April 19, 2024 • 14 mins
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Israel launched a retaliatory strike on Iran less than a week after Tehran’s rocket and drone barrage, according to two US officials, but Iranian media appeared to downplay the incident in the hours that followed the initial reports.
(2) Oil and gold surged, then retreated, after Iranian media appeared to downplay retaliatory strikes following last weekend’s unprecedented bombardment of Israel.
(3) The strikes comes hours after a top Iranian general said his country may reconsider its nuclear policies if Israel threatens to attack its atomic sites, an implicit warning that Tehran might race toward a nuclear weapon as rhetoric continued to escalate in the wake of its April 13 drone and missile attack.
(4) Netflix posted its best start to the year since 2020, attracting more new customers than anyone expected thanks to a strong slate of original programs and a crackdown on password sharing.
(5) Some lenders to Thames Water could face losses of as much as 40% in the event that it ends up being nationalized by the UK government, according to contingency plans drawn up by officials.
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Daba podcast, available every morning on Apple, Spotify or wherever
you listen. It's Friday, the nineteenth of April here in London.
I'm Caroline Hepka.
Speaker 2 (00:18):
And I'm Tom McKenzie. Coming up today targeting Iran. US
officials tel Bloomberg. Israel has struck the country less than
a week after Tehran's rocket and drone barrage.
Speaker 1 (00:28):
Socks slump and haven assets surge. Markets react to fears
of growing escalation in the Middle East, but Iran appears
to downplay the developments.
Speaker 2 (00:38):
Plus Project Timber, a potential nationalization of Thames Water could
mean some creditors facing losses of up to forty percent.
Speaker 1 (00:47):
Let's start with a roundup of our top stories.
Speaker 2 (00:50):
Israel has launched a missile strunk on Iran. That is
according to US officials speaking to Bloomberg, but Iran appears
to be downplaying the developments. One Eraian news agency says
an explosion was heard in the city of Isfahan, while
the state broadcaster says they've received no reports of damage
after air defense systems reactivated. It follows Tehran's drone and
(01:12):
missile attack on Israel over the weekend, which in turn
was retaliation for the bombing of an Iranian consulate in
Damascus at the beginning of April. Bloomberg's EMIR News director
Ross Madison says there are a number of targets Israel
may have been targeting in the region.
Speaker 3 (01:29):
That's the city that houses a number of military bases,
but also some key parts of around nuclear facilities, and
we know that there's been some sizeable blasts that have
happened there.
Speaker 2 (01:41):
Rosa Madison reporting there. As we continue, of course to
follow developments on this story. Bloomberg understands that Israeli officials
notified the US yesterday that they planned to retaliate in
the next twenty four to forty eight hours. World leaders
have been exerting heavy diplomatic pressure on Israeli Prime Minister
Benjamin at Niahu to show restraints in his response. However,
(02:03):
Etniahu and his political allies had made clear that they
would take action.
Speaker 1 (02:08):
Global markets have been reacting to fears of escalating tensions
in the Middle East. Oil prices hit more than ninety
dollars a bout on breakthrough futures before pulling back slightly.
Traders had been anticipating a response from Israel to last
weekend's attack. Nathan Sheets, global chief economists that City Group, says,
so far things are contained.
Speaker 4 (02:28):
I think at the moment, the market's telling us that
the balance of risks here looks to be reasonably favorable
and the response in the oil market has been contained.
And if that's the correct assessment, then I think the
broader implications of this are it doesn't escalate and we're
(02:49):
able to continue on more or less in the status quo.
Speaker 1 (02:55):
So that was the global Chief Economists at City Group,
Nathan Sheet, speaking to us just earlier on Bloomberg Radio.
The news did also spark flight to haven assets. The
dollar and yen rallied along with US treasuries, whilst equities
in Asia sold off. Gold also surged close to a
record high before pairing some of the gains.
Speaker 2 (03:15):
Now, the International Atomic Energy Agency he says there was
no damage to Iran's nuclear sites. The confirmation comes just
hours after a top Iranian general said his country may
reconsider its nuclear policies if Israel threatens to attack its
atomic sites. Meanwhile, the UK and US issued new sanctions
(03:35):
on Iran, targeting organizations and leaders, including the chief of
its army. British Foreign Secretary David Cameron says it's about
sending a message.
