UK Budget Day, Trump & Biden Sweep Super Tuesday | The Pulse with Francine Lacqua 03/06
Summary
TLDRThe video script covers a wide range of topics, including the UK Chancellor's upcoming spring budget, the U.S. presidential race, and market movements. As the general election looms, Jeremy Hunt is expected to focus on personal tax cuts, specifically a two percentage point reduction in National Insurance. In the U.S., Donald Trump and Joe Biden dominated Super Tuesday, increasing the likelihood of a rematch. Amidst conflicting signals from Bitcoin's record highs and gold's rise, markets await Jay Powell's testimony on Capitol Hill, where he's anticipated to signal no hurry for rate cuts. The script delves into discussions on the UK's fintech landscape, the importance of investing in women-led ventures, and the global energy transition.
Takeaways
- 👔 UK Chancellor Jeremy Hunt is expected to announce personal tax cuts, particularly a 2 percentage point cut in National Insurance, in his upcoming spring budget as a general election looms.
- 🇺🇸 In the US, Super Tuesday primaries saw Donald Trump and Joe Biden dominate, increasing the likelihood of a rematch between the two in the 2024 presidential election.
- 💰 Markets are closely watching Jay Powell's two-day testimony on Capitol Hill, with the Fed chair expected to signal no hurry to cut rates.
- 🌍 Global markets are receiving conflicting signals from the rallies in gold and Bitcoin, with one suggesting a risk-off appetite and the other indicating risk-on sentiment.
- 🇬🇧 The UK budget is significant for the ruling Conservative Party as they aim to woo voters ahead of the general election, but the opposition Labour Party questions the feasibility of tax cuts and increased spending.
- 🌐 London's role as a fintech hub is facing growing competition from Paris and New York, prompting calls for startup-friendly policies and investment in women-led ventures.
- ⚡ There is a need for increased investment in renewable energy and clean technologies to achieve global net zero emissions by 2050, with challenges such as permitting, public policy, and access to capital slowing progress.
- 🛢️ Oil supplies may be running ahead of demand due to rising US stockpiles, fears of slowing demand from China, and surging supply from non-OPEC producers.
- 📉 Emerging markets like Egypt are facing currency pressures, with Egypt devaluing its currency and implementing significant rate hikes to address a current account deficit and high inflation.
- 🇨🇳 Investors were disappointed by the lack of detailed plans from China to achieve its 5% GDP growth target, fueling skepticism about the effectiveness of policy support.
Q & A
What is the main topic of the video script?
-The video script covers various financial and economic topics, including the UK Spring Budget, the US presidential elections, the testimony of Fed Chair Jay Powell, and global market movements like Bitcoin and gold prices.
What are the key expectations from the UK Chancellor's Spring Budget?
-The Chancellor, Jeremy Hunt, is expected to announce a two percentage point cut in National Insurance, as well as personal tax cuts, to woo voters ahead of the upcoming general election.
How do Donald Trump and Joe Biden's performances in the Super Tuesday primaries impact the 2024 US presidential election?
-With both Trump and Biden dominating the Super Tuesday primaries, a rematch of the 2020 presidential election is now looking more likely than ever.
What is the significance of Jay Powell's testimony on Capitol Hill?
-As the Fed Chair, Jay Powell's testimony is being closely watched, as he is likely to signal that there is no hurry to cut interest rates, despite market expectations.
What mixed messages are Bitcoin and gold prices sending about the appetite for risk in global markets?
-While Bitcoin has hit record highs, suggesting an appetite for risk, gold's rally seems to indicate a hedge against uncertainty, sending conflicting signals about the risk sentiment in global markets.
What challenges is London facing as a fintech hub?
-According to Francesca Lacey, the new UK boss of Revolut, London's role as a fintech hub is under threat due to growing competition from cities like Paris and New York.
What initiatives are being discussed to support women entrepreneurs and increase female representation in tech?
-The script mentions a government-backed task force calling for investment in women-led ventures to drive the UK's ambition of becoming a tech superpower, as well as efforts to inspire girls and provide role models in the classroom.
How does the script portray the UK's economic situation and the challenges facing the incoming government?
-The script paints a bleak picture of the UK economy, with one guest describing it as "the worst fiscal inheritance that any party has had since the Second World War," highlighting the significant challenges facing the incoming government.
What is the role of public policy and regulation in supporting the transition to renewable energy sources?
-According to James Darnowski, global co-head of energy power and renewables at JP Morgan, public policy, regulation, and permitting processes play a crucial role in stimulating investment and enabling the transition to low-carbon and renewable energy sources.
How do emerging markets like Egypt and China factor into the global economic landscape discussed in the script?
-The script touches on the pressures faced by emerging markets like Egypt, which devalued its currency, and the lack of detail provided by China regarding its economic growth plans, highlighting the challenges faced by developing economies in the current global economic climate.
Outlines
📰 Newsmakers and Market Movers
This paragraph introduces the show 'The Pulse with Francine Lacqua' and previews the topics to be discussed, including the UK Chancellor's spring budget, the US presidential elections, and Jay Powell's testimony on Capitol Hill. It also mentions the conflicting signals from the rally in gold and Bitcoin prices, and the impact of these events on markets, currencies, and bonds.
🤑 U.S. Exceptionalism and Market Trends
This paragraph discusses the concept of U.S. exceptionalism and its impact on markets. It highlights the strength of the US economy, earnings, and tech productivity, despite geopolitical shocks. The conversation then shifts to market valuations, the conflicting signals from Bitcoin and gold, and the potential implications of the US election on Europe. The guest, Michael Stromberg, provides insights on investment strategies, favoring sectors like communications, staples, and energy stocks in the US.
