Good morning. It's Thursday, the seventeenth of August in London. This is the Bloomberg Daybreak Europe podcast. I'm Stephen Carroll. Coming up today. FED officials suggest inflationary risks may drive further interest rate hikes in the US. Our reporting finds that China's housing slump is much worse than the official data would have you believe, and Location Location revaluation. London's luxury home sellers are cutting asking prices to keep deals alive.
Let's start with a roundup of our top stories. Federal Reserve officials believe further interest rate rises may be needed to bring down inflation. The minutes from the Central Banks July meeting reveal that policymakers see quote significant upside risks to inflation, which could require further tightening. Former US Treasury Secretary Larry Summers agrees.
I kind of would guess that these higher long term rates are with us to stay, and if I head to bet, I think i'd bet that they're more likely to go higher than to go lower. And I think in general, markets are going to have to adapt to that reality.
While Larry Summers agrees with Fed officials, cracks in the fomc's consensus view emerged at the July meeting that the decision to hike was unanimous. Two policymakers said they favored leaving rates unchanged or could have supported such a proposal. The downturn in China's China's housing market maybe what much worse than official statistics reveal. Figures from property agents and private data show existing home prices falling at least fifteen
percent in prime neighborhoods. That's much higher than the six percent drop scene in government data. But Bloomberg's China economist David Shoes still thinks Bejing's growth target is achievable for this year.
We still think China got achieved the five percent GDP growth target, but it needs more policy to support if we want to achieve it. That that problem. I think that is one of the reasons why we have seen the so many boundaries to a China's gross forecast.
As David Chu suggested, there not everyone agrees with his outlook. Morgan Stanley has now downgraded its China growth forecast. The Investment Bank now expects GDP to rise by four point seven percent this year, down from an earlier projection of five percent. Returning to further news from China next, as we see China's mounting property woes coming as the financial
conglomerate jog Xi announced plans to restructure its debt. Bloomberg has learned that the shadow bank, whose liquidity crisis has faned fears of contagion, has also hired KPMG to conduct an audit of its balance sheet under the Radar Group, dub dubbed China's Blackstone by some local media, also says it will sell assets to repay investors after a string of missed payments. What's a breaking news this air and BA Systems has agreed to buy Ball Corporation's aerospace division
in a five point six billion pound deal. The takeover comes is the largest this year by a British firm. The news comes as a global security threats spur a deal making rush that's defying a broader drop off in m and A. So that deal five point six billion dollars from BAE Systems. Argentina's leading presidential candidate, Javier Milley, says he plans to close the country's central bank and
dollarize the economy if he's elected. The radical libertarian candidate has told Bloomberg he'll make every effort to avoid a default by slashing public spending if he wins October's vote. In an exclusive interview, Mille compared printing currency to theft.
Stealing is wrong, and senior ridge is nothing more or less than a swindle by politicians against good people. Therefore, let's say, if we consider that stealing is wrong, one of the greatest thieves in the history of mankind is the Central Bank.
Argentinian presidential candidate have Mille there, speaking through a translator. He went on to say that if elected, he would freeze relations with China and pull Argentina out of the mercos Or trade Block. The former Labor leader Jeremy Corbin says the party will probably win the next election, but not because of ker Starmer's policies. Corbin told Bloomberg's UK
Politics podcast the party had become too timid. Here's what the former Labor leader had to say when we asked him if he thought Kier Starmer would make a good prime minister.
What makes a good prime minister? I think somebody who listens and unites the party is a good idea. I think somebody that is committed to redistribution of power and wealth would be a good idea and I would love to hear Kit Stamus say something about those issues when.
You can hear that full interview with Jeremy Corbyn on Today's UK Politics podcast. And London's wealthiest home sellers are cutting prices to keep deals alive. Bloomberg James Wilcock has more.
