If you enjoy the Bloomberg Surveillance podcast, check out our new daily news program, the Bloomberg Daybreak Podcast. It gives you the day's top stories with context in just fifteen minutes. Look for it in your podcast feed by six a m. Eastern every morning. Subscribe on Apple, Spotify and anywhere else you get your podcasts, and stay tuned for a sample of today's edition of Bloomberg Daybreak at the very end of this podcast. This is the Bloomberg Surveillance Podcast. I'm
Tom Keene, along with Jonathan Ferroll and Lisa Abramowitz. Join us each day for insight from the best and economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. With Perspective Coachagabden, Senior Research economist at Aberdeen SRI. I'm absolutely fascinated by how you linked together the actions of Switzerland,
Norway and now the United Kingdom. Suddenly is it a hawkish tone in Europe?
I think this is clearly a hawkish tone from the UK and from Norway as well. Clearly this you know they've surprived markets Norway this morning, surprise with a fifty. There was running into this. There had been quite an intense debate. There were question marks about whether there would be a twenty five or fifty basis points from the Bank of England, also for the Norway as well, but clearly this is a surprise and just running through the
statement quickly, you know, the reasons are very clear. This is something that has been signaled actually within the speeches for some time. It is the core services inflation which has been incredibly strong. Yesterday's data really did help trigger that debate about whether twenty five or fifty would be necessary. This is really a very very strong picture for the UK.
If you compare the UK with other developed markets and look at that wage number, it is really really standing out with an increased wage pressures there while other countries are starting to see a bit of a stabilization or a rollover. If you look at other European countries, if you look at the BED or the US, UK really stands out from that core services and wage pressures angle.
We're watching the pound strengthen in response to this surprise fifty basis point rad hike from the United Kingdom, which is a departure from what we saw for the Liz Trust era.
Sree.
How much is this a positive sign that shows people believe that economies can withstand higher rates to a much greater degree than they thought just even six months ago. And then it really gives confidence that you can fight inflation with higher rates without creating some sort of deep recession.
I think that's going to be very challenging, to be perfectly honest. I think that you know the fact that we've moved to five percent, markets are pricing in six percent the last time I looked earlier this morning, This this is really triggering a recession. Now. Much policy works with long and variable lacks. That's something we often hear, and what we're seeing here is that that we are,
you know, financial conditions have tightened significantly. There is some question mark whether the Bank of England will raise as high as six percent. There's definitely further to go potentially, but six percent will would be triggering not just a recession, but a much more severe recession than economists are currently forecasting.
Now.
We do feel that the monetary tightening will trigger recessions in a number of different countries. I think a soft landing is very difficult, and unemployment rates were starting to nudge higher. But the tightness in the labor market is very worrying in that the longer the recession is delayed, the more severe we could see in terms of rate hikes and recession in a later on next year.
Sure we inform our American audience, which we understand the dynamics of a fully employed Ohio or Kansas versus challenging city unemployment rates. Perhaps in America the perception we have is London booming, the South blooming. I'm thunderstruck. A double digit unemployment in Aberdeen, way up in the northeast of Scotland. How uneven is this debate on monetary policy across the United Kingdom? How much of the United Kingdom is truly in recession right now?
I think there is a regional issue and that's something that really needs fiscal measures to really address.
Now.
From a monetary policy perspective, the Bank of England are limited to what's happening to the aggregate inflation rate? What is their target and how do we get back to the target. The or divergences is very difficult to tackle without fiscal measures and structural policies to target those issues. Now, if we think about what's happening in terms of a recession, we're not quite in a recession yet. We've seen some weakness in data for Q two. We have a number
of different drivers. We have strike action in the healthcare services, we had an extra bank holiday for the King's coronation. All of these issues will lead to some weakness and activity, but that's not necessarily a recession just yet. What the Bank of England need is for the economy to call so that some of the imbalances that are driving inflation to ease and you start to see more sustainable deceleration in that core services area, and we're not seeing that yet.
Street, thank you so much, just really outstanding street culture. Govern did with us with Aberdeen, this truly historic moment and gyrating moment for the United King.
And Terry Wiseman, global interest rates and currency strategist at mcquarie, joining us here. Terry, what do you make of that the fact that you can find out what they're going to do, but you're not going to figure out what the market response is.
Going to be book.
I think it takes a long time to rebuild central bank credibility once it's been destroyed. It's not an overnight thing. Even with the replacement of the staff and the decision makers there, It's going to take a while for a central bank that has avoided raising interest rates to gain
the credibility of the market. The market's going to have, they're going to be doubters, and I think when you have a situation like this, it's important for the central bank to start to reassert its credibility by doing more than the market expects, not less than the market expects. I want to make a case that in those emerging markets that have tried to tackle the inflation story head on and early, you have seen a lot of success. Obviously Turkey is not one of them. But look at Brazil.
They're on the verge of starting to cut interest rates, perhaps as early as August or September. Same with the Chileans. These countries were aggressive and hiking rates during the inflation upmove, and they're going to be early in cutting rates with the inflation down move that they're seeing. In these countries. Turkey is an exception here.
Okay, it's an exception. However, it's piling on the hawk is hilt that we've heard from central banks around the world today, the Bank of England. We've seen the fluctuation of the pound. Has the Bank of England lost credibility as well?
I think it did, But I think that's exactly the reason why it had to raise by fifty basis points instead of twenty five. Now, granted we did not expect that they were going to raise by fifty The tone coming out of the MPC members and their parliamentary testimony a few days ago did not signal a hike of fifty basis points. But at the same time you had an inflation printstance then, whereby implicitly you can make a case that the Bank of England had made a mistake.
They thought the inflation was going to come in about eight point three eight point two percent, and in fact it came in closer to nine. I think it's because of implicitly, this fifty basis points is an admission of the mistake and a way to correct it, and I think that's why it happened.
