April 11, 2024 • 18 mins
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Investors are signaling the Federal Reserve will cut interest rates just twice this year, starting in September, after a fresh round of hot inflation sent Treasury yields soaring to 2024 highs.
(2) Traders pared bets on European Central Bank interest-rate cuts after US inflation topped forecasts, with markets now turning their attention to President Christine Lagarde’s remarks on Thursday.
(3) The US and its allies believe major missile or drone strikes by Iran or its proxies against military and government targets in Israel are imminent, in what would mark a significant widening of the six-month-old conflict, according to people familiar with the intelligence.
(4) A key creditor to Thames Water has warned that the UK risks deterring investment from its other infrastructure assets if it takes over the firm and imposes losses on bondholders.
(5) China’s consumer prices barely increased from a year earlier and industrial prices continued to slump, underscoring the deflationary pressures that remain a key threat to the economy’s recovery.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news. This is the Boomberg
Daybake You At podcast, available every morning on Apple, Spotify
or wherever you listen. It's Thursday, the eleventh of April
in London. I'm Caroline Hepki.
Speaker 2 (00:18):
And I'm Stephen Carroll. Coming up today. Counting down from
six traders wind back FED cut bets for the year
as focus moves to Lagarde and the ECB US.
Speaker 1 (00:29):
Intelligence sources tell Bloomberg they expect an imminent missile strike
on Israel by Iran and its proxies.
Speaker 2 (00:36):
Plus building momentum. UK surveyors say they're increasingly optimistic about
the outlook for property prices.
Speaker 1 (00:43):
Let's start with a roundup of our top stories.
Speaker 2 (00:46):
Investors are rapidly unwinding bets on how many rate cuts
they're expecting from the Federal Reserve this year after March
is hotter than expected inflation data. Traders now see the
Fed just cutting twice in twenty twenty four, with the
first reduction pushed back from June to September. Month on
month course, EPI rose by a faster than expected zero
(01:06):
point four percent last month. JP Morgan's chief Global strategist
David Kelly says the writings on the wall for cuts
in the coming months.
Speaker 3 (01:14):
The sound that you heard there was the door slamming
on a June rate cut. That's gone. It's definitely more
inflation than fed once. I still think that they ought
to normalize rates over time. I'd be happy enough if
they started rates in June, but I think this means
that they won't.
Speaker 2 (01:29):
David Kelly says his current base case is for two
cuts this year, one in September and one in December.
It was the third month in a row of higher
than expected underlying US inflation, and followed a strong month
of job creation in March. Benchmark tenure treasuries reacted to
the news, surging above four and a half percent for
the first time since November.
Speaker 1 (01:50):
That US inflation surprise also has traders second guessing the
European Central Bank's rate path. The chance of a first
quarter point move in June has now fo all into
around eighty percent after being fully priced in just last week.
Speaking hours before that US CPI print, Goldman Sachs's chief
economist Yarysteath, may the case for what many still see
(02:13):
as a June cut by the ECB.
Speaker 4 (02:16):
I think the cut and drowne is very likely, and
the debate now really is shifting towards the pace. We
have strong evidence that policy is restrictive. I think we
are gaining confidence that inflation is coming back to two percent.
Speaker 1 (02:31):
Well, we'll have a better sense of whether Yarysten's view
is still the base case for many when the ECB
President Christine Legarde speaks later today. Your area officials are
expected to hold interest rates steady at today's meeting, but
have signaled readiness to start easing in the coming months.
Speaker 2 (02:50):
Bloomberg Economics is upgraded its global economic growth forecast for
this year, with the warning that central bank rate cuts
may be delayed. Our economists are expecting expanison of two
point nine percent in twenty twenty four. That's slower than
last year, but better than they had forecast last December.
Advanced economies are seen ending the year with inflation around
two and a half percent. The UK is expected to
(03:11):
grow by zero point two percent this year, slightly lagging
the Euro Area's expected expansion of zero point five percent.
