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Cash ISAs, Booming Bitcoin and Mansion House · Merryn Talks Money

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  Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
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  Speaker 2: Welcome to the Merin Talks Money Market Wrap, where we
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  Speaker 2: talk about the biggest moves in the markets this week
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  Speaker 2: and what might be driving them. I'm Merin sumst web
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  Speaker 2: editor at Large for Bloomberg UK Wealth and this week,
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  Speaker 2: well John Stafferck is out on holiday yet again, we
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  Speaker 2: have invited Mowena Conium to join us. She is part
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  Speaker 2: of the team that runs the UK Markets Today blog
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  Speaker 2: for Bloomberg. She has spent time reporting on EMEA equities,
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  Speaker 2: US docs FX rates.
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  Speaker 3: She has done it also. She is just the person
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  Speaker 3: for the job. Welcome Mawena to Merin Talks Money. Hello,
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  Speaker 3: Goda to come on.
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  Speaker 1: So this week I think we have a pretty obvious
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  Speaker 1: topic to talk about, inflation central banks. We had a
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  Speaker 1: new CPI number out for the UK today which was
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  Speaker 1: higher than expected. All that you do, I actually have
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  Speaker 1: to wonder who we ask about these expected numbers, because
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  Speaker 1: I think I certainly expected to be reasonably high.
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  Speaker 3: Well what did you expect?
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  Speaker 4: Yeah, so it was expected to be the same, and
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  Speaker 4: you know it came in a little bit higher. But
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  Speaker 4: as you say, we've been kind of primed to expect
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  Speaker 4: it to be certainly well above the Bank of England target,
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  Speaker 4: and certainly something that you know is going to feed
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  Speaker 4: into those concerns that it's sticky and it's not coming down.
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  Speaker 4: And actually we saw the core measure staying higher and
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  Speaker 4: services as well, So those two things are going to
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  Speaker 4: be a bit of a concern I think for the
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  Speaker 4: Bank of England as they're deciding what to do with
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  Speaker 4: interest rates. They've been under a bit of pressure to
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  Speaker 4: sort of cut them faster, but I think the current
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  Speaker 4: inflationary environment means that they're going to be sticking to
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  Speaker 4: that cautious message because they don't want to fan it further.
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  Speaker 1: We haven't mentioned the number as so to be clear,
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  Speaker 1: the number came in at three point six percent, which
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  Speaker 1: obviously is very significantly above the Bank of England target,
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  Speaker 1: which they now haven't hit for a very very very
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  Speaker 1: long time. At this point it might be easier to
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  Speaker 1: change the target than to attempt to hit the target.
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  Speaker 3: Now.
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  Speaker 1: One of the things was that everyone is blaming for
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  Speaker 1: this is food retailers. So food prices were up four
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  Speaker 1: peen four percent was the number leter, So that obviously
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  Speaker 1: fed through into quite a large part of the overall
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  Speaker 1: move and the retailers have all been busily blaming well
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  Speaker 1: Rachel Reeves basically for minimum wage changes and changes to
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  Speaker 1: ni etc. But maybe that's a one off.
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  Speaker 4: Well, I think that is the question, and that's what
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  Speaker 4: the Bank of England have been counting on, is that
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  Speaker 4: these inflationary pressures that we're seeing will be one offer
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  Speaker 4: and they won't be passed through to secondary effects. But
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  Speaker 4: when you do see it, to see some of those
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  Speaker 4: food prices, they are the staples and that is concerning
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  Speaker 4: and also seeing it in the services industry, so perhaps
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  Speaker 4: some of those things are not quite so easy to
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  Speaker 4: brush off. And it's also the uncertainty of the impact
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  Speaker 4: of tariffs, and we can talk more about that in
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  Speaker 4: the way that it isn't being seen in data so far,
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  Speaker 4: but certainly that people are going to be more cautious
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  Speaker 4: I think in brushing off the pressures that we're seeing.
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  Speaker 1: I mean, suddenly we've had really noisy data all over
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  Speaker 1: the place, haven't we. Everything's a bit lumpy, and we
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  Speaker 1: know there's all kinds of stuff going on with payrolls, indexation, etc.
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  Speaker 1: So there's lots of mess in it, and there's still
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  Speaker 1: a really clear divide between the people who think that
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  Speaker 1: we've got an underlying disinflationary environment and the people who
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  Speaker 1: believe that really we're in for a long period of
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  Speaker 1: fairly steady inflation at a higher level than we would like.
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  Speaker 1: That argument still exists, right.
