Good morning. It's Tuesday, the full teenth of November here in London. This is the Blueberg Daybreak you at podcast. I'm Caroline Hipkick and.
I'm Stephen Carroll. Coming up today Cameron's second act. The former Prime Minister returns to government, but will you be weighed down by his political baggage.
Biden and g do some fentanyl diplomacy and agree a deal to crack down on opioid production.
And JP Morgan's top strategist, Marko Kolanovitch calls on traders to fate stocks and bonds for commodities.
Let's start with a roundup of our top stories.
Brittie Sunach is appointed the former Prime Minister David Cameron as Foreign Secretary in an extraordinary cabinet reshuffle after a day of high drama and downing Street. Cameron takes over from James Cleverly, who's now Home Secretary after Suella Braverman was sacked. Speaking at the Lord Mayor's Banquet in the City of London, Sounach so to put a positive spin on the changes.
We've delivered one of the most significant years for British foreign policy in recent times. That's due in no small part to James cleverly and I'm pleased to have appointed a new Foreign Secretary who will build on everything that we have achieved in the last year.
Surprise return of David Cameron is a gamble for SUNAC as he tries to overturn a twenty point deficit in the Polls. Labour says Cameron's been brought back as a life draft for the Prime minister. However, Conservative Peter Michael Haseltein says the decision will quote put to bed the right wing lurch of the Tory Party.
Well, the shock decision to bring back David Cameron has conservatives from across the party telling Bloomberg that they're now on shore of sunac's political direction. Cameron was subject of a controversy in twenty twenty one when it emerged that he had aggressively lobbied the government on behalf of the now defunct Green Silk Capital. However, Cameron notably swerved the subject when asked about it after his appointment.
Well, I think all those things were dealt with by the Treasury Select Committee and as far as I'm concerned, that is all dealt with and in the past, and I now have one job as Britain's Foreign Secretary as part of Richie's Senac's team to try and make sure this country can be as secure and as prosperous in a difficult and dangerous world.
Cameron's previous views on foreign policy may also prove problematic. He was notably warm towards China during his premiership, whilst his support for remaining in the EU led to his resignation after the twenty sixteen Brexit referendum.
Joe Biden is stepping up the pressure on Israel to reduce civilian casualties in Gaza. The US President says the Al Shifa hospital quote must be protected, calling for Israel to take less intrusive action. Speaking to Bloomberg, Israel's economy minister Near Barkat insisted his country is also determined to minimize collateral damage.
And so entering Gaza focusing on the militants that are by the way using the hostages as human shields. It's a challenge, so we're taking our time. You want to make sure that we only hit the militants and enable the people to leave the northern part of Gaza.
Near Barcas was speaking to Bloomberg after AID agencies, and GAZA warns that their work will effectively cease in the next two days due to a lack of fuel.
China and the United States are set to jointly crack down on fentanyl in a diplomatic coup for Joe Biden. Bloomberg has learnt the President and jijingpin will announce a deal when they meet at the Asia Pacific Economic Cooperation Summit tomorrow. The San Francisco mayor London Breed is hosting the summit. She told Bloomberg what the deal could mean.
The resources that are being sent out of China that come into either the US or Mexico are cut off to the fullest extent possible. That we work together in order to ensure that this deadly poison that is killing people in San Francisco in significant numbers and all over the country, that we're able to combat this to stop it.
Breeze City is one of many devastated by the drug. Republicans have made the Biden administration's failure to crack down on fentanyl a campaign issue.
US Treasury Secretary Janet Yellen is taking aim at Moody's pessimism on the American economy. The ratings agency shifted its outlook on the US Triple A credit rating to negative, citing budget deficits and political instability. The response from the American government's top financial official didn't hold back.
This is a decision that I disagree with. The American economy is fundamentally strong, and treasury securities remain the world's pre eminent safe and liquid ACCID Johnett.
Yellen's comments come despite Moody's being the only major ratings agency to still give the US a top score fit down Grater the government earlier this year and the SMP in twenty eleven.
One of Wall Street's most respected strategists has warned clients against investing in the stock market. Bloomberg's tiwa Adebayo has more.
