This is Bloomberg Daymaker for this Monday, the nineteenth of June in London.
Coming up today, the best of Frenemies. Blencoln becomes the most senior US official to visit China in five years.
Restoring order, the FCA is said to restrict od asset management transactions.
Get ready to feel the squeeze. Bets on UK rates edge towards six percent.
AstraZeneca's China spin off and BT cuts its pension investments in the UK. Those are the stories we're looking at in today's papers. And I'm Leanne Gerren's.
Plus swinging the acts. The UBS CEO hints at a massive downsizing of Credit Suee's investment banking business.
That's all straight ahead on Bloomberg Daybreak Europe. The business news you need to start your day in just one fifteen minute podcast on Apple, Spotify, the Bloomberg Business App and everywhere you get your podcasts.
Good morning, I'm Stephen.
Carroll and I'm Caroline Hecker. Here are the stories that we're following today.
US Secretary of State Anthony Blincoln is matt China's top foreign policy official in Beijing, in a positive start to his two day trip He's the most senior US official to visit the country in five years. Nason Maboobi, at China specialist at the University of Pennsylvania, says, the trip seems to be going well.
The meeting, you know, lasted much longer than I think people thought. I think both of the readouts had very positive language. Some of the follow on things that are happening today and perhaps even a meeting with President Jujuiping all seemed to be on track in a very nice way.
And the language and each of the readouts had lots of phrases, you know on the Chinese side, stable, constructive, predictable relationship that signal that this was quite a productive meeting, again against the backdrop of terrible relations of late and very low expectations for what the meeting could have accomplished going into it.
That's Nason Mabooby speaking too. Is Blncoln's previous attempt to visit China in February was scrapped when the US revealed and alleged Chinese spy balloon was floating over the United States.
Goldman Sachs is the latest bank, though, to cut its forecasts for Chinese economic growth this year Bloomberg's Brian Curtis has more From Hong Kong.
Goldman lowered its estimates for GDP from six percent down to five point four percent, and perhaps to make matters worse, it sees limited options to boost stimulus. It says any easing is unlikely to exceed those in previous downturns like twenty twenty. A report says property and infrastructure stimulus will probably be targeted and moderate, and that going down the same world road is not consistent with the high quality
growth the leadership wants. Why not do more will? Goldman sees some options constrained by economic and political considerations in Hong Kong. Brian Curtis, Bloomberg Daybreak.
Europe, the UK's financial conduct authorities are reported to have imposed restrictions on the movement of cash and assets by od Asset Management. Bloomberg's Ewan Pots has more on the recent turmoil.
Od Asset Management plunged into turmoil early this month after allegations of sexual harassment by founder Crispin Odi, which he denies. Now the Ft reports that the UK's financial regulator is attempting to restore order after the departure of ODI by imposing restrictions on the movements of cash and assets. The paper says OD Wealth Management and associate firmas also agreed
to the guidelines, which could be published later today. Among the restrictions, the FCA will require pre approval for transactions above a certain level in London Immune parts Bloomberg Day Break Europe.
Politically, here in the UK, the House of Commons will vote today on a report which found Boris Johnson, the former Prime Minister, lied to MPs over party Gate. The vote threatens to fuel divisions within the Conservative Party in what's likely to be an uncomfortable week for the Prime Minister. On Thursday. The Bank of England is also set to heap further pain on borrowers by raising interest rates again. The Bank's former deputy governor, Charlie Bean says that they will need to head higher.
I think rates will certainly go higher from where they are, reflecting these bad inflation and pay and like market numbers that we've had over the past month. How much high they have to go is open. Obviously, the markets are expecting significantly higher rates.
The Bank of England's former deputy governor there speaking as markets are pricing in a peak rate for the UK of over five point seventy five percent next year. That would be a level not seen in sixteen years.
Credit Suite may be due for a quote massive downsizing of its investment banking business after its takeover by UBS. UBS CEO Sergio or Maati has been hinting at massive cuts to Credit Suite, and an opinion piece published on Saturday in a Swiss newspaper, he also said that UBS has simplified its structure and that a prudent corporate culture is at the core of everything they do. The fusion of the two financial giants is underway after the takeover was formally closed last week.
Okay, those are a few of our top stories for you this morning. Worth reflecting though, on what a very difficult week. This may well be politically economically for the UK. So the Bank of England is expected to lift interest rates from four and a half percent to four point seventy five percent doesn't entirely rule out the possibility even of a fifty basis point rate rise. It would certainly be the thirteenth rate increase in Britain in a row.