Alan Schwartz put this team together at ur Stearns, with your leadership own David Malbek driving the US and global dialogue. John writing as well, Terry, You've seen this so many times before. How do you link we rationalize idiosyncratic stories like Turkey or Argentina back to the central banker of the world, Jerome Powell. How do you link Powell's actions to what we're seeing unraveling here, there and everywhere.
I think we have to be very cautious if we're going to assume that what Jay Powell is going to do is going to be overly dependent on what other central banks do. And I think even the vice versa case is pertinent as well. The situation in the US is not the situation in the UK, or for that matter, of the situation in the area. There is not as
much labor activism and labor strikes in the US. I know that the headlines might be prominent, but we can measure this and the really the peak of labor activism in the US took place last summer. It has since died down. It makes plenty of sense. We've seen more layoff announcements in the US. The UK and Europe are
very different. We're seeing a lot of labor activism now we're seeing a lot of concessions by the price its secretary governments of these higher wage demands coming out of the workers, and as a result, the UK and Europe are delayed with regard to their ability to fight inflation and bring it down. If you look at some leading indicators of inflation in the US, they are clearly coming
down and much faster than they are in Europe. The PPIs, for example, the survey based indexes that we're getting from the from the Ism Services Survey, the Atlanta Fed's Flexible Price Index, they're all pointing downward for inflation in the US.
I have a.
Feeling and by the way, Powell even hinted at this in his testimony. Yes, Jay, I have a feeling that the back half of the year you're going to finally see that so called stickiness that we're seeing the PCE inflation Index and the CPI inflation Index start to recede and come down. And by the way, I think the market understands that, and that's why the dollar has resumed being weak again, because it sees the FED coming to an end with its rate hikes. It doesn't see that yet in Europe or the UK.
Whether they're going to the midyear reviews of JP market publishing. There's this morning and they call our disinflation paths and compete getting complete. But at Macquarie, one of your great studies has to be the greater number of lesser countries really struggling. As you just mentioned, is the IMF going to come to the rescue here or is the IMF lost credibility as we talk about the Bank of England challenge by credibility.
Well, if you mean the IMF coming to the rescue with regard to the debt load in the emerging.
Market Argentina Peso two fifty one.
Black market five, yeah, I don't think that you're going to see that happen unless these countries adopt a much more market friendly and much more Washington consensus based approach to the policy agenda. The IMF is not going to bail out countries that have made a succession of mistakes in their political economy and their policy agenda over the
last few years. It will bail out those countries that it can impose on an agreeable basis, a new plan of action with regard to fiscal responsibility and monetary policy responsibility.
Go back to something you were talking about that there does seem to be a real difference between the inflation dynamic in the US and the inflation dynamic in Europe, And you were talking about the labor dynamic in particular. Right now, what we're seeing are a number of central banks that paused or tried to and now are going back and hiking rates again. This is exactly what people
do not want to see. What gives you confidence that the US is not going to be in the exact same position with a stickier kind of inflation, especially driven by areas like the housing market that have shown incredible resilience to higher rates.
Yeah, this is These are all great questions. Let me start by saying that the way that the PEC price in dex is computed and are calculated, and the way that the CPI and Inflation Index is computed has inherent stickiness in it. About forty to fifty percent of all the prices in that basket are imputed. So to get a really good sense of what flexible prices are doing, what prices are doing that are that you can actually observe in the marketplace, you have to look at narrower.
You have to look at only the basket of things for which we can observe prices, and when we do that, we see a lot more disinflation already. Just compare for example that Atlanta FED index. The flexible basket versus the sticky basket has seen a huge divergence in the last few months.
What is the potential shock to longer term rates if this is somehow reversed, If somehow people are getting it wrong, and inflation does remain stickier in the US and follows the European story.
Yeah, so if that's going to be the case, you're going to see the back end of the yield curve go up a little bit in the US. At the same time, it doesn't mean that the curve will get less inverted, because we could see short term rates go up as well, I should say, however, but to the extent that we're going to see longer term rates go up, it's going to be because inflation break evens go up. It's going to because that inflation expectation goes up, not
because real rates go up. But yeah, that would be effectively the result inflation. Long term inflation expectations goes up, inflation break even go up, and that drags higher the ten year yield in the US.
We're linking monetary policy in here into the interests of Chairman of Powell. And you mentioned as we were going on air here that you had the immense privilege seeing Jerry Garcia. I can't believe it's been twenty seven years since he died. That's the first shock. But you saw the dead when the dead was the dead and not the dead in company. Now into parlay off this, I'm going to go to what a long strange inflation this
has been? What does a pandemic disinflation look like? This is an original inflation, isn't It's.
Original only in so far as the Federal Reserve and a lot of central banks made the mistake of printing too much money at a time when they thought that the pandemic would not end, or at least they took the risk management view that there's a possibility that the pandemic doesn't end, and therefore they aired on the side
of inflation of liquidity balances in the economy. The important thing to keep in mind is that those impulses that created the inflation in twenty twenty one and early twenty twenty two are more or less over and done with. With the possible exception of wage pressures in Europe. If you look at real monetary balances in the US, because of inflation and because of QT, they are back to trend level. They went up about fifteen to twenty percent above the trend and they've come down twenty fifteen or
twenty percent back to the trend. That's a very strong indication, a very strong suggestion that the inflationary impulse that the central banks had created is no longer in play, it's no longer manifest.
The longest dead concert, Terry was at the concert. He stood for six hours, the longest dead concert ever, six hours. It's on the edge of Springsteen.
Yeah, they have epic concerts, and evidently they used to have even more epic concerts as older was.
Terry Wiseman, Thank you so much. Pleasure today, just perfect time to have you in here. Well, the challenges that we see in Turkey today. I turned to Michael gab And, head of Economics, Bank of America's Securities. Michael, my head's spinning. There's so many trends going on here, and is Mike perfectly encapsulated. The ambiguities of the moment are immense. What is the thing at the margin you're studying subject to
change about American economics. What's the part of the story that interests you.
