host: good morning and welcome back to "bloomberg daybreak: europe."

maris halting shipments through the red sea as iran sends a warship to the area. israel's supreme court overturns a law that would weaken judicial powers. the latest blow to the prime minister. housings of troops being pulled out of gaza signaling a possible shift in the war with hamas. 30 people killed after an earthquake in japan. a lot of news coming out in the new year. over the weekend also. we are seeing investors on the sidelines. futures largely green on the screen. it is important to remember that -- ftse 100 futures are lagging. whether or not this is a magnified move coming off the holiday trading volume is the

most likely suspect of this move. watching fundamentals. shipping stocks and moves in geopolitics will be reflected in the euro stoxx 50. some getting a cue from around the world. you are seeing also a pullback in asian markets. the msci asia-pacific pacific index taking out japan japan is closed today and tomorrow. even treasury volume is going to be very light. it brings us to treasury futures. a bid in bond futures. as you see weakness -- contradiction between the bond market and the fx market. the strength not getting in the way of brent crude.

78 handle higher by 2% overnight. a 2% move in the oil market is substantial. to our main story, and iran -- in iran which has sent to a warship to the region after the u.s. destroyed three houthi ships. we have more. talk to us about this move from tehran. how serious of an escalation is this? >> i think the warship iran sent is relatively small compared to the u.s. forces. what is important is when this is happening. it is happening among already increased tensions in the red

sea. there is a u.s. led plan to try to protect shipping in this area where there have been multiple attacks by iranian backed groups on vessels affecting global shipping. it is the timing that is interesting. and the fact that at this current time, if you have a lot of military ships, u.s. ones from allied forces and iran in very tight areas and where areas where shipping is very crowded. that is always the concern in these areas where you have narrow areas of global shipping or places where there is a movement of goods, the more military ships that enter into that space a higher the risk of something happening even if it is quite small, it could grow into something quite bigger. kriti: you do have an american

military presence but there are also a lot of shipping lines and container flows pausing in the region. that brings up how much u.s. military presence actually matters. and israel cutting the size of forces in gaza. is this a new phase of the war with hamas? >> it does appear to be this way. it is unclear what the tangible goals would be for israel and its invasion of gaza. they made a clear that they would not stop until they had destroyed hamas in gaza but what that meant exactly was still unclear. did it just mean taking out top leadership? eradicating all of the group? it is a difficult task to fulfill with unclear boundaries. this looks like a starting of putting out -- pulling out.

it is interesting that there are several reasons why they might have done this. one thing -- one of the representatives from the government is talking about is that the army is largely in control of northern gaza. and there has also been u.s. pressure on israel to withdraw. there are also economic reasons. sustaining the level of combat is becoming very expensive for israel which is another factor. it does look like we are entering another phase. in the end it was unclear when they would withdraw but it does seem like gradually we are entering into a new phase. kriti: it does feel like international pressure and even domestic turmoil feeding into that decision-making. thank you for your rewarding -- for your reporting. plenty of news coming out from

israel including its supreme court which has overturned a highly contested law aiming to decrease the power of the judges. this is a setback for the prime minister. bruce einhorn is all over the story. talk to us about this court ruling. >> the court was faced with the question of whether it would go along with a law passed by the prime minister's coalition last year that restricted the courts's ability to overturn laws on the basis of reasonableness. reasonableness is a standard that courts have used in the past. the coalition of the prime minister was trying to limit that as part of a broader package of judicial reforms which caused a huge amount of unrest within israel. it led to massive protests both

for and against this and this was all before the outbreak of war in gaza. the court ruled 8-7 that no, the government does not have the ability to pass a law limiting the courts ability to overturn laws saying reasonableness is a standard. the court said that the proposed law causes severe and unprecedented harm to the court characteristics of israel as a democratic state. the court also ruled that the supreme court has the ability to put laws under judicial review in other words the court has the ability to overturn laws passed by the knesset because they violate the laws of israel. the big issue here is that israel unlike the u.s. does not have a written constitution.

