1 00:00:00,240 --> 00:00:08,360 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:10,200 --> 00:00:12,520 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:12,520 --> 00:00:14,480 Speaker 2: the top stories in the coming week from our day 4 00:00:14,480 --> 00:00:17,360 Speaker 2: Break anchors all around the world. Straight ahead on the program, 5 00:00:17,360 --> 00:00:19,400 Speaker 2: but look ahead to some key economic data in the 6 00:00:19,520 --> 00:00:23,239 Speaker 2: US how that may impact FED policy moving forward, Plus 7 00:00:23,440 --> 00:00:26,640 Speaker 2: a look at earnings from retail giant Walmart. I'm Tom 8 00:00:26,680 --> 00:00:27,760 Speaker 2: Busby in New York. 9 00:00:28,000 --> 00:00:30,360 Speaker 3: I'm Caroline Hedkait in London, where we're looking to the 10 00:00:30,360 --> 00:00:32,720 Speaker 3: future as Portugal chooses a new leader. 11 00:00:33,080 --> 00:00:35,559 Speaker 4: I'm Charlie Pellett, looking ahead to a big week of 12 00:00:35,720 --> 00:00:37,320 Speaker 4: eco data out of Japan. 13 00:00:38,360 --> 00:00:42,400 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 14 00:00:42,440 --> 00:00:46,120 Speaker 1: eleven three to zero, New York, Bloomberg ninety nine to one, Washington, DC, 15 00:00:46,640 --> 00:00:50,879 Speaker 1: Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 16 00:00:51,320 --> 00:00:54,480 Speaker 1: Sirius XM one twenty one, and around the world on 17 00:00:54,560 --> 00:00:57,720 Speaker 1: Bloomberg Radio, dot Com and the Bloomberg Business App. 18 00:01:02,600 --> 00:01:04,839 Speaker 2: Good day to you. I'm Tom Busby. We begin today's 19 00:01:04,880 --> 00:01:07,480 Speaker 2: program with some key economic data out this week. The 20 00:01:07,520 --> 00:01:11,039 Speaker 2: April Consumer Price Index on Tuesday and on Thursday, that 21 00:01:11,160 --> 00:01:15,080 Speaker 2: same month's producer price index and retail sales data. For 22 00:01:15,200 --> 00:01:17,840 Speaker 2: more on what that all could tell us about the 23 00:01:17,959 --> 00:01:20,920 Speaker 2: US consumer, the US economy, and what it may mean 24 00:01:20,959 --> 00:01:23,839 Speaker 2: to the Federal Reserve. We're joined by Edward Harrison, editor 25 00:01:23,880 --> 00:01:27,840 Speaker 2: of Bloomberg's The Everything Risk newsletter. Good to talk to you, 26 00:01:27,880 --> 00:01:30,960 Speaker 2: Tom oh pleasure Man. Pleasure, Well, let's start with inflation. 27 00:01:31,200 --> 00:01:34,360 Speaker 2: It looks like inflation at both the consumer producer levels 28 00:01:34,400 --> 00:01:37,959 Speaker 2: may be muted. There's good news there. Energy prices flat 29 00:01:38,040 --> 00:01:40,600 Speaker 2: despite the President's claims of a dollar ninety eight gas, 30 00:01:40,720 --> 00:01:44,479 Speaker 2: eggs price is still elevated, Housing rents through the roof. 31 00:01:44,560 --> 00:01:47,760 Speaker 2: But we just don't know about inflation, do we. I mean, 32 00:01:47,800 --> 00:01:50,880 Speaker 2: we really have no idea what's going to happen because 33 00:01:50,880 --> 00:01:51,720 Speaker 2: of these tariffs. 34 00:01:52,080 --> 00:01:54,960 Speaker 5: No, I mean, this is really a baseline, Tom, for 35 00:01:56,040 --> 00:02:01,480 Speaker 5: you know the pre tariff announcement numbers at CPI that 36 00:02:01,640 --> 00:02:04,600 Speaker 5: was two point four percent in March but also expected 37 00:02:04,640 --> 00:02:07,600 Speaker 5: to be two point four percent in April. That's the CPI. 38 00:02:08,160 --> 00:02:10,239 Speaker 5: If you take out footing energy, you're looking at two 39 00:02:10,240 --> 00:02:13,080 Speaker 5: point eight percent both in March and April. And those 40 00:02:13,120 --> 00:02:15,680 Speaker 5: are levels that are above the Fed's two percent target. 41 00:02:15,800 --> 00:02:20,079 Speaker 5: So on both of those they're above and it would therefore, 42 00:02:20,200 --> 00:02:23,600 Speaker 5: given the uncertainty, tell the Fed to wait, as they 43 00:02:23,639 --> 00:02:26,400 Speaker 5: have told us already last week that they would do 44 00:02:27,120 --> 00:02:31,480 Speaker 5: before any sort of impact on the economy comes from 45 00:02:31,520 --> 00:02:34,440 Speaker 5: the tariffs, either on employment or on inflation. 46 00:02:34,720 --> 00:02:38,040 Speaker 2: Yeah, Jerome Powell was pretty clear after that announcement the 47 00:02:38,080 --> 00:02:41,120 Speaker 2: third time this year that the Fed has left rates unchanged, 48 00:02:41,560 --> 00:02:43,600 Speaker 2: that we just have to wait and see. We don't 49 00:02:43,639 --> 00:02:46,240 Speaker 2: know what the impact will be on inflation, on jobs, 50 00:02:46,280 --> 00:02:47,919 Speaker 2: on the economy exactly. 51 00:02:48,000 --> 00:02:50,760 Speaker 5: And so I think that we're getting a good read 52 00:02:50,880 --> 00:02:54,640 Speaker 5: ahead of time, which says that the numbers should be flat, 53 00:02:56,040 --> 00:02:59,400 Speaker 5: somewhat elevated relative to where the FED wants them to be, 54 00:02:59,480 --> 00:03:04,080 Speaker 5: but flatish. And so if we get any numbers that 55 00:03:04,240 --> 00:03:08,600 Speaker 5: are higher than expected, that will tilt the balance toward 56 00:03:08,680 --> 00:03:11,720 Speaker 5: the FED holding for longer. Right now, if you look 57 00:03:11,760 --> 00:03:15,720 Speaker 5: at markets, it's somewhere between June and July that markets 58 00:03:15,760 --> 00:03:18,720 Speaker 5: expect the first rate cut to happen, and that could 59 00:03:18,800 --> 00:03:23,800 Speaker 5: be pushed more back towards July if the inflation numbers 60 00:03:23,880 --> 00:03:27,360 Speaker 5: before the tariffs look a little bit elevated. 61 00:03:27,560 --> 00:03:30,440 Speaker 2: Well before we get to that June and July, let's talk. 62 00:03:30,560 --> 00:03:32,840 Speaker 2: You know, we had this, this is the April number 63 00:03:32,880 --> 00:03:35,520 Speaker 2: coming out right now. It's May, but there are talks 64 00:03:35,560 --> 00:03:38,640 Speaker 2: going on. We know that. Just this past week the 65 00:03:38,680 --> 00:03:42,120 Speaker 2: President talked about a trade deal with the UK, not 66 00:03:42,240 --> 00:03:44,880 Speaker 2: the European Union much bigger, but the UK. And this 67 00:03:45,000 --> 00:03:48,080 Speaker 2: weekend there are talks between the US and a Chinese 68 00:03:48,120 --> 00:03:51,680 Speaker 2: delegation for the first time in Switzerland. Are you hopeful 69 00:03:51,760 --> 00:03:52,600 Speaker 2: for something there? 