. We just lease stuff. A building. It's the best building in Dubai at rents. I'd say double what we thought we would

rent them for. So iconic in great places go really well. What's you know on the look? There's always what's always been that way is if you have poor real estate in four places and today poor before it used to be location. Right. Today it's quality of our systems, quality of everything in the building layouts, old building. And and those buildings are are in trouble.

So. You see more like defaults on writers, and I get this Covid related. Part of it is part of it's just a continuation of things going on before. Covid just increased it. I don't think I take real estate in general. The the news out there is much, much

worse than the underlying fundamentals. In fact, fundamentals today are probably better, almost better than they've ever been. Going into recession, we're in when the financial crisis happened. We empty buildings out in Canary Wharf like Lehman Brothers went bankrupt one day, a whole million square foot gone. Today, we're 100 percent leased. So why why do you see that that difference between, I guess, perception and reality in your eyes is inflation. Is it interest rates going higher? I don't blame them. You ask me.

I'm going to say it's the media. It's not that easy. Look, look, I think I think there's some real estate has many changes that go on its largest business in the world. It's a large business world. Everyone has a piece, real estate and lives in one or is near it. They go into it every day and forever and has an opinion.

And it's not it's. It's a constantly evolving thing. It's like retail has been constantly evolving. And and the trends, the negative or positive things get exaggerated. And I think it just gets exaggerated until it settles down. In terms of share buybacks, I know you've been frustrated, right, with the share price level. Are you going to continue buying back

shares when when it's not good enough? Yes. The answer is for all company. People responsible for companies should look at capital allocation. And one of the great things to do is to

buy what you own. And we continue buyback shares in all of our companies when they're not properly valued in the marketplace. And how do you how do you define that? It's like just look, we know our we know the assets all the time. And again, I'll go back to price and

value. We know what the value is of our business. When the prices and achieving when the price in the market is higher or lower, we know we see their sell here or buy there. And now we're running a business.

We can't use all our capital to do that. But on the margin over the longer term, it's always really good for shareholders to buy back stock in the company and sink the shares. And in essence, you're buying back what you already own at a discount to the value, and that's highly positive to the owners that are left afterwards. Bruce, thank you so much for a great

conversation. The first one of many. I hope so. You'll have to come back in the studio. That was the Brookfield Asset Management and Brookfield chief executive officer Bruce Flats. Now, coming up, NATO Secretary-General Jens Stoltenberg. Stoltenberg on the Ukraine war, U.S., China, tensions and, of course, the future of the alliance. That interview is coming up shortly. Don't miss that conversation as well.

This is. Economics, finance, politics, this is Bloomberg Surveillance Early Edition and Francine Lacqua here in London. Now let's get straight to the Bloomberg. First were news. Here's Leon Gearan. Hi, Leon. Hi, Francine. Federal Reserve officials anticipate more right types to curb inflation, though most support slowing down the pace.

Minutes from the Fed's meeting three weeks ago say almost all officials agree to an increase of 25 basis points. Only a few were said to have supported a 50 point hike. Now, President Clinton says he is waiting for his Chinese counterpart to visit Moscow.

Xi Jinping is reportedly preparing for a trip in April or May to push for multi-party peace talks. China's top diplomat, Wang Yi, met with Putin in Moscow, calling the relationship between the two countries solid as a mountain. G 20. Host India is said to be seeking to avoid using the word war in any joint statement which refers to Russia's invasion of Ukraine. That would diverge from a consensus reached by leaders in Bali last November. A source says Indian officials would

prefer using words like crisis. We're told the hosts are also concerned that plans for additional sanctions on Russia will draw attention from other G 20 priorities. Global news powered by more than twenty seven hundred journalists and analysts and over one hundred and twenty countries. Many on guarantees. And this is Bloomberg frenzy. Leon, thank you. Coming up, NATO Secretary General Jens Stoltenberg on a Ukraine war, U.S.,

China, tensions and the future of the alliance. That interview is next. And this is Bloomberg. Good morning, everyone, and welcome to Bloomberg Markets. Francine Lacqua here in London. Now, coming up on today's program, the NATO secretary general Anders Stoltenberg joins us live from Brussels as we approach one year since the Russian invasion of Ukraine.