Speaker 1 (03:19):
Now away from economics to geopolitics. The United States and
its allies believe Iran or its proxies will strike targets
in Israel imminently. Bloomberg has learned that intelligence sees the
targeting of government or military facilities as more a matter
of when, not if. Iran's threatened attack on Israel would
(03:40):
be retaliation for air strikes in Damascus last week that
killed senior Iranian military officials. President Biden says that Israel's security, however,
remains a US priority.
Speaker 5 (03:53):
Our commitment to Israel's security against these threatch Moran and
as proxies is ironclad to be shading in iron clad.
We're going to do all we can to protect is
real security.
Speaker 1 (04:05):
Despite the firm words on Iran, the US leader has
publicly grown more frustrated with Benjamin Etniaho's handling of the
war on Hamas.
Speaker 2 (04:15):
Chinese inflation is stalling, putting pressure on the yuan and
threatening growth. The country's consumer prices have barely budged from
a year ago. Bloomberg's Brian Curtis has more from Hong Kong.
Speaker 6 (04:25):
The CPI rose a tenth of a percent in March
from the prior year. The estimate was for a gain
of four tenths of a percent. In the meantime, producer
price is slumped even further, underscoring deflationary pressures in the
Chinese economy, Factory gate prices down two point eight percent
from a year earlier, extending a falling streak for the
eighteenth consecutive month. The price slowdown suggests that China may
(04:49):
not get much help from local consumers to meet the
government's growth targets in Hong Kong, Brian Curtis Spoomberg Radio here.
Speaker 1 (04:57):
In the UK, property surveyors are the most stimistic about
bar demand that they've been in over a year. According
to a report from the Royal Institution of Chartered Surveyors,
UK home sales could see an upward surge over the
next few months as perspective home buyers bet on lower
interest rates. The supply of available properties is also increasing,
(05:18):
but the professional body is also warning that activity will
still be relatively limited due to high mortgage rates.
Speaker 2 (05:26):
One of TAM's Water's key bondholders says any nationalization could
spark contagion risks for the whole sector. Britain's largest utility
company is still locked in crunch talks with its stakeholders
and the government. James Wilcock has more.
Speaker 7 (05:41):
Sharon Shar says investment in UK infrastructure is at risk
if bondholders get a raw deal. The warning from the
senior fund manager at Royal London comes as a debate
rages behind closed doors between the regulator, shareholders, the government
and creditors the question who should take financial responsibility for
(06:01):
the utility giant's management and sixteen billion pounds of debt.
It's worth saying Shah as a fair bit on the line.
Thameswater bonds account for two percent of his Royal London
corporate bond portfolio, acording to the latest filing data on Bloomberg.
Thameswater declined to comment on Shah's interview, but his words
are a sign that holders of debt in the utility
(06:24):
are getting increasingly rattled about the likelihood of carrying the
can in London. James Orcock, Bloomberg Radio.
Speaker 1 (06:31):
And those are our top stories this morning on the markets.
Right now, the MSCI Asia Pacific indexes down three tens
of one percent. Eurostox fifty futures are also nudging lower,
but it's the ten year treasury yield that is of
most note this morning ahead of the ECB rate decision.
US yields trading at four point five three percent those
are the markets pull.
Speaker 2 (06:51):
In a moment, we'll be digging into the latest four
Central banking ahead of today's ECB decision and thus hotter
than expected US inflation print. Also bringing you more details
on Bloomberg's reporting of a possible escalation in the Middle East,
the imminent threat of Iranian missile or drone strikes on Israel.
Our Israeli or Chief Ethan Browner will be with us
(07:12):
with the details of that. But another story that caught
our eye this morning we're thinking about the job's outlook.
Is McKinzie starting hundreds of job cuts here in the UK.
Speaker 1 (07:20):
Yeah, so three hundred and sixty jobs to go. WHYLI
client demand is slowing down. There was a big consultancy
boom in the pandemic, if you remember. Now McKinsey though
cutting headcount, but at least in a fairly narrow field.
It's the experts, the specialist technical sort advisors, so not
the kind of mainstream consultants who are going. And of
(07:45):
course McKinsey has tens of thousands of employees, but it's
still quite a significant number.
Speaker 2 (07:49):
Yeah, it's certainly very interesting to keep an eye on
what's happening in that sector. Let's get back though to
our top stories, and traders have paired bets on ECB
interest rate cuts after US core consumer price inflation beat
expectations for a third month in a row. For the
chance of a first quarter point move in June fell
to about eighty percent, there says, bonds across Asia fell sharply.
Speaker 6 (08:11):
Today.
Speaker 2 (08:12):
US treasuries a recovering slightly, but the tenure yield still
up by eighteen basis points over four and a half percent.
Joining us now from more details has Beenberg opinion columnists
Daniel mass Down. Great to have you with us on
the program this Morning's the stakes for the EASYB have
gone up. Can Europe before to delay rate cuts?
Speaker 8 (08:30):
I'm not sure they can afford not to proceed, Let's
put it that way. Unlike the situation the Federal Reserve,
you've had numerous ECB policy makers handicapping specific months quite openly,
like June. Two other points to make. One is that
(08:52):
the European the Eurozone economy is in far weaker shape
than the United States, which is just showing great resilience
contrary to what people predicted for large parts of last year. Okay,
there is no US recession, there's no sign of it imminently.
Big economies within the Eurozone like Germany have had a
(09:14):
tougher time, so that really strengthens the case for an
ECB cut from an activity point of view. And Thirdly,
they've talked so much about June and they always say, well,
you know, we make our decisions independently, we don't just
react to what's going on in the US. Well, okay,
so go ahead and cut in June.
Speaker 1 (09:34):
Well, the other question is can the ECB then deliver
multiple cuts, because that's the other view of the markets
here in Europe is that there should be multiple cuts
on the ECB, and the Fed now is only pricing too.
Speaker 8 (09:47):
A lot of this stuff is at the margin. So
let's just game out a potential ECB reduction in June,
and let's say there's another in September and another in
November or December. That would be three. If the scenario
now is the FED does too, there's not such a
large divergence there. It's not like at this point the
(10:11):
Fed's going to resume hiking and the ECB is going
to be cutting. That is a situation without a lot
of precedent. I don't see that happening.
Speaker 2 (10:21):
Let's talk about that data print from the UAS that's
sort of upsased there, well, psyclic ups at the applicrus
on where things go next gets upset. You tell us why.
Speaker 8 (10:32):
Look, it appeared as though inflation was slowly but steadily
coming down. That descent appears to be somewhat stalled, at
least from an optics perspective. If you were mindful to
push for a reduction in June, it makes your job
(10:53):
that much harder. Now. Now, look, it's important to remember
this is not the end of the world. The Fed's
target of two percent inflation over time comes from PCE
different indicator. PCE has come down dramatically to around two
point five percent from more than seven percent during inflation's peak.
(11:17):
So there has been some real success here, but we're
just sort of seemed to be bumping along this flow
that's proving pretty resistant. I also suspect part of j.
Powell's challenges is how they've talked about rate cuts. You know,
(11:37):
so if you look at the last couple of times
that interest rates have come down, so in twenty nineteen
was more of a mid cycle adjustment, but they came
down dramatically in two thousand and eight, they came down
dramatically in twenty twenty. So when people think of cuts,
they think of a weak economy. So that's not what
we have in the US. So I keep going back
(12:01):
to a remark which Pal's made at his last couple
of press conferences, which is, quote, we are well into
restrictive territory unquote. So policy can still be restrictive, but
ease up a little if you believe we are well
into restrictive territory. And I think this is where the
communications problems start to come in.
Speaker 1 (12:23):
Yeah, Daniel, thank you so much for being with us.
A Bloomberg opinion commist, Daniel Moss then on the stakes
for the ECB, and of course his conclusions from the
USCPI report yesterday.
Speaker 2 (12:34):
Next to a significant piece of Bloomberg reporting this morning.
The US and its allies believe major Iranian missilo drone
strikes against Israel may be imminent. This is according to
people familiar with intelligence reports. On Wednesday, Around's Supreme leader
Ia tala Ali Komeni vowed to punish Israel for an
attack on Syria, while the Israeli Foreign Minister is our
(12:56):
Cat's respond to that his country would respond if attacked
by joining US. Now for more details, Bloomberg Israel Bureau
Chief Ethan Bronner, Ethan, this would be a significant escalation
in the war in the Middle East. What has Bloomberg
learned in this reporting?
Speaker 9 (13:12):
Bloomberg has learned that the US its intelligence services have
come upon some fairly strong indication that Iran plans to
do something serious against Israel very soon, and the Israelis,
of course have been saying that as well. This is
in retaliation for an attack that is presumed to have
been done by Israel about ten days ago in Damascus
(13:35):
on a diplomatic compound in which seven people were killed.
The key point there is that the two of the
people were revolutionary guard commanders, as to say, Iranian commanders
of militias in Lebanon in Syria, so that by itself
you could say that that was where the escalation began.
(13:57):
And the Iranians have said aloud they're going to come
back at Israel. So everyone is kind of waiting.
Speaker 1 (14:03):
Yes, so waiting put it into context for us though,
why now, why this escalation?
Speaker 6 (14:09):
Now?
Speaker 1 (14:10):
Why the acuteness of it?
Speaker 9 (14:11):
Well, I mean, this of course all goes back to
the October seventh attack by Hamas, another Iranian backed, armed
and funded militia. Hamas attacked Israel in October seventh, and
the result of that was that several hundred thousand Israeli
is both in the south along the border with Gaza
and in the north along the border with Lebanon, abandoned
(14:34):
their homes and Israel feels that it can't let allow
them to go back until something is done quote unquote
about the militias that are on its borders. And so
the problem is there's been a lot of tit for
tat for the last six months between Israel and Hisbola. Again,
all of this is Iranian directed and helped on the
(14:57):
other side, and so Israel also has been saying, you know,
we're going to go after the head of this octopus,
not just its tentacles, and that's when it attacked the
Revolutionary Guard guys. So you know, there is a sense
in Israel that it is facing an existential struggle that
if it can't allow its people to live within its borders,
(15:19):
then it is not performing the task that the State
of Israel promises its citizens. So it's fairly hawkish. We
also have a very hawkish government here, and Iran is
also playing a very delicate game here, so you know,
we'll see, we'll see where it goes. But it doesn't
look like either country wants a regional war, but of
(15:39):
course not wanting and happening or not the same thing.
Speaker 2 (15:43):
What does the US do in this scenario if a
shadow war breaks into an open conflict, can it be
de escalated?
Speaker 9 (15:52):
Well, that's a great question. Let's start with what the
US is doing. Now. What it's doing is saying out
loud to the world and to Iran, stand shoulder to
shoulder with Israel. If Iran were to attack Israel, we
would view that as an attack on us. At the
same time, Israel, Sorry, American diplomats are making the rounds
by phone and otherwise in the region to get people
(16:15):
to talk to the Iranians to tell them to stop. Now,
if there is an attack, it'll depend on what the
attack is. I mean, if there's an attack on the
state of Israel with missiles or drones. Israel says it's
going to retaliate against Iran on its territory, and I
think the Americans would be playing a role, that's what
they've said. So now would that lead to a genuine
(16:37):
regional war.
Speaker 1 (16:38):
Who knows Israel in the mean while seems to be
pausing the offensive on Rapha for now. What is the
situation with girls at the moment? Ethan?
Speaker 9 (16:49):
So yes, we're in a pause moment. They pulled out
most of their combat troops the beginning of this week.
They repeatedly asserting that the war or cannot end until
they have invaded Rafa, where they say four hamaspittalions are ensconced.
But what's what we're waiting for is an attempt at
(17:11):
a deal between Hamas and Israel for some kind of
six week pause or ceasefire now. Yesterday, in addition to
these intelligence reports, there was an Israeli hit on the
three adult sons of Smelhania, a major leader of Ramas.
So it's not like there's a massive de escalation going
(17:32):
on there either. There is still a lot of tit
for tat and a lot of reason for concern, and
oil of course did go up yesterday.
Speaker 2 (17:40):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Streets and beyond.