70 00:03:52,960 --> 00:03:56,160 Speaker 5: You know, I'm hopeful in terms of what it tells 71 00:03:56,240 --> 00:03:58,560 Speaker 5: us about what the sort of parameters are that we're 72 00:03:58,600 --> 00:04:00,600 Speaker 5: dealing with. But we're looking at it. At this point 73 00:04:00,640 --> 00:04:04,560 Speaker 5: now is sort of a ten percent baseline across different 74 00:04:04,640 --> 00:04:08,680 Speaker 5: countries and then you know, negotiations on top of that 75 00:04:09,240 --> 00:04:14,120 Speaker 5: based on the individual deficits with the United States or surpluses. 76 00:04:14,800 --> 00:04:18,320 Speaker 5: The UK. You know, they didn't if you remember back 77 00:04:18,360 --> 00:04:22,000 Speaker 5: in Liberation Day on the second, they didn't actually have 78 00:04:22,040 --> 00:04:24,720 Speaker 5: an additional tariff on top of the ten percent. So 79 00:04:24,760 --> 00:04:27,599 Speaker 5: this is the easiest when you know, for Trump to 80 00:04:27,600 --> 00:04:29,680 Speaker 5: come out and say this is we have a deal 81 00:04:29,720 --> 00:04:32,479 Speaker 5: with them. Look what could happen to you? This is 82 00:04:32,520 --> 00:04:36,920 Speaker 5: sort of, you know, a promise to other countries that 83 00:04:37,000 --> 00:04:39,920 Speaker 5: come to the table that this is where we're going. 84 00:04:39,960 --> 00:04:43,640 Speaker 5: But in the end, ultimately will probably end up in 85 00:04:43,640 --> 00:04:46,600 Speaker 5: the mid teens in terms of the percentage versus two 86 00:04:46,640 --> 00:04:49,160 Speaker 5: point five percent, which which is what we had before 87 00:04:49,200 --> 00:04:52,279 Speaker 5: these tariffs came into place. So that's a big increase. 88 00:04:52,320 --> 00:04:56,120 Speaker 5: And if you look at what economists expect, according to 89 00:04:56,120 --> 00:05:01,160 Speaker 5: Bloomberger estimates, they expect inflation CPI, which is now going 90 00:05:01,200 --> 00:05:05,440 Speaker 5: to be two point four percent for this month. They 91 00:05:05,480 --> 00:05:08,080 Speaker 5: expect that to move up to three point five percent 92 00:05:08,279 --> 00:05:11,400 Speaker 5: for the entirety of Q four of this year. So 93 00:05:11,440 --> 00:05:13,520 Speaker 5: it's going to continue to move up and get to 94 00:05:13,560 --> 00:05:16,800 Speaker 5: three point five percent. And so obviously what that means 95 00:05:16,880 --> 00:05:20,680 Speaker 5: is is that if the Fed doesn't see weakness in 96 00:05:20,720 --> 00:05:22,679 Speaker 5: the labor market, they're going to be on a hold 97 00:05:22,680 --> 00:05:24,559 Speaker 5: for the entirety of twenty twenty five. 98 00:05:24,760 --> 00:05:27,919 Speaker 2: And that's key. Once the labor market starts to really deteriorate, 99 00:05:28,240 --> 00:05:30,000 Speaker 2: that's going to be the impetus for the FED to 100 00:05:30,200 --> 00:05:32,039 Speaker 2: maybe act right exactly. 101 00:05:32,200 --> 00:05:35,200 Speaker 5: So, you know, what the Fed has said is is 102 00:05:35,320 --> 00:05:39,080 Speaker 5: we don't really know what's going to happen, and we 103 00:05:39,120 --> 00:05:43,040 Speaker 5: also don't know how to tease out what happens as 104 00:05:43,080 --> 00:05:45,120 Speaker 5: a result of the tariffs and what's happening as a 105 00:05:45,160 --> 00:05:48,720 Speaker 5: result of inflation expectations. The underlying economic et cetera. Because 106 00:05:48,760 --> 00:05:51,560 Speaker 5: these numbers go up, we'll just have to wait and see. 107 00:05:51,920 --> 00:05:53,839 Speaker 2: Well, I want to bring it back to retail sales. 108 00:05:54,520 --> 00:05:57,320 Speaker 2: In March, we saw a retail sales shoot up one 109 00:05:57,360 --> 00:05:59,480 Speaker 2: point four percent. A lot of that was to get 110 00:05:59,520 --> 00:06:02,040 Speaker 2: ahead of the tariffs, especially for autos. There was a 111 00:06:02,080 --> 00:06:04,960 Speaker 2: real rush in people buying. Do you see in April, 112 00:06:05,160 --> 00:06:07,440 Speaker 2: when you know April second, as you said, was in 113 00:06:07,839 --> 00:06:10,839 Speaker 2: this Independence day, all these tariffs were announced. Do you 114 00:06:10,880 --> 00:06:13,560 Speaker 2: think it may have sparked a lot of consumers to 115 00:06:13,640 --> 00:06:16,000 Speaker 2: do more shopping for the month of April or are 116 00:06:16,040 --> 00:06:18,720 Speaker 2: people just scared and maybe they were pulling back. 117 00:06:18,920 --> 00:06:21,880 Speaker 5: It's a really good question, and I think that two 118 00:06:22,000 --> 00:06:25,200 Speaker 5: surveys that we're looking at, that is CPI and retail sales. 119 00:06:25,279 --> 00:06:27,920 Speaker 5: This is the one that's the biggest question mark, especially 120 00:06:27,960 --> 00:06:32,000 Speaker 5: because of the volatility associated with people pulling forward their demand. 121 00:06:32,880 --> 00:06:35,719 Speaker 5: You know, if you look at the advanced number month 122 00:06:35,760 --> 00:06:40,520 Speaker 5: on month, it was one point four percent for the 123 00:06:40,640 --> 00:06:44,040 Speaker 5: for the previous month, and the survey here expects it 124 00:06:44,160 --> 00:06:47,880 Speaker 5: to be zero point zero percent. That's the bloom big 125 00:06:47,920 --> 00:06:52,400 Speaker 5: survey so completely flat in the month of April, so 126 00:06:54,040 --> 00:06:55,839 Speaker 5: it could be all over the place. So that's a 127 00:06:55,920 --> 00:06:58,720 Speaker 5: huge drop from one month to the next when you. 128 00:06:58,680 --> 00:06:59,240 Speaker 4: Look at it. 129 00:06:59,400 --> 00:07:01,640 Speaker 5: If you take out autos, because you know, there were 130 00:07:01,640 --> 00:07:04,880 Speaker 5: a lot of auto buying that went on in March, 131 00:07:05,279 --> 00:07:08,479 Speaker 5: the number is a little bit more normalized. You have 132 00:07:08,640 --> 