Also on the program, could a post Brexit trade deal on Northern Ireland unleash tens of billions of pounds in business investments for the UK? And the veteran investor and campaigner Helena Morsi tells us about her three year plan to double the number of female fund managers in Britain. So tomorrow marks one year since Russia launched its war on Ukraine. The invasion has upended security in Europe, placed pressure on NATO and not seen since the end of the Cold War. So just to discuss this and much more, I'm very pleased to be joined by the NATO secretary general.

Yes. STOLTENBERG Mr. Stoltenberg, thank you so much for giving a bit of your precious time to Bloomberg. It's a year since Russia's invasion of Ukraine. There's no sign of a peace deal. How does Russia think they will win this war? What we see now is that President Putin is in no way preparing for peace. He's prepared for more war, launching new offensive operations.

So we need to support Ukraine to ensure that they prevail as a sovereign, independent nation. And this has now become a grinding war of attrition, which is actually a battle of logistics, meaning we need to ensure that they get their munition, the fuel to spare parts and order the weapons they need. The Ukrainians to liberate their lands. And that's exactly what NATO allies and partners are doing.

Secretary General Putin also said in a speech that Russia will, of course, have spent Newstart, which meaning that there are no treaties governing the nuclear actions of Russia, of the US, let alone China. What does that mean for data? Does NATO need to do anything to prepare for this? So I regret that decision by Russia to suspend their participation in the New START agreement. This is one of the very last agreements of arms control under the New Start agreement is is an agreement that limits the number of long range missiles, strategic missiles and weapons. And of course, this is this is a reckless decision because we need arms control and we need transparency. So we call on Russia to to reconsider and to and to respect and to fully implement the new START agreement, including the inspection regime, which is extremely important. And then, of course, we will closely monitor what they actually do. Russia has over the last year invested

heavily in new modern nuclear capabilities. And we are taking the necessary steps to ensure that our deterrence remains safe and credible. But it does an unregulated nuclear a world leader, Vladimir Putin is more likely to use its. First of all, a world without nuclear arms control arrangements, agreements, risks leading to more nuclear weapons. And we need to understand that this is part of a pattern. Not so many years ago, Russia walked

away from the iron treaty. And the IMF treaty banned all intermediate range weapons. And now they are starting to walk away from the new start agreement, banning or regulating the number of of long range weapons sold. More nuclear weapons, of course, makes the world more dangerous. And that's exactly why we need the agreements. That's why we need the transparency, the

inspection. They they facilitate. And that's also why the Russian decisions to violate UN FTSE to to to suspend the new START treaty. These are reckless and dangerous decisions. Secretary-General China looks at to become more engaged in the Ukraine crisis, either through a police plan or according to us, even through providing arms to Russia. What would the arrival of Chinese weapons on the battlefield mean for NATO? That will be a big and serious mistake by trying life. They start to provide lethal aid to to

Russia. So far we haven't seen that happening. But we have seen signs that China is considering to provide military aid to Russia. And and we are watching closely. And of course, China should not do that, because then China will support an illegal war of aggression against a sovereign, independent state in Europe, Ukraine and China. And this will be a blatant violation of the U.N. charter. And China is a member of the U.N. Security Council.

So they should not violate the U.N. charter. And that's a clear message from from their dial ISE and United States and others. Are you concerned that this NATO could quickly lead to a proxy war between NATO allies and a Cold War type scenario with Iran, Russia, China and North Korea? First of all, they need to understand what this is. This is a war of aggression by Russia against Ukraine. And Ukraine has the right to protect and defend itself. That is a right which is enshrined in the U.N. charter.

And we need allies and we have the right to support Ukraine. NATO allies are not party to the conflict, but we support Ukrainian upholding the right to defend their own country. Russia is violating international law. Russia is launching this war against

Ukraine. And Russia is reaching out to other authoritarian regimes like Iran. And we have seen the Iranian drones. But also North Korea to get ammunition, to get weapons, to get support. And again, our only answer to that is to ensure that we provide sufficient support to Ukraine so they can prevail and push back the Russian invaders.

