Speaker 1: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 1: top stories in the coming week from our Daybreak anchors
Speaker 1: all around the world, and straight ahead on the program,
Speaker 1: A huge week ahead for tech earnings.
Speaker 2: I'm Tom Busby in New York.
Speaker 3: I'm Kroin Heager here in London, where we're looking ahead
Speaker 3: to European bank earnings.
Speaker 4: I'm Bryan Curtis in Hong Kong. Is the coast clear
Speaker 4: now for a big uptick in tourism into Japan?
Speaker 5: I'm Kaylee Lyons in Washington. As the fight over the
Speaker 5: debt ceiling intensifies. How Speaker McCarthy pushes for a vote
Speaker 5: next week the White House Still Bloomberg.
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Speaker 2: I'm Tom Busby.
Speaker 1: We begin today's program with a look at the tech
Speaker 1: sector ahead of a cavalcade of big name tech earnings
Speaker 1: coming our way this week, names like Alphabet, Microsoft, Meta Platforms, Intel,
Speaker 1: and Snap. And joining us now to talk about all
Speaker 1: that and more is Bloomberg Technology co host Caroline High. Caroline, welcome, thanks.
Speaker 2: For being here.
Speaker 8: What a joy to be with you.
Speaker 1: Well, it looks like overall tech stocks have outperformed the
Speaker 1: rest of Wall Street, in the least in the first quarter,
Speaker 1: coming off of pretty dismal lows from before that. As
Speaker 1: a sector, how do you think tech did in the
Speaker 1: first three months of this year and is that growth
Speaker 1: extending into the current quarter.
Speaker 2: Do you think we.
Speaker 8: Are starting to question that growth? Certainly from a stock
Speaker 8: price perspective. From a valuation perspective, we've got to remember
Speaker 8: the Nasdaq one hundred, the key benchmark for big tech,
Speaker 8: is back in bull market territory. It managed to escalate
Speaker 8: twenty percent off of its lows that we hit last year,
Speaker 8: and this is around perhaps not that much more fundamental
Speaker 8: change in news. Yes, there's hopes that the Federal Reserve
Speaker 8: perhaps cool its intentions on where interest rates go. But
Speaker 8: as Gina Martin Adams over at Bloomberg Intelligence will point out,
Speaker 8: the valuations are still way out of whack unless we
Speaker 8: start to see the FED actually cutting rates. At the moment,
Speaker 8: no one's anticipating that. We're just anticipating as slowing in
Speaker 8: those rate hikes. So at the moment, it feels that
Speaker 8: the growth potential just isn't there to substantiate what has
Speaker 8: been maybe a move to safety amidst some of the
Speaker 8: concerns around the US banking system.
Speaker 1: Now, before we dive deeper into the individual earnings and
Speaker 1: the impact on the rates and the impact of what
Speaker 1: the FED is going to do, let's talk about probably
Speaker 1: the biggest game changer in tech since I don't know
Speaker 1: the search engine. It's artificial intelligence chatbots like open AI's
Speaker 1: chat GPT. They've changed everything since debuwing just in November,
Speaker 1: and Microsoft's also ran search engine bing now gaining traction
Speaker 1: after how many years? About fourteen years? Google racing to
Speaker 1: develop its own search engine powered by AI meta platforms,
Speaker 1: changing its name from Facebook to focus on the metaverse,
Speaker 1: now downplaying to focus on AI. How has this changed
Speaker 1: everything in tech and every company?
Speaker 5: So funny.
Speaker 8: I just got off a call with the CEO of
Speaker 8: AMEX and he said, look, a couple of years ago,
Speaker 8: the new technology was all about blockchain. Now the new
Speaker 8: technology is all about artificial intelligence. But as he will say,
Speaker 8: look they've been.
Speaker 2: Doing it for years.
Speaker 8: They've got AI, they got machine learning, and actually all
Speaker 8: these other companies are racing to say the same thing.
Speaker 8: We heard Andy Jasse from Amazon in his letter to
Speaker 8: investors saying we've been busy on machine learning and AI
Speaker 8: for a couple of decades. Now we know that Google
Speaker 8: was almost synonymous with artificial intelligence after it bought a
Speaker 8: UK pin up and the tech sector which was deep Mind.
Speaker 5: But now it.
Speaker 8: Seems to have changed the game from a consumer perspective
Speaker 8: because we all get to play with it. The open
Speaker 8: AI revelation, the chatchept now released into version four. It
Speaker 8: is the fact that you and I can now just
Speaker 8: see how powerful it has become. People now worrying that
Speaker 8: AI is developing at too fast rate, But it really
Speaker 8: is the consumer interaction with it that I think has
Speaker 8: made us sit up and understand that, yes, the way
Speaker 8: in which search certainly could happen is going to be
Speaker 8: far more efficient, the way in which we could see
Speaker 8: the way you and I react and our productivity levels increase.
Speaker 8: But I wonder if this is also slightly a tech
Speaker 8: sect to trestplately trying to look for some sort of
Speaker 8: silver lining amid macroheadwinds that are still there.
Speaker 1: And you talked about the consumers, and here's a perfect
Speaker 1: example of how consumers are interacting. Snapchat has seen huge
Speaker 1: growth in their four dollars a month Snapchat plus and
Speaker 1: it's because they added AI from open Ai, and everybody
Speaker 1: wants to play with it. You know, they want to
Speaker 1: write poems and essays and whatever. So yeah, I see
Speaker 1: what you mean. It has really taken the consumer to
Speaker 1: a new place.