We've also got the UK CPI data, but politically, the prime Minister is absolutely you know, wedged into this problem where you have alarm bells ringing Stephen about the housing market, about borers and mortgages, and yet also you have the former Prime Minister Boris Johnson and what he did during the pandemic and the lockdown parties that were held really looming large over the Conservatives.
Yeah, I mean, look, the inflation figure is expected to show a slowdown, but nowhere near where any Prime minister would want to be seeing inflation at this stay, considering
how high it's been for now so long. And the question in an electoral cycle sense is when people are going to feel the pain of those interest rate increases the most, because people coming off fixed rate mortgages in the next year, if they're paying significantly more now, are they going to be blaming the government for that, especially if inflation is still so high On the housing market.
We've new figured some right Move today showing that house prices in London are sliding at the largest amount per region in the UK, so down one point six percent month on month according to right Move, and nationally price is broadly unchanged, but the big drops in housing prices in London, including in places like Canden and Westminster, where you know, some of the most depensive places in London to live.
Yeah. Absolutely, any seasonal rebound could well be pretty short lived if rates continue to rise in the way that we were talking about, right, So that's the sort of big thought if it were for the UK, I think at the start of this week. But then we also have to look at the markets right now. Chinese stocks sliding this morning after the State Council fell short of announcing further policy measures to support the economy. This is Golvin Sachs cut its growth forecast for the Chinese economy
to five point six percent this year. You hearing that just earlier in our round up of top stories. Joining us now is Blueberg's Markets were bought a value title to discuss high follow a good morning took us through then what is driving the sell off in China? Because stocks were actually doing pretty well. They had last week.
Yeah, they had a actually fantastic week just on these expectations of some sort of stimulus to come from China. But all the marketers reading this morning is just disappointment. There was really a lack of concrete details from that State Council meeting that you mentioned just on what policy support exactly is in the pipeline. It's leaving the market with a big question market the moment. They did call for more forceful policies to support the economy, but they
didn't tell us the timeline. They didn't give us any details. They just said the new studies or the new measures are being studied and they will adopted in a timely manner. But all the markets are reading from that is we just got our hopes up so big last week. We're just disappointed. The equity market has were traced nearly one percent, the yuan continues to weaken, and then if we look at the oil markets, the crude markets are falling out
of bed. This morning, Brent is down one point four percent. All of this back to this story of just what is this China policy support going to look like? And isn't going to meet our expectations.
And in the midst of all this, we've had GLBIN soachs Tech this may have to cut its growth forecast for China. How significant is that.
It's a big cut five point four percent from six percent, and they're not the only bank out on the street to do so. They are cutting it based on limited options to boost stimulus. So they're essentially saying that this isn't going to be some fiscal bonanza we're going to get from China. They're not going to support the property market like they did previously. Instead, it's going to be targeted and moderate in size. That's not really what the
what the market at the moment wants. But all of this going back to the fact that the hopes of this China reopening, this stimulus boost is possible, even global boost to growth from the China reopening has fizzled so quickly, and now we are sitting and waiting for more easing to come out of China.
Okay, so that on China also value. I'm interested to understand your perspective on central banks this week. Of course we've got Jeron Powell testify. But then I mentioned the Bank of England right decision on Thursday. Great day to focus on that.
Hair huge focus on the Bank of England, especially as we get the CPI report the day before. And if I look at what the markets are pricing for Thursday's Bank of England decision, it's over twenty five basis points right now. The markets are pricing in thirty basis points. The risk at the moment is we get a hot CPI print, especially in the core CPI, which we know in the UK has yet to peak, and it's really one of the only major economies who have really not
seen inflation tick down in this state key components. Yet if we get a hot CPI print, the risk is that the Bank of England could have to do fifty basis points on Thursday. The markets are not yet pricing that, but what we could shift to that if this CPI print does disappoint on the hot side.
What about Jerome Powell and his testimony he sets to deliver to Congress this week. What are the key questions he'll be facing.