I think that there's two parts. One is what Lisa mentioned, how quickly can inflation come down even an environment where the labor market is extremely tight? For Powell's words, so can we get further diminishment in goods prices, used, car prices shelter inflation? Same conversation we've been talking about for some time. But I think the mirror side of that coin, which Powell emphasized yesterday and we and others have been picking up on more, what is the big miss really
this year has not come on inflation. It's come in the labor market, where the labor force has rebounded dreamly rapidly this year. Last year, the shortfall in the labor force from kind of pre COVID projections was as high as two million in not falling. By our estimate, its down to about four hundred thousand. Now that means the probability of a softer landing or mild recession is higher, and the Fed doesn't have to lean on the labor market as much perhaps to bring inflation down. So it's
that labor force rebound. From my perspective, that puts the FED in a very different spot today than it was thinking it was in maybe six to nine months ago.
Michael, How does FED Chair J Powell draw this distinction at a time when his compatriots over across the Atlantic are moving in the opposite direction and are facing resurgent inflation exactly what they didn't want to see in a Burns like kind of the situation.
I think this is.
Where one time you fall back on the US is a large, relatively closed economy, were less affected by global trends than is the case elsewhere, and we'll make the decisions on our policy outlook based on where the domestic economy is. The upside risk on inflation in the US will come out of US labor markets and whether there's persistent tightness in the labor market that keeps services inflation elevated.
So I think you just kind of fall back on the historical tendencies of the US to be much more domestically focused, services driven, and therefore we're going to set our policy based on that evolution.
The other aspect of the conversation is the fiscal side versus the monetary policy side, and people are talking a lot about the fiscal impulse of having to repay student loans again starting in October. We've been debating this for a couple of days and trying to figure out whether
this is an overplayed risk or an underplayed risk. Do you think that the reinstatement of having to pay back your student debt after three years of a moratorium is going to have a material impact on both growth and inflation in the United States later this year.
I think we.
Would come down on the side that from a macro perspective, it's unlikely to have a material effect. It should probably dent the strength of spending in say September or October, but the magnitude of interest payments is maybe about two tenths of one percent of personal income. If you fold in principal payments, that's closer to maybe half of one percent. So from the macro perspective, we doubt it has a material impact, although certainly at the individual level it may
affect behavior quite a lot. It just doesn't We don't think it adds up to something macro systemic, if you will, So it's probably more about credit markets and the behavior of those as opposed to the macroeconomy.
More broadly, what is a Bank of America? C Michael Gabin in your immense ability to tap knowledge on the American consumer, and I want to get granually here through the month of June. Is any indication of a slowdown of the American consumer?
Yeah, there is, Tom, there is our BAA card data would suggest that consumer spending continues to slow, but at a moderate pace. And when we dig into those details, we do find that some of the revenge spending categories are starting to show softness, so airlines and lodging, which were really strong last year, those things have started to moderate, but spending on entertainment and recreation that is still strong.
It maps into what we're seeing in the labor market, where two thirds of your gains and private sector employment are still coming from areas like leisure and hospitality and education and health. So there's still some catch up spending leading probably to follow through and hiring. But on the margin, it does suggest that spending is moderating. It's about flat on a year on year basis, and in some categories moving slightly negative.
Michael, I have to say I'm hearing all of the noise behind you, and I'm thinking to myself, a lot of people are back in the office, and how different this is than what we have heard for so many years. Is that your experience that this has actually been this sort of sea change of reversion and the whole work from home trend has kind of died out.
I mean, I think that's very industry specific and probably job requirements specific, where you know, I'm in at least four days a week sales and trading here is in five days a week. So certain roles are definitely back in the office. I see it on my regular commute as well. So and certainly Monday, Tuesday, and Wednesday or sorry, Tuesday, Wednesday and Thursday are your big peak days. So yeah, there's kind of three out of the five days it's feeling quote normal, and then it kind of tapers off.
Week goes on, you know, Friday at Bank of America, moinning hands out at the summer place, gaping's in with shorts and flip flops. That's a celebration, like scary thought, Michael Gap and thank you so much as Bank of America. Everyone I talked to there is only one destination, and it is Paris. It is stunning anecdotally to see the
number of people migrating to France. Leading the way is Francine Lacroix from London at an important conference of mister mccroum on climate and on the funding for poorer nations. She is in conversation with a tour director for Paris. He's on the bus telling us about the highlights Bruno La Mayer, tour director this summer.
Francine, Tom, you couldn't be more right. Actually, I have to say everyone's here in Paris, not only because we have thirty heads of state here at talking about finance and sustainability and how to tackle poverty, which is really spearheaded by the President of France, but also there was fashion Week, and it does seem that every American actually
in Europe has decided to descend on Paris. So congratulations first of all creating so much buzz, not only around so important tackles, but actually Paris is bussing a little bit ready today, but you know it's back with vengeance.
What are you trying to achieve at this conference?
So we're talking about money transfer, debt, forgiveness or keeping the momentum to really try and do a new Bretton Woods Agreement.
I think the key purpose is to keep the momentum and to have a new financial architecture for the post countries of the world with pleasant placor. We don't want to post countries in the world to be confronted to a choice between fighting against extreme poverty and fighting against climate change. We want to provide all the financial means for those countries to be efficient in the fight against
poverty and in the fight against climate change. This is the key purpose of this summit, and I think that the key point to key purpose would be to define a new financial architecture for the twenty first century.
Minister, are you frustrated that it's taking this much time? I know the Chinese premiers here, which is a great coup because we have an actually seeing US officials and Chinese officials at this high level in a room together talking about these issues.
But you've tried to push ours voting rights on the ISLM. How's that going.
Big things need a long time, So I'm not frustrated. I think that we are totally totally determined with spent PACN to have a final positive outcome for this summit. I think that we are moving on the right direction. As far as debt restructuring is concerned, we want to move faster, we want to move quicker. I think that we could have a positive outcome as far as the
depth of Zombia and Skidonka is concerned. It is really quite good news to have the Chinese Prime Minister here in Paris today talking with all the head of states, talking with the secrifgiality, and this is really, I think a very positive outcome. We also have the new President of the World Bank, and we are defining a new role for the multi role development banks, providing more money
for the powerst country. So really things are moving in the right direction and the final outcome must be positive.
