Bloomberg Markets This present day 03/28/2024

Good morning from london.This is Bloomberg Markets today. I'm anna edwards alongside Kriti Gupta and Tom Mackenzie with the cash today just less than an hour away.Here's what you need to know. Treasuries drop as the fed's Christopherwaller says there's no rush to lower rates.We'll look ahead to tomorrow's US inflation data.The s&p 500 gets a late day boost to finish at a record high.We'll take a closer look at how markets have fared so far this year as we headinto the last major trading day of the quarter.Plus, the Baltimore bridge collapse.

Exposes the fragile nature of globalsupply chains. We'll discuss with the CEOs of Lloyd'sof London and Wizards. In the meantime, a quick check on thesemarkets here. When you look at futures, they areindicated higher with slight outperformance right here in the UK tothe tune about 4/10 of 1%. Your Stoxx 50 futures higher by 3/10 of1%. Anna was just talking about thattreasury sell off. You're seeing the yield on the ten yearhigher by we've got about two basis points for 20 on that ten year yield andof course moving the dollar a bit.

Higher.That creates weakness in the euro. 108 16 on that currency markets todaystarts right now. In my view, it is appropriate to reducethe overall number of rate cuts or push them further into the future.In response to the recent data, I see no rush in taking the step of beginning toease monetary policy. Okay.Fed Governor Chris Waller on why he sees no rush in cutting rates.He said he wanted to see a couple more months of data to get to that confidencepoint and suggested that they could push out cuts further out into the future andsuggested there could be fewer cuts.

Priced in.Though he did say that next move is more likely to be a cut than a hike.But I'm still trying to square this with the dot plots being reconfirmed at threecuts this year and the relatively dovish commentary, frankly, that we've had fromJay Powell, he said, of course, a couple of weeks ago, we are not far from havingthe confidence to be able to cut. So there seems to be a tension hereeither within the FOMC or they're not aligning in terms of the guidance forthe markets. Maybe you have a clearer steer.I definitely do not have a clear steer. But I think what's interesting here isthere's so much emphasis being put on.

This one FOMC member.And I think it's simply because back in November, he kind of backed himself intoa corner a little bit similar to the way Jay Powell did.And this is something that the Federal Reserve historically and other centralbanks don't do. They they kind of avoid giving exacttiming and exact data points. Right?They say we're data dependent, but we don't really know what that means.Christopher Waller back in November said three, four or five positive data pointsis kind of what you need or what he needs to be more.Sure, you've now seen two data points in.

The opposite direction.So that's how markets are kind of interpreting that.He arguably the most clear to read out of all of the FOMC members.Yeah, we talked about this a little yesterday, didn't we, about thedivergence to your point, Tom, about the divergence that we're seeing in the FOMCand the different views on show, although maybe some of the more hawkishlanguage has come to the fore this week with Rafael Bostic talking about maybejust one, just one cut this year, That's certainly on the same side of things asChristopher Waller. It really is interesting, by the way,that maybe this sets the stage for that.

PC deflator data that we're going to gettomorrow. We know that the Fed watches that very,very closely. If we've got all of this sort of Fedhawkishness in our minds, at least at the margin, you know, just these are Fedvoices that are saying we're not going to in a hurry.We're not in a rush to use. Well as ways to do that.I wonder what that means if we do get a halt print on PC, does the market manageto ignore it the way that it has done for the last couple of months in the waythat the Fed's Powell has done? Or does the market take that morehawkish line and doesn't even matter.

Now?Because when you look at the p e simply because the P numbers influence thepiece, the more than your CPI numbers do.I'm getting really nerdy here, Tom, bear with me.But this idea here simply that the API numbers and the PC is largely driven byimport costs, infrastructure costs, factory orders, things like that.When you look at the nitty gritty, this number that we're going to get doesn'ttake into account the increase in shipping costs that we're going to getfor the next couple of months, the increase in freight rail trucking cost,we're going to get off the collapse of.

The Baltimore Bridge itself.That's all going to feed itself into the inflation data ultimately.But it'll take may take a few months to do.It's going to be interesting that the headline data on PC and the core mightgo in the opposite direction as well. And that can, you know, cause all kindsof confusion in terms of the market and what people are watching for and all ofthat on a day when markets are not open in many parts of the world.So you could brace and the team and life have been suggesting you could brace forpretty significant volatility when market when markets reopen next weekgiven that we have PC.

But also Jay Powell as well, speaking atthe San Francisco events. This could be interesting in terms ofthe language that we've been getting from Fed officials.Whether he adjusts on that. I mean, there have been some concernthat maybe the loosening of financial conditions is actually pushing, pushingthings back as well. So the language from Japan's can beinteresting along with that data. And how much of that data's your point?How much of this data story on inflation is already priced into these bondmarkets? The the interesting piece of thatequation, though, when you talk about.

Financial conditions is you have to kindof so much of it is driven by the stock market.And stock market alone. You have to take into account theBloomberg dollar index, the ad or credit spreads, which by the way, a lot offlows. Though I was reading a note thismorning, a lot of the flows were kind of influenced by the private credit storyas well. So there's all these external factorsthat you can't actually quantify and track by the numbers you see on yourscreen. You've mentioned this already had thisinflation, you know, conversation around.

The Fed.It takes us nicely into some of the supply chain issues that we've beendealing with in markets over over, well, months, years, arguably.But now, just given the extra emphasis or underscored by some of the issuesthat some of the CEOs that we're going to be speaking to this morning aredealing with or the sectors they operate in, at least would be talking to Lloyd'sof London and clearly at the Baltimore Bridge that Marine insurance is part oftheir business. They've got an earnings story to bringus as well, and that they've benefited, of course, from higher interest ratesand what they're able to deliver for in.

Terms of their investment returns.Also, the underwriting profits look healthy compared to recent years, but itwill be interesting to get their perspective on supply chain issues orrather the impact on the insurance sector from the from the bridgecollapse. And then we'll talk to Windsor, which isnot necessarily affected by the Boeing crisis, but some of their rivals are.And that could be something to pick up. Yeah, it's interesting how we're talkingabout it in the context of the Baltimore Bridge itself, but we also have to foldinto the fact this comes in the background of Red Sea tension.So we're talking about reinsurance in.

Particular.This is building on a trend that you've already seen in the shipping space aswell with there, again, a similar story simply because when you look at Ryanair,for example, they had actually said they'd seen real drop in traffic when itcomes to flights going into the Middle East.You've seen similar story coming out of the US airlines.As well. So I wonder if Wizz Air is seeing asimilar trend when it comes to that region.Well, the the overarching story for the airline industry, obviously, is thedemand and the inability to match.

Capacity with demand.And again, tying to the supply chain constraints, they face their own engineissues. Whitney Engine issue for for Wizz Airbecause they rely, of course, on on Airbus.So we'll be getting an update, hopefully from the CEO on that front.And then on the flipside, of course, it's the challenge around Boeing forother airlines who rely on Boeing aircraft and the fact that they're justsimply not able to produce the aircraft that this industry needs right now inthe face of that still strong demand on the West specifically.There's also been in the latest load.

Factor data, just a bit of a drop downin the load factor that were teething in amidst all of that growth that they'redelivering. So you just want to we want to get asense of whether going through the summer as well, which perhaps takes uson because that's one quarter, the summer will be another quarter.So if we could reflect back on what we've seen this quarter.Christine, I know you spent quite a bit of the morning doing that.There have been some incredible standout new records within the first quarter forcertain assets, for gold, for Bitcoin, for cocoa, of course, and the stockswell, for the Nikkei, everything.

Japanese seems to do so well.My favorite one came from Tom this morning that a metric ton of cocoa canget you three months of rent in New York City.I would love to go to my landlord and say Dr.Chocolate, here you go. He is right now is dusting off that.I got a suitcase full of cocoa powder. Exactly.Exactly as given. The Easter candy is so cheap hereapparently at the moment. Well, I think what's what's interestingin terms of positioning, we talk about the volatility going into next week forEurope in particular, it's going to be a.

Catch up trade, given that on Monday theUS markets are open but European markets are not.So the catch of trade is already there. But going into next quarter, this islike they were the inflationary data and even the Red Sea data comes into a comesinto the numbers a little bit more. We talked for H&M yesterday, forexample, and even they said that even though in the first couple of months ofthis conflict they hadn't talked about paying attention, shipping costs or RedSea tensions, etc.. Now they're saying this is somethingwe're actively going to be monitoring that may affect our pricing.That's just one example of a trend we.

May see.Then I think it was interesting to see which stocks did well this last quarteras well. And some of them are no surprise,certainly stateside in video and that the strength of the story there.But here in Europe, not forgetting what is going on geopolitically on thedoorstep. Right.Mattel and Saab to stand out performances in the first quarter.And we know the defense story and the pressure on the European defense storyas a result of Ukraine. Yeah, And that story doesn't seem to begoing away, does it, in terms of fiscal.

Impulse to build out the defenseindustry. So two big names within defense, howmuch further to run then as European officials look to build out that buildout that industry. And of course, we obsess about the Maxseven, the Magnificent Seven over in the US.But it's also worth noting, of course, that Apple is down, what, about 10% orsomething year to date, Tesla down close to 30% year to date.So do we get to the point where we need to carve those two names out of theMagnificent Seven, bring it down to Magnificence five And then, of course,it brings us to the concentration risk.

Story.Jp morgan flagging that again, do we listen to JPMorgan, given that theirstrategists are not been arguably on point in the in the last few years, buttheir point around around the concentration risks are not isolated.Of course, the team at JPMorgan, we've got a couple of guests to talk about theEuropean angle on that, you know, away from the Max seven.But talking about the European side of things and I know we're speaking aboutsomething from Citigroup. He'll be talking to us about the Superseven, which is their name for the year for the European names they focused onif guy we hear he'd be pointing to his.

Sensational six.Yes. Which I think I'm taking over today.Well, we'll see if I can live up to the to the name.I think it's interesting you mentioned the Apple story simply because, Tom, wewe are for the first time seeing this divergence between the S&P 500 recordhighs and the Apple story falling the first time, by the way, you see adivergence going all the way back to 2013.Usually they go neck and neck. Apple actually drives the stock markethigher this time around. You're seeing the the breakdown in thatdivergence.

Okay.We will continue across all of these stories for you today.What else is on the agenda at 1230 UK time, we're going to get the fourthquarter GDP reading the third reading out of the US.We're also going to get initial jobless claims.Of course, the importance of the focus on the labour market in the US.Some reports suggesting there's a little bit of softness in some sectors.In some states the initial jobless claims will build out that picture forus. 2 p.m.UK time The University of Michigan.

Consumer sentiment reading It's theMarch final reading again. Is there any weakness coming throughfrom what has been a relatively strong US consumer still?5:30 p.m. UK time the ECB is villeroy will bespeaking in paris. Markets still expecting the first cutfrom the ecb to come through in june. We'll listen in to villeroy later today.6 p.m. uk time.The US treasury market closes early for the Easter break as we look at yieldsjust slightly higher on the back of those Chris Waller comments later today.Sound bite when Freed SBF is set to be.

Sentenced for stealing billions ofdollars from customers, marking the final chapter in the FTC's case, whichtook the crypto industry by storm, making me live at the New York FederalDistrict courthouse. You can catch our special coverage ofBloomberg Crypto from 4 p.m. London time.And the team in the US have just done such a comprehensive, fantastic job interms of charting this story and the latest report.Sitting out in the terminal today around some of the context to this is reallyfascinating read as well. So consequential, of course, not justsomething for free as an individual.

And those who may have made it may mayhave caught up being caught up in some of the losses.But of course, the broader crypto industry at a time when when crypto isback, it's going to record highs. Yeah, that's been a story of the quarteragain mentioning content that didn't go. Bitcoin could go in the Nikkei having arecord well cutting new records during the quarter and we've got the quarterlyGDP data out of the U.S. which just reminded me that we actuallygot confirmation of a final reading on U.K.GDP. But in case you were wondering whetherwe were going to revise away that U.K.

And recession story over the last fewquarters, what we didn't in the news is that there was no change.So the final reading, -0.3% quarter on quarter for that GDP figure.I'm curious how that's actually interpreted, though.Are we watching the recessionary or not recessionary story so closely?Does the technical recession matter in terms of the pricing is very much in therearview mirror? Yeah, The the latest data, all the morerecent data has been suggesting that the UK economy is, you know, some saysomething of a rebound. Certainly Bloomberg economics focused onthat composite PMI.

So it's not a perfect read to UK GDP butcertainly the signals there are that we've bounced back into growth again inthe first quarter. Yet the the pound hasn't movedsignificant on the back of this data, as Anna was saying, confirming really whatwe already knew. 126 currently on the pound.Interesting, of course to hear from one of the hawks in the body earlier thisweek speaking to Bloomberg, Catherine Mann, about why she dropped her callsfor a further interest rate hike, but still cautioning on the inflationimpulses in the U.K.. Okay.Coming up on the program, Barclays says.

That insurers face claims of as much as$3 billion following the Baltimore bridge collapse with firms on theLloyd's of London market most exposed. That is according to research atBarclays. We'll get the respective from theLloyd's of London market. We'll speak to the CEO at 7:30 a.m.UK time. Plus, we'll discuss summer travel demandwith Yosef Berardi, the CEO of Wizz Air. A lot of disruption for the sector as awhole. We'll ask for his experience if you haveany questions for our guest. If you want to get in touch with theteam that puts together this programme,.

I perceive go is the function to use asthe sun rises here in London ahead of a long weekend.This is me back. The shifting new world order with Chinacoming up, more disruption, more fragmentation.And of course, if we had, depending on the president, we end up having in theUS definitely more disruption and fragmentation.So that's one thing. In that you also have the long termtrend of climate, right? You have the long term trend ofdemographics. Those are inflationary.Those are in underpinnings of the.

Inflation.Virginie Maisonneuve, global CEO for equities over Allianz Global Investorsjoining us yesterday talking about the shifts that are taking place in theworlds geopolitical order but how that could actually fuel inflation in theshort term. In the long term, at a time wheneveryone's kind of pricing in those rate cuts, really convinced that the FederalReserve and its global peers are actually turning a little bit moredovish. We'll see if they're right.Joining us now, Jerry Fowler, head of European Equity strategy and GlobalDerivative Strategy over at UBS, joining.

Us this morning.The narrative has changed quite quickly, even in just the last 24 hours with thecomments we got from Governor Waller as well around pushing back these ratecuts. Are the markets ready for that?No, we don't think so. In fact, it really started about a monthago when we got that pretty hot jobs prints in January, which is actuallyvery reminiscent of January last year. If you remember, we got 500,000 nonfarmpayrolls then, and that really lit the fuse for a reassessment of Fed rateexpectations through the second quarter. And so yields rise.So we've just seen the same again and.

We've got a fantastic monthly note thatwe put out that has now cost data. It's for a variety of growth relatedtopics in the US, including nonfarm payrolls and also inflation.So we're watching that like a hawk for the February data.It was pretty much spot on for the March data.We've just highlighted that we're expecting still robust jobs, 200,000more and inflation 2.33, which is still running a 4% annualized rate.So the market's not really ready for this because for the first six weeks ofthe year, everyone was having a great time, positions were working momentum,all of the top global stocks that.

Everybody wants to own quality all doingvery, very well. But when you look at what works in ahigher yields, higher for longer environment, it's value.And so we've started to see a transition back towards value.It's been European banks. It's increasingly some of the energysector that are more sensitive to rising inflation, rising inflationexpectations, rising yields in comparison to the things that have beenworking so well since yield yields apparently peaked in October, momentumand quality quality has already started to underperform.Momentum still has some some performance.

That's coming through.But actually in Europe in particular, value has become the momentum trade.It's interesting we talk about this almost shift to value, and I would evenbroaden that out to cyclical, even though I know those aren't the exactsame thing. But yes, they're very CapEx dependentand it feels like to have that CapEx spend for a lot of these companies inthese sectors. A little bit more reassurance around thestart of a new economic cycle would be handy.Is that kind of the thinking there was the CapEx concerns not relevant now?Absolutely.

So the consensus is very clearly thatthis is quite late cycle and that we will get, you know, sluggish growth andweakness in inflation that allows for rate cuts to come through without asignificant reacceleration. But we are seeing some signs thatbusiness confidence is picking up. We're seeing the grease in the wheels ofof M&A and IPOs coming through. That's going to keep liquidity movingaround the markets. So there is some renewed optimism thatperhaps there is another growth rate acceleration coming probably more in theUS than in Europe, where obviously you can see quite a lot of investment aroundthe IP.

But also in Europe, I mean Europe's maintheme is electrification and you've seen very strong performance from SchneiderElectric, Siemens, a lot of these players that are putting cat goods,equipment into smart grids and electrification related work.So the themes are there and the performance has definitely come throughin those names. But there, you know, there are otherthemes that are coming through at the same time, just because there is stillnot a lot of faith that this is more than a burst of higher for longer asopposed to a fully fledged re acceleration.Who me who gets Burgman in that higher.

For longer scenario that you've painted.You said markets investors are not fully positioned for this yet.So where's the pain point come through. Well, it really depends how far it goes.I mean, investors had a great time for the first six weeks of the year.Quality and momentum were doing extremely well versus value and mostinvestors generally have momentum, quality growth type positions.And they you know, they have enjoyed yields peaking and coming down.But it's been a tough couple of years for quality.But as you see yields rise, that's you know that puts that that overweightpositioning on quality and momentum at.

Risk and value is catching up.So basically any investor that has that quality growth momentum bias is probablystarting to lose out because they don't have enough exposure to, say, banks andenergy is more of the value sector. But it really matters how far this goes.I mean, us ten year yields have fluctuated between sort of 4.1 and 4.3%over the last month. If you continue to get 4% inflationprints and jobs continue to print at 200 plus, there's no reason that yieldscouldn't back up a bit further to say 4.5.And who knows if they go beyond that. But at those levels, you start to put atrisk some of these positions that become.

A bit more valuation sensitive whenyou've got a higher yielding environment.Let's break down some of the sector calls that from you in the team.You have an overweight your biggest overweight on software.How much further does that have to run? Yeah, software is a bit of a uniquesector because it is actually fairly defensive.You know, they tend to be able to just put a lot of a lot of it is subscriptionbased. They're able to put through priceincreases each year. It is an expensive sector and so it canbe sensitive to rising yields that.

Pressure its valuations.But we just think there's fairly consistent pricing power there.And in fact, as it relates to the. I theme Our Singapore based tech team inthe Wealth Management CIO Office have highlighted that while there ispotentially 60% cargo growth in AI related products, semiconductors andinfrastructure, there's potentially more like 120%.I think the number is compound annual growth over the next few years insoftware. As companies start to make use of it.So I think software is still one of these quite strong themes that whilevaluations can fluctuate, there is this.

Quite steady structural growth comingthrough in the coming years. Jerry, you were talking about how growthcould reaccelerate in the United States, not necessarily in Europe, althoughthere are growth themes here around electrification.You were saying? I wonder if that is an upside risk tothe growth story in Europe. That makes us question when we get ECBrate cuts, the fact that well, there's the the the growth stories that youmentioned for Europe specifically, but also if the U.S.picks up and we see the rest of the world sort of whatever the opposite isof catching a cold, you know, feeling.

Better as a result.Exactly. Is that something that actually mighteven stop the ECB in its tracks? Not from maybe cutting a tool, but theextent of the cuts we get? Yeah, possibly.Although the ECB is only running on an inflation mandate and at the momentEuropean inflation is coming down quite nicely.So there's still room for cuts and that will open up an interesting divergencethat if the ECB is cutting before the Fed, what are the consequences for thecurrent currency and how does that impact European equities?But, you know, if you've got resilient.

Growth and actually we've got improvinggrowth in Europe from this point forward and especially into 2025, this point 9%of GDP that's being released from the recovery funds this year.So there's quite a lot of sort of on the sidelines stimulus that's actuallycoming through. But all of these things, you know, thesoft landing narrative or maybe even the no landing narrative is not what themarket was pricing last year. And a lot of sectors were price forrecession. So all of those are being repriced forno recession. That's why European banks have done verywell.

They were priced very cheaply becausethere was an expectation of cuts and slowdown.That's now not the case. So they rerating you see the same in USsmall caps priced for recession. It's no longer believed to be happening.And there are signs that there's some outperformance there as well.Let me ask you about the Brexit we see in Europe.We've got two guests coming up in the next hour of the program who talks abouthow Europe, we talk about the US being quite narrow.You know, there's there's not much breadth to the rally.It's a lot to do with AI and technology.

But she points out that Europe hasactually been narrower than usual. Does that fit with your findings andwhat would you expect to see in terms of how that develops?Yeah, it does. I mean, there's been two very bigcorrelation sort of correlation drivers over the last couple of years, whichhave really meant that some parts of the market go up, some go down, andtherefore the index is very low volatility and actually having a lowvolatility market encourages more risk taking.People either use more leverage or buy more cyclical, volatile, riskycompanies.

And that's been what we've seen in theUS and Europe. The drivers are the macro drivers.Normally macro drivers cause lots of correlation, but in this case it's donethe opposite Covid cause these dislocations within the market betweenservices and manufacturing, which went one way, then the other the other way,and that's starting to normalise. But also we had a huge yield move andyields actually have a different impact in different parts of the market aswell. Some things go up, some things go down.So this dislocation I think is potentially at risk, particularly ifjobs data weakens because at the moment.

You've still got these covered andyields driven divergences playing through in the market.That's part of the narrowness that you can see plenty of stuff going up, somestuff going down. But if you start to see thosecorrelation macro drivers dissipate and we expect they will lower bondvolatility and less disruption from Covid, then other macro consequenceswill cause more correlation and more correlation will lead to morevolatility. It makes it a bit riskier investing inmarkets. We will see slightly bigger daily moves,so our analysis suggests that that will.

Be the case over the next 9 to 12months. But it all depends on jobs.If you have job weakness, you're likely to get a 20% volatility regime.If you don't have jobs weakness, you're more likely to get a 10% volatilityregime. So again, that data once a month onnonfarm payrolls becomes pretty critical for the nature of risk in the market,the correlation of stocks, and therefore that breadth you're talking about, a lotto digest there. I feel like we can game theory this withyou all day long. Jerry Fowler, head of European equitystrategy and Global Derivative Strategy.

Over at UBS.We thank you so much for joining the program.There's a lot to digest there. He talked about the equity story.Let's talk a little bit about the macro story as well.Coming up on the program, you do not want to miss our interview.John Neel joins us, the CEO of Lloyd's of London, talking a little bit aboutthe reinsurance story around not just the Baltimore Bridge, but reallybuilding on the defense story here in Europe, the Red Sea tensions as well.We're going to ask him about all of it, not to mention what's happening righthere in Europe.

Stick with us.This is Bloomberg. Welcome back to markets today.30 minutes from the start of cash equities trading.The futures picture in Europe looks a little brighter.We are expecting to see a little bit of a bounce perhaps on the London market inparticular, The US futures picture looks a little sluggish and we do get a daybefore extended weekend feel to market. Certainly at this early stage of thetrading day. We'll keep monitoring the futures story,of course. Let's turn to a business that hasreported numbers and also has a lot to.

Tell us this week about some interestingat news events. Lloyd's of London has by one measurereported its most profitable year for underwriting since 2007.Its investment returns also benefited from higher interest rates.And as marine insurance is one of its lines of business, the insurancemarketplace can also help us understand the sector impact of the Baltimorebridge collapse. A lot to discuss then with John Kneale,CEO of Lloyd's of London. He's with us this morning.John, nice to speak to you. So let's we'll certainly want to tapinto your your understanding and talk.

About the Baltimore bridge collapse andwhat that means in marine insurance terms.But firstly, just lingering on the numbers for a moment, I mean, a combinedratio, that's the highest since 2007. So this is a measure of the underlyingprofitability of your underwriting business, the highest since 2007.And what's going right, I suppose, is the question then for Lloyd's at thispoint. So.Well, thank you. We've been working really, really hardto get performance back in shape. So good to be promoting growth.Good to show improvement in revenue.

We wanted to get costs in order andwe've also wanted to show leadership. So a lot of conversations with us arounddiversity, equity and inclusion and around climate.And I think I do feel it's really important for UK PLC, you know, because80% of our revenue comes from outside of the UK.So to represent the credentials of financial services and what insurancecan do in the UK is fantastically important.So really, really pleased to be reporting the results that we are today.Yes, because a lot of people ask questions about the role of the City ofLondon, I suppose at this point.

Post-Brexit, and with the listing storynot playing in London's favour, you know, a lot of businesses choosing toeither leave or to list in the United States and elsewhere.But but you feel from the insurance space London still has a lot to offer.I think it is the only true marketplace for insurance in the world.And we've reported double digit growth now for three consecutive years.And to give you an idea of where the geography comes from, over 40% of ourincome actually comes from the United States, in fact, to £2 out of three ofwhat we do comes from North America and Latin America.So real geographic spread in what we do,.

Hugely valuable, I think for UK PLCterms is the kind of performance that we've seen then over the last year.Does that continue for Lloyd's and what do you in terms of reinsurance pricingthere, relatively elevated, does that how does that story evolve?So it's it's interesting. So last year was helped by two thingsreally. So the frequency and severity of naturaldisasters and we'll talk about Baltimore in a minute was slightly lower than wewould normally expect. So that was good news.And isn't it exciting to actually be making some money on our assets?So we quite enjoy having interest rates.

So for the first time in like 15, 20years, we're making money on both sides of the panels.So we do think the performance is sustainable, sustainable.So there's always going to be a bit of cyclicality, but we don't think this isa one off. You know, it's been a consistent, steadyimprovement in performance that we know not a one off.And of course, the interest rate regime is likely to change this year.So that's that's going to evolve as well.Let's get to the Marine insurance that and the Baltimore disaster.We know the bridge was insured, is.

Insured that the boat's insured as well.There's a lot at play here. How material is this for Lloyd's?Have you been able to put a number on it yet?So from our point of view, as you would imagine, we go through multiplescenarios of different type of loss. Do we ever get every loss right andconsider every loss? No.But the type of loss that we've seen is one that we would envisage.So we would assume every year this type of loss will occur for us somewhere.So within our financial considerations, manageable.And you said in your remarks which.

Something is so important.You know, when I think of natural disasters, what upsets us most asinsurers is we have the capacity to insure and almost every loss you see isonly half insured. People aren't buying insurance.So we don't do a good enough job of selling the value of insurance.In this instance, as you've just said, the boat's insured, the bridge'sinsured, the Port Authority's insured. So from a financial perspective, themoney is there to deal with the loss. I mean, there'll be the issues of whathappened and whose fault was it. And all those debates will rage.But the good news is this is insured.

And so help us understand with yourMarine insurance expertise, you know, what are the types of claims then thatwe're talking about? What what are the building blocks weneed to look at? So to add up to the full picture ofinsurance exposure around this event, so you've got the easy bit, which you cansee that I mean, these things today play out on our TV screens so you can see thedamage to the boat, you can see the damage to the bridge.You know, the cost to the bridge will run clearly into hundreds of millions ofdollars as well. The damage to the boat, these boats are400 meters long and 300 meters high.

They are vast in terms of size.So you can see the easy bits, the complicated bits of the supply chainrelated issues. What impact is this having on theability for goods to move around the world?What delay and what interruption does it cause?That's the heart a bit. That takes a little bit of time.Just work its way through. Yeah, just just back to the sort of theLloyd's marketplace and its role in this.I mean, analysts at Barclays say that some of the smaller Lloyd's firms may bethe most exposed to the Baltimore Bridge.

Claims.Have you have you estimated that you've got anything you can tell us on that?So I don't think that's correct. I mean, interestingly, with theinsurance of shipping, there are these clubs called protection indemnity clubs.There are 12 of them. They gather together under theinternational group. They insure 90% of the world's shippingand then they buy insurance, if you like.They lay off with us and others, so we reinsure them.So there's quite a complex weave of insurers that are involved with this,but it's the international group that.

Sits at the bottom of the chain and theywill deal with the loss. But no, I don't.I agree with Barclays that this has the potential to be one of the largestMarine losses in history. But no, I don't think we've got anythingthat's that's causing us concern. So I think that any based on theBarclays point $3 billion is the number they put on it.Does that sound about right? It could be.I mean, it's a multibillion it's a multi-billion dollar loss.I think it has to be. But I think it's a little too early tosay.

What do you actually think it's going tocost? But, you know, in terms of the earlierquestion, do we sort of scenario manage and anticipate losses of this size?The answer is yes, we do. You mentioned earlier that the hard bitto calculate at the moment is the supply chain effect that you see broadly.There's a lot of concern in the shipping space right now that this is one moreshipping disaster that we seeing on top of the Red Sea tensions on top of thePanama Canal. I can appreciate that this is allinsured at the moment. At what point do these almost increasedshipping risks start to become a danger.

To you and your company so that itbecome a danger? I honestly, honestly think we've got todo a much better job of representing how we can provide insurance.You know, when you think of business interruption, I'm getting so old now.I remember during the floods in Thailand in 2011 and the impact that had peoplecouldn't get the chips on cars. You know, you then look at the impactthat we've seen in in the Ukraine and you've seen the energy impact around theworld. So, you know, when you think of supplychain interruption, it is all insurable. We can deal with all of these types ofsituations.

So so I think it's an opportunity for usto say, look, there are products, there are services that can help in thissituation. So, no, we're not genuinely notintimidated by the financial consequence.You know, we have the capability, the capacity and the interest to provideinsurance, and that's relative to, say, AXA protection, for example.What about in terms of actual war zones? We talk about the Red Sea tensions, inparticular Lloyd's of London active in terms of insurance to Ukrainianshipping, for example, in the ports there.That's a different story.

That is an active war zone.How are you approaching it in terms of managing risk there?So it's you're completely right. There are two very different scenarios.So when you're in an active war zone, then it takes political intervention tocreate a pathway in a passage that is insurable, provided the politicalintervention is there, we can provide the insurance, which obviously we did inpartnership with the UN, and 32 million tonnes of grain and fertilizer weremoved through the Black Sea, that the Red Sea is not uninsurable.But until there is some intervention that creates security and safety aroundthe passage of goods and people, it's.

Very difficult for us to provideinsurance. But at the moment there is there is nolack of appetite to do so. But what do you need for that assurance,especially when the US military is already in that region?We need we need government understanding and we need respected government on bothsides of the equation. So when you look in the Black Sea, youdid also have the Russians agreeing to the safe passageway and the intention totransport the goods. Right?So we do need that. We do need that dialogue to apply toboth sides.

Otherwise, there's just extremeuncertainty around the risks that we're being asked to take.John, you were talking about not being intimidated by certain global challengesand insurance being available. I want you to set that in the climatechange context, if you like. We've talked to a number of reinsurancebusinesses about whether we are in any sense moving towards an uninsurableworld in any offset geographies or around certain activities as a result ofclimate change. And they both caution they don't like tothink of it that way, but it's more about the price that people are willingto pay and suggesting that, you know,.

Only now are we starting to see the truecosts of climate change being passed on. And is that how what context would youadd around around the climate change story?I mean, the good news is talking to an insurer, you're not going to get aninsurer denies climate change. We've been talking about it for 25 or 30years and we have 25 or 30 years of weather related data.So we can show you the increase in severity and frequency of climaterelated instance evidence through weather.I think what it needs now when it gets complex, so you think of Florida orCalifornia in the US or somewhere like.

Queensland, in Australia, I think itneeds the banks, the insurers, the regulators and the government sit aroundthe same table and say, this is complex, everyone's got a role to play here.What roles are we going to play? Because I think the capacity is there,the capability is there, but it's just not one party anymore that can solve theproblem. So so when it gets really hard, thoseare the conversations that need to take place in our view.John, on the question of artificial intelligence, I want to fold twoquestions into one. One, what does.Of the most interesting use cases you're.

Seeing across the marketplace in termsof how are how is being applied within insurance across your business?And secondly, are you looking at will there be products to insure against anyrisks? Yeah, it's a great question.So on the first question, data informs everything we do and how we think.So in AI through various iterations, then it's always been part of what wedo. So when you ask questions about how wemeasure risk and manage risk, that is all data led.When I look at some of the interesting use cases now, it's how can we morequickly get to the answer?.

How can we more quickly get to yes for arisk and price and is hugely helpful in that respect.And I think when you look at the insurance opportunity and then when Ifirst started insurance, everything was tangible.Can you insure my building? Can you ensure the people that work init? 80% of what we do today is intangible.Can you insure my data? Can you insure my intellectual property?What risks are my facing from AI? And that's as much about the service asit is the product. So how do we help people when they getinto difficulty?.

What does it actually mean?So, so I think the nature of insurance is, is changing with with the rise ofdata, the rise of data, the rise of tech.How do you price that, though? You talked about the rise of tech andTom was talking about the AI story as well.We would talk about geopolitics earlier. It was Mary, The two cyber insurances isvery in vogue. Cybersecurity is very in vogue.How do you price that? So so we are the world's leading insurerfor cyber is 20% of the world. Cyber insurance is bought and sold atLloyds.

What's annoying is, is that we're notdoing a good enough job of persuading people to buy it.So, you know, the cyber market globally is still worth about $20 billion.Property insurance in the US is $300 billion.So so we've still got a job to do to persuade people that there is insurancecover and there is cover that you can buy.And we just have to think very, very differently around the types ofexposures that we might get. And when you get something like cyber,the real threat is that that would trouble us is either systemic or stateintervention.

Those are the bits that would worry usmost. What happens if everyone suffers thesame loss at the same time? That's why something like cyber is alittle bit different to some other categories of loss.But you know, we've been doing that. The first cyber policy was issued atLloyds 24 years ago. Yeah, so we've already dealt with 50,000cyber claims. So we've got quite a lot of data on whathappens. So I think we've got quite goodunderstanding of that type of risk. John, quickly before we let you go, whenyou talk to the government, when you.

Talk to possibly the opposition LabourParty in an election year for the UK, what is your top priority for them?What is the message to improve the competitiveness of your market?What are you taking to them? So there's two points really.One would be you've got to have a plan. You know, some of the plans,particularly around transition related activity or some of the promises.So they're not one year plans or two year plans or eight year plans, nineyear plans, ten year plans. So for goodness sake, commit to a longerterm plan. And then there is the financial musclefrom either either us or the banks to.

Want to help and support.So one, please do that. And two, can we just represent ourselvescompetitively? Regulation is important, but we've gotto have one eye on what a competitive marketplace looks like because, youknow, we want to stand up, don't we? We want to continue to be one of theglobal financial services centres in the world that people look to.All right. John Neil, CEO of Lloyd's of London.We've heard a little bit of everything with you.We thank you so much for joining the program.Coming up, we go into the micro.

JD Sports isn't sweating a recentdisappointing trading update. The first trading conditions willultimately improve. Are going to take a look at that andyour other stocks to watch coming up next.This is Bloomberg. Welcome back to markets today.14 minutes until the start of cash equities trading.The futures picture has looked broadly buoyant for European equity markets.U.S. futures now look almost entirely flat aswe head into an extended weekend on both sides of the Atlantic, broadly speaking.And so we keep that in mind as we look.

Ahead to important data due out.Right. Let's get into a conversation with ourmarkets live, executive editor Mark Cutmore, who joins us now.Mark, good morning. So I have to come to you on the commentswe got from Christopher Waller suggesting that he is in no rush.He seems to be putting more emphasis on the inflation data we've had to date andthe fact he's been stronger than expected than, for example, JeromePowell. How much how much weight do you put onthose those wallet comments? Well, he is a known hulk, so I don'tthink anyone would interpret them too.

Much.But on the other hand, I think he's absolutely right.The data just does not seem to justify the rate cuts that Powell and thecommittee have stuck with last week. And the market still seems to bepricing. Now there's a chance the economy isgoing to suddenly fall off a cliff, but there really no signs that at the momentthat the December Fed has means when a no landing scenario.If anything, we appear to be kind of gaining a little bit of momentum again.It is a world where stock markets are commodities.We're seeing credit.

Every single asset class is doing very,very well and everyone is determined to find vulnerabilities.But there doesn't seem to be an obvious catalyst out there.And I think the macro backdrop is still too strong and it is too early to fightthis supposed bubble in markets. Hmm.Okay. So that's the the story around the Fedright now. We're waiting for the PC deflator data,which we get late tomorrow, of course, the Fed's preferred measure ofinflation, and that's when markets are close.Given we've heard all of this.

Hawkishness this week.How do you how do we position for that PCE?Well, as we've seen, both Bostick and Waller quote these hawkish comments, Butoverall, yields haven't really gone anywhere in the week.It's been and it's been very much a low volatility market.Of course, PC can can cause some volatility when we come back intomarkets a monday morning in Asia, where we're going to really see the reaction.But I think it's been it's been overhyped as a catalyst.It's a very important data point. But I don't think we're in a situationwhere one data point is going to derail.

The narrative.It's only going to cause short term volatility.So I think the hype around PC is perfectly in fitting with this kind ofgeneral market where participants are casting around for any possible catalystto derail us and come up with nothing good.Okay. Thanks very much.Thanks to Mark by the Monkeys live executive editor Mark Cutmore.Remember, you can get up to date analysis and insight with Mark and therest of the markets. My team and mlive go is the functionsyou use on your Bloomberg terminal.

Let's get into stock specifics.Joe Easton has a briefing from our equities team.Joe, good morning. Morning.And us to the UK retailer JD Sports says sales will grow very slightly this year,but does reiterate that it's a challenging market with weakness,particularly in the UK where like for like sales did actually decline in thelast quarter. Now the US holding up pretty strong,which is quite surprising given that's where all the weakness has come in thestock. We saw a massive profit warning fromthem just a couple of months ago that.

Was related to their North America salesand also due to weak results from Footlocker, Nike, all of that hadweighed on them. But a lot of analysts are saying thatthis stock should recover. So, as we can say, 12 buys only one sellon the street. But JD pretty mixed and some negativecalls on that one this morning. Then in the chip space, we got a profitwarning out of SOI tech. In France, they make materials that gointo iPhones and other smartphones and PCs far below expectations in terms ofthe guidance, Sales in the first half could drop by 15%.Consensus was for nearly 30% growth.

Morgan Stanley writing that the declinein handset demand has been far longer than any of them had expected in termsof the analyst community. So we're going to keep an eye on a bunchof stocks that supply iPhones and also PCs as well.We've got Varta over in Germany and I suppose from SD Micro, a bit of a biggerone there. All of them having a week here today.And this is a negative indicator for that sector once again.Then over in the airport space, we've got France's Vinci and Spain's ANA bothvying to takeover Edinburgh's airport for more than £3 billion.According to a Bloomberg exclusive.

The privately held owner has had itsince 2012, but they're looking to offload it.It's the UK's sixth largest airport with 15 million passengers flying in and outof sunny Scotland every year, according to the company.These stocks are actually doing pretty well at the moment given the rebound inlong haul travel. Vince, she already has Gatwick Airportand it does Madrid. They are looking to add to their airportportfolios. Keep an eye on those stocks today.Okay. Equities reporter Joe Easton, thank youvery much indeed.

Now, one of the top red stories on theterminal right now is around the corporation.That is the stock that is Novo Nordisk, of course, and that was the stock of theyear, arguably in in 2023. And of course, it continues to postfresh eyes on, of course, all of this demand for Ozempic and Wegovy in some ofthese weight loss drugs. But the reporting is suggesting that theprofit is maybe a little excessive for Novo Nordisk.So some research has been done, some academics and how it's feeding into thedebate in the U.S. state side could become a politicalissue.

This cites some research by, I think,Yale King's College and others that talks that they've done some research onwhat to actually call it a cost price to put together as MPEG by dose or monthly.And they work out you could do it for $5 a month, but actually you're beingcharged ,000, nearly ,000 in the United States.And clearly, you know, businesses set out to make money, but they're askingquestions about whether they set out to make chipsets out to make this muchmoney in this space. And politicians have been jumping onthis story. There's two ways to view this right forthe company and the stock itself from an.

Investor standpoint.On the one hand, the bull case here is what, a margin, $995 per injection.That's enormous. And therefore you could actually seethat month. Yeah, right.Could actually see that react in the opening trade.When you see that kind of market, I don't think we've got numbers exactlyaround that. Given Novo has been to so much CapExfocus and spend. The other side of this equation is yes,the politics and yes, the regulatory action, which fair enough, takes time.There's also a consumer question.

There are people willing to pay up for aproduct that they may not see the need to pay up for.Does that is there some sort of sensitivity around that now that it'sbeen revealed? That's really only if you can certainlysee it riling both sides in the politics and political landscape of the US,particularly given that Europeans are paying far less for this drug than theAmericans. Of course, it's a Danish, it's a Danishcompany. The company would say, we don't get tothis point. We don't get to these kind of miracledrugs without the massive input in terms.

Of spending around R&D, that building atthese facilities, the capacity, the CapEx, it's enormous.Yeah, I haven't seen yet. We haven't seen the workings of whatthis Galen King's College report includes in that $5 a month cost.You know, does it include all of that R&D upfront or does it or is it justtalking about the cost on the production line, which is a very different story?And there's a question of patent production as well, right?Because Novo was the first to come to market with this kind of drug.And in particular, they can actually basically claim that because theybrought this onto the market in the.

First place, therefore they have somesort of patent protection for a couple of years until it is more mass marketed.To me, I think the most interesting analysis around Novo Nordisk actuallycame out of Goldman Sachs excuse me, at Morgan Stanley, where they had said thatif enough Americans buy into this product and you actually really see theobesity drug explode, I actually. To GDP growth as well just because ofthis product. I thought that was a really interestingkind of best case scenario coming out of Morgan Stanley.Okay. So we are just minutes away then fromthe start of the European equity trading.

Day.The futures picture, as we mentioned, has been looking kind of buoyant.But, you know, maybe we see low volumes today.We know that certain people are getting ready for a long weekend and, of course,taking the opportunity to take more time off some pretty low volumes in marketsas we will be closed on both sides. The Atlantic tomorrow and some marketshave closed here in Europe, closed on Monday as well.So we keep that in mind. U.S.futures flat to negative. We'll be back with the European Opensuspect expecting.

Welcome back to Marcus today.We're just a few minutes ago until the start of cash equity trading.It kind of feels like people are already on that kind of long holiday mindset.I know. I am.I know Ana and Tom are for sure going into what's supposed to be a veryexciting day. In theory.I know. I know.Am I taking off for it? We're all on holiday, which is thetiming is kind of a little wonky here. Tomorrow we've got the PC data.We've got comments coming out of a.

Chair, Powell as well, your inflationdata coming out as well. And the markets can't do anything aboutit. I remember days where they used to movethose releases two days when trading was happening.You know, things that usually happened on a Thursday would happen on adifferent day if there wasn't going to be any trading PC, not not getting thattreatment unless Mark Cranfield or Mark Gardner or, I should say, saying, look,maybe we're overhyping the PC. I'm not so sure.Look, it's going to come in. It's sticky, stickier is theexpectation.

That would reinforce what we've beenhearing from Bostic and of course Chris Wall on most recently.And he suggested you can push those hikes further out.He's not saying those cuts. He's not saying a cut.It's not going to come. He just says you can push them furtherout. He's not convinced he needs to couplemoment a couple more months to face it. But in a quiet week, you know this kindof quickly gets more of a mention. Oh guy was talking about it on Sundaynight about how exciting Friday was going to be And he's not even here towitness the excitement.

The the interesting thing I thinkperhaps comes in today's market open where you look at some of theseindividual stocks. I mean, yes, we're all waiting for themacro. Some of these traders are probablylikely checked out. There's a couple of names that arealready catching my eye of DHL, for example, getting Deutsche Post.He's been getting cut to a hold from buy It Deutsche Bank, ASML.We always like to watch some of those big heavyweights, conversationshappening between the Dutch prime minister and China around tech securitydoesn't have a read across into the.

Market open.We'll find out in just a few seconds. We absolutely will.Market opening in just a couple of seconds then yesterday was dominated bystrength for the retail sector. We'll see what does it today.So we're open across the European equity markets right now.Only the Footsie 100 and the Xetra DAX actually printing earlier than usual.The retail sector then, as I mentioned, did really well yesterday.It was up two and a half percent. We had the likes of H&M really movinghigher, more than 10% higher, in fact, in session yesterday.And so that was certainly an area of.

Focus for us.So what does the market do today? Well, early signs are that we havetravel and leisure moving higher as one of the sectors to watch basic resourcesalso doing pretty well and only a few sectors in negative territory, sobroadly positive. Stoxx 600 up by 2/10 of a percent thismorning. Yeah.We should mention that Lloyd's of London is not only one of the highest indexcontributors, but one of the high percentage movers as well, higher byabout 1%. We just had the CEO on talking aboutthose record moves.

They are giving us their maritimeinsurance. They're seeing a lot of that uptick intheir numbers as well, not to mention not to make kind of good out of a poorsituation. But some of the costs around theBaltimore bridge collapse, the Red Sea tensions as well, they are actually ableto deal with that and not have to kind of shell out too much more thanthey had anticipated. He did he did say he thinks it's goingto be is likely to be one of, if not the biggest Marine insurance claim that thatwe've ever seen. But specifically on their business, asyou say, they've had a very good year in.

Terms of 2023.And it was interesting, he was talking about that outlook.He said it's not a one off they expect to post and they're in a position tocontinue to build on that in 2024. Absolutely right.Of course. And it's focusing on the top sectorbeing basic resources. We have seen a bit of strength comingthrough for the commodities space this morning.Iron ore prices, having skirted with that 100 level are at 1.1 up just 5/10percent. And Brent oil is also high, as iscopper, just by a smidge.

So a little bit of movement in in thematerials, the resources space, the commodities space, lifting basicresources. So that's playing into, of course, whatwe're seeing on the Footsie 100 that is exposed to some of those miners, first100 up 3/10 of a percent. Yeah, the footsie is a little stronger.The we have that multi sense of improvement.Of course, European stocks today, it's kind of broad based, isn't it?As we've been mentioning, a lot of these sectors in that positive territory thismorning, only as I was mentioning, just a couple were moving lower.In fact, three sectors moving lower.

And the US futures picture, they lookedbroadly unchanged at just a word on the basic resources that the best performingsector 8/10 struggling for interesting things to say about this market thismorning. Yeah no that seems to be that seems tobe the story you got some of the heavyweights moving higher as well.I just want to quickly correct what I said earlier.Lloyd's of London is not listed. Apologies.Look, get Lloyds Bank instead. So you are actually seeing one of thebanks higher as well. Barclays, for example, trading higher aswell as is BNP Paribas.

So you are seeing perhaps a rate story.I'm curious, that's kind of some sort of reaction on the little slight tick uphigher in yields We got off on the wall are comments stateside, but also inEurope as well. Again, it feels more like a macro storythat's reading into some of these stocks.It's interesting. What's that red headline earlier onabout China and Australia being on better terms around wine?And, you know, you might not see there's much direct read across from that intointo to commodities. But the fact that basically when basicresources do trade around sentiment.

Towards China and global trade and andas well around metal prices, we don't see a great deal.We see a bit of upside on iron ore this morning.It could be that Australia produces this higher grade iron ore that China Chinais reliant on. So they so they never cut off.They never shut the doors to that input. But they did certainly put the put theconstraints on in terms of other trade inputs from, from Australia.You had the Labor Government come in. The relationship has thawed and you'reright in terms of the symbolism, it's important.Of course it's important for the.

Domestic wine industry of Australia.It was a massive market, was the largest market China for the wine industry.So that's that's important for them. But it tells a bigger story about Chinaat least trying to find areas in relations with some of its tradingpartners to ease some of those tensions and to kind of put a floor, at leastunder those relations Found something interesting to say about this morning'smarket. Better move music around China.Thank God Tom Mackenzie was here because what would we have done otherwise?Not Australian wine and China. Tom's expertise clearly.Well, let's go from the micro then to.

The macro story, because we're talkingabout these individual European earnings stories.Is there more upside given that in this last quarter was last day of thequarter, we actually already saw the Stoxx 600 hit that record high.Take a listen to what Goldman's Sharon Bell had to say on that earnings story.She recently just upgraded her forecast for the index.In Europe. It's not that you don't get any earningsgrowth this year. We do have a little bit of earningsgrowth, but it's kind of low single digit earnings growth this year.It reflects the fact that the cycle is.

Going to be a bit anemic even if you dosee some recovery. We're looking at less than 1% sort ofGDP growth for Europe this year. So a little bit of a little bit ofearnings growth, but quite anemic really.And most of it is valuation. Sharon Bell there of Goldman Sachstalking about. Now.We're going to get a little bit more context here about a man at the head ofEuropean equity strategy joins us coming out of Citigroup.Beata, you and Sharon both upgraded at the exact same morning and we happen tohave Sharon on set.

But what I thought was interesting isthat your reasonings were so different. She was talking a little bit more aboutvaluations, etc.. You were talking specifically also aboutthe earnings story, the earnings growth. EPS, I think, was one of your standouts.Walk us through why you're so bullish on European stocks right now.So we've been very bullish on European stocks already before the upgrades thatthat that has just happened. But so we've been highlighting thebalance of risks improving and this early cycle environment potentialfurther broadening of the market that should be really conducive ofcyclicality and not only Europe, but.

Markets that have more cyclicalitywithin their sector weights. But the reason we coincided with Sharonis probably she was thinking about the very dovish Fed encouraged us, andI'm pretty sure that that was the trigger for her upgrades as well.So basically what we've heard, don't worry about the rates will cut therates. The economy is looking okay.We are upgrading the forecasts and we don't worry about inflation so much.So what more do you need for cyclical markets then that that is a pretty goodset and add to that a strength weakness in the dollar and a strength of thelocal currency.

It's a pretty good picture.Now, on earnings, I agree. If you compare European earnings to theUS earnings, of course they are much lower.So our previous EPS forecast was for 3% growth, very low.Now we got encouraged by continued upgrades from economists.Growth is going to be below 1%, but it's every month is a bit better than wethought it would be. And that, of course, feeds into my topdown models. So now I have plus 6% EPS growth forEurope. And we've been arguing for some time.Markets have been pricing in not so long.

Ago a contraction in EPS and now themarket is pricing pretty much in line with our top down forecasts, which isslightly below the analyst. It all makes sense except for that veryfirst thing you said. The the early cycle is what you call thewe actually just a Jerry Fowler over at UBS joined us this morning calling it alate cycle dynamic but still say that you were seeing value in cyclicals kindof outperform. What is the indication to you that weare early cycle and not late cycle? So, look, it's been a very synchronizedcycle. You could almost argue I would push iteven further.

We don't have a cycle anymore as we'vebeen used to. Right.But in Europe, of course, in the US it's a different story.In Europe we are coming from very subdued growth environment, flat GDP.Last year, EPS actually contracted by 5% and by double digits, excluding thestrength in the in the banking sector. So it has been a very bad underlyingyear for fundamentals. Therefore, it's easier to argue that weare coming up from low levels. Central banks are cutting.This is for me only cycle dynamics for Europe.It's a very strange cycle.

And what do we know about the level ofconcentration that we're seeing in European stocks?Because you've mentioned this in your notes, but also I think it'sinteresting, we talk a lot about too much concentration or some people don'tthink too much, but just a lot in the United States, in the S&P, for example,or even in the NASDAQ. But we don't talk about it much in aEuropean context, is it? It's not driven by the same sector, isit by tech? I don't imagine so.So what is driving that concentration in Europe?So what is very interesting is that.

Markets around the world to wind upstrongly year to date, but through narrowing so through concentration intoa few stocks and sectors and when markets narrow, they tend to narrow intogrowth. So in the US it would be mostly tech.In Europe, it would be luxury goods as well on the top of tech and morerecently even European banks. But we've had this concentration for twomonths. Concentration doesn't mean that themarket has to come come down of the cliff.Right? So the actually the very bullishpositioning in the US has just come off.

At the beginning of this of this weekwithout the markets collapsing. So do you expect that to do you expectthe European market to broaden so our base case for this year, what was forthe continuation of the broadening charts as it happened in the fourthquarter of last year? Of course, this narrowing was veryunusual for Europe. Hardly ever happens in Europe happensmuch more often in the US. So a more natural environment for Europeto outperform is really of broadening and we are starting to see tentativesigns that this is this is starting to happen right now.So yes, Brodin in going forward, be able.

To quickly went to your first answer.I want to go to your first answer as well, because you talked about thedivision that's coming through from central bankers.You can look. And we can become less concerned aboutinflation. But is that the message we're gettingfrom Chris Wallace Is that the message we've had from Rafael Bostic doesn'tseem so. Just does that does the message fromthose voting members of the FOMC challenge that view?I think we are going to have a lot of news flow that will be challenging theview for sure.

But we really a weak dollar, which we.Yes, you don't get a weak dollar in that environment.I mean, if Chris if Chris Waller is is is is our new guiding light, then we'renot looking at a weak dollar. So first of all, we really focus on whatthe chair Powell has said. Right.And what the dots are telling us. So the dots stayed the same.That was encouraging. And that was always the risk that theywould come lower. So I think this is what the marketsleaned on, too. Now, on the on the dollar, we have a bitof the weakness.

