This is Bloomberg dabahre for this Wednesday, the seventeenth of May in London. Coming up today, Don't bang on it. Wall Street gets a China reality check, not quite dancing on the ceiling. Biden and McCarthy voice cautious optimism on a debt deal. Paper profits Ubs gets a thirty five billion dollar gain from its credit.
SUEEE takeover closer cooperation on cross channel migration. The CBI looks to rebuild trust and Starmer said we should build on the Greenbelt. Those other stories we're looking at in today's papers, and I'm Leanne Gerns.
Bus lawmakers look to shift the odds on crypto. MP's call for trading and digital currencies to be regulated just like gambling.
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 every way you get your podcasts.
Good morning, I'm Caroline Hitka. Let's go to our top stories. US banks have spent billions of dollars trying to stake acclaim on China's sixty trillion dollar financial market, but a Bloomberg investigation has found that many are now quietly scaling back their ambitions. Bloomberg's Valerie ty Tell has the full story.
Wall Street giants are cooling on the world's second largest economy as they factor in rising geopolitical risk. Goldman Bank of America and JP Morgan are among those cutting exposure, new ventures and headcounts in China. Liz Trust is currently in Taiwan is just the latest sign of the growing friction. The former UK Prime Minister framed the divide as a clash of civilizations.
You here in Taiwan know what the threat is. It's tyranny instead of freedom. It's control not choice. It's arbitrary decisions made rather than proper justice.
Despite Trust's comments on control, China recently moved to allow foreign firms full ownership of financial services, yet that hasn't stopped raids on consultancies conducting due diligence for global investors in London. Valerie Titel Bloomberg Daybreak Europ.
Now, the debt seating talks are ramping up in the US after a meeting between President Biden and the House Speaker McCarthy. The latest round of negotiations will feature a narrower group of people in the hopes that it yields a deal to avert an unprecedented US default. While there is still clear water between the two sides, the President says that he's cautiously optimistic.
We just finished another good, productive meeting with our congressional leadership about a path forward to make sure that America does not to fall on his debt. There's still work to do, but I made it clear to the Speaker and others that will speak regularly over the next several days, and the staff is going to continue meeting daily to make sure we do not befall.
Biden's comments were echoed by Kevin McCarthy, who says that a deal is possible within days, although both sides are still far apart. The Treasury says that the country could default as soon as the first of June if the debt ceiling is not lifted. After ten months of consecutive rate rises, Divisions are starting to emerge between Fed policymakers on when to stop the Chicago Fed President Austin Goulesby to Bloomberg's Michael McKee that it was the strangest business cycle in history.
Inflation is down and continues to make progress. It's not as fast as we wanted it to or we expected it to be, and therein lies the that's thenbe the of the issue of can you get it down more without starting a recession? Because we have a dual landing, we got to look at employment and inflation.
Austin Goolesby is a voting member on the FOMC this year, as is the New York Fed chief John Williams and the Dallas President Lourie Logan. They all say that coming data is going to be extremely important as the central Bank tries to assess if it has done enough to tame inflation. UBS says that its emergency takeover of Credit SUEEE could boost its bottom line by thirty five billion dollars this quarter, as well as the massive accounting gain.
UBS says that it is projecting billions in potential legal and regulatory costs. The booster profits comes from negative goodwill, at which many investors consider an accounting quirk.
So that on UBS and just.
Lastly here in the UK, crypto trading should be regulated like gambling. That's according to the Treasury Select Committee. Blomberg's U and POTS reports.
Now investigating crypto assets like bitcoin should be treated like gambling. That's the view of MPs on the Treasury Select Committee. The Cross party group has strongly recommended the changes for retail investors, warning that cryptos are highly volatile and have
quote no intrinsic value. The proposal comes after a month's long inquiry and Ron's counter to the government stated plan to regulate digital coins like traditional financial services, dated from HMRC shows around ten percent of UK adults hold or have held crypto assets. The reports also criticized the government for spending public resources on supporting cryptoactivities and single out a plan now scrapped by the Royal Mint for an NFT in London. I'm you in pots Bloomberg day Break Europe.
