UK Economy Escapes Recession, Biden to Impose Tariffs on China EVs | Daybreak: Europe 05/10/2024

UK Economy Escapes Recession, Biden to Impose Tariffs on China EVs | Daybreak: Europe 05/10/2024

Good morning. This is Bloomberg Daybreak Europe. I’m Lizzy Burden in London. And these are the stories that set your agenda. Stocks in asia higher after an upbeat day on wall Street with U.S. jobs data supporting the case for fed rate cuts this year. In the UK, Bank of England governor Andrew Bailey opening the door to a possible cut next month. I’m betting that the US is set to impose tariffs on Chinese electric vehicles and strategic sectors in a sweeping decision to be unveiled by President Biden as soon as next week. Plus, Prime Minister Benjamin Netanyahu says Israel will fight on in Gaza with or without US support. This as Washington threatens to withhold more funds if Rafah is invaded. Well, good morning. It is Friday. You have made it and it seems so far it’s been a good week, a good month, in fact, for stocks and bonds after that stumble we saw in April. Yesterday, the S&P topped 5200, less than 1% off its all time high. This after those U.S. jobless claims jumped to their highest level since August, beating estimates and reinforcing bets on Fed rate cuts. Today, we’ve got futures pointing to an even higher opening on both sides of the pond. And if we flip over to the cross asset picture, you can see the impact of that US data on other areas of the market. So the dollar yesterday was a touch weaker because of the labor market softness currently a touch stronger. The two year yield yesterday. You saw shorter maturities outperforming, but now we’re at 4.81%. Will we get the needle moved a little by Austan Goolsbee delivering some Fed speak later. The pound there a touch weaker against the dollar. We had the Bank of England yesterday keeping rates steady, but signaling that the cuts could start in June. Markets currently pricing a 60% chance of a June cut. And finally, that Brent trading at $84.40 a barrel, 6/10 of a percent higher, boosted as I say, by the prospect of Fed cut. But like commodities generally more attractive because of that weaker dollar yesterday. And we’ll dig into the Middle East geopolitics in just a moment. But let’s cross over to April Hong now. She’s on standby for us in Singapore with an update on Asia markets. April, what’s happening where you are? Yeah. You we’re seeing Asia stock markets starting the day. Pretty upbeat thanks to that surge in US jobless claims by thing. As the session progressed, those US-China tensions really coming to the fore. And the stock gauge pulled off the session highs. We are seeing the CSI 300 still in negative territory and it’s being dragged by some of these so-called strategic sector related stocks. And coming on a day, despite how we saw that improvement towards the property sector as yet another major city, this time see on scraps all those home buying restrictions. So notable. What are we seeing in the Chinese space? Bullets for the board? Because as you can see there, the Hang Seng is the one that’s leading the charge. And I want to show you what is propping things up. It is your Chinese lenders, but also HK, these financial related dividend related shares as we got reports that the regulators could be considering a proposal to waive dividend taxes. So we’re seeing these stocks surging ahead, but capping the gains and the Hang Seng, the declines in these eve makers after that Bloomberg scoop that we could see the Biden administration imposing fresh tariffs on Chinese products, including in these solar equipment batteries. And I want to flip the board and show you as well how this is playing out in the space. Remember, during the height of the US-China trade war, the way in which dollar China fared? And this is, I think, a reflection of what we’re seeing today, as well as the offshore and onshore both weakened today. We have the likes of Maybank saying that the gap between them could widen, especially in an election year, US-China tensions and the threat of terrorism unlikely to go away. We’re seeing the Aussie dollar also coming under pressure. Against that backdrop, keeping an eye on Dalian that’s been nudging closer towards that one, five, six level. But today you really see how geopolitics are thrown into the mix for things for Asian market investors to consider easy. Everything we think. Well, let’s drill down into those US-China relations. Let’s get more on that scoop. Bloomberg learning that the Biden administration is set to impose tariffs on China, EVs and other strategic sectors as soon as next week. For more on this, let’s bring in Bloomberg’s Asia industry reporter, Donnie Lee. Happy Friday, Donnie. Just tell us what exactly the Biden administration is planning here and why it’s a reason now. Yeah, in a US election year, these decisions and potential policy announcements are all important. So President Biden is set to announce a sweeping decision on fresh U.S. tariffs, fresh tariffs on on China and on Chinese industries here. And so specifically, what we’re hearing is targeting the electric vehicle sector. We’re also hearing batteries and solar industries. These are industries which are under