And China should and should not, of course, became part of this by by by providing lethal aid support to Russia. The challenge and the problem is that China has has not yet been able to condemn the invasion. And we see how China and Russia are working more and more closely. And of course, this is something which we follow also very closely from the NATO's side. Mr. Stoltenberg, what likelihood you attach to both Finland and Sweden? Sweden being members of NATO by that mid-July Vilnius summit.

I'm confident that both Finland and Sweden will become NATO allies. All their dialogues. Also, Turkey made an historic decision last July at those summit in Madrid to invite Finland and Sweden and all ISE have signed the accession protocols and so forth. Twenty eight out of 30 allies have already ratified. Hungary has made it clear they will ratify the two protocols for Finland, Sweden, early March. I welcome that.

I met with President Erdogan last week. I see some encouraging signs. I think it's absolutely possible to do to get Finland ratified in the near future and we continue to work for that. And then on Sweden, there are some more challenges that has to be addressed. But President Obama and I agreed last week that there will be a meeting between Finland, Sweden and Turkey in Brussels in mid-March here at the NATO headquarters.

And under my auspices. And they will sit down and meet and tried to address the challenges we have to overcome to ensure that also Sweden becomes a full member in the near future. My message has been all the way that that both Finland and Sweden should be ratified. Now they are ready and they should be ratified. But Turkey has has has no position.

And therefore, we need to find a way to to solve that issue. Mr. Stoltenberg, thank you so much for your precious time. Stoltenberg, the NATO secretary general joining us live from Brussels for an important conversation. For more on the war in Ukraine, William Albuquerque, director of Strategy, Technology and arms control, the International Institute for Strategic Studies, also joins us now. William, thank you for joining us.

What happens in the next twelve months? How does this for end? Well, it's a great question. Oh, I think we're going to see, at least in the short term, as the Russians are going to continue this grinding war of attrition, trying to bleed Ukrainian forces as much as possible. They think they have significant advantages in manpower and in battle tanks, even though the very old battle tanks that they're going to use along with artillery to grind the Ukrainian forces down.

The breakthrough could come with battle with the modern Western battle tanks, especially the leopard to battle tanks that have been pledged by so many countries across Europe. These can provide Ukraine with the ability to break through the Russian lines in unpredictable places to form real armored corps that can spring some strategic surprises on the Russians and throw them back. So we could see in the early spring, mid spring into the summer, some Ukrainian counter offensives that take the Russians by surprise that threw them backward and start to bring Russia back to the position they were at the beginning of the war. The big question is always going to be Crimea. How can they advance on that front? And I think once Russian forces are being pushed back in the east, then Putin starts to think about how to negotiate his way out of this for. When we had a good conversation there with the NATO secretary general trying to understand also, you know, the China fault line. So whether their peace provider, whether

they're actually armed Russia, where do you think this will go? I don't think China wants to get dragged into this conflict. I don't think they want to provide Russia with military equipment. I think that's why you hear the noises out of the United States that they're considering exposing some classified information about conversations that are happening in China. Note that the U.S. isn't saying that they're going to expose actual weapons transfers. So the US is trying to do what they've done throughout this conflict, which is the selective use of classified information in order to prevent bad things from happening, whether it's Russian false flag attacks or now the provision of Chinese military equipment. Because if China does provide military equipment, that gives Russia an enormous well of support to draw upon for more missiles, more ammunition, more artillery.

It would be it would be very deleterious to the Ukrainian chances for victory. Where do you see the UK on this? I know there's been a call for the prime minister to send some of the fighter jets right to Ukraine. They have promised a longer range weapons. How crucial is the UK's role in this? She said it promised Storm Shadow, which is a longer range missile that can really help Ukraine start to destroy some of the Russian logistics, command and control and centres from which they're launching their own missiles and aircraft.

So I think that would be a real game changer. I think it would really help because if you if the UK starts selling the longer range systems, that may break some of the logjam in the United States, where the longer range attack arms artillery for the high Mars has been something that the Ukrainians have been begging for throughout the conflict. So that could really make a difference. All right. Thank you so much for joining us, William. Albuquerque there with his vast experience, of course, on the ground, director of strategy, technology and arms control at the ISE as. Coming up, Karen Ward from JP Morgan sees the UK benefiting from an investment since it, if opposed, Brexit feels realized.

