Bloomberg Markets Today 03/28/2024

Markets Today has everything you need to know as markets open across Europe. With analysis you won’t find anywhere else, we break down the biggest stories of the day and speak to top guests who have skin in the game. Hosted by Anna Edwards, Kriti Gupta and Tom Mackenzie. Today’s guests: Gerry Fowler, UBS Head of European Equity Strategy and Global Derivative Strategy; John Neal, Lloyd’s of London CEO; Beata Manthey, Citigroup Head of European Equity Strategy; József Váradi, Wizz Air CEO; Philipp Goebel, Demecan Managing Director.

Good morning from london. This is Bloomberg Markets today. I’m anna edwards alongside Kriti Gupta and Tom Mackenzie with the cash today just less than an hour away. Here’s what you need to know. Treasuries drop as the fed’s Christopher waller says there’s no rush to lower rates. We’ll look ahead to tomorrow’s US

Inflation data. The s&p 500 gets a late day boost to finish at a record high. We’ll take a closer look at how markets have fared so far this year as we head into the last major trading day of the quarter. Plus, the Baltimore bridge collapse exposes the fragile nature of global supply chains.

We’ll discuss with the CEOs of Lloyd’s of London and Wizards. In the meantime, a quick check on these markets here. When you look at futures, they are indicated higher with slight outperformance right here in the UK to the tune about 4/10 of 1%. Your Stoxx 50 futures higher by 3/10 of 1%.

Anna was just talking about that treasury sell off. You’re seeing the yield on the ten year higher by we’ve got about two basis points for 20 on that ten year yield and of course moving the dollar a bit higher. That creates weakness in the euro.

108 16 on that currency markets today starts right now. In my view, it is appropriate to reduce the overall number of rate cuts or push them further into the future. In response to the recent data, I see no rush in taking the step of beginning to ease monetary policy.

Okay. Fed Governor Chris Waller on why he sees no rush in cutting rates. He said he wanted to see a couple more months of data to get to that confidence point and suggested that they could push out cuts further out into the future and suggested there could be fewer cuts

Priced in. Though he did say that next move is more likely to be a cut than a hike. But I’m still trying to square this with the dot plots being reconfirmed at three cuts this year and the relatively dovish commentary, frankly, that we’ve had from Jay Powell, he said, of course, a couple

Of weeks ago, we are not far from having the confidence to be able to cut. So there seems to be a tension here either within the FOMC or they’re not aligning in terms of the guidance for the markets. Maybe you have a clearer steer. I definitely do not have a clear steer.

But I think what’s interesting here is there’s so much emphasis being put on this one FOMC member. And I think it’s simply because back in November, he kind of backed himself into a corner a little bit similar to the way Jay Powell did. And this is something that the Federal

Reserve historically and other central banks don’t do. They they kind of avoid giving exact timing and exact data points. Right? They say we’re data dependent, but we don’t really know what that means. Christopher Waller back in November said

Three, four or five positive data points is kind of what you need or what he needs to be more. Sure, you’ve now seen two data points in the opposite direction. So that’s how markets are kind of interpreting that. He arguably the most clear to read out

Of all of the FOMC members. Yeah, we talked about this a little yesterday, didn’t we, about the divergence to your point, Tom, about the divergence that we’re seeing in the FOMC and the different views on show, although maybe some of the more hawkish language has come to the fore this week

With Rafael Bostic talking about maybe just one, just one cut this year, That’s certainly on the same side of things as Christopher Waller. It really is interesting, by the way, that maybe this sets the stage for that PC deflator data that we’re going to get tomorrow.

We know that the Fed watches that very, very closely. If we’ve got all of this sort of Fed hawkishness in our minds, at least at the margin, you know, just these are Fed voices that are saying we’re not going to in a hurry. We’re not in a rush to use.

Well as ways to do that. I wonder what that means if we do get a halt print on PC, does the market manage to ignore it the way that it has done for the last couple of months in the way that the Fed’s Powell has done?

Or does the market take that more hawkish line and doesn’t even matter now? Because when you look at the p e simply because the P numbers influence the piece, the more than your CPI numbers do. I’m getting really nerdy here, Tom, bear with me. But this idea here simply that the API

Numbers and the PC is largely driven by import costs, infrastructure costs, factory orders, things like that. When you look at the nitty gritty, this number that we’re going to get doesn’t take into account the increase in shipping costs that we’re going to get for the next couple of months, the

Increase in freight rail trucking cost, we’re going to get off the collapse of the Baltimore Bridge itself. That’s all going to feed itself into the inflation data ultimately. But it’ll take may take a few months to do. It’s going to be interesting that the

Headline data on PC and the core might go in the opposite direction as well. And that can, you know, cause all kinds of confusion in terms of the market and what people are watching for and all of that on a day when markets are not open

In many parts of the world. So you could brace and the team and life have been suggesting you could brace for pretty significant volatility when market when markets reopen next week given that we have PC. But also Jay Powell as well, speaking at the San Francisco events.

This could be interesting in terms of the language that we’ve been getting from Fed officials. Whether he adjusts on that. I mean, there have been some concern that maybe the loosening of financial conditions is actually pushing, pushing things back as well. So the language from Japan’s can be interesting along with that data.

And how much of that data’s your point? How much of this data story on inflation is already priced into these bond markets? The the interesting piece of that equation, though, when you talk about financial conditions is you have to kind of so much of it is driven by the stock

Market. And stock market alone. You have to take into account the Bloomberg dollar index, the ad or credit spreads, which by the way, a lot of flows. Though I was reading a note this morning, a lot of the flows were kind of influenced by the private credit story as well.

So there’s all these external factors that you can’t actually quantify and track by the numbers you see on your screen. You’ve mentioned this already had this inflation, you know, conversation around the Fed. It takes us nicely into some of the supply chain issues that we’ve been dealing with in markets over over, well,

Months, years, arguably. But now, just given the extra emphasis or underscored by some of the issues that some of the CEOs that we’re going to be speaking to this morning are dealing with or the sectors they operate in, at least would be talking to Lloyd’s of London and clearly at the Baltimore

Bridge that Marine insurance is part of their business. They’ve got an earnings story to bring us as well, and that they’ve benefited, of course, from higher interest rates and what they’re able to deliver for in terms of their investment returns. Also, the underwriting profits look

Healthy compared to recent years, but it will be interesting to get their perspective on supply chain issues or rather the impact on the insurance sector from the from the bridge collapse. And then we’ll talk to Windsor, which is not necessarily affected by the Boeing

Crisis, but some of their rivals are. And that could be something to pick up. Yeah, it’s interesting how we’re talking about it in the context of the Baltimore Bridge itself, but we also have to fold into the fact this comes in the background of Red Sea tension. So we’re talking about reinsurance in

Particular. This is building on a trend that you’ve already seen in the shipping space as well with there, again, a similar story simply because when you look at Ryanair, for example, they had actually said they’d seen real drop in traffic when it comes to flights going into the Middle

East. You’ve seen similar story coming out of the US airlines. As well. So I wonder if Wizz Air is seeing a similar trend when it comes to that region. Well, the the overarching story for the airline industry, obviously, is the demand and the inability to match

Capacity with demand. And again, tying to the supply chain constraints, they face their own engine issues. Whitney Engine issue for for Wizz Air because they rely, of course, on on Airbus. So we’ll be getting an update, hopefully from the CEO on that front. And then on the flipside, of course,

It’s the challenge around Boeing for other airlines who rely on Boeing aircraft and the fact that they’re just simply not able to produce the aircraft that this industry needs right now in the face of that still strong demand on the West specifically. There’s also been in the latest load

Factor data, just a bit of a drop down in the load factor that were teething in amidst all of that growth that they’re delivering. So you just want to we want to get a sense of whether going through the summer as well, which perhaps takes us on because that’s one quarter, the

Summer will be another quarter. So if we could reflect back on what we’ve seen this quarter. Christine, I know you spent quite a bit of the morning doing that. There have been some incredible standout new records within the first quarter for certain assets, for gold, for Bitcoin,

For cocoa, of course, and the stocks well, for the Nikkei, everything Japanese seems to do so well. My favorite one came from Tom this morning that a metric ton of cocoa can get you three months of rent in New York City. I would love to go to my landlord and

Say Dr. Chocolate, here you go. He is right now is dusting off that. I got a suitcase full of cocoa powder. Exactly. Exactly as given. The Easter candy is so cheap here apparently at the moment. Well, I think what’s what’s interesting in terms of positioning, we talk about

The volatility going into next week for Europe in particular, it’s going to be a catch up trade, given that on Monday the US markets are open but European markets are not. So the catch of trade is already there. But going into next quarter, this is like they were the inflationary data and

Even the Red Sea data comes into a comes into the numbers a little bit more. We talked for H&M yesterday, for example, and even they said that even though in the first couple of months of this conflict they hadn’t talked about paying attention, shipping costs or Red Sea tensions, etc..

Now they’re saying this is something we’re actively going to be monitoring that may affect our pricing. That’s just one example of a trend we may see. Then I think it was interesting to see which stocks did well this last quarter as well.

And some of them are no surprise, certainly stateside in video and that the strength of the story there. But here in Europe, not forgetting what is going on geopolitically on the doorstep. Right. Mattel and Saab to stand out performances in the first quarter. And we know the defense story and the

Pressure on the European defense story as a result of Ukraine. Yeah, And that story doesn’t seem to be going away, does it, in terms of fiscal impulse to build out the defense industry. So two big names within defense, how much further to run then as European

Officials look to build out that build out that industry. And of course, we obsess about the Max seven, the Magnificent Seven over in the US. But it’s also worth noting, of course, that Apple is down, what, about 10% or something year to date, Tesla down close

To 30% year to date. So do we get to the point where we need to carve those two names out of the Magnificent Seven, bring it down to Magnificence five And then, of course, it brings us to the concentration risk story. Jp morgan flagging that again, do we

Listen to JPMorgan, given that their strategists are not been arguably on point in the in the last few years, but their point around around the concentration risks are not isolated. Of course, the team at JPMorgan, we’ve got a couple of guests to talk about the European angle on that, you know, away

From the Max seven. But talking about the European side of things and I know we’re speaking about something from Citigroup. He’ll be talking to us about the Super seven, which is their name for the year for the European names they focused on if guy we hear he’d be pointing to his

Sensational six. Yes. Which I think I’m taking over today. Well, we’ll see if I can live up to the to the name. I think it’s interesting you mentioned the Apple story simply because, Tom, we we are for the first time seeing this

Divergence between the S&P 500 record highs and the Apple story falling the first time, by the way, you see a divergence going all the way back to 2013. Usually they go neck and neck. Apple actually drives the stock market higher this time around. You’re seeing the the breakdown in that divergence.

