May 6, 2025 • 19 mins
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Friedrich Merz has vowed to hit the ground running when he takes over as German chancellor on Tuesday, pledging swift action to galvanize Europe’s biggest economy, restore Berlin’s leadership role on the global stage and address voter concerns about irregular migration.
(2) China’s services activity deteriorated more than expected in April, a private survey showed, the latest setback for an economy already under pressure from US tariffs.
(3) Ford suspended its full-year financial guidance and said President Donald Trump’s auto tariffs will take a toll on profit, joining rivals stung by volatile global trade policies.
(4) The Trump administration is declaring Harvard University ineligible for new research grants from the federal government in the latest escalation between the White House and the Ivy League school.
(5) The UK’s tax overhaul for wealthy foreigners will start costing more than it raises if one in four of those affected leaves the country, according to the Centre for Economics and Business Research.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
This is the.
Speaker 3 (00:10):
Bloomberg Day BAQ podcast, available every morning on Apple, Spotify
or whatever you listen. It's Tuesday, the sixth of Main London.
I'm Caroline Hepke.
Speaker 1 (00:18):
And I'm Stephen Carroll.
Speaker 4 (00:19):
Coming up today, Friedrich Martz gets set to become Germany's
new chancellor this morning as HEBA is to hit the
ground running.
Speaker 3 (00:26):
Forecasters say us Taris will force the Bank of England
to ramp up rate reductions.
Speaker 4 (00:32):
Plus going going gone, evidence shows the UK's move to
abolish non dom status may cost more than it raises.
Speaker 3 (00:40):
Let's start with a roundup of our top stories.
Speaker 4 (00:43):
Germany's parliament is set to elect Fredrick Mertz as the
country's next chancellor in the coming hours. The Conservative leader
will head a coalition alongside the Social Democrats at a
critical moment for Europe's largest economy. Our Germany Bureau chief
Christopher all World says Martz will be looking to follow
through on his to enhance his country's role in European security.
Speaker 5 (01:04):
Pushing through economic reforms will will definitely be on top
of his list and also will be particularly in focus
in coming days. Will be his efforts to liaise with
other European leaders like French President in Manuel Macron. All
the Polish president to join has been notably passive under
outgoing chance all of shots, and Mattz really has pledged
(01:24):
and maybe one of his top priorities to change that
and play also like a more active role on the
European stage.
Speaker 1 (01:30):
Again Christopher Farrewell speaking there.
Speaker 4 (01:33):
Once sworn in, Martz will preside over his first cabinet meeting.
Germany's economy is stagnating after two years of recession. Russia's
war in Ukraine is still raging to the east, and
support for the far right alternative for Germany is strengthening,
especially in former communists eastern regions of the country.
Speaker 3 (01:52):
China's services activity fell to its lowest level in seven months,
according to a private survey. The Kaishin PMI or Purchasing
Managers Index fell to fifty point seven in April. That
is below the median forecast of fifty one point eight,
and it suggests a reduction in staff and new business orders.
And Liz poll by Bloomberg forecast China's second quarter GDP
(02:13):
growth could slow to four point two percent, below the
finance Ministry's five percent target.
Speaker 4 (02:20):
All thirty two economists in Bloomberg's survey believe the Bank
of England will cut interest rates this week. A quarter
point cut is baked in for the meeting this Thursday,
the fourth rate reduction from last year's peak of five
hunder quarter percent. Most economists expect the Center Bank to
switch to a dovish stance, judging that Donald Trump's tariffs
and uncertainty about his future plans will weigh on growth
(02:43):
and temper inflation. If the Bank of England cuts again
in June, it will be the first time borrowing costs
are lowered at successive meetings since early two thousand and
nine during the financial crisis.
Speaker 3 (02:55):
Now, the UK's new taxes on non domiciled residents will
start costing more than they raise if one in four
of those affected leaves. That's according to the Center for
Economics and Business Research, which argues that the official forecast
has underestimated the risks. The Independent think Tanks managing economist
Sam Miley says that it's a risk to the public finances.
Speaker 2 (03:18):
Ultimately, the policy is being made and supported by by
figures that are inherently uncertain, so it suggests that there
is a significant risk to fiscal matters based off what
is an entirely uncertain variable.
Speaker 3 (03:33):
Miley's report comes as some of Britain's richest investors have
already said that they are leaving, including Gold and Sax's
Richard Noddy, a spokesperson for the Treasury, said that it
did not recognize the cebr's figures and that the Independent
Office for Budget Responsibility sees the changes raising thirty three
point eight billion pounds over the next five years.
Speaker 4 (03:55):
UBS has agreed to pay five hundred and eleven million
dollars to settle a US investigation into how Credit Suisse
helped rich Americans to evade taxes, even after pledging to
stop the practice a decade ago. The resolution ends a
long running scandal involving the Lander, which was acquired by
UBS two years ago. UBS said in its first quarter
(04:16):
report that had had a provision for potential costs tied
to the case, but didn't disclose an amount.
Speaker 3 (04:22):
Ford suspending its full year guidance, saying that it expects
a one and a half billion dollar hit to profits
due to President Trump's tariffs. The news comes despite the
carmaker reporting first quarter profit that beat expectations. Speaking to analyst,
CEO Jim Farley said, the firm is still unsure of
the full impact of levies.
Speaker 6 (04:42):
It's still too early to fully understand our competitors' responses
to these tariffs. It's also early to gauge the related
market dynamics, including the potential industry wide supply chain disruptions
and the impact of Ford's domestic manufacturing advantages. As a result,
we decided to suspend our guidance.
Speaker 3 (05:03):
Ford's Jim Farley speaking there despite the negative impact of
the automaker's bottom line, and Farley went on to voice
support for the Trump administration's efforts to bring auto manufacturing
back to the United States. Ford's shares fell two point
four percent in after hours training on Monday.
Speaker 4 (05:20):
The clash between President Trump's administration and Harvard is continuing
as the White House blocks new funding for the university.
It comes after accusations of ideological bias at the institution
by the US government and its conservative allies. Bloomberg's tiwa
Adebayo has more.
Speaker 7 (05:37):
Harvard University has been declared ineligible for new research grants
from the federal government. That's after Education Secretary Linda McMahon
sent a letter to the Ivy League school warning access
to financial support would be withheld until they could demonstrate
what she calls responsible management. Bloomberg understands that to reverse
(05:58):
the dictat Harvard will need to end negotiation with the administration.
Sources close to the matter say the change could affect
over one billion dollars annually for the university, although the
administration did not immediately detail the figure. In response, a
Harvard spokesperson said the latest demands amount to improper control
(06:18):
of the institution with chilling implications for higher education in London.
To you at a Baio Bloomberg Radio.
Speaker 3 (06:25):
And those are some of your top stories. Now let's
get to the markets this morning. On the Bloomberg Dollar
Spot Index, the dollar is up a tenth of one
percent Taiwan as dollar appreciation is stabilizing this morning, Asian
efcts setting really after a couple of days of gains.
You've also got US DOT futures in the red. So
then as that features down by almost half of one
(06:47):
percent of this morning this as we're looking at European
stocks also down just a fraction, although actually Germany did
reasonably well yesterday. You did see the xetradacs, gaining about
just over one percent of the close yesterday, so just
shy of record highs Ford stock, though, fell two and
a half percent and extended trading Palanted, big tech firm,
(07:09):
also fell over nine percent in after hours. US treasuries
had a week session yesterday, tenure yields. This morning, we'll
begin trading at four thirty four. This is gold takes
its two day rally now to more than four percent.
So gold continuing to rally. We up eight tenths of
one percent this morning. That is a look at the markets.
Speaker 4 (07:27):
In a moment, we'll bring you more on the challenges
facing Germany's new chancellor, plus why the much heralded end
of the non done tax status in the UK might
not be as good for the public finance as as
the government has hoped. But another story that's caught ry
this morning, or I should say series of award winning stories,
because a Bloomberg News's City Lab has won a Pulitzer
Prize for Criticism for a collection of essays from our
(07:50):
colleague Alexandra Lang.
Speaker 1 (07:52):
This is a fascinating series.
Speaker 4 (07:53):
I love City Lab because I love thinking about the
cities that we live in and how we can basically
change them for the better. And Alexandra has written a
series of pieces about the use of public spaces and
how they can be better for families. And they're not
just fascinating to read. There's some really interesting ideas in
there as well, the idea of making public spaces you know, better,
(08:14):
easier for families to be able to live and to
be able to also keep families in city centers.
Speaker 3 (08:19):
Yes, she writes about how design promotes better mental health
for children. She's written about how burnt out parents need
better public spaces, about how the physical design of sort
of housing and transportation of public spaces. Yes, it's the
range about which she writes is so interesting. And also
as a parent, it really brought this to mind that
(08:42):
people often don't understand how fundamental certain play equipment is.
Why do you always see, you know, the swing or
the monkey bars in children's playgrounds. It's hugely important for
child development. Basically, things like writing monkey bars are massively
important for that people don't often understand and why those
things exist. And she really brought all of that stuff
(09:03):
about focus.
Speaker 4 (09:04):
It's not just about not using screens. Essentially, there's a
lot more to us. But look as action of our stories,
we'll put a link in our show notes for the
Bloomberg Daybreag Europe podcast to some of those award winning pieces.
And congratulations to Alexandra Lang.
Speaker 3 (09:18):
Now, more than two months after Germany's federal election, Fredrich
Mertz finally becomes chancellor today. He's coming to power at
a critical time for Europe's largest economy. Our EMEA News
director Rossy Matheson joins us now for more Good Morning Roz.
What's at stake then, do you think for Germany under
Mertz's leadership?
Speaker 8 (09:35):
Now, they're important changes he's already been trying to bring in,
as we know, trying to get the deckcap change and
also you know, in a big increase in infrastructure and
defense spending for Germany at a time that the economy
has really been stagnating, and fundamental questions about how do
you take an economy that's very much based around manufacturing
(10:00):
and how do you adjust that for a modern world
and make it competitive And so, like a lot of countries,
there are questions about what are the new big things
that are going to propel the German economy and how
do you shift its manufacturing base again to something else?
And so there's a lot of expectations there for him,
obviously for Germany, but also for Europe as a whole,
(10:21):
because the backdrop, of course is the trade tensions with
the US, the Trump administration questioning Europe's ability to take
care of itself and defend itself, the need to find
a solution to Russia's war to Ukraine. So there's an
awful lot on his plate, and the question is what
is he going to do that his predecessors.
Speaker 1 (10:41):
Did not ras.
Speaker 4 (10:43):
Of course, even before Kredich Wertz became chancellor, he's already
managed to get this package through the bonder Stag, which
has gone see a massive increase to defense and infrastructure
spending and changes to the rules around spending on defense
in general. How quickly will he be able to start
spending that money?
Speaker 8 (11:00):
Pushing to start pretty quickly, and that's mostly on the
infrastructure side, so you could see increases in spending around railways, bridges,
highways fairly quickly out of this, although again these things
don't get built in a day, but they will lay
the bones of a broader revamp of the economy over time.
(11:22):
The question is we know that, in fact, there's already
some money in the mix in Germany, but it's been
unable to be spent because of a lot of rules
around the way that bureaucracy works and so on, and
getting permissions and plannings, and so it's not just about
getting the money there to spend it, it's also about
making it easier for it to be spent and to
(11:42):
cut red tape. And that's something that we're not necessarily
hearing a lot of clarity on as yet from.
Speaker 1 (11:48):
This incoming administration.
Speaker 8 (11:50):
Is you've got the money, but how do you make
sure it goes where it needs to go? And it
sounds like they are keen to start spending it quickly,
but there are a lot of issues around how they
get that money where it needs to be and to
do so quickly.
Speaker 3 (12:04):
Mattz has also made big promises to curb illegal migration.
I mean, this is a lot of countries in Europe
are talking about now. It could also create problems with
Germany's neighbors, well.
Speaker 1 (12:17):
It could.
Speaker 8 (12:17):
It could create problems both at home and with its neighbors.
As you say, I mean, they're grappling with the rise
of the anti immigrant party, the AfD, which has only
just been formerly classified recently as a right winging extremist group.
So that's very much back in the news and in
the conversation in Germany, so pushing those to take a
(12:38):
harder line on migration. And the question is what does
that look like and what is the impact on the region,
Because as we know, migration questions in Europe aren't just
confined to one country. So if one country shots its
borders or says it's taking fewer migrants, where do those
migrants go? Is there a knock on effect on other
(12:59):
countries which then have to grapple with those people diverting
And so you get a lot of questions from neighbors
about what does this mean for them? If these people
come towards Germany get turned away, where.
Speaker 1 (13:11):
Else do they go?
Speaker 8 (13:12):
Because Germany's really under Angla Mercle, particularly when she was Chancellor,
really sort of became known as a place that was
willing to take migrants, especially during some of the waves
that we saw because of conflict in the Middle East
and people coming from North Africa. So if that changes
and these people get sent somewhere else, that's going to
(13:35):
raise tensions inevitably with other countries in Europe.
Speaker 4 (13:40):
What about Fromerts himself. Even since the elections, he's been
under pressure and the polls.
Speaker 8 (13:46):
Well, it's funny because normally leaders come in with the
honeymoon period, you know, but also high expectations, and so
if they don't deliver quickly, there's a crashing sense of disappointment.
Moses arguably already done some extraordinary significant things before he's
even in the chair as chancellor. But equally, his popularity
(14:06):
ratings are relatively low and have tended to be consistently
over years. So only at eighteen percent in one poll
said that they believed he do a better job of
running the country than Merkele, and almost half said they
expect him to be worse. So perhaps the benefit of
low expectations is that Merz actually only has upside from
(14:28):
here to deliver and doesn't collide with the idea that
he has to be doing a lot quickly. But that said,
it does point to the challenges he faces about selling
his agenda to the German people, selling himself to the public,
and we've seen that over and over again. So the
question is he's got a lot he wants to do,
can he find a way to sell it to the
(14:48):
German people?
Speaker 3 (14:50):
Okay, rolls, thank you so much for being with us
o AREMA News director Rosson Matheson.
Speaker 4 (14:56):
The Britain's labor government has talked a lot about ending
the so called non dom tax stile last October's budget,
saying it would help to boost the tax take. But
after changing the rules, a new report from the Center
for Economics and Business rese it suggests the tax change
will end up costing more than it raises if the
wealthy people who held the status leave the country. Are
UK Parltic supporter of James Welcock joins US Now for
(15:17):
more on this story. James, what does this new report
say and why does it make difficult reading for the government.
Speaker 1 (15:23):
Well, the tax was supposed to.
Speaker 2 (15:24):
Raise revenue, Stephen, by changing how people who are not
tax resident in the UK, but often quite wealthy and
live in the UK pay it. They would now all
be paying their tax on foreign earnings. But this report
says firstly, the OBR is overestimating how much the tax
will raise by taking the wealthiest people when it made
the estimates, and itutates the taxi seeds to find out
(15:45):
the obr's estimating the new tax will bring in four
million pounds per person, and they're like, it's probably closer
to six hundred thousand pounds per person. And secondly, they're
saying there are some wild ranges in the estimates of
how many people will leave in response to this tax.
The OBI say it's twelve percent, Oxford economics say it's
(16:05):
thirty two percent. And then there are surveys of some
sort of non doms, some sort of wealthy private tax
lawyers who coul put the number higher, closed to even
sixty percent. They then don't take of you on how
many people are leaving, but they say if more than
one in four do leave, that's the point in their
analysis where the treasury starts losing money. And this is
very difficult for the government because they have said this
(16:27):
is an ideological commitment. It's in Labor's manifesto, but it's
framed as making people money. The government say this is
supposed to make thirty three billion over five years. And
this report, which I note although it is independent, is
commissioned by think tank link to Onward, a conservative think tank,
as saying it's actually quite a gamble and at the
(16:47):
twenty five percent mark, you'll start becoming a fiscal risk.
Speaker 3 (16:50):
Yeah, And The issue is that there are only tens
of thousands of these extremely wealthy individuals, and so actually
it only depends on a relatively small number of people
changing their behavior. How likely is it then that the
ultra wealthy will go I mean, Bloomberg, we've already reported
a lot of individuals and what their movements.
Speaker 2 (17:11):
Are I mean, as you say, it's a really difficult question.
So seventy four thousand ish they'reabouts in the UK right now.
Because you have to self declare to the HMRC that
you're doing this, the data is a two year time lag,
so we won't know for sure for two years. All
I have for you, Caroline are estimates, anecdotes and precedent estimates.
We've gone through between about twelve percent to upp as
high sixty.
Speaker 1 (17:32):
Then anecdotes.
Speaker 2 (17:33):
We're hearing Goldman's Richard Noddy is already left for Milan.
The real estate magnates Ina Richard Livingston, they've left for Monaco.
Speaker 1 (17:41):
So we are.
Speaker 2 (17:41):
Seeing certain reports that some individuals are leaving, but some
doesn't equate to any kind of number and precedent. When
Switzerland put in a players attacks on it's wealthy in
the long run, thirty percent left. So at the very
least the obr's estimate we can comfortably say is at
the lower bound of where this is. But as to
where it will end up, it's hard to tell. London
(18:02):
has a lot going for it. It has all these amenities.
It has a very nice place to live, I mean,
apart from the back holiday, you could say it has
nice weather as well. The danger, though, is that there
is a risk of what's called a wealth fleeing spiral,
where if all your friends are going, if you will
also could go. If there's a lot of tax advisors
offering you a way out, it might be time to leave.
Speaker 1 (18:23):
Well, if they do leave, where are they're likely to go?
Speaker 3 (18:26):
Well?
Speaker 2 (18:26):
I mean you have the greatest hits Stephen of tax havens, Switzerland, Monaco,
the Bahamas, but increasingly with seeing new countries, especially in Europe,
who are trying to lure in some of these kind
of very wealthy, mobile, sort of high capital individuals. Italy
you have a flat tax currently of one hundred thousand euros,
and then after that you can have any sort of
(18:46):
foreign games you want. That's rising to two hundred thousand euros.
So getting quick Greece if you invest half a million euros.
You can then play a fat tax, a flat tax
of one hundred thousand for fifteen years, or you go
to Dubai where they don't levy any income or wealth
tax whatsoever.
Speaker 4 (19:02):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 3 (19:08):
Look for us on your podcast feed every morning, on Apple,
Spotify and anywhere else you get your podcasts.
