Oil Rises, FTSE higher, UK Mortgage Surprise | The Pulse with Francine Lacqua 04/02

Summary

The Pulse with Critter Gupta discusses the latest market trends and economic news. Highlights include European yields rising due to strong U.S. manufacturing data, the potential for a June rate cut from the Federal Reserve, and falling UK housing prices indicating a stagnating market. Additionally, oil prices rise following reports of an Israeli airstrike in Syria, killing Iranian generals. A conversation with Aberdeen senior research economist Shri Koku Govender provides insights into the eurozone's narrowly avoided recession and the outlook for rate cuts. The program also covers the UK stock market's performance, with the Footsie 100 showing outperformance, and the impact of geopolitical tensions on oil prices.

Takeaways

• 📉 European yields increased as investors reacted to strong U.S. manufacturing data, with the odds of a June rate cut from the Federal Reserve dropping below 50%.
• 🏠 UK housing prices experienced a decline in March, the first in three months, indicating a potential stagnation in the market due to high mortgage rates and affordability issues.
• 🥇 Aberdeen senior research economist Shri Koku Govender highlighted that the Eurozone narrowly missed a technical recession and expects some tailwinds in the sector to materialize in the second half of the year.
• 📈 The UK stock market, particularly the Footsie 100, showed outperformance driven by the banking sector and commodity-related stocks.
• 🛫 Oil prices rose as Tehran accused Israel of killing one of its top generals in a strike on Iran's embassy compound in Syria, increasing geopolitical tensions and impacting the oil market.
• 💰 Inflation data across Europe showed strong manufacturing numbers, with Germany's North Rhine-Westphalia region reporting a 2.3% rise in March CPI on a year-over-year basis.
• 📊 The U.S. manufacturing sector displayed resilience and growth, with the ISM制造业指数 (ISM Manufacturing Index) showing robust activity despite past rate hikes by the Federal Reserve.
• 🎯 The conversation with Labrum's founder, 42 Booya, emphasized the importance of storytelling in luxury fashion, as the brand combines West African heritage with British tailoring.
• 🤝 Collaborations between emerging brands like Labrum and established brands such as Adidas can amplify the storytelling aspect and provide resources for both parties.
• 🌍 Expansion plans for brands like Labrum focus on finding retail partners that can represent and embrace their unique storytelling and design philosophy.

Q & A

What is the main theme of the discussion in the beginning of the transcript?

The main theme of the discussion in the beginning of the transcript is the economic outlook, particularly focusing on European yields, investor reactions to American manufacturing data, and the potential for a rate cut from the Federal Reserve in June.

What specific news about the UK housing market is mentioned in the transcript?

The specific news about the UK housing market mentioned in the transcript is that UK housing prices fell last month for the first time in a quarter, indicating that the market may be stagnating due to high mortgage rates and strained affordability.

How does the guest, Shri Koku Govender, interpret the manufacturing data across Europe?

Shri Koku Govender interprets the manufacturing data across Europe as showing some positive signs, but overall, the euro area narrowly missed a technical recession. He expects tailwinds in the sector to materialize in the second half of the year, with the impact of rate hikes diminishing and potential rate cuts beginning in June.

What event is discussed in relation to the oil market and Middle East risks?

The event discussed in relation to the oil market and Middle East risks is an Israeli airstrike on Iran's embassy in Damascus, which killed several people, including two military generals. This incident is expected to increase tensions and potentially impact oil prices due to the risk and supply constraints.

What is the current stance of the ECB regarding rate cuts according to the transcript?

According to the transcript, the ECB is likely to start rate cuts beginning in June, although there is debate over this timeline. The ECB's decisions will be heavily reliant on the data, particularly focusing on inflation and core inflation trends.

What is the significance of the manufacturing data from the U.S., France, Spain, and Italy?

The manufacturing data from the U.S., France, Spain, and Italy indicates a stronger than expected economic performance in these regions, suggesting some stabilization and recovery in the economy, despite the challenges posed by the pandemic and other global issues.

How does the transcript describe the current state of the euro against the dollar?

The transcript describes the current state of the euro against the dollar as experiencing some weakness, but it has largely moved into positive territory, currently paring back some of those gains.

What is the impact of the strong manufacturing numbers on the equity markets across Europe?

The strong manufacturing numbers are driving the equity markets across Europe, with the UK's Footsie 100 showing some outperformance. The banking sector is particularly outperforming due to the yield story, and commodity names like oil and gold are also pushing miners higher.

What does the discussion about Germany's economic situation reveal about the broader European economy?

The discussion about Germany's economic situation reveals that while Germany is experiencing structural headwinds and a change in economic dynamics, the rest of Europe is also affected. The ECB will need to consider these factors when making decisions, but the overall expectation is for sluggish growth across the ECB.

What is the potential impact of the fiscal stimulus on the European economy?

The potential impact of the fiscal stimulus on the European economy is that it provides a temporary tailwind for economies like Italy, similar to what the United States and the UK are doing. However, this effect is expected to fade over time, and the focus will shift to how inflation trends are decelerating.

Outlines

00:00

📈 Economic Updates and Market Reactions

The paragraph discusses the impact of economic data on market trends. It highlights the European market's reaction to strong manufacturing data from the US, leading to higher European yields and a dip in the odds of a June cut from the Federal Reserve. The UK housing market is also covered, with falling prices indicating a potential stagnation due to high mortgage rates and affordability issues. Additionally, the conversation转向 to the performance of equity markets, with the UK's Footsie 100 outperforming due to the banking sector and commodity-related gains. Inflation data from Germany is also analyzed, showing a rise in CPI, with broader implications for the Eurozone's economic stability discussed.

