Good morning. It's Tuesday, the eighth of August here in London. This is the Blueberg Daybake podcast. I'm Caroline Hepki.
And I'm Stephen Carroll. Coming up today. UK politicians hit back at HSBC over a week on China comments.
Maloney's surprise, Italy's government agrees a new tax on banks extra.
Profits and a shock exit at Tesla, the electric carmakers CFO quits after thirteen years in the job.
Let's start with a roundup of our top stories.
UK politicians have rounded on HSBC after the bank's head of public affairs criticized Britain's China policy. Former Conservative Party leader in Duncan Smith says Europe's biggest bank has an awful lot to answer for. But former Business Secretary Vince Cable says the HSBC executive had a point when he said the UK was weak for following the US position on China.
I think he does, yes, I mean a very good example of it. And one eyed personal who was involved in government is the issue of Huaweh. Effectively, the Americans said no and we had to cave in, deferring accessively to pressure from the United States. It's unhelpful to the UK and not in our interests.
And you can hear that full interview with Vince Cable on the Bloomberg UK Politics podcast Foreign Tacatory James Cleverly. Meanwhile, it's currently trying to rearrange an official visit to China after it was postponed from July.
Now, China's exports fell for a third consecutive month in July. Bloomberg's Brian Curtis has more from Hong.
Kong export slump fourteen and a half percent from a year earlier. That's the worst decline since February of twenty twenty. Imports contracted twelve point four percent, more than double estimates now left a trade surplus of eighty point six billion dollars for the month. It's a double whammy for the economy.
Global demand is weak and so is domestic consumption. There's a plethora of issues here, sagging business and consumer confidence, a deflating property market, and a government that is wary of large scale stimulus in Hong Kong. Brian Curtis Slomberg Day Break.
Europe turning next to Moodies, which has downgraded ten US banks as rising interest rates continued to squeeze lenders. Firms that had ratings caught include Capital One, Bank of New York, MELON and PNC. Financial Moodies pointed to hire funding costs, potential regulatory capital weaknesses, and rising risks tied to commercial property loans as reasons for the downgrade.
Now sticking with banks, the Italian government has approved a surprise charge on extra profits to fund tax cuts and support mortgage borrowers first time mortgage borrows. In particular, the financial charge was slipped into a package of other measures, including the grant of additional taxi licenses and foreign investment. Prime Minister Georgia Maloney's unexpected move could bring over two
billion euros into state coffers. Italian bank profits surged in the first half of rising interest rates boosted income from lending.
Here in the UK, wet weather is damping retail demand as people see no reason to restock their summer wardrobes. The latest figures from the British Retail Consortium show an increase of just one point five percent in the four weeks to the end of July. That compares with growth of two point three percent in the same month last year. At the BRC's director of Insight, Chris Hamer says spending was depressed by damp weather.
Fewer shoppers are going onlined by their goods. They're returning to the stores, but the wet weather from in July really put shoppers off buying clothing and appliances to keep cool like we saw last last year.
That was the BRC's Chris Hamer speaking there I. Meanwhile, food sales were brighter as consumer confidence recovers from its lowest point last summer. Sales rose by eight point four percent over the three months to July, above annual growth of seven point eight percent.
Now, Tesla's chief financial officers is stepping down after thirteen years at the electric vehicle maker. Zachary Kirkcorn has been a prominent voice for the company with shareholders and just one of four executive officers at the firm. Kathy Woods Arc Fund is a major investor in Tesla. Speaking to Bloomberg, she says she expects a seamless transition.
We will miss him, but his successor has been with Tesla right underneath him since twenty eighteen, so he was put through the fires. Remember in twenty eighteen nineteen, many analysts were saying that Tesla was going bankrupt, and so he's been there, He's gone through the fire, and you know, it's a tough job.
It's a tough, tough job.
So I guess thirteen years was a really good run for Zach.
Despite Kathy Woods comments, the surprise shakeup has raised new questions about succession in the top ranks of Elon Musk's company. Tesla shares fell one percent in New York after the announcement, but Musk maybe too concerned. The stock price has more than doubled so far this year.