We have the latest on the Brexit talks next. And this is Bloomberg. Economics, finance, politics. This is Bloomberg UK.

I'm Francine Lacqua here in London. We're still waiting news for a potential deal between the UK and the EU on changes to post Brexit trade arrangements for Northern Ireland. But some economists are already looking at the potential upside for investment in Britain when an agreement is reached. Now we're now joined by Bloomberg's UK correspondent, Lizzie Borden. Lizzie. Great to have you on the program.

So what kind of clues can we expect from some economists? Francine, I've spoken to say that if there were a Northern Ireland protocol deal, it would reduce uncertainty, which would boost investment and then boost growth. So Cullen Pickering, who I know you often have on on the program from Berenberg, said in a note to clients that actually the uncertainty around a potential trade war with Brussels is hanging over investors and they've built up her hundred billion pound war chest of cash since the pandemic. Unlocking a deal might help to get some of that investment into the economy. I also spoke to one of the chancellor's

economic advisers, Karen Ward at JP Asset J.P. Morgan Asset Management yesterday. Take a listen to what she had to say. The numbers are the UK business investment is about the same level that it was in 2016 and the likes of France and Spain.

Those numbers are around 20 percent higher to be really meaningful. And of course, with investment then solves all the other economic ills that we have, which is low productivity, low real wages, fiscal drag. So it really is the secret sauce for economists, business investment. So I was quite surprised that Karen Ward would say this to us on Bloomberg Radio yesterday, but it means that the chancellor clearly is aware of the economic benefits of a deal. What I would say, though, is that Brexit

is impacting the economy, not just through business investment, but, of course, also through the labour market. And trade and business investment isn't just being hampered by Brexit. It's also the tax environment. But if the government could get more growth, potentially, it could deliver those tax cuts that so many in the Tory party are after. Now, speaking of the Tory Party, what is Labour doing? We're expecting a big speech. Manchester from Keir Starmer. Yes, it's in the next hour, we're going to see Keir Starmer on his feet at ten thirty at that moment. We're also expecting a document setting out what Labour would do if a government not quite a manifesto.

But the first pledge of five is expected to be that he'll grow the economy to be the fastest growing in the G7. Now, on that pledge, you have to ask, how impressive is it because is it more about the pace or is it about the level and how is he going to do it without boosting immigration, on which he's been really tough in his talk lately? The other goals, we reckon, will be on the NHS crime, education, clean energy, and you might be having days off because, of course, the prime minister set out his five point plan for growth earlier. Well, his priority priorities earlier in the year. And they both hark back to Tony Blair back in 97. 5 points. It's lesson 6. It's more than three. It's beautiful. No, it kind of sets out the agenda.

It is neat and it's substantive. Talk to me about the Northern Ireland protocol. Are we going to get a deal? Well, we're currently expecting hopefully maybe they can get a fudge by next week. We heard the prime minister at prime minister's questions yesterday, sparring with Keir Starmer, where she soon suggested that a legal change would be needed to the Northern Ireland protocol to address this democratic deficit. But we hear constantly from narrow chefs of the European Commission vice president that it's unrealistic to expect a renegotiation of the protocol at this point. What people in the Tory party, the

Brexit has want is to see the deal. They're frustrated by their strategy of trying to get them to agree before they see it. But the rescue costs for rescue see dog is if he lays his cards on the table too early. There's a big political humiliation that he has to rely on the votes of Labour to get it through parliament. But c'est Aamer clearly trying to coax where she sued into that checkmate position. PM queues yesterday.

Yeah, a lot going on. Thank you so much, Lizzie Britain. And of course, we wait for that Starmer speech in about an hour. Now, coming up, there are fewer than 200 women fund managers in the UK. Veteran investor Helena Morrissey is working on changing that. We'll bring you more of that conversation next. And this is Bloomberg Daybreak.

Economics, finance, politics. This is Bloomberg Surveillance, actually Bloomberg, you can Francine Lacqua here in London, and despite a push for gender parity in recent years, fund managers in the UK are still overwhelmingly male. There are currently only around 200 female money managers here in the UK.