00:07:12,920 Speaker 5: zero point five percent increase month on month in the 133 00:07:12,960 --> 00:07:15,520 Speaker 5: previous month, and then they expect another zero point three 134 00:07:15,560 --> 00:07:18,840 Speaker 5: percent on top of that in April. So that's kind 135 00:07:18,840 --> 00:07:21,880 Speaker 5: of like, you know, the slowing trend of growth in 136 00:07:21,960 --> 00:07:27,280 Speaker 5: terms of retail sales that economs are expecting. The variation 137 00:07:27,760 --> 00:07:29,760 Speaker 5: there is going to be a lot bigger than it 138 00:07:29,840 --> 00:07:30,560 Speaker 5: is for CPI. 139 00:07:31,000 --> 00:07:33,120 Speaker 2: Well, a lot to look forward to. That to April 140 00:07:33,160 --> 00:07:36,240 Speaker 2: retail sales data out on Thursday, along with April PPI 141 00:07:36,760 --> 00:07:40,040 Speaker 2: on Tuesday, the Consumer Price Index, and our thanks to 142 00:07:40,160 --> 00:07:44,280 Speaker 2: Edward Harrison, editor of Bloomberg's The Everything Risk newsletter. We 143 00:07:44,320 --> 00:07:47,200 Speaker 2: move now to corporate earnings from the world's largest retailer, 144 00:07:47,320 --> 00:07:50,440 Speaker 2: Walmart's first quarter results are out this Thursday. What will 145 00:07:50,440 --> 00:07:53,320 Speaker 2: they tell us about the US consumer and how retailers 146 00:07:53,320 --> 00:07:56,200 Speaker 2: are responding to the Trump tariffs? For more, we're joined 147 00:07:56,200 --> 00:08:00,760 Speaker 2: by Jennifer Bartash's Bloomberg Intelligence Senior analyst Retail saples and 148 00:08:00,800 --> 00:08:04,080 Speaker 2: packaged food. Jen, thanks so much for joining us. Well, 149 00:08:04,400 --> 00:08:06,800 Speaker 2: consumer's a word, a lot of them pulling back worried 150 00:08:06,800 --> 00:08:09,920 Speaker 2: about the tariffs is going to send prices higher? Is 151 00:08:10,000 --> 00:08:10,840 Speaker 2: Walmart worried? 152 00:08:11,360 --> 00:08:15,160 Speaker 6: Yes, Hi Tom, I think that Walmart is actually one 153 00:08:15,200 --> 00:08:18,080 Speaker 6: of the best positioned retailers out there for this really 154 00:08:18,600 --> 00:08:21,960 Speaker 6: dynamic environment that we're in. You know, they appeal to 155 00:08:22,000 --> 00:08:25,480 Speaker 6: a very wide swath of consumers, and as people are 156 00:08:25,600 --> 00:08:29,600 Speaker 6: continuing to search for value, Walmart is a natural destination 157 00:08:29,720 --> 00:08:32,280 Speaker 6: for a lot of those shoppers. So as we're looking 158 00:08:32,360 --> 00:08:36,079 Speaker 6: at the quarter and their earnings, we had a solid 159 00:08:36,080 --> 00:08:40,520 Speaker 6: Easter season. People are looking for value and Walmart is 160 00:08:40,760 --> 00:08:43,160 Speaker 6: pretty well positioned to be able to navigate a lot 161 00:08:43,160 --> 00:08:45,199 Speaker 6: of this turbulence that we're seeing right now. 162 00:08:45,880 --> 00:08:49,240 Speaker 2: Would you say they're the best retailer to navigate what's 163 00:08:49,280 --> 00:08:51,920 Speaker 2: going on right now all the uncertainty out there. I mean, 164 00:08:51,920 --> 00:08:54,800 Speaker 2: there's a lot of competition, but they seem to always 165 00:08:54,880 --> 00:08:55,560 Speaker 2: figure it out. 166 00:08:55,920 --> 00:08:58,120 Speaker 6: There is indeed a lot of competition, but when you 167 00:08:58,200 --> 00:09:02,719 Speaker 6: think about Walmart's scale, the supply chain efficiency that they have, 168 00:09:03,559 --> 00:09:05,960 Speaker 6: the fact that they've got a really broad assortment in 169 00:09:06,000 --> 00:09:08,839 Speaker 6: their store, They've got a lot of groceries, but they 170 00:09:08,880 --> 00:09:12,199 Speaker 6: have you know, other general merchandise as well. It really 171 00:09:12,240 --> 00:09:15,240 Speaker 6: puts them in a position where they can have a 172 00:09:15,280 --> 00:09:17,840 Speaker 6: lot of different levers they can pull to help make 173 00:09:17,880 --> 00:09:21,360 Speaker 6: sure that they can meet consumer needs and still have 174 00:09:21,480 --> 00:09:24,040 Speaker 6: the things in stock that the people are looking for. 175 00:09:24,240 --> 00:09:27,400 Speaker 2: Now, what are its customers doing right now? Are they spending? 176 00:09:27,640 --> 00:09:31,599 Speaker 2: Have higher grocery prices brought in a lot of new customers. 177 00:09:31,960 --> 00:09:35,319 Speaker 6: Yeah. Walmart has actually been for the last several quarters 178 00:09:35,360 --> 00:09:38,960 Speaker 6: talking about how higher income households are being pulled into 179 00:09:39,000 --> 00:09:44,079 Speaker 6: their ecosphere, which is actually pretty interesting because everybody seems 180 00:09:44,080 --> 00:09:46,000 Speaker 6: to be looking for value right now, and a lot 181 00:09:46,000 --> 00:09:48,240 Speaker 6: of that did come from the higher food prices, as 182 00:09:48,280 --> 00:09:53,559 Speaker 6: you said, But it's also that Walmart has built multiple 183 00:09:53,640 --> 00:09:56,600 Speaker 6: facets to its offering, so it's not just about low prices. 184 00:09:56,679 --> 00:10:00,320 Speaker 6: It's also about service. So for people who are members 185 00:10:00,320 --> 00:10:04,040 Speaker 6: of their Walmart Plus program, the convenience factor plays in 186 00:10:04,240 --> 00:10:07,920 Speaker 6: very much to the overall value proposition. You know, Walmart 187 00:10:08,000 --> 00:10:11,200 Speaker 6: has you know, pharmacy operations, They've got all kinds of 188 00:10:11,200 --> 00:10:14,520 Speaker 6: different things that pull people in, and once you get 189 00:10:14,559 --> 00:10:18,280 Speaker 6: into that system, you become kind of sticky. And so 190 00:10:18,880 --> 00:10:22,319 Speaker 6: you know, Walmart is got a lot of customers coming in, 191 00:10:22,400 --> 00:10:24,400 Speaker 6: and they've got a lot of things that will help 192 00:10:24,520 --> 00:10:27,839 Speaker 6: keep them there even once prices sort of normalize from 193 00:10:27,840 --> 00:10:31,160 Speaker 6: food inflation and as some of this uncertainty in the 194 00:10:31,200 --> 00:10:34,400 Speaker 6: market starts to subside. We think Walmart's actually very well 195 00:10:34,440 --> 00:10:36,640 Speaker 6: positioned to hold on to a lot of those customers 196 00:10:36,679 --> 00:10:38,200 Speaker 6: that they've gained in recent quarters. 