Are you looking for a good discount? Well, if you have more than five five million pounds on hand, London's property market might be for you. Price productions on the most expensive homes have nearly doubled this year. The data from Lonrez shows borrowing costs and economic uncertainty are hitting the market hard compared to twenty twenty two in London. I'm James Wilcock Bloomberg Daybreak Europe.
Those are your top stories. Well, let's turn some of the stories that caught aray this morning and Bloomberg has It's my favorite time of the month when Bloomberg publishes the Breakfast Index for the UK, which looks at the various prices of the components of a full English breakfast, and it's actually become cheaper for only the second time since it started measuring the cost of these ingredients. That adding to the inflation and story that we've heard so
much more about this week. That inflation print the core number. Of course, it excludes food coming in harder than expected for the month of July. But this index adds up the price of the components of a fry. But if you were feeding quite a lot of people, it's the full packets of everything involved. So the overall cost fell by twenty percent in July to thirty five pounds and
fifty eight pence. It's still well above where it was a year ago, and the total price was also lower in May, but it includes things like sausages, eggs, bacon, bread, coffee, et cetera. And actually coffee and milk are the two elements that saw the largest fall in price a month on month as well. So that is the latest from Bloomberg's Breakfast Index. Let's dig more into what we learned
from the Federal Reserve minutes. Next officials seeing the risk that a persistent inflation may require further interest rate hikes. Our chief rates correspondent Garfield ronalds is with us for more. Garfield, how seriously should we be taking these signals from officials about an upside risk to inflation and the possibility of more interest rate hikes.
Well, I think we do need to take them, You're pretty seriously. Even as inflation has markedly cooled down and the Fed has expressed satisfaction at that, there's still also been stressed that inflation remains too high and that they see the biggest risk as being a revival in inflation rather than a risk the economy will tip into recession. Part of that's the data too. Even as inflation has
come down, jobs growth has stayed strong. We've had a series of US economic indicators coming in robust in and of themselves, and more robust than expected. So that expectation that five percentage points on and plus of rate increases over the last eight months would lead the US economy to stall is not coming true. And the flip side to that for the FAIR is that while if economic activity is remaining strong, we have to be vigilant to make sure that doesn't lead to inflation.
There was some signs that the consensus around the FMC table was starting to fray, perhaps not in surprise and giving the complexity of the economic situation, but should we be listening out for more Perhaps signs of disagreement among policymakers when they meet in Jacksonville next week.
Well possibly, I mean the key tension within the Fed and also outside of the FED for markets, both bonds and stocks, is is okay once they stop hiking rates, and even the most hawkish members are saying, you know, one or maybe at most two hikes and that'll be it. They'll be done absent a really astonishing revival inflation. Then the tension becomes, well, how long do they keep them restrictive? They've said policy is restrictive, They said policy needs to
be restrictive for some time. Well what does some time mean? And what could lead that time to be shorter or longer? Obviously that's obviously where you're going to get a dubbish versus four spectrum within the Fed. And you know, the key thing is going to be where's Powell lie on this spectrum? Where does Williams from the New York Fed stand some of the other heavy hitters. How likely is it that an extended period does really end up being a very extended period for strengthed rates.
Looking at the market reaction to this, yields pushing even higher again this morning, particularly interestingly at the long end of the curve as well. What should we be taking away from the market reaction to these minutes.
Well, I mean the market reaction is also in some ways a bit nuanced, in some ways not. Yeah, the most obvious trigger is that, you know, the FMC minutes with the latest spur for traders to reduce their expectations for imminent FED rate cuts. So that's a burden for the whole market. Even beyond that, the Fed was also signaling it's not particularly interested in calling a whole quantitative tightening the reduction of its balance sheet. That's bad for
the long end. And there's also that underlying your message from the Fed, the economy is going really well, so well that they might have to raise rates further. Well, that's a far cry from the economy crashing into recession by the end of twenty twenty three. That's been the base case for a lot of bond bills for a
very long time. So doubts about how soon you get a recession feed into doubts about whether you really want to buy treasuries now with ten year yield, say at four point three percent, you thought four point three percent was as high as they were going to go, well, maybe they go high at four point five percent or Larry Summers is saying four point seventy five percent on average. So if they are going to go noticeably higher from here,
it's actually not a great buying opportunity. It's another opportunity to end up with losses, which bond investors say. We have had a lot of sort of opportunities over the last couple of years.