Speaker 5 (03:42):
Given Iran's behavior in backing the who is backing hez Bala,
backing Hamas, and of course the appalling state on state
attack on Israel, it's quite right that with partners we
take further action on sanctions.
Speaker 2 (03:57):
David Cameron spoke as he joined G seven foreign ministers
the summit in Italy to discuss the situation in the
Middle East.
Speaker 1 (04:04):
US lawmakers in the House of Representatives are expected to
vote this weekend on long delayed military aid for Israel,
Ukraine and Taiwan. Bloomberg's Ed Baxter has the details.
Speaker 6 (04:15):
House Speaker Mike Johnson says he expects to bring up
split Ukraine, Israel Taiwan aid bills tomorrow. The Chair of
the House Intelligence Committee, Mike Turner, on Bloomberg's balance of power,
says he thinks it is essential to get aid going
to Ukraine this week.
Speaker 7 (04:30):
They're running out of ammunition. Russia is certainly surging and
putting additional pressure on the front line, and also the
lack of US support is impacting morale even in Ukraine.
Speaker 6 (04:42):
House Minority leader Hakim Jeffrey says Democrats are going to
do what's necessary to get this across the finish line.
The Senate looks to move next week. Ed Baxter Bloomberg Radio.
Speaker 2 (04:53):
Switching focus now and Netflix has reported its best start
to the year since twenty twenty. The streaming giant added
over nine million new customers in the first three months
of twenty twenty four, more than had been expected, but
shares fell in after hours training on a slightly weak
in then expected revenue forecast for the second quarter. Netflix
also announced it would stop sharing quarterly membership numbers. Coc
(05:15):
Ted Sarandos says they prefer to focus on other metrics.
Speaker 7 (05:20):
So happy members watch more, they stick around longer.
Speaker 8 (05:23):
They tell friends which all grows, engagement, revenue, and profit
are north stars, and we believe that those are the
measurements of success in streaming.
Speaker 2 (05:33):
Netflix co CEO Ted Surroundels, speaking there, Netflix says about
forty percent of its new members are selecting its cheaper
advertising supported version, adding to earnings.
Speaker 1 (05:45):
Lenders to Thames Water could face losses of as much
as forty percent if the company is nationalized. That's according
to a contingency plan dubbed Project Timber, drawn up by
government officials, which explores how nationalizing the high indebted utility
would work. Officials at the Department for Environment and Rural
Affairs declined to answer questions about the contingencies being drawn up.
(06:09):
Thames Water had postponed a required update to its business
plan due to be released today, according to people familiar
with the matter, A new proposal is now expected next week.
And those were a few of our top stories today.
Speaker 2 (06:21):
Okay, let's get the latest then on the events in
the Middle East. After your US officials, of course told
Bloomberg that Israel had struck targets in Iran. There are
conflicting reports, as we said, from Iranian news agencies about
exactly what has happened. Dana Crash, our Middle East Breaking
news editor, joins us. Now, Dana, let's start there. Then,
what do we know at this point?
Speaker 9 (06:42):
Good morning.
Speaker 8 (06:43):
So initial reports from Iran suggest there was some sort
of an attack, as reports trickled in in the early
hours of the morning of a blast or Isfahan, where
we know there are military sites and nuclear infrastructure. So
the blasts are likely the result of what Iranian media
is saying is defense systems activated to intercept what has
(07:06):
now we know our drones. We also had a report
out that the nuclear site there is completely safe, and
that's of course reassuring, as Iran and Israel are art rivals,
but they also have nuclear programs. And some hours later
we saw the media there in Iran downplaying, with some
reporters even calling these flying objects miniature drones and I
(07:27):
quote but maybe wouldn't go that far because we know
you as officials told Bloomberg that Israel had launched a
retaliatory retaliatory air strike. And in Iran also we're seeing
live footage on state TV showing life is normal in Esfahan,
there are no strikes or the aftermath of a strike.
