Reeves' Tears & Market Fears, FX ‘Weaponization', £133M Divorce Ramifications
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This is the Bloomberg Daybakeywit podcast. Good morning. It's Thursday, the 3rd of July. I'm Caroline Hepke in London. And I'm Stephen Carroll in Brussels. Coming up today, the UK Prime Minister offers belated support for his Chancellor after images of Rachel Reeves crying in Parliament sparked a market convulsion.

US President Donald Trump suggests House Republicans could pass his multi-trillion dollar tax cut and spending bill later today. Plus, till wealth do us part, why the UK Supreme Court's decision to back a former UBS banker in a £133 million divorce battle could have far-reaching consequences. Let's start with a roundup of our top stories.

The UK Prime Minister Keir Starmer says Rachel Reeves will stay on as Chancellor for many years to come. The comments come after Starmer failed to back Reeves when questioned in Parliament yesterday, creating a scene as a visibly upset Chancellor was sitting behind him and appeared to be crying. Starmer later spoke to the BBC's Nick Robinson to express his full support for Reeves and say her tears were not about politics.

It was a personal matter for the Chancellor and I've been absolutely clear with you, it's got nothing to do with politics, nothing to do with any discussion between me and Rachel, nothing to do with the matters of this week. So she'll still be Chancellor by the time this interview is broadcast in full in a few days' time? She'll be Chancellor by the time this is broadcast, she'll be Chancellor for a very long time to come.

because this project that we've been working on to change the Labour Party, to win the election, change the country, that is a project which the Chancellor and I have been working on together. So, yes. Keir Starmer there speaking to BBC Radio 4's Political Thinking podcast. Starmer's latest difficulty has come only a day after he had to make a humiliating U-turn on his government's flagship welfare bill. Tomorrow, the Labour government will mark its first year anniversary since winning power.

While Keir Starmer's words of support last night came too late for markets, global bond investors reacted swiftly to the Prime Minister's earlier failure to back his Chancellor from the dispatch box in Parliament. 30-year gilt yields surged 19 basis points, the biggest jump since April as stocks slid and the pound tumbled. The sharp moves come as traders speculated that Starmer may try to placate his Labour MPs

by replacing his Chancellor with someone more open to increased spending and borrowing. This as the government faces a widening fiscal hole ahead of the autumn budget, driven by a £5 billion climb down over Starmer's flagship welfare reforms and a £1.25 billion reversal on winter fuel payments for pensioners.

A new survey of central bank managers says the weaponisation of foreign exchange is becoming a growing headache. Bloomberg's Ewan Potts has the details.

Almost half of central bank managers around the world now say the geopolitical weaponisation of FX reserves is an investment risk for them. The finding comes from a UBS survey of nearly 40 central banks completed last month. And those citing weaponisation was up sharply from just 14% two years ago. UBS say the concern is a key factor driving central bank purchases of gold, which it says is much safer from being targeted by sanctions. In London, I'm Ewan Potts, Bloomberg Radio.

President Trump says that the House is ready to vote tonight on his big, beautiful bill. In a post on Truth Social, Trump said that he had meetings with...

Republican congressional members and that they are united. But despite the comments, House Republican leaders have struggled to find the final votes to advance the president's multi-trillion dollar tax and spending package. Republican Congressman Jim Jordan says that while holdouts may have genuine concerns, they should still vote for the bill. I hope it passes. I think it will. And frankly, I think it should because this is a good piece of legislation. Um,

I always say, you know, it's a good piece of legislation because the Democrats hate it so much. They don't like it because it actually empowers families by, you know, letting them keep more of their money, giving them school choice, making sure our borders stay secure and making able-bodied people in our welfare system now have to work. Representative Jim Jordan of Ohio there. The White House so far hasn't been entertaining changes to the bill to win over House Republicans.

If changes are made to secure a majority, it would then force the Senate to vote again on the bill, blowing President Trump's 4th of July deadline and adding weeks of potential delay to his flagship measure. The Trump administration has lifted curbs on chip design software sales in China as Washington and Beijing implement a trade agreement for both countries to ease restrictions on critical technologies.

The US Commerce Department informed the world's three leading chip design software providers that they no longer need government licenses to do business in China. Siemens says it has restored full access to its software and technology for Chinese consumers, while Synopsys and Cadence say they're in the process of doing so. It's part of a deal to ease restrictions introduced during the escalation of trade tensions

after Trump's so-called April Liberation Day. President Trump has also announced a trade deal with Vietnam. It includes a 20% tariff on Vietnamese exports to the US and a 40% levy on goods deemed to

to be trans-shipped through the country. In return, Trump said that Vietnam had agreed to drop all levies on U.S. imports following weeks of intense diplomacy. In a social media post, he said there would be zero tariff on U.S. products sold to Vietnam. Greta Peich, who is former general counsel to the Office of the U.S. Trade Representative, said that the agreement raises a number of questions.

You know, the devil will be in the details, as they say. The Truth Social post by the president was pretty broad brush. It will be interesting to see, you know, are all products treated the same? Are these across the board tariff treatments? Are there any non-tariff barriers that are addressed?

Greta Peisch speaking there to Bloomberg's Joe Matthew and Kayleigh Lyons. As the deal with Vietnam risks provoking retaliatory steps on China, Rana Sajeda from Bloomberg Economics writes that Beijing has made clear that it would respond to deals that came at the expense of Chinese interests. She adds that the decision to agree to a higher tariff on goods, quote, trans-shipped through Vietnam, would fall into that category.

Those are your top stories. On the markets, the MSCI Asia Pacific Index this morning is trading two tenths of one percent higher. Eurostox 50 futures are currently up by two tenths of one percent as well. Looking at the currency markets, the pound after weakening yesterday down another tenth of one percent today at 136.27. That's as the Bloomberg Dollar Spot Index

is a tenth of 1% higher. We'll be watching very closely to see how gilts open up today after we've had that statement of support from the Prime Minister for his Chancellor, Rachel Reeves, yesterday. Just as a reminder, the 10-year gilt yield 16 basis points higher, 4.61%. The 30-year yield 19 basis points higher. Today in trading, US Treasuries are down a basis point at 4.26 on the 10-year.

Well, in a moment, we'll bring you more on the future of the UK Chancellor, Rachel Reeves, plus what we learned from a Supreme Court ruling in a divorce case involving a former UBS executive. That's in a moment. Look, yesterday was pretty extraordinary when it comes to UK politics. Having said that, we'll get into the details. Maybe we should talk about something a little lighter. Wimbledon.

cheering us all up. At least there are still some home favourites, some Brits in contention, Stephen. Yeah, indeed. And there's also some people making massive amounts of money out of this event as well, as I've been learning about from reading reporting from our colleagues Ellie Byrne and Jamie Nimmo. I've been talking about the Wimbledon debentures, which are these essentially season tickets. It's a fancy term for season tickets, as you buy a five-year stretch of a good seat on centre court or number one court and

the one perk perhaps that I didn't know about is that when you have one of these seats you can sell the tickets for the days you can't go they're the only exchangeable tickets available for Wimbledon and that's become so profitable because of the amount that you can sell them for that a

actually these debentures are now being treated as a tradable asset. People are buying them for seasons to come and then selling them on at massive markups. So the current ones for the period from 2026 to 2030 are changing hands at over £200,000. That's a profit of about 75% of what people had paid from originally. Apparently this is a lot of US buyers really interested in these premium seats. You also get access to the lounges and the VIP areas as well.

But also good for the club as it's in a way that they can invest on things. You know, the retracting roof over Centre Court was something that was paid for by these debenture fees as well. But it's certainly a hot market this time of year. Yeah, no, they've always...

been a tradable asset haven't they for a long time the debentures but yes they are super popular and yeah you get to swan in and swan out don't you so you can see the appeal maybe one summer day anywho that's one of the pieces that we've been reading about and thinking about this morning for you but as I say that the politics was dramatic yesterday for Britain and

The UK Prime Minister now saying that Rachel Reeves will stay on as Chancellor for many years to come. This after the bond market sell-off yesterday, you saw the gilt yield, the gilt curve steepen pretty dramatically because of the speculation about her future. So let's bring in our UK politics reporter, James Walcott, today. What happened yesterday that spooked the bond markets in such a big way, James? James?

Well, appearances matter in politics. And so yesterday, Prime Minister's questions, the first day after a major humiliating U-turn from Starmer, he has his Deputy Prime Minister, Andrea on the left, and his Chancellor, Rachel Reeves, on the right, as a way of showing support, the whole bench in front of them. But instead, what we and the gilt markets were treated to was this bizarre scene where the Prime Minister carries on answering these questions while his Chancellor is visibly upset and

And a couple of points, she has a few tears as the session goes on with the leader of the opposition, Kemi Badenoch, at one point questioning if she would still be in office as chancellor by the time of the next election. And then Starmer refusing to answer that question. And what's interesting to me is the U-turns themselves on Tuesday and welfare didn't actually seem to scare or spook the markets. But at the moment of the markets watching this kind of tearful exchange, it's

They clearly thought something was wrong in the Chancery and also with number 10 and the sell-off started from there.

James, what can we say on Thursday morning about Rachel Reeves' position? We've had these reassurances now from the Prime Minister, Keir Starmer. Yeah, I mean, various spokespeople have been out in the afternoon saying there was absolutely no risk at all to the Chancellor's position. They said it was a personal issue that was nothing to do with the politics. A few MPs spoke to Bloomberg and said there was also an issue going on with the Speaker. But then it's very hard to sort of ignore that this came immediately after this very serious downfall.

is sort of in sort of the government's fortunes after the welfare decision. I think after Starmer's had his second going out and backing the chancellor later in the BBC overnight, let's see how the markets open this morning for gilts. But,

The questions number 10 will be asking themselves this morning are, if someone else is going to do that job as Chancellor, what realistically is going to change about both the government policy and the UK fiscal position? Reused is quite widely seen by the market, says the most market-friendly Chancellor, Labour have...

on offer, effectively, at the front bench. Although there are betting odds going now on Cabinet Office Minister Pat McFadden, Home Secretary Yvette Cooper, anyone who comes in is going to face the same sort of fiscal set of problems. And the downside for Starmer is Rachel Reeves has been a core, central, I cannot state it enough, part of his political project. She has been the sort of name on the tin for fiscal stability and credibility for this Labour government. And losing her...

would be one of the most serious negative symbols of this administration, one can imagine. Yeah, they were in lockstep, as the Prime Minister, you know, has talked about, in trying to woo the city and speak to investors and represent UK PLC. But as you say, it's the fiscal challenges that the UK government is facing that, you know, we'll perhaps hear more on at Mansion House and then in the autumn budget. Right.

