Market Doubts Hassett Can Deliver in Fed; Bessent Under Discussion to Also Lead NEC

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break.

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1:02Bloomberg Audio Studios. Podcasts. Radio. News. Good morning. I'm Nathan Hager. And I'm Karen Moscow. Here are the stories we're following today. Karen, we begin with the latest on the next chairman of the Federal Reserve. President Trump has not announced his choice yet, but a top institutional investor says even if frontrunner Kevin Hassett is appointed, he might not be able to deliver the rapid pace of interest rate cuts that the president would like. Gregory Peters, co-chief investment officer at PGM Fixed Income, told Bloomberg Hassett wouldn't have the power to deliver cuts on his own. Does he have the credibility within the committee to drive consensus?

1:45I don't think he has that credibility. I think that's what the bond market is telling you. But it's important to remember that it's a full committee and you have to have the confidence of the committee to drive consensus. and I don't know if he has it. P. Jim's Greg Peters also says if Hassett gets the job, questions about the Fed's independence will remain a major concern. Well, Nathan, if Hassett does become the next Fed chair, Bloomberg News has learned President Trump's aides and allies are discussing the possibility of making Treasury Secretary Scott Besant the top White House economic advisor.

2:19That would be in addition to his current job. If Besant is also named to the National Economic Council, He would become the chief arbiter of the administration's economic portfolio, spanning both the Treasury Department and White House. It would also give Besant a West Wing office, granting him even more physical proximity to the president. Now, Karen, let's get to the latest on efforts to end the war in Ukraine. President Donald Trump is reacting to the latest talks in Moscow with U.S. envoys. He's describing them as reasonably good. President Putin had a very good meeting yesterday with Jared Kushner and with Steve Whitcoff.

2:53what comes out of that meeting, I can't tell you, because it does take two to ten. President Trump spoke yesterday from the Oval Office after the Kremlin described the talks as very useful, but without breakthroughs on some of its demands around territory and Ukraine's bid to join NATO. We get more from Bloomberg's Greg Sullivan. He did seem to moderate his tone a bit more and express a little less confidence that a deal is at hand. That's hardly surprising, given that there have been several rounds of talks recently, all of which have ended inconclusively. Moscow throughout this process has stuck to hardline demands that Kyiv will not accept and has shown little sign of backing away from those demands, begging the question, how do the two sides reach a consensus?

3:31Bloomberg's Greg Sullivan reports. U.S. Envoy Steve Witkoff and Jared Kushner will continue the discussions today with a Ukrainian negotiator in Miami. Well, back in Washington, Nathan, Defense Secretary Pete Hankseth is facing new pressure of our controversy from earlier this year. The Pentagon's acting inspector general has concluded that Hegseth risked endangering American troops when he shared attack plans against Houthi rebels on the Signal messaging app. The Watchdog's report was delivered to the Senate Armed Services Committee yesterday. Jack Reed is the committee's top Democrat. I think the most compelling thing I've heard is a conclusion that he jeopardized the lives of pilots that were going into action by releasing critical data.

4:16All of this adds up to very, very poor judgment. Democratic Senator Jack Reed. Hexeth says he only texted updates that did not put anyone at risk, and he was authorized to declassify any material in the chat. The IG's report disagrees with that claim, but a Pentagon spokesman says the report is, quote, Total exoneration and it proves no classified information was shared. The new attention on the Signal chat comes as Hegseth is already under scrutiny over a second strike order that killed survivors on board a suspected drug boat in the Caribbean. Turning from the Caribbean now to Asia, Karen, a new poll says a majority of Americans backed the U.S.

4:56military defending Taiwan against a potential invasion from mainland China. The survey conducted by the non-profit Ronald Reagan Institute found 60 percent of Americans would support committing U.S. forces to Taiwan's defense. Meanwhile, Nathan, Chinese leader Xi Jinping met with French President Emmanuel Macron in Beijing at a time when relations between the EU and China have been under strain. The two leaders have discussed issues, including economic ties, trade tensions, Taiwan, and the war in Ukraine. Xi, speaking through an interpreter, described their talks as frank, fruitful, and friendly.