The key thing for this this is the Humphrey Hopkins testimony. He does this twice in front of Congress every year. He'll release a statement before his initial initial before he initially testifies in front of the House on Wednesday, and normally he uses that statement to finesse a message to the market. So we'll be laser focused on what that statement is and when it's released as he sits down in front of the House at three pm UK time
on Wednesday. A lot of questions were raised last week based on this communication at the last meeting, where they told us they were in a hiking bias. They communicated that by saying we intend to hike twice more this year, but they didn't necessarily follow it up with any hawkish language, leaving the market a bit confused on what to think. Here.
We are pricing in one more hike from the Fed to get us to five and a half, but the market isn't necessarily reading that we'd get to five and three quarters FED funds by the end of the year. Perhaps a hawker's message from Powell on Wednesday could get the market.
To do that.
Okay, value, very interesting. Thank you so much for being with us. Boomberg's Markets Report Valuie title up.
Next to Astrosenica's China spinoff and BT cuts its pension investments in the UK.
Now the paper review on blue Bird Daybreak Europe, the news you need to know from today's papers and.
Boombergs Leyann Goerens is with us this morning to take us through those stories in the newspapers. Morning to you, Leanne. Let's start in the Financial Times, its headline Astrosenica drafts plan to spin off China business and attentions.
Yes, Stephen, good morning to so exactly what you've basically said, The pharmaceutical giant Astrosenica has drawn up these plans to spin off its business in China and possibly list.
In Hong Kong.
And this is all according to the Financial Times, and listing is separate unit in either Hong Kong or Shanghai. What the plan is is it could insulate the company politically from moves by China to really crack down on foreign companies, which we have seen and which is raising concerns not just with Astrosenica but with other companies invested in China. Now, the drug maker began these discussions on the idea with bankers several months ago, and this is
according to the FT. Really as those geopolitical tensions grown, as you mentioned earlier, we've got US and Chinese ambassador's meeting. At the moment. Astrosenica is the largest overseas pharmaceutical company in China by sales. We must remember this, generating one point six billion dollars in the country in the first quarter. So splitting things may be difficult or spinning things off.
So what they've said is this separation might not ultimately take place, and this is what people are cautioning because there's big money in pharmaceuticals in China. Definitely with an aging population.
Yeah, absolutely, you know, would it be a listing in Hong Kong or Shanghai. Yeah, lots of question marks about that, but very interesting story. The Telegraph now leanne BT's thirty nine billion pound pension fund cuts UK investments in blow to Hunt's big bang two point zero ambitions. A lot packed into that headline.
There's a lot packed into that headline, Caroline, and we're just going to try to dissect it now. But you're speaking earlier about, you know, really what the government's facing at the moment, the Tory government. Things are not easy. But now we're hearing that BT's position is a later setback for Jeremy Hunt's plans to unlock a new wave
of growth in British stocks. The company's thirty nine billion pound pension fund has cut back its exposure of London listed stocks to just one hundred million pounds and this is all according to new figures, so a significant drop now. A spokesman said the BT pension scheme was reducing its exposure to equities and this is really all part of
a d risking strategy for the company. And BT's overseas equities have also suffered massive losses, according to this writeup in The Telegraph, tumbling seventy five percent, So things difficult. BT's pension funds suffered an estimated eleven billion pounds drop and value of its assets, and the newspaper says this was as a result of liz Trust's mini budget, which
really triggered margin calls on products called LDI. Do remember how many we spoke about liability driven investments at the time when that mini budget happened, which are popular with pension funds. So there we are the struggle for BT, but also the struggle for British stocks.
Okay, yeah, really interesting stories follow given everything we were hearing about that story over the past couple of weeks, Leanne, let's go to the Times next. We're just talking about UK plans for regulating AI being best in class according to the Bass of Google.
Some good news to end on here. Yes, So, in a boost for Britain's international reputation, the new managing director of Google in the UK and also Ireland has called the government's approach the best in class to AI and putting guardrails in haven't we been talking about this non
stop over the last few months now. In her first interview since taking the job, which was in March, Debbie Weinstein said that the AI white papers at the UK government have published so far we're quote a great global standard for an approach that we can think will really work. Remember it was London Tech Week last week. Rishie Soue, you know, he said Britain could be the global home of AI regulation, really setting them up for that. Google has also this massive footprint in the UK with almost
seven thousand employees. But remember legislators are going to have to move fast because the European Union is moving closer to passing one of the world's first laws, which is regulating AI. So there we are, but really positive news actually coming out of the AI world. If we listen to Debbie Weinstein.
This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Street and beyond.
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