197 00:10:38,800 --> 00:10:41,000 Speaker 2: Yeah, and I see it. You know they've got this 198 00:10:41,080 --> 00:10:45,840 Speaker 2: now manager specials. These are price cuts, price matches against competitors. 199 00:10:45,840 --> 00:10:48,640 Speaker 2: So clearly this is not just groceries. I mean, they 200 00:10:48,640 --> 00:10:51,000 Speaker 2: are going after the best buys and the coals and 201 00:10:51,040 --> 00:10:53,239 Speaker 2: the targets of the world with this new initiative. 202 00:10:53,480 --> 00:10:56,320 Speaker 6: It is it's a way for them to gain market share. 203 00:10:56,480 --> 00:10:58,600 Speaker 6: And as I you know, as I mentioned, they have 204 00:10:58,800 --> 00:11:01,040 Speaker 6: a lot of scale. That means that they have the 205 00:11:01,120 --> 00:11:05,720 Speaker 6: ability to really work with suppliers to ensure that they're 206 00:11:05,760 --> 00:11:09,240 Speaker 6: getting goods, and they also have the ability to absorb 207 00:11:09,360 --> 00:11:12,640 Speaker 6: some of the tariff related costs if needed, which means 208 00:11:12,679 --> 00:11:15,280 Speaker 6: that they can have very competitive prices relative to some 209 00:11:15,320 --> 00:11:17,120 Speaker 6: of those other retailers that you mentioned. 210 00:11:17,440 --> 00:11:20,120 Speaker 2: Well, let's talk about the tariffs then. Is it better 211 00:11:20,200 --> 00:11:25,000 Speaker 2: positioned than most in getting goods from the US from 212 00:11:25,040 --> 00:11:28,320 Speaker 2: other countries that may not what I'm saying is not China. 213 00:11:28,679 --> 00:11:31,160 Speaker 2: A lot of it obviously comes from China. But are 214 00:11:31,160 --> 00:11:33,560 Speaker 2: they more nimble in getting around those tariffs. 215 00:11:35,040 --> 00:11:37,760 Speaker 6: I don't know if it's about being nimble, But when 216 00:11:37,760 --> 00:11:40,960 Speaker 6: you look at Walmart's overall operation in the United States, 217 00:11:41,880 --> 00:11:44,600 Speaker 6: more than half of their revenue comes from grocery sales, 218 00:11:45,360 --> 00:11:49,080 Speaker 6: and the majority of groceries are sourced from the US. 219 00:11:49,520 --> 00:11:51,920 Speaker 6: And so when you talk to and you talk to 220 00:11:51,960 --> 00:11:54,160 Speaker 6: the company, they'll say that two thirds of their of 221 00:11:54,200 --> 00:11:58,040 Speaker 6: the goods they sell are manufactured or bought in the 222 00:11:58,120 --> 00:12:00,959 Speaker 6: United States, which leaves only about a third of their 223 00:12:01,000 --> 00:12:05,320 Speaker 6: inventory that's subject to imports. Now that a good chunk 224 00:12:05,320 --> 00:12:08,880 Speaker 6: of that is coming from China. But again, because Walmart 225 00:12:08,960 --> 00:12:11,280 Speaker 6: is such a big player, it gives them a lot 226 00:12:11,280 --> 00:12:14,600 Speaker 6: of weight when it comes to dealing with suppliers and 227 00:12:14,720 --> 00:12:20,160 Speaker 6: finding ways to optimize what they're ordering and to help 228 00:12:20,280 --> 00:12:23,200 Speaker 6: reduce the impact of tariffs. Now, they will not be 229 00:12:23,240 --> 00:12:27,040 Speaker 6: completely unscathed. I don't think any retailer will be. By 230 00:12:27,120 --> 00:12:30,360 Speaker 6: virtue of their product mix and by virtue of their scale, 231 00:12:30,520 --> 00:12:33,160 Speaker 6: I think that Walmart is better positioned to mitigate some 232 00:12:33,280 --> 00:12:36,560 Speaker 6: of those terraff related costs than other retailers are well. 233 00:12:36,600 --> 00:12:39,360 Speaker 2: We'll see about first quarter earnings out this Thursday, ahead 234 00:12:39,360 --> 00:12:42,880 Speaker 2: of the opening bell on Wall Street. Jennifer bartashis Bloomberg 235 00:12:42,960 --> 00:12:47,120 Speaker 2: Intelligence Senior analyst retail, staples and packaged Foods, and coming 236 00:12:47,160 --> 00:12:49,000 Speaker 2: up on Bloomberg day Break weekend, we'll look to the 237 00:12:49,000 --> 00:12:52,679 Speaker 2: future as Portugal chooses a new leader. I'm Tom Busby, 238 00:12:52,760 --> 00:13:06,600 Speaker 2: and this is Bloomberg. This is Bloomberg day Break weekend, 239 00:13:06,679 --> 00:13:08,960 Speaker 2: our global look ahead at the top stories for investors 240 00:13:09,000 --> 00:13:11,439 Speaker 2: in the coming week. I'm Tom Busby in New York. 241 00:13:12,000 --> 00:13:14,000 Speaker 2: Up later in our program a look at some key 242 00:13:14,040 --> 00:13:17,400 Speaker 2: economic data in Japan. But first in the coming days, 243 00:13:17,440 --> 00:13:20,960 Speaker 2: Portugal holds its third general election in as many years 244 00:13:21,400 --> 00:13:24,720 Speaker 2: after the downfall of its center right minority government. This 245 00:13:24,800 --> 00:13:27,439 Speaker 2: comes at a complicated time for the European Union as 246 00:13:27,440 --> 00:13:31,360 Speaker 2: it navigates trade disputes and pressure to bolster defense capacity. 247 00:13:31,440 --> 00:13:33,880 Speaker 2: For more. Let's go to London and bring in Bloomberg 248 00:13:33,920 --> 00:13:36,160 Speaker 2: day Break europe banker Caroline. 249 00:13:35,679 --> 00:13:39,720 Speaker 3: Hepgar Tom Portugal is heading to the polls again in 250 00:13:39,760 --> 00:13:44,040 Speaker 3: the coming days. The news comes after Luis Montenegro's government 251 00:13:44,240 --> 00:13:48,000 Speaker 3: lost a confidence vote in early March, it's set to 252 00:13:48,080 --> 00:13:51,400 Speaker 3: once again be a close race between the Prime Minister's 253 00:13:51,400 --> 00:13:55,640 Speaker 3: center right AD coalition, which is looking for deeper corporate 254 00:13:55,679 --> 00:13:59,800 Speaker 3: and personal income tax cuts, and the center left Social 255 00:13:59,840 --> 00:14:05,520 Speaker 3: Life who are proposing VAT exemptions for certain essential products. Now, 256 00:14:05,559 --> 00:14:08,400 Speaker 3: at the moment, no single party seems to have enough 257 00:14:08,480 --> 00:14:12,120 Speaker 3: support on its own to get an absolute majority in 258 00:14:12,160 --> 00:14:15,839 Speaker 3: the Portuguese Parliament. It means that the country will likely 259 00:14:15,960 --> 00:14:19,680 Speaker 3: end up with another minority government that has to make 260 00:14:19,760 --> 00:14:24,560 Speaker 3: concessions to obtain policy support. This is likely to complicate 261 00:14:24,600 --> 00:14:29,280 Speaker 3: fiscal policy making and at a crucial moment for Europe 262 00:14:29,320 --> 00:14:34,080 Speaker 3: more broadly, the region's economic situation is something that I've 263 00:14:34,120 --> 00:14:37,760 Speaker 3: been discussing with Helen Jewell, who is a mere cio 264 00:14:37,920 --> 00:14:43,840 Speaker 3: for Fundamental Equity at Blackrock, setting the backdrop in Europe. 