Well, that works out at just one in 10 of the people who run Britain's portfolios. Veteran investor Helena Morrissey is looking to change that. Bloomberg radio anchor Caroline Hyde spoke with the British financier on her new high intensity mentoring program. And she's here with me. It was a great interview. So what exactly is Adam Morrissey trying to do? Yeah. So, Helen, democracy is the chair of the Diversity Project and they've got this new pathway program.

So we know that the gender diversity numbers in the UK in money management have basically stalled. Last year, according to Citi, why only 12 per cent of people managing money were actually women. That has stayed the same for quite some years.

So I spoke to had a numeracy around this. The Pathway program is training up 60 women in the UK this year. Very intensive program. And she's clear about what the goal of that is, is to get those women into money management, but to manage a fund and to be the named person on that fund, not just within the team. So it's a really ambitious program and she wants things to change. Have a listen to what she had to say. I asked her basically why she thinks the

numbers have stayed so stubbornly low. I learned from the 30 percent club experience that was an initiative to create a better gender balance on boards, at least 30 percent women. We only made headway when we involved men in that. And so we do need to be. I love you expression of muscular because, you know, it should feel very robust. It should be like a you've got a

business objective here. Let's improve diversity of talent. So Helena Morrissey there speaking, so she was talking about the 30 percent club, which was one of her previous initiatives. She's had a long career. She has managed money. She sits in the House of Lords. She's the chair of the Diversity Project. The 30 percent club was to try to get women on boards to increase those numbers for listed businesses up to 30 percent. So she's using that experience to bring

to the Pathway program. And as I sort of said to her, you know, this is more muscular. We've had so many initiatives, so much talk about change. But this is very practical. It's about getting these women into the top jobs. And these 60 individuals come from 33 different companies.

They are global businesses. So one of the mentors was saying to me, which I thought was very interesting. This isn't just something for the U.K. These 33 investment companies are global businesses. I mean, I don't know how much it moves the dial. Certainly what was behind her inspirations from 200.

Does she have a target of how much she wants that to be? She was quite reluctant to talk about that. She said that a lot of people are asking her, is this going to be a permanent program? Is this going to be a global program? She was reluctant to sort of make any commitments. She's saying she's focused on making this year's intake a success. And speaking to the women, which I did for radio, I did a whole kind of bespoke piece which was really flooded back to my reporting days, which I loved speaking to the women who were taking part. The mentees and the mentors, they were quite realistic, a bit sort of pessimistic sometimes about the issue, but also hopeful about this program. Have a listen again to what I had to say.

I honestly don't want us to need to have this type of program in a decade. And I actually think that's within reach. I saw with the 30 percent club that when change starts to happen, it can really accelerate and you get a new sense of what's normal. And you're right. I smiled when you said like a 6.

It sounds like, you know, this could be a veteran now it's legacy and life beyond the grave. So, I mean, I hope this is not sort of my parting shot, but I've always said, you know, I really don't want to leave this industry until it looks and feels very different. And for me, that means that we have as many women as men. And so people expect if they have a fun manager, come and visit them.

And if they're a client, they have just as much exploitation. That's going to be a woman as a man. Well, thank you so much for that great interview. Of course, great reporting for a Bloomberg radio anchor. Caroline Henneberger now. Also, be sure to subscribe to Bloomberg's inner city podcast that I host alongside David Merritt on Apple podcast, Spotify or wherever you get your podcast. Today's.

It's out today is on a similar theme. Look Ellis of Man Group on Social Mobility in the UK. This is Bloomberg. We should be in a recession right now and it's just not happening. The Fed doesn't even know. We don't know what to look for. You're looking at an environment where the Fed does need to be tied up with pretty much and highlighted the probability of rate cuts at the end of 2023. And now we're seeing, you know, a three

rate hikes over the course of the next few months. 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 New York and 6:00 p.m. in Hong Kong. Our top stories today. The Federal Reserve is inclined toward more interest rate hikes to fight inflation. Still minutes from the last meeting. So almost all Fed officials want the pace of increases to slow down to 20 finance ministers meeting in India with the war in Ukraine overshadowing their agenda. We'll talk to someone who is there.