I mean, I imagine that in the corridor, as they talk about trade.
They talk about the fact that Sexuary Blinkoling was.
In China, the fact that we have present with a rap roschma with the US.
What does this mean for global works?
I think it's good news because we all want to improve the relationship between the three continents between China, the US, Europe. We are totally determined to defend on economic interests in Europe. You know that the new Participle, which is now at the core of the European future has been defined by
prison Pacon and it is sovereignty. Sovereignty means that we want to defend or technological assets or economic interests while talking with China, but being aware that there is a necessity to really have all the necessary tools to defend or academic.
Indusrty menster given a high inflation, interest rates rising, I mean the economy is extremely complex.
Do we need to attract in Europe and friends, specifically more Chinese investments?
Yes, we are open to Chinese investments in France. We had yesterday a very foot full discussion between Prime Minister of the Chinese Republic and the key CEOs of the French economy, and we made very clear that there is any willingness of the Chinese government to invest more in France and more in Europe, for instance on the evs, on the electric batteries. We are welcoming those investments.
We have a lot of US viewers at this time in the day, would they worry that actually that investment that could have gone to the US is going elsewhere in putting Europe?
Oh, I think that you know, climate change means a lot of new investments in green hydrogen, in batteries, in evs and so on, sortar panels. So there is place for everybody. We should just be very cautious in the way we are defending our technological assets and or technologies or key technologies. But anyway to fight against climate change, we will pave the way for new investments and new innovations.
And this is a really good thing that we have foot foot talks and constructive talks between the US, the EU and China.
A ministry, how difficult is it to be in charge of finances of a country at a time where infest rates are going up. Inflation of course is going up, which leads higher interest rates. But at the same time we need to do economies because of huge deficits across the world.
To kind of fine tuning, I would say, which means that work. Yeah, no, just to fine tuning, which means that the key priority is to get rid of inflation and to bring the prices down. This is to keep priority for the household. Of course, then you have to take into account the necessity to come back to some public finances. I just announced last Monday that we would cut in public expenses by ten billion euros at least
for next twenty twenty four. So this means that we are totally determined to come back to some public finances and to stick to the path of reforms. Who just introduced two key reforms reform the level market and of course the pension reform.
But given what we heard from the FED and other central banks, do you not worry that interest rate hikes will be so severe that they will almost have to crush acartomies at least put the mineral session to achieve their inflation target.
That's why it's so important to keep a high level of investments and a high level of innovation. If you want to avoid recession, you have to find the right balance between coming back to some public finances and keeping a high level of investments in the fight against climate change and of course in defense. Since we have walked back on the European sid this is this balance that we want to preserve. You know that we are in the process of defining the new rules for the Upan countries,
the Stability and Growth Pact. We want those new rules to keep the right balance between investments and some public financials.
Do they need to be more flexible?
We need flexibility of course we need the rules, we need all the countries to abide by the rules. But let's be very clear, the key factor for the twenty first century for Europe is to keep a high level of investments in innovation.
Minister, thank you so much, as always for joining us. Was by the French Finance ministrant. With that time, I'm going to hand it back to you New York and we.
Miss you in Paris.
Friends, see, thanks so much. We wish we were here, Lisa and I. John's on an Italian island somewhere. We don't care about what he thinks right now. But for instance, Qua, thank you so much. The Prime Minister of Ukraine is a most interesting guy, with many different public duties over the years, but all working around trade and the economy of a pre war and at present war in Ukraine. In London, armor Ria today in conversation with Dennis Shmihaal.
Tom good morning, and we are joined by Ukraine's Prime Minister, mister Michell.
Thank you so much for being with us.
We've seen each other in many conferences like this multiple times, and.
I know how difficult it is for you to get here.
Is this trained from Ukraine, very big country over to Poland and then a lot of security concerns about your staff, your team, yourself. So we appreciate your time. And one of the things that you always tell me is when I come to a recovery conference like this, and there's been many, I do feel or all I say we stand with Ukraine and they mean it.
But a war is lung. It's expensive. Did you feel any fatigue in this run around?
Thank you so much for invitation. It's a pleasure to be here with you.
And morning.
Oh.
It's second conference for Ukrainian recovery. First one was sold in Switzerland one year ago. Today we are in London. Sixty two countries and international organizations are here. Hundreds of businesses are here, international businesses. We feel tremendous support from all of our partners. We feel financial support, sunctional military support, humanitarian support. Results of this conference have a long term consequences.
We have many promises, We have many concrete agreements, declarations, memorandums. We have financial support. We have middle term program for Ukrainian support from European Commission, from European Union for fifty billion euro for the next four years. We have tremendous support from United Kingdom. We have very good meetings with our partners and with United States Secretary of State. We have very good conversations, negociations and very good results.
And yet, well all this is happening, we know that back home the fighting continues on the counter offensive is going.
And I do want to make something very clear.
Was there at any point in this conference did you get any hint that anyone suggested the funding will depend on.
The counter offensive?
Absolutely? No.
If it's successful, more money. If it's not, it would be less. No one told you that we.
Have very very sustainable, very strong and very unwavering support from our partners. There is no dependence from results on the battlefield.
They're entirely different.
Absolutely, we have very strong messages, especially on that conference. Ukraine is future member of EU. Ukraine will be supported by partners. Russia must pay because of these consequences of this war, of terrible war and aggression from Russia side. So these messages from partners are very supportive, are very promising, and now we continue our contrafensive. This is not easy walk. This is not Hollywood movie. As our president wild Merzelenski said yesterday.
Yesterday he seemed a little bit exasperated. This is not a movie. It takes time, it tastes patience. Is that what you feel at times too? This is not Hollywood, it's it's it's real people.
And it's lives.