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  Speaker 4: Yeah, absolutely, And when we've been hearing from the Munety
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  Speaker 4: Policy Committee in their speeches recently, you know, some members
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  Speaker 4: are more concerned about the inflationary pressures than others, and
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  Speaker 4: we saw that in the vote split last time, and
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  Speaker 4: so I think it was quite interesting to see how
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  Speaker 4: they vote when we have the next Bank of England
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  Speaker 4: meeting next month. As you know, we are expecting to
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  Speaker 4: see a rate cut, but I think how they actually
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  Speaker 4: vote and the commentary that comes out of it will
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  Speaker 4: be very very interesting for what we'd expect going forward.
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  Speaker 1: Yeah, so expectations are now that the Bank of England
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  Speaker 1: will cut at the next meeting, as everyone previously thought. Oh,
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  Speaker 1: that's quite a weird look to see rates being likely
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  Speaker 1: to be cut when the inflation rate is not far
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  Speaker 1: off double the target. It's an odd look. But nonetherthwors
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  Speaker 1: that is that is what everyone is expecting. But then
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  Speaker 1: after that, expectations for further cuts have changed slightly haven't they.
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  Speaker 4: Yes, so we have actually seen you know, those being
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  Speaker 4: dulled back a bit today, And I should add that
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  Speaker 4: it's been expected for quite some time that there would
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  Speaker 4: be a cut in August. You know, they were on
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  Speaker 4: hold last time, so you know, they don't make it
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  Speaker 4: a sort of fly decision on the day. Sometimes obviously
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  Speaker 4: it is more short term, but they've been guiding since
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  Speaker 4: February for these sort of gradual and careful cuts, so
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  Speaker 4: it's not really necessarily a response to what we're seeing
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  Speaker 4: right now as opposed to the bigger picture in the path,
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  Speaker 4: but they are trying to guide markets that they will
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  Speaker 4: be taking. But yes, we have seen them coming back
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  Speaker 4: a bit for the end of the year overall, still
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  Speaker 4: expecting the same amount that we were before, still expecting
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  Speaker 4: two cuts before the end of the year, but certainly
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  Speaker 4: pairing away. And that's actually the opposite to what we've
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  Speaker 4: been seeing happening in the US today, where they've had
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  Speaker 4: their PPI has come in a bit soften than expected,
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  Speaker 4: and that's sort of reignited confidence in the Federal Reserve,
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  Speaker 4: cutting interest rates there. So we've also seen a bit
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  Speaker 4: of a divergence in treasury and guilt yields as well today,
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  Speaker 4: So let's.
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  Speaker 1: Talk about guilty yells in the UK and what this means,
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  Speaker 1: means or doesn't mean for them. And we have seen
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  Speaker 1: yields in the UK rather higher than elsewhere, thanks for
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  Speaker 1: the general perception that we haven't really got our financial
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  Speaker 1: situation on.
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  Speaker 3: Which we haven't.
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  Speaker 1: When you layer onto that slightly unexpectedly high levels of inflation.
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  Speaker 1: What does that mean for the market.
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  Speaker 4: Well, it's certainly a major pain for the government that
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  Speaker 4: we have got such high guilt yields. You know, they
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  Speaker 4: haven't they haven't gone back down there higher than they
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  Speaker 4: were you know, during the mini budget crisis and twenty
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  Speaker 4: twenty two, and that's something which is eating into the
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  Speaker 4: government's ability to actually budget. You know, that debt costs
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  Speaker 4: more to service, so that's bad news. And then what
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  Speaker 4: it means for sort of other markets going forward, it's
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  Speaker 4: just that there's that volatility now I think that we're
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  Speaker 4: getting quite used to. Actually, you know, we're seeing quite
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  Speaker 4: big swings, particularly in the longer dated debt, which isn't
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  Speaker 4: a good sign in terms of confidence in the market.
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  Speaker 4: And in fact, we just saw last the other week
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  Speaker 4: when we had the incident in the House of Commons
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  Speaker 4: with Rachel reason there was concern about her. You know,
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  Speaker 4: we saw how the guilt market reacted then, So there's
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  Speaker 4: definitely quite a bit of sort of fragility in there
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  Speaker 4: which I think we'd rather not be seeing because obviously
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  Speaker 4: it has a knock on impact on quite a few
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  Speaker 4: other things, you know, including other asset prices. It effects stocks,
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  Speaker 4: it effects invest as in ajustant, effects the certainty as well. There.
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  Speaker 1: Yeah, and of course we have the other part of
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  Speaker 1: that problem is that as we see inflation not coming
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  Speaker 1: down to what we'd like it to be, a very
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  Speaker 1: large part of the UK guilt issuance is inflation linked.
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  Speaker 1: So that doesn't exactly help us out either.
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  Speaker 3: No, it doesn't.
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  Speaker 4: You're still you know, you're getting that supply and it's
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  Speaker 4: certainly not making things any easier. And it again it
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  Speaker 4: just feeds into that sort of fiscal headroom in it
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  Speaker 4: and it gives them, given them any room for maneuver
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  Speaker 4: when these things are all connected.
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  Speaker 1: The other thing was happening in the UK this week,
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  Speaker 1: of course, as we had Rachel rus mentioned how speech
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  Speaker 1: last week last night. Sorry we're talking, we're talking about
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  Speaker 1: the way on Wednesday the sixteenth, So last night being
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  Speaker 1: with the Evening at the fifth was there anything in
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  Speaker 1: there that made you feel that something might happen. It
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  Speaker 1: felt to me like a lot of sort of rather
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  Speaker 1: vague announcements without any clear policy that might really lead
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  Speaker 1: to improvement for the UK market. Lots of nice things
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  Speaker 1: like wouldn't it be nice if everyone was better educated
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  Speaker 1: on investment and felt like investing more like in the US,
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  Speaker 1: wouldn't that be good for the market, etc.
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  Speaker 3: Etc. But very little that you could really hang your
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  Speaker 3: hat on. Yeah.
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  Speaker 4: Absolutely, there weren't really a lot of details. I think
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  Speaker 4: the message was clear and that was, you know, we're
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  Speaker 4: here for the City of London. We're going to try
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  Speaker 4: and stimulate growth, you know, driven by financial services, you know,
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  Speaker 4: cutting red tape, slashing regulation. That was That was the
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  Speaker 4: rhetoric that we expected and that was the message that
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  Speaker 4: we got. In terms of actual details of policies, I
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  Speaker 4: think the ring fencing reforms are probably quite interesting in
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  Speaker 4: terms of consumer banking compared to other areas, but then
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  Speaker 4: there were still going to be some protection, so we
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  Speaker 4: don't quite know how that's actually going to work. I
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  Speaker 4: think response from the city apparently was quite positive. From
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  Speaker 4: those who were there based on what our reporters who
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  Speaker 4: were covering it have said, but again it seems to
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  Speaker 4: be largely sentiment driven. I think one other thing that
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  Speaker 4: came up that was quite interesting is the sort of
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  Speaker 4: IPO task force to try and stimulate the listings market
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  Speaker 4: in the UK, which has been having a terrible year
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  Speaker 4: after you know, several very Mira bundaners, and that's something
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  Speaker 4: that I think they're really hoping to see as they
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  Speaker 4: try and create this sort of more investor friendly environment
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  Speaker 4: as well for consumers. And I think that's one sort
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  Speaker 4: of other message there is trying to get people more
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  Speaker 4: confident and interested in investing, and I think reigniting the
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  Speaker 4: UK stock market is sort of seen as perhaps one
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  Speaker 4: way of doing that too.
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  Speaker 3: Yeah, it's interest.
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  Speaker 1: It isn't meant that she simultaneously wants everyone to invest
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  Speaker 1: masses in private equity by their pension films, but at
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  Speaker 1: the same time to also invest in the list of markets.
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  Speaker 4: Yes, so that is a sort of I suppose a
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  Speaker 4: double prompt approach there, equally controversial perhaps, but I think
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  Speaker 4: the sort of overall message is that people they want
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  Speaker 4: companies to invest in the UK as well, and that's
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  Speaker 4: not going to happen if the money isn't sort of
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  Speaker 4: there and the interest isn't there to help sort of
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  Speaker 4: drive the growth from those who do want to move here.
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  Speaker 4: And I think so trying to make the UK seem
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  Speaker 4: like an attractive place to invest domestically and for companies
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  Speaker 4: looking from abroad is really part of the mission there.
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  Speaker 1: Maybe if we had lower inflation and better growth, it
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  Speaker 1: would work all by itself.
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  Speaker 4: That probably would help.
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  Speaker 1: Okay, Well, the other thing that's interesting is there was
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  Speaker 1: it looks like we've got away with there being no
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  Speaker 1: cut to the limit on cash isis yes.
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  Speaker 4: So that no change there for now. I think that's
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  Speaker 4: something that of course is coming under a lot of discussion.
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  Speaker 4: I know that you and John have talked about it
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  Speaker 4: a lot previously, because it is seen as being this
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  Speaker 4: sort of really sacrisanced thing for a lot of consumers.
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  Speaker 4: You know, it's the only way that people can really
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  Speaker 4: save tax free right now. But the question of whether
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  Speaker 4: it's taking money that would otherwise be invested in the UK,
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  Speaker 4: or whether is actually the sort of gateway for people
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  Speaker 4: to be interested in what their money is doing is
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  Speaker 4: I think probably the issue that is up to the
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  Speaker 4: debate there. You know, is it the same people who
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  Speaker 4: are maxing out their cash ice limit? Who are the
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  Speaker 4: people who are who would otherwise be investing in the
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  Speaker 4: stock market not necessarily so where that where that limit is,
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  Speaker 4: and whether there's really much to be gained from it
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  Speaker 4: is the thing that people are kind of uncertain about.