Spain's deputy prime minister. Not yet convinced. And a push into artificial intelligence processes is helping. And video. Shares are higher after the company

comes out with a bullish outlook. Welcome to Bloomberg Surveillance Early Edition. I'm Anna Edwards in London with Matt Miller in New York. And Matt.

Yes, there's the macro story. There's the post Fed minutes reaction. But then there's in video, which really does seem to have reignited the animal spirits. Absolutely. Really pushing us back to risk on. And we've heard so many people in the

last few weeks say it's less about the macro picture now and more about earnings. That hasn't proven true in terms of market pricing on the indexes. We saw a big drop day before yesterday, the biggest all year, and a huge jump in rates, all due to Fed speak and continued inflation data. CPI was really what set that off. But now maybe earnings are really going to come into focus.

Take a look at S&P futures up about four tenths of one percent. The index, the CAC trade really didn't drop too much yesterday. And we did have a rise in the Nasdaq again. The Nasdaq is up still more than 10 percent year to date, while the S&P is only up about 4 percent year to date. The U.S. 10 year yield had come off a little bit. Now it's up another 2 basis points, but

still three ninety three. Seventy one is a little bit lower than where we saw it at this time yesterday. And now I'm ex crude is also coming back a little bit, but itself a little lower than we saw at this time yesterday, 74 17 for a barrel of West Texas Intermediate.

Finally, Bitcoin at twenty four thousand two ninety nine is just about exactly where it was 24 hours ago. But what astonishes me is the lack of volatility in this digital asset. We really didn't see it come down with the latest move in equities or in yields. It just has managed to stay at the same level. Take a look what's going on in Asia. We are going to talk to the CEO of the

Hong Kong Stock Exchange a little bit later on in the program. The MSCI Asia Pacific X Japan index rising a quarter percent x Japan because Japan is closed for a holiday today. So you won't see a quote on the Nikkei that's any different than yesterday. The Hang Seng in Hong Kong down a third of 1 percent at twenty thousand three hundred fifty one. We're looking at some more weakness in the US dollar versus the Korean one. This is interesting after a pause for the central bank there, because we had seen the dollar really strengthening again against the WAN and now it's coming off a little bit. So if you watch this pair, that's a

turnaround and the dollar strengthening against the yen right now at one thirty four. Eighty five. Anna, what do you see in terms of Europe? Well, here in Europe, then we see a pretty mixed picture across European equity markets. Geographically speaking at least, Matt, we've got weakness coming through in the London market, basic resources in the mining sector, partly responsible that the auto sector and technology doing well and that plays well for the German market. So we see the German and the French markets on the rise. A quick data point for you. We just got euro area, cool inflation and this is the core number accelerating to a record of five point three percent against an estimate of five point two. So not much over the estimate.

This is cool. This is not the headline figure which has come off those recent highs as we've seen in other geographies. But it's the core number that is still advancing, is still going higher. And that no doubt a bit of a headache for those at the ECB. Here's the moving technology shares that we're seeing up by one point two percent. Maybe it's the that end video story helping to lift sentiment surrounding that sector.

Anglo American is partly responsible for the weakness in basic resources, but it's been a theme of this week. Earlier this week, we heard from Rio Tinto. We had when BHP. Both of those businesses seemingly disappointing the markets with the amounts of money that we're sending to shareholders and some to some degree, the numbers. Anglo American, some similar stories, but with some differences. A big impairment charge they're having

to take on parts of their fertilizer business in the UK. Rolls-Royce, a completely different story. And this is incredible move for a business like Rolls-Royce, the engine making business, of course, not. Cars up by eighteen point nine percent

here in the UK today. And they beat estimates. They're talking about the strength in their operations under a relatively new CEO. They're talking about transformation in the strategy and also possibly about return of cash to shareholders and say all of that adding to some upside on that particular share price. And this is the UK that you yield. I just put that in here as we're keeping track of where we are on the yield story, as we see in various curves adjusting to this higher for longer mantra that the market seems to be coming round to. We kind of back to where we started the

year on the U.K. says yields and actually the U.K. a bit of an outlier today in Europe, seeing those yields go just a touch higher. Amazing to see that Rolls Royce move. I mean, a 10 billion dollar business gaining a fifth overnight.