Okay. We will continue across all of these stories for you today. What else is on the agenda at 1230 UK time, we’re going to get the fourth quarter GDP reading the third reading out of the US. We’re also going to get initial jobless claims. Of course, the importance of the focus

On the labour market in the US. Some reports suggesting there’s a little bit of softness in some sectors. In some states the initial jobless claims will build out that picture for us. 2 p.m. UK time The University of Michigan Consumer sentiment reading It’s the March final reading again.

Is there any weakness coming through from what has been a relatively strong US consumer still? 5:30 p.m. UK time the ECB is villeroy will be speaking in paris. Markets still expecting the first cut from the ecb to come through in june. We’ll listen in to villeroy later today. 6 p.m.

Uk time. The US treasury market closes early for the Easter break as we look at yields just slightly higher on the back of those Chris Waller comments later today. Sound bite when Freed SBF is set to be sentenced for stealing billions of dollars from customers, marking the

Final chapter in the FTC’s case, which took the crypto industry by storm, making me live at the New York Federal District courthouse. You can catch our special coverage of Bloomberg Crypto from 4 p.m. London time. And the team in the US have just done

Such a comprehensive, fantastic job in terms of charting this story and the latest report. Sitting out in the terminal today around some of the context to this is really fascinating read as well. So consequential, of course, not just something for free as an individual.

And those who may have made it may may have caught up being caught up in some of the losses. But of course, the broader crypto industry at a time when when crypto is back, it’s going to record highs. Yeah, that’s been a story of the quarter again mentioning content that didn’t go.

Bitcoin could go in the Nikkei having a record well cutting new records during the quarter and we’ve got the quarterly GDP data out of the U.S. which just reminded me that we actually got confirmation of a final reading on U.K. GDP.

But in case you were wondering whether we were going to revise away that U.K. and recession story over the last few quarters, what we didn’t in the news is that there was no change. So the final reading, -0.3% quarter on quarter for that GDP figure. I’m curious how that’s actually

Interpreted, though. Are we watching the recessionary or not recessionary story so closely? Does the technical recession matter in terms of the pricing is very much in the rearview mirror? Yeah, The the latest data, all the more recent data has been suggesting that the

UK economy is, you know, some say something of a rebound. Certainly Bloomberg economics focused on that composite PMI. So it’s not a perfect read to UK GDP but certainly the signals there are that we’ve bounced back into growth again in the first quarter.

Yet the the pound hasn’t moved significant on the back of this data, as Anna was saying, confirming really what we already knew. 126 currently on the pound. Interesting, of course to hear from one of the hawks in the body earlier this week speaking to Bloomberg, Catherine

Mann, about why she dropped her calls for a further interest rate hike, but still cautioning on the inflation impulses in the U.K.. Okay. Coming up on the program, Barclays says that insurers face claims of as much as $3 billion following the Baltimore

Bridge collapse with firms on the Lloyd’s of London market most exposed. That is according to research at Barclays. We’ll get the respective from the Lloyd’s of London market. We’ll speak to the CEO at 7:30 a.m. UK time. Plus, we’ll discuss summer travel demand with Yosef Berardi, the CEO of Wizz Air.

A lot of disruption for the sector as a whole. We’ll ask for his experience if you have any questions for our guest. If you want to get in touch with the team that puts together this programme,

I perceive go is the function to use as the sun rises here in London ahead of a long weekend. This is me back. The shifting new world order with China coming up, more disruption, more fragmentation. And of course, if we had, depending on

The president, we end up having in the US definitely more disruption and fragmentation. So that’s one thing. In that you also have the long term trend of climate, right? You have the long term trend of demographics. Those are inflationary. Those are in underpinnings of the inflation. Virginie Maisonneuve, global CEO for

Equities over Allianz Global Investors joining us yesterday talking about the shifts that are taking place in the worlds geopolitical order but how that could actually fuel inflation in the short term. In the long term, at a time when everyone’s kind of pricing in those rate

Cuts, really convinced that the Federal Reserve and its global peers are actually turning a little bit more dovish. We’ll see if they’re right. Joining us now, Jerry Fowler, head of European Equity strategy and Global Derivative Strategy over at UBS, joining us this morning. The narrative has changed quite quickly,

Even in just the last 24 hours with the comments we got from Governor Waller as well around pushing back these rate cuts. Are the markets ready for that? No, we don’t think so. In fact, it really started about a month ago when we got that pretty hot jobs

Prints in January, which is actually very reminiscent of January last year. If you remember, we got 500,000 nonfarm payrolls then, and that really lit the fuse for a reassessment of Fed rate expectations through the second quarter. And so yields rise. So we’ve just seen the same again and

We’ve got a fantastic monthly note that we put out that has now cost data. It’s for a variety of growth related topics in the US, including nonfarm payrolls and also inflation. So we’re watching that like a hawk for the February data. It was pretty much spot on for the March

Data. We’ve just highlighted that we’re expecting still robust jobs, 200,000 more and inflation 2.33, which is still running a 4% annualized rate. So the market’s not really ready for this because for the first six weeks of the year, everyone was having a great

Time, positions were working momentum, all of the top global stocks that everybody wants to own quality all doing very, very well. But when you look at what works in a higher yields, higher for longer environment, it’s value. And so we’ve started to see a transition back towards value. It’s been European banks.

It’s increasingly some of the energy sector that are more sensitive to rising inflation, rising inflation expectations, rising yields in comparison to the things that have been working so well since yield yields apparently peaked in October, momentum and quality quality has already started to underperform. Momentum still has some some performance

That’s coming through. But actually in Europe in particular, value has become the momentum trade. It’s interesting we talk about this almost shift to value, and I would even broaden that out to cyclical, even though I know those aren’t the exact same thing.

But yes, they’re very CapEx dependent and it feels like to have that CapEx spend for a lot of these companies in these sectors. A little bit more reassurance around the start of a new economic cycle would be handy. Is that kind of the thinking there was the CapEx concerns not relevant now? Absolutely.

So the consensus is very clearly that this is quite late cycle and that we will get, you know, sluggish growth and weakness in inflation that allows for rate cuts to come through without a significant reacceleration. But we are seeing some signs that business confidence is picking up.

We’re seeing the grease in the wheels of of M&A and IPOs coming through. That’s going to keep liquidity moving around the markets. So there is some renewed optimism that perhaps there is another growth rate acceleration coming probably more in the US than in Europe, where obviously you

Can see quite a lot of investment around the IP. But also in Europe, I mean Europe’s main theme is electrification and you’ve seen very strong performance from Schneider Electric, Siemens, a lot of these players that are putting cat goods, equipment into smart grids and

Electrification related work. So the themes are there and the performance has definitely come through in those names. But there, you know, there are other themes that are coming through at the same time, just because there is still not a lot of faith that this is more

Than a burst of higher for longer as opposed to a fully fledged re acceleration. Who me who gets Burgman in that higher for longer scenario that you’ve painted. You said markets investors are not fully positioned for this yet. So where’s the pain point come through.

Well, it really depends how far it goes. I mean, investors had a great time for the first six weeks of the year. Quality and momentum were doing extremely well versus value and most investors generally have momentum, quality growth type positions. And they you know, they have enjoyed

Yields peaking and coming down. But it’s been a tough couple of years for quality. But as you see yields rise, that’s you know that puts that that overweight positioning on quality and momentum at risk and value is catching up. So basically any investor that has that

Quality growth momentum bias is probably starting to lose out because they don’t have enough exposure to, say, banks and energy is more of the value sector. But it really matters how far this goes. I mean, us ten year yields have fluctuated between sort of 4.1 and 4.3% over the last month.

If you continue to get 4% inflation prints and jobs continue to print at 200 plus, there’s no reason that yields couldn’t back up a bit further to say 4.5. And who knows if they go beyond that. But at those levels, you start to put at risk some of these positions that become

A bit more valuation sensitive when you’ve got a higher yielding environment. Let’s break down some of the sector calls that from you in the team. You have an overweight your biggest overweight on software. How much further does that have to run?

Yeah, software is a bit of a unique sector because it is actually fairly defensive. You know, they tend to be able to just put a lot of a lot of it is subscription based. They’re able to put through price increases each year.

It is an expensive sector and so it can be sensitive to rising yields that pressure its valuations. But we just think there’s fairly consistent pricing power there. And in fact, as it relates to the. I theme Our Singapore based tech team in the Wealth Management CIO Office have

Highlighted that while there is potentially 60% cargo growth in AI related products, semiconductors and infrastructure, there’s potentially more like 120%. I think the number is compound annual growth over the next few years in software. As companies start to make use of it. So I think software is still one of

These quite strong themes that while valuations can fluctuate, there is this quite steady structural growth coming through in the coming years. Jerry, you were talking about how growth could reaccelerate in the United States, not necessarily in Europe, although there are growth themes here around electrification. You were saying?

I wonder if that is an upside risk to the growth story in Europe. That makes us question when we get ECB rate cuts, the fact that well, there’s the the the growth stories that you mentioned for Europe specifically, but also if the U.S. picks up and we see the rest of the

World sort of whatever the opposite is of catching a cold, you know, feeling better as a result. Exactly. Is that something that actually might even stop the ECB in its tracks? Not from maybe cutting a tool, but the extent of the cuts we get?

Yeah, possibly. Although the ECB is only running on an inflation mandate and at the moment European inflation is coming down quite nicely. So there’s still room for cuts and that will open up an interesting divergence that if the ECB is cutting before the

Fed, what are the consequences for the current currency and how does that impact European equities? But, you know, if you’ve got resilient growth and actually we’ve got improving growth in Europe from this point forward and especially into 2025, this point 9% of GDP that’s being released from the

Recovery funds this year. So there’s quite a lot of sort of on the sidelines stimulus that’s actually coming through. But all of these things, you know, the soft landing narrative or maybe even the no landing narrative is not what the market was pricing last year.

And a lot of sectors were price for recession. So all of those are being repriced for no recession. That’s why European banks have done very well. They were priced very cheaply because there was an expectation of cuts and slowdown. That’s now not the case.

So they rerating you see the same in US small caps priced for recession. It’s no longer believed to be happening. And there are signs that there’s some outperformance there as well. Let me ask you about the Brexit we see in Europe. We’ve got two guests coming up in the

Next hour of the program who talks about how Europe, we talk about the US being quite narrow. You know, there’s there’s not much breadth to the rally. It’s a lot to do with AI and technology. But she points out that Europe has actually been narrower than usual.

Does that fit with your findings and what would you expect to see in terms of how that develops? Yeah, it does. I mean, there’s been two very big correlation sort of correlation drivers over the last couple of years, which have really meant that some parts of the

Market go up, some go down, and therefore the index is very low volatility and actually having a low volatility market encourages more risk taking. People either use more leverage or buy more cyclical, volatile, risky companies. And that’s been what we’ve seen in the US and Europe.

The drivers are the macro drivers. Normally macro drivers cause lots of correlation, but in this case it’s done the opposite Covid cause these dislocations within the market between services and manufacturing, which went one way, then the other the other way, and that’s starting to normalise.

But also we had a huge yield move and yields actually have a different impact in different parts of the market as well. Some things go up, some things go down. So this dislocation I think is potentially at risk, particularly if jobs data weakens because at the moment

You’ve still got these covered and yields driven divergences playing through in the market. That’s part of the narrowness that you can see plenty of stuff going up, some stuff going down. But if you start to see those correlation macro drivers dissipate and we expect they will lower bond volatility and less disruption from

Covid, then other macro consequences will cause more correlation and more correlation will lead to more volatility. It makes it a bit riskier investing in markets. We will see slightly bigger daily moves, so our analysis suggests that that will be the case over the next 9 to 12 months.

But it all depends on jobs. If you have job weakness, you’re likely to get a 20% volatility regime. If you don’t have jobs weakness, you’re more likely to get a 10% volatility regime. So again, that data once a month on nonfarm payrolls becomes pretty critical

For the nature of risk in the market, the correlation of stocks, and therefore that breadth you’re talking about, a lot to digest there. I feel like we can game theory this with you all day long. Jerry Fowler, head of European equity strategy and Global Derivative Strategy

Over at UBS. We thank you so much for joining the program. There’s a lot to digest there. He talked about the equity story. Let’s talk a little bit about the macro story as well. Coming up on the program, you do not

Want to miss our interview. John Neel joins us, the CEO of Lloyd’s of London, talking a little bit about the reinsurance story around not just the Baltimore Bridge, but really building on the defense story here in Europe, the Red Sea tensions as well. We’re going to ask him about all of it,

Not to mention what’s happening right here in Europe. Stick with us. This is Bloomberg. Welcome back to markets today. 30 minutes from the start of cash equities trading. The futures picture in Europe looks a little brighter. We are expecting to see a little bit of

A bounce perhaps on the London market in particular, The US futures picture looks a little sluggish and we do get a day before extended weekend feel to market. Certainly at this early stage of the trading day. We’ll keep monitoring the futures story, of course.

Let’s turn to a business that has reported numbers and also has a lot to tell us this week about some interesting at news events. Lloyd’s of London has by one measure reported its most profitable year for underwriting since 2007. Its investment returns also benefited

From higher interest rates. And as marine insurance is one of its lines of business, the insurance marketplace can also help us understand the sector impact of the Baltimore bridge collapse. A lot to discuss then with John Kneale, CEO of Lloyd’s of London. He’s with us this morning. John, nice to speak to you.

So let’s we’ll certainly want to tap into your your understanding and talk about the Baltimore bridge collapse and what that means in marine insurance terms. But firstly, just lingering on the numbers for a moment, I mean, a combined ratio, that’s the highest since 2007.

So this is a measure of the underlying profitability of your underwriting business, the highest since 2007. And what’s going right, I suppose, is the question then for Lloyd’s at this point. So. Well, thank you. We’ve been working really, really hard to get performance back in shape.

So good to be promoting growth. Good to show improvement in revenue. We wanted to get costs in order and we’ve also wanted to show leadership. So a lot of conversations with us around diversity, equity and inclusion and around climate. And I think I do feel it’s really

Important for UK PLC, you know, because 80% of our revenue comes from outside of the UK. So to represent the credentials of financial services and what insurance can do in the UK is fantastically important. So really, really pleased to be

Reporting the results that we are today. Yes, because a lot of people ask questions about the role of the City of London, I suppose at this point post-Brexit, and with the listing story not playing in London’s favour, you know, a lot of businesses choosing to either leave or to list in the United

States and elsewhere. But but you feel from the insurance space London still has a lot to offer. I think it is the only true marketplace for insurance in the world. And we’ve reported double digit growth now for three consecutive years. And to give you an idea of where the

Geography comes from, over 40% of our income actually comes from the United States, in fact, to £2 out of three of what we do comes from North America and Latin America. So real geographic spread in what we do, hugely valuable, I think for UK PLC terms is the kind of performance that

We’ve seen then over the last year. Does that continue for Lloyd’s and what do you in terms of reinsurance pricing there, relatively elevated, does that how does that story evolve? So it’s it’s interesting. So last year was helped by two things really.

So the frequency and severity of natural disasters and we’ll talk about Baltimore in a minute was slightly lower than we would normally expect. So that was good news. And isn’t it exciting to actually be making some money on our assets? So we quite enjoy having interest rates.

So for the first time in like 15, 20 years, we’re making money on both sides of the panels. So we do think the performance is sustainable, sustainable. So there’s always going to be a bit of cyclicality, but we don’t think this is a one off.

You know, it’s been a consistent, steady improvement in performance that we know not a one off. And of course, the interest rate regime is likely to change this year. So that’s that’s going to evolve as well. Let’s get to the Marine insurance that

And the Baltimore disaster. We know the bridge was insured, is insured that the boat’s insured as well. There’s a lot at play here. How material is this for Lloyd’s? Have you been able to put a number on it yet? So from our point of view, as you would

Imagine, we go through multiple scenarios of different type of loss. Do we ever get every loss right and consider every loss? No. But the type of loss that we’ve seen is one that we would envisage. So we would assume every year this type

Of loss will occur for us somewhere. So within our financial considerations, manageable. And you said in your remarks which something is so important. You know, when I think of natural disasters, what upsets us most as insurers is we have the capacity to insure and almost every loss you see is only half insured.

People aren’t buying insurance. So we don’t do a good enough job of selling the value of insurance. In this instance, as you’ve just said, the boat’s insured, the bridge’s insured, the Port Authority’s insured. So from a financial perspective, the money is there to deal with the loss.

I mean, there’ll be the issues of what happened and whose fault was it. And all those debates will rage. But the good news is this is insured. And so help us understand with your Marine insurance expertise, you know, what are the types of claims then that we’re talking about?

What what are the building blocks we need to look at? So to add up to the full picture of insurance exposure around this event, so you’ve got the easy bit, which you can see that I mean, these things today play

Out on our TV screens so you can see the damage to the boat, you can see the damage to the bridge. You know, the cost to the bridge will run clearly into hundreds of millions of dollars as well. The damage to the boat, these boats are 400 meters long and 300 meters high.

They are vast in terms of size. So you can see the easy bits, the complicated bits of the supply chain related issues. What impact is this having on the ability for goods to move around the world? What delay and what interruption does it cause? That’s the heart a bit.

That takes a little bit of time. Just work its way through. Yeah, just just back to the sort of the Lloyd’s marketplace and its role in this. I mean, analysts at Barclays say that some of the smaller Lloyd’s firms may be the most exposed to the Baltimore Bridge

Claims. Have you have you estimated that you’ve got anything you can tell us on that? So I don’t think that’s correct. I mean, interestingly, with the insurance of shipping, there are these clubs called protection indemnity clubs. There are 12 of them. They gather together under the international group.

They insure 90% of the world’s shipping and then they buy insurance, if you like. They lay off with us and others, so we reinsure them. So there’s quite a complex weave of insurers that are involved with this, but it’s the international group that

Sits at the bottom of the chain and they will deal with the loss. But no, I don’t. I agree with Barclays that this has the potential to be one of the largest Marine losses in history. But no, I don’t think we’ve got anything that’s that’s causing us concern.

So I think that any based on the Barclays point $3 billion is the number they put on it. Does that sound about right? It could be. I mean, it’s a multibillion it’s a multi-billion dollar loss. I think it has to be. But I think it’s a little too early to say.

What do you actually think it’s going to cost? But, you know, in terms of the earlier question, do we sort of scenario manage and anticipate losses of this size? The answer is yes, we do. You mentioned earlier that the hard bit to calculate at the moment is the supply

Chain effect that you see broadly. There’s a lot of concern in the shipping space right now that this is one more shipping disaster that we seeing on top of the Red Sea tensions on top of the Panama Canal. I can appreciate that this is all insured at the moment.

At what point do these almost increased shipping risks start to become a danger to you and your company so that it become a danger? I honestly, honestly think we’ve got to do a much better job of representing how we can provide insurance. You know, when you think of business

Interruption, I’m getting so old now. I remember during the floods in Thailand in 2011 and the impact that had people couldn’t get the chips on cars. You know, you then look at the impact that we’ve seen in in the Ukraine and you’ve seen the energy impact around the world.

So, you know, when you think of supply chain interruption, it is all insurable. We can deal with all of these types of situations. So so I think it’s an opportunity for us to say, look, there are products, there are services that can help in this situation.

So, no, we’re not genuinely not intimidated by the financial consequence. You know, we have the capability, the capacity and the interest to provide insurance, and that’s relative to, say, AXA protection, for example. What about in terms of actual war zones?

We talk about the Red Sea tensions, in particular Lloyd’s of London active in terms of insurance to Ukrainian shipping, for example, in the ports there. That’s a different story. That is an active war zone. How are you approaching it in terms of managing risk there? So it’s you’re completely right.

There are two very different scenarios. So when you’re in an active war zone, then it takes political intervention to create a pathway in a passage that is insurable, provided the political intervention is there, we can provide the insurance, which obviously we did in partnership with the UN, and 32 million

Tonnes of grain and fertilizer were moved through the Black Sea, that the Red Sea is not uninsurable. But until there is some intervention that creates security and safety around the passage of goods and people, it’s very difficult for us to provide insurance.

But at the moment there is there is no lack of appetite to do so. But what do you need for that assurance, especially when the US military is already in that region? We need we need government understanding and we need respected government on both sides of the equation.

So when you look in the Black Sea, you did also have the Russians agreeing to the safe passageway and the intention to transport the goods. Right? So we do need that. We do need that dialogue to apply to both sides. Otherwise, there’s just extreme uncertainty around the risks that we’re

Being asked to take. John, you were talking about not being intimidated by certain global challenges and insurance being available. I want you to set that in the climate change context, if you like. We’ve talked to a number of reinsurance businesses about whether we are in any

Sense moving towards an uninsurable world in any offset geographies or around certain activities as a result of climate change. And they both caution they don’t like to think of it that way, but it’s more about the price that people are willing to pay and suggesting that, you know,

Only now are we starting to see the true costs of climate change being passed on. And is that how what context would you add around around the climate change story? I mean, the good news is talking to an insurer, you’re not going to get an insurer denies climate change.

We’ve been talking about it for 25 or 30 years and we have 25 or 30 years of weather related data. So we can show you the increase in severity and frequency of climate related instance evidence through weather. I think what it needs now when it gets

Complex, so you think of Florida or California in the US or somewhere like Queensland, in Australia, I think it needs the banks, the insurers, the regulators and the government sit around the same table and say, this is complex, everyone’s got a role to play here. What roles are we going to play?

Because I think the capacity is there, the capability is there, but it’s just not one party anymore that can solve the problem. So so when it gets really hard, those are the conversations that need to take place in our view. John, on the question of artificial

Intelligence, I want to fold two questions into one. One, what does. Of the most interesting use cases you’re seeing across the marketplace in terms of how are how is being applied within insurance across your business? And secondly, are you looking at will there be products to insure against any risks?

Yeah, it’s a great question. So on the first question, data informs everything we do and how we think. So in AI through various iterations, then it’s always been part of what we do. So when you ask questions about how we measure risk and manage risk, that is

All data led. When I look at some of the interesting use cases now, it’s how can we more quickly get to the answer? How can we more quickly get to yes for a risk and price and is hugely helpful in that respect. And I think when you look at the

Insurance opportunity and then when I first started insurance, everything was tangible. Can you insure my building? Can you ensure the people that work in it? 80% of what we do today is intangible. Can you insure my data? Can you insure my intellectual property? What risks are my facing from AI?

And that’s as much about the service as it is the product. So how do we help people when they get into difficulty? What does it actually mean? So, so I think the nature of insurance is, is changing with with the rise of data, the rise of data, the rise of

Tech. How do you price that, though? You talked about the rise of tech and Tom was talking about the AI story as well. We would talk about geopolitics earlier. It was Mary, The two cyber insurances is very in vogue. Cybersecurity is very in vogue. How do you price that?

So so we are the world’s leading insurer for cyber is 20% of the world. Cyber insurance is bought and sold at Lloyds. What’s annoying is, is that we’re not doing a good enough job of persuading people to buy it. So, you know, the cyber market globally

Is still worth about $20 billion. Property insurance in the US is $300 billion. So so we’ve still got a job to do to persuade people that there is insurance cover and there is cover that you can buy. And we just have to think very, very

Differently around the types of exposures that we might get. And when you get something like cyber, the real threat is that that would trouble us is either systemic or state intervention. Those are the bits that would worry us most. What happens if everyone suffers the same loss at the same time?

That’s why something like cyber is a little bit different to some other categories of loss. But you know, we’ve been doing that. The first cyber policy was issued at Lloyds 24 years ago. Yeah, so we’ve already dealt with 50,000 cyber claims. So we’ve got quite a lot of data on what happens.

So I think we’ve got quite good understanding of that type of risk. John, quickly before we let you go, when you talk to the government, when you talk to possibly the opposition Labour Party in an election year for the UK,

What is your top priority for them? What is the message to improve the competitiveness of your market? What are you taking to them? So there’s two points really. One would be you’ve got to have a plan. You know, some of the plans, particularly around transition related

Activity or some of the promises. So they’re not one year plans or two year plans or eight year plans, nine year plans, ten year plans. So for goodness sake, commit to a longer term plan. And then there is the financial muscle from either either us or the banks to

Want to help and support. So one, please do that. And two, can we just represent ourselves competitively? Regulation is important, but we’ve got to have one eye on what a competitive marketplace looks like because, you know, we want to stand up, don’t we?

We want to continue to be one of the global financial services centres in the world that people look to. All right. John Neil, CEO of Lloyd’s of London. We’ve heard a little bit of everything with you. We thank you so much for joining the program. Coming up, we go into the micro.

JD Sports isn’t sweating a recent disappointing trading update. The first trading conditions will ultimately improve. Are going to take a look at that and your other stocks to watch coming up next. This is Bloomberg. Welcome back to markets today. 14 minutes until the start of cash

Equities trading. The futures picture has looked broadly buoyant for European equity markets. U.S. futures now look almost entirely flat as we head into an extended weekend on both sides of the Atlantic, broadly speaking. And so we keep that in mind as we look ahead to important data due out. Right.

Let’s get into a conversation with our markets live, executive editor Mark Cutmore, who joins us now. Mark, good morning. So I have to come to you on the comments we got from Christopher Waller suggesting that he is in no rush. He seems to be putting more emphasis on

The inflation data we’ve had to date and the fact he’s been stronger than expected than, for example, Jerome Powell. How much how much weight do you put on those those wallet comments? Well, he is a known hulk, so I don’t think anyone would interpret them too

Much. But on the other hand, I think he’s absolutely right. The data just does not seem to justify the rate cuts that Powell and the committee have stuck with last week. And the market still seems to be pricing. Now there’s a chance the economy is going to suddenly fall off a cliff, but

There really no signs that at the moment that the December Fed has means when a no landing scenario. If anything, we appear to be kind of gaining a little bit of momentum again. It is a world where stock markets are commodities. We’re seeing credit.

Every single asset class is doing very, very well and everyone is determined to find vulnerabilities. But there doesn’t seem to be an obvious catalyst out there. And I think the macro backdrop is still too strong and it is too early to fight this supposed bubble in markets. Hmm. Okay.

So that’s the the story around the Fed right now. We’re waiting for the PC deflator data, which we get late tomorrow, of course, the Fed’s preferred measure of inflation, and that’s when markets are close. Given we’ve heard all of this hawkishness this week. How do you how do we position for that

PCE? Well, as we’ve seen, both Bostick and Waller quote these hawkish comments, But overall, yields haven’t really gone anywhere in the week. It’s been and it’s been very much a low volatility market. Of course, PC can can cause some volatility when we come back into markets a monday morning in Asia, where

We’re going to really see the reaction. But I think it’s been it’s been overhyped as a catalyst. It’s a very important data point. But I don’t think we’re in a situation where one data point is going to derail the narrative. It’s only going to cause short term

Volatility. So I think the hype around PC is perfectly in fitting with this kind of general market where participants are casting around for any possible catalyst to derail us and come up with nothing good. Okay. Thanks very much. Thanks to Mark by the Monkeys live

Executive editor Mark Cutmore. Remember, you can get up to date analysis and insight with Mark and the rest of the markets. My team and mlive go is the functions you use on your Bloomberg terminal. Let’s get into stock specifics. Joe Easton has a briefing from our equities team. Joe, good morning.

Morning. And us to the UK retailer JD Sports says sales will grow very slightly this year, but does reiterate that it’s a challenging market with weakness, particularly in the UK where like for like sales did actually decline in the last quarter.

Now the US holding up pretty strong, which is quite surprising given that’s where all the weakness has come in the stock. We saw a massive profit warning from them just a couple of months ago that was related to their North America sales and also due to weak results from

Footlocker, Nike, all of that had weighed on them. But a lot of analysts are saying that this stock should recover. So, as we can say, 12 buys only one sell on the street. But JD pretty mixed and some negative calls on that one this morning.

Then in the chip space, we got a profit warning out of SOI tech. In France, they make materials that go into iPhones and other smartphones and PCs far below expectations in terms of the guidance, Sales in the first half could drop by 15%. Consensus was for nearly 30% growth.

Morgan Stanley writing that the decline in handset demand has been far longer than any of them had expected in terms of the analyst community. So we’re going to keep an eye on a bunch of stocks that supply iPhones and also PCs as well. We’ve got Varta over in Germany and I

Suppose from SD Micro, a bit of a bigger one there. All of them having a week here today. And this is a negative indicator for that sector once again. Then over in the airport space, we’ve got France’s Vinci and Spain’s ANA both vying to takeover Edinburgh’s airport

For more than £3 billion. According to a Bloomberg exclusive. The privately held owner has had it since 2012, but they’re looking to offload it. It’s the UK’s sixth largest airport with 15 million passengers flying in and out of sunny Scotland every year, according to the company. These stocks are actually doing pretty

Well at the moment given the rebound in long haul travel. Vince, she already has Gatwick Airport and it does Madrid. They are looking to add to their airport portfolios. Keep an eye on those stocks today. Okay. Equities reporter Joe Easton, thank you very much indeed.

Now, one of the top red stories on the terminal right now is around the corporation. That is the stock that is Novo Nordisk, of course, and that was the stock of the year, arguably in in 2023. And of course, it continues to post fresh eyes on, of course, all of this

Demand for Ozempic and Wegovy in some of these weight loss drugs. But the reporting is suggesting that the profit is maybe a little excessive for Novo Nordisk. So some research has been done, some academics and how it’s feeding into the debate in the U.S. state side could become a political issue.

This cites some research by, I think, Yale King’s College and others that talks that they’ve done some research on what to actually call it a cost price to put together as MPEG by dose or monthly. And they work out you could do it for $5

A month, but actually you’re being charged ,000, nearly ,000 in the United States. And clearly, you know, businesses set out to make money, but they’re asking questions about whether they set out to make chipsets out to make this much money in this space. And politicians have been jumping on this story.

There’s two ways to view this right for the company and the stock itself from an investor standpoint. On the one hand, the bull case here is what, a margin, $995 per injection. That’s enormous. And therefore you could actually see that month. Yeah, right. Could actually see that react in the

Opening trade. When you see that kind of market, I don’t think we’ve got numbers exactly around that. Given Novo has been to so much CapEx focus and spend. The other side of this equation is yes, the politics and yes, the regulatory action, which fair enough, takes time. There’s also a consumer question.

There are people willing to pay up for a product that they may not see the need to pay up for. Does that is there some sort of sensitivity around that now that it’s been revealed? That’s really only if you can certainly see it riling both sides in the politics

And political landscape of the US, particularly given that Europeans are paying far less for this drug than the Americans. Of course, it’s a Danish, it’s a Danish company. The company would say, we don’t get to this point. We don’t get to these kind of miracle drugs without the massive input in terms

Of spending around R&D, that building at these facilities, the capacity, the CapEx, it’s enormous. Yeah, I haven’t seen yet. We haven’t seen the workings of what this Galen King’s College report includes in that $5 a month cost. You know, does it include all of that

R&D upfront or does it or is it just talking about the cost on the production line, which is a very different story? And there’s a question of patent production as well, right? Because Novo was the first to come to market with this kind of drug. And in particular, they can actually

Basically claim that because they brought this onto the market in the first place, therefore they have some sort of patent protection for a couple of years until it is more mass marketed. To me, I think the most interesting analysis around Novo Nordisk actually came out of Goldman Sachs excuse me, at

Morgan Stanley, where they had said that if enough Americans buy into this product and you actually really see the obesity drug explode, I actually. To GDP growth as well just because of this product. I thought that was a really interesting kind of best case scenario coming out of Morgan Stanley. Okay.

So we are just minutes away then from the start of the European equity trading day. The futures picture, as we mentioned, has been looking kind of buoyant. But, you know, maybe we see low volumes today. We know that certain people are getting

Ready for a long weekend and, of course, taking the opportunity to take more time off some pretty low volumes in markets as we will be closed on both sides. The Atlantic tomorrow and some markets have closed here in Europe, closed on Monday as well. So we keep that in mind.

U.S. futures flat to negative. We’ll be back with the European Open suspect expecting. Welcome back to Marcus today. We’re just a few minutes ago until the start of cash equity trading. It kind of feels like people are already on that kind of long holiday mindset. I know.