Yes, and every life is very important for us. And we are not Russia. We are not Soviet style army when they bring their lives to the fire of the war. So we are very careful, we are very smart. We use NATO standards in this war because we are fighting according to NATO standards. We are fighting for weaponry of NATO countries and contravansive. It's multiple operations, it's offensive, it's defensive operations, it's tactical pauses. So it will take time. But we have first.
Results purely to make an assessment, that's what you say.
We have first results of our contrafensive. Eight villages are liberated, more then one one hundred thirteen square kilometers is liberated. Seven kilometers go into the head from the front line. So it's very important results for the two weeks and we will continue.
And so of course now you have your Bloomber TV. Of course you have the investment community that's watching the center. But we also have a lot of taxpayers, some of whom are very sympathetic to Ukraine too, but they say we want to see vally for money, but also this idea of corruption at times, I remember President Selenski said, my government will crush the oligarchs.
We will be a before and after moment in Ukraine.
Is that the moment or the message that you're sending to people thinks are changing in Ukraine?
Ukraine is changing absolutely, President, our government we have zero tolerance to the corruption.
You will ditch people that are corrupted if you find anyone.
We finished formation and creation of our anti corruptional infrastructure together with our partners. We are absolutely transparent, accountable and opened. And this anti coruptional infrastructure is work now and we demonstrate to all the world that we are fighting with a corruption country and we will have results. We continue our reforms, we continue digitalization. We take off a state and public services from persons and go to the digital space.
And this is very very effective way to fight corruption. Just don't let people to be corrupted because digitalization brings new technologies and new possibilities.
And can I ask you your meeting with mister Blinkn, the US Secretary of State. He was here, and I know you had a one to one meeting. There's an election coming up in the United States.
Is that something that worries here? Digital in the United States is in for the long haul. This is about values for the US.
United States is very important partner, is the biggest supporter for Ukraine. So we discussed all the important issues. We discussed first of all financial support, and mister Blinken unknownst the next one point three billion dollars support financial support for Ukraine, for our reforms, for our recovery, for our
energy sector. It's very important for us. We also discuss all other issues very important in sense of development of my country despite the war, demining activity, sanctions against Russia, development of energy sector in Ukraine and other many other very important issues.
So the middle and well.
And I also wonder, however, with the average American and maybe watching that's true and it's thinking, but Ukraine is a far way off. I don't know anything about this country. What's going on with my money? What's your message?
What would you say?
Just because what First of all, we are very grateful to American people, to United Kingdom people, to all our partners who support US military financially. By sanctions. It's crucially important because we are fighting not only for our land, for our families, for our people, are fighting for democratic and for civilized values. It's crucial and because of this, all democratic world support Ukraine. Why because this is about
global security system and it's very important. Don't let any aggressor to have a free thinking about future possible aggression.
If Russia were to win this as a hypothetical, then would you say it would be the moral collapse of the West. If will let that happen, it would be the moral collapse of the West.
I think that you don't even contemplate Russia winning.
It's impossible. It's impossible, and I think that I'm sure that civilized world will not let Russia win this war because it's about existential things, it's about the world security system. And from my side, I should say that Ukrainian have no intention, no imagination that we may lose this war because it's about our existence. War with war, crimes with war against humanity, was henocide against Ukrainian nations. So if Russia will win this war, it will mean that Ukraine
and Ukrainian nation is not exist anymore. So from our side, we understand that we will liberate our country and the borders as on the nineteen ninety one, and.
It is existential.
That's a word I heard the most last time I was in Ukraine, that this was existential for the country now. And I want to ask you, however, another existential question perhaps is the NATO summit. You said in this conference, for a strong economy, you need a strong country and that means security. What's going to happen in that meeting? Presidence Selenski said, my people have shed blood for a timeline now to NATO. What's going to happen in a month time?
In that meeting?
I may repeat, we are fighting according to NATO standards. We are fighting by weaponry of NATO.
Why is it so scary for some?
In fact, our army is NATO army right now. We are fighting for the same principles for which NATO was created. So I'm sure that membership of Ukraine in NATO it will be a very win win situation, very mutually beneficial situations. So we are waiting so that this summit in Wsinos will be very strong summit and we will hear very concrete and very strong messages about Ukrainian membership and NATO,
and we hope that partners will do this. We have twenty twenty allies which are supporting, which are supporting Ukraine, which signed declarations. We discussed with some skeptical allies, but we have sure inside of our hearts that everything will be going.
And very briefly.
Sometimes you hear people say just sit down and talk to Vladimir Putting. When you hear the name Latimir Pudding doesn't trigger anything, and you really just go this is in the past.
I'm not interested in Latimir Pudding.
Putting is the biggest crimer of our times, of twenty first century. We don't believe that he may do something to bring peace in Ukraine. So only one his step to stop shot and take off Russian army from Ukrainian territory may stop this war and bring peace back on the European continent. But he has this possibility since to one hundred and fourteen. So when the stands of this now impossible, and.
For you you say it's now impossible, it's too late. Prime Minister. Thank you so much, appreciate it.
Always very good to see you in Bloomberg, and thank you for being here with us in London.
Thanks, Thank you so much.
Tom Maria today, Thank you so much for a piercing conversation, ending with comments of Ukraine. I'm a leader of Russia. Subscribe to the Bloomberg Surveillance Podcast on Apple, Spotify, and anywhere else you get your podcasts. Listen live every weekday starting at seven am Eastern on Bloomberg dot Com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can watch us live on Bloomberg Television and always. I'm the Bloomberg Terminal. Thanks for listening. I'm Tom Keen, and
this is Bloomberg. Thanks for listening to the Bloomberg Surveillance podcast. Now. Stay tuned for today's edition of Bloomberg Daybreak. It's your daily news podcast, delivering today's top stories to your podcast feed by six am Eastern. It's all the news you need in just fifteen minutes. The Bloomberg Daybreak podcast. It starts right now.
From the Bloomberg Interactive Burgers Studios. This is Bloomberg day Break for Thursday, June twenty second.