I think the question now for the Labour Party as a whole, because as we're finding out from this week, the MPs increasingly have a large amount they want to say about the direction of the party, is who is the winner here? Is it Reeves, the Chancellor of Fiscal Credibility, and this week has been a major setback for her on the welfare spending, or is it Labour MPs and their bids for changes to two-child benefit caps, further pushes on welfare, a willingness to have wealth taxes in the autumn as well?

The normal arbiter of these things is the Prime Minister, Keir Starmer. He's set to speak later this morning. I think many people in both the markets and wider Westminster politics will be watching to see where he comes down on those two decisions.

Okay. James Wilcock, our UK politics reporter. Thank you very much. Pay later and all major cards so you can focus on scaling up.

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Well, there's another story here in the UK that we want to talk about today. This is the Supreme Court, which has ruled that a former UBS executive can hold on to the majority of his £133 million wealth, this after a court ruling on his divorce. Clive Standish, who was the CFO...

at the Swiss bank has been embroiled in a more than five year long dispute with his former wife, Anna, and our legal reporter, Luca de Paoli, joins us now for more on this story. Luca, why did this fight go on for so long? I guess the simple answer is that there was so much to fight over. Not all divorces are worth taking all the way to the Supreme Court and incurring all those fees, but

This is a divorce where one of the assets up for grabs was this huge farm in Australia which had nearly 5,000 cattle and about 5,700 merino sheep. So it's worth paying all of these expensive lawyers to go and fight for them. There's also a few sort of thorny legal issues that were at play here and particular circumstances which made it worth fighting for over basically.

So what did the Supreme Court decide then? How are the assets going to be divided up?

So at the heart of this dispute, there's about £80 million worth of assets which were transferred from Clive Standish to his wife, Anna, in 2017. Not long, about three years before the marriage really began to fall apart. The whole point of the transfer was to avoid paying inheritance tax. So that was if they were to die, it would be put into a trust. His wife was a non-domicile taxpayer. So that meant that they wanted to do this.

A lower court ruled that effectively all of those assets were a joint part of the marriage because they had been "matrimonialized" to borrow a term from the judge's ruling.

The main source of the wealth might have been the husband, but once it had been gifted to the wife, then it was to be split 50-50. The Supreme Court ruling goes against that and says it's important what the source of the wealth was, but also what the intention was. The intention was to gift the assets so it would be better for their children not to benefit Anna Standish. And as a result, the husband gets a much larger share of the divorce settlement than the wife. The wife only ends up with £25 million. Yeah.

But it's also why it's an interesting ruling, isn't it? That idea of the kind of sourcing of the wealth. But also, I mean, we know London is a setting for a lot of these high net worth divorce cases.

Why do people still choose this jurisdiction to have these long, difficult battles? So I guess, although this sort of case might go against that, on the whole, London's a really good space for the non-earning spouse.

Much better than a lot of other courts around the world. So if you're looking to take a case, London is a great place to do it from that reason. I mean, the largest divorce settlement we've had in London was £450 million. So that was to the non-earning spouse. So, I mean, that's a huge part of why we do it here. There's also a load of lawyers here who are set up to do this kind of stuff themselves.

And a lot of billionaires in Mayfair who fall out and then have to go and argue this stuff at the High Court. Look, what does this ruling mean for other divorce cases in the UK? Will it have wider ramifications?

So I guess it's kind of hard to imagine how something with 133 million quid might affect a broader group of people. But the sort of practice of trying in your marriage to...

avoid incurring too much tax is something that people probably do quite frequently. I mean, a lot of people I know, they divide up their ISA allowances, which is only 20 grand, not 133 million. So it affects that.

The ruling didn't bring as much clarity as some lawyers had hoped. Lawyers thought they might get clarity on when marital homes are matrimonialized and that didn't really come through. So the ruling kind of empowers judges to look at things on a case-by-case basis, which is important. If you think, you know, marriages last for different lengths of time, marriages are different forms of partnerships, it's probably no bad thing that judges have discretions to make decisions on a case-by-case basis.

This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Street and beyond. Look for us on your podcast feed every morning on Apple, Spotify and anywhere else you get your podcasts. You can also listen live each morning on London DAB Radio, the Bloomberg Business App and Bloomberg.com.

Our flagship New York station is also available on your Amazon Alexa devices. Just say Alexa, play Bloomberg 1130. I'm Caroline Hipker. And I'm Stephen Carroll. 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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