Bloomberg Daybreak: Europe 04/02/2024

Summary

Bloomberg Daybreak Europe discusses strong US factory data leading to a reevaluation of the number of Fed cuts anticipated for the year, with the odds of a June cut falling below 50%. Geopolitical tensions rise after an Israeli strike in Syria results in Iranian military casualties, and oil prices approach a five-month high due to Middle East risks and tightened supply. Additionally, the show covers economic data, central bank decisions, and market reactions from various regions including Turkey, Argentina, and Egypt.

Takeaways

• 📈 Strong US factory data leads to a market reevaluation of the number of Federal Reserve rate cuts anticipated for the year, with the probability of a June cut falling below 50%.
• 🇮🇷 Iran promises a decisive response to an Israeli airstrike on its embassy in Syria, which resulted in the death of two military generals, escalating tensions in the Middle East.
• 🤝 Israel agrees to face-to-face talks with the US regarding an invasion of Rafah, amidst heightened risks and tighter oil supply, pushing oil prices near a five-month high.
• 🌐 Asian markets display mixed reactions, with Hong Kong's Hang Seng experiencing a catch-up rally and the Nikkei in Japan slightly positive despite previous losses.
• 💰 US dollar remains relatively stable, while Brent crude oil trades just below $88 a barrel, and gold prices hover near record highs at $2,257 an ounce.
• 🇯🇵 Yen weakens towards 152 per US dollar, with traders anticipating the possibility of Japanese official intervention to strengthen the currency.
• 📉 US stocks joined bond losses following the release of strong factory data, reinforcing the narrative of a resilient US economy and less urgency for Fed rate cuts.
• 📈 Strong economic data from China, including better-than-expected PMI figures, but the CSI 300 index sees a slight decline.
• 🛣️ Oil prices are driven not only by geopolitical risks but also by supply fundamentals, with OPEC+ maintaining production cuts and US refineries seeking alternative sources after Mexico cancels some crude exports.
• 🏦 Citigroup reportedly implements a new round of job cuts in its US investment bank, affecting roles in technology, media, and telecom sectors.
• 🛒 UK supermarket price inflation drops to its lowest level in over two years, with increased competition among retailers to attract customers.

Q & A

What was the main impact of the strong U.S. factory data on the financial markets?

The strong U.S. factory data led to a rethink among markets regarding the number of Fed cuts this year, with the odds of a June cut dipping below 50%.

How did Iran respond to the Israeli strike on its embassy in Syria?

Iran vowed a decisive response to the Israeli strike that killed two of its military generals.

What is the significance of the U.S. jobs report for March?

The U.S. jobs report for March is significant as it will influence the Fed's decision on whether to cut rates, with all eyes on the employment data for clues about the state of the labor market.

What is the current stance of the Federal Reserve on interest rates based on the recent economic data?

Based on the recent economic data, the Federal Reserve is not in a rush to cut rates as the US economy has shown resilience, with strong factory data and slower than expected inflation falls.

What is the current situation with the yen and the potential for Japanese intervention?

The yen is weakening towards 152 per US dollar, a key level that has traders elevating the chances that Japanese officials may intervene to strengthen the currency.

How has the oil market been affected by geopolitical risks and supply constraints?

Geopolitical risks and supply constraints have led to oil prices nearing a five-month high. Tensions in the Middle East and tighter supply from Mexico have contributed to the price increase.

What is the current status of the UBS share buyback program?

UBS has announced a new share buyback program of up to $2 billion, which is expected to commence after the completion of the merger between UBS and Credit Suisse.

What was the outcome of the municipal elections in Turkey?

In the municipal elections, Turkey's president, Recep Tayyip Erdogan, suffered an unprecedented defeat as the AK Party fell behind the main opposition CHP.

What are the key economic data points to watch for in the upcoming week?

Key economic data points to watch for include eurozone CPI, euro area PMIs, and the US March jobs report, which will be influential in terms of Fed rate decisions.

What is the Reserve Bank of Australia's new system for implementing monetary policy?

The Reserve Bank of Australia plans to transition to a new system that focuses on the nuts and bolts of moving money around to achieve the cash rate target, responding to imbalances within the system and the running down of excess reserves.

What are the potential implications of a U.S. debt crisis for emerging markets?

A U.S. debt crisis could have significant ripple effects for emerging markets, potentially leading to financial instability and reduced investor confidence. However, fundamentals in many emerging markets are currently on the mend, with improving financing channels and fundamentals.

Outlines

00:00

📉 Opening Remarks and Market Rethink on Fed Cuts

The segment begins with the host, Lizzy Burden, welcoming viewers to Bloomberg Daybreak Europe and setting the agenda for the day. She highlights strong U.S. factory data that has led markets to reconsider the number of Federal Reserve cuts expected this year. The June cut probability has dipped below 50%. The host also mentions a firm opening for European markets and provides an overview of the U.S. economic resilience and inflation trends, emphasizing the impact on bond and stock markets. The segment closes with a mention of the upcoming economic data and Fed speakers, including Fed Chair Jay Powell.

05:01

🌍 Geopolitical Tensions and Middle East Risks

This paragraph discusses the heightened geopolitical tensions in the Middle East, particularly focusing on Iran's response to an Israeli airstrike on its embassy in Syria, which resulted in the death of two military generals. The discussion also covers Israel's agreement to in-person talks with the US regarding an invasion of Rafah. The risks emerging from these tensions are highlighted, especially in relation to oil prices which are nearing a five-month high due to supply constraints and the increased risk in the region.

10:01

📊 Analysis of US Economic Data and Fed's Stance

Bloomberg's Jill Dees provides analysis on the recent U.S. economic data, emphasizing the strong factory data that has led traders to pare their bets on a June rate cut. The conversation touches on the resilience of the U.S. economy, the impact of ISM data, and the core inflation gauge. The discussion also includes expectations for upcoming economic indicators, such as the JOLTS data and the jobs report, which will provide further clarity on the trajectory for rate cuts. The segment concludes with a focus on the 19 Fed speeches scheduled for the week, and the importance of paying attention to the statements made by key Fed officials.

15:05

🔄 Yen Weakness and Japanese Intervention

The paragraph delves into the weakening yen and the potential for Japanese officials to intervene to strengthen the currency. It includes commentary from Mark Mobius, who suggests that shorting the yen could be profitable, and discusses the psychological level of 152 that traders are watching closely. The conversation explores the possibility of intervention and the strategies that Japanese officials may employ to influence the yen's value, including the historical context of previous interventions.