🇬🇧 UK Budget and Labour Party's Perspective
This paragraph focuses on the UK budget and the opposition Labour Party's perspective. Darren Jones, the Shadow Chief Secretary to the Treasury, discusses the party's stance on tax cuts, economic growth, and fiscal responsibility. He outlines Labour's priorities, including stability, investment, and reform policies, while addressing concerns about balancing the books and maintaining public spending commitments if elected. The paragraph also touches on the potential impact of the budget on the UK economy and the views of businesses and investors.
🗳 US Election and Policy Implications
This paragraph explores the implications of the US presidential election and potential policy changes. It discusses the divergent approaches of Donald Trump and Joe Biden, particularly regarding trade policies and incentives like the Inflation Reduction Act. The conversation highlights the potential impact on Europe and the challenges faced by the opposition candidate, Nikki Haley, in securing support from grassroots conservatives and Wall Street donors.
🌍 UK's Position as a Fintech Hub
This paragraph discusses the UK's position as a fintech hub and the challenges it faces from competition in Paris and New York. It explores the efforts of the government and private sector to attract and retain talent, particularly women, in the technology and entrepreneurship sectors. The conversation covers initiatives to increase funding for female-led ventures, coding education, and the role of corporates in creating an inclusive environment.
🚀 Empowering Women in Tech and Entrepreneurship
This paragraph continues the discussion on empowering women in tech and entrepreneurship. It highlights the importance of role models and initiatives to raise the profile of women in these fields, particularly through education and media representation. The conversation also touches on the government's efforts to retain talent, increase funding, and create an inclusive environment for women to rejoin the workforce.
⚡ Energy Transition and Clean Tech Investment
This paragraph features a conversation with James Danowski, the global co-head of energy power and renewables at J.P. Morgan, at the company's Clean Tech Stars conference. Danowski discusses the need for investment in traditional energy sources as well as low-carbon, green renewables, and clean tech to achieve global net zero emissions by 2050. He highlights the challenges of scaling up capital investment to meet the required levels and the importance of public policy, regulation, permitting, and access to capital for these companies.
💸 Investing in Clean Tech and Renewable Energy
This paragraph continues the discussion with James Danowski on investing in clean tech and renewable energy. Danowski provides insights into the flow of capital across various subsectors, including renewables, grids, battery storage, EVs, and clean fuels. He highlights the encouraging growth in the number of companies and investor interest, despite the challenges posed by headwinds such as high interest rates, supply chain disruptions, and permitting delays. Danowski also emphasizes the role of corporate strategics in supporting the growth of smaller clean tech companies.
🇪🇬 Egypt's Currency Devaluation and Emerging Market Pressures
This paragraph shifts the focus to Egypt's currency devaluation and the pressures faced by emerging markets. It discusses the reasons behind Egypt's decision to devalue its currency, including a current account deficit exacerbated by the conflict in the Middle East and its impact on trade and revenues through the Suez Canal. The paragraph also mentions the central bank's rate hike and the possibility of an IMF deal, as well as the broader global story of capital outflows from emerging markets due to US rate hikes.
Mindmap
Keywords
💡Spring Budget
💡Super Tuesday
💡Federal Reserve (Fed)
💡National Insurance
💡Bitcoin
💡Fintech
💡Revolut
💡Inflation Reduction Act (IRA)
💡Energy Transition
💡Gilt Investors
Highlights
The UK Chancellor Jeremy Hunt is expected to put personal tax cuts at the center of his spring budget as a general election looms.
Donald Trump and Joe Biden dominated on Super Tuesday with a rematch of the 2020 presidential election now looking more likely than ever.
Markets are eyeing two days of testimony from Fed chair Jay Powell on Capitol Hill, where he is likely to signal there's no hurry to cut rates.
There are conflicting messages about the strength and risk assets in the economy from the rally in gold and Bitcoin.
The new UK boss of Revolut, Francesca Lacey, has signed up to a new Unicorn council to push the government on startup-friendly policies.
A government-backed task force has called for investment in women-led ventures to drive the UK's ambition of becoming a tech superpower.
There is a sense that the talent pool in London's fintech scene is diluting, with competition from New York and Paris.
Access to capital is a very big challenge for female founders, but recent reforms around pensions could enable businesses to access a larger pool of capital.
The shocking statistic is that only 81% of students were able to name a male role model in tech, highlighting the need to raise the profile of women in tech.
The UK government has set aside a significant budget to increase talent retention, particularly for women who have left the workforce for childcare.
There are still question marks around Revolut's plans, as they have been trying to get a banking license for three years.
The city of London wants stability from the budget, as they don't expect it to last given the potential for a change in government.
Entrepreneurs are looking for stability from the government, as it is challenging to make plans with the uncertainty about the future.
There is a need for a combination of traditional energy and low-carbon, green renewables to achieve global net zero by 2050.
Last year, $1.4 trillion of capital was invested in the energy transition and decarbonization, but scaling up to $4-7 trillion per year is needed between now and 2050.
Transcripts
Newsmakers and Market Movers. This is The Pulse with Francine Lacqua.
Well, good morning, everyone, and welcome to the Pulse and Francine Lacqua
here in London where the conversations that matter.
And here's what's coming up on today's programme.
The UK Chancellor Jeremy Hunt is set to put personal tax cuts at the center of
his spring budget as a general election looms for life in Westminster.
Donald Trump and Joe Biden dominate on Super Tuesday with a rematch of the 2020
presidential election now looking more likely than ever.
Plus, markets eye two days of testimony from Jay Powell on Capitol Hill.
The Fed chair is likely to signal there's no hurry to cut rates.
So first thing is first, let's take a look at the European markets map.
But frankly, a lot of things going on moving these markets.
One of the signals that we're looking out for the most is also the rally in
gold and Bitcoin, which are basically giving conflicting messages about the
strength and risk assets in the economy. And if you look at stocks, but also a
lot of the bonds, they're actually posting some pretty small moves.
The one thing we're watching out for is that testimony from Jay Powell and then
here in the UK, watch out for any movement in Sterling and of course,
gilts on the back of the chancellor giving that budget.
So it's a big day for politics on both sides of the Atlantic.
We'll bring you the latest on Trump and Biden's Super Tuesday sweep with critic
Gupta in a moment. But let's start here in the UK with
Lizzie Borden. As we build up to the budget, the
chancellor expected to give workers a two percentage point national insurance
tax cut when he delivers his spring budget this lunchtime.
The Jeremy Hunt, under pressure to present a pre-election giving away but
will also need to raise other taxes or cut spending to do so.
So, Lizzie, what are we expecting from the chancellor?
What's his rabbit out of the hat moment? Well, as you say, Francine, this is one
of Jeremy Hunt's last chances to woo the electorate before the general election.
So it's going to be a distinctly political budget.
We're hearing that the expectation is he'll cut national insurance again, as
he did in the Autumn Statement. You can hear them calling for a general
election here in Westminster. But if he cuts national insurance, on
the one hand, the thought is that it will be cheaper than income tax, it'll
be less inflationary, and it will also help to incentivise people back into
work because it only applies to people who are in jobs.
However, if you give consumers back £10 billion, it's hard to imagine that it
won't be at least to some degree inflationary and mean that the Bank of
England at least has to keep rates higher for longer.
If not, hike again, that seems a bit unlikely.
How is he going to pay for it? One measure could be that he ends the
non Dom's loophole, which currently means 70,000 people don't have to pay
tax on their overseas earnings. That would have the added benefit of
stealing one of Labour's ideas. And the big question really today is
will the bond vigilantes come for Jeremy Hunt like they did for Liz Truss?
The reality is, as long as he does the dance with the Office of Budget
Responsibility and lets the markets homework, it looks like the markets
could be pretty quiet. But let's see if he does anything
egregious today, Francine. Yeah, and let's see if anybody out there
loses their voice at Westminster. There's some, you know, pretty
enthralled singing behind you. Lizzie Borden there in Westminster.
Now, we'll speak to you in a short while.
President Joe Biden, Donald Trump have also swept the Super Tuesday state
primaries. Meanwhile, the former president's
remaining rival, Nikki Haley, scored her second win, this time in the state of
Vermont. Well, let's bring in Bloomberg's critic,
Gupta Christie. When you look at, you know, this
election, it feels like Americans aren't really enthralled by it and certainly
not enthused by it. And it looks like we're going to see a
rematch despite so many billionaires giving money to the game.
Yeah, friend, no protesters in here, but I'm sure there's plenty on the other
side of the Atlantic. Look, this is a really kind of tricky
question when we're talking about financing in particular.
And that's where Nikki Haley really matters here, where she has been out
front in terms of getting a lot of backing, not just from grassroots
conservatives, but from major Wall Street donors as well, who think that
neither President Trump or President Biden are the right fit.
But I think that's the exact point of it, that if she does end up dropping the
fact that there is this kind of neither is the right fit mentality across
America is really where you're starting to see the polarization, especially as
it applies to right here in Europe and what the policy actually looks like.
And that's the campaign rhetoric that we're expecting to kind of amp up from
President Trump, who. Believe it or not, has actually had a
fairly reserved approach relative to his last campaign, especially when it comes
to things like tariffs around what that might actually look like for Europe.
In addition to China, he's already mentioned that 60% on the Biden side.
It's a different story. He's using more of the carrot mentality
than the stick mentality through kind of his inflation reduction act, for
example, incentives really trying to bring production domestic.
Similar to President Trump, but doing it in a very different way that is still
angering some of his colleagues across the Atlantic.
Thanks so much, critic Gupta. There was a thorough look at the
elections Now to stock markets and how all of this plays into markets, of
course, and treasuries. We're joined by Michael Stromberg, chief
investment officer at Lombard O'Dea. Michael, so good to have you back in the
studio in person to talk about all of the good or bad things happening in the
markets. You still believe in U.S.
exceptionalism, but we worry about deficits, we worry about the cost of
money, and we worry about the US actually just having too much on their
hands. How do you play this still U.S.
exceptionalism in the markets? By betting on the US, which is doing
great, which is doing great, and its exceptionalism has paid off very
handsomely in markets. I mean, the US is leading the charts on
growth, on earnings, on tech productivity, productivity on growth.
Doesn't seems as if much has gone wrong for for the Americans.
But but it's more fundamental than that. U.S.
assets are sort of a strong core in today's global economy.
Look at Europe quite in sort of a perilous state.
Also because of the geopolitical uncertainty, China has materially slowed
down and the US has has held off the global economy coming out of two
geopolitical shocks, the pandemic and the war and and is showing little sign
of weakness. It's actually showing sign of of
strength as we sit here. So what does this tell you?
I mean, I guess the question is, is it everything priced to perfection, Right?
Is valuations, especially in the US, because of all the good news that you
lay out, you know, at peak? Well, it's certainly not cheap, but I
don't think in this market valuation plays a lot of role in investors
thoughts. I think it's more about safety.
I think it's more about quality. I think it's more about sort of
sustainability of earnings. There's a lot of stuff out there that is
very cheap, but it just keeps getting cheaper.
At some point, maybe has reached out to go down, will see a broadening of the
rally. But for now, it's really about focusing
on the winning business models that is tech, that is global firms, monopolies
that sit on enormous pools of profits, and that's very much in the US market
overall. And I want to talk a little bit more
about the US, given that we have the testimony of Jay Powell and also given
that we have a big election year. But overall, the markets, you know, you
have a record high for Bitcoin, you have gold moving in the other direction.
It seems to be a little bit jarring in how the markets look at risky assets.
Yes, that's that's quite sort of a conundrum to think about.
But Bitcoin obviously is still this speculative element that we have here.
We still have a system that is full of liquidity and where people are chasing
returns. Gold is quite a different story.
And I think of it still as somewhat of a hedge for for large investors.
Maybe right now people are piling into two gold to stock up in the US as a
physical asset. I think that's what keeping it quite
high. But on average, real rates, you seem to
have peaked and will be under pressure to go down a bit.
That's normally good for gold. So, Michael, in the U.S., what do you
buy? I don't know whether it's fixed income
or actually equities. Again, we have Jay Powell speaking today
and tomorrow. But then you also have this US election.
It's unclear. I know we're now focusing maybe more on
policies, but it's unclear what a Trump in the White House would do for the
Inflation Reduction Act and regulation. So number one you take is unavoidable.
We like communications sector services, we like staples in the US and also to
some extent, energy stocks. Trump would probably be good for that.
Treasuries. Absolutely.
I mean, we are in an environment of very materially higher interest rates, short
and long ones that we have been used to for the last ten years.
And that is an opportunity. It's not a threat, especially if, as
maybe Mr. Powell may suggest today, that they are
still on track. I think he'll be quite sort of tempered
and I don't think he's going to be seen as pivoting again in some kind of
direction. What in terms of being more aggressive
with cuts? I mean, there's always this mismatch
between the market's expectations in terms of the pace.
Yeah. And actually what central banks, you
know, wanted to do. Yeah.
Look, I think the rally that we've seen since October was really sparked by a
pivot. It was sparked by the fact rates have
peaked. They are coming down, inflation or
disinflation is here to stay. I think they need to be very, very
careful at this final stage of the battle against inflation, not move too
fast, not get ahead of themselves, but balancing very carefully what the labor
markets think. Goldilocks, it has to be just right on
the UK. Yeah.
Michael, are you excited? I mean, this is very important budget
for the Tories because we have an election looming.
Yes. Does it matter to the markets?
I don't think so. To me, from what I'm reading, it looks
like a smaller type deal. It can be undone by whoever wins the
next election and I don't think it matters a whole lot.
Michael, thank you so much. Michael Show back there, Chief
investment officer at Lombard O'Day, of course, staying with us.
And we'll talk a little bit about China next.
Coming up, could the UK chancellor be about to borrow policies from the
opposition party to fund tax cuts? We'll get reaction from the shadow chief
secretary to the treasury next. And this is Bloomberg.
That takes at a very high level in the UK at the moment.
That's because on the back of the 400 billion that was spent during the
pandemic supporting households and businesses and then of course, the extra
help of 94 billion that was given after Putin's evil invasion of Ukraine.
You know, that has meant that there's been more public spending than
anticipated. So you've got a high tax take.
But I think what you'll hear today is the chancellor takes steps to reduce
that further on top of the 2% that he cut in National Insurance back in
November that came into effect on January the sixth.
I think it's plausible that he'll do another 2% today.
Harry Baldwin there, chair of the UK's Commons Treasury Committee, speaking to
Bloomberg ahead of today's budget. Now, let's stick with the story.
Jeremy Hunt expected to announce a two percentage point cut in National
Insurance. There's speculation that he may borrow
some of opposition labour policies to fund it.
Well, our UK correspondent Lizzie Borden joins us live from Westminster with a
guest. Lizzie, over to you.
Thanks, Francine. Well, I'm joined by Labour's Darren
Jones. He's shadow chief secretary to the
Treasury. Darren.
Do lower taxes mean higher growth? Well, first of all, we in the Labour
Party have said for some time that the tax burden should come down on working
people, irrespective of the greatest assessment, because they're higher than
they have been since the Second World War.
But we've also got to get the economy back onto a trajectory of growth in
order to those to be sustainably funded. Now, this will be the 22nd budget from
the Conservatives since they came into office in 2010.
And every single time the Tories have said they're going to grow the economy.
And where are we right now? We're in the middle of a recession.
That's why growth is going to be at the centre of Labour's policies coming into
the general election. But everybody wants growth, so let's be
absolutely clear. If the Tories cut national Insurance
again today, if, as we understand, they cut income tax down the line, are you
going to maintain those pledges? So we support taxes coming down on
working people. That's why we supported them in
November. Let's see what the Chancellor sets out
today. Now, it's right to say that if people
have got a few extra quid in their pocket that they might spend, that might
stimulate some economic growth. But the fact of the matter is that when
people look at their tax bill, their mortgage or their rent, the cost of
their bills and how much money they've got spare at the end of each month.
Even with the announcements that we expect to see in the budget today, we
think the people will still be worse off and the cost of living will still be a
real problem for people. So the idea that that will flow through
to growing the economy when it's really just helping people kind of pay the
bills, I think is probably unlikely indeed.
But the bond markets question to Labour is how you balance the books, right?
If you maintain their tax pledges, how you continue your pledges on public
spending, you've already had to scale back the £28 billion pledge on the green
economy. So if you match what the Tories are
doing, will you have to scale back your plans even further?
Well, we will inherit what we inherited if we win the election this year.
We're very clear that if we do win the election, it'll be the worst fiscal
inheritance that any party has had since the Second World War.
That's the scale of the challenge. We can't really do anything about that
from opposition. It's the Tories who are responsible for
that damage where you can change your own plans and we can start to turn
things around. Our manifesto and our policies will all
be fully funded and fully costed in line with Rachel Reeves.
The fiscal rules, which is that we will not be borrowing for day to day spending
and we will get debt falling as the size of the economy.
But are you confident that the market will believe you can be both tax cuts
and public spenders? Well, you've got to get the balance
right. One of the big questions, of course, is
reform. I mean, if you look at what we're
spending money on, our public services, they're in enormous need for
modernisation, for reform, for efficiency savings, both to try to get
the public sector budget under control, but also to improve outcomes for people
across the country. So we will invest when it's prudent and
responsible to do so. But reform is going to be a huge part of
our agenda for public services in order to get that balance right.
Okay. It's a pretty bleak picture that you've
just painted of the UK economy, but actually lots of CEOs that Bloomberg's
been talking to are actually now pretty bullish on Britain are economists say
that we could be top of the league table of the G7 when it comes to economic
growth if people keep spending their savings.
Are you just talking down the economy? No, I'm just reflecting the facts that
we see in the April forecasts in the economic assessment of the country.
That's not to deny that we still have huge assets, huge strengths as a country
with huge opportunities for the future. But we know that when we speak to
investors and businesses, for example, that they can't invest or pay for the
things they want to because of other policy blockers, whether it's planning
reform or the energy system or the labour market or the apprenticeship
levy. There's a whole package of policies that
the government ought to be taking seriously to stimulate investment and
growth. And for reasons I didn't really
understand, the Tories are failing to do that.
And when you're having your smoked salmon and scrambled eggs offensive
wooing the city, what is it you're promising them that you think they like
what we think? There are three things that we're saying
to the private sector that Labour will bring.
One is stability. The second is investment and the third
is reform policies. Well, the policies that flow under those
themes. So stability is really important because
of course I can't remember how many chancellors we've had now and how many
times they've said tax rates are going to go up and go down.
It keeps moving around because of the chaos in the Conservative Party.
You will not get that from the Labour Party.
We want specifics and our five missions which are to grow the economy, to fix
the National Health Service, to tackle crime and antisocial behaviour, to
decarbonise the power sector by 2030 and to reform education and skills will be
the driving policies that will underpin that stability alongside our package of
investment with the private sector and reform.
Okay. Darren Jones, Shadow Chief Secretary of
the Treasury. Thanks, Will.
I'm sure you'll be covering the budget for us later today.
Back to you, Francine. Leslie, thank you so much.
Is the burden with Darren Jones now? We have plenty more, of course, on the
UK budget. We have special coverage plus reaction
and analysis. Our coverage begins at 12:15 p.m.
with the Chancellor's speech at around 1230.
You can. Watch that in the UK on the terminal or
follow our live blog on Bloomberg dot com and we'll be joined by John Step and
of course our very own Stephanie Flanders.
Now later today we'll also be speaking to the Chancellor of the Exchequer,
Jeremy Hunt. Don't miss that conversation this
evening here on Bloomberg TV. Much more to come.
Welcome back now. Still with us, Michael Straub, chief
investment officer at Lombard OD. Michael, thank you so much for sticking
around. We talked to a quite extensively about
the U.S., some of the opportunities there.
I don't know what you do with China and you have that you're a little bit
different to everyone else who says we need stimulus.
You say they need to be very cautious and what kind of stimulus?
And actually, they should focus on stability of the currency first.
Yeah, looks like China is in quite a precarious situation.
So growth materially has slowed down and they don't seem willing or quite sort of
grabbing the challenge of of that growth by stimulus right now.
I think it is driven by, as you say, stability.
They don't want to be seen as having overstated situations, default
situations like we've seen. And finally, and this is my thinking of
China in general. China is caught in this wind of change
of of the fracturing world, as we call it.
Obviously, they're feeling strong headwinds from from the US in terms of
maybe support for for the war in Ukraine or at least the tacit support.
But but more importantly, we're in a Cold War situation between the US and
China on tack. And I think they're taking stock of that
before they go forcefully on stimulus. So I've taken out Chinese assets from
from our strategic portfolios and we will look at it from a tactical
perspective on you make you also worry about deflation in China.
Is China kind of on its own or could it actually also impact, you know, world
inflation prices here? It absolutely can.
It may actually make the jobs slightly more easier for central banks outside
China. But China into deflationary tendencies
is not good in total. Maybe short term, it will help the
central banks, but long term, for sure, China cannot end up in a deflationary
scenario which is not not consuming. They are not consuming or saving and
they're not stimulating, stimulating. What's your take on Europe?
Caught in between. I would say needs to stand on its own
feet. Let's see what happens in the US if
Donald Trump comes back. Europe will feel a very strong cold wind
to take responsibility for its own security and defense.
Show more commitment to, if you will, the US as well, by the way.
And ultimately, I think the US election caught in between China is really
Europe's moment of truth to to look ahead ten years and get its houses in
order. Are there any tactical plays?
And I had a big Wall Street banks saying actually they've identified seven
companies that should rival the Magnificent Seven, but that that the
share price is just not following through because they're based in Europe.
Yeah, sure there I mean the fantastic companies in Europe.
My home country, Denmark, has has fantastic companies.
Switzerland, very large companies with solid business models.
Any sort of investor I think today needs to focus on a global business model, a
monopoly like situation. Strong balance sheet and strong
earnings. And there are some in Europe for sure.
Okay, Michael, thank you so much as always, for coming on, especially coming
in the studio. Michael Stromberg there, chief
investment officer at Lombard, OJ with a good conversation around the world.
Coming up, we'll look at London's environment for fintech startups as the
city faces growing competition from Paris and New York.
That is coming up shortly. Then we have a full roundup of some of
the big market moves. One theme that we really want to talk on
is record highs for Bitcoin and gold seem to be sending mixed messages about
the appetite for risk across global markets.
Now, Bitcoin has jumped 50%, of course, helped by inflows into recently minted
U.S. exchange traded funds.