so it is a little fuzzy when it comes to things -- are laws unconstitutional because there is not a written constitution in israel. kriti: and to your point there is an underlying narrative that this would have been the achilles heel for the prime minister and how much power he holds in the face of public opinion. talk to us about the tensions in israeli society right now. >> the court ruling does, even by the nature of the ruling itself, 8-7, showed some of the divisions that we see within israel. israeli politics over the years has moved more and more to the right. the judiciary has been seen as more liberal and has been a source of frustration for many among israel's conservatives for thwarting some of the changes

that governments want to make. the prime minister now is phase with a major setback for his domestic agenda at the same time his popularity has suffered considerably following the outbreak of the war in october. kriti: certainly something we are watching closely. bruce einhorn, thank you for bringing us that crucial reporting for what is going on in israel as well as outside. israel really talking about how they will be tackling the exodus of flows in terms of capital investment going into the country. pretty classic when you have a war outbreak. israel has cut their benchmark rate when it comes to their bank and monetary policy is expected -- this was priced into the currency. we are seeing slight weakness in the is really shekel. it is worth mentioning that this may be a first in a series of how the bank of israel may

inject liquidity. the fx reserves have already been deployed to the economy. how much more reserved and they have to support the economy? that will be one of the stories that you can get a round up of when you get your day going. if you are a terminal subscriber just type in da why be go. -- dayb[go]. it will be something we watch closely in terms of the read through when it comes to the market. private gauge of china's manufacturing ability expanded more than expected in december. the economy searched for more momentum at the end of last year.

sam is all over the story and he joins us from bloomberg market team. the question i asked a lot of people at the end of last year is is china relevant? it feels like post-covid given the ruling they had for so long, there is so much pullout of investor exposure. >> i would not say it is irrelevant but i see your point. as you go into this year -- the report we just have had out, we are in a new year but this feels like what we got last year. every piece of data you get from china is something for the bulls and something for the bears. because of that pattern continuing, there are other areas where investors are starting to look. i won't go so far as to say

irrelevant but it has gone down. kriti: do your point, a major expectation for the year is that the chinese slow down will slow down even more. what else are the expectations going into the new year? >> that is right for china and this is what i mean that there is more focus elsewhere. there are a lot of checks and balances. looking at the u.s. and what the fed will do. and when the first rate cut will come. when it does, that is where things will rev of. that is when we will look at the outlook for treasuries. that is key. overall, there is still caution. that is the word. caution is the key. yes, they see a soft landing potentially. some see a harder landing. a lot of different moving parts

have to come together. kriti: one has real repercussions for the dollar. i would argue it is one of the biggest dislocations. last week we were talking about the weakness in the european economies and massive strength when you look at the euro and the pound. >> caution everywhere. for the dollar, not so much. it is a question of how much will it weaken over the course of the year. the fed story is key. the u.s. economy is key. and at the end of the year you have an extra political risk with an election coming. that will also be a key focus. at the moment everyone things the dollar will drop quite a bit. kriti: the election coming. the first week of 2025 we will be having deficit ceiling conversations once again.

thank you for joining us this morning. he will be monitoring a lot of the data that we will get this week ahead. diving in starting on wednesday. manufacturing data. there will be a lot of concerns about whether we will see divisions in the federal reserve. the perfect precursor to friday's job report. a quiet start to trading today but plenty of action this week. i want to get to what is coming up on the program. dan was talking about the dollar. the brics club doubles its membership. and the currency impact of that conversation is coming up next. this is bloomberg. ♪

kriti: welcome back. the story we are monitoring closely is the story of the brics group. argentina declining an invitation for membership. the expanded block puts together some of the largest energy producers. i'm joined by ziyanda stuurman. good morning. talk to us about the strategy behind this. why this partnership? ziyanda: thank you and good morning. i think what we have seen with this brics expansion and the way it has gone so smoothly is a bringing in of regions of the world that were not represented

within the original brics grouping. saudi arabia and uae as well as iran are in the group now and you have a strong middle east contingent. it will represent a group of countries that represents much of the region's interests. there was a desire to have argentina on board to bolster the cohort within the grouping. you have also seen egypt and ethiopia join the group so you have a stronger african contingent. we are talking about a group that is meant to represent the global south. i think that is the underpinning logic behind this expansion. kriti: talk to us about the decline of the invitation from argentina. there are all these economic advantages and it feels like of all the economies and south

america, argentina might need it the most. what is the logic? ziyanda: it comes down to the ideology and vision of the leader for where argentina is going in terms of economy, and trade. [inaudible] moving in a direction in which trade in the future -- that is one aspect. the other is he has made no bones about the fact that he is not someone that sees a vision or future for argentina in a grouping with russia and china. that is absolutely one aspect of that as well. each individual country had their reasons for applying to join brics or showing interest

in joining. there were about 30 other countries that have done so as well and each will have a slightly different dynamic. and a lot of that dynamic shifted once they were selected. kriti: you used the magic word of d dollarization -- dedoll arization. and this is not just a story for argentina. if you look at fx reserves around the world, the dollar has decreased pretty substantially in the last year. can south america in particular afford to do that? their debt is at the whim of the dollar and priced in it, frankly. ziyanda: it is a difficult conversation that a number of countries have had to grapple

with and central banks as well. not just in latin america but certainly and africa as well. we see large declines in currency value. i think that broadly the idea of this is one that is not going to go away. particularly in this period of the war where inflation is high and interest rate are high and look to stay higher in many countries for longer. that is a conversation that is being held. but i don't know if it will be a monumental shift within the next 12 months for example. i think there will be countries that will look different ways at dedollarization. i don't think there is a proscriptive one way or another that is best across the board. kriti: the trade piece of the

equation is so important. talking about all these little eastern countries. we don't know the details of the deals but the agriculture and south america is also priced in dollars. we have to leave the conversation there but we hope you will join us very soon again. we thank her for her insight. plenty more ahead. this is bloomberg. ♪

kriti: welcome back to "bloomberg daybreak: europe." other top stories starting in japan. a public broadcaster says 30 people are confirmed dead after the powerful earthquake on new year's day. tsunami warnings have been lifted though dozens of

aftershocks have hit the region. many areas without power and without running water. in south korea the main opposition leader has been attacked during a visit to a southern coastal city. the nominee for the presidential election was taken to hospital with bleeding from his neck. video from the incident appears to show him walking through a crowd of reporters when the attack happens. chinese corporate news -- byd sold -- electric vehicles. in total selling more than 3 million electric and hybrid vehicles in 2023, almost as many as in their previous five years combined. a lot of emphasis on what you are seeing in tesla. when you look at how much progress has been had, it is substantial when you think of

record deliveries. tesla has the advantage. they are talking affordability and the idea that not only will they be appealing to a more ev crowd and there are tax subsidies but releasing a more affordable vehicle for mass consumers that may not be in the luxury space or the ev space. analysts estimating the 483,000 cars are on the docket. something we will monitor closely as well as the impact on the stock price. elon musk has been vocal on how much emphasis should be put on how tesla is trading and whether delivery should be emphasized as well as other parts of their business. and there are labor strikes in sweden and the u.s. will be big parts of the tesla story. coming up we stick with the tax story. -- tech story.

asml --we are learning that the u.s. pushed the firm to block sales to china before the ban was in place. we will talk more about the market impact and what it means for geopolitics between the u.s., china and the netherlands stuck in between. the numbers are next. stick with us. this is bloomberg. ♪ (announcer) enough with the calorie counting, carb cutting, diet fatigue, and stress. just taking one golo release capsule with three balanced meals a day has been clinically proven to repair metabolism, optimize insulin levels, and balance the hormones that make weight loss easy. release works with your body, not against it, so you can put dieting behind you and go live your life. head to golo.com now to join the over 2 million people

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kriti: good morning and welcome to "bloomberg daybreak: europe." top stories to set your agenda.

maer is halting shipments once again as iran sends a warship to the area after the u.s. destroyed three houthi ships. and a blow to the israeli prime minister. thousands of troops getting pulled out of gaza signaling a shift in the war with hamas. at least 30 people killed in japan after an earthquake and aftershocks continued to rattle the region. a lot going on in geopolitics and around the world. a quick check of the markets. volume will be light as people take easy steps in going back into futures trading. an element of autopilot. what is notable is an outperformance in europe. we never see that kind of move this early in the session especially when we see u.s. futures and ftse 100 futures

virtually unchanged. when we talk about what we are seeing in asian markets, japan is closed today and tomorrow so when you look at the msci asia-pacific pacific index it is down. by the same margin that you are seeing in the outperformance in european futures. the bond market in japan will be closed. treasury trades will have to be looked at futures contracts. showing a little bit of a bid. it means the bond market is going to be at least in old market territory for today's session. coming in contradiction to what you are seeing in the dollar. some weakness by .1%. brent crude, a 78 handle on the benchmark. get that in the context of geopolitical tensions. some might argue it is creating

some magnified moves in the space. when we talk about the oil story we have to talk about the latest going on in russia and the war in ukraine. ukraine sang it shot down almost 90 russian drones on new year's eve. that follows missile attacks that killed 30 people in ukraine. it is a tragic and scary anniversary when it comes to the war. talk to us about where we are in the conflict. >> we have seen intensification of attacks over recent days especially over the last week. we have seen quite a lot of aerial bombardment. it started with ukraine claiming one of the landing ships in crimea and then russia responded with the attack shortly before the new year which was actually

the biggest of the war. and then we had another attack from ukraine on a town right next to the border on the russian side and then russia responded and retaliated over the new year. we are seeing a lot of tit for tat attacks and a lot of shooting. and on the ground there is not much movement. we are seeing a stalemate on the ground. both countries are locked in the situation for the last few months. in terms of movement on the ground, there is not much but there is a lot of aerial attacks happening at the same time. and we have heard from president vladimir putin recently saying i'm ready for peace talks but on my terms whatever those are though he did not disclose them. russia controls about a fifth of

the territory of ukraine. and there is also a presidential election coming up in march for vladimir putin. there is a lot going on in terms of the war. the last week has been very active in terms of attacks. kriti: certainly a deadly escalation. i'm curious about how the next steps of the war are dependent on the aid that kyiv may be getting from the u.s. and europe. why does the likelihood that will resume? >> at this point, ukraine said basically we have enough money to stay afloat for the next month more or less. in not so many words. that is the situation. they need about $37 billion at this point in terms of aid from western partners.

what we are probably looking at right now is there is $10 billion that is outstanding. the eu will seek to resolve the situation at the summit on february 1 and that will probably yield some kind of resolution. there is talk about potentially the eu doing some kind of a deal that circumvents hungary which is against extending aid to ukraine. the package they will probably get will be smaller. when will we get some resolution in the u.s. congress? when will there be an agreement between biden and the republicans? at the same time ukraine is seeking aid from donors. a letter was sent recently asking for an urgent meeting

with donors because they urgently need money. and the government has been on record saying if we don't get money on time he might have to postpone payments to civil servants and pension payments. this is pretty serious. the money will be needed early on if ukraine can actually continue to sustain supporting and defending itself. kriti: a very diverse situation that we are monitoring closely. our warsaw bureau chief having us that update. thank you. it is important to keep in mind that the tensions we are just talking about, at the onslaught of the war, it contributed to food inflation around the world. that region was responsible for 25% of the world's food. it looks like that trend is going in the opposite direction at least right here in u.k.

food inflation falling sharply in december 2 it's lowest level in more than a year as supermarkets competed on prices to attract christmas shoppers. lizzy burden is all over the story. encouraging signs on the u.k. inflation front. >> the headwinds though, the disruptions in the red sea causing issues. we will also have a new higher national living wage in april. let's take that good news for now. it is nice to see this surprised that prices have come down and it contributes to the surprise that we saw in the headline rate of cpi, 3.9% surprising all economists. it adds pressure on the bank of england to cut rates and

currently markets are expecting the first cut in may. kriti: it comes in tandem with some of the politics that we are seeing in the ok -- in the u.k. rishi sunak is dealing with small boat migration. >> one of his top five priorities was to stop the boats of the migrants crossing the english channel. it is a hot button election issue because he has staked his reputation on being prime minister with these five pop priorities. he wanted to deport asylum-seekers to rwanda but it is difficult to get a flight off to that country. welcomed news -- the crossings of small boats have fallen by a third in the last year and that is for the first time in five years.

this is good news for rishi sunak. the worry will be that the headwind is literally wind. at the end of last year it was very windy and there weren't too many boats crossing. will those wins died down -- will those winds die down? kriti: leave it to lizzy burden to introduce some political puns. i want to move to a scoop that bloomberg officials have noted that the u.s. pushed asml to stop trading with china before the ban was in place. the dutch company says it has held discussions with the u.s. about the scope of its trade. the chinese president has told biden that their countries

should strive for a more peaceful coexistence. in a letter he noted that chinese-u.s. relations have contributed to global peace. the chinese president has used a new your address to reiterate that china will be united. a message to taiwan. >> the reunification of china is a historical inevitability and compatriots on both sides of the taiwan strait should join hands. our goal is grand and simple. kriti: taiwan's president used her new your speech to call on beijing to help maintain peace in the region. her call comes two weeks before the election.

we go from the asian story to the one in the middle east. saudi arabia's public investment fund emerges as the world's most active sovereign investor of 2023. more news on that after this. this is bloomberg. ♪

kriti: welcome back to "bloomberg daybreak: europe." saudi arabia's public investment fund was one of the most active sovereign investor is last year. data shows the public investment fund deployed more than $31 billion last year. state own fund invested less than the previous year. at the martin joins us now. this is a big deal for the saudi investment fund. will this continue this year? how much momentum is there? >> last year we saw the spending -- we saw it spending huge amounts of money on investments. and you can add up a lot of the other projects it is doing

domestically the money would be -- the spending would be much higher. the big spending last year came off the back of the high oil prices we had in 2022 so we had a big tailwind which helped. as we go into this new year we have not had that tailwind they're giving it the funding it required to go out but i think what we will see is that the pif and other entities it has established under it will be borrowing more aggressively than they have in the past and they will do that to continue funding big investment plans. the crown prince still has an ambition for the pif to be the world's biggest sovereign wealth fund and a lot of that will be done by transfers from the government but also borrowing and leveraging so they can invest more. it is very keen and it has all the investment teams in place.

it is still a very young fund in terms of its peers in the region. it has investment teams in place and it will have the funding so i think we will continue to see it be very aggressive spending money internationally and domestically. kriti: to your point, we have seen a lot of investors, global investors, pull away from the middle east because of some of the geopolitical tensions. is saudi yield -- is saudi arabia immune? >> no. saudi arabia itself is stable. it has not had any disturbance. there is no popular protests as we have seen in some other parts of the region following the israel-hamas war. what you have seen and what the leadership acknowledges is that they need a stable region if they want to get this goal of

prosperity and attract foreign investment they need to continue diversifying the economy. with things like the israel-hamas war, with attention we have in the red sea which continues to get worse right now where just yesterday the iranians sent warships and and the u.s. killing some houthis fighters, this does not create the environment that saudi arabia needs to attract foreign investment. it is another thing on the ledger that makes big foreign investors cautious before putting investment in the region. if you look at the fdi numbers into saudi arabia, they have improved somewhat but they are nowhere near the scale they want them to be. we see the pif spending a lot of money outside as well as domestically because it is not getting the foreign investors to

come in and fill that foreign investment gap. kriti: we are talking about geopolitics and the financial aspect. you mentioned the red sea and the issues there especially with the houthis rebels. saudi arabia is no stranger to that. what is the role saudi arabia is playing where you see iranian warships going to the region as well as american warships. saudi arabia has been at it for more than a decade. what role is that playing now? >> a delicate balancing act for the saudi's. they are pursuing a policy of trying to cool down tensions in the region. they have had a rapprochement with iran that they have tried to use to settle the war with yemen. and the situation between israel and hamas has thrown that all out. and now we are in a situation

where tensions are rising again. saudi arabia wants to try to balance because it needs to state under the u.s. security umbrella but it also does not want to get too far or being seen two too far into the pro-u.s. camp because it does not want to make itself a target for houthis attacks. houthis at one point knocked out half of saudi oil production so they have shown themselves to be very capable of launching attacks into saudi arabia. the saudi's need to make sure that they don't have a target on their backs or on their infrastructure. they will be very keen to try to balance themselves between trying to make sure the situation does not escalate and become worse. they have been trying to promote a cease-fire in israel and

between the war with hamas and trying to make sure the situation does not continue to escalate. they also need the security of shipping because a lot of their own imports and exports are going out through both the straits of hormuz and the other straits in the region. kriti: there is a difference between a delicate position and trying to quiet some of the tensions versus sticking on the sidelines. their role as a diplomatic authority when it comes to the tensions we are talking about -- how effective are they as we talk about the red sea and the negotiations with israel and hamas going through other parties? what is their role outside of their key -- outside of their role as being a key player in opec? >> they want to be seen as the

key diplomatic ally for both the west and for the rising powers like china as well when they want to deal with issues in the middle east. they view themselves as being the leading diplomatic strategic power in the middle east. the challenge they have been trying to address issues like what is going on in israel at the moment is that they don't have diplomatic relations with israel. they are no particular fans of hamas as a military movement either. they do not have diplomatic channels like the qataris who do have relations with the is rallies. and they have played a prominent role in hostage negotiations and cease-fire agreements. the saudi's want to position themselves as being a key interlocutor in the region but

they do not necessarily have all the channels they need to be able to do it which is why we have seen the saudi foreign minister traveling around all of the key global players last year as part of an effort to promote a saudi plan to try to resolve the situation. kriti: and to your point, we got close between saudi arabia almost discussing normalization of relations with israel but not quite getting there. thank you for your analysis. plenty more ahead. this is bloomberg. ♪

kriti: welcome back to "bloomberg daybreak: europe." i want to flag one of my favorite stories of the weekend. close to my heart. i wrote my college thesis on

it. talking about disney. they are changing the game or having the game changed on them. they are losing their copyright protection on some of the earliest versions of mickey mouse. this comes after a 20 year extension for some of the copyright protection they had installed for them in 2004 by the u.s. congress. disney for decades in order to protect their trademark over their iconic mickey mouse character have been lobbying the u.s. government for years to push back. they have come across a lot of scrutiny for doing that. what is significant is that it is the new year and we are seeing that the copyright protection has been lost for a number of characters. there are new iterations of mickey mouse and disney present.

-- disney princesses. now disney may be setting the trend when it comes to other copyright laws including ai for example which is at the core of so many labor issues in the u.s. and around the world. it will be interesting to see how one of the world's biggest tech or media companies handles the copyright story. what you need to know right now is that steamboat willie is officially in the public domain. just a story i wanted to flag. up next, markets today. plenty for your playbook ahead. this is bloomberg. ♪

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♪ anna: this is bloomberg markets today. i am anna edwards.