5:34Today, the world is undergoing profound changes unseen in a century at an accelerated pace, and humanity once again stands at a crossroads. China and France should demonstrate their sense of responsibility, uphold the banner of multilateralism, see through the fog of uncertainty, and firmly stand on the right side of history. On the issue of Ukraine, Xi said that China hopes a fair binding agreement acceptable to all parties can be reached. Those comments came as Macron renewed his call for Xi to back Europe's stance on Ukraine and warned against the disaggregation of the world order. Well, let's look at some stocks on the move this morning, Karen.

6:18Shares of Salesforce are up almost 2 percent. The software company's revenue outlook topped analyst estimates. But on the flip side, shares of Snowflake are flurrying lower by nearly 9 percent. The company makes software that helps organize, analyze and store corporate data in the cloud. It gave an operating margin outlook that fell short of analyst estimates. Now, Nathan, the latest on the battle for Warner Brothers Discovery. Bloomberg News has learned Paramount Skydance has more than doubled the proposed breakup fee. And it's offered to acquire the parent of HBO and CNN to five billion dollars.

6:52The breakup fee would be paid to Warner Brothers if a deal is agreed to but not consummated. And it's a sign Paramount has confidence. Its proposed merger would pass muster with regulators. Warner Brothers is weighing offers from three media companies, Paramount, Netflix, and Comcast.

7:11Time now for a look at some of the other stories making news in New York and around the world. And for that, we're joined by Bloomberg's Michael Barr. Michael, good morning. Good morning, Karen. President Trump unleashed another round of attacks on Somali immigrants. During an event in the Oval Office yesterday, President Trump said that Somali immigrants have destroyed Minnesota. He also lashed out at Democratic Congresswoman Ilhan Omar, who is an immigrant from Somalia, saying she should be thrown out of the country. All she does is complain about this country. Without this country, she would not be in very good shape.

7:44She probably wouldn't be alive right now. So Somalia is considered by many to be the worst country on earth. I don't know. I haven't been there. I won't be there anytime soon. Minneapolis Mayor Jacob Fry dismissed President Trump as a, quote, fool. Democrats on the House Oversight Committee have released new images of the private island owned by convicted sex offender Jeffrey Epstein. The videos and pictures were taken by local authorities showing where multiple accusers say they were trafficked and abused. Video of the secluded hideaway shows the grounds along with interior images of a bedroom and bathroom, a room with a dental chair, and face masks of men tacked to the wall.

8:28President Trump has granted another pardon, this time to a Democratic member of Congress. The president's pardon means Congressman Henry Cuellar of Texas and his wife won't go to trial in April on federal bribery and corruption charges. He's a respected person. He was treated very badly because he said that people should not be allowed to pour into our country. Congressman Cuellar thanked the president. Now we can get back to work. Nothing has changed. We will continue working hard. President Trump alleged without evidence that the Biden administration went after Cuellar because he criticized border policy.

9:03The annual lighting of the Rockefeller Center Christmas tree took place last night in Manhattan. The 75-foot-tall Norway spruce is decked out in more than 50 ,000 multicolored LED lights. Global News 24 hours a day and whenever you want it with Bloomberg News Now. I'm Michael Barr and this is Bloomberg. Thanks, Michael. Time now for our Bloomberg sports update. And for that, we bring in John Stashauer. Thanks, Karen. Giannis Antetokounmpo in the news with reports that he's unhappy with the Bucs sub-500 record. And he's in talks with the team about getting traded. And his first desire is to go to the Knicks.

9:41The Bucs then hosted the Pistons. And Giannis, three minutes into the game, heard his cat headed for an MRI. The Bucs still won the game. Chris Paul, released by the Clippers, said to be friction with Coach Ty Lue. The game tonight in the NFL is Dallas at Detroit. a big one in the NFC. That's your Bloomberg Sports Update. Stay with us. More from Bloomberg Daybreak coming up after this. As markets move and headlines break, what matters most is context. A Bloomberg subscription gives you unmatched reporting, sharp analysis, and powerful tools that help you connect the dots. Visit Bloomberg.com slash podcast offer to learn more.

10:24Coast to coast on Bloomberg Radio, nationwide on Sirius XM, and around the world on Bloomberg.com and the Bloomberg Business App. This is Bloomberg Daybreak. Meta Platforms has been hit by a full-scale European Union antitrust investigation over how its artificial intelligence features in WhatsApp may be harming competition. This is the latest EU probe into big tech's dominance on the continent. And for more, we get details from Bloomberg's Stephen Carroll in Brussels. Stephen, what is this probe over? This is over Meta's new AI policy, which was announced in October, which prohibits AI providers from using tools to allow them to communicate with businesses via WhatsApp.