Garfield, Briefly, if you wouldn't mind, I just wanted to ask you about another event that we've had on markets this morning in Asia and this government bond auction in Japan. You and your colleagues are applying a lot of adjectives to it on the market's live job, awful, miserable week. How bad was this.
Well, it was pretty shocking. You know. The tail was the longest since nine ninety seven's that's the gap between the average price and the lowest price, So that's showing that you're at the margins. This was a very, very tough sell. It's a bit of a struggle to put it away, and that is tribute, I think to you know, the general concerns about bonds and about whether boj is going to go and of course you're talking about at the margins. You know, the JGBS the lowest yielding debt
out there. So we're in an environment with demand is fragile for bonds. That should be one of the areas that's cracking. And you know this is a sign that it is and that you even still strong bojay purchases can't prop up the Japanese bond wagon.
Garithiad Reinald's chief rates correspondent, thank you up next to Sinak sticks with a triple lock, and Franz says, bonjour to more millionaires.
Now the paper review on blue Bird Daybreak Europe the news you need to know from today's papers and Bloem.
Brixley and Gerrins is with us in studio for more lee and let's start in The Guardian. The headline there Sinac pledges to keep pension triple lock despite signs of extra ten billion pounds cost.
Yes, indeed, so Rishie Sunak is committed to raising the UK state pension in line with the nation's triple lock, despite it proving increasingly expensive. The Prime Minister was speaking to I TV yesterday. Now The Guardian says the policy means pensions rise each year in line with whichever is
the highest, so wage gains inflation or two point five percent. Now, annual earnings growth has picked up and was running at eight point two percent including bonuses in the three months ending June twenty twenty three.
We've got that data.
Out on Tuesday and actually stood at seven point eight percent excluding bonuses. So that looks like it's going to be the highest economic key that they're going to have to raise that pension to. And basically the annual uplift is something that Rishie soon access. He's comfortable with. Its important,
it's going to be carried out. But Stephen, the state pension costs a taxpayer one hundred and twenty four billion pounds this year, and like I said, is on cause to raise that further amount in April in line with wage growth we got.
I mean, it's yet again something else pointing to the importance of the next set of data that we get, because it will be the next set of earnings data and the next inflation print that will give us the bay sine of which will be higher. And at this stage, as you say, wage growth looks like it's going to be higher, but we're we're ready for surprises, as we always are with UK data. At the moment, I.
Think we're absolutely one hundred percent ready for surprises. Like I said, it looks like that at the moment, but we know before the Bank of England makes a decision on the twenty first of September, we get more important data out.
Yeah, let's go to the Telegraph. Next lean France overtakes UK with the number of dollar millionaire residents.
Well, well, well, Britain has dropped from fourth place to sixth in the Global Wealth Survey and France basically knocking us out of the top five countries with the biggest number of dollar millionaire residents. And they've taken the spot behind America and China. So France really climbing the ladder there, and it's leap frog Britain as well as Japan and Germany. So there's two point eight million an adult sitting on assets in France of more than one million dollars. So
some experts say that basically it's a luxury industry. We've spoken so much about Alvier, mate, haven't we. Bernard, Oh no, he's a chimmin and the CEO and they've got brands like Louis Vauton, Christian Dior, Tiffany Javonci. They've been doing a really well.
This is Bloomberg day Break Europe, your morning brief on the stories making news from London to Wall Street and beyond. Look for us on your podcast feed every morning, on Apple, Spotify and anywhere you get your podcasts. You can also listen live each morning on London Dab Radio, the Bloomberg Business app, and Bloomberg dot Com. Our flagship New York station, is also available on your Amazon Alexa device. Just say
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