Speaker 8: It has, But has it taken the actual revenues of
Speaker 8: the business to a new place? Many would argue say
Speaker 8: with Microsoft, no, actually, Microsoft's future quarter that we're all
Speaker 8: anticipating this fiscal third quarter is likely to be well
Speaker 8: an underperformance one. We're still thinking about where the businesses
Speaker 8: are investing, rather than in their azure, rather than actually
Speaker 8: whether practically the integration of open AI's Chat GPT into
Speaker 8: being is really changing up their own dollars in terms
Speaker 8: of revenue. It's not in the short term. In the
Speaker 8: longer term, yes, we could start to advertise against that,
Speaker 8: and yes, our productivity levels could go through the roof
Speaker 8: and it makes their own offerings that much more in demand.
Speaker 1: Well, you bring us to a great transition to talk
Speaker 1: about individual companies and it's not all just chat GPT,
Speaker 1: but let's go through some of them one by one,
Speaker 1: and we're going to start with the Alphabit, which is
Speaker 1: out on Tuesday. What do we and now this is
Speaker 1: an advertising driven company, Yeah, but advertising is in a slump,
Speaker 1: it is, and.
Speaker 2: What do you see for this company?
Speaker 1: There is also the search engine in cloud computing and YouTube,
Speaker 1: but they have a lot of revenue generators, But what
Speaker 1: do you expect?
Speaker 8: And YouTube could be a bit of a silver lining
Speaker 8: once again here they've had some price increases that really
Speaker 8: could bolster performance for that particular segment. But we know
Speaker 8: that actually growth expectations for YouTube for advertising in general
Speaker 8: have come down of late, so cloud could at least
Speaker 8: break even. Remember in a moment, they are a little
Speaker 8: bit of an also ran against Amazon's AWS and Microsoft's
Speaker 8: as you're but they are trying to boost profitability in
Speaker 8: their cloud segment. Overall, Alphbet it's likely to see revenue
Speaker 8: actually climb about two percent. Remember they're raking in more
Speaker 8: than fifty billion dollars on a quarterly basis. But you're right,
Speaker 8: this top nine growth is likely to remain pretty muted
Speaker 8: because search network segments that they're exposed economic challenges. We've
Speaker 8: got to worry about how much people want to pay
Speaker 8: for advertising. And also I wonder whether this Chatchypt excitement
Speaker 8: means you and I are using Google a little less.
Speaker 8: I know, for one, my husband won't do anything unless
Speaker 8: it's on Chatchypt in some way, So I do wonder
Speaker 8: whether we might see a little tiny sliverer of evidence
Speaker 8: that people are turning away from Google Search to use
Speaker 8: chatchipt instead.
Speaker 1: What did we expect from Microsoft, also out on Tuesday.
Speaker 8: Probably quite sad when you think that more than thirty
Speaker 8: percent growth isn't up to enough. But as you're is
Speaker 8: likely to see thirty one percent sales growth on a
Speaker 8: constant currency basis, but that isn't the sort of growth
Speaker 8: we've got oh so used to. Microsoft likely to see
Speaker 8: maybe revenue climb about four percent. We've seen fifty one
Speaker 8: billion per quarter on its fiscal third quarter, but we
Speaker 8: like to see evidence of this pullback in PC spending.
Speaker 8: You and I haven't been spending so much on hardware,
Speaker 8: on on going out and buying our computers because we
Speaker 8: bought them all in the pandemic, so that PC weakness
Speaker 8: is likely to take them as is also a bit
Speaker 8: of infrastructure. Software results likely to be pulled back a
Speaker 8: little bit as companies try and curtail they spending, so
Speaker 8: could see some slowing down Microsoft though instead they're all
Speaker 8: about marketing, aren't they. They're AI. They're all about showing
Speaker 8: the enhancements over the last couple of months, but there
Speaker 8: isn't going to be any near term sales growth because
Speaker 8: of that.
Speaker 2: Got it Meta of course, another big one. We've seen massive.
Speaker 1: Job cuts there talks about more what does this earnings look.
Speaker 8: Like for I mean, unsurprisingly profit under pressure in a
Speaker 8: big way. We're likely to see revenues actually only down
Speaker 8: about one percent, but it really is the profitability. This
Speaker 8: is why Mark Zuckerberg talks time and time again about
Speaker 8: the focus on efficiency. For this year, you're going to
Speaker 8: see perhaps a bit of a drag and engagement on
Speaker 8: the old blue Facebook, but there's going to be an
Speaker 8: uptick perhaps in the way and you and I are
Speaker 8: interacting with reels, with WhatsApp, with messaging ads, but they
Speaker 8: have been hampered by the fact that Apple doesn't want
Speaker 8: to build in of course, the way in which we
Speaker 8: track our data, so that's overall been a bit of
Speaker 8: a headwind. We're likely to see challenges once again, a
Speaker 8: second round of layoffs. At least they're going to help
Speaker 8: with their expenditures to a certain degree.
Speaker 2: Got it.
Speaker 1: Snap also the owner of Snapchat reporting, and we talked
Speaker 1: briefly about that before. How they've embraced AI and the
Speaker 1: chatbot and how is it looking for them. They have
Speaker 1: suffered kind of it also ran as well, Yeah.