Speaker 1 (07:46):
Okay, So that's what's been happening in Iran. What have
been these statements and the signals out of Israel.
Speaker 8 (07:53):
So in Israel has not said or taken responsibility for
this attack, and usually they don't do that for any
thing or any operations they're suspected of doing abroad. But
it seems maybe that Nataniello had heeded those calls from
the US and its allies in the West asking it
not to respond in a way that would drag the
entire region into a full blown war, because it feels
(08:16):
really with every strike, with every retaliatory attack, we are
on the edge.
Speaker 6 (08:20):
Here.
Speaker 8 (08:21):
The most recent comment that we had is from the
National Security Minister on Twitter with just a simple word,
calling these attacks week. So here, again, Nataniejo is in
a dilemma between it's his allies in the West and
the US telling them not to respond to harshly, and
you have the hardliners asking him to do it, and
(08:43):
they are now perhaps criticizing that exact response.
Speaker 2 (08:47):
Okay, so that's the debate that continues within Israel, as
you say, retaliation for retaliation for retaliation. Meanwhile, in Iran,
what are officials they're saying. We had some very strong
words coming out from one of the officials in the
UN yesterday before of course, this attack, at least according
to US officials, What are the Irain officials saying.
Speaker 8 (09:04):
Now, So the most recent thing we have is on
the terminal, of course, it's Iran's army chief saying Israel
has already seen our reaction. This may be a good
indication that Iran might not retaliate, and them downplaying this
on state right and media means that there is no
reason for Iran to retaliate. Now that's also a good sign,
(09:27):
but of course it remains to be seen along the
day what really happened inside Iran.
Speaker 1 (09:34):
Yeah, and so in terms of putting it into perspective, Dana,
in terms of an escalation, is it being seen as
an escalation so far? Another tip for how are people
thinking about this?
Speaker 8 (09:47):
I mean with every attack, I think it is an
escalation because you always run the risk of someone overplaying
their hand or making a mistake in an attack that
would just infuriate the other party. So, like I said before,
in the region, we're really on the edge here with
every single attack as we try to anticipate what the
response would be. So, yes, there still is an escalation,
(10:09):
although this time around Iran might not want to respond back.
Speaker 1 (10:14):
Okay, Donna Crage, thank you so much for your time
this morning and for your reporting. That is our Bloomberg
Midle East News editor, Donna Create again.
Speaker 2 (10:21):
Treasuries of course rallying yields lower, but giving up some
of those gains. It was really pronounced straight after the
news of this attack. Now yields are up just between
three to five basis points across the treasury curve. The
dollar remains bid, but again the moves into the dollar
have eased as well. If you look at the Bloomberg
Dollar Index for the context, then on the market moves
(10:43):
around this crucial geopolitical story. Let's bring in our managing
editor for FX and Rates, Rachel Evans. Rachel talked to
us about what you've been seeing in the FX and
bond markets and the reaction.
Speaker 9 (10:54):
Yeah, I mean, I think we've had a very classic
reaction that we would normally fight into teer political risks
this morning. You know, you typically see sort of treasuries,
you're really kind of rallying into geopolitical risk. You see
the dollar rally, We've seen gold up, oil up. I mean,
this is really kind of a very textbook example. I
think one of the things that I'm kind of keen
to see how it plays out over the next few
(11:15):
days is the degree to which sort of tensions in
the Middle East can keep that haven bid for assets
like treasuries going. We've definitely seen your upward pressure on
yields being kind of the theme of the moment, all
the talk about inflation, how much the Fed can cut
this year, So whether the geopolitical risk, can I guess
(11:37):
stir a kind of longer, longer lasting bid for treasuries
than perhaps just one day. I think kind of remains
to be seen that alongside carry trades, which I think
I've been getting really badly hit, I think it's going
to be really interesting to see whether we see some
of those unwind as some of the traditional funders of
carry trades, the Swiss Frank and the En and have
a haven bid on this news.
Speaker 1 (11:57):
Yeah, absolutely, I mean, and talk us through some of
the more preferred haven bids that we saw this morning,
and there were quite a lot actually that saw significant moves.