JP Morgan's chief market strategist, Marko Kolanovich says investors should ditch stocks in favor of commodities. A client note reveals that the bank is staying underweight in equities in favor of cash and commodities. The JP Morgan strategist is using a cut in bond allocation to fund an increase in commodities, where he's most optimistic on energy. Klanovitch believes that equities will soon become unattractive as the Fed's higher for longer
strategy continues. The note comes as Bloomberg Economics says it expects today's US inflation report to show slower progress towards the Fed's two percent target, keeping the central bank bias towards more tightening. In London, I'm tiwa Adebio Bloomberg Radio.
Now to the politics in the UK, which she soon act brought back former Premier David Cameron as the Foreign Secretary. The shock move bringing a baut the leader who called the Brexit referendum but campaigned against leaving the EU, has led conservatives from across the party to question at Sunak's political direction. Joining us now for more is Bloomberg's EMEA News Desk Managing Editor Adam Blenford. Good morning, Adam, Thank
you so much for your time. There is a long list of questions that many journalist, perhaps some MPs also have for David Cameron on Brexit, China, Libya and lobbying. Is Cameron going to be bogged down justifying his own legacy?
Good morning, Caroline. Well, journalists will of course ask the questions.
As you said, there are.
Several topics, but that the past is that Sinak and Cameron will very much want to look to the current situation.
The media will no doubt focus on those perhaps unfinished bits of business from David Cameron's past, but there is plenty going on in the world today, as we all know every day, and so the intro for the UK Foreign Secretary is exceedingly long, ranging of course, from the ongoing wars in the Middle East and Russia's war against Ukraine to relations with China, which will be complicated by perhaps Cameron's ongoing and previous links with the country that
perhaps could be the most interesting and most thorny of the issues that he's facing. Brexit is and remains a bit of a lightning rod for division, but it is something that has now faded slightly into the past. Certainly the rights and wrongs of whether we call calling the referendum on how it went is now does feel not?
Does it not? Quite?
Quite a long time ago? So it would be very interesting to see. Of course, not long ago Richie Seen posted himself as the change candidate, and then of course he's brought back David Cameron to how much can David Cameron bring the change the Foreign Office.
Well, it was, as you say, Adam, quite the surprise when we first learned about this yesterday. Let's take a listen to some of the coverage as David Cameron emerged outside Downing Street.
I was not expecting.
Okay, what we've just seen would mean a place in the House.
The Foreign Secretary could.
Be David Cameron, Lord Cameron Foreign Sector Camp, can it?
Well, that was coverage from Sky News as David Cameron emerged as the Foreign Secretary. Adam, what does this show about Rishie Sunak's leadership that he's made this decision to bring back David Cameron. Former Cabinet Minister Reese Mark raises the issue of the Conservatives being in danger of losing votes to the refeign Party.
Sunak will of course portray this as him being strong. He will of course show this as his attempt to make it clean break with what was becoming a distraction the the the policies and public statements of Suella Bradman and her her pushing back against the Number ten's authority. But you're absolutely right bringing back somebody who's who's had his time in the public eye, was a divisive figure in his own way and certainly doesn't look directly completely
to the future. It's it's already dividing the Conservatives, or at least some of the right more right wing media are pretend attempting to say that it's dividing the Conservatives. The Daily Telegraph this morning says that the Camera's appointment is opening up a backlash and threatens of backlash with Entry Breggs, a teer MPs and a backlash from the right. And so there's debates around that you're right to highlight Jacob Briece Mobb, but the proof, as they always say,
will be in the pudding. You know, the Reform Party might be prompted to stand more candidates in a general election which is coming up in the coming year, and it perhaps changes a little bit of the electoral calculus.
How does Cameron, the old Etonian former Prime Minister who opposed Brexit, how does he speak to the red wall, although as protector it's not particularly his job, but in terms of the Conservative Party as a whole, perhaps he could hold He could shore up support within the southern Conservative constituencies in the south of England where they've been under pressure from the Liberal Democrats and they've lost quite a significant number of by elections in recent times, so
it's a really interesting, really interesting prospect.
Yeah, it certainly is Cameron back after being away from frontline politics for seven years. Of course, it means no women in leadership roles in government right now, not the big four most senior positions in cabinet. Totally fascinating. Adam, thank you so much for your time this morning. Bloomberg's EMEA Newsdesk Managing Editor Adam Blendford.
Well, let's turn to the markets next and JP Morgan Chase Stratus. Marco Kalanovitz continues to see risks in the stock market. He's in recommending investors fade this year's rally, seeing equities reverting back to a quote unattractive risk reward as the FED set to marine higher for longer. Joining US stats Scott Spinberg, Television niker Anna Edwards. Morning to you, Anna, Why is Marco Klalovitch turning outative stocks?
Good morning, Stephen and Caroline. Yes, he's talking about fading this rally, And just to paint a picture for radio listeners during October that was a terrible month for US stocks and the November's been pretty good. So we've been seeing this bounce taking place in stocks, and he's saying, you fade this rally. He gives a whole host of reasons, and I'll briefly mention some of them. The FED staying higher for longer is one of them. So higher interest
rates from the Fed. There are divided opinions out there about that, but he sees higher for longer and that puts pressure on any business model that relies on low interest rates. He talks about profit expectations being too optimistic, businesses losing their pricing power. That's the other side of course, inflation coming down. We've seen inflation coming down in lots of geographies, and the other side of that is that companies aren't able to achieve the margins they've previously made.
And then there's a couple of arguments he makes that are to do with market dynamics, if you like. One of them is momentum strategies, which basically means computers that spot what was happening and say, well, that was happening, maybe that will carry on happening, and just buy that stuff. So he says that a lot of the rally that we've seen in November has been driven by these momentum
strategies and shortcovering another market dynamic. And so as a result of all of that, he says, fade this stock rally.
Really interesting. He's got a number of points of why that should be. But Klonovitch himself is well known for sort of making these significant Cause what's he been saying about markets.
Up to now?
Yeah, so JP Morgan Chase strategist. This is Marko Kolanovitch, much quoted in Bloomberg News copy and by other investors watch closely by their investors. He was one of Wall Street's biggest optimists during twenty twenty two, and that didn't always work out so well for him. He reversed his view on many of those calls last year when they weren't working out. And he's cut his equity allocation actually in mid December, in January, in March.
And in May.
It's all of that due to the deteriorating economic outlook this year. So he's already been sort of taking a knife to his equity allocation, and here he is doing it a little more by suggesting we fade this at this current rally, so.
Reducing exposure to stucks, but more optimistic on oil.
Why is that, Yeah, absolutely, so overweight then on commodities and oil is a big part of that. Also overweight on cash, So the oil side of things. He says, we've seen a recent pullback in oil prices. Of course they spiked up around the tensions in the Middle East, but they've actually pulled back a little bit, so he sees potential for them to rise. He sees oil, as many people do, as a geopolitical hedge. So it's come off a period where it was used as an inflation
hedge for many people. So if you're going to be hurt by inflation, on the one hand, you might benefit from the higher oil price. Well, here he is talking about it as a geopolitical hedge, So geopolitics might play bad for you for many of your assets, but it might be that oil prices benefit and'suggesting that that could be an area of strength. He also says overweight cash. But there in mind, cash isn't what we think of cash.
When they don't mean boxes under the bed, they mean they mean in bank accounts, in money market funds, in short duration treasuries, So cash and cash equivalents things that are easy to access.
Okay, Anna Edwards and your boxes of cash, thank you very much for joining us. Thank you Ray this morning into of course, that we're having that conversation on a day when market's very much focused on the USCPI report due out later on, again expected to show progress towards the federal reserves two percent targets Bimberck Economics. They'll sees
the Fed keeping its bias towards more tightening. So we're looking at the year on year rate being unchanged at four point one percent according to our economists, but the end of the food excluding food and energy core number being zero point three percent games for the second straight month in October, So the downward trajectory being maintained. But this this issue of what it actually means and whether it kind of changes the game for the FED doesn't like this print is expected to do so.
No, but the year on years of slow grind lower is perhaps a good thing. Look after all of that sort of serious politics and markets chatter, I do think that we've got a point to your attention to possibly the best read on the Bloomberg terminal. How much do you think you'd pay for a vintage Ferrari race car?
Oh well, I think if I was in New York yesterday, I'd be much poorer this morning anyway. By the sounds of things.
Nine on fifty two million dollars at auction for nineteen sixty two Ferrari. It's certainly a very special one.
Special because it actually raced in the twenty four hours of Aman race in nineteen sixty two, which is part of kind of Ferrari's legacy when it came to their racing team as well. So that's it's one of these very particular gto examples that was used in one of their and one of their races too. This is Bloomberg Daybreak Europe. You're morning brief on the stories making news from London to Wall Street and beyond.
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