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  Speaker 3: Yeah, the question is not what they would do, but
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  Speaker 3: what they should do to a degree.
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  Speaker 1: I mean John n I was talking about to say, well,
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  Speaker 1: you know, who are these people who would actually need
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  Speaker 1: to have more than twenty thousand pounds in cash every year?
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  Speaker 1: And you have your allowance anyway, your tax reallowance for
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  Speaker 1: interest from your cash, which if you're a lower rate
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  Speaker 1: taxpayer you can have, depending on what your interest from
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  Speaker 1: between twenty and twenty five pounds in cash and not
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  Speaker 1: pay any tax on.
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  Speaker 3: The interest as it is. And if their standard.
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  Speaker 1: Idea is that you should have three to six months
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  Speaker 1: of your income in cash in case of emergencies and
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  Speaker 1: after that you should be invested, it would seem that
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  Speaker 1: an awful lot of the people who are in cash
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  Speaker 1: isers should be nudged into investing for their own sake
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  Speaker 1: for their long term.
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  Speaker 4: Wealth might certainly be better longer term, but the mentality
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  Speaker 4: isn't necessarily at that at the moment, and I suppose
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  Speaker 4: that's something that the government is saying they want to
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  Speaker 4: try and change Althougheit, they're not looking to do it
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  Speaker 4: in this way at this time.
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  Speaker 1: And yeah, so that was one of the big ideas
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  Speaker 1: that we should attempt to educate people more about investment.
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  Speaker 3: But these education programs they rarely work.
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  Speaker 1: I'm afraid.
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  Speaker 4: Well, it's difficult when people are focusing on their taxes,
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  Speaker 4: I think, to necessarily get them to sort of look
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  Speaker 4: at the longer term in that way.
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  Speaker 1: Yeah, focusing on things are a little bit more more
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  Speaker 1: micro than perhaps they should.
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  Speaker 4: Right.
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  Speaker 1: Is there anything else that we should mention around what's
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  Speaker 1: happened with interest rates, with inflation, with what the Bank
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  Speaker 1: of England might do, anything we've messed well?
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  Speaker 4: I think what's interesting, as we all was, we're getting
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  Speaker 4: into earning seasons sort of in the US and we're
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  Speaker 4: seeing whether over there the impact of tariffs is feeding
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  Speaker 4: through enter prices, and as we said earlier, sort of
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  Speaker 4: the CPI suggests perhaps perhaps it had, but actually PPI
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  Speaker 4: today has come out and sort of reassured some of
• 13:28
  Speaker 4: those nerves. But we're also seeing some very strong reports
• 13:32
  Speaker 4: coming through from US banks today. In particular, I think
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  Speaker 4: Goldman had its best trading revenue ever. That suggests that,
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  Speaker 4: you know, they're not being impacted by the trade concerns.
• 13:47
  Speaker 4: But then if you look at companies like ASML, they
• 13:50
  Speaker 4: are a chip maker, they are a little bit more
• 13:53
  Speaker 4: apprehensive and they've been dialing back their guidance. And so
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  Speaker 4: I think we're only just starting to see where the
• 14:01
  Speaker 4: threat of tariffs, you know, and the actual potential impact
• 14:05
  Speaker 4: of those that have already been imposed, is going to
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  Speaker 4: sort of hit companies and you know, on their bottom
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  Speaker 4: line as all these adjustments are being made. So I
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  Speaker 4: think that's something very interesting to watch, you know, throughout
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  Speaker 4: its quarter, and particularly adds the flurry of tariff announcements
• 14:20
  Speaker 4: and changes keep coming from the US President.
• 14:24
  Speaker 3: Wellwhene, have you been watching what's been going on with crypto.
• 14:27
  Speaker 1: Week in the US. Obviously, it's been a great week
• 14:29
  Speaker 1: for bitcoin, and my very small holding of bitcoin is
• 14:32
  Speaker 1: doing me proudly at the moment. Have you been watching it?
• 14:35
  Speaker 4: I haven't been watching it intensively, but I have been
• 14:37
  Speaker 4: keeping an eye on the bitcoin price, which has just
• 14:40
  Speaker 4: absolutely been soaring. I think some people think the momentum
• 14:44
  Speaker 4: is going to continue. It does tend to do well
• 14:47
  Speaker 4: when you know traditional assets are struggling. It's an interesting
• 14:51
  Speaker 4: one because it is seen as being a risk asset,
• 14:54
  Speaker 4: but it's also alternative.
• 14:57
  Speaker 1: Yeah. Okay, well, this is the subject that we will
• 14:59
  Speaker 1: come back to again and again and again.
• 15:01
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