I was sticking with news from the world's richest man. Elon Musk's brain implant company, Neuralink, has raised two hundred and eighty million dollars in new funding. The startup aims to develop a digital device which can be inserted into human skulls and interact with the brain. Neuralink recently received approval from the US Food and Drug Administration to begin conducting human clinical trials. Mosk hopes the implanted chips will be able to augment brain power and allow humans to
compete with AI. Those are some of our top stories on the program this morning.
Absolutely, the Q and A that was held between the Bank of England's chief economist Hupil and MPs yesterday is
quite interesting. I think it'll be quite striking here in the UK, where we've become to some extent accustomed to very stiff competition amongst the supermarket retailers, and a lot of the time in a falling price or price cuts have been particularly notable, not of late, of course, given a food price in inflation, but the Bank of ing, this cheap economist is saying, effectively, we might see a slowdown in the rate of food price inflation, but we're
not going to see cuts anytime soon. I think that was the most remarkable thing out of that Q and A.
Yeah, I mean it's a Hugh Pill has quite frequently had to deliver quite on popular messages from the Bank of England and on the broader outlook for the UK economy as well, and this is yet another one, is that he's essentially saying prices have been going up and they're not going to come down.
Yeah.
Look for food price inflation is at seventeen point three percent in June. He's talking about the Bank of England expecting a faulter around ten percent or below by the end of the year that is ten percent food price inflation. So yeah, it's still pretty staggering story for the UK.
Yeah, very cold comfort there from those comments from Hugh pill. Let's get more now on the controversy around the comments by HSBC's head of Public Affairs. But the UK's approached relations with China, despite shared cauper Coles saying that his comments were of a personal nature, they've drawn criticism from some prominent politicians. Member Exchames Wilcock is with us now for more on this story. James, good morning to you. So we heard from Ian Duncan Smith a little bit earlier.
He's among those as criticized HSBC. What have these politicians have been saying?
Well, I mean so a lot of China Hawk's Conservative Party. Ian Duncan Smith in particular has called this kind of the worst kind of apologism because this AHSBC employee was a former diplomat and he's saying that in many ways, this is kind of putting aside all the human rights atrocities that China has committed. And Ian Duncan Smith is won to make that point because since twenty twenty one he has been sanctioned by China for speaking against human
rights abuses Indian Jang. So for him, he sees this as this kind of view of a large international bank that is putting aside these kind of issues with China for the sake of its bottom line.
Yeah, okay, so Ian Duncan Smith. Yeah, and shared Coper Coles. I mean he's had jobs, you know, in the British diplomatic service in place like Saudi Arabia and Afghanistan and lots of interesting places. The UK Politics podcast yesterday we spoke to the former Business Secretary Vince Cable. He's a former Liberal Democrat leader of course, who took quite a different view.
Yes, it was a fascinating to you, Caroline, because Vince pointed out that take Huawei an example where we as the UK have to make difficult decisions. We look at the risks of weighing up involving with someone like China, we come to a compromise that Vince said it is as someone who was involved in that decision. The US then came in and said, actually that's a very big
natural securitist and then we stepped down. So he say, actually, in his view, the former diplomat who works at HSBC has a point and that we as the UK need to be able to come to our own decisions about these things, look at the risks and make a view. And he referred to the sort of comments been as paranoia and this argument that we are looking for spies under our beds everywhere. So it's this argument about weighing
up the risks, the benefits and costs. And to say, go back to Indougars Smith's comments, whether these are human rights abuses or business decisions.
Now these were as Sherid Carbercils has put as comments of a personal nature, but nonetheless it's dragged HSBC into this controversy. What does it mean for the bank?
Well, I mean this points to the international nature of ahs of PC and the difficulties that any international bank faces and trying to balance these kind of risks. HBC is located in London, Europe's largest bank and at times has been a big hero for Britain. I mean, look at SVB just this year it was the bank riding to the government's rescue and bearding the things out. And it's got massive European growth compared to its European peers, but that growth is often tied to its massive age
of success. It's underwritten by the dollar by the US, so it has to balance all these competing forces as it delivers for its returns. So it's shelled as in Europe, whilst those then balancing the countervailing political pressures it gets from European politicians.
Yeah.
Absolutely, an immensely difficult position and sort of nuanced one that they have to hold. James, thank you so much for being with us this morning and discussing. Yeah, all of the fallout around these HSBC comments that happened over the summer in what was a closed door meeting for which this particularly executive apologized, I mean he apologized you
for any offense that he had caused. And also you did try to say that these are his personal views rather than those either of the bank or actually of his other significant role, which is as the British as the chief of the British China Chamber of Comments, I think.