Speaker 8: Oh boy, their share price has suffered. It's languished at
Speaker 8: at about ten for what the last end of twenty
Speaker 8: twenty two. Really we started to see Snap I think
Speaker 8: last year become the canaryan the coal mine. They come
Speaker 8: out with their ownings first and they then set the
Speaker 8: tone for how the rest of the advertising market was
Speaker 8: going to really look. And snaps growth expectations have come
Speaker 8: down sharply in the first half of the year. Six
Speaker 8: percent likely drop in top line overall revision the company.
Speaker 8: We're likely to see a twenty percent cut and fixed costs. Again,
Speaker 8: this is more about how they can preserve profitability rather
Speaker 8: than drive it. So this is again being cautious, as
Speaker 8: we likely to see advertisers be cautious with their budgets. Remember,
Speaker 8: if you're thinking about, oh, where shall I put my
Speaker 8: advertising dollars to work? You're probably gonna stick with Facebook's Instagram.
Speaker 8: You might be sticking with Google's YouTube. You might cut
Speaker 8: back on a snap because it is a bit of
Speaker 8: an also around, as you say, although they are always
Speaker 8: a creative way to perhaps get some bang for your
Speaker 8: buck with the AI focus.
Speaker 1: Intel also reporting now this is hardware, the chip maker.
Speaker 1: They are fresh concerns about chip makers. Now Washington sanctions
Speaker 1: hamstringing China's ambitions there. What do you see for Intel?
Speaker 2: Though?
Speaker 8: And we're back to boombust. They all told us in
Speaker 8: COVID and in the post pandemic era that we were
Speaker 8: gone out of boom bus cycles for chips because we
Speaker 8: all move to automated devices, the fact that we're going
Speaker 8: to have every connected device Internet of things, the industry
Speaker 8: would be changed. And it doesn't happen that quickly, it
Speaker 8: would seem. And so for Intel, I'd like to see
Speaker 8: actually a forty percent sales drop. We're likely to see,
Speaker 8: of course again the PC slow down that's affecting Microsoft
Speaker 8: it's going to impact Intel as well. Slumping comsumer demand
Speaker 8: means look, they're not going to have as many chips
Speaker 8: in the devices that we're buying. So we know the
Speaker 8: headwinds are there for PC. We know that actually they're
Speaker 8: losing some market share in terms of data centers as well.
Speaker 8: AMD they're buy females. Executives just been doing phenomenal work
Speaker 8: there at catching some market and this is a market
Speaker 8: that we want to hear from. The CEO, Pat Gelsinger
Speaker 8: has been very upfront with the challenges he faces, his
Speaker 8: entire sector faces. And remember they are trying to build
Speaker 8: a new, more resilient global supply chain at the moment,
Speaker 8: so we has to invest in future fabs here in
Speaker 8: America and in Europe, and that's more expensive. We're still
Speaker 8: trying to see where they end up.
Speaker 1: Caroline, thank you so much. Caroline Hyde is the co
Speaker 1: host of Bloomberg Technology. Great to have you with us.
Speaker 2: Coming up on.
Speaker 1: Bloomberg day Break weekend, earning season for European banks as well.
Speaker 1: I'm Tom Busby and this is Bloombergo. This is Bloomberg
Speaker 1: Daybreak Weekend, our global look ahead at the top stories
Speaker 1: for investors in the coming week.
Speaker 2: I'm Tom Busby in New York.
Speaker 1: Up later in our program, the fight over the dead
Speaker 1: ceiling heating up even more. But first, European banks from
Speaker 1: Ubs and Credit Sweee to Deutsche Bank, Barclay's and Santandar
Speaker 1: reporting first quarter results next week. But it's not going
Speaker 1: to be a simple quarter. For more, Let's head to
Speaker 1: London and bring in Bloomberg Daybreak anchor Caroline Hepgar.
Speaker 9: Tom.
Speaker 3: After the tremor of the demise of Credit Sweee, we
Speaker 3: turn to bank earnings, and many European names face individual
Speaker 3: issues as well as the broader themes around trading revenue
Speaker 3: and net interest income that will be key to this
Speaker 3: set of earnings. For More, I'm joined by Bloomberg's final editor,
Speaker 3: Tom Metcalf. Tom, there are going to be a lot
Speaker 3: of issues I think in this set of results, aren't there.
Speaker 3: What do you think though, First of all, the US
Speaker 3: bank results show about what we can expect from Europe.
Speaker 7: Yeah, I think you're absolutely right. There'll be a lot
Speaker 7: of different things for investors to digest, and you know
Speaker 7: that sort of exemplifiber what's happened in the US, So
Speaker 7: you know a couple of points to pull out of that.
Speaker 7: First of all, one of the big things we saw
Speaker 7: was effectively a flight to safety by some customers. So
Speaker 7: you had JP Morgan, the biggest bank, seeing a lot
Speaker 7: of deposits come its way after the term oil of
Speaker 7: you know, Silicon Valley Bank, and on all the regional
Speaker 7: lenders out in the US there too, So I think
Speaker 7: that will be very very interesting to see. You know,
Speaker 7: how much do the big banks in Europe benefit from
Speaker 7: that kind of trend or was it sort of you know,
Speaker 7: unique to the US. And then at the same time
Speaker 7: you've also got net interest margins, so you saw across
Speaker 7: a lot of the US lenders, you know, the big
Speaker 7: retail lenders, they're still benefiting from that. And again it's
Speaker 7: just a case of you know, how good is the
Speaker 7: outlook there going forward? And then finally for me, you know,
Speaker 7: it's the high finance side of things. It's those traders,
Speaker 7: how are they doing? And the US painted a very
Speaker 7: mixed picture. So you had Golden Sacks typically a bellweather
Speaker 7: for this kind of thing, but actually its traders didn't
Speaker 7: do so well this quarter. That really hurt the shares.