265 00:14:43,960 --> 00:14:47,240 Speaker 7: So Europe has performed incredibly well here today, particularly in 266 00:14:47,280 --> 00:14:50,360 Speaker 7: dollar terms, and what's interesting is that what we're not 267 00:14:50,440 --> 00:14:54,600 Speaker 7: really seeing at the moment are US investors pivoting into 268 00:14:54,640 --> 00:14:59,360 Speaker 7: European stocks. We're seeing more flows coming through from European investors. 269 00:14:59,680 --> 00:15:02,680 Speaker 7: When we of our our clients, we have more than 270 00:15:02,720 --> 00:15:05,440 Speaker 7: fifty percent of them saying that they're thinking about allocating 271 00:15:05,520 --> 00:15:07,880 Speaker 7: more to Europe over the next six to twelve months, 272 00:15:08,240 --> 00:15:10,240 Speaker 7: but we're not yet seeing as much of that in 273 00:15:10,480 --> 00:15:14,200 Speaker 7: US investors now. Maybe if we continue to see the 274 00:15:14,280 --> 00:15:17,520 Speaker 7: euro strengthen we will start to see some kind of 275 00:15:17,520 --> 00:15:19,840 Speaker 7: flows moving back into Europe and that will help the 276 00:15:19,840 --> 00:15:23,280 Speaker 7: European story. But at the moment, it's difficult to see 277 00:15:23,440 --> 00:15:25,400 Speaker 7: what will take it that much further because from a 278 00:15:25,520 --> 00:15:30,280 Speaker 7: multiple perspective, Caroline it's trading at a pretty fairly valued level, 279 00:15:30,320 --> 00:15:33,120 Speaker 7: and like the UK, which is at a discount, Europe 280 00:15:33,200 --> 00:15:37,280 Speaker 7: is at fourteen times pretty fairly valued relative to history. 281 00:15:37,720 --> 00:15:40,040 Speaker 7: So I do think Europe will need some kind of 282 00:15:40,120 --> 00:15:43,640 Speaker 7: catalyst to take it potentially to that next level. If 283 00:15:43,720 --> 00:15:46,320 Speaker 7: we don't see that, if we don't see some kind 284 00:15:46,360 --> 00:15:50,640 Speaker 7: of a strong outcome to trade negotiations at some point soon, 285 00:15:51,080 --> 00:15:53,760 Speaker 7: we might find it flat. Not to say there won't 286 00:15:53,800 --> 00:15:57,640 Speaker 7: be opportunities within it. We saw Ferrari, it was performing well, 287 00:15:57,720 --> 00:16:01,000 Speaker 7: strong results, saying their order book is full. Those kind 288 00:16:01,040 --> 00:16:03,400 Speaker 7: of names will continue to do well. We still think 289 00:16:03,400 --> 00:16:06,880 Speaker 7: European banks domestically focused names will do well, but the 290 00:16:06,880 --> 00:16:09,960 Speaker 7: index as a whole, I think, without a catalyst, might 291 00:16:10,040 --> 00:16:12,239 Speaker 7: just bubble along the level it is at the moment. 292 00:16:12,000 --> 00:16:14,040 Speaker 8: And top top one you think eurostrength is good news 293 00:16:14,040 --> 00:16:16,040 Speaker 8: because it can pull those US investors in without being 294 00:16:16,040 --> 00:16:18,760 Speaker 8: worried about downside in the currency. How clean is that 295 00:16:18,840 --> 00:16:22,240 Speaker 8: play given the export function of a number of European 296 00:16:22,280 --> 00:16:25,400 Speaker 8: companies and the weight the europlate strong europlays on that. 297 00:16:25,760 --> 00:16:28,480 Speaker 7: So that is the key interaction at the moment. The 298 00:16:28,520 --> 00:16:30,640 Speaker 7: thing we've seen, however, is that they are not the 299 00:16:30,720 --> 00:16:34,000 Speaker 7: names that have significantly outperformed. A few exceptions obviously I 300 00:16:34,120 --> 00:16:36,960 Speaker 7: mentioned Ferrari, but I think that's a special case given 301 00:16:37,160 --> 00:16:39,760 Speaker 7: the brand that they have. But on the whole, what 302 00:16:39,880 --> 00:16:43,240 Speaker 7: has outperformed here to day has been the domestically exposed 303 00:16:43,320 --> 00:16:47,080 Speaker 7: names and not those global names because already tariffs have 304 00:16:47,160 --> 00:16:49,560 Speaker 7: played down on those. So I think what you're likely 305 00:16:49,600 --> 00:16:53,240 Speaker 7: to see is some kind of pressure easing because of 306 00:16:53,280 --> 00:16:57,040 Speaker 7: the tariffs, but some kind of from the dollar weakening 307 00:16:57,120 --> 00:16:59,800 Speaker 7: kind of offsetting that a little bit. So I think 308 00:17:00,120 --> 00:17:02,200 Speaker 7: two things will interapt. But don't forget they are not 309 00:17:02,240 --> 00:17:04,159 Speaker 7: the names that have done well year to date. It 310 00:17:04,200 --> 00:17:07,560 Speaker 7: has been much more than domestically focused European names that 311 00:17:07,600 --> 00:17:09,720 Speaker 7: have driven the European rally that we've seen so far. 312 00:17:10,440 --> 00:17:12,520 Speaker 3: Yeah, in terms of the European rally, how much of 313 00:17:12,560 --> 00:17:16,439 Speaker 3: it is affected by the difficult political situation now for 314 00:17:16,520 --> 00:17:18,080 Speaker 3: Germany and for Friedrik Mertz. 