I am. I know Ana and Tom are for sure going into what’s supposed to be a very exciting day. In theory. I know. I know. Am I taking off for it? We’re all on holiday, which is the timing is kind of a little wonky here.

Tomorrow we’ve got the PC data. We’ve got comments coming out of a chair, Powell as well, your inflation data coming out as well. And the markets can’t do anything about it. I remember days where they used to move those releases two days when trading was happening. You know, things that usually happened

On a Thursday would happen on a different day if there wasn’t going to be any trading PC, not not getting that treatment unless Mark Cranfield or Mark Gardner or, I should say, saying, look, maybe we’re overhyping the PC. I’m not so sure. Look, it’s going to come in.

It’s sticky, stickier is the expectation. That would reinforce what we’ve been hearing from Bostic and of course Chris Wall on most recently. And he suggested you can push those hikes further out. He’s not saying those cuts. He’s not saying a cut. It’s not going to come.

He just says you can push them further out. He’s not convinced he needs to couple moment a couple more months to face it. But in a quiet week, you know this kind of quickly gets more of a mention. Oh guy was talking about it on Sunday night about how exciting Friday was

Going to be And he’s not even here to witness the excitement. The the interesting thing I think perhaps comes in today’s market open where you look at some of these individual stocks. I mean, yes, we’re all waiting for the macro. Some of these traders are probably likely checked out.

There’s a couple of names that are already catching my eye of DHL, for example, getting Deutsche Post. He’s been getting cut to a hold from buy It Deutsche Bank, ASML. We always like to watch some of those big heavyweights, conversations happening between the Dutch prime

Minister and China around tech security doesn’t have a read across into the market open. We’ll find out in just a few seconds. We absolutely will. Market opening in just a couple of seconds then yesterday was dominated by strength for the retail sector.

We’ll see what does it today. So we’re open across the European equity markets right now. Only the Footsie 100 and the Xetra DAX actually printing earlier than usual. The retail sector then, as I mentioned, did really well yesterday. It was up two and a half percent.

We had the likes of H&M really moving higher, more than 10% higher, in fact, in session yesterday. And so that was certainly an area of focus for us. So what does the market do today? Well, early signs are that we have travel and leisure moving higher as one

Of the sectors to watch basic resources also doing pretty well and only a few sectors in negative territory, so broadly positive. Stoxx 600 up by 2/10 of a percent this morning. Yeah. We should mention that Lloyd’s of London is not only one of the highest index contributors, but one of the high

Percentage movers as well, higher by about 1%. We just had the CEO on talking about those record moves. They are giving us their maritime insurance. They’re seeing a lot of that uptick in their numbers as well, not to mention not to make kind of good out of a poor situation.

But some of the costs around the Baltimore bridge collapse, the Red Sea tensions as well, they are actually able to deal with that and not have to kind of shell out too much more than they had anticipated.

He did he did say he thinks it’s going to be is likely to be one of, if not the biggest Marine insurance claim that that we’ve ever seen. But specifically on their business, as you say, they’ve had a very good year in terms of 2023. And it was interesting, he was talking

About that outlook. He said it’s not a one off they expect to post and they’re in a position to continue to build on that in 2024. Absolutely right. Of course. And it’s focusing on the top sector being basic resources. We have seen a bit of strength coming through for the commodities space this

Morning. Iron ore prices, having skirted with that 100 level are at 1.1 up just 5/10 percent. And Brent oil is also high, as is copper, just by a smidge. So a little bit of movement in in the materials, the resources space, the commodities space, lifting basic resources.

So that’s playing into, of course, what we’re seeing on the Footsie 100 that is exposed to some of those miners, first 100 up 3/10 of a percent. Yeah, the footsie is a little stronger. The we have that multi sense of improvement. Of course, European stocks today, it’s

Kind of broad based, isn’t it? As we’ve been mentioning, a lot of these sectors in that positive territory this morning, only as I was mentioning, just a couple were moving lower. In fact, three sectors moving lower. And the US futures picture, they looked broadly unchanged at just a word on the

Basic resources that the best performing sector 8/10 struggling for interesting things to say about this market this morning. Yeah no that seems to be that seems to be the story you got some of the heavyweights moving higher as well. I just want to quickly correct what I

Said earlier. Lloyd’s of London is not listed. Apologies. Look, get Lloyds Bank instead. So you are actually seeing one of the banks higher as well. Barclays, for example, trading higher as well as is BNP Paribas. So you are seeing perhaps a rate story. I’m curious, that’s kind of some sort of

Reaction on the little slight tick up higher in yields We got off on the wall are comments stateside, but also in Europe as well. Again, it feels more like a macro story that’s reading into some of these stocks. It’s interesting. What’s that red headline earlier on about China and Australia being on

Better terms around wine? And, you know, you might not see there’s much direct read across from that into into to commodities. But the fact that basically when basic resources do trade around sentiment towards China and global trade and and as well around metal prices, we don’t

See a great deal. We see a bit of upside on iron ore this morning. It could be that Australia produces this higher grade iron ore that China China is reliant on. So they so they never cut off. They never shut the doors to that input.

But they did certainly put the put the constraints on in terms of other trade inputs from, from Australia. You had the Labor Government come in. The relationship has thawed and you’re right in terms of the symbolism, it’s important. Of course it’s important for the

Domestic wine industry of Australia. It was a massive market, was the largest market China for the wine industry. So that’s that’s important for them. But it tells a bigger story about China at least trying to find areas in relations with some of its trading partners to ease some of those tensions

And to kind of put a floor, at least under those relations Found something interesting to say about this morning’s market. Better move music around China. Thank God Tom Mackenzie was here because what would we have done otherwise? Not Australian wine and China. Tom’s expertise clearly. Well, let’s go from the micro then to

The macro story, because we’re talking about these individual European earnings stories. Is there more upside given that in this last quarter was last day of the quarter, we actually already saw the Stoxx 600 hit that record high. Take a listen to what Goldman’s Sharon

Bell had to say on that earnings story. She recently just upgraded her forecast for the index. In Europe. It’s not that you don’t get any earnings growth this year. We do have a little bit of earnings growth, but it’s kind of low single

Digit earnings growth this year. It reflects the fact that the cycle is going to be a bit anemic even if you do see some recovery. We’re looking at less than 1% sort of GDP growth for Europe this year. So a little bit of a little bit of earnings growth, but quite anemic

Really. And most of it is valuation. Sharon Bell there of Goldman Sachs talking about. Now. We’re going to get a little bit more context here about a man at the head of European equity strategy joins us coming out of Citigroup. Beata, you and Sharon both upgraded at

The exact same morning and we happen to have Sharon on set. But what I thought was interesting is that your reasonings were so different. She was talking a little bit more about valuations, etc.. You were talking specifically also about the earnings story, the earnings growth.

EPS, I think, was one of your standouts. Walk us through why you’re so bullish on European stocks right now. So we’ve been very bullish on European stocks already before the upgrades that that that has just happened. But so we’ve been highlighting the balance of risks improving and this

Early cycle environment potential further broadening of the market that should be really conducive of cyclicality and not only Europe, but markets that have more cyclicality within their sector weights. But the reason we coincided with Sharon is probably she was thinking about

The very dovish Fed encouraged us, and I’m pretty sure that that was the trigger for her upgrades as well. So basically what we’ve heard, don’t worry about the rates will cut the rates. The economy is looking okay. We are upgrading the forecasts and we

Don’t worry about inflation so much. So what more do you need for cyclical markets then that that is a pretty good set and add to that a strength weakness in the dollar and a strength of the local currency. It’s a pretty good picture. Now, on earnings, I agree.

If you compare European earnings to the US earnings, of course they are much lower. So our previous EPS forecast was for 3% growth, very low. Now we got encouraged by continued upgrades from economists. Growth is going to be below 1%, but it’s

Every month is a bit better than we thought it would be. And that, of course, feeds into my top down models. So now I have plus 6% EPS growth for Europe. And we’ve been arguing for some time. Markets have been pricing in not so long

Ago a contraction in EPS and now the market is pricing pretty much in line with our top down forecasts, which is slightly below the analyst. It all makes sense except for that very first thing you said. The the early cycle is what you call the we actually just a Jerry Fowler over at

UBS joined us this morning calling it a late cycle dynamic but still say that you were seeing value in cyclicals kind of outperform. What is the indication to you that we are early cycle and not late cycle? So, look, it’s been a very synchronized cycle.

You could almost argue I would push it even further. We don’t have a cycle anymore as we’ve been used to. Right. But in Europe, of course, in the US it’s a different story. In Europe we are coming from very subdued growth environment, flat GDP. Last year, EPS actually contracted by 5%

And by double digits, excluding the strength in the in the banking sector. So it has been a very bad underlying year for fundamentals. Therefore, it’s easier to argue that we are coming up from low levels. Central banks are cutting. This is for me only cycle dynamics for Europe. It’s a very strange cycle.

And what do we know about the level of concentration that we’re seeing in European stocks? Because you’ve mentioned this in your notes, but also I think it’s interesting, we talk a lot about too much concentration or some people don’t think too much, but just a lot in the

United States, in the S&P, for example, or even in the NASDAQ. But we don’t talk about it much in a European context, is it? It’s not driven by the same sector, is it by tech? I don’t imagine so. So what is driving that concentration in Europe? So what is very interesting is that

Markets around the world to wind up strongly year to date, but through narrowing so through concentration into a few stocks and sectors and when markets narrow, they tend to narrow into growth. So in the US it would be mostly tech. In Europe, it would be luxury goods as

Well on the top of tech and more recently even European banks. But we’ve had this concentration for two months. Concentration doesn’t mean that the market has to come come down of the cliff. Right? So the actually the very bullish positioning in the US has just come off

At the beginning of this of this week without the markets collapsing. So do you expect that to do you expect the European market to broaden so our base case for this year, what was for the continuation of the broadening charts as it happened in the fourth quarter of last year?

Of course, this narrowing was very unusual for Europe. Hardly ever happens in Europe happens much more often in the US. So a more natural environment for Europe to outperform is really of broadening and we are starting to see tentative signs that this is this is starting to

Happen right now. So yes, Brodin in going forward, be able to quickly went to your first answer. I want to go to your first answer as well, because you talked about the division that’s coming through from central bankers. You can look. And we can become less concerned about inflation.

But is that the message we’re getting from Chris Wallace Is that the message we’ve had from Rafael Bostic doesn’t seem so. Just does that does the message from those voting members of the FOMC challenge that view? I think we are going to have a lot of

News flow that will be challenging the view for sure. But we really a weak dollar, which we. Yes, you don’t get a weak dollar in that environment. I mean, if Chris if Chris Waller is is is is our new guiding light, then we’re not looking at a weak dollar.