Coming up today, Crouz race to find the missing sub near the Titanic before the air runs out.
The US and India strength and military and economic ties.
Rates in focus.
As Jay Powell appears before Congress again and the Bank of England makes a policy.
Decision, I mean bring you an exclusive interview with the CEO of Deutsche Bank.
New York Mayor Adams announced his new guidelines after lithium ion battery fires, plus a New York City board votes for increases in rent stabilized apartments. I'm Michael Barr.
More ahead, I'm.
John Stanish, Edwards Swartz, the Yankees in three home runs and a widower see Adam. The Mets lost in Houston. The NBA Draft takes place tonight in Brooklyn.
That's all straight ahead on Bloomberg day Break, the business news you need to start your day in just one fifteen minute podcast each morning on Apple, Spotify, the Bloomberg Business app, and everywhere you get your podcasts.
Good morning, I'm Nathan Hager.
And I'm Karen Moscow. Here are the stories we're following today.
First, we want to keep you updated on the search for that missing submersible near the Titanic. Crews from around the world are zeroing in on underwater noises detected over the past two days. Former Coast Guard Commandant Thad Allen says, filtering out the signal from the noise is a tough task.
There's animal life, there are other noises that are out there. There are ships operating.
In the area, so the question is to localize it and try and understand.
What it is.
Former Coast Guard command on Thad Allen says, the situation is growing more desperate for the five people on board the Titan. The vessel left Sunday with about ninety six hours of air. At this point, they may have just a couple of hours left.
Well, Nathan, we turn to geopolitics now. In an important moment in the US relationship with India, President Biden is hosting India's Prime Minister Narendra Modi for his first ever stayed visit to the White House. Senior US officials say the two leaders will announce a series of defense and commercial deals aimed at improving military and economic ties. They'll also hold a brief adjoint news conference, a rare toy for the Indian leader, before Mody addresses Congress this afternoon.
Meantime, in Florida, Karen, the federal government's case against Donald Trump is moving forward. Prosecutors are now turning over evidence to the former president's legal team. Amy Morris has details from our Bloomberg ninety nine to one newsroom in Washington.
Evidence is being headed over to the defense as both sides get ready for the August fourteenth trial date. The grand jury testimony of witnesses set to testify at trial, a twenty twenty one recording of the former president discussing having classified information, other public statements made by Trump, an FBI interview of Trump's personal aid and co defendant, and
pictures of boxes of records at mar A Lago. Both sides are prevented from publicly sharing the evidence that's been turned over, and Trump's attorneys are working on getting security clearances to review any classified material. In Washington. I'm Mamy Morris, Bloomberg Daybreak.
Right, Amy, thank you well. Elsewhere in Washington, the House is voted to censure Adam Schiff. Lawmakers voted along party lines to center the California Democrat over comments made during investigations at Donald Trump's ties to Russia. Schiff was defy and a head of the vote, calling out House Speaker Kevin McCarthy.
McCarthy would spend the nation's time on petty political payback, thinking he can censure or find Trump's opposition into submission, but I will not yield, not one inch.
Adam Schiff becomes the twenty fifth House lawmaker to be censured. He was the lead prosecutor and former President Trump's first impeachment trial.
Karen Let's turn from politics now to financial markets. Jay Powell is back in focus as the FED chair prepares for day two of congressional testimony. Yesterday, Powell told the House Financial Services Committee more interest rate hikes are on the way.
Almost every single of the sixteen of the eighteen participants on the FMC wrote down that they do believe it'll be appropriate to raise rates, and a big majority believes razor rates twice this year. And you know, I think that's a pretty good guess of what will happen if the economy performs about is expected.
And Pale's comments come after the Fed pause drate hikes last week for the first time in fifteen months.
Well, Nathan, not all FED officials are on board for more rate increases. Atlanta Fed Bank President Raphael Bostick says he supports holding at the current level for the rest of this year. We get more from Bloomberg's Charlie Pellett.
Bostick says it is prudent to give time for inflation to ease. In response to past moves. In an online commentary, Bostick said, quote, letting restrictive policy work for a while is prudent because the Podlsey has been truly restrictive for less than a year, and it takes time from monetary policy changes to meaningfully influence economic activity. In a later Yahoo Finance interview, bostics said, quote, my baseline is that we should stay at this level for the rest of
the year. In New York, Charlie Podett Bloomberg Daybreak.
Thank you, Charlie. Central banks are also in focus overseas this morning. The Bank of England is expected to raise rates again today, and we get the details from Bloomberg's Uwan parts in London.
Central banks were meant to get boring this summer, but Britain's red hot inflation may force the Bank of England to press hard on the breaks today. Economists and investors expect the Monetary Policy Committee to push ahead with another cause point increase in the base rate to four point seventy five percent. What would be the thirteenth rise in the hiking cycle, but core inflation at a thirty one year high. It means money markets now placed a forty
percent chance on a bigger half point increase. It's an anxious backdrop. So a mortgage market which has already seen soaring rates this month in London, immune pot's been back daybreak.
All and you and thanks.
So we have some other central bank decisions in Europe to tell you about this morning.
Switzerland hiked rates by twenty five.
Basis points and that amounts to the smallest increase since the SNB started tightening policy last year. And Norway when even further, hiking rates by fifty basis points, that's the largest increase since the central bank's current tightening cycle.
Staying in Europe, Karen Deutsche Bank's CEO, is out with an optimistic outlook. Christian Saving says he expects trading results to improve in the second half as clients navigate a complex and challenging economy. Speaking exclusively to Bloomberg, the Deutsche Bank CEO said there are also challenges facing the business.
With regard to the investment bank, we always said that we had a record year. We had an extraordinary strong year in the fig business in twenty twenty two. I still think that actually in Q one and Q two we have done well, but the overall market is a bit weaker than in the record year of twenty twenty two.