11:04This is specifically due to the sorts of services where AI is the main business. It's not automated customer support that many companies offer through WhatsApp. It's when it's a specific AI product. What the commission is concerned about is that this new policy could prevent these third-party providers from offering their services through the messaging service and that could be anti-competitive. The statement from the commission announcing this investigation says that as a result of this new policy, competitors to Meta in AI could be blocked from reaching their customers but Meta's own AI service would remain accessible.

11:40Now Meta will be now forced to submit solutions to try and appease the regulators concerns. But if this, first of all, investigation finds wrongdoing, and if it is successfully upheld by the courts, it could lead to a fine as high as 10 % of global annual revenue. WhatsApp in response to this have said the claims are unfounded that their API, the technology underpinning WhatsApp was not designed to be used for AI chatbots, and it would place severe strain on their services. They say that's why this policy has come into force. But the investigation will now proceed at force. It's, of course, the latest strand of the EU investigations targeting big tech companies.

12:16And we know that that's been a particularly politically sensitive issue when it comes to the Trump administration. Now, we understand, Stephen, that this is coming under the European Union's traditional antitrust law, not necessarily under the digital services laws that have come under so much criticism from the Trump administration. Yeah, that's right. This is the old set of rules as opposed to the new ones that Meta is being hit by. The Digital Markets Act in particular is the one that has caused a lot of hand-wringing among technology companies and a fine already issued under the Digital Markets Act against Meta for 200 million euros was issued in April of this year and it also had to pay a 798 million euro fine for tying its Facebook marketplace service to its social network.

13:01That was an abuse of dominance question as well. This is the multi-layered regulations that tech companies have to face in the European Union. That's part of the contract for doing business in this area. But this is a more traditional sort of case that we've seen. And of course, Meta will be building its response to this investigation now. So given that it is more of a traditional antitrust probe, what's the potential timeline for how this all could play out? The European Commission hasn't given a timeline on how long it takes. It can technically take years to get through the full process because you come to a conclusion and then there can be an appeal that goes through several levels of the European courts here as well.

13:39This could be something that we're talking about in a couple of years' time, but it is something that both the EU and the companies take very seriously because of the potential fines involved. I've talked about, you know, over a billion euros already being levied against Meta over previous cases. 10 % of global annual revenue is what can be imposed if wrongdoing is found at these sorts of investigations even, and that is something that can often be reduced to below that level, particularly if we're talking about short-lived wrongdoing. And given that this is an investigation about a policy that's only coming into effect in the coming weeks and months, it might actually be something that Meta puts a pause on that while this investigation is underway.

14:21We'll be watching closely to see how they react to it. And just quickly, given the fact that this is yet another antitrust effort by the European Union over big tech. It kind of stands in contrast to what we've seen for Meta platforms here in the US, where just recently Meta was found not to be a monopoly. Indeed, and of course, you have to remember these are sprawling tech companies, and each of these investigations is looking at a different aspect of what a company like Meta does. The overlapping rules do mean that you have investigations. I mentioned one about Facebook Marketplace. We know that Google has faced cases over the years as well, because you're looking at both a competition issue, but then the additional regulation coming under the Digital Markets and Digital Services Acts as well means it's a very complex legal network for these companies to try and negotiate.

15:11It's worth saying that MetaShares and pre-market are only up slightly this morning, up seven-tenths of one percent. Investors don't seem terribly concerned by this latest announcement coming out of Brussels. It certainly looks that way in the pre-market trading. Thank you for this, Stephen. Really appreciate it. That is Bloomberg Daybreak Europe anchor Stephen Carroll with us this morning from Brussels. Karen. Nathan, let's repeat some of our top stories this morning. President Trump says he thinks talks went reasonably well between Russian President Vladimir Putin and U.S. Envoy Steve Witkoff and Jared Kushner.

15:42But he says he does not know the outcome with Ukraine, saying it takes two to tango. A Pentagon watchdog report says Defense Secretary Pete Hagseth could have endangered American lives by sharing Houthi attack plans on a signal group chat. Hank Seth is already under scrutiny over a second strike order that left no survivors on a suspected drug boat. And French President Emmanuel Macron is pushing for more Chinese investment during a state visit with Chinese leader Xi Jinping. France is looking to rebalance its economic ties with Beijing and narrow a persistent trade gap. And we have more on those stories coming up on Bloomberg Daybreak.