So first of all, we really focus on what the chair Powell has said. Right. And what the dots are telling us. So the dots stayed the same. That was encouraging. And that was always the risk that they would come lower. So I think this is what the markets leaned on, too.

Now, on the on the dollar, we have a bit of the weakness. I think the risk on the environment is enough for equities outside of the U.S. for the dollar not to strengthen further. So we do not have huge weakening in the dollar, but over the next two quarters

Or so. Okay, you’re overweight continental Europe and emerging markets, you’re underweight the U.K. The answer, how does that does the U.K. not have a cyclical you you favor the cyclicality of this market. Does the U.K. not have a role there? It does.

50% of the sectoral weight comes from cyclicality, but it’s very skewed towards commodities and especially the energy sector, while the another 50% is purely defensive. So it’s a very interesting and unique market from that perspective. So what’s the U.K. really needs is for the commodities to start picking up.

This will be a better setup for the U.K. market for the Footsie 100. So is that not eat into the bottom line, though, just given that there is that dependency, for example, hypothetically for I think the very first time in months, we’ve heard Morgan float the idea of 00 oil, for example.

It’s not their base case, but they said it’s a possibility in kind of the worst case scenario. Does that kind of spook you in any way in terms of the bottom line for some of these European companies? So 00 could be a risk, especially for the inflation rate.

Circling back to the to the central banks, it’s been coming up gradually, mostly because actually the demand around the world is better. So it’s a leading indicator that actually the global growth is not so bad. And of course, it’s a function of of

Some supply constraints as well. And it all depends how it goes up, right. How fast and to what levels, but a bit higher and a bit higher. Oil, I don’t think should be a problem at that point if the growth continues to pick up economic growth.

I want to ask about the significance of real wages in 2020 for buyouts, or is this a an upside risk for for growth, for all kinds of dynamics within the European economy? Maybe. We saw the U.K. retailer next talking about this some time ago and today. Then we got H&M numbers.

Yesterday, they were strong. JD Sports numbers seem to be strong, as if there’s something propelling these retailers at the moment. A next set. And he was talking about the real wage story that’s just very U.K. but that seems to be a conversation we’re having in other geographies as well.

So wage growth is always the risk for inflation and for the central banks again, but and could put some pressure on margins. But as long as earnings pick up or don’t really proper margin pressures, you only get when the earnings call ups, Right. We don’t see that on the horizon at the

Moment, but definitely a risk. Absolutely. That’s not played out a lot to digest. So we’ve thrown a lot at you. Beata Manthey, head of European Equity Strategy over at Citigroup. We thank you so much for joining the program. She’s talking a little bit about how do you look at some of the even

Concentration risk, how you look at some of the indexes. Well, I’m going to put my Guy Johnson hat or Guy Johnson tie on perhaps today and look at the sensational six, his sensational six where he likes to look at some of the bigger heavyweights, the kind of sectoral picture that we really

Look at today. It looks like it’s all green on the screen except for Novo Nordisk, which is interesting given that we were talking about that margin story that they potentially are selling a drug for about ,000 per injection could be made in about $5, according to one medical

Review. The rest of the heavyweights, LVMH, for example, ASML, even Schneider Electric, which we had Jerry Fowler on earlier, talking a little bit about the I read through, they’re all higher by over 4/10 of 1%, leading the index higher as well. So that is your quick check on the

Sensational. So let’s get a couple more sensational stocks here. Joe Easton monitoring those very, very closely. Joe, walk us through it. So the most sensational ones in the UK at the moment are in the retail space, both JD Sports and IO World Gaming. Both of them are recovery stories.

JD We had in stocks to watch, they have reiterated some of their top line guidance and a bit of a relief, saying as well a massive drop from them in January. The sales are providing some support in terms of the American sales where the strength seems to be.

The UK actually looks pretty weak. In terms of the profit guidance, that was up 17% at the open. It’s come back down to 8%. Now, in terms of, well, this is white goods, dishwashers, fridges, that kind of thing. They’ve had a terrible run.

But again, it’s more about no downgrade to profits and therefore some relief in the stock coming up 13% this morning. We’ll take a look at the chip stocks. We had that big warning from soy tech and that one is getting absolutely

Slammed over in Paris is down 11%. It was down 15% at the open, much worse than expected, according to analysts at Morgan Stanley. And it is in the iPhone and smartphone area. Semi supplied Internets are actually starting to see a bit of a read across

Now coming in some peers varta in Germany, they make the little batteries that go into airports and AMS. They also supply iPhones as does SD micro all of those coming down. A bit of a read across despite that positive update from hon Hai over in Asia, the big iPhone supplier in terms

Of deals we’ve got the latest UK takeover this company Sprint, it makes equipment for the telecoms area. They’ve got a second bid previously agreed a takeover and they’ve actually got a new bid above 200 pence a share in that stock gaining 10% casino that’s in and out of a trading halt.

It’s resumed trading after a long period of suspension. The takeover by Daniel Krasinski has been finalized. It’s very, very messy. It’s down 50%. It will take a while to understand what’s going on there, but it is a dilution of shareholders following that takeover. And and Brace is over in the video game space.

They’re doing a deal. That stock was up around 8% at the open in Sweden, but it’s actually coming down a little bit now, doing a 460 million deal with take two in the US. Finally, we’re keeping on the same of Lloyd’s of London insurers. We’ve got an upgrade for score very

Timely given your interview just now a hard market strong pricing in the Lloyd’s of London market. I mean score gets an upgrade at HSBC and a lot of focus on that given the events of the week. That stock up three and a half percent. HSBC upgrades it to buy.

Okay Joey St Excellent. Thank you very much indeed. Some of the stocks on the move for us this Thursday morning. Coming up, the world’s biggest banks quietly hang on to carbon intensive clients, exposing cracks in the world of climate finance. That story is next. This is Bloomberg. Welcome back. This is market today.

20 minutes into what feels like a bit of a sluggish session as we head towards a long weekend here in Europe and also in the United States. But we do have some upside on European equity markets, just up a 10th of a percent. The German market underperforms, the

Footsie outperforms retail, the best performing sector, as we saw yesterday. Some of those retailers do pretty well. That seems to be a bit of a theme of the week. Time for your Bloomberg Quicktake story now. This morning, the world’s biggest banks are quietly hanging on to carbon intensive clients because of what they

See as unrealistic demands from regulators and civil society and the threats to their fees, of course. Joining us now is Bloomberg’s Alister Marsh. Alistair, the fees were always going to get into the story somewhere, but it is to do with other things as well.

And you’ve got some really interesting ways to illustrate where this story is going. But let’s start with you know, it’s been three years since most banks made commitments around climate. It’s been a big focus for the sector. So what progress has been made?

Well, in the real world, emissions have gone up year on year, every year to record highs, and banks continue to funnel billions of dollars into fossil fuel clients. So you can draw your own conclusions that the energy transition is not going that smoothly.

And even if you look at what recently the CEOs of some of the big oil companies, the Exxon and Aramco, were saying is that actually we need to put more money into oil and gas. We’re going to be needing to rely on oil and gas for a lot longer than we thought.

And we keep pushing money there. And that puts banks in a bit of an awkward position because they’ve come out with these climate commitments. They’ve said we’re going to get to net zero by 2050. But actually the progress has been very slow.

Some could say that the expectations were too high for banks on what banks could deliver on, but so far, progress is not that much to show really. Can you connect the dots for so how a bank gets involved in energy transition? I don’t I can’t even understand that relationship.

Well, the cost, the price tag of the energy transition is like 5 to 0 trillion every year. That’s the money that’s needed to wean is off of fossil fuels to build a kind of low carbon energy system, to build low carbon transportation, you know, aviation, steel, cement, all the things

That kind of make up our economy. We need to get off fossil of a fossil fuel based under a kind of clean energy base. And that’s going to require a lot of money. And the governments don’t have that money or most of that money needs to

Come from the private sector, from banks and from investors. And that’s kind of the role that they play. And they’ve pledged that they will support that transition and that they will align their lending portfolios and their financing businesses with a 1.5

Degree outcome with net zero. And that sounds easy on paper, but in practice it turns out to be fiendishly difficult, not least because of what I just said about emissions keep rising and we’re just way off track globally for hitting net zero. And so those commitments look a bit like

Pie pie in the sky, and that tension kind of bubbled through in one particular meeting. And this is some color that is woven through the Bloomberg Quicktake of the data and focuses on an on a UBS banker. Yes. So there’s a UBS banker called Judson Berkey. He essentially is the main guy for

Sustainable finance regulation. And there was a meeting in Tokyo held by the Financial Stability Board, which is a group of global regulators. Representatives from the Fed were there, the ECB, and he basically said, you regulators, your expectations of banks are way off track.

You’re asking us to align our lending our portfolios with that 1.5 degree world. But the world itself is on track for 2.8 degrees or more. How can you possibly expect us to align with 1.5 is ridiculous. And the way banks, big banks could do

That, but if they were to do it, they’d have to basically divest all of their big clients. You could deliver a portfolio decarbonization, but that’s not helpful for real world decarbonization, which is what we need. Right. And I guess this takes us into the question of fees for banks that clients

You mention and who they compete with, because this is all very well. It’s one thing if banks decided to do that, but then they would only hold the power to drive change. I suppose if they were the only source of capital, the only source of funds stepped forward.

The private sector, the private and private credit sector. You know, there are other places that businesses can go to get funding these days, and banks are going to be acutely aware of that. Exactly. There’s a big argument that comes from

The banks that says if we divest from our heavy carbon clients, there are plenty of other people that can step in and take over from us. And we actually, because we’ve made these commitments, are kind of on the hook for having to deliver on them and are therefore more likely to push those

High carbon clients to decarbonize. Whereas if you then have those same loans or that same financing, go into the private markets where you have perhaps lenders with less scruples when it comes to climate or certainly have not made those commitments and perhaps are less.

Caring, shall we say, on such topics? Well, that can allow for emissions to grow in the private markets with less clarity, less transparency, and less kind of, you know, no one really holding them accountable. And so that’s a big problem. Or potentially as to how big is all that

We’ve all in on this when it comes to the banks. I mean, they made this commitment to bring out the tiny violin for the banks. They made these commitments. They did they made these commitments. They’re not naive. They’re smart individuals, men and women working through this. Yes.

They made the commitments. Why they something that they’re suddenly doing the hand wringing. Now, the other question is there has to be a point where you make the cost of credit more expensive for the carbon intensive industry. You make it cheaper for the renewables, and that’s got to be part of the process.

Yes, but a lot’s happened since they made these commitments mostly. So they made most of these commitments for the 2021 era. 2022. We have the war in Ukraine, the energy crisis that’s come. And so the assumption that oil and gas is going to go away was in terminal decline.

