Good morning. It's Wednesday, the fourth of October in London. This is the Bloomberg Daybreak EUROP podcast. I'm Stephen Carroll. Coming up today, Rishi Sunac looks to both the Conservative Party agenda back on track as HS two dominates headlines.
And I'm Caroline Hipkett at the Conservative Party conference in Manchester with the latest on what could be the Prime Minister's biggest speech of his political career.
Plus a House divided Republican Kevin McCarthy is ousted as US Speaker by those and his own party. Let's start with a roundup of our top stories. The Prime Minister, Rishi Sunac is today expected to announce that part of Europe's biggest infrastructure project, HS two is being scrapped. It's understood that the Prime Minister will use his speech at today's Conservative Party conference to soften the blow, announcing that some of the savings will be used to boost other
parts of the UK's transport network. But Labour's Greater Manchester Mayor Andy Burnham says the plan is a disgrace.
Do not pull the plug on the North of England. Do not treat people here as second class citizens when it comes to transport because if you do do those things, people here will never forget.
Burnham's criticism has been echoed by both the former Chancellor, George Osbourne and Conservative West Midlands mayor Andy Street, who had this to say when we asked him about the fact that costs of the project have spiraled to more than one hundred billion pounds.
My argument is you do need to have ages too, so that's not really the question, is it. And of course what's been put to the Prime Minister is a proposal which is supported by private businesses, to say let us try to rethink the Lake to the North, but it is still needed to win the investment around the world.
Those comments from Andy Street and others have helped to cast a long shadow over the annual Tory gathering, with HS two a core plank of previous Tory pledges to level up economic opportunities across the country. In the United States, Kevin McCarthy has been ousted as the House Speaker after the Republican hardliners revolted over his compromise with Democrats to avert at government shutdown. Goldman Sachs says the raises the
risk of a government shut down next month. With his successor under even more pressure from those on the right of the party. The move ends a tumultuous nine months in the job for McCarthy, who says he won't run for the position again.
I don't regret standing up for choosing governing over grievance.
It is my responsibility, it is my job. I do not regret negotiating. Our government is designed to find compromise. I don't regret my efforts to build coalitions and find solutions. I was raised to solve problems, not create them.
Despite McCarthy's lack of regret, the latest turmoil as fueled concerns about deepening dysfunction in Washington. The last time the House even voted on removing a speaker was in nineteen ten, and in that case, it survived the test. US job openings unexpectedly increase in August, fueled by white collar postings. The number of available positions increased to nine point six million,
with hiring increasing while layoffs remained low. According to Jolts, the level of openings topped all estimates in a Bloomberg survey of economists. Treasury yields rose to multi year highs, and the SMP declined after the report. Polunteer, the data analysis firm founded by tech billionaire Peter Thiel, has emerged as the top pick for a major NHS data contract. The five year deal could be worth close to half
a billion pounds and focuses on analyzing medical information. Volunteer's relationship with the NHS has been criticized by civil rights and patient advocacy groups who worry about data privacy and the firm's work with intelligence and defense agencies, and the billionaire investor. Ray Dalio says US China relations are close to breaking down. Speaking to Bloomberg's David Weston, the Bridgewater Associates founder warned of the risk of conflict between the world's two largest economies.
US China relationship are in a number of areas on the brink of red lines, so, in other words, these irreconcilable differences, they're right on the.
Brig Dahalio went on to say the breaking point would be if the United States comes out in favor of an independent Taiwan, that he said would be quote the equivalent of a declaration of war. Dahalio has long nurtured relations with Chinese officials and previously expressed admiration for some of Beijing's economic policies. Well, let's turn two politics here in the UK, Rishi Sunak facing one of the most important speeches of his career as Prime Minister at the
Conservative Party conference. Later he needs to unite his supporters ahead of an election year after a party gathering overshadowed by questions over the Hyighth Chess two high speed rail link. Karlin Hepker's been following all the developments at the Conservative Party conference, he joins us from Manchester, Carl and great to have you. Good morning. What are the key things that Rishie Sinak is trying to achieve today?
So Rigie Sunac took over from Prime Minister Liz Trust last year when the party was at historic lows in the polling. Remember, of course, the Bank of England had to intervene after Liz Trust's chancellor made a disastrous speech pledging unfunded tax cuts and that sent bondials spiking and there had to be Bank of England intervention to prop
up the pensions industry. Richie Sunac took over. He has managed to stabilize the situation in the month since then with his Chancellor Jeremy hunt this speech, though, the Prime Minister needs to wow MPs and party activists here, not just deliver stability that we've seen in the last few months. Perhaps the sort of speech that we really have not
seen from the Prime Minister so far. He must prepare the Conservatives for the next general election, which is expected to take place perhaps in the autumn of next year. Will he talk about his own personal story, not quite to riches, but certainly a big British success story, imagining to get into an elite private school, go to Oxford, then get into Goldman Sachs, become elected as an MP and make it all the way to Chancellor and then the first British Asian Prime minister that the country has
ever seen. Will he talk about that? So far this Conservative Party conference has been pretty policy light, so big expectations for what we'll get from the Prime Minister today.