20:08

📈 Asia Market Update and Economic Indicators

Vonnie Quinn provides an update on the state of Asia markets, highlighting the varied performance of different markets in the region. She discusses the significant catch-up rally in Hong Kong's Hang Seng index and the strong orders for a new model unveiled by a Hong Kong company, which could potentially compete with Tesla in China. The segment also covers the downtrend in China's CSI 300 index, despite better-than-expected PMI data, and the decline in Korea's market due to sticky inflation and potential central bank caution.

25:10

🛫 Impact of Israeli Airstrike and Iran's Response

The focus of this paragraph is the implications of an Israeli airstrike on Iran's embassy in Syria, which has resulted in the death of several people, including two military generals. The discussion centers on Iran's potential response, the escalation between Iran and Israel, and the broader geopolitical implications. The segment features insights from Bloomberg's Patrick Sykes, who discusses the significance of the attack, Iran's potential response options, and the seriousness with which Iran is对待 the incident.

30:13

📅 Economic Data and Monetary Policy Outlook

The segment provides an overview of the economic calendar for the week, with a particular emphasis on the U.S. March jobs report, which is set to be a major influence on Fed policy. The discussion also touches on the eurozone CPI and PMIs, as well as the potential impact of UBS's new share buyback program. The segment concludes with a brief mention of Turkey's presidential election results and the potential implications for the country's economic policy.

35:17

🇦🇺 Australian Monetary Policy Shift and Economic Indicators

This paragraph discusses the Australian central bank's plan to switch to a new framework for implementing monetary policy. The bank's assistant governor, Christopher Kent, outlines the changes and emphasizes that the new system is about the mechanics of achieving the cash rate target, rather than the target itself. The conversation also covers the bank's response to imbalances within the system and the gradual unwinding of excess reserves put in place by central banks during unconventional monetary policy measures.

40:20

📈 Market Volatility and Economic Outlook

The segment features a discussion on the current state of market volatility, the outlook for U.S. economic policy, and the potential impact of geopolitical risks on oil prices. The conversation includes insights from Bloomberg's Mark Kirk, who shares his views on the likelihood of Fed rate cuts and the structural reasons behind the yen's weakness. The segment also covers the bullish sentiment in oil markets and expectations for the OPEC+ meeting, as well as updates on various economic and political developments around the world.

45:21

🗳️ South African Political Landscape and Opposition Strategies

The paragraph focuses on the political landscape in South Africa, with an exclusive interview with John Steenhuisen, the leader of the main opposition party, the Democratic Alliance. Steenhuisen discusses his party's strategy for the upcoming elections, their multi-party charter, and the possibility of forming a government without the ruling ANC. The conversation highlights the opposition's commitment to change and the challenges of working with other parties to achieve a majority.

🌐 Emerging Markets Update and IMF Outlook

The segment provides an update on various emerging markets, including Turkey, Argentina, and Egypt, and their expectations from the upcoming IMF meetings. The discussion features insights from Trung Nguyen, the global head of credit strategy at BNP Paribas, who talks about the potential for more volatility in Turkey, the focus on reforms in Argentina, and the positive impact of FDI inflows on Egypt's economy. The conversation also touches on the broader themes of ESG frameworks and the importance of IMF support for these countries.

💼 US National Debt Concerns and Economic Fundamentals

The final paragraph discusses the growing concerns about U.S. national debt, with comments from Citadel founder Ken Griffin. The conversation explores the potential ripple effects of a U.S. debt crisis on emerging markets and the current state of economic fundamentals. Trung Nguyen shares his bullish view on emerging market credit and highlights the recovery and improving financing channels in these countries. The segment concludes with a discussion on the EU's rules on greenwashing and the importance of including emerging markets in climate goals and energy transition initiatives.

Keywords

💡US Factory Data

US Factory Data refers to statistical information about the performance of the manufacturing sector in the United States. In the context of the video, strong US factory data suggests that the US economy is more resilient than expected, leading to a reevaluation of the number of Federal Reserve interest rate cuts anticipated for the year. This data is significant because it can influence economic decisions and market expectations.

💡Federal Reserve (Fed)

The Federal Reserve, often referred to as the Fed, is the central banking system of the United States, responsible for implementing monetary policy to regulate the country's money supply and interest rates. In the video, the Fed's potential actions regarding interest rate cuts are a central focus, as market participants anticipate the implications of their decisions on economic growth and inflation.

💡Geopolitical Tensions

Geopolitical tensions refer to the strained relationships and conflicts between different countries due to political, economic, or territorial disputes. In the video, heightened geopolitical risks in the Middle East, particularly involving Iran and Israel, are mentioned as factors contributing to the increase in oil prices and market volatility.

💡Oil Prices

Oil prices are the costs per barrel of crude oil, which are influenced by various factors such as supply and demand, geopolitical events, and economic indicators. In the context of the video, oil prices are nearing a five-month high due to the combination of geopolitical risks and tighter oil supply, impacting global markets and economies.

💡Market Resilience

Market resilience refers to the ability of financial markets to withstand and recover from adverse events or economic conditions. In the video, the resilience of the US economy is demonstrated by its strong factory data, which suggests that a rapid decline in interest rate cuts may not be necessary, contrary to earlier expectations.

💡Yen

The yen is the official currency of Japan. In the context of the video, the yen's value in relation to other currencies, particularly the US dollar, is discussed in the context of potential currency intervention by Japanese officials to prevent excessive weakening. This is significant as it reflects broader economic and policy concerns.

💡Interest Rate Cuts

Interest rate cuts refer to the reduction in the interest rates set by a central bank, like the Federal Reserve. These cuts are typically implemented to stimulate economic growth by encouraging borrowing and spending. In the video, the possibility of the Fed cutting interest rates is a central theme, with market expectations shifting based on economic data and geopolitical developments.

💡Middle East Risks

Middle East risks encompass the various geopolitical, economic, and security challenges that can arise in the region, which has significant implications for global energy markets and international relations. In the video, these risks are highlighted in relation to tensions between Iran and Israel, and their potential impact on oil prices and market volatility.

💡Economic Data

Economic data consists of quantitative information that reflects the performance and structure of an economy. This can include indicators such as GDP, employment rates, inflation, and manufacturing output. In the video, economic data from the US, particularly factory data, is emphasized as a key factor influencing market expectations and central bank decisions.

💡Currency Intervention

Currency intervention refers to the actions taken by a country's central bank or monetary authority to influence the exchange rate of its currency by buying or selling foreign currencies. In the video, the potential for Japan to intervene to weaken the yen is discussed, highlighting the strategic use of currency policy to manage economic outcomes.

Highlights

Strong U.S. factory data leads to a rethink in the number of Fed cuts this year, with the odds of a June cut falling below 50%.

Iran promises a decisive response to an Israeli strike on its embassy in Syria, which reportedly killed two military generals.

Oil prices approach a five-month high due to heightened risk in the Middle East and tighter supply conditions.

The U.S. dollar remains steady amidst economic data suggesting a more resilient economy than anticipated.

Brent trading just below $88 a barrel as tensions in the Middle East increase and supply from Mexico tightens.

Gold prices hover near record highs, currently trading at $2,257 an ounce.

The Nikkei experiences a positive turn, albeit small, after a significant down session the previous day.

The Hang Seng rallies, increasing by 2.25%, with notable stories emerging from Hong Kong.

Chinese manufacturing data comes in stronger than expected, surprising the markets.

Korea experiences stickier inflation, which may cause the central bank to hesitate on rate cuts.

India's Nifty index sees a slight decline, raising questions about potential market shifts.

The yen's value fluctuates around a key level, with traders speculating on potential intervention from Japanese officials.

UBS announces a new share buyback program of up to $2 billion following a reduction in its bonus pool.

Turkey's President Recep Tayyip Erdogan faces an unprecedented defeat in municipal elections, marking a potential shift in the political landscape.

South Africa's main opposition leader discusses the possibility of forming a coalition without the ruling ANC.

OPEC+ is expected to maintain current production cuts, reflecting their aim to keep oil prices above $80 per barrel.

The Australian central bank announces a new system for the implementation of monetary policy, focusing on the mechanics of achieving the cash rate target.

The U.S. Federal Reserve Chair, Jerome Powell, emphasizes the importance of the upcoming March jobs report in guiding the Fed's decision on interest rates.

Transcripts

Good morning. This is Bloomberg Daybreak Europe.

I'm Lizzy Burden in London. And these are the stories that set your

agenda. Strong U.S.

factory data pushes markets to rethink the number of Fed cuts this year after

the June cut dipping below 50%. Iran vows a decisive response after it

says an Israeli strike on its embassy in Syria killed two military generals.

This is Israel agrees to in-person talks with the US over an invasion of Rafah.

Plus, oil nears a five month high on that heightened risk in the Middle East

and tighter supply. Well, a very good morning.

Welcome to Tuesday. I hope you had a lovely Easter break.

You've had a chance now to digest that central bank bonanza, but it's going to

be a lively one ahead. We've got lots of eco data on the docket

amongst lots of Fed speak as well. 19 I counted, including Fed Chair Jay

Powell himself. But we've already had a solid set of US

factory data reinforcing this narrative that the US economy is more resilient

than economists had expected, that inflation's falling more slowly than

economists had expected. Hence why you've got this narrative

reinforced that the Fed's not going to be in a rush to cut rates.

So you saw stocks joining the losses in bonds yesterday, and that is set to

continue later. Futures stateside pointing to a lower

opening, but in Europe, slightly tilted to the upside, maybe a bit of brightness

closer to home. But if we flip the board over to the

cross asset picture, you've got the two year Treasury yield currently well, show

you in a memo, but that we go 4.69% on the ten year

Treasury yield as traders have pushed back pricing for their first full Fed

cut to September for a moment. You saw the odds of a first move in June

dipping below 50%. And therefore, now all eyes turn to that

US jobs report for March on Friday. The dollar currently pretty steady

there. Brent trading just below $88 a barrel as

we've got all those tensions in the Middle East ratcheting up and tighter

supply for Mexico. Oil really near a five month high on all

of that and we'll dig into it later. Gold, as well, has been hovering near

record highs and currently trading at $2,257 an ounce.

But let's get over to Vonnie Quinn. She's on standby for us in Dubai with an

update on how Asia markets are faring. Bonnie, what's happening where you are?

Lizzie, it's been a fascinating session because there were all these

cross-currents coming together. Right now, as we know, this is some

markets first reaction to the piece of data which already came out last Friday.

Right. So Hong Kong, for example, had been

closed yesterday. It's now reopened.

So we saw a huge catch up there. But let's start with the yen, because

really a lot of activity around the yen today.

Mark Mobius telling Haslinda Amin earlier that anyone who is short the

yen, well, they might be in line to make some money and that this is a losing

battle for the authorities in Japan. We are at, as you can see, one 5176 152

is a line in the sand potentially we might see intervention there.

But as Mark Cranfield of MLive said earlier, why should it be 152 It could

be anything. And the ministry and the officials in

Japan have been good about sort of, you know, wrong footing traders.

So if traders think it's 152, well, they might just let the yen weaken past 152

before they do anything about us. Anyway, that's all playing out.

The last time we got an intervention was 2022 and it was below the level that

we're at now. Previously it was 1998, so that is going

to be a huge deal for the markets. As you can see, the Nikkei 2 to 5, well,

it has turned just barely positive, but it was a very down session for the

Nikkei yesterday, 1.4% lower. In fact, one of the narratives that was

percolating through the markets was that perhaps this might be the end or at

least we might be approaching the end of the Nikkei's upcycle and that China

could be a beneficiary of that. Well, we'll see.

It has to play out. The Hang Seng a catch up rally two and a

quarter percent. Some great stories out of Hong Kong

today, including show me, as you can see, is up a whopping 11 and a half

percent. The story there is that it unveiled its

first ever model and orders went gangbusters in the first 24 hours.

We're talking about 90,000 orders that would put it on par with Tesla in China.

If that were to continue, we flipped up the board.

So as you can see across Asia, if you take it as a whole, the Asia Pacific

index up about 3/10 of 1%. China, though, is hesitating just a

little bit. We're seeing the CSI 300 now down 4/10

of 1%. Even after we got that better than

anticipated PMI data out of China as well.

It wasn't just the US. We got manufacturing data that was very

strong in China too, which was a major surprise.

Korea down 2.2%. We're seeing stickier inflation in Korea

as well, and that's also causing the central bank to perhaps hold off on a

card. And then in India, down about a 10th of

a percent on the Nifty, which has been rallying this year.

That's the other narrative that might be playing out in this markets.

Is it India's turn to give back? Some money.

Are investors turning away from India potentially and back to China as well as

a. All right.

A whistle stop tour of Asia. Thank you, Bloomberg's Vonnie Quinn.

And I'm glad you mentioned the yen because dollar's gain is yen pain.

So let's dig more deeply into all of that economic data we've had out of the

US strong factory data prompting traders to price in less monetary policy easing

by the Fed this year, briefly pushing the odds of a first move in June below

50%. And markets also weighing cautious

comments on Friday from the Fed chair, Jerome Powell.

We can get some analysis now from Bloomberg's Jill Dees this morning.

Joe, you've got traders cutting their rate cut backs again off the back of

this data. How doubtful is a June cut looking now?

Yeah, let's see. I think that at this point it seems like

traders are really paring their bets to the point where repricing maybe a 50%

chance that we're actually going to get that June rate cut.

It's a really far cry from where we were just a few months ago when we were

expecting a rate cut, or at least traders were expecting a rate cut as

soon as March. But of course, as you see from some of

this data, it's just that the economy has been so much more resilient than

initially anticipated. Getting that ISM data beating

expectations, I think really added to those complications, even though you had

a little bit of cooling in that core inflation gauge last Friday that the Fed

really cares about. All of this is really combining to show

that the picture for when exactly that trajectory for rate cuts to start is

actually becoming a little bit less clear.

Of course, as we've been talking, we know that we're getting some additional

jobs data. Hopefully that shows us a little bit

more about where we're at in terms of the labor market.

First, you know, looking at this upcoming JOLTS data and then ultimately

the jobs report, I think will give the Fed a little bit more clarity on where

when exactly they can start cutting. But yes, it's still a pretty murky

picture there overall. Okay, So that June cut on a knife edge.

Of course, we also get 19 fed speeches. I counted apart from Jay Powell, of

course. Who are you listening to?

Yeah. I mean, I think that at this point, you

know, obviously Powell is really going to sort of set the directive there.

I think it's really interesting to hear from somebody like Bostic, you know,

exactly. On when when the really pressing things

in. I think he really kind of Lizzy, have to

take the totality of where some of these statements are coming in.

Because looking back at those Fed minutes, you know, just looking back at

that that Fed meeting just a couple of weeks ago, you know, kind of, you know,

getting this idea that, you know, a lot of them are expressing patience over the

data you really want to pay attention to, you know, who's keying in on the

next CPI report, who's keying in on this upcoming labor market report.

I think we'll kind of see how that develops, you know, over the next couple

of weeks as we get into, you know, I guess I guess a bit closer to June,

because, you know, again, I mean, if we're sitting here on a 5050 chance of

something, we want to know whether there's going to be crystallization

about a cut. You know, by the time we're getting into

May at least. Okay.

So all eyes on that March jobs report on Friday ably makes your thesis.

Thank you for that update. Now, I want to get back to the

geopolitical story, because, of course, as we mentioned, it is affecting the oil

price. Iran and Syria say that this Israeli

airstrike on Tehran's embassy compound in Damascus has killed several people,

including two military generals. Iran's foreign minister says Israel

should be held accountable for the repercussions of the attack.

As the tensions grow between these two longtime adversaries.

Joining us now for more is Bloomberg's Patrick Sykes in Istanbul.

Patrick, what more do we know about this attack?

Morning, Lizzy. I think it is certainly an escalation

between these two longtime enemies. You've got them technically targeting

Iranian soil here in Syria, but being the consulate compound, it is affiliated

to Iran itself in a way much more directly than previous similar attacks

we've seen, where they've perhaps targeted military personnel or Iranian

proxies, but not in this direct way on what is technically Iranian territory.

There was footage overnight showing the aftermath.

Is this sort of one building still standing where you can see the

government's posters still up and the building next to it completely

flattened, car outside, completely burnt out.

We know that the two targets, Mohammad Reza Zaidi and his deputy, both there as

as military advisers from Iran to Syria. And he's got a long history in the

Republican in the Revolutionary Guards, Quds Force.

That's the expeditionary force responsible for bringing Iran's

revolutionary ideals abroad to the region.

Now, you kind of have to wonder whether this is Netanyahu using the war with

Hamas to take the fight to Iran. What's been Iran's response and what are

its options here? Yeah it's it's it's that that tricky

balancing act where they're going to absolutely feel the need to respond but

they're also constrained by, I think, a practical, uh, prerogative to not invite

further response themselves. But already we've seen, I think, Iran

going further than it has in previous similar cases.

You mentioned the foreign minister's statement.

This time they also summoned the the Swiss attache who represents US

interests in in Iran. US, of course, not being there

themselves. That's not something we usually see when

this happens. We also found out just an hour or so ago

that the top National Security Council met late last night and a statement said

they took appropriate decisions without elaborating.

So they're already signaling that this is being taken seriously and that

they're sort of telegraphing that there will be a response in a more public way

than they have in in previous similar attacks.

The question, of course, is do they do something similar?

Do they try and attack Israel on its own territory?

That would, of course, be a huge escalation.

Or do they find some kind of proximate equivalent like this, you know,

extraterritorial territory, like in the case of the consulate?

It's a tricky balancing act for them. Okay.

Bloomberg's Patrick Sykes, thank you for that update.

As we have the US Israel meeting back on the docket in person after it was

canceled and then made a video call back on the schedule now in person.

Well, that is the geopolitics. Let's get you up to date with what we

have on the docket for the week in terms of eco data is set to be a busy one on

Wednesday. Tomorrow we get eurozone CPI, which you

might take with a pinch of salt, giving the timing of Easter on Thursday, its

euro area PMIs. And then on Friday it's the US March

jobs report really the highlight of the week in terms of OECD data.

As we say with Jill, you already saw in the ISO manufacturing survey the

employment side of the report showing declining demand for workers.

This report, of course, is going to be hugely influential in terms of those Fed

rate cut. But we've also just had the news

crossing the terminal that UBS is going to launch a new share buyback program of

up to $2 billion. This after we saw UBS cutting its bonus

pool for last year by 14%. A tough year for deal makers and

traders. You saw the CEO, Sergio Amati, being

elevated to the rank of the best paid European boss.

But of course, the buyback program very much in focus given the merger we've

just passed there at the one year anniversary.