On possible strategic changes is huge, a huge story. Let's get back to the macro picture. The minutes from the latest Fed meeting show the central bank is inclined toward more interest rate hikes to curb inflation if you hadn't already woken up to that. Meanwhile, New York Fed President John Williams says it's critical that central bank stay committed to its 2 percent inflation goal.

Price stability is, in fact, the foundation of economic prosperity. Without price stability, all of the other goals that we have, whether maximum employment or low and stable or low interest rates can't be accomplished. So that's an absolute imperative for us. Bloomberg's Valerie TTL joins us now for the key takeaways from the Fed minutes. And Valerie. I thought, you know, one of the most interesting things was the minutes seem more hawkish than Powell did at the pressure. There was no talk, for example, of a pause. And he wasn't very firm about that.

Yeah. Also that there was no mention of the word disinflation, which he seemed to say ad nauseum in that Q and A. But let me go back to a few things. The first one for me was that only a few

wanted a 50 basis point hike. That implies that Bullard and Mestre maybe only had one friend and that 50 basis point camp the market took a sigh relief on that one. But on the hawkish side, there was no mention of a pause. And as I said, there was no mention of this word disinflation. And instead there was a big emphasis on maintaining the restrictive stance. And then lastly, for me, they only

focused on the upside risk to inflation, saying that that's key to their policy. We had a pretty we had some soft CPI prints heading into this January Fed meeting. Some suppose there would be some focus on the downside, not a downside risk to inflation, but there wasn't. This all goes to say that there has been a 50 basis point shift higher in the Fed's terminal rate, somewhat implying that the March dots do have room to move higher when the Fed convenes again on March 22nd. Yeah, that's interesting. Sounds questions about the extent to

which the market is already front run. The hawkishness. We saw that whether there's more to come onto, other matters to do with the Fed. Then Valerie vice chair Lael Brainard departs the Fed this week.

This has crept up on me and more quickly than expected. Any hints on who's going to replace having this key seats? And there was a report out from The Wall Street Journal that named two names, both economists who have previously worked in the Obama administration. I want to talk about Janice really here real quick. In 2019, she co-authored a piece that found that a 3 percent inflation target would have been better in the aftermath of the global financial crisis to aid recovery. It's very clear from these initial rumored picks from Biden that he is looking for a dove to replace Lael Brainard in that vice chair seat. OK, finally. Thanks very much. Certainly wants to watch, Glenn.

I saw with that news on the markets and key appointments. Let's get over to the tech space. And video is edging, hiring us premarket trading after it gave a bullish revenue outlook for the current quarter. The pushing into artificial intelligence processes is helping offset sluggish demand for P.C. chips. Joining us now on this, I know the techniques that IBEX Tom Mackenzie with the details Tom. Good morning to you.

So what can you tell us about these results? So what's the guidance, particularly the first quarter leading up to April? They're expecting sales of about six and a half billion U.S. dollars, well above the estimates. And as you say, that is impinging or at least contingent on what they see as ISE demand for A.I. chips. And as you say as well, of course, a key revenue driver for Nvidia has been the gaming part of the business gaming chips. But what they've successfully managed to do, it seems, is pivots from gaming to a guy using those chips that are well versed in terms of crunching the data for A.I.

applications. And that's why they're seeing the demand. They also announced that they're setting up an a cloud service in partnership with the likes of Microsoft, Oracle and Google. So that could be another revenue driver going forward just for the context. And video is one of the best performing. In fact, the best performing chip company within the Philly index is going to more than 40 percent year today. And again, investors rewarding this

company on this upbeat guidance. All right. A, I certainly hot this earnings season. Yeah. In terms of a much longer term bet, Apple apparently making headway on its glucose tracking watch, which Tom, I think is fascinating, is the growth of diabetes is monstrous globally. And this would allow them to test your blood sugar levels without, you know, a pinprick. Yeah. And as you say, this is an enormous potential market. So one in 10 Americans alone suffering

from diabetes. So what are we talking about, 40 million people? Yes. You're also right to say this has been a long running project, more than 12 years, highly secretive as well. And what they're trying to do is use the hardware that Apple has. Its at its disposal with the software to

do this non invasive. And as you rightly point out, that's key to this non-invasive blood glucose testings. They use photo, sonic things or Silicon Photo Photonics, which is a part of chip chip technology, silicon photonics with lasers and with their own algorithms to measure glucose levels. They say they're a proof of concept level. There's still a number of years away from getting it onto the market. They need to shrink it.