The Business Council. Yeah, and HSBC has also said in a down statement again that these were the personal views of mister kraiber Cole's too as well. Up next, METO shifts towards commercial AI and the era of ultra cheap stuff comes under a threat.
Now the paper review on blue Bird Daybreak Europe.
The news you need to know from today's papers.
Fully Masie and go and joins us. Now for more. Let's start with the Financial Times Leanne this headline Meta disbands protein folding team in shift to Worldward's commercial AI.
What's this about, Caroline, Good morning to you.
Yes, this is an exclusive from the Financial Times, and they're saying that Meta has axed this team that was using artificial intelligence to create the very first database of protein structures. So a group of about a dozen or so scientists were employed by Meta on a project.
Called esm fold.
Let me just give you a brief outline of what it does, which trains basically a large language model capable of processing vast amount of biological data to predict to predict protein structures. It's a bit of a mouthful. I'll get there in the end. But those involved in the team said the scientific project was really in place to develop new drugs and treatments when it came to our health and look at different structures that we do have. But the move has actually been canceled, according to the
Financial Times. And basically what they're saying is this shows the desire of Meta to now abandon this research and really concentrate on AI projects that will generate bigger revenue. And as we know, so many of the tech companies are investing hugely in artificial intelligence. And the CEO Mark Zuckerberg also said earlier it's a year of efficiency for Meta. We do know that Meta has undergone significant restructuring in
recent months. That has been something that the company has been focused on.
But now we know they've acced this.
Massive team that's behind these protein protein structures.
Yes, really interesting story there from Metal. Let's go to the Telegraph next. Lee on the energy price cap keeping bills artificially high. This is warning from the think tank.
Yes it is indeed so the center right think tank, the Center for Policy Studies says the government is effectively set the market price for energy, and the new report claims off gems energy price cap is actually costing us money and it's also driving up inflation. So what they want is minister ministers to basically at the limits and allow market rates to dictate prices.
So they are arguing that the price.
Cap prevents us everyone the people from accessing cheaper deals.
They're keeping it high.
And the cap sets the maximum price energy companies can charge households per unit of energy, and it is based on the wholesale cost of power.
But the thing is it's only.
Reviewed every three months, so basically, if there's a change in the wholesale cost, the households aren't getting the benefit of that. And economists are blaming the price cap for prolonging the pain that we're seeing in Britain because it just takes too long for the wholesale price changes to really filter through into home and for homes to benefit and also have that extra money to spend in the economy.
So really criticism from the Center of Policy Studies Caroline and Stephen about the energy price cap keeping our bills artificially high.
Yeah.
Absolutely, Look, this was always inevitable, wasn't it. I mean, this was the whole argument that we had at the beginning when energy prices suddenly soared, is that the price cap and the review that off GM does the regulator in the UK, it only happens every few months, as six months, and I think they then brought it down to three months in order to try to overcome this issue. You know that the prices were you know that it's
a delayed effect basically of everything. So now you know, on the way up we had it and now we have it on the way back down as well when it comes to prices. Okay, the Wall Street Journal has the story the era of ultra chiefs cheap stuff is under threat.
Under threat, Yes it is, Caroline.
Just imagine we've become so used to things so as well and consumers, we've almost become accustomed to inexpensive goods. And this is basically what the Wall Street Journal is saying. It's saying factories across Asia are now really struggling to attract young workers. So the disappearance of the ultra cheap Asian factory labor is emerging as the latest test of the globalized manufacturing model. I find this really fascinating what
the FT's saying. And basically, in response to this crisis, to try and attract young people into the factories, you know, factories across Asia have had to do lots of different things.
They've had to increase wages.
They've had to also improve cafeteria areas to attract people free coffees, and build kindergartens within the company's for children so that their parents can come to work and the knock on effectedness. As the toy and game maker has Bro they are of saying that they shortages in Vietnam and China, they've had to push up their costs of goods. The Barbie maker Mattel, I'm sure Barbie's really back in fashion again since the movie.
They also grappling with higher costs, and Nike.
Which makes most of its shoes in Asia, also flagged in June that its product costs have gone up because of higher labor expenses.
This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Street and beyond.
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