Speaker 7: But in contrast, Bank of America normally a bit more
Speaker 7: scayed than Golden Sacks actually did very very well like
Speaker 7: blue past estimates, so you know, not quite sure whether
Speaker 7: European lenders will land between those two, which just means
Speaker 7: to me that I think it's going to be a
Speaker 7: very interesting, kind of difficult to unpick set of earnings
Speaker 7: and it'll be intriguing to see how sort of various
Speaker 7: banks sort of come out of it.
Speaker 3: Yeah, and on the specifics, of course, we're only just
Speaker 3: about a month or so out from the demand is
Speaker 3: of Credit Sweee, and you've got results both from UBS
Speaker 3: and Credit Sweee, so bank regulation and all the issues
Speaker 3: around this merger are going to be at the four too.
Speaker 2: Yeah.
Speaker 7: Absolutely, it look for me, the Credit Swiss UBS story
Speaker 7: probably the one that continues to dominate the headlines for
Speaker 7: obviously reasons. You know, I think it will be Credit
Speaker 7: Swiss's last set of results as an independent bank, so
Speaker 7: plenty of reasons to look closely at that. But I
Speaker 7: suspect most of the grillin will be on the h
Speaker 7: UBS executives, who will presumably be asked, you know, how
Speaker 7: is the sort of merger proceeding? You know, what are
Speaker 7: your long term plans? Is this really good for UBS?
Speaker 7: Et cetera, et cetera, And it's just an absolutely enormous story.
Speaker 7: There's so many different kind of stakeholders here. We've seen
Speaker 7: a lot of sort of agro from the Swiss side,
Speaker 7: so we'll be curious see if on the political side
Speaker 7: there's kind of pressure there. And ultimately, obviously what UBS
Speaker 7: want to do is show you know, a really good
Speaker 7: set of results and kind of a path forward to
Speaker 7: make sure this sort of very difficult merger can kind
Speaker 7: of proceed. So that for me will probably be the
Speaker 7: dominant story, certainly, at least in the use side of things.
Speaker 3: Okay, what about the UK? How resilient are the balance
Speaker 3: sheets of the big UK banks?
Speaker 7: Yeah, I think it'd be similar questions to what I
Speaker 7: was saying about the US. So are they benefiting from
Speaker 7: the net interest margin? And if so, you know, toward extent?
Speaker 7: And what is their guidance? What are they saying is
Speaker 7: likely to happen in the coming months. So it does
Speaker 7: seem that the Bank of England's likely to raise interest
Speaker 7: rates again, so maybe that will be a positive. But
Speaker 7: you know, what we have seen is even after you know,
Speaker 7: right in the midst of these interest rates rate rises,
Speaker 7: investors are already looking ahead and going, well, how long
Speaker 7: will these good times last for the banks? So there's
Speaker 7: that question. I think, you know, this is fair to say.
Speaker 7: I think the UK banks have largely dodged, you know,
Speaker 7: some of the term what you saw in the US.
Speaker 7: Obviously they have been rocked by it somewhat, but you know,
Speaker 7: that does seem like a pretty specific issue to the US.
Speaker 7: So I think the focus will be on kind of
Speaker 7: how well they executed this quarter, how well these interest
Speaker 7: rates are coming through. But again, and this is what
Speaker 7: makes this particular earnescis and really interesting. I think there's
Speaker 7: just lots of idiosyncratic issues for each bank, so kind
Speaker 7: of for almost every bank, you're going to be looking
Speaker 7: at different things.
Speaker 3: Yeah, one of which, of course, has come to the
Speaker 3: four again this week, which is HSBC and the battle
Speaker 3: with their big shareholder ping Ann about whether the business
Speaker 3: is split.
Speaker 7: Yeah, exactly, really heating up. So it's kind of being
Speaker 7: almost like a phony war for the last year or so,
Speaker 7: where we knew ping An were pushing for this, but
Speaker 7: it was perpetually kind of they won't send anything on
Speaker 7: the record, It was all kind of done through proxies.
Speaker 7: What happened this week is you had a ping An
Speaker 7: unit come out and say, you know, we are deeply
Speaker 7: concerned about HSBC's performance. They sort of slightly tweaked what
Speaker 7: they wanted HSBC to do. It's basically now more of
Speaker 7: listing their Asian units, which is slightly more feasible to achieve.
Speaker 7: But if you read this letter from ping A, it's
Speaker 7: two thousand words and they basically spend most of it
Speaker 7: saying HSBC aren't listening to us. You know, they don't
Speaker 7: seem to take any kind of consideration of our ideas.
Speaker 7: And what's fascinating is, you know, this is HSBC's top shareholder,
Speaker 7: So be really curious to see both of the results,
Speaker 7: which I think are sort of May the second, but
Speaker 7: probably more interesting at the AGM which follows on May
Speaker 7: the fifth, where I'm kind of preparing myself for fireworks there.
Speaker 3: Fireworks. Okay, what about Barclay's then and the issues around
Speaker 3: just Daley.
Speaker 7: Yeah, so that will again probably dominate some of the
Speaker 7: coverage there. And you know, obviously former CEO, you know,
Speaker 7: Barcleays as it is today, has you know, really very
Speaker 7: little to do with this, and you know that that's clear,
Speaker 7: you know, all when to day he was at JP
Speaker 7: Morgan actually, but that doesn't mean sort of the bard
Speaker 7: of Barkleys don't have questions to answer about you know,
Speaker 7: how come they let the bank get into this position
Speaker 7: where even you know, you know, a year or so
Speaker 7: after they knew that the FCA was investigating their CEO,
Speaker 7: they were still standing by him. And I think now
Speaker 7: as more and more kind of these details emerge, that's looking,
Speaker 7: you know, more and more questionable. I think the bank
Speaker 7: has finally come out and said, yes, these new allegations
Speaker 7: are sort of horrific, and you know, we were not
Speaker 7: aware of them at the time, so that will be interesting.
Speaker 7: I think the bank will presumably doing everything it can
Speaker 7: to move the conversation away and you know, look at
Speaker 7: what it can control, you know, which is obviously it's
Speaker 7: business and stuff. But you know, in terms of the story,
Speaker 7: when people think of sort of Barclays right now, that's
Speaker 7: right at the top of the list, I think.
Speaker 3: Yeah, absolutely that they may well be pressed, Yeah, the
Speaker 3: directors about their support for Jess Daily, Yeah, even when
Speaker 3: he was leading that bank. Look, that's an interesting story
Speaker 3: also though Deutsche Bank, I wonder what your view is
Speaker 3: on this last year. Of course, they've managed the highest
Speaker 3: profit in more than a decade, so the benchmark for
Speaker 3: them is enormous.
Speaker 2: Yeah, exactly.
Speaker 7: It's one of those sort of almost hoisted by your
Speaker 7: own petar, right, You've got kind of.
Speaker 5: That very nice position to be all well.
Speaker 7: Exactly, Yeah, So that just the comparatives are really tough,
Speaker 7: and that's actually a good thing to remember at all
Speaker 7: the banks. So for example, you know, last year we
Speaker 7: saw a lot of the investment banks doing really well
Speaker 7: on the trading side, and that obviously just makes it
Speaker 7: really harder. So when you see some of these falls,
Speaker 7: it's kind of you've got to kind of put against
Speaker 7: the long term trend rather than just looking back at
Speaker 7: twenty twenty two per se. But yeah, no, I think
Speaker 7: Deutsche Bank another fast, fascinating story. They're come to an
Speaker 7: end of this long, long restruction they've been doing that
Speaker 7: seems to be pursued, okay, but again it's you know,
Speaker 7: has been driven by that investment bank and you know
Speaker 7: that's obviously much more volatile than other revenue streams. So
Speaker 7: I'll be very curious to see how in particular their
Speaker 7: investment bankers do. And I think they report on the
Speaker 7: same day as Barkley, So it's going to be a
Speaker 7: lovely comparison on that day.
Speaker 3: Okay, just lastly on pay or his an issue, the
Speaker 3: kind of war for talent or the war to retain
Speaker 3: talent does seem to have faded a little bit. But
Speaker 3: what about costs and compensation?
Speaker 7: Yeah, those are always top focus for investors. So yeah,
Speaker 7: I think in previous years they were looking at those
Speaker 7: increases and sort of wonderingly, how is that going to
Speaker 7: affect the bottom line, et cetera. You know, a large
Speaker 7: chunk of this is all variable, So you would expect,
Speaker 7: particularly on the investment banking side, where there's really been
Speaker 7: such you know, little deal flows, little activity, that those
Speaker 7: variable conversations should fall quite substantially. And we are seeing
Speaker 7: job cuts again more on the investment banking side. So yeah,
Speaker 7: it's the mood changes is drastic, right. No one is
Speaker 7: now talking about, you know, fantastic pay rises across the
Speaker 7: whole bank, So very different mood and be interesting to
Speaker 7: see what gets said.
Speaker 3: Tom, thank you so much for being with me. That
Speaker 3: is Bloomberg's finance editor, Tom Metcalf, so laying it all
Speaker 3: out for you in the coming days of what to
Speaker 3: expect in terms of European bank earnings. I'm Caroline hepget
Speaker 3: here in London. You can catch us every weekday morning
Speaker 3: for Boomberg Daybreak. You up beginning at six am in London.
Speaker 3: That's one am on Wall Street.
Speaker 2: Tom.
Speaker 1: Thank you Caroline, and coming up on Bloomberg day Break
Speaker 1: weekend watch for the Battle over the dead Ceiling two intensified.
Speaker 2: I'm Tom Buzzby. This is Bloomberg.
Speaker 6: Broadcasting live from the Bloomberg Interactive Brokers Studio in New York.
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Speaker 6: This is bloom Bird Daybreak.
Speaker 4: We can.
Speaker 1: Hi'm Tom Busby in New York with your global look
Speaker 1: ahead at the top stories for investors in the coming week,
Speaker 1: The fight over the debt ceiling getting more intense. For more,
Speaker 1: let's add to our Bloomberg ninety nine one newsroom in
Speaker 1: Washington and sound on co host Kaylee.
Speaker 5: Lines, thanks Tom. Yeah, this clock toward the X status
Speaker 5: ticking and potentially ticking louder and faster. The X state,
Speaker 5: of course, is when the Treasury could hit the wall
Speaker 5: and run out of money to pay the bills of
Speaker 5: the United States, and progress on raising the debt sealing
Speaker 5: to avoid a potential default has been hard to find
Speaker 5: to this point, but this past week, House Speaker Kevin
Speaker 5: McCarthy put a proposal on the table, a three hundred
Speaker 5: and twenty page plan that would raise the debt ceiling
Speaker 5: by one and a half trillion dollars, which could be
Speaker 5: enough to stave off a default until March of next year.
Speaker 5: He hopes the plan will get the White House to
Speaker 5: start playing ball. Here's what he said Wednesday while introducing
Speaker 5: the Limit Save Grow Act on the House floor.
Speaker 9: President Biden has a choice come to the table and
Speaker 9: stop playing partisan political games, or cover his ears, refuse
Speaker 9: to negotiate, and risk bumbling his way into the first
Speaker 9: default in our nation's history.
Speaker 5: The White House, though, has accused him and House Republicans
Speaker 5: of holding the American economy hostage, and the President himself
Speaker 5: pushed back on the spending cuts that come with Speaker
Speaker 5: McCarthy's plan.
Speaker 10: You and the American people should know about the competing
Speaker 10: economic visions of the country that are really at stake
Speaker 10: right now. Massive cuts and programs you count on massive
Speaker 10: benefit protected for those at the top, a lot of
Speaker 10: you know, all the tax cuts go to the top,
Speaker 10: none to the bottom. And who do you think will
Speaker 10: hurt the most, you hard working people in the middle class.
Speaker 5: So how are these two ever going to compromise? Joining
Speaker 5: us now to discuss are Eric Wawson, congressional reporter for
Speaker 5: Bloomberg News, and Jordan Fabian, who covers the White House
Speaker 5: for US. So Eric, let's first start with you, because
Speaker 5: McCarthy put the plan out on the table this past week.
Speaker 5: He also, though, has to get his entire caucus in line.
Speaker 5: How hard is that job getting all the different factions
Speaker 5: of House Republicans with him here?
Speaker 11: You know, it's very tricky because he only has a margin.
Speaker 11: You only lose four of his members and still passes
Speaker 11: since all Democrats will be united against it. And we
Speaker 11: talked to a lot of the members up on the
Speaker 11: hill and there are more members they were saying they're
Speaker 11: undersized or not committed than four. I mean, we were
Speaker 11: talking about a dozen or more who are saying on
Speaker 11: the conservative side that the work requirements in the builds,
Speaker 11: there are new work requirements requiring twenty hours a week
Speaker 11: of labor from Medicaid and food stamp recipients who do
Speaker 11: not have children. They want that to thirty hours. So
Speaker 11: they're pushing for that change, and then that kind of
Speaker 11: maneuvering as moderate saying they won't go along. So there's
Speaker 11: still a lot of wrangling at this point. I think
Speaker 11: they're not going to change the text because this one
Speaker 11: member said, it's a game of whack a mole. Once
Speaker 11: you start changing it for one group, the other group
Speaker 11: gets angry. So it's not a done deal at all
Speaker 11: that he can get two hundred and eighteen and it
Speaker 11: would be a major belly flop if he doesn't. If
Speaker 11: he does get it, then they're hoping at least from
Speaker 11: the McCarthy said, this is something that would put pressure
Speaker 11: on the White House and Democrats to come to the
Speaker 11: table and do a deal.
Speaker 5: So Jordan to that exact point, what is it going
Speaker 5: to take for the White House to come to the table.
Speaker 5: Do they have to see that this gets two hundred
Speaker 5: and eighteen votes passes in the House before they will
Speaker 5: do anything.
Speaker 12: Line thus far has been that Republicans need to release
Speaker 12: a full budget blueprint before the President will agree to
Speaker 12: sit down with Speaker McCarthy. That's pretty unlikely, at least
Speaker 12: in the short term, given Republican divisions over what should
Speaker 12: be in that budget. But you pointed out that if
Speaker 12: this proposal on the limit gets two hundred and eighteen
Speaker 12: votes and passes the House, it will increase Speaking McCarthy's
Speaker 12: leverage to ask for a vote. If it doesn't, President
Speaker 12: Biden can afford to stand pat and say, look, I
Speaker 12: can't negotiate with you because you don't have a position
Speaker 12: to negotiate on. You can't you don't have control over
Speaker 12: your conference. And so that's why the vote is going
Speaker 12: to be looked at so closely, both on the Capitol
Speaker 12: and the White House. The other thing that could increase
Speaker 12: leverage on for Republicans is if tax receipts come in
Speaker 12: lower than expected from this tax day and the X state,
Speaker 12: the so called X day with a data which default
Speaker 12: would sort of occur, would would be sooner than expected,
Speaker 12: you know, if if that date moves up to say,
Speaker 12: you know, June, that would also increase urgency for both
Speaker 12: sides to sit down and hammer something out.
Speaker 5: Yeah, that's a really good point. We've seen this past
Speaker 5: week some strategists from Wall Street saying they're looking at
Speaker 5: the receipt numbers which are tracking well below twenty twenty
Speaker 5: two levels and saying June might be actually more of
Speaker 5: a possibility than we previously thought, which would just mean
Speaker 5: that the clock is perhaps ticking faster and louder because
Speaker 5: the window is shorter. But eric As Jordan was just
Speaker 5: raising the line from the White House has been show
Speaker 5: us the budget. Where are we on the budget? If
Speaker 5: McCarthy's just focusing specifically on this debt sealing race.
Speaker 11: Bill, now we may never see a budget. I think
Speaker 11: the White House would like them to produce that because
Speaker 11: separately from all this, Republicans have pledged to renew the
Speaker 11: Trump era tax cuts. So essentially, you know, spending two
Speaker 11: trillion or more on tax cuts that it's kew toward
Speaker 11: the wealthy, And if the budget comes out and reflects that,
Speaker 11: they can say, look, these aren't deficit hawks. These aren't
Speaker 11: people trying to reduce the deficit. They're just trying to
Speaker 11: cut Medicaid benefits in order to give a tax break
Speaker 11: to the rite Republicans are divided on that budget, we
Speaker 11: may never see it. It made this and that. Functionally,
Speaker 11: that would just mean that the appropriators, the committees that
Speaker 11: actually divide up the age and key budgets and write
Speaker 11: those bills, would just go ahead and figure out a
Speaker 11: top line number for the whole year on their own.
Speaker 11: But I think, I mean, functionally, if the debt ceiling
Speaker 11: bill passes, I don't see how the Whites can sustainably
Speaker 11: continue to say they need a budget. I mean, there
Speaker 11: will be an effective offer on the table. They can
Speaker 11: say we're not going to negotiate.
Speaker 5: I mean, we had Senator Joe Manchin, a Democrat from
Speaker 5: West Virginia, on Thursday, praising Speaker McCarthy and criticizing the
Speaker 5: White House for not negotiating. Are others likely to join him?
Speaker 11: Well, he's the proverbial canary nicole mine. But yeah, others
Speaker 11: are already joining. We have this members of the Problem
Speaker 11: Solvers Caucus. It's the thirty two Democrats as part of
Speaker 11: a sixty four member bipartisan group that put forward their
Speaker 11: own plan. They would raise the debt ceiling until December
Speaker 11: and set up sort of a commission it's kind of
Speaker 11: a punch, really, a commission to come up with budget
Speaker 11: cuts and force a vote in two years. You know,
Speaker 11: this is the kind of gimmicky solution we've seen in
Speaker 11: past debt ceiling crises where they don't really want to
Speaker 11: take responsibility for cuts of maybe they institute something that
Speaker 11: could potentially do cuts of revenue later. But yeah, that
Speaker 11: means that thirty two Democrats there are sort of on
Speaker 11: the idea of negotiate, let's let's find a compromise. But
Speaker 11: so far that the leaders of the party, Akeeme Jeffries
Speaker 11: in the House and Chuck Schumer and the senat are
Speaker 11: holding a line saying, you know, we're going to see
Speaker 11: them buckle. We're looking also very closely at Senate Republicans
Speaker 11: right now they're backing McCarthy. But at some point the
Speaker 11: way that the White House would win on this is
Speaker 11: would be that the Senate would center Publis would cave
Speaker 11: presumably enough of them, you know, ten of them that
Speaker 11: are needed to pass a bill, and it cleaned that
Speaker 11: something increase comes out of the Senate, and then at
Speaker 11: that point, in the face of literally minutes away from
Speaker 11: a default, McCarthy folds at the risk of his own
Speaker 11: career and puts that bill on the floor.
Speaker 5: Okay, so that's McCarthy's career and how it could affect him. Jordan,
Speaker 5: let's talk about the president's career, which in theory, he's
Speaker 5: hoping to prolong. There were reports over this past week
Speaker 5: that he's finally going to do it. President Biden is
Speaker 5: going to announce he's running again in twenty twenty four
Speaker 5: this coming week. Could we just talk about the timing
Speaker 5: of that announcement if it is in the middle of
Speaker 5: this debt sealing conflict. It seems interesting.
Speaker 12: You raised a great point, which is that no president
Speaker 12: wants to run for reelection amid economic uncertainty or any
Speaker 12: headwinds that it's going to hurt the economy. I mean,
Speaker 12: it's really traditionally to the number one issue the voters
Speaker 12: cast ballots on. And so the president has kind of
Speaker 12: dragged a seat on a reelection announcement. We're hearing from
Speaker 12: sources he's going to do it as soon as you know,
Speaker 12: the coming week, and so he's going to want going
Speaker 12: forward this to be taken.
Speaker 4: Care of, all right.
Speaker 5: Jordan Fabian and Eric Wasawson are terrific reporters covering both
Speaker 5: the White House and Congress for Bloomberg. Thank you so
Speaker 5: very much, and Tom will see a new week. We'll
Speaker 5: see if we see progress as that clock ticks ever louder.
Speaker 2: Thank you.
Speaker 1: Kaylee reporting from our Bloomberg ninety nine one newsroom in Washington.
Speaker 1: And you can hear Sound on with Joe, Matthew and
Speaker 1: Kaylee weekdays one to three pm Wall Street Time right
Speaker 1: here on Bloomberg Radio and coming up on Bloomberg day
Speaker 1: Break Weekend. How hot could tourism get in Japan this
Speaker 1: summer and what does it mean for the country's economy.
Speaker 1: I'm Tom Busby, and this is Bloomberg. This is Bloomberg
Speaker 1: day Break Weekend, our global look ahead at the top
Speaker 1: stories for investors in the coming week. I'm Tom Busby
Speaker 1: in New York, thinking about getting some R and R
Speaker 1: in Japan. Turns out, tourism there is seeing a pickup
Speaker 1: for more. Let's go to Hong Kong and Bloomberg Daybreak
Speaker 1: Asia host Brian Curtis and his colleague Doug Krisner.
Speaker 4: For the most part, the COVID story is now firmly
Speaker 4: in the rear view mirror, at least for many countries.
Speaker 4: Central banks are getting close to the end of their
Speaker 4: intense rate hiking cycle, and at least for much of
Speaker 4: the world, we may, and I have to stress the
Speaker 4: word may be getting close to the end of this
Speaker 4: recent bout of inflation.
Speaker 13: Well, if that's the case, we might see a big
Speaker 13: pickup in tourism and tourism related spending around the world.
Speaker 13: For a case study, we selected Japan. We know the
Speaker 13: currency as we can considerably and recently Bloomberg reported that
Speaker 13: foreigners have been buying up hotel property in Japan at
Speaker 13: a rapid pace and at a scale not seen in decades.
Speaker 4: Joining us now is Lisa dou who covers Asia finance
Speaker 4: for Bloomberg again wrote that story about the hotel investment. Lisa,
Speaker 4: thanks so much for being with us. We thought it
Speaker 4: might be a decent prism through which we can see
Speaker 4: if real foreign demand could be coming. We know that
Speaker 4: domestic demand is still a little sluggish in Japan, but
Speaker 4: is it come and how far might it go?
Speaker 14: We actually just had the latest numbers in March from
Speaker 14: the Japan Tourism Bureau. They had one point eight million
Speaker 14: visitors for the month. Definitely improvement from the last three
Speaker 14: years where they are effectively no tourists, but still a
Speaker 14: very far away from full recovery.
Speaker 13: So Japan recently approved plans for the country's first casino.
Speaker 13: This paves the way to open up what may be
Speaker 13: the largest untapped casino market in Asia, and recently is
Speaker 13: a part of this. Prime Minister Kishita said that he
Speaker 13: hopes the resort and casino will become a tourism base
Speaker 13: that promotes Japan's charms to the world. So where is
Speaker 13: the government when it comes to driving tourism right now?
Speaker 14: Tourism is definitely one of the biggest strategies that Japan
Speaker 14: had before the pandemic to drive growth in the economy,
Speaker 14: and I think it continues to it will now continue
Speaker 14: to be so now that COVID is mostly behind us.
Speaker 4: If we look at that hotel investment story, is it
Speaker 4: investors from Hong Kong or Singapore? And does it match
Speaker 4: up with where we see the biggest numbers of tourists
Speaker 4: going into Japan.
Speaker 14: You definitely see a mix of investors. Just to give
Speaker 14: you the numbers, you know, for investors basically accounted for
Speaker 14: nearly half of the three point seven billion invested in
Speaker 14: hotel deals in Japan the past twelve month and that's
Speaker 14: probably the highest proportion we've seen since twenty fourteen according
Speaker 14: to MSCI data. And and you know, looking at some
Speaker 14: of the big deals you are seeing, it is Hong Kong,
Speaker 14: US and Singapore and so and these are reflective also
Speaker 14: of you know, where most of the tours are coming from.
Speaker 14: So some of the big deals we've seen in the
Speaker 14: past twelve months, KKR, with a Hong Kong fund called
Speaker 14: gall Capital, spent fifty seven billion yen buying the High
Speaker 14: Regency in Tokyo. The Canadian pe firm Bental Green Oak
Speaker 14: bought a nice hotel in Osaka also for about fifty
Speaker 14: five billion yin And you know, and then you compare
Speaker 14: that now against where most of the tours are coming
Speaker 14: from this year. The highest numbers you're seeing in Asia,
Speaker 14: South Korea, Taiwan, Hong Kong, and then in North America
Speaker 14: definitely the US and Canada. So it does you do
Speaker 14: see some matching up there as well.
Speaker 4: And just briefly, Lisa, what does inbound tourism do for
Speaker 4: the overall Japanese economy? In other words, could you know
Speaker 4: this kind of rush of people and money coming in
Speaker 4: will that stoke growth in the local economy.
Speaker 14: I think that's what the hope is, you know, the
Speaker 14: if these inbound tours are coming in and spending locally,
Speaker 14: you know, that puts more money into the system. The
Speaker 14: yen has weakened considerably against the dollar since you know,
Speaker 14: the beginning of twenty twenty two because the boj and
Speaker 14: the Bank of Japan has kept its negative rate policy
Speaker 14: while most of the other developed you know, economies have
Speaker 14: raise rates. And so I think the hope now is
Speaker 14: if you know, people are coming in and spending in
Speaker 14: Japan and bringing their foreign currenzies into Japan, that will
Speaker 14: maybe kind of ease the pressure on the yen a
Speaker 14: little bit, and that and that will then feed over
Speaker 14: into the rest of the economy and helping with food
Speaker 14: prices and energy prices, which have been you know, kind
Speaker 14: of the main source of inflation, and up the slight
Speaker 14: we're seeing in Japan.
Speaker 13: Lisa, Thank you so much. Lisa do there. She covers
Speaker 13: Asia Finance for Bloomberg. I'm Doug Krisner along with Brian
Speaker 13: Curtis in Hong Kong, and you can catch us weekdays
Speaker 13: here from Bloomberg Day Break Asia beginning at six am
Speaker 13: in Hong Kong. Six pm on Wall Street.
Speaker 1: Tom, thank you, Brian and Doug. And that does it
Speaker 1: for this edition of Bloomberg day Break Weekend. Join us
Speaker 1: again Monday morning at five am Wall Street time for
Speaker 1: the latest on markets overseas and the news you need
Speaker 1: to start your day.
Speaker 2: I'm Tom Buzzby. Stay with us.
Speaker 1: Top stories and global business headlines are coming up right now.