the radar from Washington. These are industries which Washington are really concerned about because China has so much dominance and strengthen. And so therefore, Biden in an election year, is trying to put out his stall, his economic response to China as he looks to be re-elected. And when you have pressure from the Republican candidate, Donald Trump, who’s looking to have hikes of 60% tariffs on all Chinese imports. This is Biden setting out his store, in fact, to try and have something which is a bit more, I guess, sensible in this regard. Okay. So feeling the impact of that domestic politics in the markets this morning, The CSI 300 as Real says down 2/10 of a percent this morning. How is China going to respond? This is really a key question. And we have seen China already react, in fact, to earlier comments from Joe Biden. In fact, when the US president actually announced tariffs on Chinese steel and aluminum and China reacted angrily, but they haven’t necessarily responded in a way which would harm US-China relations, which are already clearly under strain from this tit for tat over tariffs. And so we just have to wait and see what kind of measures Joe Biden will announce, which we’ll hear as soon as Tuesday, in order to then to see what kind of reaction and steps China might take. All right, great reporting. Danny Lee Bloomberg, Asia industry reporter. Excellent scoop there. Thanks, Don. Now, Asian stocks rising after an upbeat day on Wall Street with US. Jobs data supporting the case for Fed rate cuts this year. It also saw pretty solid demand on that 30 year bond auction yesterday. Let’s break it down now. We’ve got mark on field from Bloomberg’s live team. Morning, Mark. Just tell us what they see us data means for US assets. Hey, good morning. We’re in a little bit of a Goldilocks period here where investors are back to looking at weak data as good news overall for for risk assets. So it’s a it’s a kind of a benign situation where the employment numbers are cooling slightly, but the economy is still underneath doing okay. So that’s as good for the equity market because it’s keeping the Fed at bay. So the chances, as Jerome Powell said, he never planned to have another interest rate hike, but this data is really giving him the position where he doesn’t need to defend anymore. And people can look forward to the point where eventually interest rates will be cut. That’s not on the horizon immediately, but certainly people can start to plan for the idea. But there will be at least one rate cut later this year. So that’s good from an equity point of view, Bond market obviously enjoyed it as well. That played out through the 30 year auction that came in slightly better than expected and it kept a bit of a lid on the US dollar, which is also beneficial for the US markets as well. Although of course these tariffs being imposed on China will be a bit of a risk to the yuan and that could derail some of the emerging markets currencies, although that’s only just starting to play out. We need to see a little bit more detail on that in the coming days. And speaking of rate cuts, of course, we had the Bank of England decision yesterday. The governor of the Bank of England, Andrew Bailey, set out his case for why perhaps we’ll see rate cuts sooner than the market had expected. Take a listen. It’s quite amazing the history of the NPC that most of the cutting cycles, cycles in inverted commas, have actually been prompted by some sort of shock or other, rather than being what I might call a natural cyclical sort of we’ve reached the top and now we go down to the streets of Moscow. So we don’t have a lot of I mean, I would just caution there isn’t a lot of sort of history writer. So Bailey saying that June is neither ruled out nor a fait accompli market is pricing a 60% chance of a June cut now. Mark, did Andrew Bailey manage to nail the columns this time? It did pretty well. It didn’t disrupt the markets. There’s no huge volatility around it. He’s kept the pound in a pretty tight range, which everybody be relieved about. Equity markets took it well and and gilts as well absorbed it without too much action. So that really overall he’d be giving self a pat on the back. That was that was a pretty good result. So from here you can see the incentive for the for the Bank of England is really to step into a path that mirrors the European Central Bank. So with the Fed really in a situation where they probably can’t do anything to the fourth quarter, but the pressure on Europe and the U.K. is a bit more immediate. So both of them would probably like to move ahead. And if they move in tandem or at least very close together from the market’s point of view, that’s going to be the least disruptive. If you look at the European exchange rate, the euro against the pound, it’s been pretty steady around the 86 level for some time. Now, if the central banks can get away with keeping it in that fairly tight range for longer, they’ll be very happy. So if we get a situation where about three rate cuts are priced in for Europe and for the U.K. and they’re on a similar timetable, you get relatively low volatility and in foreign exchange that helps the equity markets and doesn’t disrupt the bond