That’s basically that doesn’t exist anymore. Those crises are profitable, very profitable. It’s very hard to say, oh, we don’t want to bank ExxonMobil anymore. There’s no banking CEO willing to make that kind of move. And so, yeah, we’re in a very tricky position where there’s a lot of money to

Be made on fossil fuels. But we also need to drastically move if we’re to have any chance of hitting the 1.5 degree target actually just happened today. So there’s this real tension. Bloomberg’s Alistair Marsh walking us through that tension that we’re seeing

In the banks with the energy transition. We thank you so much for bringing that to our attention. Coming up on the programme, we speak to Wizz Air CEO and co-founder Joseph Varadi on his outlook for the airline industry, travel and more. It’s a conversation you don’t want to

Miss as we talk about the demand going into the summer season, the inflationary pressures and of course those supply chain issues that you were seeing on both sides of the Atlantic. All of that and more coming up next. Stick with us. This is Bloomberg.

So it’s been a monster rally. That rally was mostly fueled by adoption, right? With the ETF, it made it very easy for people in the U.S. institutions and the wealth channel, most importantly, to access Bitcoin for the first time. That was the Galaxy Digital founder and CEO Mike Novogratz on the Bitcoin rally.

Certainly it’s been a really strong quarter for Bitcoin for a host of other assets for gold as well. But the focus of this, a lot of our conversations this morning, Kristie, has been around supply chains. And we’re going to go into another conversation where that is important.

We spoke earlier on to the CEO of Lloyd’s of London, and he was talking about the the impact on the insurance sector of one big supply chain issue, and that’s the collapse of that Baltimore Bridge. Yeah, but supply chain certainly something that’s really dominant when

You think about what’s going on in the aviation sector right now, be it engines or the supply of aircraft. It is. And then also, I mean, dare I say, actually connects to the Bitcoin story and the investment story here, because some of those inflation concerns are

Actively driving the market. There is a fundamental connection between inflation and alternative assets and private credit and private equity in Bitcoin, not to put those all together, but the inflationary story is important because take a look at where all the uptick is coming from is coming from

Demand that hasn’t gone away. Supply chain points that you mentioned. And a lot of that, at least in the United States, if you break it down into the nitty gritty coming from airfare. Yep. Yes. Yeah, absolutely. So efforts have been certainly playing their part in that inflation story.

Let’s get into a conversation about the inflation at the aviation sector then. Now we’re joined by the CEO of Wizz Air, Joseph Ferrante, who’s passing through London this morning and with us. So very nice to speak to you. It’s nice to have you with us. Let’s look ahead to the summer.

I know we’ve got all these supply chain issues to talk about and we’ll get to that. But I just wanted to have a moment to think about where what the summer looks like, because I know, you know, you’ll have people, network planners and computers all all focused on how strong

Bookings look for the summer. And I was looking at your load factor over the last few months, and it did seem as if it had dropped year on year. But I know you’re growing. What should we be concerned about? That load factor drop? What’s going on there?

No, not at all. We see demand being very strong and intact and people want to fly. To be honest, I think demand is a function of economic prosperity as the world is still doing relatively well. Of course, we always wanted to be to be better, so there is nothing wrong with

Demand. The challenge to the industry comes on the supply chain side. Okay, so let’s go there then, shall we? Because that’s going to be important. Let’s start with the supply chain stories that do impact your business. And I want to this is, of course, around

The A320 family of planes grounded to Pratt and Whitney engine issues. Can you give us any update And thinking about the summer, is the summer under threat at all because of the lack of availability of these aircraft?

So at the moment, we have around 20% of our fleet grounded as a result of the pattern between GTF engine inspection cycle. We try to mitigate that issue by extending existing aircraft operations, taking market loses or so we continue to take new aircraft deliveries.

So as a result of that, we are planning on flat capacity year on the year going into into summer. So I think we have created some protective layer, whether we’d be difficult, but this is a significant take up in the industry unexpected. But by now I think we are all fully on

Top of that. We have plans, we have motors, we have all sorts of compensation schemes in place and operational. We are processing the idea. So it’s going to take us a year or two to forgo sort of cycle, but I think we are on top of it.

What’s the most up to date time frame you’re looking at for resolving the Pratt and Whitney engine issue? This is not going to go away too quickly. I mean, we are talking about two types of issues. On is the engine technology is a brand

New groundbreaking technology that is that you should be reasonably expecting of some childhood diseases. And I think we are going through that cycle of childhood diseases. And on top of that, that was this industrial hiccup of contaminated materials, the so-called powdered

Matter, which needs to be corrected and parts are being replaced as we are as we speak. Both lines, I think, will come to an end in the next 18 to 24 months. What is the Boeing impact you exclusively with Airbus for now at least, the Boeing going through, of

Course, these momentous challenges. But it ripples across the sector in terms of the ability to churn out planes, to get planes to airlines. The impact on you as a business, as you look ahead from what Boeing is going through that travails? Yeah, first of all, we are happy to

Operate Airbus. We like the Airbus planes. And we took a strategic decision by we were going for the Airbus. Having said that, we have an interest in a very strong Boeing. We want a competitive industry because competition drives economic efficiency in the industry, drives innovation, and we need both going forward.

So we want to see Boeing to recover from this, to become solid again and be a quality player. India in the industry. You talk about this kind of interest and ramifications for the broader industry. Talk to us about the capacity crunch there.

Where is the bigger risk factor? Is it that demand has exploded in the way that it has or is it the supply crunch is what what’s the bigger hurdle for you? Yeah, look at us. If you look at demand on a global basis, I mean, the auto industry globally is

Basically back to Covid level. So I don’t think that this is the explosion of demand globally. It is the explosion of the supply chain globally. This is what’s affecting the operations of the industry. But that’s pushing the airfares higher as well. And you’re seeing that both sides of the

Atlantic. Talk to us about the air fare picture. When do you as a company address that or pull it down in line with the inflationary pressures that we’re seeing? Yeah. So basically, you know, airfares are the function of supply and demand. And if supply is contained, obviously

This is going to make an effort push down on airfares. Our business model, however, is to make sure that we derive the most economic efficiency from our operations and apply that saving to the consumers because we are still stimulating the market. I mean, let’s not forget that in the

United Kingdom it is a fairly saturated market. But if you go to countries like Sandton instead of you are still stimulating for fliers. 30, 40% of our passengers, our first flyers, they just flew first time ever in their life. How? That’s quite the experience.

And I sort of go back to some of the supply chain issues we were talking about with regards to Boeing. And you’re saying it’s important to have a strong Boeing. I find that interesting given you don’t use them as a unit, you know, not not customers, as Tom said.

Why is it important for you then, if you’re not a customer of Boeing, that we have a strong Boeing in the marketplace? Because I don’t want anyone in this industry to monopolize this market position because this is going to push prices up on the airplane. And if we slow down innovation, I think

We need both. We need to have good assets coming out of the production line at reasonable price. And also we need to innovate this industry. I mean, you know, we have the carbon challenge and we need to make sure that

The investments are put out properly and that is an innovative force driving the industry. So you don’t want Airbus to put up prices, you don’t want any of your supply as well. So I don’t want to have to put up prices.

Is that to some extent an argument that maybe you benefit, though, if if Boeing customers are not able to get hold of their planes, for example, Ryanair and you’re in the same markets as them to some degree in various geographies, So do you benefit from their inability to get hold of the aircraft?

Look, there are any benefits coming out of the situation will be to take them. But we are in the long term strategic game here. The interest strategically is to have a strong Airbus, a strong Boeing, strong players in the industry operating properly and delivering the right

Quality of product to the market, safety and critical quality issues. Obviously, in focus at Boeing, are you are you completely and 100% reassured that Airbus has none of these issues? How confident are you in Airbus’s ability to turn out quality aircraft beyond? I mean, we are deeply into the Airbus system.

I mean, just look at it from this perspective. Every year we take it off here on 14 year of deliveries. So we live and breathe together with Airbus. We understand our quality system, we understand the aircraft, and we are exposed to two new aircraft deliveries

On a continuous basis. We are very confident regulators are on it, the regulators out on it. I think air is doing a good job. Airbus is doing a good job. I think they are making the necessary investment needed in quality controls. I have full confidence.

Full confidence. But is there something else you’d like to see from the regulatory authorities in terms of ensuring that safety and ensuring that consumer confidence as well? I think what we need to have and maybe this is what has eroded over the last

Few decades, that due to the consolidation of the industry, the relationship between the regulator and the and the manufacturer became somewhat more cosy than what it should have been. These two lines must be totally separated out. The manufacturer must control internally

Quality of their products and it has to be scrutinised and oversighted by the regulator in a separate manner and those things should not be overlapped. Okay, so that’s the regulatory story away from the supply chain issues. There’s something else I wanted to ask you about, and that is the way that

We’re sort of almost going back a few decades in the sense that some consumers want packaged holidays. Again, it seems we’ve been writing about this appealing back, and I know others have as well, but easyJet is making profits in that area. Ryanair has deals in place to sell

Packaged holidays with cost of living crises in various places. It’s focused consumers on knowing exactly what they’re going to have to spend upfront. Are you doing anything in that space to make money on that on that front? I think we are seeing conflicting

Trends, to be honest. I mean, that may be a trend for package holidays and there is another trend for unbundling and people are going to pick their choices, whether that’s a hotel or logistics order or airfare. We are essentially enabling them to do both depending on consumer preferences.

If people want a package job, they can do it on or off side. They can do their own holiday package. If they wanna buy various products separately, they can do it too. All right. A lot to digest there. We thank you so much for joining the program. With their CEO and co-founder Joseph

Varadi joining the program this morning. Coming up, with Germany set to partially legalize cannabis for personal use in the coming days, we’re going to discuss the opportunities for the commercial market. That conversation next. Stick with us. This is Bloomberg. Welcome back. 843 this Thursday.

The Markets Today show, of course, continuing to keep across these markets for you. Their benchmark is actually up 2/10 of a percent. So building on three straight days to get to a fourth straight day of gain in progress right now, fresh records set yesterday. It looks like going to add to that

Today, the Footsie 100 turning up 3/10 of a percent. The commodities left coming through slightly for the footsie 100 over in France and also getting 3/10 of a percent and across your sectors quickly having a look on how things are shaping up.

Consumer products, energy, food and beverage all at the top of the list in terms of what is happening trouble this year, I should say. In fact, top of the list gains of 8/10 of a percent, consumer products up 7%. But on the list is construction off by tenths.

And S&P and these are flat, NASDAQ futures flat. Again, fresh records on US stocks yesterday taking a bit of a pause, it seems today. Let’s get to the banking space now where UBS has cut its bonus pool for last year by 14%, one for 14% after a tough year,

Of course, for dealmakers and traders. This as the Swiss bank increases its cost saving targets amid the integration of Credit Suisse annual profit came in at a record 27.8 billion USD. Let’s bring in Bloomberg’s Tom Metcalfe, then, who leads our finance team for the details on this.