That's going to be key for them. They're at the point now where they're trying to get this product down to about the size of an iPhone to put onto your bicep to measure these glucose levels. But as you say, a number of years away, they said they've had some major successes. It's been cloaked in secrecy, but the market potential is clearly huge for them. OK. Tom, thanks very much. IBEX Tom Mackenzie with those tech

themes for us. Back to the geopolitics. India is hosting the G 20 finance chiefs meeting this week. U.S. Treasury Secretary Janet Yellen comments at the gathering mark a shift in tone on the global economic outlook from the last time the world's top policymakers met in October. It's fair to say that the global economy is in a better place today than many predicted just a few months ago in the fall.

Many were worried about a sharp economic slowdown across the world. The challenges we face are real and the future is always uncertain. But the outlook has improved since we gathered in the fall.

U.S. Treasury Secretary that talking about the improving outlook, we're joined by Bloomberg's Haslinda Amin, who is going to be speaking to Spain's deputy prime minister at the DNC meeting Haslinda Amin. Good morning. Well, Anna, the world economy may be in a better place, but there are lots of challenges, including debt restructuring, 60 percent of developing nations are either in debt distress or close to it. So it is a huge issue. Let's get perspective from Spain's out. First deputy prime minister. Good to have you with us, ma'am.

We talk about debt restructuring. It's a huge issue here. And some say that perhaps China is dragging its feet. I mean, where are we in terms of progress? Debt restructuring is undoubtedly a very important element. A key tool to provide financial support to most vulnerable countries. As you say, there are many discussions ongoing in different foreign.

I hope that we manage to find a breakthrough, including also private sector participation, of course. But some say that needs to be some tweaking and a common framework. I mean, what can be done? At the end of the day, what we need is the will of all the key creditors. They must all contribute so that we manage to provide these debt relief to most vulnerable countries and thus reinforce the whole financial safety net. The thing is, the US, even India, they want China to take a haircut. But China says for them to take a

haircut, it wants the World Bank to do it as well. Should the World Bank take a haircut as well? We need to have a broad and balanced approach because we cannot endanger the Tripoli and the and the the role of the World Bank. And the IMF has lenders of last resort. We cannot weaken the multilateral framework in this discussion. So that's why I was saying we need to

all get together and find a balanced and the right approach that provides relief without weakening the common safety net. We heard from the U.S. Treasury Secretary, Janet Yellen, just slightly earlier. She's also pushing for reform to the World Bank. She says that the world needs to expand its balance sheet.

For instance, the World Bank currently is undergoing a leadership change. Who would you like to see there? Should we see yet another American? Oh, I wouldn't get into that discussion. I think the most important issue is not so much the person, but rather at what kind of structure and multilateral framework do we think we need going forward? Actually, our frameworks have served us well to respond to the pandemic through good coordination of monetary and fiscal policies and the strong role of the World Bank and the IMF. We have prevented a massive financial

crisis as happened in 2008. And so we need to continue to reinforce our multilateral framework with the institutions based in Washington and other development banks throughout the world so that we can ensure financial stability and therefore strong sustainable growth. Leadership does matter. Countries like Indonesia, India feel that it is time for someone from the developing world to be leading the World Bank. After all, we you take a look at growth,

80 percent of growth this year will come from developing nations. Shouldn't that be reflected in organizations like the World Bank, like the IMF? Well, obviously, right now we are in a tectonic shift. You know, of the coming world order that has served us since the end of World War Two. I think there are many changes and also geopolitical challenges and tensions are taking place mostly due to the war in Ukraine.

Most recently, I think that we definitely need to see how to build, how to put the building blocks of these new world order. And countries such as India have a strong voice and have an important role to play. And that's that's for sure. And I'm very glad that the G. 20 is taking place in India, because I think that can help us find a way forward in many of the challenges of the present and the future. Speaking of Ukraine, we're ma

2023-02-25 04:22

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