05:03

🌐 Global Economic Indicators and Central Bank Policies

This segment focuses on the interpretation of economic indicators and central bank policies. The discussion involves the manufacturing PMI data, the potential for rate cuts in Europe starting in June, and the impact of US economic data on global markets. The conversation also touches on the divergence between US and European central bank policies and the risks associated with them. The structural challenges faced by Germany are also discussed, along with the potential for fiscal stimulus to impact the Italian economy.

10:04

🛫 Geopolitical Tensions and Their Impact on Oil Markets

The paragraph covers the geopolitical tensions in the Middle East, particularly the airstrike on Iran's embassy in Damascus by Israel, which resulted in several deaths including military generals. The potential retaliations by Iran and the implications for the region are discussed. The conversation then shifts to the impact of these tensions on oil markets, with oil prices reaching a five-month high due to supply constraints and geopolitical risks. The discussion includes insights on how the oil market has reacted to regional attacks and the influence of OPEC's production cuts on oil prices.

15:05

🏠 UK Housing Market and Economic Outlook

This segment provides an in-depth analysis of the UK housing market, with a focus on the first quarterly dip in house prices reported by Nationwide Building Society. The potential causes for this stagnation are explored, including high mortgage rates and affordability issues. The conversation also includes predictions for future trends, the impact of potential rate cuts by the Bank of England, and the long-term implications of fiscal policies on the housing market. Additionally, the discussion touches on the broader economic outlook, with a focus on inflation targets and the market's reaction to manufacturing data from the US and Europe.

20:07

👔 Fusion of West African and British Design in the Luxury Fashion Market

The paragraph features an interview with the founder of Labrum, a fashion brand that combines West African heritage with British tailoring. The founder discusses the brand's audience, market positioning, and competition in the luxury fashion space. The conversation highlights the importance of storytelling in the brand's marketing strategy and its collaborations with established brands like Adidas. Expansion plans, including potential partnerships with major department stores in the US, are also discussed, with an emphasis on maintaining the brand's unique storytelling and artisanal quality.

25:09

🚗 Tesla's Market Performance and Future Projections

The final paragraph discusses Tesla's market performance, with a focus on the lowered projections for the company's latest deliveries report. The conversation covers the challenges faced by Tesla, including production issues in China and the need for new product offerings to invigorate the market. The potential impact of Tesla's upcoming models, such as the Cybertruck, on the company's market performance is also discussed, along with the stock's pre-market trading behavior.

Keywords

💡Manufacturing Data

Manufacturing data refers to statistical information that reflects the performance and health of the manufacturing sector in a country or region. In the context of the video, strong manufacturing data from the United States is mentioned, which indicates a positive development in the industry and can influence economic decisions and market reactions. The data is seen as a sign of economic growth and can affect decisions by central banks, like the Federal Reserve, on interest rate adjustments.

💡Federal Reserve

The Federal Reserve, often referred to as the Fed, is the central banking system of the United States, responsible for implementing monetary policy and regulating the country's financial institutions. In the video, the Fed's potential actions, such as interest rate cuts, are discussed in relation to economic data and indicators, including manufacturing data and inflation rates.

💡Yields

Yields refer to the returns on financial investments, particularly bonds, and are closely watched by investors as an indicator of market sentiment and economic health. In the context of the video, European yields are mentioned as being higher, which can reflect investors' reactions to global economic data, such as manufacturing strength in the U.S.

💡Housing Market

The housing market encompasses the buying, selling, and renting of residential properties. It is an important part of the economy and can indicate economic trends. In the video, the U.K. housing market is discussed, noting that prices fell for the first time in three months, suggesting a potential stagnation due to high mortgage rates and affordability issues.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Central banks attempt to limit inflation and avoid deflation to keep the economy running smoothly. In the video, inflation data is discussed as a critical factor influencing the decisions of central banks, such as the ECB and the Federal Reserve.

💡Oil Prices

Oil prices refer to the cost of crude oil, a key commodity that influences global energy markets and has wide-ranging effects on economies and industries. Fluctuations in oil prices can be caused by various factors, including geopolitical events, supply and demand dynamics, and economic indicators. In the video, oil prices are mentioned in the context of rising tensions in the Middle East, which can affect global oil supply and, consequently, prices.

💡Market Movers

Market movers are factors or events that have a significant impact on financial markets, causing changes in the prices of securities, such as stocks, bonds, or commodities. These can include economic data releases, corporate news, political events, or changes in monetary policy. In the video, various market movers are discussed, including manufacturing data, inflation rates, and geopolitical tensions.

💡Geopolitical Risks

Geopolitical risks refer to uncertainties and potential conflicts that arise from political developments, international relations, and other government-related factors. These risks can affect economies, trade, and financial markets. In the video, the strike on Iran's embassy compound in Syria is mentioned as an example of a geopolitical event that can increase tensions and impact oil prices and other markets.

💡Central Banks

Central banks are the primary monetary authority in a country or region, responsible for formulating and implementing monetary policy to regulate the economy. They control the money supply, set interest rates, and aim to maintain economic stability. In the video, central banks like the Federal Reserve and the European Central Bank (ECB) are discussed in relation to their potential responses to economic data and market conditions.

💡Equity Markets

Equity markets are platforms where stocks or shares of publicly traded companies are bought and sold. These markets reflect investor sentiment and are influenced by various factors, including corporate performance, economic indicators, and global events. In the video, the performance of equity markets across Europe is discussed, with specific attention to sectors like banking and commodities that are outperforming.

Highlights

European yields rise as investors respond to strong US manufacturing data, with the odds of a June rate cut from the Federal Reserve falling below 50%.

UK housing prices fell last month for the first time in a quarter, indicating a potentially stagnating market due to high mortgage rates and affordability issues.

Oil prices rise following reports of Tehran retaliating against the killing of one of its top generals in a strike on Iran's embassy compound in Syria.

Banking and commodity sectors outperform in the UK equity markets, driven by yield stories and rising oil and gold prices.

Inflation data across Europe shows strong manufacturing numbers, with Germany's Bavaria and Saxony regions reporting rising CPI.

The euro shows some weakness against the dollar, despite positive territory gains, reflecting the overall European economic trend.

Aberdeen senior research economist Shri Koku Govender discusses the narrowly avoided technical recession in the euro area and potential rate cuts beginning in June.

The Federal Reserve's rate cut expectations have been pushed back further, raising questions about the divergence between US and European monetary policies.

Manufacturing data from France, Spain, and Italy shows strength, while Germany's data is less impressive, raising concerns about the impact on the rest of Europe.

The UK stock market, specifically the Footsie 100, is driven by the banking sector and commodity prices, with major banks and oil companies outperforming.

Iran and Syria report an Israeli airstrike on Tehran's embassy in Damascus, killing several people including military generals, escalating tensions in the region.

Oil prices reach a five-month high due to Middle East risks and tightened supply, with geopolitical risks adding a premium to the price.

OPEC+ is expected to maintain production cuts, with the market anticipated to tighten by the end of the year, influencing their decision on when to reintroduce barrels to the market.

UK house prices experience a first-time dip this quarter, suggesting a possible stagnation in the market due to high mortgage rates and affordability issues.

Nationwide building society data indicates a potential stagnation in the UK housing market, with prices falling for the first time in three months.

The Bank of England's expected rate cuts and the potential for lower mortgage rates could stimulate the housing market, preventing a crash and leading to a Goldilocks recovery.

The UK housing market shows resilience with a slight dip in prices, but no significant crash, attributed to low unemployment and fixed mortgages allowing people to adjust.

The Turkish lira experiences significant devaluation, losing more than half its value over five years, with political and economic factors influencing its future.

Labrum, a British fashion brand, combines West African heritage with classic British tailoring, targeting a global audience that appreciates storytelling through clothing.

Founder of Labrum, 42 Boya, discusses the brand's collaborations with established brands like Adidas, emphasizing the importance of storytelling in their designs.

Labrum's expansion plans focus on partnering with stores that can represent and tell the brand's story, prioritizing quality and craftsmanship over mass production.

Transcripts

Newsmakers and Market movers. This is the pulse with friends who like.

Good morning and welcome to The Pulse. I'm Critter Gupta in London with the

conversations that matter. Here's what's coming up on today's

program. European yields higher as investors wake

up to America's strong manufacturing data.

The odds of a June cut from the Federal Reserve dipping below 50%.

And U.K. housing prices falling last month for

the first time in the quarter, really suggesting the market may be stagnating

with high mortgage rates and strained affordability.

Plus, in commodities, oil rising as Tehran says it will killed one of its

top generals in a strike on Iran's embassy compound in Syria.

A lot to digest there. Let's get a quick check on how these

markets are faring, at least the equity markets across the continent.

Green on the screen broadly, some outperformance right here in the UK with

the Footsie 100. A lot of that really being driven by the

yield story. Banking seems to be the sector that is

outperforming. There's a lot to digest here because

some of the other outperformers are going to be the commodity names we just

talked about the oil story, the gold story, all of that pushing some of the

miners higher as well. So that is going to be crucial as well.

In the meantime, we are getting some breaking inflation data.

It has been a morning of inflation data across the continent of Europe.

We've seen some really strong manufacturing numbers.

Now you're getting them out of Germany as well.

It looks like the Bavaria march CPI rising about 2.3% year over year.

You've also got the Saxony march, consumer prices two and a half percent

year over year on a monthly basis, higher by about 4/10 of 1%.

Now, remember, a lot of us when you talk about the market reaction, has also been

pricing in the data we got out of France, Spain, Italy, and of course, it

is some numbers we got over in the US as well in yesterday's session.

So net net, what does that mean for the euro or right now you are looking at

some euro weakness on the table and largely gone to positive territory

against the dollar. Now paring back some of those gains.

107 35 on that currency pair. The theme here seems to be Europe is

kind of chugging along for lack of a better term.

I'm curious how a true expert interprets this.

Let's bring in our guest this morning, Aberdeen senior research economist Shri

Koku Govender. And I hope I said that name.

I apologize if I did it. These numbers are largely manufacturing

across Europe seems to be stronger than expected.

Germany seems to be the continuous weak spot.

How much of a positive or negative is that?

What's your interpretation? I think these are there are some

positive signs in there, as you say, but overall what we've seen so far in the

euro area is that that's a very narrowly missed a technical recession.

Now, going forward, I think there are likely to be some sort of tailwinds in

the sector which will start to materialize in the second half of the

year, more more meaningfully where we start to see the impact of, you know,

the rate hikes have largely that's behind us.

And then as we've have indicated so far, particularly in the ECB Watchers Survey

Watchers conference recently, that there is likely to be a rate cuts beginning in

June. I know that's a big debate over the

weekend. Yeah, but as that feeds through, we're

likely to see some stabilization in the euro area economy.

You know, manufacturing data still have got a four handle there with the PMI is

still in the forties. So it's not ideal, but we do expect to

see that sort of stabilizing and recovering going into the second half of

the year. You mentioned a little bit about the Fed

pricing changes over the weekend. It has been volatile when Europe has

been enjoying their long weekend. We're now seeing those cuts getting

pushed back further and further, which begs the question, do you see that

divergence between the US and Europe accentuated and is that even a problem?

I think that obviously there are risks. I mean, we still have pencilled in a

June as a start of the rate cut for a number of central banks, including the

Fed euro area as well. But obviously what we've seen over the

weekend has really been the data. All of the central banks are data

dependent. It will be it will be very heavily

reliant on what happens to inflation and in particular core inflation.

So core inflation, we are expected to be relatively sticky and stable.

But the key areas there would be the services sector.

So what does this mean? I guess they know there are risks that

we could see a delay in the in the in the US.

But I think for the euro area they would really need to be focused on their

economy, looking at how inflation trends are decelerate.

They are on the correct path at the moment

and we do expect inflation to sort of dip below 2% later on in the year.

So there are some good signs there. Even in the Fed.

Even for the Fed, there are some good signs from the core PC drivers.

It's the breakdown where we started to see, well, you know, the the the core

inflation, if you annualize that, smooth that over three months, it's still not

quite going in the right direction. So possibly some delays not derailed,

but delays, obviously, there are some upside risks that we're seeing coming

through in the headlines. You're absolutely right.

Hold that thought. Because we are getting Germany numbers

as well. More regions of Germany.

Germany's North Rhine-Westphalia, I hope I'm saying that right as well.

Their March CPI numbers rising about 2.3% on a year over year basis.

We're still waiting for the monthly numbers and the breakdown there.

But net net, what you are seeing is, is that deceleration theme that you were

just talking about, you're seeing on both sides of the Atlantic.

As we get that breakdown, we'll bring it to you right here.

I want to come back to the manufacturing story, though, because we're talking

more about that core inflation story, kind of stagnating,

driven by the services data, as you point out.

What do you make of this manufacturing data that's come out?

And even just in the last hour or so, we're seeing strength in French,

Spanish, Italian manufacturing data, not necessarily Germany, but that's its own

kind of story in line, just, you know, less than 24 hours after we got that ISM

data out of the state. Is manufacturing relevant again for the

US? I think within context, it's still a

smaller part of the economy, but it is very important in terms of a signal of

the overall trade picture. And, you know, we've we've had a lot of

focus on, you know, what's happening with new orders, production picking up

in the U.S. And this is important from a global

spillovers as well. So so, yes, these are good signs that we

are we've avoided a recession, that there is some stabilization.

So, yes, it's even though it's just less than 20% in some of the economy, in some

economies, it's still relevant in terms of the direction of travel and the fact

that, you know, we have narrowly missed recession.

A number of countries, including Japan as well.

Just we've had that revision in data which shows that where was it was a

technical recession moving into marginally positive.

So even though it's sluggish growth, it's still, you know, avoiding recession

and therefore a positive story. If it's a positive story, let's talk

about the positive or not the positive story in Europe as well.

Bring it back to that theme of divergence here in Europe when we're

talking about this weakness in Germany in particular.

What does contagion look like to the rest of the continent, especially when

we're seeing French, the services numbers kind of staying fairly strong

relative to its German peers. You're seeing outperformance in Spain,

Italy, Guy Johnson I were just talking about this on the last show as well.

Is that an impact of kind of fiscal stimulus that you're seeing Italy, for

example, pumping money into their economy in a similar way that the United

States is as well, the U.K. kind of doing its own thing with its

housing story. So I don't want to loop that into the

ECB. We do see a lot of these European

continents traditionally perform together, except right now the narrative

seems to be quite different for a European country.

The Germany is the outlier here. When does that seep into the rest?

I think there is there are some syncretic factors there for Germany, and

these are some structural headwinds as well.

Unfortunately, you know, the nature of the economy has changed that.

The dynamics have changed in the sense of, you know, cheap energy, which had

been a benefit for many, many years that's now behind them.

They were very, very reliant, obviously, on Russian energy.

So there are some structural headwinds there which they are working around.

It is difficult for the rest of Europe to remain immune.

You are correct there, but it's really this is part of the the decision making

process for the ECB. It's not just an inflation story,

though. They will be monitoring this activity

data in Germany. And again, as we start to see the cuts

coming through in the second half of this year, that will be a benefit for

all of the economies. And furthermore, we are, as you

mentioned, there has been that fiscal tailwind so far.

Unfortunately, that will start to fade for a number of countries across Europe

as well as in the US. That was a tailwind that is starting to

fade as well. So that's so it's a bit of a net net.

It's still sort of sluggish growth that we're expecting across the ECB.

Pay attention to when it comes to Germany or talk about this contagion or

lack thereof. As you point out, you kind of laid out

the scenarios there. Should the ECB be more sensitive to the

German story because of that? Read through, given that Germany is

still the largest economy in Europe, or does it kind of ignore Germany for a

little bit and pay attention to the strength everywhere else?

Either way, it feels like a lose lose for the ECB.

It is difficult. Obviously, they would say we need we

consider all of the economies within within our assessment and they wouldn't

sort of single out any particular country when they're discussing their

views. But at the moment they are very much

focused on the this the services side of the story.

So I know we had manufacturing data out earlier, but it is still that services

inflation and what's happening with wage growth, real incomes and these factors

are starting to improve. And that again, as we move into the

second half of the year, we should see real incomes improving in some increase

in spending, which we haven't really seen in the last few months, and that

should start to feed through. And I think those are the factors

they'll be they'll be looking at. But yes, Germany is a key economy, which

and that does have. Spillover.

So it's difficult to ignore what's happening there.

Stuck between a rock and a hard place. It seems like so much to digest.

We look forward to having you back on. Thank you so much for joining us this

morning. Aberdeen senior research economist Sree,

Kojo Government then joining us this morning.

In the meantime, we were talking about the outperformance in some of the

European economies and talk about outperformance in the UK stock market at

the moment, the footsie on 100 headed for a record high closed up 8/10 of 1%.

Look, a lot of this is driven by two main sectors.

The banking story already seeing that massive move in gilts pushing the

banking sector higher. You're also seeing a move in commodities

this morning, also pushing some of the miners and some of the big oil hires,

all shell BP alongside the likes of HSBC, Standard Chartered, Barclays,

Lloyds. Those are your outperformers this

morning. Not to mention ASML is higher as well.

That listing high of I think, 2.4% the last time I checked all of that up

cutting again the UK index to a record high.

How much of it is it a catch up trade? How much of it is driven by the

fundamentals? We're going to stick with that story for

you. In the meantime, coming up on the

program, we go from the stock market to the oil market, nearing a five month

high, oil trading higher. A lot of that on that Middle East risk

and tighten supply. We're in a dive into that story next.

This is Bloomberg.

The conversations that matter and the insights you need.

Welcome back to The Pulse. I'm Christy Gupta in London.

Iran and Syria say an Israeli airstrike on Tehran's embassy 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 tensions grow between the longtime

adversaries, get a little bit more context here.

Joining us now for more swimmers, Dana Kreiss.

Joining us from Dubai, I believe. Dana, a pleasure to have you on the

program. Walk us through the story.

What do we know so far? Yes.

Well, we know a suspected Israeli airstrike hit a compound linked to

Iran's embassy in Damascus, killing at least seven Iranian, including a high

ranking commander and his deputy. Images out of Syria show the building

completely demolished as a result of this airstrike.

Now, Iran did vow revenge, but Israel doesn't really comment on such attacks

and has never done that. But it has said before and repeatedly

that it would stop or obstruct weapons transfers via Syria or attack any Iran

linked assets to whatever it thinks is a threat to its existence.

Speaking of that threat to its existence, this has been a narrative

that's been going on for a while here. How much of what we've heard in the last

2448 hours is actually an escalation. This attack is quite an escalation and

Israel with it has upped the ante of its airstrikes in Syria.

So since the October seven attack against Israel to the northern front by

Hamas, we have seen repeated attacks by Israel on Syria attacking Iran linked to

assets, including those linked to Hezbollah.

And with this one, it's a more direct attack.

This is a compound linked to Iran's embassy.

It's more direct. It's more of Iran's official

representation in Syria. And so we it remains to be seen how Iran

would retaliate against it. And it has repeatedly now since last

night vowed retaliation. The Iranian foreign minister also said

that he sent a message to the US about this attack and kind of holding the U.S.

responsible for it as well. Well, speaking of that retaliation

story, what does that even look like? So in earlier this year, we saw Iran

attack Erbil saying that there was kind of a spy headquarters linked to the

Mossad and it struck Baghdad as well and and Iraq.

Now, it can do that, but I think that Iran would probably retaliate and attack

in a way that it won't hit a very harsh nerve here.

We can see this probably via the Houthis upping the ante in the Red Sea or

Hezbollah maybe escalating attacks on Israel's northern border.

But it probably will be calibrated, as Iran has repeatedly said it does not

want or intends to be involved in a wider Middle East war.

I have Bloomberg's Dana Bash monitoring those developments for us out of the

Middle East. We thank you so much.

Let's talk a little bit about how the geopolitics translates to the markets

there. Oil holding there, a five month high

with high geopolitical risks and those supply constraints both creating a

little bit of a tailwind to prices. I want to get a little bit more context

here. Bloomberg Anthony de Paolo joins us this

morning. Anthony, we've seen the oil market and I

would argue broader risk assets kind of shrug off some of the geopolitics,

especially some of the tensions coming out of the Middle East.

How much of today's move higher is driven by the news that Dana was just

walking us through? Yeah, we did see a little bit additional

jump in the oil price due to that. So so it did give it a little bit of

juice. We do have some risk premium in the

price because of everything that's going on in the region.

But oil perhaps hasn't reacted as strongly as one might think to a lot of

the attacks on on shipping in the region and generally the state of war in the

region. As far as the shipping attacks go, we

haven't really seen oil supplies affected per se.

It's taking longer insurance. Shipping rates are up a little bit.

So that's coming through in a little bit of the general cost to the to the

market. But we haven't seen those supplies

impacted yet. And so that's the real issue why oil

hasn't been reacting as strongly. But we did see some strength in oil in

the first quarter and it's keeping those gains now a little bit, a little bit

stronger after this attack in the Middle East now.

But we are continuing to see that. And that's that's partly because of

these those OPEC plus cuts that are affecting exactly that supply in terms

of the market. So we're we're tightening a little bit.

And OPEC is expected to at a meeting this week of a technical committee not

to make any recommendations for changes. We're probably going to see that through

the rest of this quarter. Pretty.

It's interesting you mentioned Opec+. We will have a lot of headlines coming

out of Mexico as well in terms of their supply.

You have headlines coming out of the United States hitting those record oil

exports, kind of trying to seep in to those other markets around the world.

Is Opec+ concerned about that? And at any point, is there something

that's going to kind of seep in when we talk about that excess supply?

Well, one of the challenges that Opec+ is dealing with and one of the reasons

why they are reducing production is because of all that non-OPEC supply

that's coming on. So the US is bringing on supply this

year. There are new supplies coming on from

Brazil, from Guyana, and so those additional barrels in the market are

going to take up a lot of the extra demand increase that we expect to see

this year. So that's that challenge for OPEC.

Where do they find the space for their oil to come back into the market?

So that's what they're dealing with. That's why they're taking those barrels

off the market now so that they stop inventories from building.

And they want to see that market tightening before they begin putting

those barrels back. So right now, a lot of the analysts

looking at the market are expecting that the market will be tightened by the end

of the year. And so that's kind of the framework, the

timeframe when OPEC could come back into the market with those additional

barrels. All right, bloomers.

Anthony DePaulo joining us from Dubai, walking us through some of the dynamics

in the oil market at the moment. Coming up, we go from the commodity

story to the broader macro story right here in the UK.

We discuss the UK house prices nationwide reporting their first dip in

the data for the first time this quarter.

More on that next. This is Bloomberg.

South Africa's main opposition leader says he would resist forming a coalition

with the ruling ANC. Speaking exclusively with Bloomberg, we

have already got a pre-prepared agreement about how we going to work

together, how are we going to stabilise the coalition and how are we going to

make sure it governs everything? 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 to organisations 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 all of these parties and we're seeing the fact that they're not

making the breakthrough that people would expect them to precisely because

there 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 co-op about the DA and the ANC.

No, we don't want to be in government with the ANC, and that's all 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 him.

And that's what 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? It's 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 it.

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.

The latest German data showing inflation largely cooling, whereas the rest of

Europe actually outperforming. That could support traders betting on

the ECB cutting interest rates as soon as June.

Or maybe not. European yields also higher as investors

wake up to America's strong manufacturing data.

The odds of a June cut from the Fed dipping below 50%.

Plus oil rising as well as Tehran's. Has Israel killed one of its top

generals in a strike on Iran's embassy compound in Syria?

Brent crude trading an 88 handle. Good morning and welcome to the Pulse.

I'm critic Gupta in London. We talked a little bit about the

European inflation story. There's also an inflation story right

here in the U.K., starting with housing, UK house prices falling.

However, in March, for the first time in three months, this data coming from

nationwide building society suggesting the market may be stagnating due to high

mortgage rates. We're expected to get that data in just

a few seconds. Amid some of that strained affordability

story. Let's get more on the story with

Bloomberg's European economist, new Rich Shai Niraj.

Talk to us about the data that we got. First, to begin with, this dip in

housing prices feels more like a stagnation story than a proper

deceleration. So tell highlights how the recovery is

going to be bumpy ahead. Really.

So you have actually quite robust growth at the start of the year, the first two

months of the year. And then you had this slight dip.

But overall, we've turned the corner and ahead it's going to be more bumpy and

this really highlights that. Well, speaking of bumpy, we're actually

just getting that mortgage approval data as we speak.

The February numbers coming in about 60,383, a very specific number, but

significantly higher than about 56 and a half.

That was expected double folded question here.

One, does that data signify anything in terms of the fact they were coupling it

with that dip in the nationwide prices? What what are you waiting for for for

the data to be more promising? Well, that actually is quite promising.

60,000. That's quite a significant jump.

And it's only about 6000 below the long term average.

So that suggests that people are going back into the market, applying for

mortgages and there's always a lag. So this is going to be three months

ahead. Yeah, you're going to see slightly more

pick up. So that's actually quite encouraging.

But again, a lot depends on the Bank of England and when they cut rates,

we've already saw at the start of the year rates was dipping mortgage rates

and they've crept up a little bit because expectations have tempered.

But essentially we're expecting rate cuts from June and rates end at 4% this

year and 3% next year. That would get the housing market going.

So resiliency seems to be a little bit of the theme here, starting to kind of

come back in. It hasn't crashed yet.

You've made the argument in the past that there was an expectation that maybe

you should have a year ago. Why didn't that happen?

So it's a great question. It's really everyone.

You saw this incredible rise in interest rates.

The big thing was people kept their jobs.

Unemployment still remained near record lows.

And also a lot of people were on fixed mortgages, so had time to adjust.

So you didn't have the full sales that would flood the market.

And that was a big reason why prices didn't crash.

But you did have a correction. So the nationwide house price is still

four and a half percent below their peak in 2020.

And in real terms, when you take account of inflation, they're down about 15%.

So there's been a correction rather than a crash.

I love that correction rather than a crash.

Is that music to the Bank of England's ears or is that there still more

concern? Is there still more of a kind of

sensitivity around some of the data? I think there is.

That is music to the Bank of England. Yeah.

And it's something that reassures a lot of people.

We want a kind of Goldilocks recovery and there's still some concerns over

wage growth and whether inflation won't actually for all come back up a little

later on. So but overall, it's encouraging.

I final question on just kind of where the extra supply may or may not come

from. There's some big promises on the fiscal

side about at least in terms of the Labor government, what the extra supply

the market may actually look like. Does that make a difference to the data

at all? So that's more long term.

But one thing that does make a difference is we just had last week

Yorkshire Building Society offering mortgages with a 1% deposit.

So that might help some of those first time buyers really struggling to get a

deposit together. You've just had other data showing rents

have gone up to record above £2,000 for the first time in London.

Yeah, so they're scrambling to get a deposit together, so this just might

help them. The affordability story at its core and

one that really is a global one. We thank you so much for bringing us a

little bit more insight. Bloomberg European economist Near-shore

talking to us about the UK housing story and where it may or may not be going

wrong and sticking with some of the data that we got.

We got it from the UK. We also got some US data in the last

2448 hours where we've seen really big sensitivity, strong factory data in

particular prompting traders to price in less easing from the Federal Reserve

this year, setting the odds of a first move in June below.

50% that all squared with some caution from Jay Powell on Friday.

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.

Let's bring in Bloomberg's Ben Ron from our markets live team.

When this sensitivity to the ISM data, we usually don't see a sustained move

like we do or like we did in the last 24 hours and a 10 to 14 basis point move.

Based on where you look at the curve, it traditionally tends to be a knee jerk

reaction that then kind of comes back. Why the sensitivity to American

manufacturing now? Morning created a sensitivity, always in

large part not so much to the eyes and headline number, but the price is paid

number. If you look at that gauge, prices are

back up to the highest since July 2022. That is, of course, when the Fed that

started just started raising rates. So basically, if prices are going to go

back to those levels and the market's worst fears are being kindled, which is

that, look, if the Fed's cumulative policy tightening of 500 basis points

hasn't made much of a dent on price pressures, then what is to stop a

reacceleration of inflation? That speaks to the market's worst fears

and which is why you got the kind of vehement reaction that you got in

Treasuries last night. We're talking about the read through,

though, for the rest of the world here. If we look at some of the manufacturing

strength that you're seeing in the United States, what was matched in just

the last hour to 2 hours in Italy and Spain and France as well, All those

manufacturing numbers coming in hot this morning.

What is the trade there? Is this a early sign that people need to

start hedging inflation again? Yeah, possibly.

I mean, we should prepare for writing the

E forget 2% inflation targets. I think we are more like in the cusp of

3% inflation. That's going to be around those levels

for some time now. But I don't think we are expecting a

reacceleration of inflation. Back to those numbers that we saw in

those numbers that we saw in 2021 and 2022.

But 3% feels like the new 2% and the market should prepare for it.

How does the market prepare for it, though?

There is one part of the market that is piling into gold.

On the surface, it looks like an inflation hedge.

It may or may not be depending on where you actually see that demand coming

from. What are the other ways actually

positioned for it? Well, the best way to position for it is

in terms of real rates. Real rates are going to go back higher.

I mean, they're a lot stickier. Already in this quarter, we have seen

real yields back higher and that will go higher, even higher from current levels.

The dollar is going to be a lot stronger.

So those are the two cleanest ways to position for this new inflation regime

that we've got. A really interesting dynamic.

I'll give you I'll save the last one for you.

This is kind of the wild card that I got to say.

I can't really fold into the global inflationary story either.

Let's talk about the lira, because record highs for gold, but also some

very interesting levels for the lira as well.

A lot of that driven by some municipal election results.

This is a market that a lot of people have already pulled out of.

Not a ton of exposure here, but one the people I think like to watch is kind of

almost from a spectator perspective. Your take on the Turkish lira.

Well, I think that the leader has fallen a lot over the past five years.

It's kind of lost more than half its value.

And this year alone, it's fallen more than 8%.

Look, the bulk of the currency adjustment to the macroeconomic

fundamentals has already taken place. And I think we investors are going to

wait and watch from here to see how inflation evolves.

We are expecting the headline inflation numbers to come out again next tomorrow.

And if it's going to Bob, around current levels, I think the markets are going to

be okay with it. If you look at the one month into

deposit rate, which is a function of re market expectations on where the Turkish

one week benchmark rate is headed, I think that the markets are not thinking

they need another massive hike like the 500 basis points that we got from the

Turkish central bank last time. So I think that, you know, they've worst

case fears are being laid to rest here. But, you know, politics is something

that we go on factor in. I mean, so that is going to be a big

and that's going to be a big canary in the coal mine.

And investors have to watch for it watchful any risks from there.

And I but I think that the bulk of the currency adjustment has already taken

place. An interesting one to watch for sure.

Bloomers. Ben Romney, thank you so much for your

analysis this morning. You make a strong pivot here away from

the market. So a very exciting guest we have coming

up. We speak with the latest innovator

featured in Bloomberg's industry shakers fondé, demure, founder of labrum.

Joining us as we look at the future of British luxury design.

Stick with us. This is bloomberg.

The conversations that matter and the insights you need.

Welcome back to The Pulse. I'm created.

GUPTA In a London industry, Shakers is a Bloomberg special series profiling black

and diverse entrepreneurs and innovators across a range of sectors.

My next guest is creative director of fashion brand Labrum, which combines

West African heritage and values with classic British tailoring.

His collections are featured a collaboration with Adidas and Guinness.

Last year saw him presented with the Queen Elizabeth, the second award for

British design. I'm pleased to say 42 booya joins me

right here on set. Welcome, sir, and welcome to bloomberg.

It's a pleasure to have you on the program.

Thank you. Look, we're a financial network first,

so we got to start off with the business aspect of this West African design meets

British tailoring. Talk to us a little bit about the

audience, the market that you're trying to target.

Well, thanks for having me in the first place.

My audience is is quite mixed and like I said, is Italian West African stories

together with British tailoring. So it's a global audience, is a people

that understands the stories and people that.

No. Why?

People move and people migrate from place to place and how that touches

them, that their world. That's what we're trying to do is the

message in more than the clothing. It's all about communities, about how we

bring those people to life within those designs.

That's what we about. So if you ask me in terms of what's the

which is like global. So you could be anyone.

I could wear my coat. So it could be Asia, Europe, Africa,

America, everywhere, to be honest.

Who are you? Who are you competing with when you look

at your peer group in the luxury space? Who do you feel like Is is the market

share that you want to get? For me, in terms of market share, I'm

kind of taking it from different people. For example, Ozwald Boateng does really,

really amazing suits and then mixing colors.

So some of some of those are some of my market.

Yeah, my peers, people like Beyoncé's on this, we tell stories a lot and she

tells stories about a Caribbean culture. And I tell stories about African and

British tailoring. So those those are the people I see that

kind of like fits in with my market together with them and the likes of

Nicholas Daily and people like Ahluwalia as well.

And also when we talk about bigger brands and we

talk about the likes of Burberry and it's what they do, how they interpret

Prince and in their storytelling. I love that we're talking about kind of

prince and the appetite for luxury right now, because you'll know better than

anyone that we're coming in an environment where luxury they're able to

keep their kind of core, wealthier audience and wealthier consumer

demographic. But when it comes to that kind of mass

market consumption or an inflationary environment, we're talking about a

recession, etc., there isn't as much appetite for luxury even in the states,

from kind of that mass market consumer. What changes that?

How how do you appeal to someone who says, I can't afford the bigger brands?

Yeah, Again, like I said, the thing about Love Room, the thing about our

comments and the design is more about the storytelling.

I think we sell the story. People buy into the story, become a fan,

and then we take them through the journey of how the garment is created

from designing London development fabric in France, in the U.K..

And I think once the consumer kind of understand that journey and they tend to

want to connect and buy the product because the people actually just look

for cheaper product, probably doesn't understand the story behind it.

And if you understand the story and also the longevity of the garment, sometimes

it kind of sway your purchasing power. So I think those are the people we

appeal to. People that love stories, mindset are

stories connect with brands and the things that make them feel like they're

part of the journey. I think that's what we were trying to

connect with because sometimes if we look at the mass market, it's very

difficult to compete because the likes of Paramount doing a garment for like

£5. We don't compete in that because we know

that's completely out of what we believe in.

So what we're saying is pay people for what is worth.

So what we're developing is we work with artisans in Africa, in all over the

world because we believe in what they try to create.

And that's why the brand tells you stories and that's why they part the

price point is what it is and the luxury where we sit to use that word artisanal.

Yeah. Which to me thinks of quality, quality

fabrics, crafting and classics and classic pieces.

And when I think of classic pieces, I think of Adidas, for example, or Edie

does, as I'm told, it's pronounced in this part of the world.

You have a collaboration coming up with Adidas.

Talk to us a little bit more about how you're collaborating with other more

established brands. Yeah, it is.

Collaboration is a beautiful thing because you tapping into other brands

like sort of network of consumers. We've Adidas, they've they've believe in

a story to tell. They believe in my journey so they've

been supporting me for for several years now and I think to them collaboration is

always like how can they amplify? And I'm an up and coming brand story.

I think that's where they come in on this.

I've worked with like several collaborations with them recently.

We did the I did a samba for my show, which was again inspired by the anomaly

and which is a story back home where I'm from.

And then also we're working with them and

designing the civilian Olympic kit, which hasn't been unveiled yet anyway.

So it's just a conversation we're having about that.

It's been worked on, it's been designed. Hopefully we'll showcase the idea

another month or maybe May. So again, they don't just collaborate.

They bring the resources to support you. I think that's the that's the

interesting thing about collaboration, because you tap into resources that you

probably wouldn't have. So you talk about the Adidas

collaboration and the others on your radar, what's on your wish.

And I have interesting stuff coming up, which unfortunately I can't talk about.

Hopefully, I will be able to give us the exclusive when it comes out.

Yes, we try and make sure we do that. But yeah, and my wishlist is is is to

work with. I did that scene and in.

And in an aspect that I wish I could say much about that.

But yeah, we'll come back. We'll come back.

Talk to us a little bit about then of the expansion plans.

You're already in Selfridges, you're already inherited.

You mentioned the United States as a market that perhaps you want to expand

to or have a bigger reach at what you're talking about department stores and that

mass consumption kind of story. You're already partnering with Adidas.

To me, as an American, it becomes Macy's, Bloomingdales, Dillard's,

Nordstrom, any of those on your radar? Yeah, Not sure what specifically is on

my radar, to be honest. I know.

So we did stock in H Lorenzo in L.A. and for us, I think it's not about huge.

It's more about can this store represent us?

Can they tell the story that we tell? I think that's why we work with

Selfridges and Brown's in London, because they kind of embrace this story,

showcase what we do, and then that's what we look for partnership in terms of

like the stores that we go into. Yes, Nordstrom, we've been talking to

them for a while now, but I think for me, selecting those stores is can they

represent us? Can they represent the story behind the

garment? And I think that's why we're going to

select like confused of some of the stores that we can go into because we

don't produce a lot. We produce like what we what consumer

can consume. And we also do a lot of bespoke because

we develop all our fabrics ourself is to give the consumer these options of like

coming to one of our store. What hopefully we'll be opening this

store in in in couple of weeks and for consumers to come in and and be able to

kind of select those fabrics and we can make something for them.

I think that's that's that niche the brand has.

I very quickly, I want to put you on the spot.

Any pushback that you're getting in terms of department stores, in terms of

collaborations, anything any hurdles that you're finding very quickly?

And for now, I think the huddles was like some of the stores.

They probably think. Very, very huge numbers.

And for us, it's more like we want it to be.

We want it to be more about the storytelling and don't oversaturate the

market. And I think that's what the push back,

because some of these stores are so huge, they look at big volumes.

And I think because of what we do and in the way we portray the product is

probably doesn't work for them, but the stores actually understand it.

Yeah, they always carry us so far. What a pleasure to have you on the

program. I feel like I've learned so much the

last 10 minutes or so. We thank you so much for joining the

program for a W there founder of Labyrinth.

Joining us for a little bit more about his business and his story as well

coming up on the program. Tesla is trading lower pre markets

analyst lower projections for the makers latest deliveries report.

Details ahead. This is Bloomberg.

We are expected to get Tesla's deliveries report today.

Wall Street analysts lowering the projections over and over again, though.

What gives? Let's bring in a shoe expert.

Craig Trudell joins me right here on set.

Craig, walk us through some of these numbers and why people are more and more

pessimistic. Yeah, we saw consensus really drop like

a rock as the quarter was coming to a close.

A lot of softness we're seeing in China toward the end of the quarter.

Our colleagues in China reported that the Shanghai plant will move down to a

sort of lower, lower schedule of production.

We're also seeing some some weakness in the US in terms of basically just, you

know, these are tired models. After all, the Model three and Model Y

have been out quite a while. This is a company that desperately needs

to bring a new product to market. The Cybertruck, of course, only just

started sales late last year, but that's a low volume product and looking like

it's going to remain that for some time because of the challenges of

manufacturing it. So this is a company that is just

expected to have trouble until they bring that cheaper model to market

hopefully late next year. And we've already seen the stock at

least trade pre-market a little bit lower crater Doug Global Autos.

Ed, we thank you so much. This is Bloomberg.