315 00:17:18,840 --> 00:17:20,280 Speaker 2: And you know, we. 316 00:17:20,280 --> 00:17:23,280 Speaker 3: Saw for example, Germany industrial production rising before the bars 317 00:17:23,359 --> 00:17:26,720 Speaker 3: of tariffs, but tariffs again are going to hit Germany 318 00:17:26,760 --> 00:17:28,200 Speaker 3: particularly hard. 319 00:17:28,720 --> 00:17:31,640 Speaker 7: So I think what happened earlier this week in Germany 320 00:17:31,920 --> 00:17:34,360 Speaker 7: is perhaps just a signal and a reminder that things 321 00:17:34,400 --> 00:17:38,160 Speaker 7: aren't always plain sailing. However, the key commitment that has 322 00:17:38,200 --> 00:17:43,080 Speaker 7: been made within Europe, particularly by Germany on the infrastructure spend, 323 00:17:43,640 --> 00:17:46,840 Speaker 7: is really phenomenal on the defense spend as well, and 324 00:17:46,840 --> 00:17:49,359 Speaker 7: that's really important. If you look at the defense spend, 325 00:17:49,720 --> 00:17:53,720 Speaker 7: so much of that defense spend historically was for global companies. 326 00:17:53,800 --> 00:17:56,879 Speaker 7: Now so much of that is going to be European focused, 327 00:17:57,359 --> 00:18:00,000 Speaker 7: and that remains there are going to be bumps along, 328 00:18:00,440 --> 00:18:02,800 Speaker 7: and I wonder whether those bumps are what's stopping US 329 00:18:02,840 --> 00:18:06,400 Speaker 7: investors coming into Europe by as much as perhaps they should, 330 00:18:06,920 --> 00:18:09,399 Speaker 7: given the narrative that we see in Europe and given 331 00:18:09,400 --> 00:18:12,479 Speaker 7: the strength of the euro versus the dollar. But I 332 00:18:12,560 --> 00:18:14,639 Speaker 7: don't think they are anything more than little bumps in 333 00:18:14,640 --> 00:18:18,200 Speaker 7: the road rather than necessarily underlying changes to the structural 334 00:18:18,280 --> 00:18:20,280 Speaker 7: narrative that we see in Europe at the moment. 335 00:18:20,520 --> 00:18:23,120 Speaker 3: So that was Helen Jewell there speaking to me and 336 00:18:23,240 --> 00:18:26,640 Speaker 3: to my colleague Tom McKenzie about what's going on in 337 00:18:26,680 --> 00:18:30,520 Speaker 3: Europe more broadly and amid the pressure on the continent. 338 00:18:30,960 --> 00:18:34,480 Speaker 3: What is at stake in Portugal's election. The country has 339 00:18:34,520 --> 00:18:38,240 Speaker 3: a population of ten point six million people. The finance 340 00:18:38,320 --> 00:18:41,560 Speaker 3: minister expects the country to grow by two percent this year. 341 00:18:42,000 --> 00:18:46,080 Speaker 3: But successive governments have been and gone and a raft 342 00:18:46,119 --> 00:18:49,199 Speaker 3: of smaller parties are vying for a share of the 343 00:18:49,280 --> 00:18:54,119 Speaker 3: vote in an increasingly heated election campaign. I've been speaking 344 00:18:54,200 --> 00:18:58,880 Speaker 3: to Bloomberg's Portugal bureau chief, jau Lima Jaho, just talk 345 00:18:58,960 --> 00:19:02,080 Speaker 3: us through the main contenders who are vying for power 346 00:19:02,200 --> 00:19:03,919 Speaker 3: in this election in Portugal. 347 00:19:04,240 --> 00:19:07,439 Speaker 9: So you have the ruling party is actually the ruling coalition, 348 00:19:07,560 --> 00:19:11,680 Speaker 9: center right coalition, led by Prime Minister Luisian Montenegru, and 349 00:19:11,760 --> 00:19:15,639 Speaker 9: he actually called a confidence motion in March and he 350 00:19:15,720 --> 00:19:19,399 Speaker 9: lost that vote and ultimately that's what triggered this early election. 351 00:19:19,760 --> 00:19:22,920 Speaker 9: It's Portal's third early election in three years, and he'll 352 00:19:22,960 --> 00:19:27,200 Speaker 9: be competing against the socialist leader Peter nun Santuche. Those 353 00:19:27,200 --> 00:19:30,400 Speaker 9: are the two main centrist parties in Portugal, and they've 354 00:19:30,520 --> 00:19:33,359 Speaker 9: more or less dominated politics in the fifty years that 355 00:19:33,400 --> 00:19:37,160 Speaker 9: Portos had democracy, and they seem to be heading again 356 00:19:37,200 --> 00:19:41,000 Speaker 9: for a tight race. The center right the prime Minister's coalition, 357 00:19:41,640 --> 00:19:44,520 Speaker 9: and the center right is leading by about five six 358 00:19:44,600 --> 00:19:47,720 Speaker 9: seven percentage points depending on the latest polls, and the 359 00:19:47,760 --> 00:19:51,399 Speaker 9: Socialists are still very very close. And still it's not 360 00:19:51,480 --> 00:19:54,000 Speaker 9: clear if prime minister will be able to keep his 361 00:19:54,080 --> 00:19:56,960 Speaker 9: job or if you'll have a socialist government. But for 362 00:19:57,000 --> 00:19:59,359 Speaker 9: now the prime Minister is still in the lead in 363 00:19:59,400 --> 00:20:00,000 Speaker 9: the latest opinion. 364 00:20:00,800 --> 00:20:03,560 Speaker 3: Okay, interesting, but three governments in three years, or at 365 00:20:03,600 --> 00:20:06,439 Speaker 3: least three elections in three years, that's a lot of 366 00:20:06,480 --> 00:20:10,080 Speaker 3: political uncertainty. Do people think that there will be perhaps 367 00:20:10,119 --> 00:20:12,320 Speaker 3: more stability as a result of this vote. 368 00:20:12,480 --> 00:20:14,880 Speaker 9: It really depends on how strong or weak the next 369 00:20:14,880 --> 00:20:17,840 Speaker 9: government will be. Portuless had this tradition of having weak 370 00:20:17,880 --> 00:20:22,880 Speaker 9: minority governments, and at the moment, none of the neither 371 00:20:22,920 --> 00:20:25,280 Speaker 9: the socialist nor the center right collision seem like they 372 00:20:25,280 --> 00:20:27,840 Speaker 9: will be getting an absolute majority. I could say some 373 00:20:27,920 --> 00:20:30,639 Speaker 9: commentators have said there's an element of election fatigue and 374 00:20:30,680 --> 00:20:33,480 Speaker 9: ports at the moment, but we'll have to see that 375 00:20:33,480 --> 00:20:36,840 Speaker 9: there will be probably more pressure felt by lawmakers and 376 00:20:36,880 --> 00:20:41,119 Speaker 9: by whoever's in government to try to you know, coalesce 377 00:20:41,160 --> 00:20:43,760 Speaker 9: and find a solution that will let the government last 378 00:20:44,119 --> 00:20:46,080 Speaker 9: more than just a year, as has been the case 379 00:20:46,480 --> 00:20:47,960 Speaker 9: in the recent years. 380 00:20:48,240 --> 00:20:51,560 Speaker 3: Do you foresee more political maneuvering then, if a minority 381 00:20:51,600 --> 00:20:54,120 Speaker 3: government is looking for external support. 382 00:20:54,240 --> 00:20:58,760 Speaker 9: Yes, definitely. I mean the whichever party wins, whichever the 383 00:20:58,760 --> 00:21:01,560 Speaker 9: two main centrist parties win, and they will have to 384 00:21:02,040 --> 00:21:05,240 Speaker 9: compromise to get backing from others to get a budget approved. 385 00:21:05,240 --> 00:21:08,040 Speaker 9: For example, that happened last year. For instance, the center 386 00:21:08,119 --> 00:21:11,880 Speaker 9: right government had to compromise on tax cuts. It wants 387 00:21:11,880 --> 00:21:14,960 Speaker 9: to push through deeper tax cuts, but to get the 388 00:21:15,000 --> 00:21:17,320 Speaker 9: abstension of the Socialists, which was necessary to let the 389 00:21:17,320 --> 00:21:21,760 Speaker 9: budget pass, it had to settle for short, smaller tax cuts. 390 00:21:22,000 --> 00:21:24,800 Speaker 9: And similarly that will happen if the Socialists win. They 391 00:21:24,800 --> 00:21:27,760 Speaker 9: will probably have to find backing from parties on the 392 00:21:28,000 --> 00:21:30,160 Speaker 9: further to the left, and they will have to find 393 00:21:30,720 --> 00:21:33,040 Speaker 9: compromise on different policy areas. 394 00:21:34,359 --> 00:21:39,280 Speaker 3: There are those tectonic plates in Europe shifting, aren't there, not, 395 00:21:39,400 --> 00:21:44,280 Speaker 3: least because of the Trump administration in the United States, 396 00:21:44,680 --> 00:21:49,840 Speaker 3: Additional defense spending infrastructure spending across Europe, the idea of 397 00:21:49,880 --> 00:21:53,600 Speaker 3: trying to battle weak economic growth, and so many other 398 00:21:53,720 --> 00:21:57,680 Speaker 3: challenges for Britain sorry for, and so many other challenges 399 00:21:57,840 --> 00:22:01,120 Speaker 3: for Europe. Just tell us about how the candidates are 400 00:22:01,240 --> 00:22:04,960 Speaker 3: thinking about their relationship with the EU and all of 401 00:22:05,000 --> 00:22:05,920 Speaker 3: these challenges. 402 00:22:07,440 --> 00:22:07,640 Speaker 10: Well. 403 00:22:07,880 --> 00:22:11,240 Speaker 9: In Portugal, the center right and the center left they 404 00:22:11,480 --> 00:22:16,160 Speaker 9: share many positions in terms of the big policy issues 405 00:22:16,240 --> 00:22:20,560 Speaker 9: of foreign policy of defense. For instance, the center right 406 00:22:20,600 --> 00:22:24,520 Speaker 9: government recently announced it would use an escape course of 407 00:22:25,040 --> 00:22:30,080 Speaker 9: an EU rule allowing it to spend more than a 408 00:22:30,119 --> 00:22:33,679 Speaker 9: certain limit defined for EU countries in order to boost 409 00:22:33,680 --> 00:22:38,440 Speaker 9: defense spending, and it mentioned that it addressed this issue 410 00:22:38,480 --> 00:22:41,560 Speaker 9: before making the announcement with the socialists, So that kind 411 00:22:41,600 --> 00:22:44,520 Speaker 9: of underlines how the center right and center left in 412 00:22:44,600 --> 00:22:49,560 Speaker 9: certain key policy areas like defense, foreign policy, they share 413 00:22:49,760 --> 00:22:54,760 Speaker 9: this consensus and there is agreement on major major policy issues, 414 00:22:55,600 --> 00:22:58,000 Speaker 9: especially when when it has to do with defense and 415 00:22:58,040 --> 00:23:01,920 Speaker 9: foreign policy. More domestically, there are differences obviously, but again 416 00:23:02,000 --> 00:23:06,919 Speaker 9: in terms of the bigger EU issues defense diplomatic relations, 417 00:23:07,200 --> 00:23:10,240 Speaker 9: there tends to be a shared view between center right 418 00:23:10,280 --> 00:23:10,920 Speaker 9: and center left. 419 00:23:11,960 --> 00:23:14,720 Speaker 3: So if there isn't much between them, then in terms 420 00:23:14,760 --> 00:23:17,119 Speaker 3: of those sort of big policy lies what will be 421 00:23:17,160 --> 00:23:20,160 Speaker 3: the top priority for a new government once elected. 422 00:23:21,480 --> 00:23:24,240 Speaker 9: Where there is a clear divide, for instance, in terms 423 00:23:24,240 --> 00:23:26,560 Speaker 9: of for instance, tax policy and where to cut taxes. 424 00:23:26,840 --> 00:23:30,240 Speaker 9: So the center right is talking about continuing to cut 425 00:23:30,320 --> 00:23:34,399 Speaker 9: corporate taxes and income taxes, while the socialists are proposing 426 00:23:35,400 --> 00:23:39,920 Speaker 9: removing VT tax from certain essential food products. So they 427 00:23:40,000 --> 00:23:43,919 Speaker 9: argue that that's that kind of tax cut when you 428 00:23:44,000 --> 00:23:48,840 Speaker 9: tackle VAT is a way of benefiting everyone. And they 429 00:23:48,920 --> 00:23:53,040 Speaker 9: argue that the center right, in focusing on corporate tax 430 00:23:53,040 --> 00:23:56,840 Speaker 9: and income tax is only helping a part of the population, 431 00:23:56,920 --> 00:24:01,080 Speaker 9: of part the smaller group of the population. On the 432 00:24:01,119 --> 00:24:04,080 Speaker 9: other hand, the center right will say that you need 433 00:24:04,119 --> 00:24:07,880 Speaker 9: to create wealth first before redistributing it, and that's why 434 00:24:07,960 --> 00:24:11,000 Speaker 9: they are betting more on cutting corporate tax for instance. Again, 435 00:24:11,000 --> 00:24:14,159 Speaker 9: it's a debate that's you know, been going on in 436 00:24:14,240 --> 00:24:16,440 Speaker 9: center right between center right and center left for many 437 00:24:16,440 --> 00:24:20,920 Speaker 9: countries for decades, and that's here that still is at 438 00:24:20,920 --> 00:24:23,760 Speaker 9: the moment one of the key policy divides going into 439 00:24:23,760 --> 00:24:24,240 Speaker 9: this election. 440 00:24:24,680 --> 00:24:27,840 Speaker 3: And so what sort of economic position is Portugal in 441 00:24:28,000 --> 00:24:31,679 Speaker 3: then at also this time of real global financial and 442 00:24:31,720 --> 00:24:32,800 Speaker 3: trade uncertainty. 