What that means longer term is something we need to keep an eye on.
This is Bloomberg.
Now UK Chancellor Jeremy Hunt is set to put personal tax cuts at the centre of
his spring budget as the general election looms.
Donald Trump and Joe Biden dominate on Super Tuesday with a rematch of the 2020
presidential election now looking more likely than ever.
Plus, markets eye two days of testimony from Jay Powell on Capitol Hill.
The Fed chair is likely to signal there's no hurry to cut rates.
Well, good morning, everyone, and welcome to the Pulse and Francine Lacqua
here in London. Now, the new UK boss of Revolut said
London's role as a fintech hub is under threat with growing competition from
Paris and New York. Francesca Lacey has signed up to a new
Unicorn council to push the government on startup friendly policies.
Now, at the same time, a government backed task force has called for
investment in women led ventures to drive the UK's ambition of becoming a
tech superpower. Well, joining us now for more on all of
this on budget day as well, I should add, our city editor, Katherine
Griffiths, and June Angelides, an investor at Fabulous Investment.
So thank you both for joining us. First of all, can you paint the picture
of actually how June lives this day in and day out?
It's VCs is trying to raise money, giving women a better chance.
But how does it feel actually for for city people?
I think it feels in some ways positive. So Revolut has this new boss in the UK,
Francesca Alessi. She herself has been a founder before.
She created a digital mortgage business called Marlowe, and she's taken on this
really, really interesting role at Resolute running the UK business, which
is right in the spotlight of whether or not they get the banking licence.
And I think her kind of long experience, as she was saying, shows that London had
this amazing kind of time after the financial crisis.
There was this real sense that it was the place to be if you wanted to create
new start up banks. And that continued for a long time.
And she's still really positive about London.
She's very, very European. She's worked all over the world.
But she's. But she does think that in the last few
years, perhaps there's been this sense of the talent pool diluting a little
bit. That's New York, you know, kind of
counterintuitively, we think of New York as being this huge financial centre.
But in terms of fintech, that being a more recent thing.
And then of course, on the continent, to that sense of the Macron policies or
just that sense perhaps of whether people want to be inside the eurozone
and of course in London, we're not. Yeah, we're certainly not.
You know, you live this day in, day out, and I know you've called for, first of
all, more investment in women entrepreneurs, but also more angel
investors. What's hard?
Is it the access to capital when you start out?
Yeah, access to capital is a very, very big thing.
I mean, if you look at the stats last year, funding dropped significantly to
female founders, but in general the landscape is very hard.
But I think a few reforms that have been put into place recently, especially
around pension, hopefully will enable businesses to access a larger pool of
capital. And it's great for pensioners, but the
money will be put to work. Yeah, I mean the British I saw that we
were talking about, I mean there are complexities in that.
Does the Chancellor go through with it? In a few hours we will definitely find
out. Yes, I think I think probably we get
something on the British ISA and while the kind of name is jazzy, actually,
what that will really mean is maybe a bit more complicated because it might be
things that are listed in London, but of course that can be all sorts of things
all around the world. But that plus some other reforms to sort
of try and move pension fund money in particular into growth assets could
create some opportunities for for UK fintechs and other things too.
And Jean, what's interesting about what you've been trying to push for is also
it's actually at education level, so it's inspiring girls, you know, in the
classroom to not only have role models, but I guess to have task force that will
propel them in becoming high growth entrepreneurs.
Absolutely. I think the shocking statistic was that
only 81% of students were able to name a sort of a role model in tech and they
were male. And I think how do we lift that number a
big. And the objective of the task force is
to increase that number, putting more material in school, especially with
Women's Month. How do we raise the profile?
I think the media really helps with that.
I mean, one of the questions that we try and often, you know, discuss on the UK
show is actually what does the city of London stand for?
And I know the Chancellor has always tried to push this idea that the UK can
become the next NASDAQ that actually does want to focus on tech and
entrepreneurship. But is it still insurance and banking?
Yeah, I mean it is insurance and banking and professional services, but I think
everyone can see that, you know, the UK and London in particular is this
incredible hub of talent and that does stretch from tech to science, amazing
universities, great campuses. But I think we've heard a lot of
rhetoric from Jeremy Hunt, and he is pretty popular actually, out there in
the city, but really not a great deal of concrete action.
And I think it's going to be really interesting to see how people feel about
what is to come in the budget and if indeed we do get the national insurance
reduction and all the rest of it, whether actually people might prefer a
bit more focus on these sorts of topics which sort of propel us into the future.
And, you know, I mean, you have some great statistics, right, in.
For example, there are some task force that this government wants to put in
place. Now, there's a general election.
Doesn't look like they'll be around for much longer.
I could be wrong. But that, you know, they really want to
increase the number of female entrepreneurs.
And again, how difficult is that? We have a huge labour shortage in this
country. So does that accelerate things?
Yeah, I think there are a lot of great initiatives being worked on.
The government has put aside quite a big significant amount of money to increase
the amount of talent. And Minister Coalfield recently spoke
about a budget being put aside to help with retention.
I think we have an untapped a large untapped talent pool with with women who
have left the workforce for childcare and how to get them back in.
I think training them up is a great way, but we also need the corporates to play
a big role in making it an inclusive environment for them to join.
I mean, the other thing, so you also focus on coding for females, actually
for a lot of mums, but also females in general.
I don't know the interplay between coding and AI.
Is it, is it more necessary to have coding skills with AI or does it does
that get taken away? Well, I think AI and natural language is
made it a lot easier to be able to understand.
And I think what we need to see going forward is just people's interest,
curiosity. I think that's what excites me about
coding and how do we get people to think outside the box, How do we help them to
understand the power to transform their ideas and make an impact on society?
We're all a little bit obsessed with Revolut because of the banking licence.
And you know what happens to the. Were you impressed by the plans going
forward or so many still question marks? Yeah, and I think there are lots of
question marks still. Revolut It's been trying to get this
banking licence for three years, but I think one of the sort of
interesting dynamics of that is it's become so sort of big without the
banking licence. It has 40 million customers around the
world, 8 million of those in the UK. And of course not all of those people
are using Revolut all the time, but it's still quite a large number.
And so that that decision by the UK regulators about giving them the licence
is just a lot more loaded than when people get licences, when they're a bit
smaller and the stakes are not quite so high.
So I think they are showing signs that they are kind of ticking off their
problems. They're sort of trying to get in on in
control of their accounts and things like that.
But yes, questions still to be answered. You always have such a good pulse of
what the city wants. What are they expecting from the budget?
Is it I don't know whether it's a downbeat.
I had a big investor and they were saying like, look, the budget's fine,
but they're probably not in charge. Yeah, in a couple of months, certainly,
you know, by the end of the year. So does it really matter to the people
of City of London? I think I think that's the real
challenge. I think they definitely, you know, don't
want to see anything rash. You know, they don't want a sort of
Kwarteng style budget and they don't expect to get one.
But I think that's the problem. They don't really expect it to be a
lasting thing. June, Is there anything that
entrepreneurs like, you know, need from the budget?
Again, it's, you know, a bit prepared, precarious for this government right
now. I think in general what people are
looking for is a bit more stability. It's just an understanding that the
government is going to stick to the promise if it like what you've just
said, how do we how can they make plans if they're not
certain about what it's going to look like in a few months from now?
And, you know, back to that point of attracting talent and making the UK an
attractive place so people come and they can access the talent they need to grow
their businesses. Yeah, it's a tricky, but I think it's a
tricky budget yet because they have to probably win votes.
They don't have much money to play with and they want to make sure that the
markets are okay. Thank you so much for joining us today,
June. And to Leeds investor at CMOS
Investments and Bloomberg's city editor Kathryn Griffiths.
Now coming up, we're also joined by James Darnovsky, the global co-head of
energy power and renewables at Jp morgan.
He's live from the company's Clean Tech Stars conference.
So a good conversation on infrastructure and, of course, spending.
This is Bloomberg.
Well, oil supplies may be running ahead of demand after a report of rising U.S.
stockpiles for a six week in a row. Fears of slowing demand from China and
surging supply from non-OPEC producers are also weighing on prices.
Brent has risen by almost 7% this year due to tensions in the Middle East and
higher transport costs. Now to discuss all of this, we're joined
by James Danowski, the global co-head of energy power and renewables at J.P.
Morgan, and she joins us from the company's Clean Tech Stars conference,
which brings together the future leaders of decarbonization.
So, James, thank you so much for joining us.
I mean, one of the things that we keep on asking a lot of our guests and a lot
of head of commodities tell us is that we're running out of things.
And this is because there had been decades of underinvestment in old oil
and gas, but also in renewables. Do you worry that we're running out of
things? Good morning Francine, and thank you
very much again for for having me join this morning where I were hosting our
second annual Clean Tech Stories Conference here at our offices in
London. Its focus on private image companies
that are at the forefront of technologies that we need to achieve
global net zero by 2050. As you think about your question, am I
worried about right now, what we're worried about is making sure that we can
help these companies get access to capital, because we need both.
We need traditional energy, but we also need low carbon, green renewables, clean
tech. And the companies we have here, we have
over 45 companies, The founders and management of these companies that are
in hydrogen e fuels, battery storage,
energy efficiency, carbon capture, the technologies that we need in addition to
renewables and as we make the transition away from fossil fuels.
So it's a combination. But James, is the right investment going
to the right place? So again, I understand it's a
combination, but actually, what are you most worried about?
And then you also hear from, again, a lot of the big commodity producers that
even if you go through a transition and go for renewables, there's not enough
copper, there's not enough of these rare earths out there to make it viable in
time. So it's a combination of we need a few
things. We need public policy and regulation to
help be stimulating for investments. We need permitting to move faster, but
we also need access to capital for these companies to be able to develop the
resources, develop the technology, spend on the innovation.
So I the it's a combination. It's not just one element to make the
transition successful. Who's getting it right the most again.
How many investments or how much in terms of money pool of money needs to go
where? I think what's encouraging is if we look
at last year, we saw $1.4 trillion of capital for energy transition
decarbonization, which is a record. The challenge we have is to scale that
up to the 4 to $7 trillion a year that we're going to need between now and
2050. We've had some headwinds, obviously,
with high interest rate environments, energy supply shocks.
We've had supply chain disruptions, permitting being a bit slow.
So it hasn't stopped. It's probably is going slower than what
everyone would like as we saw the attendance at COP 28 and then even at
Davos, there's a lot of momentum for this from the corporate and the private
world public. So we're confident it's going to come.
We just have to have a little bit more patience as this evolves over the next
few years and this to change the global energy ecosystem, to make sure that we
have the ability to scale up to low carbon is going to take time.
It's not an overnight event. James, I know there's a lot of focus, of
course, on raising capital to go into infrastructure for renewables or
infrastructure for energy. Is this where the smart money is going?
The smart money is going across. So we continue to see capital being
raised across all subsectors renewables. So solar or wind, the grids, battery
storage, EVs, clean fuels.
As I said, some of the more emerging technologies capital is continuing to
go. The issue is just because of what's
happened. For the reasons I said about some of the
headwinds we faced last year, it's just slowed down the pace of capital coming.
We went from the 30 companies last year to 45 companies this year.
At our conference we went from roughly 200 plus investors last year to 250 plus
this year. That's to us quite encouraging that we
continue to see companies grow, be successful.
But investor interest would be there from, as you said, venture capital,
private equity. It's infrastructure, it's a combination.
I think the other thing we're seeing is the big corporates and the big
strategics are also continuing to put more and more capital into helping these
clean type companies or these smaller type companies grow up so that they can
scale up and also deploy their technology quicker.
And James, when you look at you know, you're basically the team's joining you
at this conference today. I think you have growth companies,
highly successful growth companies that raised some $7 billion of capital over
the last several years. Is it easy to raise capital across the
board or is there a region that actually is more in tune to raising capital in
the space? So the what we're seeing right now is
it's quite it is quite challenging. I mean, globally for the reasons I said.
But we're starting to see the green shoots.
We're starting to see the public equity capital markets open up, which is always
a good thing. We've seen policy in the US with IRA,
obviously be supportive. We've seen the UK and EU adopt new
policies and new incentives and subsidies.
The I wouldn't say it's one specific region.
What it is, is it comes down to companies that are able to demonstrate
that they have the technology, that they're beyond the pilot phase, they're
scaling up to be commercial and that they have an end market demand and that
those companies then are are able to go and say, you know what, I would like my
next round, whatever that is, a C round round in round of growth capital because
I've proven and there is demand, there's fiscal policy around it, those elements
are really just global. So it's not one region, it's quite
specific. But overall the fact that we saw more
capital raise last year gives us a lot of encouragement and the momentum just
in the market that we see talking to clients and investors is quite
encouraging. Great.
Thank you so much. Jim Czarnecki there, the global co-head
of energy power and renewables at Jp morgan.
Now coming up, as the U.K. chancellor prepares to deliver his
spring budget. We'll look at why Gilt investors will be
hoping the whole statement is actually uneventful.
That's next. And this is Bloomberg.
So just a few hours until the final UK government budget before the election.
But could disappointment for voters turn out to be a bonus for gilt markets?
Bloomberg's markets reporter Justin Alle is with us now.
I mean the U.K., this is a very important budget, frankly, for the
Tories. I don't know whether it'll have a huge
impact on the economy given the looming election, but what are you expecting to
see now? Yeah, I think the biggest headline, you
know, for all of us living in the UK has already been reported out in the press,
which is that everyone's expecting a cut to the National insurance tax rate and
perhaps not yet, you know, a cut to the income tax rate.
But I think that's going to be a really important part of the pitch that the
Tories are going to desperately bring to UK voters ahead of a potential election.
But, you know, it's kind of a difficult kind of dilemma for Jeremy Hunt here,
because on the one hand, I mean, they do kind of want to bring more perks to UK
voters, but on the other he's not working with a lot of fiscal headroom
here. So we're also going to try to see where
he's going to find some of that headroom, you know, potentially by
extending a windfall tax, you know, kind of on the energy companies that kind of
what he's going to do with the tobacco tax and kind of other parts of the
budget. So how is the market positioned ahead of
that? Yeah, I think kind of another big kind
of big picture, a structural question here is that is there going to be more
perks for kind of the UK financial industry in particular?
Because obviously going into this budget, there have been a lot of
concerns about the lack of listings in the UK and also the lack of domestic
investment in the domestic economy. And so there have been kind of a lot of
chatter about whether there's going to be a British ISA which could bring some
tax perks just specifically for investing in domestic stocks, and that
could, at least in the long run, provide some support for British stocks.
Now, just, you know, one of the most read stories on the Bloomberg terminal
is actually Egypt and the fact that they devalue their currency.
What can you tell us? Yeah, I think it kind of speaks to the
pressures that emerging markets are under at the moment.
And for Egypt's, it's been particularly difficult because they've seen kind of a
deficit in their current account for quite a while.
And that always brings pressure to the currency, but has also been especially
hard because with the conflict in the Middle East, I mean, that's hurt kind of
trade and Red Sea and revenues through the Suez Canal.
And so what we kind of got from the central bank today is, you know, a huge
rate hike of 600 basis points, as well as a devaluation of the currency, which
kind of will bring it a bit closer to the black market rate.
And also economists are expecting potentially a deal with the IMF coming
kind of very soon. Yeah, and we heard from the IMF that
they were encouraging, of course, you know, to tighten monetary policy because
inflation is around 30%. Yeah, exactly.
And I think part of that is kind of a global story, which is that with the
rate hike coming out of the US, a lot of kind of capital has left emerging
markets. And I think this is a particular kind of
dire case, but it's definitely the pressure that a lot of developing
countries are seeing right now. And then just, you know, we're watching
out for trying to pass that possible new policy coming from from there.
Yeah. I mean, speaking of emerging markets,
right, I mean, investors were a bit disappointed yesterday because even
though the GDP target has been kind of similar, you know, at 5%, I think a lot
of people were hoping for a lot more detail about the plan to get there.
And we still didn't really get a lot of that detail today.
I mean, apart from, you know, the central bank governor saying that there
could be more room for another, you know, reserve requirement ratio cut,
which is why we're seeing Chinese bonds rally today and also another ultra long
central government bond sale to support development.
But I think, you know, people kind of are a bit skeptical after the lack of
support that we've seen over the past year.
Just, you know, thank you so much as always for that.
Wonderful markets round up, Justin. Just now, another reminder for viewers
in the UK. You can join us later for special
coverage of the spring budget beginning at 12:15 p.m..
The chancellor's speech then scheduled for around 1230.
Now, later today, we'll also be talking to the Chancellor of the Exchequer.
Don't miss that conversation right here this evening on Bloomberg tv.
Up next, the bloomberg brief, Dani Burger and Manus Cranny in new york.
Have a great day, everyone.
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