What about the issue that has dominated so many of the conversations that you've been having there, Caroline, Are we any clearer now about what's going to happen over the HS two rail link?
No?
Not particularly The Prime Minister spent all of yesterday speaking to journalists. It has been the question that has dominated this party conference. We are in Manchester after all, and the rumor has been for weeks and months, several weeks at least, that there would be the potential of high speed rail to the connection from Birmingham to the city here in Manchester would be scrapped because of rising costs.
The Prime Minister has meant Tuesday telly journalists that he has still not made up his mind on this issue, has not made a decision, even though holding a cabinet meeting it would seem during conference, which is also quite
an extraordinary step. So will we get perhaps a decision on HS two It's possible as part of the Prime Minister's speech and what comes alongside that if the HS two rail line is scrapped or part of it is scrapped, will we hear about new transport projects in the north of England to try to sweeten that blow?
Caroline, The question of party unity has been another continuing theme during this event as well. Is the party because of the discussions that you've been talking about over HS two, over tax cuts? Is the Conservative Party coming away less united from this conference than it went into us Ah.
I'm not sure. It's hard to say whether it's less united. I mean, it's certainly been an immensely difficult few years for the Conservatives, you know, chopping and changing prime ministers through Boris Johnson, you know, Theresa May, Boris Johnson, Liz Tras now Rishi Sunac. That's quite something, totally unprecedented really
in British history. Frankly, having said that, we spoke for example to former Minister and member of the Treasury Select Committee Andrea led Some, you know, incredibly strong about how united the party is. But there are of course signs of division. You've got really open positioning for the leadership of the Tories. Were Rishi Sunac to lose the next general election, particularly, it would seem between Kemy Baide, not
the Business Secretary, and the Home Secretary, Sella Bartherman. But the other thing to mention is that the thing that is more clear is that the US style culture wars, at least the language of those culture wars, does seem very present at this Conservative conference. The Home Sectuary Sweller Bravman got a standing ovation yesterday a speech talking about how toys were calling out the woke politics of labor.
She talked about how politicians have been too squeamish about being smeared as racist in her words by not talking about migration. She talked about the hurricane of migrants that would becoming to the UK. She herself is of Indian origin, her parents migrated to the UK from East Africa. So that has been clear that the language is certainly ratcheting up with the science sectually. Michelle donnellan railing against woke
scientists that got a lot of attention. So certainly some perhaps US style language and that does seem very divisive.
Caroline, the questions around you mentioned they're the Conservative Party conference so far being quite light on policy. You've been speaking to a lot of the business groups over the past few days about what they want to see in terms of policy. I mean, one of the most notable absences, I suppose, given that we haven't had that many announcements.
Well, they want long term thinking, they want delivery, and there is a level of frustration you can detect, and yet also the need to be even handed, you know, you think about the big business lobbies in the UK, the Confederation of British Industry we spoke to this week, one of the export associations we spoke to this week they are, they want to give everybody a fair hearing, but you can sense that there is a question mark about the tone of this conference, which is policy light
and not that enthusiastic. It's not packed. People are walking around the floor here and we were sort of commenting yesterday that it's more the pace of a museum shop, it would seem, or perhaps you know, there's not the excitement that we are perhaps expecting from the Labor Party confidence at the weekend. But all all business people say, you know, they want policy, They want clarity in terms of policy, they don't want to see big changes, and
they want industrial policy to be clear. Certainly the net zero issue is also why a lot of business.
Leaders Yeah, and understandably, I think, given that idea of wanting policy certainty, which seems to have come up as a theme in many of the conversations that you've been having there at the Conservative Party conference. Caroline for now
thank you very much. More from Caroline throughout the day on Bloomberg Radio and of course the Bloomberg UK Politics podcast as well, where you can hear some of the conversations that Caroline has been having with those business leaders, but also some of the leading Conservative MPs as well. Caroline for now, thank you very much. Let's turn to
us politics now. The House Speaker Kevin McCarthy has been removed from his position after a rebellion by hardliners within his own Republican party, plunges Congress into an internal power struggle as it faces key deadlines on avoiding a government shutdown and approving more aid for Ukraine. Let's get more now from Bloomberg's Gill Desis on this story. Great to have you with us. Kevin McCarthy is gone from the position, says he won't run again. Who could replace him?
So there's a few names in mind, Stephen, as we kind of reached this very unprecedented in historical situation, first of all, remember that essentially Congress is kind of calling for resos at this point, will reconvene in October eleventh and ultimately decide who maybe neesked I think the front runner at this point is the second ranking Republican in
the House, that Steve Scalase of Louisiana. At this point, he's got the backing of Matt Gates, who's ultimately the rep who called this vote to oust McCarthy in the
first place. Scleas is pretty popular, but also kind of comes from more of that establishment line of thought that might not be something that's necessarily desired in an incredibly politically tumultuous environment where McCarthy was ultimately ousted with the help of a lot of very Republican hardliners who weren't happy with the government shutdown deal, just the stop gap
deal that he made with Democrats over the weekend. The other thing that's a challenge for Scalise is that he's currently receiving some pretty serious medical treatment at this point. Gates has said that that shouldn't preclude him, but ultimately, you know, it's just a consideration among some of the other options. Here. You've got a GOP whip, Tom Emmer, he's from Minnesota. And then you've also got Alistaphonics. She's a representative from New York who is the GOP's fourth
in command. She's a pretty big, full throated Donald Trump loyalist, though I'm not sure how well that's going to play with some in the Republican Party who are a bit more moderate than you see a lot of these hardliners here. But I think the bottom line here, Stephen, is that this is an incredibly open race.