markets. Everybody is relatively happy. And we can forget about the Fed for the time being. Everybody relatively happy, including politicians at Downing Street. Of course, they’ve been saying that rate cuts would be a feel good factor ahead of the election here in the UK. Mark Cranfield from Bloomberg’s live team, we thank you. Well, we have rather a busy day on the docket and we start with data in the U.K. at 7 a.m. London time, we get first quarter GDP numbers, the numbers for March, completing the set for the first quarter, likely to confirm the economy is on the path to recovery. The estimates growth of 0.4% quarter on quarter. So adding to that changing mood music here in the U.K., now that the cuts seem to be coming soon, Also at the top of the hour, we get IAG earnings. This, of course, the owner of British Airways, the tight labor market, that geopolitics could be a risk here. But on the plus side, traffic operations on the balance sheet are on the mend. And so you might see a resumption of the dividend. The other thing to watch today is the University of Michigan survey at 3 p.m. London time, likely to show consumer sentiment deteriorating in early May as Americans worried about their financial situation in that cooling labor market that we’ve been discussing seen in the jobless claims data. But you can get a round up of those stories and all that you need to know to get your day going. In today’s edition of the DAYBREAK newsletter today, they have Biden poised to impose tariffs on China EVs, as Donnie Lee was telling us about. They also have banks pressing Rishi Sunak to ease up on China curbs and they have UBS potentially rewarding the rainmakers for wealth asset by that by going to day wipe. Go on, you’re terminal. Coming up on the program, Israeli Prime Minister Benjamin Netanyahu strikes a defiant tone against President Biden in his first public comments since the US confirmed it was withholding bombs from its ally. We’ll have more on the situation in the Middle East next. So stay with us. This is Bloomberg. Welcome back to Bloomberg Daybreak here at 615 here in London. Let’s go to the Middle East now. Israeli Prime Minister Benjamin Netanyahu striking a defiant tone against President Biden in his first public comments since the US confirmed it was withholding a shipment of bombs to Israel. Speaking to the American talk show host, Dr. Phil Netanyahu said he hopes the two leaders can overcome their differences. I’ve known Joe Biden for many years, 40 years and more. You know, we often had agreements, but we’ve had our disagreements. We’ve been able to overcome them. I hope we can overcome them now. But we will do what we have to do to protect our country. That’s being brought. Bloomberg’s Paul Wallace in Dubai. Morning, Paul. You’ve heard this ramping up of threats on weapons from Biden to Israel. But from that interview, it doesn’t seem like Netanyahu has been shifted at all by these threats. And is he? That’s correct. He is very much saying that Israel will go ahead with its plan to attack Rafah and take out the remnants of Hamas that are there. And Israel thinks it up to 8000 Hamas fighters are in the southern Gaza City. I think it’s important to note that it’s not just Netanyahu that’s saying this. It’s pretty much politicians across the Israeli spectrum, even the likes of Benny Gantz, who he’s in the war cabinet, but he is essentially an opposition leader of an opposition party and even members of leftist parties as well. They’re not pushing back much, if at all, against this idea that Israel has to go into Rafah. The country seems intent on it, despite what Biden has decided to do by delaying this shipment of about three and a half thousand bombs. Okay. So the international pressure perhaps not making much of a dent, but domestically, we’ve also seen a significant expansion of Israel’s budget deficit, 6 billion. The war bill so far. At what point does that become unsustainable and the domestic pressure actually change the situation on Rafah? I think that’s a very important element towards this. Bloomberg We’ve been covering the financial cost of this war, not just on Gaza and the West Bank, but also on Israel since it started. And it is growing and it’s becoming very significant. You mentioned the budget deficit that, well, Israel announced yesterday that the 12 month trailing fiscal deficit through April was 7% of GDP. That’s extremely high by Israeli standards, and that’s larger than what the government was projecting for this year as a whole. And it may say that things can smooth out over the coming months of the year. And the deficit for 2020 for one, got much above 7%. But that’s going to be a tough ask. This war in Gaza continues, obviously. Israel is using huge amounts of armaments. They’re very costly ones. The skirmishes, the everyday skirmishes with Hezbollah on the northern border are continuing. And Netanyahu himself has said that Israel will have to ramp up spending not just this year, but for the next few years to come at least. So I think this is something that’s going to the world is already having a big impact on the Israeli economy. But I think it’s increasingly clear that this is at least a medium term thing, if not a long term