Those are a few of our top stories for you this morning. I also thought that it was quite interesting that the regulator, the FCA, is talking about how many more Britons are in difficulty because of loans and rising inflation. So they've picked out that there are ten point nine million people who have found it tough to meet their obligations i e. Bills and credit card payments, So the number of people struggling to pay those has risen by
forty percent. So the FCA has issued quite a number of reminders to banks to try to treat customers fairly if they run into difficulties. But I think those figures are pretty staggering that so many people now are finding it very difficult in the last three to six months actually to meet their obligations. This is you contrast it to another story that we have on the terminal. The gap between rich and poor countries has widened so much. Given COVID, it now takes twelve and a half million
dollars to be amongst Monaco's wealthiest. Compare that to the US. You just need five point one million to be in the top one percent to make the cut there. But the research by night Frank shows just how much different countries are showing that widening gap between rich and port nations. Anyway, a few stories that I found of interest this morning. Let's move on, though, and talk about Bloomberg's Big Take today, which tackles I think the biggest issue in global finance
and geopolitics today, which is the role of China. Wall Street firms seem to be giving up on any hope of significant inroads into China's financial markets quite remarkable, let alone hoping for any outsized profits. Only two years ago, foreign funds started to call China uninvestable.
But President Shijinping.
Seemed to want to lure them back with market friendly reforms. Now Wall Street seems to be waking up to a souring business climate. China's state owned enterprises dominate in domestic banking, insurance, asset management. Joining me now to discuss is our Bloomberg opinion columnists Shuly ren Sally, Good morning.
Lovely to have you on the program.
You've written in depth about this issue in such interesting ways.
But it does seem that Wall Street is.
Sort of has been nursing this hope about China for a long time, and now they're finally giving up on that.
Do you think that's true?
I think that's largely true. I mean, look at a decade ago, twenty fourteen, right, that was when Ali Baba when public in New York, where the twenty five billion dollars capitalies I was one hundreds and millions of investment banking fleees. So they've been trying to get the China business since then, since basically twenty fourteen, twenty fifteen and it seems like the business is not coming their way,
and it's very unfortunate. Like if you look at like a China's star market, it actually is the world's busiest IPO market right now. I mean, we know us there are no IPOs, but in China this year alone, we see over one hundred deals and they're raising more than twenty five million, twenty five billion in IPO money. But they're Wall Street thanks, They're just not getting any of that business.
But I suppose you know, you see the latest crackdowns on consulting firms now also on capital flows of our online brokerages. I mean you've written a piece recently, you know that seems so prescient. Don't bother investing in China unless you are Chinese. I mean, the difficulties are quite clear, aren't they to foreign investors.
Yeah, Like, let me just talk about like IPO. If you're IPO bans, you have to do diligence right, and the government makes investment bankers personally responsible if the company turns out to be a complete flop. But the kind of companies that go public in China these days are these so called industrial tech companies that do like I mean semiconductors, smart manufacturing and these kind of companies. They can be for due purposes right, commercial and possibly in military.
And it's very hard for Wall Street foreign banks to go in and say, Okay, I'm going to do due diligence, I don't know, facial recognition software or robotics. It's very tough. So basically it's the mainland Chinese banks doing this kind of work.
What does it mean truly to have China now increasingly in its own financial bubble?
I think as long as the presence continues with this industrial push. Basically at this point, the only domestic banks, especially SOE banks, are there to finance this industrial push because for everyone else there is the danger of you know, infringing upon China's national security, security risk or whatever they call it.
I mean.
Having said that, of course, Will Street has spent years in these joint partnerships, but Wall Street expertise isn't needed any longer, not so much.
I mean, some Wall Street banks have done very well, like UBS, they had a joint venture with China for many years, right, and they have done a lot of trade flows through the Hong Kong stock connect. They have done well, But the problem is all these Wall Street banks. They have hired very, very aggressively, so now they have to pair back quite aggressively too. It's not unlike what
we saw with the big tech companies. If you hire to aggressively in the past, when the reality does not turn out as well, you have to lay off a lot of people too.
Absolutely, And last thought, Shirley, what it means for Europe and the UK then, I mean we've largely talked about, you know, the relationship between the world's two biggest players, but there are others, you know. I mean, perhaps in the UK is a minno in comparison, but I mean I think worth understanding. What are the implications then for businesses out of Europe the UK. Europe's tried to position itself differently to the US visa v Beijing.
I mean, Beijing definitely likes Europe more than the US, and they do some of the technologies, especially in Germany, and they hope that they can import some of the technologies. But I do think Europe is working a very tight rope. UK, for instance, has been talking about, you know, warming up its relations with Hong Kong in recent weeks, right, But
me being based in Hong Kong. I just feel like the Hong Kong economy is working closer and closer to China, and we don't really need that much of collaboration with UK anymore.