I think the risk on the environment isenough for equities outside of the U.S. for the dollar not to strengthenfurther. So we do not have huge weakening in thedollar, but over the next two quarters or so.Okay, you're overweight continental Europe and emerging markets, you'reunderweight the U.K. The answer, how does that does the U.K.not have a cyclical you you favor the cyclicality of this market.Does the U.K. not have a role there?It does. 50% of the sectoral weight comes fromcyclicality, but it's very skewed.

Towards commodities and especially theenergy sector, while the another 50% is purely defensive.So it's a very interesting and unique market from that perspective.So what's the U.K. really needs is for the commodities tostart picking up. This will be a better setup for the U.K.market for the Footsie 100. So is that not eat into the bottom line,though, just given that there is that dependency, for example, hypotheticallyfor I think the very first time in months, we've heard Morgan float theidea of 00 oil, for example. It's not their base case, but they saidit's a possibility in kind of the worst.

Case scenario.Does that kind of spook you in any way in terms of the bottom line for some ofthese European companies? So 00 could be a risk, especially forthe inflation rate. Circling back to the to the centralbanks, it's been coming up gradually, mostly because actually the demandaround the world is better. So it's a leading indicator thatactually the global growth is not so bad.And of course, it's a function of of some supply constraints as well.And it all depends how it goes up, right.How fast and to what levels, but a bit.

Higher and a bit higher.Oil, I don't think should be a problem at that point if the growth continues topick up economic growth. I want to ask about the significance ofreal wages in 2020 for buyouts, or is this a an upside risk for for growth,for all kinds of dynamics within the European economy?Maybe. We saw the U.K.retailer next talking about this some time ago and today.Then we got H&M numbers. Yesterday, they were strong.JD Sports numbers seem to be strong, as if there's something propelling theseretailers at the moment.

A next set.And he was talking about the real wage story that's just very U.K.but that seems to be a conversation we're having in other geographies aswell. So wage growth is always the risk forinflation and for the central banks again, but and could put some pressureon margins. But as long as earnings pick up or don'treally proper margin pressures, you only get when the earnings call ups, Right.We don't see that on the horizon at the moment, but definitely a risk.Absolutely. That's not played out a lot to digest.So we've thrown a lot at you.

Beata Manthey, head of European EquityStrategy over at Citigroup. We thank you so much for joining theprogram. She's talking a little bit about how doyou look at some of the even concentration risk, how you look at someof the indexes. Well, I'm going to put my Guy Johnsonhat or Guy Johnson tie on perhaps today and look at the sensational six, hissensational six where he likes to look at some of the bigger heavyweights, thekind of sectoral picture that we really look at today.It looks like it's all green on the screen except for Novo Nordisk, which isinteresting given that we were talking.

About that margin story that theypotentially are selling a drug for about ,000 per injection could be made inabout $5, according to one medical review.The rest of the heavyweights, LVMH, for example, ASML, even Schneider Electric,which we had Jerry Fowler on earlier, talking a little bit about the I readthrough, they're all higher by over 4/10 of 1%, leading the index higher as well.So that is your quick check on the sensational.So let's get a couple more sensational stocks here.Joe Easton monitoring those very, very closely.Joe, walk us through it.

So the most sensational ones in the UKat the moment are in the retail space, both JD Sports and IO World Gaming.Both of them are recovery stories. JD We had in stocks to watch, they havereiterated some of their top line guidance and a bit of a relief, sayingas well a massive drop from them in January.The sales are providing some support in terms of the American sales where thestrength seems to be. The UK actually looks pretty weak.In terms of the profit guidance, that was up 17% at the open.It's come back down to 8%. Now, in terms of, well, this is whitegoods, dishwashers, fridges, that kind.

Of thing.They've had a terrible run. But again, it's more about no downgradeto profits and therefore some relief in the stock coming up 13% this morning.We'll take a look at the chip stocks. We had that big warning from soy techand that one is getting absolutely slammed over in Paris is down 11%.It was down 15% at the open, much worse than expected, according to analysts atMorgan Stanley. And it is in the iPhone and smartphonearea. Semi supplied Internets are actuallystarting to see a bit of a read across now coming in some peers varta inGermany, they make the little batteries.

That go into airports and AMS.They also supply iPhones as does SD micro all of those coming down.A bit of a read across despite that positive update from hon Hai over inAsia, the big iPhone supplier in terms of deals we've got the latest UKtakeover this company Sprint, it makes equipment for the telecoms area.They've got a second bid previously agreed a takeover and they've actuallygot a new bid above 200 pence a share in that stock gaining 10% casino that's inand out of a trading halt. It's resumed trading after a long periodof suspension. The takeover by Daniel Krasinski hasbeen finalized.

It's very, very messy.It's down 50%. It will take a while to understandwhat's going on there, but it is a dilution of shareholders following thattakeover. And and Brace is over in the video gamespace. They're doing a deal.That stock was up around 8% at the open in Sweden, but it's actually coming downa little bit now, doing a 460 million deal with take two in the US.Finally, we're keeping on the same of Lloyd's of London insurers.We've got an upgrade for score very timely given your interview just now ahard market strong pricing in the.

Lloyd's of London market.I mean score gets an upgrade at HSBC and a lot of focus on that given the eventsof the week. That stock up three and a half percent.HSBC upgrades it to buy. Okay Joey St Excellent.Thank you very much indeed. Some of the stocks on the move for usthis Thursday morning. Coming up, the world's biggest banksquietly hang on to carbon intensive clients, exposing cracks in the world ofclimate finance. That story is next.This is Bloomberg. Welcome back.This is market today.

20 minutes into what feels like a bit ofa sluggish session as we head towards a long weekend here in Europe and also inthe United States. But we do have some upside on Europeanequity markets, just up a 10th of a percent.The German market underperforms, the Footsie outperforms retail, the bestperforming sector, as we saw yesterday. Some of those retailers do pretty well.That seems to be a bit of a theme of the week.Time for your Bloomberg Quicktake story now.This morning, the world's biggest banks are quietly hanging on to carbonintensive clients because of what they.

See as unrealistic demands fromregulators and civil society and the threats to their fees, of course.Joining us now is Bloomberg's Alister Marsh.Alistair, the fees were always going to get into the story somewhere, but it isto do with other things as well. And you've got some really interestingways to illustrate where this story is going.But let's start with you know, it's been three years since most banks madecommitments around climate. It's been a big focus for the sector.So what progress has been made? Well, in the real world, emissions havegone up year on year, every year to.

Record highs, and banks continue tofunnel billions of dollars into fossil fuel clients.So you can draw your own conclusions that the energy transition is not goingthat smoothly. And even if you look at what recentlythe CEOs of some of the big oil companies, the Exxon and Aramco, weresaying is that actually we need to put more money into oil and gas.We're going to be needing to rely on oil and gas for a lot longer than wethought. And we keep pushing money there.And that puts banks in a bit of an awkward position because they've comeout with these climate commitments.

They've said we're going to get to netzero by 2050. But actually the progress has been veryslow. Some could say that the expectationswere too high for banks on what banks could deliver on, but so far, progressis not that much to show really. Can you connect the dots for so how abank gets involved in energy transition? I don't I can't even understand thatrelationship. Well, the cost, the price tag of theenergy transition is like 5 to 0 trillion every year.That's the money that's needed to wean is off of fossil fuels to build a kindof low carbon energy system, to build.

Low carbon transportation, you know,aviation, steel, cement, all the things that kind of make up our economy.We need to get off fossil of a fossil fuel based under a kind of clean energybase. And that's going to require a lot ofmoney. And the governments don't have thatmoney or most of that money needs to come from the private sector, from banksand from investors. And that's kind of the role that theyplay. And they've pledged that they willsupport that transition and that they will align their lending portfolios andtheir financing businesses with a 1.5.

Degree outcome with net zero.And that sounds easy on paper, but in practice it turns out to be fiendishlydifficult, not least because of what I just said about emissions keep risingand we're just way off track globally for hitting net zero.And so those commitments look a bit like pie pie in the sky, and that tensionkind of bubbled through in one particular meeting.And this is some color that is woven through the Bloomberg Quicktake of thedata and focuses on an on a UBS banker. Yes.So there's a UBS banker called Judson Berkey.He essentially is the main guy for.

Sustainable finance regulation.And there was a meeting in Tokyo held by the Financial Stability Board, which isa group of global regulators. Representatives from the Fed were there,the ECB, and he basically said, you regulators, your expectations of banksare way off track. You're asking us to align our lendingour portfolios with that 1.5 degree world.But the world itself is on track for 2.8 degrees or more.How can you possibly expect us to align with 1.5 is ridiculous.And the way banks, big banks could do that, but if they were to do it, they'dhave to basically divest all of their.

Big clients.You could deliver a portfolio decarbonization, but that's not helpfulfor real world decarbonization, which is what we need.Right. And I guess this takes us into thequestion of fees for banks that clients you mention and who they compete with,because this is all very well. It's one thing if banks decided to dothat, but then they would only hold the power to drive change.I suppose if they were the only source of capital, the only source of fundsstepped forward. The private sector, the private andprivate credit sector.

You know, there are other places thatbusinesses can go to get funding these days, and banks are going to be acutelyaware of that. Exactly.There's a big argument that comes from the banks that says if we divest fromour heavy carbon clients, there are plenty of other people that can step inand take over from us. And we actually, because we've madethese commitments, are kind of on the hook for having to deliver on them andare therefore more likely to push those high carbon clients to decarbonize.Whereas if you then have those same loans or that same financing, go intothe private markets where you have.

Perhaps lenders with less scruples whenit comes to climate or certainly have not made those commitments and perhapsare less. Caring, shall we say, on such topics?Well, that can allow for emissions to grow in the private markets with lessclarity, less transparency, and less kind of, you know, no one really holdingthem accountable. And so that's a big problem.Or potentially as to how big is all that we've all in on this when it comes tothe banks. I mean, they made this commitment tobring out the tiny violin for the banks. They made these commitments.They did they made these commitments.

They're not naive.They're smart individuals, men and women working through this.Yes. They made the commitments.Why they something that they're suddenly doing the hand wringing.Now, the other question is there has to be a point where you make the cost ofcredit more expensive for the carbon intensive industry.You make it cheaper for the renewables, and that's got to be part of theprocess. Yes, but a lot's happened since theymade these commitments mostly. So they made most of these commitmentsfor the 2021 era.

2022.We have the war in Ukraine, the energy crisis that's come.And so the assumption that oil and gas is going to go away was in terminaldecline. That's basically that doesn't existanymore. Those crises are profitable, veryprofitable. It's very hard to say, oh, we don't wantto bank ExxonMobil anymore. There's no banking CEO willing to makethat kind of move. And so, yeah, we're in a very trickyposition where there's a lot of money to be made on fossil fuels.But we also need to drastically move if.

We're to have any chance of hitting the1.5 degree target actually just happened today.So there's this real tension. Bloomberg's Alistair Marsh walking usthrough that tension that we're seeing in the banks with the energy transition.We thank you so much for bringing that to our attention.Coming up on the programme, we speak to Wizz Air CEO and co-founder JosephVaradi on his outlook for the airline industry, travel and more.It's a conversation you don't want to miss as we talk about the demand goinginto the summer season, the inflationary pressures and of course those supplychain issues that you were seeing on.

Both sides of the Atlantic.All of that and more coming up next. Stick with us.This is Bloomberg. So it's been a monster rally.That rally was mostly fueled by adoption, right?With the ETF, it made it very easy for people in the U.S.institutions and the wealth channel, most importantly, to access Bitcoin forthe first time. That was the Galaxy Digital founder andCEO Mike Novogratz on the Bitcoin rally. Certainly it's been a really strongquarter for Bitcoin for a host of other assets for gold as well.But the focus of this, a lot of our.

Conversations this morning, Kristie, hasbeen around supply chains. And we're going to go into anotherconversation where that is important. We spoke earlier on to the CEO ofLloyd's of London, and he was talking about the the impact on the insurancesector of one big supply chain issue, and that's the collapse of thatBaltimore Bridge. Yeah, but supply chain certainlysomething that's really dominant when you think about what's going on in theaviation sector right now, be it engines or the supply of aircraft.It is. And then also, I mean, dare I say,actually connects to the Bitcoin story.

And the investment story here, becausesome of those inflation concerns are actively driving the market.There is a fundamental connection between inflation and alternative assetsand private credit and private equity in Bitcoin, not to put those all together,but the inflationary story is important because take a look at where all theuptick is coming from is coming from demand that hasn't gone away.Supply chain points that you mentioned. And a lot of that, at least in theUnited States, if you break it down into the nitty gritty coming from airfare.Yep. Yes.Yeah, absolutely.

So efforts have been certainly playingtheir part in that inflation story. Let's get into a conversation about theinflation at the aviation sector then. Now we're joined by the CEO of Wizz Air,Joseph Ferrante, who's passing through London this morning and with us.So very nice to speak to you. It's nice to have you with us.Let's look ahead to the summer. I know we've got all these supply chainissues to talk about and we'll get to that.But I just wanted to have a moment to think about where what the summer lookslike, because I know, you know, you'll have people, network planners andcomputers all all focused on how strong.

Bookings look for the summer.And I was looking at your load factor over the last few months, and it didseem as if it had dropped year on year. But I know you're growing.What should we be concerned about? That load factor drop?What's going on there? No, not at all.We see demand being very strong and intact and people want to fly.To be honest, I think demand is a function of economic prosperity as theworld is still doing relatively well. Of course, we always wanted to be to bebetter, so there is nothing wrong with demand.The challenge to the industry comes on.

The supply chain side.Okay, so let's go there then, shall we? Because that's going to be important.Let's start with the supply chain stories that do impact your business.And I want to this is, of course, around the A320 family of planes grounded toPratt and Whitney engine issues. Can you give us any update And thinkingabout the summer, is the summer under threat at all because of the lack ofavailability of these aircraft? So at the moment, we have around 20% ofour fleet grounded as a result of the pattern between GTF engine inspectioncycle. We try to mitigate that issue byextending existing aircraft operations,.

Taking market loses or so we continue totake new aircraft deliveries. So as a result of that, we are planningon flat capacity year on the year going into into summer.So I think we have created some protective layer, whether we'd bedifficult, but this is a significant take up in the industry unexpected.But by now I think we are all fully on top of that.We have plans, we have motors, we have all sorts of compensation schemes inplace and operational. We are processing the idea.So it's going to take us a year or two to forgo sort of cycle, but I think weare on top of it.

What's the most up to date time frameyou're looking at for resolving the Pratt and Whitney engine issue?This is not going to go away too quickly.I mean, we are talking about two types of issues.On is the engine technology is a brand new groundbreaking technology that isthat you should be reasonably expecting of some childhood diseases.And I think we are going through that cycle of childhood diseases.And on top of that, that was this industrial hiccup of contaminatedmaterials, the so-called powdered matter, which needs to be corrected andparts are being replaced as we are as we.

Speak.Both lines, I think, will come to an end in the next 18 to 24 months.What is the Boeing impact you exclusively with Airbus for now atleast, the Boeing going through, of course, these momentous challenges.But it ripples across the sector in terms of the ability to churn outplanes, to get planes to airlines. The impact on you as a business, as youlook ahead from what Boeing is going through that travails?Yeah, first of all, we are happy to operate Airbus.We like the Airbus planes. And we took a strategic decision by wewere going for the Airbus.

Having said that, we have an interest ina very strong Boeing. We want a competitive industry becausecompetition drives economic efficiency in the industry, drives innovation, andwe need both going forward. So we want to see Boeing to recover fromthis, to become solid again and be a quality player.India in the industry. You talk about this kind of interest andramifications for the broader industry. Talk to us about the capacity crunchthere. Where is the bigger risk factor?Is it that demand has exploded in the way that it has or is it the supplycrunch is what what's the bigger hurdle.

For you?Yeah, look at us. If you look at demand on a global basis,I mean, the auto industry globally is basically back to Covid level.So I don't think that this is the explosion of demand globally.It is the explosion of the supply chain globally.This is what's affecting the operations of the industry.But that's pushing the airfares higher as well.And you're seeing that both sides of the Atlantic.Talk to us about the air fare picture. When do you as a company address that orpull it down in line with the.

Inflationary pressures that we'reseeing? Yeah.So basically, you know, airfares are the function of supply and demand.And if supply is contained, obviously this is going to make an effort pushdown on airfares. Our business model, however, is to makesure that we derive the most economic efficiency from our operations and applythat saving to the consumers because we are still stimulating the market.I mean, let's not forget that in the United Kingdom it is a fairly saturatedmarket. But if you go to countries like Sandtoninstead of you are still stimulating for.

Fliers.30, 40% of our passengers, our first flyers, they just flew first time everin their life. How?That's quite the experience. And I sort of go back to some of thesupply chain issues we were talking about with regards to Boeing.And you're saying it's important to have a strong Boeing.I find that interesting given you don't use them as a unit, you know, not notcustomers, as Tom said. Why is it important for you then, ifyou're not a customer of Boeing, that we have a strong Boeing in the marketplace?Because I don't want anyone in this.

Industry to monopolize this marketposition because this is going to push prices up on the airplane.And if we slow down innovation, I think we need both.We need to have good assets coming out of the productionline at reasonable price. And also we need to innovate thisindustry. I mean, you know, we have the carbonchallenge and we need to make sure that the investments are put out properly andthat is an innovative force driving the industry.So you don't want Airbus to put up prices, you don't want any of yoursupply as well.

So I don't want to have to put upprices. Is that to some extent an argument thatmaybe you benefit, though, if if Boeing customers are not able to get hold oftheir planes, for example, Ryanair and you're in the same markets as them tosome degree in various geographies, So do you benefit from their inability toget hold of the aircraft? Look, there are any benefits coming outof the situation will be to take them. But we are in the long term strategicgame here. The interest strategically is to have astrong Airbus, a strong Boeing, strong players in the industry operatingproperly and delivering the right.

Quality of product to the market, safetyand critical quality issues. Obviously, in focus at Boeing, are youare you completely and 100% reassured that Airbus has none of these issues?How confident are you in Airbus's ability to turn out quality aircraftbeyond? I mean, we are deeply into the Airbussystem. I mean, just look at it from thisperspective. Every yearwe take it off here on 14 year of deliveries.So we live and breathe together with Airbus.We understand our quality system, we.

Understand the aircraft, and we areexposed to two new aircraft deliveries on a continuous basis.We are very confident regulators are on it, the regulators out on it.I think air is doing a good job. Airbus is doing a good job.I think they are making the necessary investment needed in quality controls.I have full confidence. Full confidence.But is there something else you'd like to see from the regulatory authoritiesin terms of ensuring that safety and ensuring that consumer confidence aswell? I think what we need to have and maybethis is what has eroded over the last.

Few decades, that due to theconsolidation of the industry, the relationship between the regulator andthe and the manufacturer became somewhat more cosy than what it should have been.These two lines must be totally separated out.The manufacturer must control internally quality of their products and it has tobe scrutinised and oversighted by the regulator in a separate manner and thosethings should not be overlapped. Okay, so that's the regulatory storyaway from the supply chain issues. There's something else I wanted to askyou about, and that is the way that we're sort of almost going back a fewdecades in the sense that some consumers.

Want packaged holidays.Again, it seems we've been writing about this appealing back, and I know othershave as well, but easyJet is making profits in that area.Ryanair has deals in place to sell packaged holidays with cost of livingcrises in various places. It's focused consumers on knowingexactly what they're going to have to spend upfront.Are you doing anything in that space to make money on that on that front?I think we are seeing conflicting trends, to be honest.I mean, that may be a trend for package holidays and there is another trend forunbundling and people are going to pick.

Their choices, whether that's a hotel orlogistics order or airfare. We are essentially enabling them to doboth depending on consumer preferences. If people want a package job, they cando it on or off side. They can do their own holiday package.If they wanna buy various products separately, they can do it too.All right. A lot to digest there.We thank you so much for joining the program.With their CEO and co-founder Joseph Varadi joining the program this morning.Coming up, with Germany set to partially legalize cannabis for personal use inthe coming days, we're going to discuss.

The opportunities for the commercialmarket. That conversation next.Stick with us. This is Bloomberg. Welcome back.843 this Thursday. The Markets Today show, of course,continuing to keep across these markets for you.Their benchmark is actually up 2/10 of a percent.So building on three straight days to get to a fourth straight day of gain inprogress right now, fresh records set yesterday.It looks like going to add to that.

Today, the Footsie 100 turning up 3/10of a percent. The commodities left coming throughslightly for the footsie 100 over in France and also getting 3/10 of apercent and across your sectors quickly having a look on how things are shapingup. Consumer products, energy, food andbeverage all at the top of the list in terms of what is happening trouble thisyear, I should say. In fact, top of the list gains of 8/10of a percent, consumer products up 7%. But on the list is construction off bytenths. And S&P and these are flat, NASDAQfutures flat.

Again, fresh records on US stocksyesterday taking a bit of a pause, it seems today.Let's get to the banking space now where UBS has cut its bonus pool for last yearby 14%, one for 14% after a tough year, of course, for dealmakers and traders.This as the Swiss bank increases its cost saving targets amid the integrationof Credit Suisse annual profit came in at a record 27.8 billion USD.Let's bring in Bloomberg's Tom Metcalfe, then, who leads our finance team for thedetails on this. Tom, a maltese pay, Sergio Maltese payin Focus. What does that number look like?Where does this rank among banking.

Executives?You had to have around €15 million mark, which puts him right at the top of atleast among the main European banking CEOs.You know, as we know, when you compare that to us bank CEOs, it is relativelythin. You know, you get someone at a Goldmanor a city getting paid north of $25 million a year.But it just goes to show, I think, a obviously the size and scale of the jobahead, but also the sense that, you know, it's perceived that executives atUBS doing a pretty good job of this integration, albeit as they themselveshave said this year is a really tough.

Year for these mammoth projects ofgetting Credit Suisse completely absorbed into UBS.So you compared it to the US banks as well.But talk to us a little about how it compares to European banks, given thatthe bonus pool is down about 14%. Yeah.So the bonus pool for all the traders and the deal makers is down.You know, there's been a bit of a mixed bag in Europe.So you've had some banks like a UniCredit actually boost their bonuspools, but largely for sort of the really big players like UBS and Oxy inthe U.K.

At Barclays, we have seen that pool drop14% is, you know, around about in line with those kind of lenders.And just again, speaks to that push by UBS to keep their costs down and thesense that, you know, Credit Suisse had a much more more sizable investmentbank, at least relative to its kind of entity size.And and UBS is looking to shrink that a bit.Hmm. Tom, is this this coming from an annualreport, I think, where, you know, typically you find more in the in thefinancial statements usually tell you about these businesses, but you'vemanaged to glean quite a lot from the.

From this statement today.What else stood out to you? Yeah, there was a really interestingline that you can read the tea leaves on, but, you know, not a speculationabout how long the model is going to stay.And, you know, previously there was a sense it obviously stayed through.Right. Integration is complete, which they'reaiming for by the end of 2026. But there was a line there, I think,from the chairman saying, we expect you to stay at least through then.So when you're reading those things carefully, that kind of wording belowwith central bankers, you know, you.

Could read that as suggesting that Moatis going to be there for longer than perhaps people were initially bankingon. Tom, thanks so much.So Metcalf bringing us the latest on the banking sector.Obviously, folks there on the pay at the top and the bonus pool and how thatcompares to the European competition. And I think when we when we talk aboutthe banking sector as well, we have to put this in the context of something,the European interest rate story over and over again.We heard it from Commerzbank. We heard from others as well, that ifyou're talking about peak rates in.

Europe that have been kind of fuelingthis, these gains in the banks and fueling, therefore bonuses and thesekind of salaries. What does that mean for for the interestrate picture and therefore the banks broadly?Okay. Let's pivot firmly away from theinterest rate picture. I can think of no linking thoughtmarkets markets on a high. Excellent.Thank you, Tom. He should be doing this bit.Europe's largest medical cannabis market, Germany is set to partiallylegalize weed for personal use from next.

Week.Bloomberg's Oliver Crook is at a medical marijuana growing and processingfacility just outside Dresden. He's dressed for the occasion.He brings us a conversation on this front.Good morning. That's right.And away from interest rates. But rates of interest may be high inthis story because we are one of the biggest growers here in Germany wherethere are only three companies that can legally grow cannabis here in Germany.And only one of them is a local German company and that's Denmark.And that's where we're standing right.

Now in their growth facility.And this comes as the law has been passed.Now that starting on the 1st of April, there is going to be a partiallegalization, a decriminalization and huge implications not only for themedical part of this business, but the potential future commercial sale.So I'm very pleased to be joined right now by one of the managing directors,Philip Gerber, who is here. Can you take us first what's going on inthis room and a little bit about what the operation is here?This is one of our growing rooms where we currently grow up to one ton peryear, which we only can deliver up to.

Now to the German government.As of Monday, we will be allowed to use the one ton of spare capacity we alreadyhave for grow, which we can then sell directly to the pharmacies.So we already can double our production here at this site.And we also have lots of expansion capacity when it comes to the pond,which you mentioned, the second column of the law, when medical when cannabiswill be allowed for recreational purposes.Well within the test regions, which are going to be defined.That's right. So there's pilot program we're expectingmaybe at the end of the year, the.

Beginning of next year, and that will beselling directly to the public, which is really the game changer here because youare primarily and really only a medical producer right now.But really there's a chance in the next couple of years that becomes the smallerpart of your business. What do you expect for the timeline forthe commercial sale and illustrate a bit for us the scale of what we're talkingabout here? So the cannabis market in Germany isestimated to be between four and 20 and 770 tons.If you talk to paper producers which are often used to consume cannabis, theyArava expect a thousand tons to be.

Consumed in Germany.So this is interesting. I just want to make this point becauseit's very difficult to get data because this is obviously illegal.So you need to go to the manufacturers of rolling papers to get an idea of howmuch is being used in Germany and the paper from the government for the phoneand to 70 and 70 tons was taking assumptions from the US, from Colorado,from Canada to estimate the German market size.So we see it's a huge potential market knowing that the medical cannabis marketis just right now about 12 to 13 tons. Still, however, the medical cannabismarket over the next 12 to 24 months is.

Expected to grow by 5 to 10 times.So you can see already the big potential within the medical market as a firststep. And then when the recreational marketsteps in, this is obviously a huge growth opportunity as well, especiallybecause within that second part, which is going to come, everything which isgoing to be sold for recreational purposes has to be grown in Germany.And as you said, we had just one of the three licensed producers right now whocan grow cannabis in Germany. So that positions you pretty well in themarket here. Here's the question Do you need toactually expand now to fill that.

Capacity?And currently we can serve two tons out of this facility for the medical market.When it comes to that second part, we already have the expansion capacityforeseen. We have all of the permits in place toquickly ramp up the business to serve that recreational pot as well.Right. Which is no small feat in Germany, aswe've learned, and across a lot of different industries.And there's been a lot of hype, at least in the United States and Canada, with alot of valuations for cannabis companies, much less here in Europe.So for you, what are you looking at in.

Terms of speaking to investors?I assume you got a lot of calls in the last few weeks.Totally true. So we are currently starting such aseries C with the clay, so everyone who's interested reach out to us.So we are doing this clay now and then close our series C over the time of thisyear to keep up ramping up the business in Germany where we see this huge growthpotential, which is besides the growing pot, which we already do here, we haveservice lines where we serve our other customers with pharmaceutical servicesto get their medicinal products to the market as well as software solutions,which we developed for the pharmacies.

So we really cover the full supply chainwhere we see the leverage of this market for the future.I think really the cannabis ecosystem for the first time.Exactly. The ecosystem.And but the Canadians are also at the door.They're growing here in Germany. How do you stay ahead of competition?Because a lot of the sort of overhead and a lot of the barriers to entryaren't that high from a physical standpoint.From a physical standpoint, that's right.But the regulatory wise, the hurdles are.

Quite high because we havepharmaceutical production company, so we adhere to the same standards as the bigpharmaceutical companies in the market. And that is a hurdle you first need totake. What we've got to say as well is thatwith of all the cannabis which is currently grown in Germany, we have 70%of market share, although we only got the smaller number of lots which we canproduce, we got three and the other ones got each five.So we see as Andrew an underdog to say so we achieve too high quality standardsand have more than 70% market share of that.What is growing in Germany and I'm.

Curious to get also a little bit of anidea of your your relationship with the government and how the government istrying to sort of treat this industry and how is it trying to encourage it orhas it been A it's difficult. The government is really supportive tous. So we have two states in Germany whoinvested into the company as well. We got subsidiaries here from the localstate of Saxony, a 30%, which subsidize the assets here when we build up thisfacility because we have more than 70 people who are now working here that acompany, we have implemented that. So we see good support also from thelocal and national governments.

We are working very closely togetherwith the beef fund, which is the FDA in the US, where we have a goodrelationship to build up this business. Philip Granville, thank you so much.And for taking the time and for bearing this sort of tropical climate that wehave in here in Denmark. And so again, you know, this is a hugeopportunity for these guys in the medical industry, but really for any ofthe investors and for the businesses that are looking into the future inGermany and in Europe, it's tapping into that recreational market, which as wewere saying, you know, they're producing two tons here.We're talking about just for Germany,.

450 to 750 tonnes.And across Europe, the estimates are if the legalization were to proceed morebroadly, it could be a quarter trillion dollar market.Bloomberg's Oliver Crook there walking us through some of the numbers is reallyinteresting story because we've seen it actually become a real growth story inother parts of the world. Canada, for example, of course, gettinga lot of gains, I think, in the state of New York, seeing that as well.In terms of watching some of the growth. Let's talk about what else we're goingto be watching in terms of today's data docket.At 1230, UK time will get us fourth.

Quarter GDP.The third reading is going to be coming out the initial jobless claims as wellat about the same time. 2 p.m.UK time you missed consumer sentiment data that March final reading hitting atabout 2 p.m. there at 5:30 p.m.UK time the focus shifts to Europe. The ECB's Villeroy speaking in Paris nowby 6 p.m. UK time U.S.Treasury market closing early for that Easter break.And of course later today, Sam Bankman-fried set to be sentenced forstealing billions of dollars from.

Customers, marking the final chapter inthe FTC's case, which shook the crypto industry by storm.We're going to be live with the New York Federal District Courthouse.And you can catch our special coverage of Bloomberg Crypto from 4 p.m.London time onwards. You know, it's interesting, when thisstory first broke and we saw the ramifications, there was an expectationthat suddenly interest in the actual crypto institutional adoption would beoff. Right.And we've seen the exact opposite that happened in the same quarter as we aregetting this sentencing.

We also saw a record price on Bitcoin.Yeah. CC Of course.And Binance also pleaded guilty in a case with investigators, at least theDOJ in the US taking a bit of a knock to Binance.One of the other big exchanges, of course.But as you say, it has done nothing to quell the interest.Now that those approvals came through January 11th from the S.E.C.for the likes of BlackRock Fidelity and those ETF products ETF sorry of coursethe driver and worth mentioning. So as we bring this program to a close Isuppose the markets there's the data.

That you mentioned Kristie on the daybut but tomorrow is the key data point when possibly nobody will be looking.Yeah, no markets will be trading, at least not on both sides.The Atlantic. Yeah, well I think it may be maybe agood thing this one time around given the your point earlier in the show whichis that people have been shrugging off this data over again the CPI numbers,the pie numbers for the PC deflator. And of course, Chairman Powell, hiscomments given we've heard so many of his peers speak this week, starting withRafael Bostic, most recently the Fed's. Waller.Yeah.

So maybe post Waller.It is a good thing that we have a little time to digest exactly what this datatells us. And of course, we'll get that tomorrowwhen, as I say, markets are broadly closed.That is it for markets today. The European equities story is aslightly positive one, up by 2/10 of 1% volumes, no doubt a little depletedbecause of the market holidays coming tomorrow and in some cases in parts ofEurope next week as well. So U.S.futures flat to negative. The pulse is up next.This is like that.

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