thing in terms of sustainability. For now, it’s okay that debt levels are fine. They still got a very high credit rating. They’re rated single-A and even A-plus by one of the main agencies despite a downgrade a couple of months ago. So on that side, they’re okay. But certainly this war is more costly than Israel was envisaging. You know, in the few days after October the seventh or even in November and December. Costly indeed, both financially and in humanitarian terms. Beanbags. Paul Wallace in Dubai, we thank you for that update. We’re looking at the oil price at $84 a barrel for Brent, 7/10 of a percent higher. A third day of advances for oil, not just because of the geopolitics, but of course, also because of the optimism for Fed rate cuts. Coming up on the program, top Chinese and U.S. climate officials meet in Washington for talks on curbing greenhouse gases. We’ll bring you more on that story next. This is Bloomberg. Welcome back to Bloomberg Daybreak here. Now, the STOP CEO says the US should develop a framework for dealing with national security issues in the tech sector. He’s been speaking at the Bloomberg Technology summit and SPIEGEL said more defined measures will be important for US companies that do business with the likes of China. He was commenting on the recent Divest or Ban legislation targeting TikTok. Take a listen. What I think is really important is that we come up with a durable framework to deal with these sorts of national security issues. I think the United States has recognized that there are these issues but has sort of been dealing with them in sort of an ad hoc one off kind of way. And I think that has real implications for the economy. Looking forward, if you think about how many businesses in the United States, you know, have a relationship with China, you know, whether or not they manufacture their or they sell their products there. I think it’s going to be really important for those businesses here in the United States to get a lot of clarity. The stop CEO there. And we can continue this theme of US-China tensions. They’ve been playing out in EVs, as we were discussing with our Bloomberg scoop on the latest on tariffs. But now let’s deep dive into the green energy transition and that impact there, because over the past two days, US and Chinese climate negotiators have met in Washington for talks on curbing greenhouse gases. It’s been a rare corporate liberation fought between the two superpowers amid all the trade tensions. And for analysis, let’s bring in C, C, Tang Greenberg and some China research manager. So these are the world’s top two economies and the top two greenhouse gas emitters. So how much headway did they actually manage to make? Thank you for having me, Lizzie. I think the outcome of the climate talks is still unclear, but I think the meeting itself is a good, important sign because it continues the rapport between their predecessors, John Kerry and Sir Donghua. Their good relationship was crucial in enabling collaboration between the US and China in many important global climate milestones, such as the Paris Agreement in 2015 and the many climate cop meetings afterwards. So during their last formal meeting between John Kerry and Sir John, why in November 2023, they issued a communique called the Sunderland Statement, which it called for like a high level event, quote, on subnational climate action in the first half of this year, which I think kindly explains the timing of the current set of meetings. So you’re giving me optimism here about how they can collaborate. Are there other areas where the US and China can collaborate more? Yeah, I think everyone knows that the two countries are not best friends in the world, but I think there are areas that the two countries can work together. One is that both countries supported the COP 28 initiative for tripling global renewable capacity by 2030 relative to 2022 levels based on our forecast had been if we expect China will reach this goal while the US may fall short. This is despite the additional incentives from the Inflation Reduction Act and partially because that the US is currently facing challenges in grid connection and permitting issues. And I think another area which also highlighted in the talk should be methane reduction, because the Sunnylands statement that we talked earlier also called for a technical work from two sides to advance policy and technologies in curbing methane emissions. If we look at from the China side, only China gas holdings, only one company is a member of the US. In fact, Oil and Gas Methane Partnership, or GMP. So GMP is an entity that develops, that develops stricter reporting standards and a broad measurement based approach to safety. We’re going to have to see see? Excellent research. Bloomberg Any China research trying to chip with a bit of optimism on the US-China collaboration. And if you’d like more from the Bloomberg and analysts download the Switched On podcast on Apple, Spotify or wherever you get your podcasts, plenty more coming up. This is Bring Back. Good morning. This has been bad day right here. I’m Lizzie Borden in London. And these are the stories that set your agenda. Stocks in Asia higher after an upbeat day on Wall