16:18Nathan. All right, Karen, thank you. Let's turn back to our top story now. doubts that may be building in the bond market on whether Kevin Hassett could deliver the rapid interest rate cuts that President Trump wants, even if the president gives his top economic advisor the nod to be the next chairman of the Federal Reserve. For more on this, we're joined by Bloomberg Markets reporter Valerie Teitel. And Valerie, of course, that's a concern we heard live from PGM's Greg Peters on Bloomberg Television in the overnight hours. Is that what we're seeing in the bond market, it looks, at least in this morning's action, that things are kind of sanguine.

16:54Well, look, there's a few facets to this discussion, one of which is being that, yes, the Fed chair is only one vote. He really has to get the whole committee behind him in order to make these policy decisions. So just because there is a new Trump pick as Fed chair doesn't necessarily mean that that Fed chair gets to decide what goes on forward. The second thing is that we need to keep mentioning here, Nathan, is that the labor market is continuing to show weakness. And so the market is already pricing in the fact that we are going to have a Fed cutting next year. We're pricing in a Fed cutting all the way down to some 3 % over the course of the next 12 months.

17:35So that does kind of chime in with what these more dovish Fed chair candidates have been calling for. We know that Hassett has been a key part of Trump's economic agenda, and he has always stood by quite adamantly that Trump's policies are disinflationary in nature. He's not worried about tariff-induced inflation. If anything, he thinks that Trump's policies around deregulation, this pro-growth, is going to be something that is going to get inflation back to target without the Fed having to do anything, leaving the door open for them to be cutting interest rates. The real problem comes, Nathan, if, for instance, we get a reacceleration of the U.S.

18:11labor force, if early next year we start to get a reacceleration of inflation. And then you have Hassett as the Fed chair in May calling for Fed cuts when the market is pricing in, perhaps a Fed on hold. That is when the situation gets hairy, but we are not there yet. And it does raise the question that we heard as well from Greg Peters of PGM about Federal Reserve independence. But if there is a question about whether Hassett can build the kind of consensus around rate cuts, wouldn't that sort of obviate some of those concerns? Well, look, you have to think that Kevin Hassett is a respected economist.

18:46Powell is a lawyer by trade, but he has done a very good job in getting a consensus together on the committee. The question really is whether Hassett is going to have the view of an economist or is he going to have the view of the Trump administration when he sits down? So that's kind of the concerns that some investors have. Even the FT was reporting that some senior bond investors have told them that they would have been at least more comfortable with someone who wasn't as close to the president as Kevin Hassett. We had other candidates like BlackRock's Rick Reader and also current Fed Governor Christopher Waller.

19:19We know that they were part of the interview process for the Fed chair as well, who are dovish in nature, but not necessarily people who are very close to the Trump administration. So perhaps it's the closeness to the Trump administration which is worrying people. But again, we just don't know when Kevin Hassett, if he does get the seat and accept the nomination. When he sits down in May, what kind of hat is he going to be wearing? Is he going to be one of a conservative economist that supports Trump's policies or one of pushing adamantly for rate cuts that Trump has been very vocal in asking for?

19:52That is an if, because President Trump hasn't formally made the announcement yet. He says he's going to make it earlier next year. But we are getting some reporting that there's discussion within the White House that if Hassett gets the nod, maybe Treasury Secretary Scott Besant could be the National Economic Council director, the top economic advisor. Does that make us more of a signal that Hassett could be a done deal here on FedShare? Yeah, well, I think this is another hint that they are seriously considering Kevin Hassett for the Fed chair, because there looks like to be seriously considering what to do with his open position once Kevin Hassett moves on.

20:30Now, the director of the National Economic Council, as you mentioned, is essentially the top White House economic advisor. If it goes to Scott Besant and he wears that hat alongside Treasury Secretary, it would really allow him to consolidate oversight of Trump's economic policies from the White House to the Treasury. It would also give him more proximity to the president. He would get a West Wing office in the White House. So this is just telling us perhaps that at least within the Trump administration, Besant is playing such a key role that he is being considered for a second one. This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond.

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21:44We'll be right back. in five minutes or less. Search Bloomberg News Now on your favorite podcast platform to stay informed all day long. I'm Karen Moscow. And I'm Nathan Hager. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak.