December 1, 2025 • 19 mins
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Rachel Reeves denied misleading the British public about the state of the UK’s public finances ahead of her budget, as she faced ongoing criticism over her messaging in the run-up to Wednesday’s £26 billion package of tax hikes.
(2) Prime Minister Keir Starmer said he’ll make a renewed push to curb UK welfare spending, as he vies to revive his ailing premiership and sell a budget which was poorly received by voters.
(3) US and Ukrainian negotiators said they had productive discussions about a framework for a peace deal, but there was no final breakthrough as President Donald Trump continues to push for a truce with Russia.
(4) President Donald Trump said Sunday he has decided on his pick for the next Federal Reserve chair after making clear he expects his nominee to deliver interest-rate cuts.
(5) Switzerland voted to reject a 50% inheritance tax on super-rich residents after wealthy entrepreneurs threatened to leave the country.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:10):
This is the Bloomberg Day BAQ podcast. Good morning, It's Monday,
the first of December. I'm Caroline Hepcitt in London.
Speaker 3 (00:15):
And I'm Stephen Caroline Brussels. Coming up today, the UK's
Chancellor Rachel Reeves is forced to deny she was dishonest
with the public about the state of the government finances
ahead of last week's budget.
Speaker 2 (00:27):
US and Ukrainian negotiators talk up productive discussions on ending
the war with Russia.
Speaker 3 (00:33):
Plus holding on to peak net worth in the Alps.
Switzerland votes to reject a fifty percent inheritance tax on
the super rich.
Speaker 2 (00:42):
Let's start with a roundup of our top stories.
Speaker 3 (00:45):
The UK's Chancellor, Rachel Reeves is facing calls to resign
following accusations she misled the public about the state of
the country's public finances ahead of her budget. The controversy
erupted after the head of Economic analysis of the Office
for Budget Responsibility told Bloomberg Radio that the underlying forecasts
presented to the Chancellor had not changed after she raised
(01:06):
the prospect of an income tax hike in a highly
unusual pre budget speech and interview. Following that revelation, the
OBR on Friday released the forecast that had provided to
the Chancellor and the lead up to the budget, showing
that she already knew she was on course to meet
her fiscal rules at the time of the speech. Yesterday'
skuynese as Trevor Phillips asked Reeves whether Conservative leader Kemmi
(01:29):
Badenock's accusation that she lied to the public head of
the budget to justify increasing taxes to fund welfare spending
was accurate.
Speaker 4 (01:38):
Look, I'm a labor chancellor. I want to reduce child poverty.
I might no apologies for that. This will be the
biggest ever reduction in child poverty in a parliament ever,
and I'm proud to be the chancellor that lifts half
a million kids out of poverty. That means kids not
going to bed hungry. It means kids not waking up
in cold and damp homes. I am proud and I'm
(02:01):
very happy.
Speaker 5 (02:02):
In the timeline, I just asked you, did you lie?
And I have to say the antage looking for was known.
I didn't hear the word no.
Speaker 4 (02:10):
You also asked about welfare In that.
Speaker 5 (02:11):
No, I just asked you, did you lie. Of course,
I didn't Reeves are speaking is.
Speaker 3 (02:15):
Initial polling from Yugo of showed that only twenty one
percent of the British public see her budget as fair.
Speaker 2 (02:22):
The fallout from the budget comes as the Prime Minister
Kiss Starmer is signaling a renewed push to curb welfare
spending in the UK in exerts release the head of
a speech that he'll deliver later today. Starmer is expected
to pledge to cut Briton's rising benefits bill, which climbed
further in the budget after the decision to lift the
(02:43):
two child benefits cap. The party is now scrambling to
blunt criticism that the budget increase welfare spending whilst raising
taxes on working people. Meanwhile, the Office for Budget Responsibility
says that total welfare spending is forecast to reach three
hundred and thirty to eat billion pounds this year and
rise to four hundred and six billion by twenty thirty.
Speaker 3 (03:06):
US and Ukrainian negotiators say they had productive discussions about
a framework for a peace deal with Russia, but there
was no final breakthrough. As President Donald Trump continues to
push for a end to the war, US Secretary of
State Marko Rubio spoke to reporters in Florida after the talks.
Speaker 5 (03:24):
So this is not just about ending a war.
Speaker 1 (03:25):
This is about ending a war in a way that
creates a mechanism and a way forward that will allow
them to be independent and sovereign, never have another war again,
and create tremendous prosperity for its people, not just rebuild
the country, but to enter an era of extraordinary economic progress.
It's a country with Ukraine has tremendous economic potential. Ukraine
has tremendous opportunity for true prosperity.
Speaker 3 (03:48):
Marco Rubia was speaking ahead of a trip to Moscow
by US Envoy Steve Whitcoff this week for further discussions
with Russia. It comes as the US is reducing its
military presence in Europe, asking other NATO countries to step
up for the continent's defense.
Speaker 2 (04:02):
Now, President Trump says that he has made his choice
for the next chair of the Federal Reserve. Without giving
a name or a timeline, Trump told reporters on Air
Force one that he will be making an announcement. Whitehouse
Economic Council Director Kevin Hassard is seen as the likely
choice to succeed current FED chair Jerown Powell. Speaking to
CBS over the weekend, has It declined to address whether
(04:24):
he was the front runner, but said that markets are
ready for the President's decision.
Speaker 6 (04:29):
We had a great treasury auction, interest rates went down,
and so I think that the American people could expect
President Trump to pick somebody who's going to help them
have cheaper car loans and easier access to mortgages at
lower rates. And that's what we saw in the market response.
Speaker 2 (04:46):
White House Economic Council Director Kevin Hassett. There, President Trump
has criticized your own Powell repeatedly and made clear that
he expects his nominee to forcefully pursue interest rate cuts.
Speaker 3 (04:59):
Switzerland voted to reject a fifty percent inheritance tax on
super rich residents after wealthy entrepreneurs threatened to leave the country.
Official figures show more than three quarters of the electorate
opposed the measure. Bloomberg's freddie Fulston has more.
Speaker 7 (05:13):
Switzerland's Young Socialists had proposed the levee as a way
of raising funds to fight climate change. The plan had
been to tax all inherited or gifted assets exceeding fifty
million francs, but it faced staunch opposition over the weekend,
critics arguing the departure of the wealthy would offset any
tax gains and leave the country worse off. For now,
(05:36):
at least, the vote has eased any concerns about switzerland
status as a haven for the global rich. In London,
Freddie Fulston, Bloomberg Radio.
Speaker 2 (05:45):
Those are our top stories for you this morning. Looking
at the markets, it looks like a difficult start to December.
S and P five hundred EVENI futures are currently down
by seven tenths of one percent. Eurostox futures are also
down three tenths, the Nikket two to five declining almost
two percent in a sell off in Japan. TENNY. US
treasury yields up three basis points of four spot zero four.
(06:06):
We are expecting important data out this week for the US,
including inflation and consumer demand, so that's likely to shape
the expectations for the rate cutting cycle from the Fed.
The dollar is a bit firmer. The pound is down
a tenth of one percent. Gold is also lower, and
bitcoin taking another hit this Monday morning, trading just above
(06:27):
eighty six thousand dollars, dropping five and a half percent.
Those are the markets.
Speaker 3 (06:32):
In a moment, we'll bring you more in how our
interview with the UK's Office for Budget Responsibility has sparked
a political storm. Plus we'll have the latest on the
Ukraine peace talks. Another story I've been reading this morning.
In case, on this Monday morning you're tempted to pull
the covers over the head and ignore everything that might
be happening in the outside world, You're not alone. There's
(06:52):
a theory it's the ostroge effect. We're all ignoring more things,
and in particular the news. That's something that Alex Stone
has been writing about on Bloomberg Weekend. I mean, this
is a conversation I'm hearing more and more of people
saying they love saying it to journalists.
Speaker 5 (07:06):
Obviously I don't read the news anymore.
Speaker 3 (07:09):
Great, but it's something that's, you know, a broader psychological effect.
And actually Alex has been digging some of the research
by psychologists around this as well, and how because of
people having problems essentially being exhausted by the endless flood
of headlines, that this is selective ignorance as essential as
critical thinking.
Speaker 2 (07:30):
Maybe, well, I think it's just surprising that apparently four
out of ten people are not really tuned into the news,
according to this Reuter's survey. Apparently, yes, I do hear
that also from you know, friends and acquaintances. You'll say,
you know, I don't listen to the news, and I
never know what to do, Steven. I never know whether
(07:54):
to try to convince them that they should be and
that there's a reason to be well informed or not.
Speaker 5 (08:01):
Well.
Speaker 3 (08:01):
Look, it's I think the point that Alex kind of
comes to at the end of this as well is
that it's about picking what you choose to engage with,
and we hope you'll continue listening to us as well.
Speaker 5 (08:11):
But something to think about as well.
Speaker 3 (08:13):
This is perhaps one of the reasons that older people
are often happier, because despite having perhaps a greater exposure
to bad news, people are simply more selective about what
they've taken, right.
Speaker 2 (08:25):
I think that's sort of great story. We're going to
put a link to it in our show notes. But
if you were listening last week you might have heard
our interview with David Miles of the Office for Budget
Responsibility after the UK budget on Thursday. There was one
key question in that conversation about the revised forecast for
the UK's fiscal watchdog, the OBR, that they provided to
(08:48):
the Chancellor and how that influenced her pre budget speech
and her decisions running up to Budget Day, and I
want you to listen to it now. Here is what
David Miles told us.
Speaker 8 (09:00):
Well, the pre measure's estimate, that is, you know, how
much is the balance between government spending and tax revenues
before the government has implemented any new policies. That number
was for just being on the right side of the target,
but by a wafer thin amount of about four billion pounds,
(09:21):
which is very small in the context of an economy
that's three trillion billion large. So that forecast was not
that there would be an obvious miss on the government target,
but that most of the headroom had essentially gone and
that was there back in toward the end of October,
(09:43):
because that meant that in order to rebuild headroom there
had to be a sort of net tightening in policy. Obviously,
there are many ways that the government could choose to
fill the gap, if you.
Speaker 2 (09:56):
Will, So sorry are you saying that there wasn't an
improved forecast offered?
Speaker 8 (10:02):
Well, the pre measure's estimate, which is you know what
the government would look at and see, well, how much
have we got.
Speaker 5 (10:10):
To play with?
Speaker 8 (10:11):
What do we need to do if they decided to
try and build a bedroom that was just about the
right side of hitting the target that buy a wifer
thin margin.
Speaker 3 (10:20):
So that was David Miles, head of Economic allows as
at the OBR, speaking to you Caroline last week. And
I saw the headlines from this story from the Canary
Islands where I was last week as well. Why was
this such a key moment?
Speaker 2 (10:31):
So this was the revealing moment from the Officer Budget
Responsibility because it shows that the chancell Rachel Reeves had
consistently favorable economic forecast before she made both her budget
speech but also the unusual pre budget speech that she
made that we played for you here live on Bloomberg ragious.
(10:54):
So basically it left a lot of people, including our
own report of Phil Aldrick, with questions about what was
the reason then for delivering a major tax increasing budget
if actually the full cast were a little bit rosier
than a lot of economists had been expecting. And that
was what David Miles was saying when he was sitting
(11:16):
down in the radio studio with me in the run
up to the budget. You'll remember on the twenty sixth
of November, there was just constant media speculation about what
the chancell was going to do. There was a concern
that there would be another big budget black hole, as
there was last time. Around this time, the worry was
around whether there'd be a big productivity downgrade. The Chancellor
(11:37):
chose to make this unusual pre budget speech where she
hinted at an income tax increase and she talked about
hard choices. She spoke to the media about this, but
actually we now know from what David Miles said and
then from what the correspondence was from the Ober after
that interview that the Chancellor privately knew and was told
(11:57):
by the budget watchdog that the fiscal position was actual
bit better than had expected. In the meantime, she actually
dropped the idea of that big tax increase. And so
the conclusion is really that the Chancellor chose to spend
on welfare, both in the U turns earlier this year,
but also scrapping that limit on benefits for larger families.
(12:20):
You also spent on increasing her fiscal headroom. Sixteen billion
pounds was the uplift overall in terms of welfare spending.
And you also have to remember that there was a
financial markets issue. There was a guilt rally around that
idea that there could be an income tax increase. Investors
(12:41):
backed the idea of that rise. In early November. There
was a guilt rally that then unwound and it all
basically falls Downing Street on Friday to reject the idea
that the Chancellor had misled the public and financial markets
over the course of that whole period running up to
the budget and so over the weekend. This was the
(13:02):
sort of question that Rachel Reeves got and this is
what she said, tackling the cost.
Speaker 4 (13:06):
Of livery, which is why I took one hundred and
fifty pounds off of energy bills and froze prescription charges.
I wanted to continue to cut NHS waiting lists, and
I wanted to bring borrowing down four billion pounds the
head room would not have been enough.
Speaker 2 (13:20):
So that was Rachel Reeves, the UK Chancellor, effectively saying
that even that slightly rosier forecast, that four billion pounds
was not enough in her view. She needed a bigger
fiscal buffer and she wanted to do various other things,
But that was her response.
Speaker 3 (13:35):
And of course this is a story that seems to
be continuing to Rumbalan as well. We're expected to hear
from the Prime Minister on this later today too.
Speaker 2 (13:43):
Yeah, the Prime Minister is going to make a speech
today the exert show that he's going to focus on
a renewed push to curb welfare spending. I mean it's
basically also to revive his leadership. The budget, it must
be said, was not well received by voters if you
look at the polling. Nigel Faraje of Reform UK has
called for an investigation to Rachel Reeves's pre budget comments.
He wants Lori Magnus, the Independent Advisor or Ministerial Standards
(14:06):
to look at this. And in terms of Kis Starmer,
he's going to talk about this benefits bill. If you
look at the obr's forecast, three hundred and thirty three
billion pounds of spending, that's ten point nine percent of
UK GDP and that's expected to rise to more than
eleven percent of GDP by twenty thirty. So look, the
(14:27):
pressure perhaps is really still on the government.