And from UBS, his statement on that at UBS, his statement, they say we

intend to commence a new 2024 share repurchase program of up to 2 billion

USD as previously communicated. We expect to repurchase up to billion

of our shares commencing after the completion of the merger between UBS and

Credit Suisse, which is expected to occur by the end of the second quarter.

They say their ambition is for share repurchases to exceed that pre

acquisition level by 2026. I'm sure we'll bring you more on that

story throughout the program, but you can get a roundup of the stories that

you need to know to get your day going on the DAYBREAK newsletter.

Go to a Y, B, go on the terminal. Coming up, Turkey's president suffers an

unprecedented defeat in municipal elections and realized it in Cairo to

discuss the fallout. That's next.

This is Bloomberg.

Welcome back to you. Bloomberg Daybreak Europe.

It's 616 here in London and we'll go to Turkey now where the president, Recep

Tayyip Erdogan, has suffered an unprecedented defeat at the ballot box.

The AK Party fell behind the main opposition CHP in Sunday's municipal

elections, and it's the first defeat since President Erdogan swept to power

more than two decades ago. We can get more now from our Turkey

economy and government. Reporter Beryl Akman, who is in the

Turkish capital for us. Is this barrel a watershed moment for

President Erdogan? I think you could say that as you just

mentioned, it is a rare defeat for president.

Add on, since he came to power initially as prime minister about two decades ago,

and it is a historic moment for the opposition where we have rarely seen

them take strongholds from AK Party, especially in local elections.

Now, five years ago, in the local vote, again, we had seen the opposition

capture. Istanbul, the country's commercial hub,

as well as the capital, Ankara, and some other major cities in the west.

But this time, it's it's a landmark victory because they've been able to

take control of cities that party. And President Erdogan has ruled for

decades, even before, you know, with what the predecessors of Adam's party.

So it is definitely a show of force against the president and and a

watershed moment. So, yes.

And is it a watershed moment for Turkish macro policy?

Barrow. Oh, we're yet to see what's going to

happen with economic policy. Now, Turkey is prone to policy swings,

and we've seen in the past how election results or major events impact economic

policy. But for now, when President Erdogan on

Sunday conceded defeat, he signaled that's policy.

This normalization path we've seen since the president's re-election in May to

continue saying that inflation we'd seen inflation slow down as of the second

half and the program would continue, which includes aggressively tight

monetary policy with the benchmark rate at 50% right now, as well as fiscal

discipline, which the president's finance minister has said, we would see

even more savings on more typical discipline after elections.

And investors and big banks do not see any immediate risk to an immediate shift

in policy for the time being. Now we have inflation data tomorrow,

which is expected to show consumer inflation annually edging towards 70%.

And we'll see what what the economy authorities will do, whether they'll

have to tighten policy further. All right, Turkey economy and government

reporter Beryl Lachman, we thank you for that.

And we're going to continue the conversation about the impact on the

lira later in the program with McEwen, who is BNP Paribas Global head of credit

strategy. But coming up next on the program,

Australia's central bank says that it's going to introduce a new system for the

implementation of monetary policy. We'll bring you our exclusive

conversation with the RBA assistant Governor Christopher Kent.

That's up next. This is Bloomberg.

Welcome back to Bloomberg Daybreak. Europe Australia's central bank is set

to switch to a new framework for the implementation of monetary policy.

The RBA's assistant governor for financial markets outlined the changes

in a speech at our Sydney office. Christopher Kent spoke earlier to back.

What we've announced today is a new system for implementing monetary policy.

What we'll be transitioning to in the future.

But I wanted to emphasize that really is about the plumbing.

The nuts and bolts of moving money around about us achieving our cash rate

close to the cash rate target. But it's not what that target is.

What that target is, is is monetary policy.

This isn't about monetary policy. It's just how we achieve the target at

any given time. But it's also about responding to some

of the imbalances within the system structurally coming from the last few

years. Well, it's about responding to the

running down of the very large level of reserves.

We call that excess reserves that are in the system because we and other central

banks pursued unconventional monetary policy.

So they put a lot of money in the bank accounts.

Those are gradually unwinding as that bonds mature as the TFF gets repaid.

So it's about looking to the future and thinking about how what we need to do to

survive. What system we need to transition to

when it comes to the moderation of that balance sheet.

Obviously, a lot of it would depend on underlying demand.

But do you have sort of an idea of scale of timing of how that framework will

play out? No, we don't.

And indeed, that's partly why we picked the system we've picked.

So what we've chosen is what we call a full allotment allocation system at

most. That means the banks come to us and for

a fixed price they can borrow reserves, pledge collateral for 28 days at the

moment, and they can take what they want as long as they have sufficient

collateral. So what that's about what that means is

the supply of reserves is going to depend on the banks demand.

The banks have their own estimates. We could come up with some rough ones,

but until we get there, we won't know. But the it should transition fairly

seamlessly from one of excess to ample, and we'll know we're there when banks

start showing up in larger numbers and larger quantities at our operations on a

weekly basis. I think until we get there, we won't

know. Probably is a good phrase to describe a

lot of aspects of what we're out at the moment in terms of monetary policy.

Upstairs, you asked, you know, a little bit cheekily to give one word to

describe monetary policy settings and trajectory.

I'm going to give you a few more words if you want.

Can you elaborate? Yeah, I think the starting point is just

to say that the board's made it clear thinks the interest rate path

that will best bring inflation down in a timely manner is uncertain.

And so they've not wanted to rule anything in or out with regards to

interest rate changes where we're in a better place than we

had been. Inflation has come down a long way.

It does look to be moderating, but the path in, according to our forecasts, is

a gradual moderation from here. Labour market pressures, they're easing,

they're still tight, but they're easing and that's because growth is slowing.

And so that brings demand into a better balance with supply.

So all those things are in place. Our central forecasts are sort of

predicated on sort of further good things happening, including productivity

growth. But there's a lot of uncertainty around

that. And I think the key point is those are

reasonably well balanced as best we can tell.

And because of that, the path is uncertain.

The next rate change, I don't know if it's higher, don't know if it's going to

be a lower interest rate. When you talk about the not being the

inability to rule out shocks. Right.

How much of those risks do you worry about that might be external, that might

be geopolitical, You know, that might be, you know, election driven the

policies of other countries and how much of it are sort of domestic, maybe

structural macroeconomic aspects that perhaps we haven't seen in the data sets

yet? I think it could be both.

We just don't know. But I mean, as a small open economy,

we're always subject to developments offshore.

We've talked at length about what's happening in China.

China's a major export market for us, and there are concerns they have about

their property sector and the problems that they're trying to deal with there.

So that can have an impact on things like the demand for commodities like

iron ore and that can move our economy around.

But equally domestically, things can be moved by what people here in the

Australian economy are doing, particularly households at the moment.

How are they going to behave in the future?

That will sort of be a key, a key point for where the economy goes.

So that was RBA Assistant Governor Christopher Kent speaking earlier to

Bloomberg. We are looking at US futures pointing to

a lower opening today. This is after the S&P closed lower 2/10

of a percent yesterday. Stocks joining the losses in bonds after

that. US factory data which is stronger than

expected, reinforcing the narrative that the Fed is not in a rush to cut rates.

You've got trade is now pressing for the full first cut to come in September.

So pushed way back from the start of the year in new bond space.

Not a whole lot of movement across the curve.

The two year Treasury yield at 4.69%. Coming up, oil nears a five month high

on Middle East risks and tight supply. We'll dig into that next.

This is Bloomberg.

Good morning. This is Bloomberg Daybreak Europe.

I'm Lizzie Boden in London. And these are the stories that set your

agenda. Strong US factory data pushes markets to

rethink the number of Fed cuts this year.

Odds of a June cut dipping below 50%. Iran vows a decisive response after it

says an Israeli strike on its embassy in Syria killed two military generals.

This as Israel agrees to in-person talks with the US over an invasion of Rafah.

Plus, oil. And there's a five month high on that

heightened risk in the Middle East, as well as tighter supply.

We'll dig into all of those stories throughout the program.

Lots of geopolitics to get our teeth into, but it is a busy week ahead for

economic data. You've already had a little bit of it

from the US factory data. And as I say, it has pushed back Fed

rate cut. But there was a moment where you saw the

June pricing dipping below 50% and you can see on the picture there the impact

in terms of stocks. It's meant that stocks joined the losses

in bonds yesterday. The S&P closing down 2/10 of a percent

and Wall Street set to open even lower today.

Not the case in Europe. A bit more optimism flat to the upside

when it comes to euro stoxx 50 futures. But if we flip the board over to the

cross asset picture and you look at treasuries, there's not a whole lot of

movement. The two year treasury yield at 4.69%.

But you have seen, as I say, traders pushing back their pricing for the first

four fed cut to September and now all eyes turn to that US jobs report for

March on Friday. The dollar pretty steady at the moment

higher six basis points. Oil though just below $88 a barrel.

This is on all of the geopolitical risk in the Middle East.

Also the supply tighter for Mexico. And you've got gold hovering near record

highs, currently trading at $2,254 an ounce.

Meanwhile, the yen is weakening towards 152 per dollar.

It's a key level, but traders see elevating the chances that Japanese

officials will bring us back yen intervention.

Let's get more from mark. Good morning.

The markets live executive editor morning mark.

Spring is here. Is it time for the yen to blossom.

Good morning, Lizzie. It is absolutely not time for the end to

blossom. There won't be any cherry blossoms here

for this currency, I'm afraid. Look, I think, you know, whether there's

intervention from the IMF, it'll only lead to some short kind of short term

gains. Overall, the fundamental reasons for yen

weakness are structurally still there and will not change an intervention and

have not changed based on recent BOJ action.

The fact is Japan still has deeply negative real yields and they are far

more negative than the rest of the world.

And that is, even though it's got deep negative real yield, it's not like its

economy is booming. They are still fighting a deflationary

mindset. And I know that they've had positive

inflation print the last couple of years, but it's not exactly runaway

inflation in one of the biggest inflation, global inflation threats that

we've had in 40 years. And so therefore, I think the structural

reasons for yen weakness remain the same, and it could continue to weaken

even after intervention. Intervention might need it strengthened

for a couple of days. But quickly, traders will sell into

that. So that's the internal story in Japan.

But how much is the resilience in the US economy feeding into it?

And Mark, where are you on this 50 versus 75 basis point rate cuts from the

Fed debate as we've got all of this data coming in?

Oh, I just don't see how the Fed can cut even 50.

I would be shocked if we get more than 25 basis points this year.

Look, we have a strong labor market. We have a consumer that's contained to

spend. We finally had manufacturing sector come

out of contractionary territory. I know that's a smaller part of the US

economy, but it's a good lead indicator because it matters for hiring, etcetera

as well. So all parts of the US economy are still

strong. The Fed December meeting, they set a

very, very dovish message and that reignited an economy that might have

been started to slow. There is no landing out there.

I know the Fed has expressed desperation to cut and I know they're going to try

getting away with 25 basis points. Some point.

I'm not even sure they get away with that and I don't see them being able to

do more than 25 basis points unless there are some crisis.

And I don't see where the crisis is going to come either.

Sure, some regional banks are going to go because of commercial real estate,

but it's not systemic. Sure, private markets have some

stretched valuations, but again, it's not systemic.

It's not going to the pillar that's going to take this out.

There's nothing on the horizon which is looking likely to derail this economy at

the moment. And therefore, it's going to be very,

very hard for the Fed to sell cuts no matter how hard they try.

So I don't think we get 50 basis points. I'll go for something further.

I think it's more likely that we'd get something like 150 basis points than 50

basis points. That may sound strange.

And what I mean is the only justification for the Fed doing more

than one token gesture cut would be because the US economy does have a

problem, does go into crisis, in which case the federally to cut much more

aggressively. But I think yields need to go much

higher from here still. Not even core P.C.

The Fed's preferred inflation gauge coming in in line with expectations

could knock your confidence melt. Could.

Well, we thank you, Bloomberg's Mark Kirk and all that.

Now let's go to oil. It's holding near a five month high with

heightened geopolitical risks and supply constraints boosting prices.

And for the latest, we've got Bloomberg senior Energy reporter in Singapore,

Stephen PINSKY. Stephen, thanks for joining us.

What more can you tell us about this rally in oil prices?

You know, oil's up over 10% so far this year.

There are a number of reasons, as you mentioned, there is that geopolitical

risk that you mentioned with with Iran and the tension there as well with

Israel and what's going to happen to the region.

That's honestly been a story for the last six months.

But what I think is really driving the oil market now is just plain

fundamentals. You look at what OPEC Plus is doing

there. They've they've cut back.

They've they've kept their production cuts in place going into the second

quarter. Now, the market is a lot of the supply

in the froth is being kind of sucked out of the market.

And then on top of that, there are some sort of pressure points, one of them

being yesterday in Mexico, Bloomberg reported that they canceled some

contracts for some of their heavier grade crude exports to refineries in the

US and other places. That means that US refiners are going to

have to find supply elsewhere. And you're already seeing an indication

that US prices are kind of trading at a premium because of that.

And there's also risk that potentially Cushing oil inventories are also kind of

trending lower there as well. They're at the lowest seasonal level in

about two years. So there are some fundamentals in the

markets beyond just this geopolitical risk sort of thing that you're looking

at. Certainly that is part of it.

And there is that risk premium in oil prices.

But we're finally beginning to see true fundamentals driving the oil market.

And when you're also looking at the bullish bets in the market, that's also

at the highest level in months and about a year as people are expecting that this

rise, Brent is around right below $88 right now.

This rise to potentially 00 a barrel is sort of potentially in the cards.

Now, there is a lot more uncertainty what's going to happen with U.S.

production, what's going to happen with Mexico, what have the election, how

they're going to keep reducing their exports, what's going to happen with

Chinese demand. But in all, it does seems that there is

this bullish sentiment and oil is going to trudge higher over the next few weeks

and months. So it's not all about geopolitical risk.

It's also about supply curves. Speaking of Opec+, when it meets

tomorrow, Stephen, what can we expect? We're going to expect them to keep the

cuts in place. I don't think there are very many people

in the market that are expecting a surprise.

This is precisely where OPEC plus and biopic plus I really mean Saudi Arabia

wants the oil market, right. They they want prices above $80.

If they go above 00, then you have, you know, gasoline prices rising around

the world. You have your customers knocking on your

door. But this seems to be the sweet spot,

this $88 level. And so I think what to expect is just a

rubber stamp. You know, they expect that the market

requires these production cuts to continue.

They were likely going to say very little or nothing at all about the third

quarter and what they're going to do moving forward into that.

But overall, I think it's going to be a rubber stamp event.

If it's not, then you could see potentially maybe some fireworks in the

market going one way or the other. All right.

Well, Brent, trading at $87.81 a barrel currently.

We'll wait to see if we get any fireworks.

Bloomberg senior Energy reporter Stephen PINSKY.

Now let's get to some of the other stories that are making news this

morning. A billionaire Donald Trump supporter

known for subprime auto loans has posted the former president's appeal bond in

the civil fraud suit by New York State. Don Hankins company lodged the 75

million bond three days before a court imposed deadline, giving Trump a

lifeline when he appeals on Keyes fortune stems from car dealerships, real

estate investments and financial investments.

Elsewhere. McKinsey is offering nine months pay and

career coaching services to some UK staff who'd like to leave.

The move comes after the firm earlier warned some US consultants that they

were running out of time to win promotions.

McKinsey and its peers have trimmed their headcount and slowed the pace of

hiring over the past year as demand from clients declines.

In other news, Citigroup is said to have implemented a fresh round of job cuts in

its US investment bank last week. Sources say technology, media and

telecom were among the coverage areas hit the hardest, with senior bankers and

junior roles affected. The cuts come as Citi says it's now

concluded its planned changes. And the owner of the ship that rammed

into a bridge in Baltimore last week is seeking to limit its liability to about

$44 million. In a joint petition with Synergy,

Maureen Grace Ocean says the collapse was not due to any fault or neglect, so

it shouldn't be held liable. The disaster killed six people and

severely disrupted the Eastern US transport network

here in the UK. Stock price inflation dropped to its

lowest level in more than two years last month, with supermarkets competing to

lure shoppers. According to the British Retail

Consortium, the rate of price rises slowed to 1.3% in the year to march,

sharply down from two and a half percent.

Food price inflation eased for the 10th month in a row, its lowest since April

2022. Those are some of your top stories this

morning. Now we can take a quick look at what

else is happening this week. On Tuesday, we get Germany CPI.

We have Fed speakers, Bowman, Williams, Mester and Daly and a load more besides.

On Wednesday, NATO's foreign ministers meet.

There's also euro area CPI. Plus, Fed Chair Jerome Powell speaking

on the US economic outlook. And on Thursday, we've got even more Fed

speakers before on Friday. It is, of course, jobs day with US

payrolls and that jobs data. We've got plenty more coming up on the

program. So do stay with us.

This is Bloomberg.

Now the leader of South Africa's main opposition, the Democratic Alliance, has

joined. John Steenhuisen says he would resist

forming a coalition with the ruling ANC. Polls suggest the ANC could lose its

majority in major general election for the first time since coming to power 30

years ago. Steenhuisen's spoke exclusively with

Bloomberg's Jennifer Sylvester. We have already got a pre-prepared

agreement about how we're going to work together, how are we going to stabilize

the coalition and how are we going to make sure that governs effect?

Why not just have one single party ruling the country?

I mean, is it because of the past 30 years of the ANC?

What what is it that you're so opposed to?

I think that if you look in South Africa, people are very brand loyal to

two organizations and brands. It would be, I think, foolhardy a year

before an election to form a totally new party and expect it to get the name

recognition and the traction. I mean, we're seeing a lot of new

parties we are seeing of these parties, and we're seeing the fact that they're

not making the breakthrough that people would expect them to precisely because

are unknown quantities. We are hoping that the multi-party

charter, the whole is going to end up being greater than the sum of the parts.

The IFP can go on the hunt for votes in rural KwaZulu-Natal.

The Freedom Front can bring votes in from rural parts of the north west and

and those communities. The Acdp can bring in the religious

voters and to bring all of those to the table to form a big pile of chips that

can be used to be able to form a good about the DA and the ANC.

No, we don't want to be in government with the ANC.

And that's that is out of the question. It's precisely why we formed the

multi-party charter. My job is to get the ANC out of

government. I don't think we're going to solve the

country's problems by having the same people who are responsible for the

economic crisis, the social crisis and the infrastructure crisis sitting around

the table. We've got to change them.

And that's why the multi-party charter has said we will not do deals with the

ANC. What if we see a scenario where the ANC

still is somewhat in the majority? Is the DA going to rule out working?

We will go back to the multi-party charter and we will decide on what the

best option for it. Maybe a minority.

Maybe we could form a minority government as a multi-party charter.

I just think there's too many unknowns at this stage to say.

My focus is on getting the ANC way below 50% and getting a new set of people

around the table so we can get our country off this low growth, high debt

and employment trajectory. So South Africa's opposition leader,

John Steenhuisen, speaking exclusively to Bloomberg's Jennifer office.

And I want to say now with the emerging markets and turn to Turkey, where

President Tayyip Erdogan has suffered a stinging defeat against the main

opposition in local elections. For the impact on markets, we can bring

in BNP Paribas, global head of credit strategy, Trung Nguyen Trunk.

Great to have you with me. Turkey.

Are we braced for a really watershed moment in macro policy?

So I don't think this would be categorized as watershed given the

outcome over the weekend. You know, this is clearly a surprise.

And the story we've seen in Turkey is that markets have been expecting this

return to orthodoxy by Erdogan, which really surprised us after last year's

elections. So if you look at asset prices and we've

seen a substantial rally already, we're talking about multi notch ratings

upgrade. You know, we've seen that already

in recent months. So the the outcome over the weekend will

inject some degree of uncertainty around this.

But Erdogan has already spoken publicly about his commitment to reforms.

So is it a game changer? I don't think so.

But I think we should be bracing for more volatility here.

Okay. So we continue to hold our breath in

Turkey. I want to take a trip round home with

you. Let's go to Argentina next.

When do you expect the government to dollarized the economy?

Because, of course, this was a big campaign promise of melaye.

Yeah, but, you know, I think he's backtracked from from that.

So actually, right now what Melaye is more focused on is reforms.

And what he has working in his favor is a clean slate when it comes to

negotiations with the IMF. Right.

So I think that's really been what's been holding the rally in Argentina.

Now, of course, the the bill has suffered a lot of setback in Congress.

I think we're going to see more watering, watering down before it gets

passed. But again, I think the IMF story here is

key. The dollarization, I think now is

currently on the backburner. And, of course, all eyes are on the IMF

meeting. What are you looking up from any

perspective? I mean, I think, you know, in two weeks,

we're going to we're going to see the meetings commence.

I'll be there. And expectations again, are very high.

A lot of these stories are currently hinging on the continuation of IMF

support. We have Argentina, Ecuador, Ukraine,

Egypt, to name a few. And so a lot of these really rely on

this ongoing support, not just from a balance of payments standpoint, but from

a fiscal credibility. So I MEF support is key.

And just given the extent of the rally so far, any hiccups I think will result

in a consolidation. We mentioned Egypt.

How long do you think that investors are going to need to feel confident about

stabilization before they buy Egypt's debt?

Well, I think we see we've already seen that the FDI inflows from from the UAE

deal is substantial. And I think that's that's been a game

changer. And it's provided the central bank, the

authorities with some breathing room in order to enact the measures that they

needed to do on the effects. So I think the confidence is already

there. Now, again, you know, we've seen a 20%

plus rally in Egypt, but so far, you know, I think near-term, the space for

us to rally further is more limited. And again, we are waiting for more

signals from the IMF meetings. Okay.

Interesting. Just thinking about the US, though,

We've had some interesting comments from the Citadel founder, Ken Griffin.

He's been saying that it is a growing concern that cannot be overlooked, this

issue of US national debt. How real a possibility is a US debt

crisis trying given the ripple effects for em as well?

Well, if we have a US debt crisis, no one is immune.

But I think on the bright side, I'd say that fundamentals are actually on the

mend. You know, I, I entered the year with a

very bullish view on AM credit. I probably wasn't bullish enough.

Actually, the speed of this recovery, the speed and depth of the recovery has

been quite profound. And and triple C has rallied 22%.

So why is that? Well, we have improving financing

channels. We have improving fundamentals as well.

And, you know, the theme that I keep talking about is the idea that in high

yield, countries in particular have access to alternative sources of

financing. So debt to GDP metrics are actually on

the decline for this year. And the the higher debt costs that a lot

of the developed market nations have to lock in are being avoided and because

they have access to concessional sources of financing.

Well, that's interesting because I also read your comments on the EU's rules on

greenwashing and green bonds in emerging markets.

In a sense, is Brussels throwing the baby out with the bathwater, trying to

stop greenwashing? But then.

Not applying a specific kind of lens when it comes to regulating M bonds.

Yeah. So I think there is a, you know, a bit

of a stalling in the ESG momentum at the moment for that very reason.

But I think there's also broad recognition that any kind of ambitious

climate goals, any ambition on energy, the energy

transition agenda needs to scope in M countries.

And we actually see more M countries now developing social ESG frameworks in

their bond issuance, and that is a welcome initiative.

So then actually do you see a move from the G to the S within ESG?

We see that already. And I think the that the

the S pillar is a bit more encompassing and broader.

And so we we see a lot more of those issuance in and bonds recently.

All right. Trying new and looking fabulous as ever

Thank you for joining me. That's BNP Paribas global head of M

credit strategy, Trung Nguyen with a trip round here.

Markets will have plenty more coming up. So stay with us.

This is Bloomberg.

The report that came out this morning is pretty much in line with our

expectations. We're making progress.

This is good, but we need to see more. The decision to begin to reduce rates is

a very, very important one. When the economy is strong, we see very

strong growth. We had growth for last year over 3%.

We don't need to be in a hurry to cut. It means we can wait and become more

confident. I don't think rates will go back down to

the very, very low levels they were at before the pandemic.

This economy doesn't feel like it's suffering.

So that's Fed Chair Jay Powell speaking there.

And of course, the key influence on the Fed's thinking is going to be the US

jobs report on Friday for March. This is really the key highlight of the

week when it comes to economic data. And if we just think back to the last

report, you can see that the unemployment reading was at a two year

high. Estimates are for a 3.8% reading this

time. And if you flip the board over the last

print saw the biggest revision to the month before in over a year.

So really, we need to keep an eye on volatility here.

If we flip the board again, you can see that jobs data surprises have been

relatively strong. So this could be a very interesting day

for markets. On Friday, we'll have full coverage for

you here on Bloomberg TV. You've already been seeing Fed rate

cutbacks being pushed back. Such a dramatic change from the start of

the year. Of course, we had the factory data

yesterday showing this resilience in the economy.

Again, more resilient than economists had expected.

Inflation falling more slowly as well than economists had expected.

And there was one moment when actually you saw those pricing for the June cut

slipping below 50%. So do we see even more of a push back on

that on Friday? We'll have full coverage for you here.

Markets today is up next. So stay with us.

This is Bloomberg.