Speaker 9 (12:08):
Yeah, I mean. On the currency side, Swiss Frank has
really been kind of the standout performer of the day,
you know, obviously that's a classic sort of a haven bid.
And the Yen as well, you know, getting a bit
of strength, which I'm sure is definitely something that the
Japanese authorities are happy to see, just given that the
yen has very much been under pressure recently. So you know,
obviously these currencies, because they have been weak in recent months,
(12:30):
have been used as kind of the funding lego of
the carry trade to buy higher yielding currencies like the
Mexican pace, So and we saw some of those unwinding
earlier today, the Pacer in particular getting absolutely hammered. You know,
it's a very kind of risk on currency. So when
we do see risk off sort of sentiment, that does
tend to kind of pair. So over the next few days,
like if we do see a kind of like a
(12:51):
bigger kind of pick up in some of those rallies
and Swiss frank and Yen, we could see some quite
painful and windings of some of those carry trades around
the world.
Speaker 2 (12:58):
Yeah, the Mexican pestor move was interesting, wasn't it. And
as you said, the carry trades are borrowing in y
end buying buying in the high yielding Mexican currency. When
it comes to clearly the Middle East is the top
story right now for US and for the market, but
this week as well, the key theme prior to this
was the adjustment to a more hawkish fed. How are
(13:20):
the markets? How does that tie into what you've been watching?
Speaker 9 (13:23):
Yeah, well, whenever you see geopolitical turmoil, there's that question
about you know, whether we're going to see sort of
a hot war and how that then ties into oil prices.
Your oil prices going up. It's, you know, all else
being equal, an inflationary effect, given that you already have
central bankers thinking about sticky inflation and the degree to
(13:44):
which they can sort of cut rates, well, inflation stays
pretty hot. If you have inflationary pressures coming in through
from oil as well, that just adds another kind of
tricky sort of calculation for central bankers to be weighing in. So,
if anything, kind of the geopolitical situation just really makes
that the job for central bank is harder as they
think about their own economies and whether they can actually
(14:06):
cut rights this year.
Speaker 10 (14:08):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 1 (14:14):
Look for us on your podcast feed every morning, on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 10 (14:20):
You can also listen live each morning on London DAB Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 1 (14:26):
Our flagship New York station is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
I'm Caroline Hepka and.
Speaker 10 (14:35):
I'm Stephen Carroll. Join us again tomorrow morning for all
the news you need to start your day right here
on Bloomberg day Break. Europe
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Daba podcast, available every morning on Apple, Spotify or wherever
you listen. It's Friday, the nineteenth of April here in London.
I'm Caroline Hepka.
Speaker 2 (00:18):
And I'm Tom McKenzie. Coming up today targeting Iran. US
officials tel Bloomberg. Israel has struck the country less than
a week after Tehran's rocket and drone barrage.
Speaker 1 (00:28):
Socks slump and haven assets surge. Markets react to fears
of growing escalation in the Middle East, but Iran appears
to downplay the developments.
Speaker 2 (00:38):
Plus Project Timber, a potential nationalization of Thames Water could
mean some creditors facing losses of up to forty percent.
Speaker 1 (00:47):
Let's start with a roundup of our top stories.
Speaker 2 (00:50):
Israel has launched a missile strunk on Iran. That is
according to US officials speaking to Bloomberg, but Iran appears
to be downplaying the developments. One Eraian news agency says
an explosion was heard in the city of Isfahan, while
the state broadcaster says they've received no reports of damage
after air defense systems reactivated. It follows Tehran's drone and
(01:12):
missile attack on Israel over the weekend, which in turn
was retaliation for the bombing of an Iranian consulate in
Damascus at the beginning of April. Bloomberg's EMIR News director
Ross Madison says there are a number of targets Israel
may have been targeting in the region.
Speaker 3 (01:29):
That's the city that houses a number of military bases,
but also some key parts of around nuclear facilities, and
we know that there's been some sizeable blasts that have
happened there.
Speaker 2 (01:41):
Rosa Madison reporting there. As we continue, of course to
follow developments on this story. Bloomberg understands that Israeli officials
notified the US yesterday that they planned to retaliate in
the next twenty four to forty eight hours. World leaders
have been exerting heavy diplomatic pressure on Israeli Prime Minister
Benjamin at Niahu to show restraints in his response. However,
(02:03):
Etniahu and his political allies had made clear that they
would take action.
Speaker 1 (02:08):
Global markets have been reacting to fears of escalating tensions
in the Middle East. Oil prices hit more than ninety
dollars a bout on breakthrough futures before pulling back slightly.
Traders had been anticipating a response from Israel to last
weekend's attack. Nathan Sheets, global chief economists that City Group, says,
so far things are contained.
Speaker 4 (02:28):
I think at the moment, the market's telling us that
the balance of risks here looks to be reasonably favorable
and the response in the oil market has been contained.
And if that's the correct assessment, then I think the
broader implications of this are it doesn't escalate and we're
(02:49):
able to continue on more or less in the status quo.
Speaker 1 (02:55):
So that was the global Chief Economists at City Group,
Nathan Sheet, speaking to us just earlier on Bloomberg Radio.
The news did also spark flight to haven assets. The
dollar and yen rallied along with US treasuries, whilst equities
in Asia sold off. Gold also surged close to a
record high before pairing some of the gains.
Speaker 2 (03:15):
Now, the International Atomic Energy Agency he says there was
no damage to Iran's nuclear sites. The confirmation comes just
hours after a top Iranian general said his country may
reconsider its nuclear policies if Israel threatens to attack its
atomic sites. Meanwhile, the UK and US issued new sanctions
(03:35):
on Iran, targeting organizations and leaders, including the chief of
its army. British Foreign Secretary David Cameron says it's about
sending a message.
Speaker 5 (03:42):
Given Iran's behavior in backing the who is backing hez Bala,
backing Hamas, and of course the appalling state on state
attack on Israel, it's quite right that with partners we
take further action on sanctions.
Speaker 2 (03:57):
David Cameron spoke as he joined G seven foreign ministers
the summit in Italy to discuss the situation in the
Middle East.
Speaker 1 (04:04):
US lawmakers in the House of Representatives are expected to
vote this weekend on long delayed military aid for Israel,
Ukraine and Taiwan. Bloomberg's Ed Baxter has the details.
Speaker 6 (04:15):
House Speaker Mike Johnson says he expects to bring up
split Ukraine, Israel Taiwan aid bills tomorrow. The Chair of
the House Intelligence Committee, Mike Turner, on Bloomberg's balance of power,
says he thinks it is essential to get aid going
to Ukraine this week.
Speaker 7 (04:30):
They're running out of ammunition. Russia is certainly surging and
putting additional pressure on the front line, and also the
lack of US support is impacting morale even in Ukraine.
Speaker 6 (04:42):
House Minority leader Hakim Jeffrey says Democrats are going to
do what's necessary to get this across the finish line.
The Senate looks to move next week. Ed Baxter Bloomberg Radio.
Speaker 2 (04:53):
Switching focus now and Netflix has reported its best start
to the year since twenty twenty. The streaming giant added
over nine million new customers in the first three months
of twenty twenty four, more than had been expected, but
shares fell in after hours training on a slightly weak
in then expected revenue forecast for the second quarter. Netflix
also announced it would stop sharing quarterly membership numbers. Coc
(05:15):
Ted Sarandos says they prefer to focus on other metrics.
Speaker 7 (05:20):
So happy members watch more, they stick around longer.
Speaker 8 (05:23):
They tell friends which all grows, engagement, revenue, and profit
are north stars, and we believe that those are the
measurements of success in streaming.
Speaker 2 (05:33):
Netflix co CEO Ted Surroundels, speaking there, Netflix says about
forty percent of its new members are selecting its cheaper
advertising supported version, adding to earnings.
Speaker 1 (05:45):
Lenders to Thames Water could face losses of as much
as forty percent if the company is nationalized. That's according
to a contingency plan dubbed Project Timber, drawn up by
government officials, which explores how nationalizing the high indebted utility
would work. Officials at the Department for Environment and Rural
Affairs declined to answer questions about the contingencies being drawn up.
(06:09):
Thames Water had postponed a required update to its business
plan due to be released today, according to people familiar
with the matter, A new proposal is now expected next week.
And those were a few of our top stories today.
Speaker 2 (06:21):
Okay, let's get the latest then on the events in
the Middle East. After your US officials, of course told
Bloomberg that Israel had struck targets in Iran. There are
conflicting reports, as we said, from Iranian news agencies about
exactly what has happened. Dana Crash, our Middle East Breaking
news editor, joins us. Now, Dana, let's start there. Then,
what do we know at this point?
Speaker 9 (06:42):
Good morning.
Speaker 8 (06:43):
So initial reports from Iran suggest there was some sort
of an attack, as reports trickled in in the early
hours of the morning of a blast or Isfahan, where
we know there are military sites and nuclear infrastructure. So
the blasts are likely the result of what Iranian media
is saying is defense systems activated to intercept what has
(07:06):
now we know our drones. We also had a report
out that the nuclear site there is completely safe, and
that's of course reassuring, as Iran and Israel are art rivals,
but they also have nuclear programs. And some hours later
we saw the media there in Iran downplaying, with some
reporters even calling these flying objects miniature drones and I
(07:27):
quote but maybe wouldn't go that far because we know
you as officials told Bloomberg that Israel had launched a
retaliatory retaliatory air strike. And in Iran also we're seeing
live footage on state TV showing life is normal in Esfahan,
there are no strikes or the aftermath of a strike.
Speaker 1 (07:46):
Okay, So that's what's been happening in Iran. What have
been these statements and the signals out of Israel.
Speaker 8 (07:53):
So in Israel has not said or taken responsibility for
this attack, and usually they don't do that for any
thing or any operations they're suspected of doing abroad. But
it seems maybe that Nataniello had heeded those calls from
the US and its allies in the West asking it
not to respond in a way that would drag the
entire region into a full blown war, because it feels
(08:16):
really with every strike, with every retaliatory attack, we are
on the edge.
Speaker 6 (08:20):
Here.
Speaker 8 (08:21):
The most recent comment that we had is from the
National Security Minister on Twitter with just a simple word,
calling these attacks week. So here, again, Nataniejo is in
a dilemma between it's his allies in the West and
the US telling them not to respond to harshly, and
you have the hardliners asking him to do it, and
(08:43):
they are now perhaps criticizing that exact response.
Speaker 2 (08:47):
Okay, so that's the debate that continues within Israel, as
you say, retaliation for retaliation for retaliation. Meanwhile, in Iran,
what are officials they're saying. We had some very strong
words coming out from one of the officials in the
UN yesterday before of course, this attack, at least according
to US officials, What are the Irain officials saying.
Speaker 8 (09:04):
Now, So the most recent thing we have is on
the terminal, of course, it's Iran's army chief saying Israel
has already seen our reaction. This may be a good
indication that Iran might not retaliate, and them downplaying this
on state right and media means that there is no
reason for Iran to retaliate. Now that's also a good sign,
(09:27):
but of course it remains to be seen along the
day what really happened inside Iran.
Speaker 1 (09:34):
Yeah, and so in terms of putting it into perspective, Dana,
in terms of an escalation, is it being seen as
an escalation so far? Another tip for how are people
thinking about this?
Speaker 8 (09:47):
I mean with every attack, I think it is an
escalation because you always run the risk of someone overplaying
their hand or making a mistake in an attack that
would just infuriate the other party. So, like I said before,
in the region, we're really on the edge here with
every single attack as we try to anticipate what the
response would be. So, yes, there still is an escalation,
(10:09):
although this time around Iran might not want to respond back.
Speaker 1 (10:14):
Okay, Donna Crage, thank you so much for your time
this morning and for your reporting. That is our Bloomberg
Midle East News editor, Donna Create again.
Speaker 2 (10:21):
Treasuries of course rallying yields lower, but giving up some
of those gains. It was really pronounced straight after the
news of this attack. Now yields are up just between
three to five basis points across the treasury curve. The
dollar remains bid, but again the moves into the dollar
have eased as well. If you look at the Bloomberg
Dollar Index for the context, then on the market moves
(10:43):
around this crucial geopolitical story. Let's bring in our managing
editor for FX and Rates, Rachel Evans. Rachel talked to
us about what you've been seeing in the FX and
bond markets and the reaction.
Speaker 9 (10:54):
Yeah, I mean, I think we've had a very classic
reaction that we would normally fight into teer political risks
this morning. You know, you typically see sort of treasuries,
you're really kind of rallying into geopolitical risk. You see
the dollar rally, We've seen gold up, oil up. I mean,
this is really kind of a very textbook example. I
think one of the things that I'm kind of keen
to see how it plays out over the next few
(11:15):
days is the degree to which sort of tensions in
the Middle East can keep that haven bid for assets
like treasuries going. We've definitely seen your upward pressure on
yields being kind of the theme of the moment, all
the talk about inflation, how much the Fed can cut
this year, So whether the geopolitical risk, can I guess
(11:37):
stir a kind of longer, longer lasting bid for treasuries
than perhaps just one day. I think kind of remains
to be seen that alongside carry trades, which I think
I've been getting really badly hit, I think it's going
to be really interesting to see whether we see some
of those unwind as some of the traditional funders of
carry trades, the Swiss Frank and the En and have
a haven bid on this news.
Speaker 1 (11:57):
Yeah, absolutely, I mean, and talk us through some of
the more preferred haven bids that we saw this morning,
and there were quite a lot actually that saw significant moves.
Speaker 9 (12:08):
Yeah, I mean. On the currency side, Swiss Frank has
really been kind of the standout performer of the day,
you know, obviously that's a classic sort of a haven bid.
And the Yen as well, you know, getting a bit
of strength, which I'm sure is definitely something that the
Japanese authorities are happy to see, just given that the
yen has very much been under pressure recently. So you know,
obviously these currencies, because they have been weak in recent months,
(12:30):
have been used as kind of the funding lego of
the carry trade to buy higher yielding currencies like the
Mexican pace, So and we saw some of those unwinding
earlier today, the Pacer in particular getting absolutely hammered. You know,
it's a very kind of risk on currency. So when
we do see risk off sort of sentiment, that does
tend to kind of pair. So over the next few days,
like if we do see a kind of like a
(12:51):
bigger kind of pick up in some of those rallies
and Swiss frank and Yen, we could see some quite
painful and windings of some of those carry trades around
the world.
Speaker 2 (12:58):
Yeah, the Mexican pestor move was interesting, wasn't it. And
as you said, the carry trades are borrowing in y
end buying buying in the high yielding Mexican currency. When
it comes to clearly the Middle East is the top
story right now for US and for the market, but
this week as well, the key theme prior to this
was the adjustment to a more hawkish fed. How are
(13:20):
the markets? How does that tie into what you've been watching?
Speaker 9 (13:23):
Yeah, well, whenever you see geopolitical turmoil, there's that question
about you know, whether we're going to see sort of
a hot war and how that then ties into oil prices.
Your oil prices going up. It's, you know, all else
being equal, an inflationary effect, given that you already have
central bankers thinking about sticky inflation and the degree to
(13:44):
which they can sort of cut rates, well, inflation stays
pretty hot. If you have inflationary pressures coming in through
from oil as well, that just adds another kind of
tricky sort of calculation for central bankers to be weighing in. So,
if anything, kind of the geopolitical situation just really makes
that the job for central bank is harder as they
think about their own economies and whether they can actually
(14:06):
cut rights this year.
Speaker 10 (14:08):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 1 (14:14):
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and anywhere else you get your podcasts.
Speaker 10 (14:20):
You can also listen live each morning on London DAB Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 1 (14:26):
Our flagship New York station is also available on your
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I'm Caroline Hepka and.
Speaker 10 (14:35):
I'm Stephen Carroll. Join us again tomorrow morning for all
the news you need to start your day right here
on Bloomberg day Break. Europe
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