kriti: good morning and welcome to "daybreak: europe" i'm kriti gupta in london. let's get to the top stories. tech back in the driver's seat after tsmc's outlook drove a 160 $5 billion global rally in chip stocks. u.s. congress passes a temporary spending bill to avert a partial government shutdown this weekend and ensure funding for the next six weeks. the view from davos on interest rates. we hear from the blackstone ceo, the u.k. chancellor, and the german finance minister. as we digest all those headlines, quick check on markets because it's a really interesting dynamic. you are seeing outperformance in europe. you're a stocks higher 0.3%, perhaps following that asian story, the ftse 100 higher by zero .2%. is this the readthrough you see from the overnight session in the united states, having a

ripple effect around the world, or perhaps cashing in given that we had risk off sentiment in yesterday's session? nevertheless, s&p futures slightly modest, but again, the tech story is dominating on the other side of the atlantic. a quick check on the cross assets story because a lot of people are talking about what the federal reserve might be doing not just in march, which seems to be the pivot point a lot of folks are talking about, but specifically in january in terms of setting up that pivot. nevertheless, overnight a really in yields. -- rally in yields. you are seeing dollar strength come back and be a threat. euro-dollar at 1.08. cable just shy of 1.27. dollar strength will have ripple effects across the commodity space. that is your cross assets picture. quick check on how the asian markets are faring. avril hong standing by in

singapore with that story. avril: despite that dollar strength, asia equities are rallying. it is the tsmc effect, as the taiex and nikkei lead the charge, fueled by gains in the chip-related stocks. we are seeing chinese stocks left on in the cold for yet another session, as we're seeing weak sentiment still dogging the markets. this is despite what we heard about the biggest brokerage in china looking to restrict shortselling. we're talking about state-owned citic, but that hasn't helped to stem the bleeding. we're seeing continued slide in chinese stocks. he is mc today the big gainer, that is the biggest rise in about a year. i want to take you to dollar-yen because we saw a spike after the boj scheduled operation to cap the purchase amount of ultra-long bonds unchanged,

despite plans for fewer operations. this is being read is a dovish signal. we also had japan inflation numbers showing cooling today. overall it doesn't look like we will see the boj move next week, but i'm sure we will be keeping a close watch on food as well as energy prices. kriti: of course, the main importer for both of those things. thank you so much for driving us through that story. it's going to be a topic that has ripple effects around the world. the middle east at the center when it comes to what the inflationary picture might look like. i want to get the latest where houthi militants have fired missiles at an american-owned commercial vessel in the red sea. president biden vowed to continue military action against the houthi's despite acknowledging the strikes are having limited success. while wallace leads bloomberg's coverage of middle east economy and government. some strong comments coming from president biden at a time when it feels like the international

community is questioning whether this is the right approach. this time, the houthis actively targeting an american vessel, what more do we know? >> the fourth attack on a vessel in or around the red sea since the u.s.-led strikes on yemen began a week ago today on january 12. it's clear that the houthis still have the ability and willingness to hit out at vessels in this vital waterway. you mentioned joe biden's comments, they were very interesting. he unambiguously admitted that the houthis are not being deterred by u.s. strikes on targets in yemen. to be fair to him, this is something that the u.s. has been saying from the start, also the u.k. which has joined some of the strikes with america. they said they don't expect to

stop the houthis trying to carry out attacks on ships, but they want to degrade their ability to do so. they are arguing in private that for all that the houthis are still attacking vessels in the red sea, they are not doing it as frequently, or on as big as a scale as they were before january 12. but the fact remains that the waterway is still incredibly dangerous for ships. not all of them, there is still quite a few going through, but if you are a western owned vessel, or linked in any way closely to western countries, then you will probably avoid that area. if you are going from asia to europe, or the other way around, you are not using the suez canal anymore, you are going around the southern tip of africa which is adding a lot of time onto your journey -- and costs in the way a few will. it's definitely something that the u.s. and its allies want to stop as soon as possible.

kriti: speaking of that story, this was something we were talking about the impact of the shipping. strategists said the longer this lasts, the more of an issue it is, but if it is only a temporary reprieve perhaps delayed by the presence of the u.s. navy, this won't have as much readthrough for not only shipping but the global economy. this timeline now seems to be extending. are we worried about a more tangible impact on shipping and the global economy? >> we are already two months into this because the houthis started these attacks in mid-november and have ratcheted them up since the beginning of this year. the fact remains, there is no end in sight to this. biden and other u.s. officials have all but said these strikes on yemen will continue. they are not daily at the moment, they are happening roughly every two or three days.

there is more to come on that front. from their point of view, they hope to do grade -- degrade the houthis ability to attack ships. this could go on for a lot longer per we have seen the impacts in fright markets. the cost of shipping containers from asia to the mediterranean has absolutely soared in the last three weeks. the costs have more than doubled. energy markets are still pretty relaxed. brent is still below $80 a barrel and barely up on the year, but that could change if this looks like it will last several more months, and the u.s. and u.k. cannot stop the houthis without escalating things much more, then i think we will see repercussions beyond just the freight market. kriti: a really dire circumstance we're continuing to watch. we thank you so much for walking us through the dynamics of the region. at its core is the question of

how much involvement the united states actually has. president biden making those controversial comments about the success of that strategy. in another aspect of the united states that has global readthrough is what's going on with the deficit. congress passed a temporary spending bill to avert a partial u.s. government shut down this weekend. the interim measure would fund some agencies through march 1, and others until march 8. i'm joined now by bill faries. it feels like this is only six weeks of time bought. how much difference does that really make? >> it really is the definition of kicking the can down the road just six weeks, as you said. there is a high likelihood that congress will have to have another deal extending a temporary spending bill through for a few more weeks between now and that march 1 and the march 8 the march 8 deadlines you mentioned. lawmakers are specter to be out

of washington for almost three weeks. that's about half the time they have left where they will not be working on legislation in washington. what will likely force their hand going forward is a deadline in april. at which point, if they haven't reached agreement for the end of the year, mandatory spending cuts that nobody in either party wants to see will come into effect. they have kicked the can a bit, they will likely have to do so one more time, after that the consequences become a little bit serious. kriti: does this actually play to the shutdown story? one of my favorite fun facts is even as we talk about the presidential election ramping up, the first thing the new president has to do in january 2025 is deal with the deficit yet again. how does this all lead up to that moment? >> it's interesting, being a

presidential year, you have to remember we are talking about a budget that was supposed to come into effect on october 1. so, we're already three months plus into the fiscal year, and it looks like it will go for at least weeks, if not months further. leaders on both sides have largely said that they don't want a shutdown. i think republicans looking to retake the white house don't want to be seen as agents of a shut down, of government chaos. but there is this hard-core faction in the house of representatives we have seen that is continually opposed to these measures. they can still threaten to oust the latest speaker mike johnson. so there is a lot of politics going on just within the republican party on this. but what you are saying is key, heading into a november election and major deficit issues on the table, i think both sides will try to find a way to get over

this. if not by the early march deadlines, by those april deadlines where the consequences in terms of budget cuts become more severe. kriti: certainly something that puts a lot of pressure on the united states finances. bill faries, thank you for walking us through that story. speaking of united states finances, the u.s. preparing to introduce a plan to require banks to tap the fed discount window at least once a year to ensure that lenders are ready for troubled times. last year's regional bank crisis revealing that some weren't even set up operation only to quickly borrow from the facility. that was partially created during covid times when we talk about the reserve and how they were going to tackle that quick liquidity buyout. a quick check on the day ahead. there is a lot to digest outside of the united states. at 7 a.m. u.k. time, we get u.k. retail sales talking about the

british consumer. later it goes back to the states, 3:00 p.m. u.k. time, university of michigan sentiment data, how strong is the consumer and what does that mean for fed policy? the fed's mary daly speaking, we will see if she diverges from the general take. plus, we're live from the world economic forum in davos all week long. bloomberg's francine lacqua moderating a discussion on the global economic outlook read panelists including the ecb president and the german finance minister christian lindner. plenty more ahead on this program. this is bloomberg. ♪

kriti: welcome back to "daybreak: europe" i'm critic up to "daybreak: europe" i'm kriti

gupta in london. chinese travelers were once the biggest spenders when it comes to overseas trips. they are staying closer to home despite it being a year since covid measures eased. outbound airline capacity from china just 60% of 2019 levels during the fourth quarter. with us to discuss is asia transport reporter dany lee. walk us through the impact of this pullback. >> back in 2019, 100 70 million trips were made, that equates to 240 billion u.s. dollars of spending from chinese travelers on stuff like hotels, flights, lottery goods as well. that is also 14% of all spending by foreign travelers globally. a big chunk of change. that 60% figure of flights back to recovery level, but we have seen is a bit of a wiped out in chinese spending, so we're down by one under 29 billion u.s.

dollars from proof covid times to where we are now. contrast with the likes of the u.s. and u.k., france and germany, which have all seen spending levels from foreign tourists recover much quicker. basically back to pre-covered levels. kriti: talk about the spill over into other industries. it feels like the thought process of where we might see a market reaction is airlines, but i imagine this is a broderick and them story in china. -- broader consumer story in china. >> you feel like the consumer companies who rely on their chinese travelers for luxury spending, you were to traditionally see an impact there. but when you see tourism-dependent economies reliant on chinese travel, and not quite hitting those targets they set in 2023, we have seen an impact on countries, particularly in asia on gdp, because they have not seen that kind of tourists that normally

come from china. kriti: certainly a lot to keep in mind. bloomberg's asia transport reporter, thank you for walking us through that story. he was talking about the readthrough on corporate's. i want to bring you the news from such corporates, that is from basf, the chemical company putting out some earnings numbers here. this kind of sets them up for not such a great european market open. the luminary full-year adjusted ebt at 3.8 one billion, the estimate was a little short, but the guidance was where they are not set up for success. they previously got a 2023 sales of between 73 to 76 billion euros, now it looks like they are guiding at about 68.9 billion. not that much of a miss, but the idea that they are more cautious when it comes to not only ebitda , but full-year sales, perhaps something that will not be as

well received by the market. we will see how that happens in just about two hours' time for that share price. from the corporate story right back to more macro stories around the world. to the continent of africa. african nations' debt levels have been top of mind at the world economic forum in davos. ondiro oganga is in kigali, rwanda monitoring those comments. why now, why there? >> because the debt level that is due the next two years in africa is worrying according to some of the business executives that were attending the panel conversations in davos. if we look at countries like kenya, ethiopia, senegal and south africa they have maturities between 2024 and 2025, and payment of this could derail sovereigns. the ceo of net bank was saying the biggest risk for lenders in

africa is there ability to pay back their debt. when they are not able to pay back, then restructuring comes on the table and this means more losses for them. ethiopia will begin restructuring tops very soon. zambia and ghana will finish the restructuring talks in june. this is some of the challenges that were being raised. the imf also says that half of low income countries are at risk, or already in debt distress, this was why debt was one of the key conversations at davos for african countries. kriti: something we will be watching very closely. it's an interesting dynamic and something that the imf and world bank have monitored. ondiro oganga in kigali bringing us that coverage. as we talk about more coverage out of davos. bloomberg's francine lacqua will be moderating a panel on the global economic outlook with ecb

president christine lagarde and the german finance minister. what does the future of the global rate story look like specifically right here in europe? stick with us. this is bloomberg. ♪

kriti: welcome back to "daybreak: europe" i'm kriti gupta in london. i want to give you a look at the green energy transition. this decade shaping up to be the crucial one for the world's net zero ambitions. much of the focus going towards a scaling up renewable energy. not just output, infrastructure needs to be built to carry all that solar and wind power. covering it closely, the head of grids and utilities over at bloomberg nef. some strain is on grids around the world, is it ready for these

net zero ambitions? >> unfortunately, the answer to that question is no. there is some regional variation because these grids are fundamentally planned and funded at a regional or national level. wherever we look, we find a common picture, which is electricity grid that is strained and underdeveloped for a net zero world. one barometer we use is the size of interconnection cues, and we have some data here to show that. these are basically queues that renewable energy projects have to sit and wait in before they can connect to the electricity grid. in the u.k., hundreds of gigawatts, business as usual doesn't seem to be cutting it. kriti: what changes it, how do we get the grid up to speed? >> fundamentally this is about returning to building out the electricity grid. if we look at the last decade in europe, we have doubled the amount of renewable energy capacity. over that same time span, there has only been a 6% increase in

the length of the transmission grid. looking forward, we see an electricity grid that needs to grow at a compound annual growth rate of 3% per year, up to 152 million kilometers. that happens to be the distance from the earth to the sun. as daunting as that may seem, this is a build the project that we have seen happen before in history in europe and the u.s. we just need to return back to that level of tilde that we had before. kriti: when we talked about using constraints, talking about the build, walk us through how foam a fiscal standpoint countries can get ahead of this. what exactly do they need to be building? >> the electricity grid. they also need to be enhancing the way the grid is operating day-to-day. for the near term, what we need to do is make best use of the infrastructure that's there. one specific segment i'm looking at is demand-side flexibility

technologies, these are ways we can do this without having significant fiscal impact. this allows us to use resources that are already scattered within the community, so electric vehicles, storage assets, and we have some data to show what that might look like in germany. we see a substantial scale out all the way to 2030. that allows us to use infrastructures to solve goods congestion and not have to build as much infrastructure in the short run. kriti: that is a short-term problem and you are talking about infrastructure that is expensive and time-consuming. how are countries creatively working around the problem short-term? >> the creativity comes in the best utilization. there is various digital technologies we can use to make sure the infrastructure we have is being fully utilized. talking about things that allow a transmission line to be 100% utilized, as opposed to making deserve -- conservative assumptions about what his capability would be in any given

hour. creating marketplaces that allow us to use the capacity scattered around the grid to make sure we have prices that are reflective of the actual congestion in the system. kriti: i will leave you with one quick question. in terms of pricing, are we concerned about some readthrough into consumers of that product? >> there is a great impact to all of this. the substantial capital expenditures we will have to see in the electricity grid will have a rate impact. so the pace at which we can scale this out will be dictated fundamentally by what consumers can absorb. kriti: really interesting dynamic that is adding pressure to states and international governments. thank you for that crucial analysis. the head of grids and utilities over at bloomberg nef talking about the rate impact. interesting to talk about on in context of her noble energy because we are also talking about what monetary policy looks

like this year. we have the boj meeting next week and the fed coming right after. not to mention a slew of other european banks. one of the big questions will be do you actually continue to face inflationary pressures? especially around some of the geopolitics. that's a crucial question especially when we look at this massive upwards pressure in yields. 10-year yield at about 4.16, overnight continuing to see moves in the bond market, at a time when a lot of people doubled down on this idea of starting to see a dovish pivot, therefore creating a big bond bull run. that will be a topic for the u.k. chancellor of the exchequer on tax cuts and this year's looming general election in a crucial panel coming up ahead. there is 20 of coverage you

kriti: good morning and welcome to "daybreak: europe" i'm critic up to in london. let's get a quick check on stories that set your agenda. tech back in the driver's seat effort tsmc's outlook drove a $165 billion global rally. u.s. congress passes a temporary bill to avert a parcel government shut down this weekend and ensure funding for the next six weeks. the view from davis on interest rates. we hear from the blackstone ceo, the u.k. chancellor and the german finance minister in the hours ahead on bloomberg television. first, green on the screen and outperformance in europe. your stoxx 50 futures higher by 0.4%. i emphasize the outperformance because some of it is following the green in the u.s. session. having a ripple effect from the asian session as well. this is in the context of a selloff in european assets this week.

the bond market, as we talk about that bid into equities, you are seeing a selloff in bonds. overnight, the 10-year hitting 4.17, climbing higher today two basis points because of questions about the momentum around some of this dovish pivot that the market had been pricing in. as the market ahead of itself, and how is that reflecting in yields? at the moment sustainably above that crucial 4% level. euro-dollar 1.08, cable at 1.27 when a lot of people have doubled down on the idea that elder weaknesses in the future. as we talk about dollar strength, it is having a ripple effect on brent crude, trading just shy of $79 a barrel, very light volume there. how many people want how much exposure to the commodities base right now given all of the geopolitics? which brings me to one of our top geopolitics stories. ukraine aiming to organize a call with chinese president xi

jinping to push forward its blueprint for peace. ukraine-russia war is among the top geopolitical issues at this year's world economic forum in davos. annmarie hordern reports. >> when will central banks cut rates? how geopolitics is impacting global economy and what to make of the consequential u.s. election in november? these were the top themes at this year's world economic forum in davos switzerland. more than just a business meeting, this was a conference for top foreign-policy minds. we had secretary of state antony blinken at the same conference of iran's foreign minister, even as we see hostilities continuing in the red sea. one geopolitical risk that overshadowed the event was ukraine. that's because president zelenskyy was making his pitch for aid to to continue. not just from washington and brussels, but also the private sector.

we spoke to ukraine's foreign minister, who said he was reassured that aid is on the way. >> we received reassurances that the aid is on its way. the good news is we see the congress is not debating the aid to ukraine per se. the discussion is on the border issue, and there are no disagreements on whether and to what extent ukraine should be helped. >> former president donald trump, kuleba says he is ready for whoever americans elect. kriti: the u.k. chancellor jeremy hunt had been trying to boost the u.k.'s sluggish levels of investment. he spoke to francine lacqua about taxes, the election, as well as the almost $1 billion investment right here in the u.k. >> it's a big sign of confidence. what i'm detecting here in davos is a recognition that the u.k.

has become one of the great technology centers of the world. it's now the third-largest tech economy after the united states and china. double the size of anywhere else in europe. and companies like google are reflecting that in their investments. this is a billion dollars to improve their data processing. it means people who use google facilities like gmail about get faster service. data is kind of the wiring of the internet. if you don't store it effectively, the internet grinds to a halt. it's an example of the kind of deals i'm talking about the whole time as people look at the u.k. and say, this is europe's silicon valley, and dwell on the way to becoming the world's next big tech center. >> is this because they see opportunities in the u.k., or because they look at europe and think it is a bit of a mess? >> the u.k. has got stability and the rule of law and that's very attractive to international investors.

it has also got two things that virtually nowhere else has outside the united states, the biggest financial services sector. these small businesses that get off the ground can get the backing they need to grow. and that is very interesting to companies like google and microsoft. but it's also got outside the united states, the world's most respected universities, four of the world's top 20 universities. so the new ideas that are for example treating the new medicines of the future, a lot of that is happening in the u.k., and that makes it a exciting place to invest. >> there was so much turbulence in the u.k. economy because of politics. now we're more stable but we are looking at elections. >> when investors look around the world at the instability in other countries. the rise of populist far right parties in many parts of europe. they say that even with elections, which is right because we're a democracy, the

u.k. is a very stable long-term bet. what we are also seeing a something they haven't seen before, which is that the technology sector is now so vibrant in the u.k., that they can't afford not to be there. >> will you tell investors that we will see a corporation tax cut? >> they have already seen a huge corporation tax cut. i introduced full expensing of capital allowances which means for investors with capital, they get a 25% discount off their corporation tax bill, more attractive than any other major country. we will continue to do everything we can to get the tax burden down. that is a choice we have as a country because other parties will increase the tax burden and increased borrowing. we think the way we grow the economy is by reducing taxes and making them more competitive. >> will that happen in the next budget statement? is that the last financial event before the election? >> its early days for the

budget. it's on march 6. i haven't seen the figures from the office of budget responsibility. i don't know the headroom i will have to play with. i can tell you what i want to do, because i look around the world, and i see that north america, asia where generally countries have lower taxes than europe, they are going faster. in europe, our taxes tend to be higher, we are going more slowly. if i can, i want to reduce the tax burden and make the u.k. more competitive, more dynamic. >> will you deliver an autumn statement or will we have an election before then? >> the timing of the election, i wish i could tell you. is not that i'm hiding it, i just don't know. this is a decision for the prime minister. what i have to do it as chancellor is make sure that i set the economy on the right track. the main reason people vote conservative is because they trust us with the economy. they can look at rishi sunak's record and say we have brought

inflation from 11% to 4%. so far, we have avoided recession even though many predicted we would get one. and they can see tremendous prospects for the future. >> your party was not always stable, but when you look at instability around the world, this is conflicts and concerns with the price of oil, the middle east and ukraine, do you worry that it will be a very difficult economy this year? >> i worry about the world, yes. i don't think we have seen at this unstable for a very long time. the u.k. has a very important role in protecting global stability working alongside allies like the united states. if you are responsible for a country's economy, you have to keep a careful eye on what's happening in places like the red sea. what i would say is the things that will really help to do that bring down inflation, bring down borrowing, keep public spending under control. that will make the economy resilient for whatever shocks

might be around the corner. >> you are behind in the polls, an election is close, can you really make that up? >> i believe we can. politics has never been more volatile. in the end, when people see an economy that has weathered the pandemic, the cost-of-living crisis, the very many shocks and challenges we have had. when they see that actually our potential is huge despite all those challenges, they will understand the value of a conservative government. kriti: u.k. chancellor of the exchequer jeremy hunt speaking to francine lacqua in davos earlier this week. she was also speaking to christian lindner, the german finance minister, who defended the ruling coalition's handling of the budget. take a listen. >> there is no government crisis, there is no budget crisis in germany. but in fact to the

constitutional court has made for the first time a decision about the debt break of our constitution. this is quite new. switzerland has more experience with their debt break. this is the first decision. we had to decide for the consequences. this ruling of the constitutional court, it was so unexpected, and some princip les have been shifted by the constitutional court. now we have made the necessary decisions. now we are compliant. with the constitution. now we can work further on the turnaround in our fiscal policies. >> we say the government is not in crisis but you can't tell me the three parties are getting along. how would you describe the three parties? >> three very different parties, two left-wing parties, and one

more or less centristic, social market economy driven party, the liberal party which i have the honor to lead. and of course, we have to consider policies. and there are different perspectives. the good news is, in the end, we find consensus. >> so there is no danger of a breakup? >> there is no danger. frankly, the process of decision-making could be more silent. could be faster. but in the end, they are good decisions. thing about the german situation after the unprovoked war of aggression against ukraine. after the russian attack, we had to completely reinvent our energy infrastructure. which we were so dependent on

russian energy imports. last year in davos, there were still concerns whether germany is capable of managing this situation. of course, the growth is not satisfying, but as i thought, there would be a huge economic crisis in germany, but there hasn't been anything like this. kriti: german finance minister christian lindner speaking to our very own francine lacqua in davis. also from the world economic forum, she will moderate a panel on the global economic outlook. including panelists christine lagarde and christian lindner making another appearance. that something you want to tune into as we talk about the interest rate dynamic. i want to get to other story starting in the united states. jp morgan raised ceo jamie dimon's pay to $36 million after it recorded the highest profit in the history of american banking.

his total pay is up 4.3% from 2022, with a $1.5 million salary and the rest coming as performance-based incentives. jp morgan's revenue last year was just short of $50 billion. all street bosses at davis are predicting m&a deals will pick up as the fed brings rates down. morgan stanley ceo ted pick says morgan stanley will be prudent and predict ability is good for investment banking. david rubenstein sees he will be shocked if the fed doesn't cut rates by march. sticking with wall street, bloomberg learned that ubs plans to sell credit suisse pasta strat debt business piecemeal after failing to attract enough interest from a single bitter. credit suisse ought to exit the business last year in an attention to shore up confidence weeks before it was first in an emergency takeover by his biggest rival. to the tech space. the eu antitrust regulator is expected to block amazon's

proposed one $.4 billion acquisition of roomba maker irobot. the e-commerce giant was told yesterday that the deal would likely be rejected. shares in irobot plunged in after hours trading. the final decision is due by february 14, with the deal also likely to face opposition in the united states. stick with us. this is bloomberg. ♪

>> i think 2024 will start out slower in the sense that interest rates are still pretty high and the fed will keep them that way. everybody has their own guess. probably until the second half, at some point, that will

have a little bit of a baffling effect. the stock market had such a run in the fourth quarter that you wouldn't expect that to really take off and go. and the economy is slowing a bit. that's normal with high interest rates. on the other side of the ledger, the expectation that interest rates are going down is creating animal spirits again. at blackstone, we did six private equity investments in six weeks at the end of the year, after a slow year we're much busier now in a way that represents some type of

capitulation for people who were holding back for two years. so we're optimistic for this year. >> are you worried that if we don't get those cuts promised by the fed, because a lot of good news is already priced in markets, that people will start waning on the deals a little bit? is the second half of the year a little bit trickier? >> we will get the cuts because the way we measure inflation at blackstone, we're already right around the 2%. the fact that the fed is using different numbers for rents and real estate. we think they are looking at 6% inflation in rents, residential real estate, we're the largest owner of residential real estate. we think it is zero to 1%, let's bet on us on this one, because

we're the people actually doing it. and if you correct the index for that difference between what's really going on, and they are saying it is 6.2%, you get around 2%. i'm quite confident that they will be lowering rates. kriti: blackstone ceo steve schwarzman speaking about the future of the interest-rate path and how blackstone thinks about it. let's talk about how bank of america sees it, the ceo sees four interest-rate cuts by the federal reserve in 2024 and 2025. he discussed his outlook with us at davis. >> our core team has four cuts, and four cuts, 2024 and 2025. that is actually higher for longer because you came off of 25 basis points and if you end up at three point 5% next year, eight quarters away from now.

my team are basically saying they will have to start cutting because they have this space to cut. the credit is in good shape, it is normalizing, it is normalizing to base case. they have got access to credit. inflation hurts median income. that's tough on people. but at the end of the day, they have to start cutting unless the drag gets too strong. and the housing market has to get more oomph to it. you have to get car purchases up. >> just on that housing point, how much do rates have to drop before you see the mortgage market come back? >> there are two parts to that equation. if you get a six handle consistently, high-fives, then people just need time.

when i got my first mortgage at 8.5, i thought i got a deal. when i first got into business the prime rate was 23. people are used to this. it will take time for them to think about it differently and get used it the pricing. it will flatten out and adjust. their wages have to come up. but the good news is most americans have a fixed rate mortgage which in inverse is an asset right now against the market. it should start picking up as people get more used to this. frankly, there is turnover in housing because people get divorced, get sick, move to a bigger house. so there is always an activity. it is just that refinance activity is mortgage-driven. but the purchase activity will pick up because people have kids that want houses. >> in your earnings call, you expressed consciousness around your outlook.

other ceos of certain financial firms have been less so. talk about hiring and the incredible boom in m&a and ipo's , how do you explain the difference? >> we are cautious because the economy is slowing down. that's just how you have to manage expenses. we have a big enterprise. over the course of the year we went down 5000 headcount. we still hired 15,000 people last year. kriti: think of america ceo speaking about the interest-rate story but also about the future of the bank. we have plenty of more analysis ahead. this is bloomberg. ♪

kriti: boko back to "daybreak: europe" i'm kriti gupta in london. as we transition, i want to put something on your radar, this is the dislocation we have been talking about the last couple of months.

i am talking about the dollar story. about the end of 2023 we were saying chair powell has made that dovish pivot clear to the markets. whether or not that is actually true, the markets interpreted it as the federal reserve is done hiking, his peers around the world are done hiking, that means we can double down on that bullish bond bet. and by extension, a weakness in the dollar. that created a tailwind into some of the currencies on your screen. euro-dollar almost hit 1.10 at one point. you are starting to see a little reprieve, but this morning you see a turnaround story, where you see not only yields higher, but the dollar stronger as well. what does that mean for some of the snapping back people were expecting in the euro and pound? we have boj next week, 148 .62 is where we are on dollar-yen. and dollar-swissie is one of the big longs in this market simple because there was one of this

expectation that the swiss national bank was going to stop and have their dovish pivot, creating massive weakness in the swiss franc. really fighting some of the capital flows going into that currency given the geopolitical situation. let me put a chart on your radar, this will have read across into asian currencies. this chart shows the daily pboc reference rate, as we talk about dollar strength, you will see more intervention from the pboc in the offshore yuan. dollar strength becoming a concern globally yet again. that wraps up the conversation we have at davis. perhaps something francine lacqua will be asking as she moderates the discussion on the global economic outlook with christine lagarde and the german finance minister at 10:00 a.m. ♪

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