And again, that was Deutsche Bank's CEO Christian Savings, speaking exclusively with Bloomberg State Tuned for more of that conversation coming up shortly, and for that look at other stories making news in New York and around the world. We are joined by Bloomberg's Michael Bark Morning.
Michael, Good Morning, Nathan.
A deadly tornado hit a small town in northwest Texas last night, leaving significant damage in its wake. The mayor of Matadoras says at least three people had been killed in the storm, which also damaged and destroyed homes and businesses. The dangerous heat wave across the South is turned deadly. The US Postal Service confirmed a letter carrier in Dallas, Texas, died while delivering mail in the heat. Multiple cities are shattering all time heat records. South of Houston, crews are
racing to repair roads that buckled under the heat. Texas Department of Transportation spokesman Danny Perez says workers safety is being monitored closely, making sure.
They're staying hydrated, making sure that they're aware of the situation.
And making sure that they're not staying out longer than they need to.
Near Corpus Christy, it felt like one hundred and twenty seven degrees. Tenants in New York City's roughly one million rents stabilized apartments will face increases of three percent for one year leases after a tense meeting filled with protesters. The city's rent Guidelines Board also voted yesterday for two year leases. Rents will increase two point seventy five percent in first year and an additional three point two percent in the second year. The rents are expected to increase
October first. Another lithium ion battery fire in New York. At least two people were hurt in the blaze last night in Bensonhurst, Brooklyn. The fire that was quickly extinguished comes just hours after Mayor Eric Adams says that New York is taking action after four people were killed from a fire and an e bike repair shop in Manhattan
earlier this week. Adams announced a new action plan to speed up investigations about potentially hazard his conditions involving lithium ion batteries and bike shops.
We need real action not only on the state level, but on the federal level. They have been over one hundred and eight lithian ion related battery fires in this city this year alone.
Mayor Adams also announced an outreach and education campaign aimed at shop owners about the dangers regarding the batteries. The New York State legislature has passed a bill to protect abortion providers against being sued from states where the practice is banned. The bill would legally protect doctors, ensuring medical providers in the state will be able to provide telehealth services to patients who do not live in New York.
Global News twenty four hours a day, powered by more than twenty seven hundred journalists and analysts in over one hundred and twenty countries. I'm Michael Barr. This is Bloomberg, Nathan.
Thank you, Michael. Time now for the Bloomberg Sports Up. Take good morning, John Staneshaw A good morning, Nathan and Yankees. Of course some big name, high priced guys, they were not the ones that led them to victory at the stadium. Johnny Brido got the start up for the Miners. He pitched it to the sixth inning, did not allow a run, gave up just two hits. Yanks had only five hits, but three of them left the yard.
Here's the payoff.
He's not running in the pitches.
Swung on and ahead of the edity right that falls high, that is far there, it is gone. It's a two run home run by the Yankee of ours, and that's Jake.
Bauerfa and six home run for Bowers.
Billy mckinning other than left handed hitting outfielder just stuck from Scranton hit his second as many nights and later the tenth of the season for the rookie Anthony Volpa. Yankees beat the Mariners four to two, and they go for the sweep.
Tonight.
The Mets lost in Houston ten to eight. This game is nine to six. Still in the fourth inning, Tyler McGill gave up five runs. Anthony and Leoni followed got only four. House gave up four more runs in defeat. Twenty third home run for Pete Lonzoa. The Mets have now lost thirteen their last seventeen. Cincinnati has won all it's last eleven, the Red's longest winning streaking sixty six years and the Giants won again.
They've won their last ten. Big NBA trade just.
Ahead of tonight's draft, It takes place at the Barkley Center. Three teen deal saw the Celtics acquire the ex Nick christophs Porzengis coming in from Washington. It cost them Marcus Smart, a Celtic for nine years two seasons ago, the NBA's top defensive player, he goes to Memphis. The draft will begin with San Antonio taking Victor Wembiniama the French penal. The Nets have back to back picks in the first round,
twenty first and twenty second. The Knicks have stockpiled picks in later years, but tonight, barring a Trey, the Knicks will not have a pick.
John Stashwin Bloomberg.
Sports from coast to coast, from New York to San Francisco, Boston to Washington, DC, nationwide on Sirius xam, the Bloomberg Business app in Bloomberg dot Com. This is Bloomberg day Break. Good morning, I'm Nathan Hager.
There's momentum in the business, so says Deutsche Banks CEO Christian Saving. Then, while he warns of a decline in trading revenue this quarter. He expects results to improve in the second half, pointing to clients currently navigating a complex and challenging economy. Christian Savings sat down for an exclusive interview with Bloomberg's Guy Johnson. Let's listen into that conversation.
Now, the macro uncertainty that has driven markets so much recently, do you get the feeling that that is beginning to received, Do you get the impression that you are increasingly on more solid ground.
Well, first of all, I think we all have to admit that if you look what has happened over the last twelve to fifteen months in the macro. On the geopolitical side, I think economies have really shown how resilient they are. Because a year ago, a lot of people would have said there is a quite material recession in Europe, in Germany, potentially also in the US. And if we now look back, I think we see that the answer we have given is actually showing that we fared quite
well over the last twelve to fifty months. Now, I think the situation remains complex. I do believe that with a very persistent inflation, interests will further go up on both sides of the ocean, And I also do believe Guy, that the interest will then stay a little bit longer elevated than potentially a lot of people think. And that means that I still believe that there is a chance of a mild recession in the US at the end of twenty three early twenty four, as well as in Europe.
You see that Germany is in a technical recession, has been in a technical recession. So I don't believe that we will see a material recession, but I do think that uncertainty still prevails, and hence we need to watch out. And the second half of twenty twenty three is for sure a half which is still complex and is still challenging.
So does that mean that the Q two guidance that your CFO gave a few days back was just a was just a blip? He was talking about fixed income being down fifteen to twenty percent. You talk about the fact that the second half is going to see significant uncertainy. That's a good environment for fixed income. So therefore, was the Q two guidance just a blip? And do you still believe that the fullier numbers are going to be better than the numbers that James gave well, let's.