Street with U.S. jobs data supporting the case for Fed rate cuts this year. In the UK, Bank of England Governor Andrew Bailey opening the door to a possible cut next month. Opening bell excuse for the US set to impose tariffs on Chinese electric vehicles and strategic sectors. In a sweeping decision to be unveiled by President Biden as soon as next week. Plus, Prime Minister Benjamin Netanyahu says Israel will fight on in Gaza with or without US support. This as Washington threatens to withhold more bombs if Rafah is invaded. Well, good morning. We do have the latest TSMC sales for you. It is coming in at 236 billion Taiwanese dollars. So far we have seen TSMC really being one of the world’s most valuable companies. The chip maker seemingly making everybody’s logic chips. The tech, of course, that powers some of the world’s most advanced electronics. We’re talking about the likes of India and Apple. Of course, they have been concerned that demand wouldn’t hold up or that a smartphone recovery could take a while. But you are seeing sales there in front of you. Up three quarters of a percent. So you could see a read across similar shares at the European Open. We’ll keep an eye out for that later in the day. More broadly, across the markets, it’s been a good week, a good month so far for stocks and bonds, at least after the tumble in April. As we get more confirmation of an economic slowdown. The S&P 500 topping 5200 yesterday. You can see the futures there pointing to a higher opening on both sides of the pond. And if we flip over to the cross asset picture, you can see a bit more of the impact of that jobless claims data in the US. Yesterday, we did have the dollar a touch weaker yesterday, currently pointing to the upside. The two year Treasury yield at 4.81%. You had outperformance on shorter maturities yesterday, but let’s see if Austan Goolsbee manages to move the needle when he speaks later. A look at the pound that .25 is where we trade a touch stronger. After the Berry decision yesterday, it was slightly weaker and then recovered as we had the suggestion of strong suggestions that a June rate cut is potentially on the cards. 60% is the chance currently priced in markets over June. Cut. And finally, just a look to oil Brent trading at $84 a barrel, 7/10 of a percent stronger. We have the geopolitical news that we’ve been discussing, but of course, also the weaker dollar making commodities broadly more attractive yesterday. Now, Xi Jinping has pledged more rail and energy investments in Hungary following the Chinese president’s visit to Europe. Beijing is counting on Prime Minister Viktor Orban to push back against overcapacity accusations by other EU nations. And we could get the latest from DreamWorks. Pyotr Scally Mouse. Pyotr, President Xi is going to wrap up his visit to Hungary today. I wonder how you think it’s gone and what he’s managed to achieve because he is trying to present it as a different case from the rest of Europe. A bit of an example for how they could behave towards China, indeed. And he basically managed to act to achieve that. And what we’ve seen yesterday is that she and Hungary’s Sorbonne signed agreements for around 16 well, 16 different agreements for all sorts of investments ranging from nuclear energy to various rail links. What we can say about Hungary is that this country has gone all in when it comes to investments from China. They’re already a place where where China is building. One of the Chinese producers is already building a manufacturing hub. There’s going to be a new investment announced to market today, which is a great wall. Great Wall Motor Company is also going to announce its factory in Hungary. So so clearly, there is there is a very close cooperation, very close investment links between China and Xi. In his letter to Orban basically said yesterday, Orban is or Hungary, they are priority partner for China, which obviously considering what’s going on in the EU. And when we talk about the overcapacity about China, flooding new market with subsidised EVs, then obviously that that shows Hungary sort of standing out doing its own let only. And of course, earlier in the trip you had g visiting president Emmanuel macron. He also met von der Leyen. So where does it leave relations between China and the west at the end of this trip? So indeed, what what probably she managed to achieve this sort of drive a bit of a wedge between some of the members of the EU. Obviously, when it comes to Western partners, especially France, Germany, but also comes to some some of the Eastern Europe. They they they are very much aligned when it comes to to approach to China. And what she managed to achieve as obviously she didn’t, you know, in France, he obviously had to deal with awkward questions about his his approach to the war in Ukraine. And he had to face questions about overcapacity, which he pushed back against. He has faced those questions in places like Serbia, where he was showered with with praise and the same Hungary. So some some of that has been achieved at the same time. And we have to remember that 2012 China has launched what was called 60 plus one investment cooperation agreement with countries from mostly Eastern Europe. And