Okay, Suley, thank you so much for being with me this morning. Okay Salient points Blomberg Opinion Commerce. Judy ran on our big take then today tackling well one of the biggest issues in global finance and geopolitics, the relationship between the US and China when it comes to a big banking business. Coming up next, closer cooperation on cross channel migration. The CBI looks to rebuild trust and kiss Starmer says we should build on the green belt.
Now the paper review on Bluebird Daybreak Europe the news you need to know from today's papers.
So the Guardian has the headline.
The CBI points at Chief People Officer as it aims to quote rebuild trust. Leanne Goens is with me this morning, so we followed, obviously, the travails of the Confederation of British Industry, the biggest lobby group in the UK.
What's the latest, Yes, indeed, Carolineton, we'll start off with that one at the moment. So Elizabeth Wallace, a former head hunter for back Rock, has actually joined the Confederation of British Industry as the Chief People Officer.
As you just.
Said, now the scandal hit CBI has made this appointment and this is in an attempt to overhaul the Lobby Group's internal culture after the series of sexual misconduct allegations. We have spoken about a lot in the newspaper Review and this was first reported by the Guardian newspaper and now they're bringing this news to us. Now Wallace will take up the new role as part of the Executive Committee and she will report on workplace conduct and cultural
issues directly to the board. Now we know that the CBI also has a new directed General, Raine and Newton Smith, and she says the new role for Wallace will be
integral to reforming our people's strategy. So this is all about reform and we know that this is really important for the Lobby Group because more than fifty large businesses, including the likes of John Lewis and Natt West, have suspended or canceled their membership in the last month after the Guardian's publication of a series of allegations of sexual misconduct. So a big turnaround here for the lobby group. That is what they're looking for.
Yeah, OLiS attempting to do that.
The Financial Time says the UK and EU agreed to collaborate over cross channel migration. This is a real flash point in UK politics.
Yeah, I couldn't agree with you more.
The EU and UK will collaborate on curbing irregular migration across the English Channel and really, Caroline, in a further sign of warming relations after years of post Brexit tensions, So Brussels and London will negotiate a deal to exchange intelligence expertise and also personnel, and this will really be to combat smugglers. After six months of deadlock over the plans.
So Rishie Sunak Urshela vonderlyon. They've both welcomed the idea of London working with Frontext now that's the EU Border Agency. And this all happened at a meeting on this sidelines of the Council of Europe so at Caroline, which is in Iceland. So Rishie Snak was there and this appears
to be what he's saying. We also saw him talking there yesterday in Iceland and he said he's pushing four reforms to court orders which have blocked deportation flights to Rwanda, which has been very controversial here once again on the immigration discussion. That is a flashpoint if we really want to look at it that way. But Yesday's announcement Marxist significant step up in europe wide efforts to tackle the problem of migration together.
Yeah, I think the Prime Minister is sort of trying to make this a European issue, you know, one that affects all countries rather than just the UK. But I think the big date is going to be the twenty fifth of May, isn't it when we get the independent data or actually on migration flows such as it is. Anyway, let's just end though. On the Times, the headline there kissed Arma Labor will rebuild working class dream of owning home. How much of an appeal will that have to voters?
Well, Caroline.
The Times leads with this story saying kir Stamer is going to abow to make the Labor Party the house building party by relaxing planning restrictions and really allowing more homes to be built on the green belts. So he's been speaking to The Times interviews in the newspaper, and the Labor leader has taken the sort of chance and the barb to accuse the Conservatives of killing the aspiration of home owning for a whole generation. We know how
difficult it is to get on the property ladder. It is tough, and there is a shortage of houses now. He's also warned that house building was on course to fall to its lowest level and that since the Second World War. He said that labor would give local authorities and residents more power to build on the green belts and to meet local housing needs. So that's what he really wants to do. It's a whole reform really when
it comes to house building and planning permission. Now, I just have to say one thing, in a super stark contrast to this, a conservative government has really said it's going to pledge to enhance protections for green about land and Bloomberg's Joe Mason, Ellen Milligan, they have a really good story on the Bloomberg terminal today, really interesting, and they're saying that the opposition to more home building really comes largely from conservative MPs in rural seats who are
arguing that more development threatens the environment and the whole esthetic of our countryside. So here we see the labor and the Conservative's complete polar opposite when it comes to what to do about the shortage of homes and the dream of owning your own.
Yeah.
Absolutely, it's a hugely important issue, both in terms of the built environment but also for voters. Thank you so much to Lean Gerins for our newspaper review.
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