Start with your world bank, and there we see a good momentum. That is the strategy of Deutsche Bank. Then we says we need a more balanced bank. That was exactly what we wanted to achieve in twenty nineteen when we called out the transformation of Deutsche Bank. And we see the results. We have a very strong corporate bank, a very nice developing private bank, and therefore we can confirm our twenty eight to twenty nine billion of revenues
for this year. We see the momentum. We see a Q two to be honest, Q two twenty twenty three from a revenue point of view, which is higher than Q two twenty twenty two. So overall, I would say this bank is faring well. The strategy is paying off. With regard to the investment bank, we always said that we had a record year. We had an extraordinary strong
year in the fake business in twenty twenty two. I still think that actually in Q one and Q two we have done well, but the overall market is a bit weaker than in the record year of twenty twenty two. But I do believe with some uncertainties, for instance, the dead ceiling issue going away in the US then with the still complex situation which is in front of us, I do believe that in Q three and Q four there is momentum in the business on.
The fix side.
But for us, as a strategy of Deutsche Bank, it's important that we've further balance out the investment bank or all. We have a very strong fake business, we have a very strong DCM business. What we really wanted to achieve is that also the owen A business is further s frankstened and hence we've put a lot of investments into that.
So just to wrap this part of the conversation up, it is going to be it's going to be an operating environment for the fake business that is likely to be less good than next year than last year. Q two may or may not be a blip. You still see uncertainty in the second half of the year, which could provide opportunity. So on balance, the numbers are likely to be slightly better than the fifteen to twenty percent that James guided to.
That's what I would say for the coming months and weeks.
Again, Q two was.
Also a particular quarter given the situation also which we had in the US. We can already see also now in June on the most recent days that there is a that there is momentum in the business. So I'm overill quite comfortable also with the Fig business. And again Q two was a particular quarter. I would say that the Fig business in Q three and Q four I think there was a slight recovery.
You are very good at keeping secrets. Let's talk about the new Mist acquisition for those of us to follow the bank. It caught us all by surprise. I understand you'd been working on it for quite some time, but it definitely caught us by surprise. Was the offer just too good to refuse? Was the price just too good to refuse? Where did it come from? Where did where did your decision to go in this direction the advisory business come from?
Well, I just said it in my previous answer. You know, I'm a big believer, and the whole management team of Deutsche Bank is a big believer that we need balance business, not only for the overall bank. That was the reason why we did the transformation four years ago. Stable, well balanced set up with four businesses. In each of those business I again want to be balanced, and we have a very strong thick and DCM business. Where we wanted
to further invest is in the ONA business. And you know, we looked at Numis for a long long time, and yes we kept the secret quite well, and we think it's an optimal addition to our business mix and to our offerings in Europe and in particular in the UK. The UK is from a fee market pool, it's the most lucrative European market. We are adding one hundred and seventy top corporate lines and it fits beautifully to our
global house bank concept. Everybody is only thinking about the investment banking offering, and yes that's obviously something we are very much interested in and it fits to our existing positioning in the UK. But we have a really well functioning corporate bank. So we have one hundred and seventy additional clients with Numis now and we can offer our corporate banking product and at the same time we have a private bank where I think we can also do
the one or the other things. So the over global houseback concept is fitting very well to Numous and therefore we looked at it very carefully. I'm very glad about the job Fabrizo and the team have done and now we concluded this and now we need to make the final steps.
Right.
Are you keeping more secrets from me?
Are there?
You talk about the other divisions and the fact that you want to you want to have balance. Are there other deals in the offering, even another great opportunity came along. Are you still interested or is the dry powder gone?
No?
I would say, look, I think we are very careful and cautious planning team. But of course we always said that after restructuring and positioning this bank, we are up for growth, and we always says we want to grow in more capital led products, which is for instance, the o NA business in the m and a business in the advisory business. But you have also seen that we have done senior hires again in corporate finance, but also
in the wealth management business. So we think that we can further balance out the business at some point in time over two three years. You know, we want to also and we need to plan for a situation that ANII is at some point in time again coming down. We need then additional income streams, and this bank is planning for that and is investing for that right now.
And hence a I wouldn't tell you about secrets because you just said we are good at it at keeping it, but that there is a clear growth strategy in parts like wealth management, origination advisory. Yes, we are focusing on that and with the recent hires we've seen.
That you talk about HighRes on the well side, though, do you see the growth they're being organic? Do you see it being via acquisition of talent rather than acquisition of businesses?
Well, it's it's it's both. But I do believe that we have now such a nice positioning and such a nice structure that we really do believe that if you have a chance to acquire and get good and great talent in all kinds of regions, this is a really good way in step by step growing your business. Claudio DeSanctis has done that very successfully in Asia in other parts of southern Europe. So that is the first way of growing.
If Commons Bank ever came back, would you be interested in that acquisition. They have got a huge deposit base, which in this environment is hugely attractive.
Well, we also have a huge deposit base.
Together it will be even bigger.
Yeah.
But I think we have shown also during the recent volatilities in the market, how firm and how stable. Our deposit base is so that is not a reason to actually think about further enlarging it or acquiring somebody else. I think the full focus of Deutsche Bank is now, after successfully delivering transformation over the last three or four years, is now growing into an area where we have a return on equity of larger than ten percent in twenty twenty five. We are in a good way of achieving that.
The first quarter of twenty twenty three has clearly shown the strength of Torche Bank, and we can control it by ourselves. We can achieve that by ourselves, and that is all focused.
This is Bloomberg Daybreak Today, your morning brief on the stories making news from Wall Street to Washington and beyond.
Look for us on your podcast feed at six am Eastern each morning, on Apple, Spotify, and anywhere else you get your podcasts.
You can also listen live each morning starting at five am Wall Street time, on Bloomberg eleven three to zero in New York, Bloomberg ninety nine to one in Washington, Bloomberg one oh six' one in Boston, and Bloomberg ninety sixty in San Francisco.
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Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak