>> this is denigrate europe, joe biden cancels his final foreign trip as president and los angeles in its worst natural disaster in decades. hundreds of thousands are evacuated from hollywood and other neighborhoods. asian shares fall as inflation data shows themis efforts

failing to revive demand. the fed cautions on future rate cuts. president biden is said to plan more carbs to keep advanced ai chips out of china and russia. u.k. stocks, bonds, and the pound tumble, adding to climbing pressure for chancellor rachel reeves to calm investors over the government's fiscal plans. ♪ happy thursday, markets looking for direction and the fed minutes yesterday where caution was reiterated. lines coming through, that meeting in december and certainly flagging inflation risks to the upside. that was when the key takeaways. european futures currently pointing to losses of about .10%

, flatlining essentially across u.s. markets yesterday. nonfarm payrolls data tomorrow potentially that's the catalyst. the u.k. stories now front and center in the selloff in assets we saw yesterday. yields up, the pound down. what is it tell us about international investor appetite? s&p futures stateside pointing to losses of .2%, nasdaq 100 futures looking to drop 39 points. with the focus on u.s. adversaries like china and russia. the four-day selloff in u.s. treasuries, yields up in global bond ceasing in the session today at least for now. a bit of money moving in across the treasury curve. it will be a shortened trading day as the u.s. marks the

passing of president jimmy carter, the former president. u.s. seeing yields down close to three basis points. the pound continues to be in focus after drop of one point 3% yesterday. the pressure is still therefore starling. just down .10% on the crypto market cap. that's because asia, some important data, two different dynamics out of japan and the focus on the inflation or deflation sorting china. avril: i think it's a lack of inflation in china that's really worrying investors. on a day where asian markets are already really cautious, you look at the declines for a second session, headed for weekly loss on the msci asia pacific amid caution, nonlaw of risk appetite given the fed

signals, the concerns around potentially biden furthering more restrictions on chip exports and then add to that the china data. what we're really seeing is consumer inflation weakening for yet another month, now nearing zero. you look at the producer price dead as well, the deflationary trend for 27 months, very much intact, clearly showing an economy that despite seamless efforts has not been enough to stimulate demand which is what policymakers want to see. chinese stocks are extending some of the declines we saw earlier in the session, slipping deeper into negative territory. japanese equities underperforming today. the let's flip the board and look at how are faring the currency space. amid the specter of elevated u.s. yields and greenback strength, asian currencies have been succumbing to that and among the data points were seen out of china, it's putting

upward pressure on dollar china. that has forced the pboc's hand in terms of support, another strong one today but also via plans announced today that it's going to issue a record amount of hong kong bills. this another way to add to demand for the renminbi. the end is among those currencies that are weakening in the asia-pacific. i want to highlight focus and the japanese currency today. some of this has to do with the consolidation in the u.s. dollar but also after data out of japan showed base pay climbing by the most in more than three decades and of course when it comes to japan and the policy expectations, what the boj wants to see is that positive picture on wages, stimulation of the japanese economy, enough for them to take their foot off even

more from the stimulus handle, so to speak. this is a positive sign but at the heart of the matter is how traders are not convinced that the japanese policymakers are serious about hiking or tightening later this month. if you look at the pricing, is still 50-50 for a of weeks from now. you are seeing some firmness in the japanese yen but overall still a story of weakness in the yen. tom: still lacking conviction on where the boj goes. taking the box when it comes to the wage story. now to the fed where with the latest minute show officials are eager to slow the pace of rate cuts. meanwhile the fed governor says he believes inflation will continue to cool toward the central bank's 2% target. >> my bottom line messages i believe more cuts will be appropriate.

if the outlook evolves as i have described, i will support continuing to cut our policy rate in 2020 five. the pace of those cuts will depend on how much progress we make on inflation. while keeping the labor market from weakening. tom: let's bring in valerie, argue be the fed minutes even though they were backward looking drew specific attention this week, given the global picture you been breaking down. what stood out for you with these fed minutes >> >> thankfully there were no hawkish surprises in those fed minutes yesterday. specifically there wasn't anything hawkish from that lawyer speech we heard yesterday afternoon. it was his dovish comments that calmed the bond rout at least in the treasury market, for instance he did say that he believed inflation will continue on its trajectory downwards. he does support for the rate

cuts but it was his comments on tariffs that the market found specifically interesting. he said he doesn't expect tariffs to have a significant impact on inflation. he noted the broad uncertainty around that and went on to say that tariffs are unlikely to shift his view on monetary policy. it calmed market down a bit. we are seeing a bit of calm when it comes to the treasury market. it's an early close for jimmy carter's funeral taking place in washington later today at 2:00 p.m. eastern time close. lack of liquidity perhaps we will see a bit of calm when it comes to the treasury market today. eyes on the 30 year old -- 30 year yield. some other markets have not found calm yet. tom: there are links between what's happening with the treasury market stateside that's now on a bit of a pause and what is happening globally in the u.k..

we are on the fringes of a market crisis in the u.k. >> the market is strong analogies to what is going on now to what happened in the liz truss episode in 2022. unless we hear change of direction from rachel reeves, we saw this weakness gripping markets yesterday, the 10 basis point rise in the 30 year old -- yield rachel reeves come out to reassure markets in the coming days? we saw such a big reaction when it comes to the currency, down from 1.3% during the session. we did hear reports a market trader saying there was large downside options in the market so a big flurry of positioning to protect from further losses when it comes to the cable currency. tom: the focus still clearly

with the u.k. assets given the pressure here. thank you very much indeed for breaking down what were seeing in terms of the global bond markets and the challenges here. to the u.s. right now, the major story stateside, joe biden canceling his final overseas trip as u.s. president in response to those devastating fires raging in california, specifically los angeles. the uncontrollable fires are still burning, with hurricane strength winds. shell was in los angeles for us. thank you for taking the time to give us an update. what is the latest? >> the latest unfortunately is that the biggest fire, they eaton fire and the palisades fire are both still 0% contain. on top of that we've just heard news of another fire that broke out today the hollywood hills,

the sunset power in a few other files around the region, notably the sunset fire and some iconic landmarks like the hollywood bowl the chinese theater in more than 100,000 people have evacuated due to these fires. and we have heard unfortunately of at least five deaths. some have lost their homes already and everything their own and a few of them have compared the fire situation to the 1994 earthquake that totally devastated the city. it's truly a big disaster and i think the economic impact so far has been estimated at over $52 billion. tom: you're saying they are 0% contained in terms of major fires. there's a chance it spreads from here. you've touched on the human cost and economic toll as well.

why are the fires so bad this time around and water authorities doing to respond? we are hearing of firefighters having to draw water from swimming pools, for example >>. it's a new -- unique set of circumstances, a santa ana winds are typical for this time of year in this region but what is not typical is the fact that january is typically rainy season but we been dry for months. on top of that ad the fact that we've had extremely high winds is just a problem that's been waiting to happen. from what we're are hearing and seeing, the winds will continue to stay high lasting group thursday and there's potential for another windstorm next week with no rain in between. so all together it is a dire situation. tom: meanwhile donald trump has blamed california's governor gavin newsom for the deadly fires.

less listen to more of what he had to say. >> is very sad because i've been trying to get gavin newsom to allow water to come in. they're trying to protect a tiny little fish which is in other areas, by the way. they had no water in the fire hydrants today in los angeles, it was a terrible thing. we're going to get it done. i got it done from the federal side. is not going to happen again like that. there is no reason. tom: clearly history reminds us that donald trump and gavin newsom have no love lost between these two. is there anything to justify what he is saying? what do we make of what he -- how he has been characterizing the events on the ground in l.a.? >> i've been talking to folks on

the ground and people who are experts on the subject. it is clear that republicans like trump have been using the fire hydrant issue and they argue is being wasted on this endangered fish. the experts i spoke to said that argument is essentially a red herring. yes, it is true that there have been drive fire hydrants in some of these laces were fire hydrants need water, water and while i've researchers i spoke to an firefighters sate has more to do with the increase in unprecedented pressures on these water systems than actions of the governor. these are water systems there were not made for these kind of conditions, pumps, tanks, generators and the reservoirs, these are systems that in many cases are very outdated and they are not equipped to handle what they're dealing with.

so these folks i talked to her saying the focus really needs to shift to real discussion about upgrading the infrastructure to be able to handle these kinds of fires and figuring out who at the end of the day is going to handle lease upgrades. tom: for the latest updates go to the terminal where it is updated on a minute by minute is basis. german industrial production data, touching on the health of the german economy. we will get a french bond sale, a reminder of the enormity of sovereign debt that's been put into the markets at this moment. given the political tensions over in france, and we will hear

from susan collins as well. we will see if she aligns with consensus coming through from fed officials and if they can take their time on future rate cuts. what she has to say about the path ahead will be important. u.k. borrowing costs soaring with stocks falling and the pound tumbles, putting more pressure on rachel reeves to reassure the markets on her fiscal plans. so far they are less than reassured. we will look at her options, next. this is bloomberg. ♪

tom: welcome back to bloomberg "daybreak: europe." u.k. market tumble yesterday, pushing levels to the highest since 1998. the treasury has signaled if higher worm costs wipe out the fiscal headroom, she will choose cuts overspending tax hikes. let's bring in lizzy burden, this is a challenge to state police least for racial reis. having flashbacks to liz truss and to the budget. we saw the pressure on the pound, those dynamics suggesting

the fed is turning sour on u.k. assets. what is rachel reeves to do? >> let me give you the big picture, the labour party really contrasted themselves with the conservatives by saying remember the specter of liz truss? rachel reed has put herself in a straitjacket, she said there will be no more tax rises, no austerity, one physical event in gear and she will stick to her fiscal rules of only borrowing to invest. she has really box herself in here. this is high risk because at the october budget she left herself a big margin for error, really relying with a hope and a prayer that the economy was going to grow. we know that growth has been in the doldrums, so then after the budget, she sat down and had the yield spike and pretty much the headroom was evaporating. now we've got the global bond rout and she is really boxed in.

so what is she going to do? she tried to calm the market yesterday, she's off to beijing at the weekend. that's about the long-term to try to rustle up more investment for the future, but she needs to deal with this now. she was planning to do a speech when she got back from beijing reaffirming her commitment to the fiscal rules, but we continue to see these difficulties in the markets today. there's an expectation that she needs to say something. at the moment, what we got yesterday was a signal that if she ran out of headroom she would choose spending cuts, as you say, over more tax rises, that's going to be politically difficult and the reason i say it's more like the 70's then liz truss is because at least liz truss had an idea of how to grow the economy and her tax cuts. it looks like according to now she might have no choice but

austerity. tom: the jobs data, the job situation in the labor market in the u.k., it seems to be a is less and less convinced it will go further with rate cuts. there are tensions here when it comes to the labor market. >> remember the official jobs data has been the bane of bank of england policymakers lives. no one is answering their phone. policymakers looking very closely at these private surveys, and this one in particular is interesting because vacancies have fallen at the fastest rate in four years, coming down in general but this is a sudden jump. it's not because people are filling the vacancies, it's because companies are taking these jobs off the table. it's a sign -- is not a sign the economy is growing well. if it doesn't grow as fast, it just adds to her headache. tom: it arguably comes back to

the budget and they're having to rein in the number of jobs i can put out on the market. that was an excellent breakdown of what's happening here in the u.k. in terms of selloff across assets and what it all means for the chancellor, rachel reeves. has she boxed yourself in or is she boxed in by circumstances? there's plenty more coming up. stay with us. this is bloomberg. ♪

tom: welcome back. breaking onto minute ago from the swiss national bank in terms of the profit is turned on its fx holdings for 2024. the snb has reported and 80 billion swiss franc full your profit for 2024. it has accumulated a stockpile

of fx reserves and has made a profit on that as well as its gold holdings as well. so it's able to return some money and some of that profit to the state and also the individual regions as well. making a profit for 2024 and it will be able to resume payouts to state coffers. it will be making a payout of 3 billion francs to the federal government for the first time in three years and also paying a dividend to its private shareholders. so gains coming through for the gold positions of the swiss national bank. some other stories making the news this thursday, advisers to president elect donald trump or to be considering michelle bulman as the next vice chair.

the current terrible step down while maintaining his seat on the board of governors. they begun drawing up a short list of potential replacements for fed chair to rome powell whose term ends in may 2026. a tentative deal has been reached with operators for a new six-year contract, avoiding a possible strike. the agreement guarantees union jobs when certain technologies are implemented, including a semiautomated cranes that have been a sticking point. the deal still needs to be ratified by the two sides. a state funeral is taking place in washington today for former u.s. president jimmy carter. his body has been lying in state at the capitol where members of congress have been paying their last respects. after a service in washington,

carter will be taken back to georgia for a private burial. you're seeing live pictures there. markets are closed for a day of mourning. we will have special coverage of the funeral from 2:00 p.m. u.k. time. we will leave you with live pictures of the former president lying in state in the u.s. capitol. this is bloomberg. ♪ let's go boys. the way that i approach work, post fatherhood, has really been trying to understand the generation that we're building devices for. here in the comcast family, we're building an integrated in-home wifi solution for millions of families, like my own. connectivity is a big part of my boys' lives. it brings people together in meaningful ways. ♪ ♪

tom: good morning, this is "bloomberg daybreak: europe." these are the stories that set your agenda. joe biden canvases final four in

trip as president as wildfires place los angeles into its worst natural disaster in decades. hundreds of thousands are evacuated from hollywood and other neighborhoods. asian shares fall as inflation data shows beijing stimulus efforts failing to revive demand. the fed cautions on future rate cuts what president biden is said to plan more kurds to keep advanced ai chips out of china. u.k. stocks, bonds, and the pound double adding to borrowing caused and piling pressure on chancellor rachel reeves to calm investors over fiscal plans. still looking for the catalyst. you did have the minutes coming through from the federal reserve, reiterating the message from these fomc officials that they see upside risks to inflation. interestingly starting to perry -- pary forecast and

implications of potential trump policies into their forecast. european futures off by .1 of 1%. u.s. markets are closed today as the country marks the funeral of former president jimmy carter. you had a successful and well received sale of $22 billion of u.s. treasuries and comments from chris wallace that seems to have temporarily calmed the markets. ftse 100 went into gains of .2 of 1% after the route yesterday. u.k. assets taking a knock at the session on wednesday. s&p futures pointing to losses of .2 of 1% as markets open friday. nasdaq 100 futures pointing lower by 37 points. cross asset treasuries, relief and session data after four state days of selling with eltel. yields down, 4.66 on the 10 year. the pound, a drop yesterday.

further pressure on the pound today down .4 of 1%. brent, $76 per barrel. bitcoin below the $95,000. let's get to the major story unfolding, uncontrolled wildfires are burning through parts of california fanned by hurricane strength winds. the fire which have forced more than 100,000 residents from their homes are the worst natural disaster for los angeles in decades. >> i am making sure that we leave no resource untapped. firefighters are now on the scene from across the state and across the country. tom: for more let's bring in ready go down -- kriti gupta. are the authorities any closer to getting fires under control. kriti: further apart simply

because of this is a fire that started off in the pacific palisades and made its way down. it has almost engulfed at 11,000 acres in california due to the strong wind, but now it is affecting city dwellings. this was initially affecting more affluent neighborhoods outside of the core of los angeles. you have evacuation warnings around notable landmarks. the hollywood bowl, adobe theater -- the dolby theater. this is a quickly developing situation, one challenging to get under control not just because of the power of the wildfires but the terrain as well, and this is simply one that means people get short notice to evacuate their homes, and that is what you are seeing. tom: the images are stunning and disturbing. there is the human cost.

there is the economic toll as well. obviously the primacy of the human toll right now, but we will have to think about the cost. kriti: 11 million people in california affected by these wildfires. a water shortage has been an ongoing conversation for years in california because of the climate risk associated with this region, but you mentioned you have not seen a disaster of this scale since 1994, an earthquake that had similar damage, and these are firefighters working around the clock. they have been good about getting people out of their homes as quickly as possible, and the message has been received from residents on the ground that if you see a with -- whiff of risk usually your home. the liability risk is another angle to look at, because of the last couple of years we started to see this thing called last resort insurance where traditional private insurers are

choosing not to ensure those parts of the country that are more vulnerable to climate risks including california, florida, and set about to the point that people who are living have to go to last resort insurance that is more expensive because of the risks attached to it. you have seen a doubling of those plans since 2018. you also have to consider the effective up with a disaster aid can get to these regions. joe biden is canceling his trip to italy to deal with the issues at home, and the wildfires. the u.s. government has been dealing with fires in hawaii, hurricanes in north carolina, florida, so in terms of disaster relief there is a question of federal response that will be top of mind. tom: scientists are linking these two climate science.

the president calling this a hoax. the human impact and economic toll in los angeles. thank you. for the latest updates go to tliv to get up to minute updates. blackrock has told employees it is cutting 1% of its workforce, part of the company's efforts to realign resources after a committed $25 billion for takeover to expand its reach in private market assets and data. the firm says the recent acquisitions will add another 2000 euros this year. jeffries reported profit that soared on the rebounded m&a and a surge in equity trading revenue.

net income tripled and a near doubling of advisory revenue. the u.k. prudential regulation authority says plans to reduce bank bonuses will introduce more risk into the financial system. it shortens to the waiting period for top manager bonuses from as long as eight years to five, part of efforts to support the country's growth ambitions. new research about the impact of a eye the banking industry finds 200,000 jobs could be lost over the next 3 to 5 years, by the prophets could jump by up to 17%. a senior analyst joins us. what are the key takeaways?

there is the profit upside but a real impact on jobs. >> the most key takeaway is the banks are bullish. if you look at the cost, it proves the point ai is expensive to introduce and implement but expensive to maintain, and in terms of job cuts there are 200,000 jobs to be lost in the next 3 to 5 years, so it is not the massive figure, but think about the fact that last year 10 european banks caught 25,000 jobs, so it is a natural way of banks cutting costs. ai is not just about job replacement. ai is about job creation. jobs being graded including compliance governance, computer

science. tom: what does it means for profits? >> productivity boost is the key drivers according to banks resurveyed. more than 80% of banks claim generation will increase by five persons, which could be quite bullish. regulators could be scrutinizing more what banks are doing with ai and generative ai. there was a competition not only between the banks and ai, but also the fintech world. we have to take this into account if you think about the profitability boosted generation. tom: given the context of 25,000 jobs just last year, you were talking about 200,000, which

jobs are most vulnerable from ai? >> if you follow the industry, the repetitive tasks can be replaced. customer service, you talk to chatbots and robots then the agent. these kinds of jobs will be replaced in the first based -- place, but the time can be used for value-added services. how much new jobs will be created in the next three to five years. tom: do you get a sense that banks understand what they need to be investing in and how much of dry powder they're putting aside? do banks know what they should be adding? >> for the last three years they

have been benefiting from high interest rates, so they have good revenues that they can spend on ai. this is an interesting question. this is where we get the survey to understand the priorities. they will investigate some areas. they have to be concerned about the regulatory regime, so it is quite difficult, and banks manage to identify areas where they could have a big impact with ai. i think only jp morgan is the one which is quite open about the impact of ai on their businesses, and they claim up to $2 billion of benefits can come from ai, and it can go more, so banks start thinking about this in more detail, and we expect

this will be even more investigated in the coming quarters. tom: jp morgan had put a dollar number on it, and you expect more banks to be disclosing in the months and quarters ahead. really great piece of research. how ai is shaping and affecting the finance sector with a particular focus on banks. today's bloomberg big take takes a look at former wall street analysts who are turning to social media and content creation to make a living. the biggest base globally of slashed equity analyst jobs. the story talks to a former analyst plying his trade on youtube, giving his irreverent investment takes behind an

avatar of shrek. that is also with your time at dictate. the global bond selloff good place yields further toward thresholds. longer did a yields getting about 5%. we will discuss next with alexander from a wealth management company. what is happening with the global bond rout that has taken a temporary pause. this is bloomberg. ♪

♪♪ ♪ three little birds ♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪

tom: you markets plummeting, you so that pain causing anxiety about the economy and leisure on

the labour party government. let's bring in valerie. but there was into context the magnitudes of the moves we saw yesterday. the pound under pressure again. >> the pound under pressure down nearly .501% so far in this morning's trade, and the markets are telling the u.k. government they need more reassurance. the problem is what more can the government give? the effort sources saint rachel reeves is looking at cutting spending. that will hamper growth, and if you are saddled with debt you need to grow. the market is saying we are not sure whether growth is going to come from. it goes back to the narratives that the u.k. needs to compete for finances on the global stage, and if you have treasury up to 5%, that means the you'll that which guilds need to be at is high enough.

interest rate costs will climb, and you can think about the u.s. being some massive black hole with its own gravitational field sucking it all of this capital from the globe and leaving others like the u.k. needing to compete on a global scale, leaving a guild yields at a penalizing high-level for the u.k. government. tom: we are looking exposed with 30 year yields as low as when i listen to oasis. it's get further details and analysis in terms of the global bond market selloff, taking despite stateside and treasuries are shortened given the marking of the funeral of president jimmy carter.

let's bring in to cio at endo suez wealth. how far did this selloff go? the respite, will it be short-lived? >> good morning, thank you for having me on the program. if you look at the parallel of 2016 during the first trump presidency, the trajectory is more or less the same. it is a readjustment of about 100 basis points from the low to the high, so if you look at the trough in the center mid-september two below 370, i think we have done most of the readjustment. as usual, with fixed income you can exaggerate on both sides. we have seen lower volatility in the past 18 months, so it can exaggerate and we can have a pickup. when t-bills were 4% nobody was talking about 5%.

my impression is we are not too far away from stabilization. i can actually say as a private bank we see interest at the current interest rates, so logging into guilds at this level in the u.s. will start to be attractive. tom: and history would support that. you get to 5% and investors start to login those yields, and it put something of a ceiling on how high yields go at the long end. do you think that's scenario plays out again? >> absolutely. when you take off a little bit from credit spreads, there has not been any spread widening, rates are low. the u.s. economy is really resilient. you can easily achieve 6%, 6.5% for the next five years, so

compared to money markets at 4.5% and headed to 4%, all will give you a fairly standardized outcome for your capital. tom: how are you modeling potential inflationary impacts from incoming tariffs? >> this is one of the key questions that definitely contributes to this bond yields move. one of the keywords tonight from the fed minutes was uncertainty. they actually use that word nine times, and less time it was only four times. the reason is they do not know about the tariffs. the impression is some of the tariffs will be inflationary. we slightly revised our forecast on inflation by 20 basis points for 2025, so it is not a massive spike of inflation, but we need

to reflect the uncertainties regarding both trade policy and immigration policy. is trump going to put a massive amount of pressure on inflation? probably not. it is smart the way they are managing today between inflation risk and level market risk is to keep some optionality. today the market is forecasting two cuts on that which seems to be fair but on friday at what we see the nonfarm payrolls if we start to see weakening of the market the fed can shift from its focus on inflation back to the labor market. tom: the focus has shifted, it has been back and forth. whether or not nonfarm payrolls tomorrow moves it back to the labor market is going to be a key question.

alexander, thank you for your take on what you are seeing across these global bond markets and with the view that investors will be looking to take advantage of high yields when it comes to longer dated u.s. treasuries. plenty more coming up. stay with us. this is bloomberg. ♪

tom: welcome back. the fed minutes of yesterday confirming that officials within the fed at the fomc are tilting more hawkish. it really underscored what they described as the upside risks around the nation. they talked about the strength of the consumer, the labor market and overall u.s. economy. the spotlight on inflated risks,

and interestingly as well, and by the way this terminal chart shows the breakdown of those members within the emma -- fomc are tilting hawkish. they are starting to factor in trump policies. that will come into clearer focus in the months ahead. that's what the board and have a reminder in terms of what is happening in the selloff of u.k. assets. pound down, yields out, and that suggested some international investors are putting a question mark over the broader investment case for the u.k. yields at a decade level high in terms of the tenure. the 30 year at levels well above 5% since 1998. the pound under pressure again today.

this is a story of intense focus for the rachel reeves team. nvidia in focus with the news the news the biden administration is working out more restrictions on accelerators. if you are an ally of the u.s. you get unlimited access, but if you are china and russia you will be restricted a must entirely. as second tier will have to get backing and sign off. the opening trade is up next. this is bloomberg. ♪

kriti: good morning from london, i am kriti gupta alongside guy johnson and lizzy burden. wildfires plunge los angeles into the worst natural disaster in decades with hundreds of thousands of people being evacuated from hollywood and other neighborhoods and spurring joe biden to cancel his final foreign trip as president.