Speaker 1 (17:46):
Look for us on your podcast feed every morning, on Apple,
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Speaker 2 (17:52):
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Speaker 1 (17:58):
Our flagship New York station, is also available on your
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I'm Caroline Hepka and.
Speaker 2 (18:07):
I'm Stephen Carol. Join us again tomorrow morning for all
the news you need to start your day right here
on Bloomberg Daybreak Europe
Bloomberg Audio Studios, podcasts, radio news. This is the Boomberg
Daybake You At podcast, available every morning on Apple, Spotify
or wherever you listen. It's Thursday, the eleventh of April
in London. I'm Caroline Hepki.
Speaker 2 (00:18):
And I'm Stephen Carroll. Coming up today. Counting down from
six traders wind back FED cut bets for the year
as focus moves to Lagarde and the ECB US.
Speaker 1 (00:29):
Intelligence sources tell Bloomberg they expect an imminent missile strike
on Israel by Iran and its proxies.
Speaker 2 (00:36):
Plus building momentum. UK surveyors say they're increasingly optimistic about
the outlook for property prices.
Speaker 1 (00:43):
Let's start with a roundup of our top stories.
Speaker 2 (00:46):
Investors are rapidly unwinding bets on how many rate cuts
they're expecting from the Federal Reserve this year after March
is hotter than expected inflation data. Traders now see the
Fed just cutting twice in twenty twenty four, with the
first reduction pushed back from June to September. Month on
month course, EPI rose by a faster than expected zero
(01:06):
point four percent last month. JP Morgan's chief Global strategist
David Kelly says the writings on the wall for cuts
in the coming months.
Speaker 3 (01:14):
The sound that you heard there was the door slamming
on a June rate cut. That's gone. It's definitely more
inflation than fed once. I still think that they ought
to normalize rates over time. I'd be happy enough if
they started rates in June, but I think this means
that they won't.
Speaker 2 (01:29):
David Kelly says his current base case is for two
cuts this year, one in September and one in December.
It was the third month in a row of higher
than expected underlying US inflation, and followed a strong month
of job creation in March. Benchmark tenure treasuries reacted to
the news, surging above four and a half percent for
the first time since November.
Speaker 1 (01:50):
That US inflation surprise also has traders second guessing the
European Central Bank's rate path. The chance of a first
quarter point move in June has now fo all into
around eighty percent after being fully priced in just last week.
Speaking hours before that US CPI print, Goldman Sachs's chief
economist Yarysteath, may the case for what many still see
(02:13):
as a June cut by the ECB.
Speaker 4 (02:16):
I think the cut and drowne is very likely, and
the debate now really is shifting towards the pace. We
have strong evidence that policy is restrictive. I think we
are gaining confidence that inflation is coming back to two percent.
Speaker 1 (02:31):
Well, we'll have a better sense of whether Yarysten's view
is still the base case for many when the ECB
President Christine Legarde speaks later today. Your area officials are
expected to hold interest rates steady at today's meeting, but
have signaled readiness to start easing in the coming months.
Speaker 2 (02:50):
Bloomberg Economics is upgraded its global economic growth forecast for
this year, with the warning that central bank rate cuts
may be delayed. Our economists are expecting expanison of two
point nine percent in twenty twenty four. That's slower than
last year, but better than they had forecast last December.
Advanced economies are seen ending the year with inflation around
two and a half percent. The UK is expected to
(03:11):
grow by zero point two percent this year, slightly lagging
the Euro Area's expected expansion of zero point five percent.
Speaker 1 (03:19):
Now away from economics to geopolitics. The United States and
its allies believe Iran or its proxies will strike targets
in Israel imminently. Bloomberg has learned that intelligence sees the
targeting of government or military facilities as more a matter
of when, not if. Iran's threatened attack on Israel would
(03:40):
be retaliation for air strikes in Damascus last week that
killed senior Iranian military officials. President Biden says that Israel's security, however,
remains a US priority.
Speaker 5 (03:53):
Our commitment to Israel's security against these threatch Moran and
as proxies is ironclad to be shading in iron clad.
We're going to do all we can to protect is
real security.
Speaker 1 (04:05):
Despite the firm words on Iran, the US leader has
publicly grown more frustrated with Benjamin Etniaho's handling of the
war on Hamas.
Speaker 2 (04:15):
Chinese inflation is stalling, putting pressure on the yuan and
threatening growth. The country's consumer prices have barely budged from
a year ago. Bloomberg's Brian Curtis has more from Hong Kong.
Speaker 6 (04:25):
The CPI rose a tenth of a percent in March
from the prior year. The estimate was for a gain
of four tenths of a percent. In the meantime, producer
price is slumped even further, underscoring deflationary pressures in the
Chinese economy, Factory gate prices down two point eight percent
from a year earlier, extending a falling streak for the
eighteenth consecutive month. The price slowdown suggests that China may
(04:49):
not get much help from local consumers to meet the
government's growth targets in Hong Kong, Brian Curtis Spoomberg Radio here.
Speaker 1 (04:57):
In the UK, property surveyors are the most stimistic about
bar demand that they've been in over a year. According
to a report from the Royal Institution of Chartered Surveyors,
UK home sales could see an upward surge over the
next few months as perspective home buyers bet on lower
interest rates. The supply of available properties is also increasing,
(05:18):
but the professional body is also warning that activity will
still be relatively limited due to high mortgage rates.
Speaker 2 (05:26):
One of TAM's Water's key bondholders says any nationalization could
spark contagion risks for the whole sector. Britain's largest utility
company is still locked in crunch talks with its stakeholders
and the government. James Wilcock has more.
Speaker 7 (05:41):
Sharon Shar says investment in UK infrastructure is at risk
if bondholders get a raw deal. The warning from the
senior fund manager at Royal London comes as a debate
rages behind closed doors between the regulator, shareholders, the government
and creditors the question who should take financial responsibility for
(06:01):
the utility giant's management and sixteen billion pounds of debt.
It's worth saying Shah as a fair bit on the line.
Thameswater bonds account for two percent of his Royal London
corporate bond portfolio, acording to the latest filing data on Bloomberg.
Thameswater declined to comment on Shah's interview, but his words
are a sign that holders of debt in the utility
(06:24):
are getting increasingly rattled about the likelihood of carrying the
can in London. James Orcock, Bloomberg Radio.
Speaker 1 (06:31):
And those are our top stories this morning on the markets.
Right now, the MSCI Asia Pacific indexes down three tens
of one percent. Eurostox fifty futures are also nudging lower,
but it's the ten year treasury yield that is of
most note this morning ahead of the ECB rate decision.
US yields trading at four point five three percent those
are the markets pull.
Speaker 2 (06:51):
In a moment, we'll be digging into the latest four
Central banking ahead of today's ECB decision and thus hotter
than expected US inflation print. Also bringing you more details
on Bloomberg's reporting of a possible escalation in the Middle East,
the imminent threat of Iranian missile or drone strikes on Israel.
Our Israeli or Chief Ethan Browner will be with us
(07:12):
with the details of that. But another story that caught
our eye this morning we're thinking about the job's outlook.
Is McKinzie starting hundreds of job cuts here in the UK.
Speaker 1 (07:20):
Yeah, so three hundred and sixty jobs to go. WHYLI
client demand is slowing down. There was a big consultancy
boom in the pandemic, if you remember. Now McKinsey though
cutting headcount, but at least in a fairly narrow field.
It's the experts, the specialist technical sort advisors, so not
the kind of mainstream consultants who are going. And of
(07:45):
course McKinsey has tens of thousands of employees, but it's
still quite a significant number.
Speaker 2 (07:49):
Yeah, it's certainly very interesting to keep an eye on
what's happening in that sector. Let's get back though to
our top stories, and traders have paired bets on ECB
interest rate cuts after US core consumer price inflation beat
expectations for a third month in a row. For the
chance of a first quarter point move in June fell
to about eighty percent, there says, bonds across Asia fell sharply.
Speaker 6 (08:11):
Today.
Speaker 2 (08:12):
US treasuries a recovering slightly, but the tenure yield still
up by eighteen basis points over four and a half percent.
Joining us now from more details has Beenberg opinion columnists
Daniel mass Down. Great to have you with us on
the program this Morning's the stakes for the EASYB have
gone up. Can Europe before to delay rate cuts?
Speaker 8 (08:30):
I'm not sure they can afford not to proceed, Let's
put it that way. Unlike the situation the Federal Reserve,
you've had numerous ECB policy makers handicapping specific months quite openly,
like June. Two other points to make. One is that
(08:52):
the European the Eurozone economy is in far weaker shape
than the United States, which is just showing great resilience
contrary to what people predicted for large parts of last year. Okay,
there is no US recession, there's no sign of it imminently.
Big economies within the Eurozone like Germany have had a
(09:14):
tougher time, so that really strengthens the case for an
ECB cut from an activity point of view. And Thirdly,
they've talked so much about June and they always say, well,
you know, we make our decisions independently, we don't just
react to what's going on in the US. Well, okay,
so go ahead and cut in June.
Speaker 1 (09:34):
Well, the other question is can the ECB then deliver
multiple cuts, because that's the other view of the markets
here in Europe is that there should be multiple cuts
on the ECB, and the Fed now is only pricing too.
Speaker 8 (09:47):
A lot of this stuff is at the margin. So
let's just game out a potential ECB reduction in June,
and let's say there's another in September and another in
November or December. That would be three. If the scenario
now is the FED does too, there's not such a
large divergence there. It's not like at this point the
(10:11):
Fed's going to resume hiking and the ECB is going
to be cutting. That is a situation without a lot
of precedent. I don't see that happening.
Speaker 2 (10:21):
Let's talk about that data print from the UAS that's
sort of upsased there, well, psyclic ups at the applicrus
on where things go next gets upset. You tell us why.
Speaker 8 (10:32):
Look, it appeared as though inflation was slowly but steadily
coming down. That descent appears to be somewhat stalled, at
least from an optics perspective. If you were mindful to
push for a reduction in June, it makes your job
(10:53):
that much harder. Now. Now, look, it's important to remember
this is not the end of the world. The Fed's
target of two percent inflation over time comes from PCE
different indicator. PCE has come down dramatically to around two
point five percent from more than seven percent during inflation's peak.
(11:17):
So there has been some real success here, but we're
just sort of seemed to be bumping along this flow
that's proving pretty resistant. I also suspect part of j.
Powell's challenges is how they've talked about rate cuts. You know,
(11:37):
so if you look at the last couple of times
that interest rates have come down, so in twenty nineteen
was more of a mid cycle adjustment, but they came
down dramatically in two thousand and eight, they came down
dramatically in twenty twenty. So when people think of cuts,
they think of a weak economy. So that's not what
we have in the US. So I keep going back
(12:01):
to a remark which Pal's made at his last couple
of press conferences, which is, quote, we are well into
restrictive territory unquote. So policy can still be restrictive, but
ease up a little if you believe we are well
into restrictive territory. And I think this is where the
communications problems start to come in.
Speaker 1 (12:23):
Yeah, Daniel, thank you so much for being with us.
A Bloomberg opinion commist, Daniel Moss then on the stakes
for the ECB, and of course his conclusions from the
USCPI report yesterday.
Speaker 2 (12:34):
Next to a significant piece of Bloomberg reporting this morning.
The US and its allies believe major Iranian missilo drone
strikes against Israel may be imminent. This is according to
people familiar with intelligence reports. On Wednesday, Around's Supreme leader
Ia tala Ali Komeni vowed to punish Israel for an
attack on Syria, while the Israeli Foreign Minister is our
(12:56):
Cat's respond to that his country would respond if attacked
by joining US. Now for more details, Bloomberg Israel Bureau
Chief Ethan Bronner, Ethan, this would be a significant escalation
in the war in the Middle East. What has Bloomberg
learned in this reporting?
Speaker 9 (13:12):
Bloomberg has learned that the US its intelligence services have
come upon some fairly strong indication that Iran plans to
do something serious against Israel very soon, and the Israelis,
of course have been saying that as well. This is
in retaliation for an attack that is presumed to have
been done by Israel about ten days ago in Damascus
(13:35):
on a diplomatic compound in which seven people were killed.
The key point there is that the two of the
people were revolutionary guard commanders, as to say, Iranian commanders
of militias in Lebanon in Syria, so that by itself
you could say that that was where the escalation began.
(13:57):
And the Iranians have said aloud they're going to come
back at Israel. So everyone is kind of waiting.
Speaker 1 (14:03):
Yes, so waiting put it into context for us though,
why now, why this escalation?
Speaker 6 (14:09):
Now?
Speaker 1 (14:10):
Why the acuteness of it?
Speaker 9 (14:11):
Well, I mean, this of course all goes back to
the October seventh attack by Hamas, another Iranian backed, armed
and funded militia. Hamas attacked Israel in October seventh, and
the result of that was that several hundred thousand Israeli
is both in the south along the border with Gaza
and in the north along the border with Lebanon, abandoned
(14:34):
their homes and Israel feels that it can't let allow
them to go back until something is done quote unquote
about the militias that are on its borders. And so
the problem is there's been a lot of tit for
tat for the last six months between Israel and Hisbola. Again,
all of this is Iranian directed and helped on the
(14:57):
other side, and so Israel also has been saying, you know,
we're going to go after the head of this octopus,
not just its tentacles, and that's when it attacked the
Revolutionary Guard guys. So you know, there is a sense
in Israel that it is facing an existential struggle that
if it can't allow its people to live within its borders,
(15:19):
then it is not performing the task that the State
of Israel promises its citizens. So it's fairly hawkish. We
also have a very hawkish government here, and Iran is
also playing a very delicate game here, so you know,
we'll see, we'll see where it goes. But it doesn't
look like either country wants a regional war, but of
(15:39):
course not wanting and happening or not the same thing.
Speaker 2 (15:43):
What does the US do in this scenario if a
shadow war breaks into an open conflict, can it be
de escalated?
Speaker 9 (15:52):
Well, that's a great question. Let's start with what the
US is doing. Now. What it's doing is saying out
loud to the world and to Iran, stand shoulder to
shoulder with Israel. If Iran were to attack Israel, we
would view that as an attack on us. At the
same time, Israel, Sorry, American diplomats are making the rounds
by phone and otherwise in the region to get people
(16:15):
to talk to the Iranians to tell them to stop. Now,
if there is an attack, it'll depend on what the
attack is. I mean, if there's an attack on the
state of Israel with missiles or drones. Israel says it's
going to retaliate against Iran on its territory, and I
think the Americans would be playing a role, that's what
they've said. So now would that lead to a genuine
(16:37):
regional war.
Speaker 1 (16:38):
Who knows Israel in the mean while seems to be
pausing the offensive on Rapha for now. What is the
situation with girls at the moment? Ethan?
Speaker 9 (16:49):
So yes, we're in a pause moment. They pulled out
most of their combat troops the beginning of this week.
They repeatedly asserting that the war or cannot end until
they have invaded Rafa, where they say four hamaspittalions are ensconced.
But what's what we're waiting for is an attempt at
(17:11):
a deal between Hamas and Israel for some kind of
six week pause or ceasefire now. Yesterday, in addition to
these intelligence reports, there was an Israeli hit on the
three adult sons of Smelhania, a major leader of Ramas.
So it's not like there's a massive de escalation going
(17:32):
on there either. There is still a lot of tit
for tat and a lot of reason for concern, and
oil of course did go up yesterday.
Speaker 2 (17:40):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Streets and beyond.
Speaker 1 (17:46):
Look for us on your podcast feed every morning, on Apple,
Spotify and anywhere else you get your podcasts.
Speaker 2 (17:52):
You can also listen live each morning on London DAB Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 1 (17:58):
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 2 (18:07):
I'm Stephen Carol. Join us again tomorrow morning for all
the news you need to start your day right here
on Bloomberg Daybreak Europe
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