of all those countries, there’s only one listed when it comes to two to you, that’s Hungary and Serbia. So there is a partial achievement in trying to drive that wedge. But when it comes to but it’s clearly very limited to the countries such as Serbia, which is outside the EU, but wants to be a member and Hungary, which is within the EU. But but clearly going into Chinese can. Peter Scally Maskey, who’s been following that trip of President Xi’s over the past five days. We thank you for the overview. Now to some other stories making news. Banks Bank Bloomberg has learned that HSBC and Standard Chartered are among major U.K. firms pressing the Prime minister, Rishi Sunak, to town, toned down proposed restrictions on doing business with China. Sources say the banks are lobbying ministers not to include China in the strictest risk category in some new national security legislation. They argue it would impede business and trigger negative publicity. Elsewhere, Bloomberg learned that UBS is considering introducing a reward system for investment bankers who refer clients to the firm’s wealth management business. Some bankers would likely be in line for payouts when they successfully attract new money to the lender’s private banking unit, and the referral fees would be a first for the Swiss lender. Echoing earlier incentives that Credit Suisse had offered to its dealmakers. Staying with banks, we go to Spain now because Sabadell has accused banking rival BBVA of breaching Spanish laws with its hostile takeover bid as tensions mount between the two lenders. BBVA is seeking to buy Sabadell in an all share offer that values the smaller rival at about 11 and a half billion euros. For more, we can bring in our deals. Reporter Manuel Bike. Manuel, why is this deal so important in Spain? Just give us the context. Hello, Lizzie. It is important indeed, because it would change dramatically the banking landscape. Here we’ve got BBVA, Spain’s second largest lender, trying to buy another very significant bank in Spain, very, very present in the Mediterranean coast, particularly in Catalonia. Roughly 2 billion all share over the has been hostile. I mean, it’s unprecedented. You need to go back all the way to the eighties, at least to see such a thing, such a move in in Spain and in Europe. Hostile dates in banking. No, very frequent, just precisely because they impact the financial system. And as such, they are also very, very politically driven or sensitive. And we are we’ve got a major move. We’ve seen a lot of consolidation in banking in Spain since the global financial crisis, and this would be a major step in that direction. Now, the question mark is what’s going to happen next, given it’s become a very politically driven deal? Yeah, of course, as you say, there’s hardly any precedent for this in Spanish banking, but it’s not the first time BBVA has tried to make the offer. If it isn’t successful, is it the nail in the coffin for this potential deal? Yeah, precisely. They tried and failed about three years ago, and it didn’t go it didn’t go very far. These hostile bid, now they extend their offer and the market will see it. We’ll see how it plays out. I mean, it’s a little bit unprecedented. So this a lot of question marks. The BBVA seems to suggest they they’ve got some important shareholders backing the bid. Sabadell came yesterday also with that with a statement saying that bbva’s move is breaching the laws the the the the the takeover laws in Spain in the way they’ve presented documentation. So it’s a little bit unclear. It’s all up in the air as of now, but now is when it becomes really all about money tactics and the next moves will be critical for sure. All right. Manuel bich already our deals. Reporter We thank you for staying across that bit of M&A potentially in spanish banking. But just 10 minutes ago we brought you the latest. TSMC, tsmc sales, a 60% jump in April driven by a I and we can continue with that theme because the CEO of ARM is downplaying concerns over an AI spending slowdown that was fueled by his company’s lukewarm revenue forecast for the fiscal year. Ronnie has told us why he’s still confident in the chip design as long term growth. I’m actually forecasting even higher growth this year north of 20%. And we also signaled to the markets yesterday that in 25, 26, 27, we see that growth continuing. So we have incredible visibility into our business and we’re very, very confident of this growth rate going forward. I want to focus in on the cell phone play, Renee, because that’s been where your bread and butter has been in history. How are we looking from a smartphone perspective? Is the market looking strong to you? We’ve had many a mixed message coming from China. Demand, for example. Overall, what we’ve seen in the smartphone market typically for ARM has been quite a good growth rate in terms of royalties. Our version nine, which is now being used in many of the premium mobile phones that drives a higher royalty rate for ARM. There’s also more complex CPU’s that go into that. That’s also better for ARM and going forward. Caroline One of the things that we’re seeing and it’s not just in smartphones is that as these models are moving so fast, the hardware