Speaker 4 (19:15):
You can also listen live each morning on London DAB Radio,
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Speaker 3 (19:20):
Our flagship New York station, is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
I'm Caroline Hepka and.
Speaker 1 (19:29):
I'm Stephen Carroll.
Speaker 4 (19:30):
Join us again tomorrow morning for all the news you
need to start your day right here on Bloomberg Daybreak
Europe
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
This is the.
Speaker 3 (00:10):
Bloomberg Day BAQ podcast, available every morning on Apple, Spotify
or whatever you listen. It's Tuesday, the sixth of Main London.
I'm Caroline Hepke.
Speaker 1 (00:18):
And I'm Stephen Carroll.
Speaker 4 (00:19):
Coming up today, Friedrich Martz gets set to become Germany's
new chancellor this morning as HEBA is to hit the
ground running.
Speaker 3 (00:26):
Forecasters say us Taris will force the Bank of England
to ramp up rate reductions.
Speaker 4 (00:32):
Plus going going gone, evidence shows the UK's move to
abolish non dom status may cost more than it raises.
Speaker 3 (00:40):
Let's start with a roundup of our top stories.
Speaker 4 (00:43):
Germany's parliament is set to elect Fredrick Mertz as the
country's next chancellor in the coming hours. The Conservative leader
will head a coalition alongside the Social Democrats at a
critical moment for Europe's largest economy. Our Germany Bureau chief
Christopher all World says Martz will be looking to follow
through on his to enhance his country's role in European security.
Speaker 5 (01:04):
Pushing through economic reforms will will definitely be on top
of his list and also will be particularly in focus
in coming days. Will be his efforts to liaise with
other European leaders like French President in Manuel Macron. All
the Polish president to join has been notably passive under
outgoing chance all of shots, and Mattz really has pledged
(01:24):
and maybe one of his top priorities to change that
and play also like a more active role on the
European stage.
Speaker 1 (01:30):
Again Christopher Farrewell speaking there.
Speaker 4 (01:33):
Once sworn in, Martz will preside over his first cabinet meeting.
Germany's economy is stagnating after two years of recession. Russia's
war in Ukraine is still raging to the east, and
support for the far right alternative for Germany is strengthening,
especially in former communists eastern regions of the country.
Speaker 3 (01:52):
China's services activity fell to its lowest level in seven months,
according to a private survey. The Kaishin PMI or Purchasing
Managers Index fell to fifty point seven in April. That
is below the median forecast of fifty one point eight,
and it suggests a reduction in staff and new business orders.
And Liz poll by Bloomberg forecast China's second quarter GDP
(02:13):
growth could slow to four point two percent, below the
finance Ministry's five percent target.
Speaker 4 (02:20):
All thirty two economists in Bloomberg's survey believe the Bank
of England will cut interest rates this week. A quarter
point cut is baked in for the meeting this Thursday,
the fourth rate reduction from last year's peak of five
hunder quarter percent. Most economists expect the Center Bank to
switch to a dovish stance, judging that Donald Trump's tariffs
and uncertainty about his future plans will weigh on growth
(02:43):
and temper inflation. If the Bank of England cuts again
in June, it will be the first time borrowing costs
are lowered at successive meetings since early two thousand and
nine during the financial crisis.
Speaker 3 (02:55):
Now, the UK's new taxes on non domiciled residents will
start costing more than they raise if one in four
of those affected leaves. That's according to the Center for
Economics and Business Research, which argues that the official forecast
has underestimated the risks. The Independent think Tanks managing economist
Sam Miley says that it's a risk to the public finances.
Speaker 2 (03:18):
Ultimately, the policy is being made and supported by by
figures that are inherently uncertain, so it suggests that there
is a significant risk to fiscal matters based off what
is an entirely uncertain variable.
Speaker 3 (03:33):
Miley's report comes as some of Britain's richest investors have
already said that they are leaving, including Gold and Sax's
Richard Noddy, a spokesperson for the Treasury, said that it
did not recognize the cebr's figures and that the Independent
Office for Budget Responsibility sees the changes raising thirty three
point eight billion pounds over the next five years.
Speaker 4 (03:55):
UBS has agreed to pay five hundred and eleven million
dollars to settle a US investigation into how Credit Suisse
helped rich Americans to evade taxes, even after pledging to
stop the practice a decade ago. The resolution ends a
long running scandal involving the Lander, which was acquired by
UBS two years ago. UBS said in its first quarter
(04:16):
report that had had a provision for potential costs tied
to the case, but didn't disclose an amount.