Speaker 5 (14:29):
Yeah. Indeed, in a story we'll we get doing to
watch as well.
Speaker 3 (14:32):
Carolyne, thanks for bringing us up to date and how
that story of that interview that you did last week
is now playing into the political conversation in the UK.
Speaker 2 (14:42):
Stay with us. More from Bloomberg DAYBAQUB coming up after this.
Speaker 3 (14:47):
I want to bring the focus though to Brussels here
next where you Defense ministers are meeting this morning to
discuss support for Ukraine as the Bloc tries to carve
out a place for itself in the peace process. We've
had those talks between the US and Ukraine over the
world weekend. US ENVOYE Steve Whitcoff leading a delegation to
Russia in the coming days. Our Chief hev of correspond to.
Oliver Crook is with me in the Brussels studio for more. Oliver,
(15:08):
let's start down with these talks between the US and
the Ukraine Florida over the weekend.
Speaker 5 (15:13):
What do we know about what was discussed.
Speaker 9 (15:15):
Well, what we know so far is that, of course
they're trying to adapt that plan that was originally put
out about a week and a half ago, that twenty
eight point plan that really caught the Europeans and the
Ukrainians and really much of the world by surprise, probably
even the Russians. By surprise or the degree that it
was seen as tilted towards the Russian perspective. That has
now evolved into what we understand that living document of
those nineteen points of what this actual peace proposal could
(15:35):
look like. But since then we've not really gotten any
transparency in terms of what the actual contents of this planet.
So it's very difficult to make an appraisal at how
close the two sides between the United States and the
Ukrainians are, apart from the fact that we keep hearing
from both delegations that they're very encouraged that progress is
being made. That being said, you know Marco Rubio over
the weekend yesterday in Florida saying there's still a decent
(15:56):
amount of work to be done there. So we focus
our attention this week on the diplomacy that will be
going on Monday. We have Zelenski in Paris meeting with
Himnu and Makol as you mentioned, defense ministers here today.
On Wednesday, Marco Rubio will actually make his way over
to Brussels where he'll be meeting with foreign ministers from Europe,
and of course we await Steve Witkoff heading out there
to Moscow we should say, what is drastically different this
(16:17):
week from last week. Andre Yurmak is no longer leading
the Ukrainian negotiation dere At delegation, the number two within
the Ukrainian President's office, resigning on Friday as he was
sort of being ensnared in this corruption investigation. We should
say he's not been charged with anything, but his home
and his offices have been rated. That of course, is
massively damaging to the Ukrainian position.
Speaker 2 (16:36):
How does then this all set us up for the
talks in Russia this week?
Speaker 9 (16:41):
I think it's very difficult to appraise at this point.
I think that we've seen that reports at Witcoff himself
could potentially be going as early as today. We don't
know if that will actually happen today. There actually needs
to be more time for these things to be fleshed
out from the US and the Ukrainian side before being
presented to the Russians. But again, this is going to
be a crucial week, I think also for the europe
Opeans who get the opportunity to get in front of
(17:02):
Marco Rubio and Wednesday to try to lay out their position.
Remember that twenty eight point plan included a huge amount
of things, not just about Ukraine, but about the charter
to NATO, about what the NATO would agree to, what
the European sort of defense architecture would look like. I
think from the European perspective, it's absolutely crucial to get
in front of Marco Rubio, try to get their position
sort of exposed and maybe you can get a collective
front here with the United States and Europe.
Speaker 3 (17:23):
Well, of course, ahead of that meeting on Wednesday, we
have a meeting happening this morning, which is those defense
ministers gathering here in Brussels. What would we be expecting
to come out of beast. I think there's going to
be a lot of reassuring words.
Speaker 9 (17:34):
We expect the Ukrainian Defense Minister to be in attendance
in some manner in that meeting, Dennish Mihal, who will
be discussing with them. But listen, the reality of the
situation is the sort of European impact since that plan
dropped about a week and a half ago, has been
basically completely negligible. There's been a lot of sort of
encouraging rhetoric as usual, but as you know, Prime Minister
Tusk said a while ago, if all the positive words
(17:54):
had been committed, had been transferred into ammunition. That is
the kind of thing that's actually going to make a
difference for Ukraine. That being said, we should also say
that over the weekend Victor Orbond was where he was
in Moscow meeting with Vladimir Putin. We should also say
that the Belgians who hold those frozen Russian assets have
now dug into that position saying that you know what,
maybe this is not the time to actually touch those
assets and to figure out what to do with them.
(18:15):
Let's let the peace process play out. So those are
two actually quite painful and quite negative stories for the
Ukrainians from the European side.
Speaker 3 (18:21):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 2 (18:28):
Look for us on your podcast feed every morning, on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 3 (18:34):
You can also listen live each morning on London DAB Radio,
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Speaker 2 (18:40):
Our flagship New York station is also available on your
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I'm Caroline Hepka.
Speaker 3 (18:49):
And I'm Stephen Carroll. Join us again tomorrow morning for
all the news you need to start your day right
here on Bloomberg day Break.
Speaker 5 (18:55):
Europe
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:10):
This is the Bloomberg Day BAQ podcast. Good morning, It's Monday,
the first of December. I'm Caroline Hepcitt in London.
Speaker 3 (00:15):
And I'm Stephen Caroline Brussels. Coming up today, the UK's
Chancellor Rachel Reeves is forced to deny she was dishonest
with the public about the state of the government finances
ahead of last week's budget.
Speaker 2 (00:27):
US and Ukrainian negotiators talk up productive discussions on ending
the war with Russia.
Speaker 3 (00:33):
Plus holding on to peak net worth in the Alps.
Switzerland votes to reject a fifty percent inheritance tax on
the super rich.
Speaker 2 (00:42):
Let's start with a roundup of our top stories.
Speaker 3 (00:45):
The UK's Chancellor, Rachel Reeves is facing calls to resign
following accusations she misled the public about the state of
the country's public finances ahead of her budget. The controversy
erupted after the head of Economic analysis of the Office
for Budget Responsibility told Bloomberg Radio that the underlying forecasts
presented to the Chancellor had not changed after she raised
(01:06):
the prospect of an income tax hike in a highly
unusual pre budget speech and interview. Following that revelation, the
OBR on Friday released the forecast that had provided to
the Chancellor and the lead up to the budget, showing
that she already knew she was on course to meet
her fiscal rules at the time of the speech. Yesterday'
skuynese as Trevor Phillips asked Reeves whether Conservative leader Kemmi
(01:29):
Badenock's accusation that she lied to the public head of
the budget to justify increasing taxes to fund welfare spending
was accurate.
Speaker 4 (01:38):
Look, I'm a labor chancellor. I want to reduce child poverty.
I might no apologies for that. This will be the
biggest ever reduction in child poverty in a parliament ever,
and I'm proud to be the chancellor that lifts half
a million kids out of poverty. That means kids not
going to bed hungry. It means kids not waking up
in cold and damp homes. I am proud and I'm
(02:01):
very happy.
Speaker 5 (02:02):
In the timeline, I just asked you, did you lie?
And I have to say the antage looking for was known.
I didn't hear the word no.
Speaker 4 (02:10):
You also asked about welfare In that.
Speaker 5 (02:11):
No, I just asked you, did you lie. Of course,
I didn't Reeves are speaking is.
Speaker 3 (02:15):
Initial polling from Yugo of showed that only twenty one
percent of the British public see her budget as fair.
Speaker 2 (02:22):
The fallout from the budget comes as the Prime Minister
Kiss Starmer is signaling a renewed push to curb welfare
spending in the UK in exerts release the head of
a speech that he'll deliver later today. Starmer is expected
to pledge to cut Briton's rising benefits bill, which climbed
further in the budget after the decision to lift the
(02:43):
two child benefits cap. The party is now scrambling to
blunt criticism that the budget increase welfare spending whilst raising
taxes on working people. Meanwhile, the Office for Budget Responsibility
says that total welfare spending is forecast to reach three
hundred and thirty to eat billion pounds this year and
rise to four hundred and six billion by twenty thirty.
Speaker 3 (03:06):
US and Ukrainian negotiators say they had productive discussions about
a framework for a peace deal with Russia, but there
was no final breakthrough. As President Donald Trump continues to
push for a end to the war, US Secretary of
State Marko Rubio spoke to reporters in Florida after the talks.
Speaker 5 (03:24):
So this is not just about ending a war.
Speaker 1 (03:25):
This is about ending a war in a way that
creates a mechanism and a way forward that will allow
them to be independent and sovereign, never have another war again,
and create tremendous prosperity for its people, not just rebuild
the country, but to enter an era of extraordinary economic progress.
It's a country with Ukraine has tremendous economic potential. Ukraine
has tremendous opportunity for true prosperity.
Speaker 3 (03:48):
Marco Rubia was speaking ahead of a trip to Moscow
by US Envoy Steve Whitcoff this week for further discussions
with Russia. It comes as the US is reducing its
military presence in Europe, asking other NATO countries to step
up for the continent's defense.
Speaker 2 (04:02):
Now, President Trump says that he has made his choice
for the next chair of the Federal Reserve. Without giving
a name or a timeline, Trump told reporters on Air
Force one that he will be making an announcement. Whitehouse
Economic Council Director Kevin Hassard is seen as the likely
choice to succeed current FED chair Jerown Powell. Speaking to
CBS over the weekend, has It declined to address whether
(04:24):
he was the front runner, but said that markets are
ready for the President's decision.
Speaker 6 (04:29):
We had a great treasury auction, interest rates went down,
and so I think that the American people could expect
President Trump to pick somebody who's going to help them
have cheaper car loans and easier access to mortgages at
lower rates. And that's what we saw in the market response.
Speaker 2 (04:46):
White House Economic Council Director Kevin Hassett. There, President Trump
has criticized your own Powell repeatedly and made clear that
he expects his nominee to forcefully pursue interest rate cuts.
Speaker 3 (04:59):
Switzerland voted to reject a fifty percent inheritance tax on
super rich residents after wealthy entrepreneurs threatened to leave the country.
Official figures show more than three quarters of the electorate
opposed the measure. Bloomberg's freddie Fulston has more.
Speaker 7 (05:13):
Switzerland's Young Socialists had proposed the levee as a way
of raising funds to fight climate change. The plan had
been to tax all inherited or gifted assets exceeding fifty
million francs, but it faced staunch opposition over the weekend,
critics arguing the departure of the wealthy would offset any
tax gains and leave the country worse off. For now,
(05:36):
at least, the vote has eased any concerns about switzerland
status as a haven for the global rich. In London,
Freddie Fulston, Bloomberg Radio.
Speaker 2 (05:45):
Those are our top stories for you this morning. Looking
at the markets, it looks like a difficult start to December.
S and P five hundred EVENI futures are currently down
by seven tenths of one percent. Eurostox futures are also
down three tenths, the Nikket two to five declining almost
two percent in a sell off in Japan. TENNY. US
treasury yields up three basis points of four spot zero four.
(06:06):
We are expecting important data out this week for the US,
including inflation and consumer demand, so that's likely to shape
the expectations for the rate cutting cycle from the Fed.
The dollar is a bit firmer. The pound is down
a tenth of one percent. Gold is also lower, and
bitcoin taking another hit this Monday morning, trading just above
(06:27):
eighty six thousand dollars, dropping five and a half percent.
Those are the markets.
Speaker 3 (06:32):
In a moment, we'll bring you more in how our
interview with the UK's Office for Budget Responsibility has sparked
a political storm. Plus we'll have the latest on the
Ukraine peace talks. Another story I've been reading this morning.
In case, on this Monday morning you're tempted to pull
the covers over the head and ignore everything that might
be happening in the outside world, You're not alone. There's
(06:52):
a theory it's the ostroge effect. We're all ignoring more things,
and in particular the news. That's something that Alex Stone
has been writing about on Bloomberg Weekend. I mean, this
is a conversation I'm hearing more and more of people
saying they love saying it to journalists.
Speaker 5 (07:06):
Obviously I don't read the news anymore.
Speaker 3 (07:09):
Great, but it's something that's, you know, a broader psychological effect.
And actually Alex has been digging some of the research
by psychologists around this as well, and how because of
people having problems essentially being exhausted by the endless flood
of headlines, that this is selective ignorance as essential as
critical thinking.
Speaker 2 (07:30):
Maybe, well, I think it's just surprising that apparently four
out of ten people are not really tuned into the news,
according to this Reuter's survey. Apparently, yes, I do hear
that also from you know, friends and acquaintances. You'll say,
you know, I don't listen to the news, and I
never know what to do, Steven. I never know whether
(07:54):
to try to convince them that they should be and
that there's a reason to be well informed or not.
Speaker 5 (08:01):
Well.
Speaker 3 (08:01):
Look, it's I think the point that Alex kind of
comes to at the end of this as well is
that it's about picking what you choose to engage with,
and we hope you'll continue listening to us as well.
Speaker 5 (08:11):
But something to think about as well.
Speaker 3 (08:13):
This is perhaps one of the reasons that older people
are often happier, because despite having perhaps a greater exposure
to bad news, people are simply more selective about what
they've taken, right.
Speaker 2 (08:25):
I think that's sort of great story. We're going to
put a link to it in our show notes. But
if you were listening last week you might have heard
our interview with David Miles of the Office for Budget
Responsibility after the UK budget on Thursday. There was one
key question in that conversation about the revised forecast for
the UK's fiscal watchdog, the OBR, that they provided to
(08:48):
the Chancellor and how that influenced her pre budget speech
and her decisions running up to Budget Day, and I
want you to listen to it now. Here is what
David Miles told us.
Speaker 8 (09:00):
Well, the pre measure's estimate, that is, you know, how
much is the balance between government spending and tax revenues
before the government has implemented any new policies. That number
was for just being on the right side of the target,
but by a wafer thin amount of about four billion pounds,
(09:21):
which is very small in the context of an economy
that's three trillion billion large. So that forecast was not
that there would be an obvious miss on the government target,
but that most of the headroom had essentially gone and
that was there back in toward the end of October,
(09:43):
because that meant that in order to rebuild headroom there
had to be a sort of net tightening in policy. Obviously,
there are many ways that the government could choose to
fill the gap, if you.
Speaker 2 (09:56):
Will, So sorry are you saying that there wasn't an
improved forecast offered?
Speaker 8 (10:02):
Well, the pre measure's estimate, which is you know what
the government would look at and see, well, how much
have we got.
Speaker 5 (10:10):
To play with?
Speaker 8 (10:11):
What do we need to do if they decided to
try and build a bedroom that was just about the
right side of hitting the target that buy a wifer
thin margin.
Speaker 3 (10:20):
So that was David Miles, head of Economic allows as
at the OBR, speaking to you Caroline last week. And
I saw the headlines from this story from the Canary
Islands where I was last week as well. Why was
this such a key moment?
Speaker 2 (10:31):
So this was the revealing moment from the Officer Budget
Responsibility because it shows that the chancell Rachel Reeves had
consistently favorable economic forecast before she made both her budget
speech but also the unusual pre budget speech that she
made that we played for you here live on Bloomberg ragious.
(10:54):
So basically it left a lot of people, including our
own report of Phil Aldrick, with questions about what was
the reason then for delivering a major tax increasing budget
if actually the full cast were a little bit rosier
than a lot of economists had been expecting. And that
was what David Miles was saying when he was sitting
(11:16):
down in the radio studio with me in the run
up to the budget. You'll remember on the twenty sixth
of November, there was just constant media speculation about what
the chancell was going to do. There was a concern
that there would be another big budget black hole, as
there was last time. Around this time, the worry was
around whether there'd be a big productivity downgrade. The Chancellor
(11:37):
chose to make this unusual pre budget speech where she
hinted at an income tax increase and she talked about
hard choices. She spoke to the media about this, but
actually we now know from what David Miles said and
then from what the correspondence was from the Ober after
that interview that the Chancellor privately knew and was told
(11:57):
by the budget watchdog that the fiscal position was actual
bit better than had expected. In the meantime, she actually
dropped the idea of that big tax increase. And so
the conclusion is really that the Chancellor chose to spend
on welfare, both in the U turns earlier this year,
but also scrapping that limit on benefits for larger families.
(12:20):
You also spent on increasing her fiscal headroom. Sixteen billion
pounds was the uplift overall in terms of welfare spending.
And you also have to remember that there was a
financial markets issue. There was a guilt rally around that
idea that there could be an income tax increase. Investors
(12:41):
backed the idea of that rise. In early November. There
was a guilt rally that then unwound and it all
basically falls Downing Street on Friday to reject the idea
that the Chancellor had misled the public and financial markets
over the course of that whole period running up to
the budget and so over the weekend. This was the
(13:02):
sort of question that Rachel Reeves got and this is
what she said, tackling the cost.
Speaker 4 (13:06):
Of livery, which is why I took one hundred and
fifty pounds off of energy bills and froze prescription charges.
I wanted to continue to cut NHS waiting lists, and
I wanted to bring borrowing down four billion pounds the
head room would not have been enough.
Speaker 2 (13:20):
So that was Rachel Reeves, the UK Chancellor, effectively saying
that even that slightly rosier forecast, that four billion pounds
was not enough in her view. She needed a bigger
fiscal buffer and she wanted to do various other things,
But that was her response.
Speaker 3 (13:35):
And of course this is a story that seems to
be continuing to Rumbalan as well. We're expected to hear
from the Prime Minister on this later today too.
Speaker 2 (13:43):
Yeah, the Prime Minister is going to make a speech
today the exert show that he's going to focus on
a renewed push to curb welfare spending. I mean it's
basically also to revive his leadership. The budget, it must
be said, was not well received by voters if you
look at the polling. Nigel Faraje of Reform UK has
called for an investigation to Rachel Reeves's pre budget comments.
He wants Lori Magnus, the Independent Advisor or Ministerial Standards
(14:06):
to look at this. And in terms of Kis Starmer,
he's going to talk about this benefits bill. If you
look at the obr's forecast, three hundred and thirty three
billion pounds of spending, that's ten point nine percent of
UK GDP and that's expected to rise to more than
eleven percent of GDP by twenty thirty. So look, the
(14:27):
pressure perhaps is really still on the government.
Speaker 5 (14:29):
Yeah. Indeed, in a story we'll we get doing to
watch as well.
Speaker 3 (14:32):
Carolyne, thanks for bringing us up to date and how
that story of that interview that you did last week
is now playing into the political conversation in the UK.
Speaker 2 (14:42):
Stay with us. More from Bloomberg DAYBAQUB coming up after this.
Speaker 3 (14:47):
I want to bring the focus though to Brussels here
next where you Defense ministers are meeting this morning to
discuss support for Ukraine as the Bloc tries to carve
out a place for itself in the peace process. We've
had those talks between the US and Ukraine over the
world weekend. US ENVOYE Steve Whitcoff leading a delegation to
Russia in the coming days. Our Chief hev of correspond to.
Oliver Crook is with me in the Brussels studio for more. Oliver,
(15:08):
let's start down with these talks between the US and
the Ukraine Florida over the weekend.
Speaker 5 (15:13):
What do we know about what was discussed.
Speaker 9 (15:15):
Well, what we know so far is that, of course
they're trying to adapt that plan that was originally put
out about a week and a half ago, that twenty
eight point plan that really caught the Europeans and the
Ukrainians and really much of the world by surprise, probably
even the Russians. By surprise or the degree that it
was seen as tilted towards the Russian perspective. That has
now evolved into what we understand that living document of
those nineteen points of what this actual peace proposal could
(15:35):
look like. But since then we've not really gotten any
transparency in terms of what the actual contents of this planet.
So it's very difficult to make an appraisal at how
close the two sides between the United States and the
Ukrainians are, apart from the fact that we keep hearing
from both delegations that they're very encouraged that progress is
being made. That being said, you know Marco Rubio over
the weekend yesterday in Florida saying there's still a decent
(15:56):
amount of work to be done there. So we focus
our attention this week on the diplomacy that will be
going on Monday. We have Zelenski in Paris meeting with
Himnu and Makol as you mentioned, defense ministers here today.
On Wednesday, Marco Rubio will actually make his way over
to Brussels where he'll be meeting with foreign ministers from Europe,
and of course we await Steve Witkoff heading out there
to Moscow we should say, what is drastically different this
(16:17):
week from last week. Andre Yurmak is no longer leading
the Ukrainian negotiation dere At delegation, the number two within
the Ukrainian President's office, resigning on Friday as he was
sort of being ensnared in this corruption investigation. We should
say he's not been charged with anything, but his home
and his offices have been rated. That of course, is
massively damaging to the Ukrainian position.
Speaker 2 (16:36):
How does then this all set us up for the
talks in Russia this week?
Speaker 9 (16:41):
I think it's very difficult to appraise at this point.
I think that we've seen that reports at Witcoff himself
could potentially be going as early as today. We don't
know if that will actually happen today. There actually needs
to be more time for these things to be fleshed
out from the US and the Ukrainian side before being
presented to the Russians. But again, this is going to
be a crucial week, I think also for the europe
Opeans who get the opportunity to get in front of
(17:02):
Marco Rubio and Wednesday to try to lay out their position.
Remember that twenty eight point plan included a huge amount
of things, not just about Ukraine, but about the charter
to NATO, about what the NATO would agree to, what
the European sort of defense architecture would look like. I
think from the European perspective, it's absolutely crucial to get
in front of Marco Rubio, try to get their position
sort of exposed and maybe you can get a collective
front here with the United States and Europe.
Speaker 3 (17:23):
Well, of course, ahead of that meeting on Wednesday, we
have a meeting happening this morning, which is those defense
ministers gathering here in Brussels. What would we be expecting
to come out of beast. I think there's going to
be a lot of reassuring words.
Speaker 9 (17:34):
We expect the Ukrainian Defense Minister to be in attendance
in some manner in that meeting, Dennish Mihal, who will
be discussing with them. But listen, the reality of the
situation is the sort of European impact since that plan
dropped about a week and a half ago, has been
basically completely negligible. There's been a lot of sort of
encouraging rhetoric as usual, but as you know, Prime Minister
Tusk said a while ago, if all the positive words
(17:54):
had been committed, had been transferred into ammunition. That is
the kind of thing that's actually going to make a
difference for Ukraine. That being said, we should also say
that over the weekend Victor Orbond was where he was
in Moscow meeting with Vladimir Putin. We should also say
that the Belgians who hold those frozen Russian assets have
now dug into that position saying that you know what,
maybe this is not the time to actually touch those
assets and to figure out what to do with them.
(18:15):
Let's let the peace process play out. So those are
two actually quite painful and quite negative stories for the
Ukrainians from the European side.
Speaker 3 (18:21):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 2 (18:28):
Look for us on your podcast feed every morning, on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 3 (18:34):
You can also listen live each morning on London DAB Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 2 (18:40):
Our flagship New York station is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
I'm Caroline Hepka.
Speaker 3 (18:49):
And I'm Stephen Carroll. Join us again tomorrow morning for
all the news you need to start your day right
here on Bloomberg day Break.
Speaker 5 (18:55):
Europe
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