can’t keep up with the software. The software innovation is happening so quickly that by the time the hardware is ready to run, those models everyone wishes they had, they had more performance, they had more efficiency. So what does that mean for ARM? It’s driving growth in our licensing activity. People are looking to do more and more design chips faster and faster, and that’s all all good for us going forward. So I think going forward, you’re going to see more and more innovation happening not only in the smartphones but across all these edge devices. Renny, what’s been keeping up is your valuation. Boy, I mean, do you think there’s too much exuberance around AI valuations out there? Are you going to make the most of it by. Well, we’ve talked to one point of listing in the UK two. You know, I don’t think about the valuations as much as I just think about the opportunity, which I frankly believe is under called in terms of just what it’s going to mean relative to society and what it can do for our planet. I think, again, we are in very, very early days in terms of the capabilities of what this can unleash for our society. Incredibly excited to be part of it. But I don’t think we’re part of a hype cycle at all. I think there’s a lot of innovation taking place. And, you know, frankly, the innovation that’s taking place and the inventions that we’re seeing, it’s just breathtaking. So, no, I don’t personally view it as a hype cycle at all. So that was the ARM CEO, Rene Haas, speaking with Bloomberg’s Caroline Hyde. And just recapping those TSMC sales that we got about 13 minutes ago, a 60% jump driven by a I taking them to 236 billion Taiwan dollars in April. This is after a really tough year. Last year, muted demand for personal electronics and there had been concern that demand wouldn’t hold up or that a smartphone recovery could take a while. Alas, no need to worry. It seems the global smartphone industry returning to growth over the first three months of the year, including in that highly competitive Chinese market, which really could drive orders for the traditional mainstay of mobile chips for TSMC. Will we see a read across to ASML shares at the European Open? We shall keep an eye. Elsewhere in tech news, Bloomberg has learned that Apple will deliver some of its upcoming artificial intelligence features this year via data centers equipped with its own in-house processors. Sources say that high end M2 ultra chips will be deployed in cloud computing service designed to process the most complicated A.I. tasks. Apple is expected to lay out its strategy in that area over the coming months. Coming up, we’re going to get back to the monetary policy. The Bank of England is sending its clearest signal yet that it’s closing in on the rate cuts. We’ll discuss that. And the Fed with the global head of private capital advisory at Raymond James next. Stay with us. This is Bloomberg. US jobs data supporting the case for Fed rate cuts this year. That’s after jobless claims hit their highest level since August. Joining me now to discuss is Sue Nina Haldia at Raymond James, Global head of Private Capital Advisory. Lovely to have you with me in the studio. Let’s talk about the fat, how patient can afford to be and can we afford to be quite patient after being very late to the party when it came to inflation? I think their concern is if they let the inflation genie out of the bottle again, it’ll be twice as hard to put it back without breaking something. So they are right to be cautious. But how cautious is the question? So we’re in the bad news is good news territory with the US jobs claims last yesterday showing a print that is encouraging for the rate cut dovish arguments out there. I think that would be helpful. That’ll certainly point the direction to potentially one or two rate cuts this year. Not much more than that. So you’re optimistic, but are you in the camp that doesn’t rule out a hike before a cut? I think so far the rhetoric seems to be specially from the chairman of the Fed that Jay Powell, that we’re not going to see a hike unless the data completely goes the other way. And certainly yesterday’s jobless print shows a softening of the labor market. You know, one of the things I’m really looking at is that lower income consumer in the US, which is facing higher debt servicing costs at a time where inflation has hurt them as well. That consumer really needs the labor markets to be healthy. Now you’re starting to see some softening creep into the labor markets. And so all of that is trending in the direction of a softening economy. Can they achieve this soft landing slash lending scenario? We’ll see. But it’s pointing the way to flat slash one or two cuts, not a hike. And indeed, equity markets taking enthusiasm, encouragement from that narrative. We had the S&P flirting with its record yesterday. Where do you think it’ll end the year? Oh, such a $64,000 question for sure. I think the issue with the S&P or the tailwind behind it, rather, is that the technical flows in the market remain very healthy because of a cycling out of money market funds, which were the flavour of 2023, as we both know, into more risky assets. So right now we’re staying still seeing a lot of support for on risk behavior around the world that is finding its way into equity markets and other capital appreciation place. I think that’ll remain the case, especially as is a recycling out of the China story into other markets. We continue to see those technicals really pushing up rather than a fundamental analysis on a fundamental basis. Some of the European and UK markets look even more attractive. Yeah. Do you see 100 getting a boost yesterday from the Bank of England decision, do you reckon of a June cut? It looks very likely. I think it’s in play and on the cards from all the messaging yesterday. You know the one thing that is going to make their life a little complicated on the rate cuts is that the economy is starting to grow. And well, as we saw the first quarter point 4% GDP growth versus an expectation of just 0.1. So I think they, too, will continue to keep that balance of growth versus inflation in mind. But so far, so good for a June rate cut. And just how attractive are UK equities when the Bank of England sounds more dovish than before, but is it as dovish then as the ECB? It looks more direction market pricing. Is it more dovish in your mind? Well, I think the question is, of course, there’s the rate differential argument between Fed versus Bank of England and ECB. But beyond that, you remember you’ve had a pounding on the Footsie over the last year and a half because of just a lack of depth in the markets, which has really pushed down relative valuation. So on a relative basis, it’s been looking good for the last quarter, which is why we’ve seen a record in the Footsie versus ECB. I think it’s six of one and half a dozen of the other. The investors are going to pick their spots on a on a indices and company by company basis. But on a relative basis, both markets look relatively cheaper than many others out there, which is why you’re seeing the appreciation in them these days. And given that Raymond James is one of the world’s largest private wealth advisors, another long term question, just how much more of the money do you expect to be allocated in private equity by the end of the decade? We are seeing a secular once in a generation move from high net worth and ultra high net worth individuals into alternatives at large, especially private equity infrastructure, private credit and so on. That’s because individual investors are saying that they too need to manage their portfolios away from just a traditional equity bond story, given what’s happened in the last couple of years. And there’s a big tailwind shift into adding alternatives to their portfolios, which is pushing up those inflows into private equity materially. Yeah, but you know, of course there’s been a shortage of debt financing because of higher interest rates. You’ve seen firms that. For turning to private lenders. I do wonder whether that will reverse somewhat with rates seeming to be coming down. But. Excellent to have you with me on the program today. The center held a global head of private capital advisory at Raymond James. We’ll have plenty more still on the program. This is Bloomberg. We have changed our view on the likely persistence of inflation on second round effects. I know it’s good news. We think that we think there was evidence that suggests that will be less pronounced and we thought they would be. Bank of England Governor Andrew Bailey there say the be a step closer to cuts. Markets now pricing a 60% chance of A Bank of England B a week. It was 40% before the meeting. A coin toss just afterwards and ending the day here. Actually, the Bank of England is looking even more dovish now than the Fed or the ECB. In the eyes of markets, if you flip the board, you can see that charted for you here. You’ve got the various central banks there, the Bowie in green, the ECB in blue, on the Fed in white. Why is that pricing so different from yesterday? Well, we had various dovish signals, didn’t we? We had the forecasts updated, really pushing back against the market curve here. We have the guidance somewhat. Lagarde telling us which data points they’re watching and suggesting that if they come in the right direction, that June could be not a fait accompli, but certainly not something they’ve shut the door to. And of course, we had a more dovish vote split. The deputy governor, Dave Ramsden, joining Swati Dhingra in voting for a cut. They’ll get more of that economic data in just a few minutes time. 4 minutes to UK GDP. It’s the March numbers completing the set for the first quarter. It’s going to look like the economic recovery is continuing, or at least that’s what economists expect they’ll just go say on markets today. Next, Anna Edwards and Guy Johnson. We’ll take you through the next 2 hours of Bloomberg. So stay with us. This is Bloomberg.

Bloomberg Daybreak Europe is your essential morning viewing to stay ahead. Live from London, we set the agenda for your day, catching you up with overnight markets news from the US and Asia. And we’ll tell you what matters for investors in Europe, giving you insight before trading begins.
Today’s guest: Sunaina Sinha Haldea, Global Head of Private Capital Advisory at Raymond James.
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