Speaker 3 (04:22):
Ford suspending its full year guidance, saying that it expects
a one and a half billion dollar hit to profits
due to President Trump's tariffs. The news comes despite the
carmaker reporting first quarter profit that beat expectations. Speaking to analyst,
CEO Jim Farley said, the firm is still unsure of
the full impact of levies.
Speaker 6 (04:42):
It's still too early to fully understand our competitors' responses
to these tariffs. It's also early to gauge the related
market dynamics, including the potential industry wide supply chain disruptions
and the impact of Ford's domestic manufacturing advantages. As a result,
we decided to suspend our guidance.
Speaker 3 (05:03):
Ford's Jim Farley speaking there despite the negative impact of
the automaker's bottom line, and Farley went on to voice
support for the Trump administration's efforts to bring auto manufacturing
back to the United States. Ford's shares fell two point
four percent in after hours training on Monday.
Speaker 4 (05:20):
The clash between President Trump's administration and Harvard is continuing
as the White House blocks new funding for the university.
It comes after accusations of ideological bias at the institution
by the US government and its conservative allies. Bloomberg's tiwa
Adebayo has more.
Speaker 7 (05:37):
Harvard University has been declared ineligible for new research grants
from the federal government. That's after Education Secretary Linda McMahon
sent a letter to the Ivy League school warning access
to financial support would be withheld until they could demonstrate
what she calls responsible management. Bloomberg understands that to reverse
(05:58):
the dictat Harvard will need to end negotiation with the administration.
Sources close to the matter say the change could affect
over one billion dollars annually for the university, although the
administration did not immediately detail the figure. In response, a
Harvard spokesperson said the latest demands amount to improper control
(06:18):
of the institution with chilling implications for higher education in London.
To you at a Baio Bloomberg Radio.
Speaker 3 (06:25):
And those are some of your top stories. Now let's
get to the markets this morning. On the Bloomberg Dollar
Spot Index, the dollar is up a tenth of one
percent Taiwan as dollar appreciation is stabilizing this morning, Asian
efcts setting really after a couple of days of gains.
You've also got US DOT futures in the red. So
then as that features down by almost half of one
(06:47):
percent of this morning this as we're looking at European
stocks also down just a fraction, although actually Germany did
reasonably well yesterday. You did see the xetradacs, gaining about
just over one percent of the close yesterday, so just
shy of record highs Ford stock, though, fell two and
a half percent and extended trading Palanted, big tech firm,
(07:09):
also fell over nine percent in after hours. US treasuries
had a week session yesterday, tenure yields. This morning, we'll
begin trading at four thirty four. This is gold takes
its two day rally now to more than four percent.
So gold continuing to rally. We up eight tenths of
one percent this morning. That is a look at the markets.
Speaker 4 (07:27):
In a moment, we'll bring you more on the challenges
facing Germany's new chancellor, plus why the much heralded end
of the non done tax status in the UK might
not be as good for the public finance as as
the government has hoped. But another story that's caught ry
this morning, or I should say series of award winning stories,
because a Bloomberg News's City Lab has won a Pulitzer
Prize for Criticism for a collection of essays from our
(07:50):
colleague Alexandra Lang.
Speaker 1 (07:52):
This is a fascinating series.
Speaker 4 (07:53):
I love City Lab because I love thinking about the
cities that we live in and how we can basically
change them for the better. And Alexandra has written a
series of pieces about the use of public spaces and
how they can be better for families. And they're not
just fascinating to read. There's some really interesting ideas in
there as well, the idea of making public spaces you know, better,
(08:14):
easier for families to be able to live and to
be able to also keep families in city centers.
Speaker 3 (08:19):
Yes, she writes about how design promotes better mental health
for children. She's written about how burnt out parents need
better public spaces, about how the physical design of sort
of housing and transportation of public spaces. Yes, it's the
range about which she writes is so interesting. And also
as a parent, it really brought this to mind that
(08:42):
people often don't understand how fundamental certain play equipment is.
Why do you always see, you know, the swing or
the monkey bars in children's playgrounds. It's hugely important for
child development. Basically, things like writing monkey bars are massively
important for that people don't often understand and why those
things exist. And she really brought all of that stuff
(09:03):
about focus.
Speaker 4 (09:04):
It's not just about not using screens. Essentially, there's a
lot more to us. But look as action of our stories,
we'll put a link in our show notes for the
Bloomberg Daybreag Europe podcast to some of those award winning pieces.
And congratulations to Alexandra Lang.
Speaker 3 (09:18):
Now, more than two months after Germany's federal election, Fredrich
Mertz finally becomes chancellor today. He's coming to power at
a critical time for Europe's largest economy. Our EMEA News
director Rossy Matheson joins us now for more Good Morning Roz.
What's at stake then, do you think for Germany under
Mertz's leadership?
Speaker 8 (09:35):
Now, they're important changes he's already been trying to bring in,
as we know, trying to get the deckcap change and
also you know, in a big increase in infrastructure and
defense spending for Germany at a time that the economy
has really been stagnating, and fundamental questions about how do
you take an economy that's very much based around manufacturing
(10:00):
and how do you adjust that for a modern world
and make it competitive And so, like a lot of countries,
there are questions about what are the new big things
that are going to propel the German economy and how
do you shift its manufacturing base again to something else?
And so there's a lot of expectations there for him,
obviously for Germany, but also for Europe as a whole,
(10:21):
because the backdrop, of course is the trade tensions with
the US, the Trump administration questioning Europe's ability to take
care of itself and defend itself, the need to find
a solution to Russia's war to Ukraine. So there's an
awful lot on his plate, and the question is what
is he going to do that his predecessors.
Speaker 1 (10:41):
Did not ras.
Speaker 4 (10:43):
Of course, even before Kredich Wertz became chancellor, he's already
managed to get this package through the bonder Stag, which
has gone see a massive increase to defense and infrastructure
spending and changes to the rules around spending on defense
in general. How quickly will he be able to start
spending that money?
Speaker 8 (11:00):
Pushing to start pretty quickly, and that's mostly on the
infrastructure side, so you could see increases in spending around railways, bridges,
highways fairly quickly out of this, although again these things
don't get built in a day, but they will lay
the bones of a broader revamp of the economy over time.
(11:22):
The question is we know that, in fact, there's already
some money in the mix in Germany, but it's been
unable to be spent because of a lot of rules
around the way that bureaucracy works and so on, and
getting permissions and plannings, and so it's not just about
getting the money there to spend it, it's also about
making it easier for it to be spent and to
(11:42):
cut red tape. And that's something that we're not necessarily
hearing a lot of clarity on as yet from.
Speaker 1 (11:48):
This incoming administration.
Speaker 8 (11:50):
Is you've got the money, but how do you make
sure it goes where it needs to go? And it
sounds like they are keen to start spending it quickly,
but there are a lot of issues around how they
get that money where it needs to be and to
do so quickly.
Speaker 3 (12:04):
Mattz has also made big promises to curb illegal migration.
I mean, this is a lot of countries in Europe
are talking about now. It could also create problems with
Germany's neighbors, well.
Speaker 1 (12:17):
It could.
Speaker 8 (12:17):
It could create problems both at home and with its neighbors.
As you say, I mean, they're grappling with the rise
of the anti immigrant party, the AfD, which has only
just been formerly classified recently as a right winging extremist group.
So that's very much back in the news and in
the conversation in Germany, so pushing those to take a
(12:38):
harder line on migration. And the question is what does
that look like and what is the impact on the region,
Because as we know, migration questions in Europe aren't just
confined to one country. So if one country shots its
borders or says it's taking fewer migrants, where do those
migrants go? Is there a knock on effect on other
(12:59):
countries which then have to grapple with those people diverting
And so you get a lot of questions from neighbors
about what does this mean for them? If these people
come towards Germany get turned away, where.
Speaker 1 (13:11):
Else do they go?
Speaker 8 (13:12):
Because Germany's really under Angla Mercle, particularly when she was Chancellor,
really sort of became known as a place that was
willing to take migrants, especially during some of the waves
that we saw because of conflict in the Middle East
and people coming from North Africa. So if that changes
and these people get sent somewhere else, that's going to
(13:35):
raise tensions inevitably with other countries in Europe.
Speaker 4 (13:40):
What about Fromerts himself. Even since the elections, he's been
under pressure and the polls.
Speaker 8 (13:46):
Well, it's funny because normally leaders come in with the
honeymoon period, you know, but also high expectations, and so
if they don't deliver quickly, there's a crashing sense of disappointment.
Moses arguably already done some extraordinary significant things before he's
even in the chair as chancellor. But equally, his popularity
(14:06):
ratings are relatively low and have tended to be consistently
over years. So only at eighteen percent in one poll
said that they believed he do a better job of
running the country than Merkele, and almost half said they
expect him to be worse. So perhaps the benefit of
low expectations is that Merz actually only has upside from
(14:28):
here to deliver and doesn't collide with the idea that
he has to be doing a lot quickly. But that said,
it does point to the challenges he faces about selling
his agenda to the German people, selling himself to the public,
and we've seen that over and over again. So the
question is he's got a lot he wants to do,
can he find a way to sell it to the
(14:48):
German people?
Speaker 3 (14:50):
Okay, rolls, thank you so much for being with us
o AREMA News director Rosson Matheson.
Speaker 4 (14:56):
The Britain's labor government has talked a lot about ending
the so called non dom tax stile last October's budget,
saying it would help to boost the tax take. But
after changing the rules, a new report from the Center
for Economics and Business rese it suggests the tax change
will end up costing more than it raises if the
wealthy people who held the status leave the country. Are
UK Parltic supporter of James Welcock joins US Now for
(15:17):
more on this story. James, what does this new report
say and why does it make difficult reading for the government.
Speaker 1 (15:23):
Well, the tax was supposed to.
Speaker 2 (15:24):
Raise revenue, Stephen, by changing how people who are not
tax resident in the UK, but often quite wealthy and
live in the UK pay it. They would now all
be paying their tax on foreign earnings. But this report
says firstly, the OBR is overestimating how much the tax
will raise by taking the wealthiest people when it made
the estimates, and itutates the taxi seeds to find out
(15:45):
the obr's estimating the new tax will bring in four
million pounds per person, and they're like, it's probably closer
to six hundred thousand pounds per person. And secondly, they're
saying there are some wild ranges in the estimates of
how many people will leave in response to this tax.
The OBI say it's twelve percent, Oxford economics say it's
(16:05):
thirty two percent. And then there are surveys of some
sort of non doms, some sort of wealthy private tax
lawyers who coul put the number higher, closed to even
sixty percent. They then don't take of you on how
many people are leaving, but they say if more than
one in four do leave, that's the point in their
analysis where the treasury starts losing money. And this is
very difficult for the government because they have said this
(16:27):
is an ideological commitment. It's in Labor's manifesto, but it's
framed as making people money. The government say this is
supposed to make thirty three billion over five years. And
this report, which I note although it is independent, is
commissioned by think tank link to Onward, a conservative think tank,
as saying it's actually quite a gamble and at the
(16:47):
twenty five percent mark, you'll start becoming a fiscal risk.
Speaker 3 (16:50):
Yeah, And The issue is that there are only tens
of thousands of these extremely wealthy individuals, and so actually
it only depends on a relatively small number of people
changing their behavior. How likely is it then that the
ultra wealthy will go I mean, Bloomberg, we've already reported
a lot of individuals and what their movements.
Speaker 2 (17:11):
Are I mean, as you say, it's a really difficult question.
So seventy four thousand ish they'reabouts in the UK right now.
Because you have to self declare to the HMRC that
you're doing this, the data is a two year time lag,
so we won't know for sure for two years. All
I have for you, Caroline are estimates, anecdotes and precedent estimates.
We've gone through between about twelve percent to upp as
high sixty.
Speaker 1 (17:32):
Then anecdotes.
Speaker 2 (17:33):
We're hearing Goldman's Richard Noddy is already left for Milan.
The real estate magnates Ina Richard Livingston, they've left for Monaco.
Speaker 1 (17:41):
So we are.
Speaker 2 (17:41):
Seeing certain reports that some individuals are leaving, but some
doesn't equate to any kind of number and precedent. When
Switzerland put in a players attacks on it's wealthy in
the long run, thirty percent left. So at the very
least the obr's estimate we can comfortably say is at
the lower bound of where this is. But as to
where it will end up, it's hard to tell. London
(18:02):
has a lot going for it. It has all these amenities.
It has a very nice place to live, I mean,
apart from the back holiday, you could say it has
nice weather as well. The danger, though, is that there
is a risk of what's called a wealth fleeing spiral,
where if all your friends are going, if you will
also could go. If there's a lot of tax advisors
offering you a way out, it might be time to leave.
Speaker 1 (18:23):
Well, if they do leave, where are they're likely to go?
Speaker 3 (18:26):
Well?
Speaker 2 (18:26):
I mean you have the greatest hits Stephen of tax havens, Switzerland, Monaco,
the Bahamas, but increasingly with seeing new countries, especially in Europe,
who are trying to lure in some of these kind
of very wealthy, mobile, sort of high capital individuals. Italy
you have a flat tax currently of one hundred thousand euros,
and then after that you can have any sort of
(18:46):
foreign games you want. That's rising to two hundred thousand euros.
So getting quick Greece if you invest half a million euros.
You can then play a fat tax, a flat tax
of one hundred thousand for fifteen years, or you go
to Dubai where they don't levy any income or wealth
tax whatsoever.
Speaker 4 (19:02):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 3 (19:08):
Look for us on your podcast feed every morning, on Apple,
Spotify and anywhere else you get your podcasts.
Speaker 4 (19:15):
You can also listen live each morning on London DAB Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 3 (19:20):
Our flagship New York station, is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
I'm Caroline Hepka and.
Speaker 1 (19:29):
I'm Stephen Carroll.
Speaker 4 (19:30):
Join us again tomorrow morning for all the news you
need to start your day right here on Bloomberg Daybreak
Europe
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