Which, of course, you know, leads us to think, what's happening to policymaking in the meantime is as Congress now focuses on electing the speaker.
Yeah, I mean, I think that at this point, Stephen, it's pretty obvious that it's going to be very, very difficult to get a lot done. It already was pretty
difficult to get a lot done. I think that, you know, even when you had temporary deal to avert an immediate government shut down over the weekend that was came it as I think a little bit of a surprise to some, but ultimately we only have until November seventeenth to actually get another deal done, and I'm not really sure how likely that's going to be, especially when whoever the new House speaker coming in is they're going to be under
even more pressure, especially from these Republican hardliners, to avoid making any sort of deals that offer up more funding for Ukraine, for example, one of the big points of those sticking points of contention that they have with Republicans or excuse me, with Democrats. So I think that at this point it is going to be very difficult to see any kind of a big shift in governance.
Of course, the looming deadlines that the US government are going to be facing is the potential of another shutdown only just over a month away.
Yes, it's really coming up very very soon. I think that at this point we're going to have to see whether, you know, we actually get somebody in place who's going to be able to strike some of those deals. I mean, even if you look at McCarthy who was able to strike a deal with Democrats over the averting the government shutdown in the short term, it's ultimately Democrats who joined in with the Republican hardliners who oust him from his speakership.
So it's yes, it's a very very tricky line to watch, especially as they said, when it comes down to matters over funding in Ukraine, which could be a very much a sticking point for whatever spending package is ultimately passed. But I think it's just it's a long road to go, and I think it's going to be a really really long six weeks or so before we get to that next deadline November seventeenth.
Okay, Jill Desis, thank you very much for bringing us the late US on that story around US politics. Bridgewater Associates founder Ray Dalio says cash is a good investment of the moment, and that he doesn't want to own bonds right now. He's told Bloomberg that firms that really know how to use artificial intelligence will do well. Ray Dalio has been speaking to Bloomberg's David Weston at the Greenwich Economic Forum.
The US China relationship relations are in a number of areas.
On the brink of red lines.
So in other words, these irreconcilable differences, they're right on the brig So if I was to take let's say the Taiwan issue, it's an irreconcilable issue and so on.
It's right at the line.
The breaking point is if the United States said we are in favor of the independence of Taiwan, that's the equivalent of a declaration of war. And because of our political issues that are now internally, you're going to be likely to push that, because of the fact that many in Congress and so on would say, we will defend Taiwan and world cost then we will give them this, and you could even cross that line. It's my point
is it's right at the edge. That's that we have a chips issue, and we have a technology and sanctions issue.
The reason in World War two war.
With Japan you had the cutting off of the oil and then the sanctioning them taking their payments. So you have a somewhat similar situation. Chips is like oil back then, and it's a very very very delicate issue. You have the geopolitical issue which also is manifest in each of them and so on, supporting the supporting Ukraine, and other geopolitical issues which are also right at the edge.
Neither country wants to go to war.
Everybody's afraid of what that war would be like because it would be devastating economically and politically.
So you will see sort of the postponing.
These issues will remain and probably intensify over the next five to ten years.
But they will be at that edge.
So you're going to see in November there will be in San Francisco the APAC Conference and you will see presidentcy get together with President Biden. But we have a political situation, and so that's it. In China, they are also dealing with a number of big problems. As we're
dealing with our problems, they're dealing with their problems. Those problems are first the debt problem, that has now been allowed to pass through the into the system, meaning you have real estate, and real estate counts for about seventy percent of savings. People put their money in real estate
and about twenty percent of their economy. And there was a bubble, and then that's passing through and that goes down to local governments that we're living on debt and also land sales for real estate purchases, and so that's a structural issue. They need to do a debt restructuring, and debt restructuring is a very difficult thing to do. They can do it, but it's also very politically impactful because those who are you determine whoever's making these decisions
determines who's wealth and how they divide the pie. So you have that going on, you have a move to what president she calls the hundred year storm on the horizon. In other words, he believes there's one hundred year storm on the horizon. That's the sort of things that we're now talking about. And with that one hundred year storm on the horizon, you.
Have a very.
Autocratic in other words, if you don't behave well, you'll lose your head and so on, and that kind of environment, which by the way, in war periods and so on, has been what most countries have moved toward or something, and so that's having an effect on the economy. We have the US China conflict itself, which is affecting what companies do. Do I want to be in China or
do I want to be in Vietnam. That's one of the things that's benefiting neutral countries, so they think, okay, if the Acion countries, India and other places can be a beneficiary of that, where do I want to be? But that's also hurting them. And then of course that we have a world economy which is relatively slow moving.
That affects their exports. So they're going through a very difficult period.
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