Tom, a maltese pay, Sergio Maltese pay in Focus. What does that number look like? Where does this rank among banking executives? You had to have around €15 million mark, which puts him right at the top of at least among the main European banking CEOs. You know, as we know, when you compare

That to us bank CEOs, it is relatively thin. You know, you get someone at a Goldman or a city getting paid north of $25 million a year. But it just goes to show, I think, a obviously the size and scale of the job ahead, but also the sense that, you

Know, it’s perceived that executives at UBS doing a pretty good job of this integration, albeit as they themselves have said this year is a really tough year for these mammoth projects of getting Credit Suisse completely absorbed into UBS. So you compared it to the US banks as

Well. But talk to us a little about how it compares to European banks, given that the bonus pool is down about 14%. Yeah. So the bonus pool for all the traders and the deal makers is down. You know, there’s been a bit of a mixed

Bag in Europe. So you’ve had some banks like a UniCredit actually boost their bonus pools, but largely for sort of the really big players like UBS and Oxy in the U.K. At Barclays, we have seen that pool drop 14% is, you know, around about in line

With those kind of lenders. And just again, speaks to that push by UBS to keep their costs down and the sense that, you know, Credit Suisse had a much more more sizable investment bank, at least relative to its kind of entity size. And and UBS is looking to shrink that a bit. Hmm.

Tom, is this this coming from an annual report, I think, where, you know, typically you find more in the in the financial statements usually tell you about these businesses, but you’ve managed to glean quite a lot from the from this statement today. What else stood out to you?

Yeah, there was a really interesting line that you can read the tea leaves on, but, you know, not a speculation about how long the model is going to stay. And, you know, previously there was a sense it obviously stayed through. Right. Integration is complete, which they’re aiming for by the end of 2026.

But there was a line there, I think, from the chairman saying, we expect you to stay at least through then. So when you’re reading those things carefully, that kind of wording below with central bankers, you know, you could read that as suggesting that Moat is going to be there for longer than

Perhaps people were initially banking on. Tom, thanks so much. So Metcalf bringing us the latest on the banking sector. Obviously, folks there on the pay at the top and the bonus pool and how that compares to the European competition.

And I think when we when we talk about the banking sector as well, we have to put this in the context of something, the European interest rate story over and over again. We heard it from Commerzbank. We heard from others as well, that if you’re talking about peak rates in

Europe that have been kind of fueling this, these gains in the banks and fueling, therefore bonuses and these kind of salaries. What does that mean for for the interest rate picture and therefore the banks broadly? Okay. Let’s pivot firmly away from the interest rate picture.

I can think of no linking thought markets markets on a high. Excellent. Thank you, Tom. He should be doing this bit. Europe’s largest medical cannabis market, Germany is set to partially legalize weed for personal use from next week. Bloomberg’s Oliver Crook is at a medical marijuana growing and processing facility just outside Dresden.

He’s dressed for the occasion. He brings us a conversation on this front. Good morning. That’s right. And away from interest rates. But rates of interest may be high in this story because we are one of the biggest growers here in Germany where there are only three companies that can

Legally grow cannabis here in Germany. And only one of them is a local German company and that’s Denmark. And that’s where we’re standing right now in their growth facility. And this comes as the law has been passed. Now that starting on the 1st of April,

There is going to be a partial legalization, a decriminalization and huge implications not only for the medical part of this business, but the potential future commercial sale. So I’m very pleased to be joined right now by one of the managing directors, Philip Gerber, who is here.

Can you take us first what’s going on in this room and a little bit about what the operation is here? This is one of our growing rooms where we currently grow up to one ton per year, which we only can deliver up to

Now to the German government. As of Monday, we will be allowed to use the one ton of spare capacity we already have for grow, which we can then sell directly to the pharmacies. So we already can double our production here at this site. And we also have lots of expansion

Capacity when it comes to the pond, which you mentioned, the second column of the law, when medical when cannabis will be allowed for recreational purposes. Well within the test regions, which are going to be defined. That’s right. So there’s pilot program we’re expecting maybe at the end of the year, the

Beginning of next year, and that will be selling directly to the public, which is really the game changer here because you are primarily and really only a medical producer right now. But really there’s a chance in the next couple of years that becomes the smaller part of your business.

What do you expect for the timeline for the commercial sale and illustrate a bit for us the scale of what we’re talking about here? So the cannabis market in Germany is estimated to be between four and 20 and 770 tons. If you talk to paper producers which are

Often used to consume cannabis, they Arava expect a thousand tons to be consumed in Germany. So this is interesting. I just want to make this point because it’s very difficult to get data because this is obviously illegal. So you need to go to the manufacturers

Of rolling papers to get an idea of how much is being used in Germany and the paper from the government for the phone and to 70 and 70 tons was taking assumptions from the US, from Colorado, from Canada to estimate the German market size. So we see it’s a huge potential market

Knowing that the medical cannabis market is just right now about 12 to 13 tons. Still, however, the medical cannabis market over the next 12 to 24 months is expected to grow by 5 to 10 times. So you can see already the big potential within the medical market as a first step.

And then when the recreational market steps in, this is obviously a huge growth opportunity as well, especially because within that second part, which is going to come, everything which is going to be sold for recreational purposes has to be grown in Germany. And as you said, we had just one of the

Three licensed producers right now who can grow cannabis in Germany. So that positions you pretty well in the market here. Here’s the question Do you need to actually expand now to fill that capacity? And currently we can serve two tons out

Of this facility for the medical market. When it comes to that second part, we already have the expansion capacity foreseen. We have all of the permits in place to quickly ramp up the business to serve that recreational pot as well. Right.

Which is no small feat in Germany, as we’ve learned, and across a lot of different industries. And there’s been a lot of hype, at least in the United States and Canada, with a lot of valuations for cannabis companies, much less here in Europe. So for you, what are you looking at in

Terms of speaking to investors? I assume you got a lot of calls in the last few weeks. Totally true. So we are currently starting such a series C with the clay, so everyone who’s interested reach out to us. So we are doing this clay now and then

Close our series C over the time of this year to keep up ramping up the business in Germany where we see this huge growth potential, which is besides the growing pot, which we already do here, we have service lines where we serve our other

Customers with pharmaceutical services to get their medicinal products to the market as well as software solutions, which we developed for the pharmacies. So we really cover the full supply chain where we see the leverage of this market for the future. I think really the cannabis ecosystem for the first time. Exactly.

The ecosystem. And but the Canadians are also at the door. They’re growing here in Germany. How do you stay ahead of competition? Because a lot of the sort of overhead and a lot of the barriers to entry aren’t that high from a physical standpoint. From a physical standpoint, that’s

Right. But the regulatory wise, the hurdles are quite high because we have pharmaceutical production company, so we adhere to the same standards as the big pharmaceutical companies in the market. And that is a hurdle you first need to take.

What we’ve got to say as well is that with of all the cannabis which is currently grown in Germany, we have 70% of market share, although we only got the smaller number of lots which we can produce, we got three and the other ones

Got each five. So we see as Andrew an underdog to say so we achieve too high quality standards and have more than 70% market share of that. What is growing in Germany and I’m curious to get also a little bit of an idea of your your relationship with the

Government and how the government is trying to sort of treat this industry and how is it trying to encourage it or has it been A it’s difficult. The government is really supportive to us. So we have two states in Germany who invested into the company as well.

We got subsidiaries here from the local state of Saxony, a 30%, which subsidize the assets here when we build up this facility because we have more than 70 people who are now working here that a company, we have implemented that. So we see good support also from the local and national governments.

We are working very closely together with the beef fund, which is the FDA in the US, where we have a good relationship to build up this business. Philip Granville, thank you so much. And for taking the time and for bearing this sort of tropical climate that we have in here in Denmark.

And so again, you know, this is a huge opportunity for these guys in the medical industry, but really for any of the investors and for the businesses that are looking into the future in Germany and in Europe, it’s tapping into that recreational market, which as we were saying, you know, they’re producing

Two tons here. We’re talking about just for Germany, 450 to 750 tonnes. And across Europe, the estimates are if the legalization were to proceed more broadly, it could be a quarter trillion dollar market. Bloomberg’s Oliver Crook there walking us through some of the numbers is really interesting story because we’ve seen it

Actually become a real growth story in other parts of the world. Canada, for example, of course, getting a lot of gains, I think, in the state of New York, seeing that as well. In terms of watching some of the growth.

Let’s talk about what else we’re going to be watching in terms of today’s data docket. At 1230, UK time will get us fourth quarter GDP. The third reading is going to be coming out the initial jobless claims as well at about the same time. 2 p.m. UK time you missed consumer sentiment

Data that March final reading hitting at about 2 p.m. there at 5:30 p.m. UK time the focus shifts to Europe. The ECB’s Villeroy speaking in Paris now by 6 p.m. UK time U.S. Treasury market closing early for that Easter break. And of course later today, Sam

Bankman-fried set to be sentenced for stealing billions of dollars from customers, marking the final chapter in the FTC’s case, which shook the crypto industry by storm. We’re going to be live with the New York Federal District Courthouse. And you can catch our special coverage of Bloomberg Crypto from 4 p.m. London time onwards.

You know, it’s interesting, when this story first broke and we saw the ramifications, there was an expectation that suddenly interest in the actual crypto institutional adoption would be off. Right. And we’ve seen the exact opposite that happened in the same quarter as we are getting this sentencing.

We also saw a record price on Bitcoin. Yeah. CC Of course. And Binance also pleaded guilty in a case with investigators, at least the DOJ in the US taking a bit of a knock to Binance. One of the other big exchanges, of course. But as you say, it has done nothing to

Quell the interest. Now that those approvals came through January 11th from the S.E.C. for the likes of BlackRock Fidelity and those ETF products ETF sorry of course the driver and worth mentioning. So as we bring this program to a close I suppose the markets there’s the data

That you mentioned Kristie on the day but but tomorrow is the key data point when possibly nobody will be looking. Yeah, no markets will be trading, at least not on both sides. The Atlantic. Yeah, well I think it may be maybe a good thing this one time around given

The your point earlier in the show which is that people have been shrugging off this data over again the CPI numbers, the pie numbers for the PC deflator. And of course, Chairman Powell, his comments given we’ve heard so many of his peers speak this week, starting with Rafael Bostic, most recently the Fed’s.

Waller. Yeah. So maybe post Waller. It is a good thing that we have a little time to digest exactly what this data tells us. And of course, we’ll get that tomorrow when, as I say, markets are broadly closed. That is it for markets today.

The European equities story is a slightly positive one, up by 2/10 of 1% volumes, no doubt a little depleted because of the market holidays coming tomorrow and in some cases in parts of Europe next week as well. So U.S. futures flat to negative. The pulse is up next. This is like that.