443 00:24:34,040 --> 00:24:36,720 Speaker 9: Well, Portugal together with Spain, for example, has been doing 444 00:24:37,119 --> 00:24:40,680 Speaker 9: better than the EU average in terms of growth. It's 445 00:24:40,720 --> 00:24:43,080 Speaker 9: it's obviously there was obviously the post COVID boom, but 446 00:24:43,119 --> 00:24:49,600 Speaker 9: it's continued to benefit from exports, from from tourism, continuing 447 00:24:49,800 --> 00:24:52,960 Speaker 9: to have strong growth, you know, well beyond the post 448 00:24:53,040 --> 00:24:55,800 Speaker 9: immediate post COVID period. And so the Bank of Portugal, 449 00:24:55,800 --> 00:24:58,800 Speaker 9: for instance, in in March it raised its forecast for 450 00:24:58,800 --> 00:25:00,919 Speaker 9: the country's growth this year to two point three percent. 451 00:25:01,720 --> 00:25:09,199 Speaker 9: So there's been steady overperformance compared to other U countries. However, 452 00:25:09,320 --> 00:25:14,360 Speaker 9: we're under the Trump administration. There's obviously been new announcements 453 00:25:14,400 --> 00:25:16,439 Speaker 9: in terms of taris and so on, and that effect 454 00:25:16,600 --> 00:25:19,120 Speaker 9: might not have filtered through to the Portuguese economy yet, 455 00:25:19,119 --> 00:25:23,040 Speaker 9: so that outlook could still change. So there's still a 456 00:25:23,040 --> 00:25:25,520 Speaker 9: lot of uncertainty. That's something the Central Bank governor has 457 00:25:25,600 --> 00:25:28,159 Speaker 9: pointed at and has stressed repeatedly that there is a 458 00:25:28,160 --> 00:25:29,320 Speaker 9: lot of uncertainty at the moment. 459 00:25:30,280 --> 00:25:33,680 Speaker 3: That was Bloomberg's Jao Lima speaking to us form Lisbon. 460 00:25:33,760 --> 00:25:37,200 Speaker 3: My thanks to Joo. Now we'll have full coverage of course, 461 00:25:37,400 --> 00:25:40,480 Speaker 3: as Portugal heads the polls here on Bloomberg Radio over 462 00:25:40,520 --> 00:25:43,119 Speaker 3: the next few days. I'm Caroline Hepkea in London. You 463 00:25:43,119 --> 00:25:45,600 Speaker 3: can catch us every weekday morning for Bloomberg day Break. 464 00:25:45,600 --> 00:25:48,080 Speaker 3: You up beginning at six am in London. That's one 465 00:25:48,119 --> 00:25:49,719 Speaker 3: am on Wall Street. Tom. 466 00:25:50,160 --> 00:25:52,960 Speaker 2: Thank you, Caroline, And coming up on Bloomberg Daybreak weekend, 467 00:25:53,040 --> 00:25:55,680 Speaker 2: we look ahead to some key economic indicators out this 468 00:25:55,720 --> 00:25:59,560 Speaker 2: week in Japan. I'm Tom Busby, and this is Bloomberg. 469 00:26:10,840 --> 00:26:13,080 Speaker 2: This is Bloomberg day Break weekend, our global look ahead 470 00:26:13,080 --> 00:26:15,200 Speaker 2: at the top stories for investors in the coming week. 471 00:26:15,359 --> 00:26:18,240 Speaker 2: I'm Tom Busby in New York. We turn our focus 472 00:26:18,280 --> 00:26:22,000 Speaker 2: now to Japan, where a trio of high impact economic 473 00:26:22,000 --> 00:26:24,480 Speaker 2: indicators will be released this week, and for a closer 474 00:26:24,520 --> 00:26:26,720 Speaker 2: look at what those data points could mean, we turn 475 00:26:26,800 --> 00:26:28,480 Speaker 2: to Bloomberg's Charlie Pellett. 476 00:26:28,840 --> 00:26:33,719 Speaker 4: Tom Japan has been walking a delicate economic tightrope, balancing 477 00:26:33,840 --> 00:26:39,320 Speaker 4: sluggish growth, sticky inflation under week Yen, We're expecting updates 478 00:26:39,359 --> 00:26:44,280 Speaker 4: on GDP, factory output and producer prices, three key indicators 479 00:26:44,320 --> 00:26:47,560 Speaker 4: that could give us a clearer picture of where things stand. 480 00:26:48,000 --> 00:26:51,440 Speaker 4: Are we looking at a rebound or more signs of strain? 481 00:26:51,840 --> 00:26:54,960 Speaker 4: And to answer that question, we're joined now by Paul Jackson, 482 00:26:55,400 --> 00:26:58,680 Speaker 4: Asia Ekogov, editor for Bloomberg News. He joins us from 483 00:26:58,720 --> 00:27:02,840 Speaker 4: our studios in token Paul, let's start with GDP. What 484 00:27:03,000 --> 00:27:07,240 Speaker 4: are economists expecting and what would a surprise in either direction? 485 00:27:07,440 --> 00:27:11,679 Speaker 11: Tell us, Well, I think we're expecting another week start 486 00:27:11,840 --> 00:27:16,280 Speaker 11: to the year. I think we had somewhat inflated GDP 487 00:27:16,480 --> 00:27:19,720 Speaker 11: figures the end of last year. They were a bit flattering. 488 00:27:20,200 --> 00:27:22,919 Speaker 11: It was largely a kind of lull in imports that 489 00:27:23,040 --> 00:27:26,160 Speaker 11: gave us the two point two percent annualized growth there. 490 00:27:26,760 --> 00:27:30,239 Speaker 11: So I think we're going to be flipping towards a 491 00:27:30,320 --> 00:27:34,720 Speaker 11: contraction in this first quarter. Now that's a bad sign because, 492 00:27:35,200 --> 00:27:39,680 Speaker 11: as you know, US President Donald Trump has unleashed this 493 00:27:39,880 --> 00:27:43,800 Speaker 11: barrage of tariffs on the world. This Liberation Day that 494 00:27:43,920 --> 00:27:47,280 Speaker 11: took place at the beginning of April. Means that if 495 00:27:47,280 --> 00:27:52,639 Speaker 11: you're starting with a week quarter, the second quarter isn't 496 00:27:52,760 --> 00:27:54,800 Speaker 11: looking pretty. In fact, it's looking a. 497 00:27:54,760 --> 00:27:59,000 Speaker 4: Lot worse on the ground in Tokyo. So the Japanese 498 00:27:59,040 --> 00:28:01,720 Speaker 4: people follow tariff developments that closely. 499 00:28:02,520 --> 00:28:05,200 Speaker 11: Well, I think there is a lot of fear and 500 00:28:05,320 --> 00:28:09,960 Speaker 11: uncertainty about what this all means for Japan's economy. I mean, 501 00:28:10,359 --> 00:28:13,080 Speaker 11: you're right, you know, does the average person on the 502 00:28:13,119 --> 00:28:17,920 Speaker 11: street follow closely the GDP figure or the latest number 503 00:28:17,960 --> 00:28:21,320 Speaker 11: on tariffs, know, but they do get an impression of 504 00:28:21,720 --> 00:28:24,159 Speaker 11: is the news kind of good or bad? And if 505 00:28:24,160 --> 00:28:28,280 Speaker 11: you're looking at consumer confidence at the moment, we saw 506 00:28:28,440 --> 00:28:32,160 Speaker 11: that falling to the lowest level in two years in April, 507 00:28:32,240 --> 00:28:36,720 Speaker 11: So our consumers worried about the state the outlook for 508 00:28:36,840 --> 00:28:41,520 Speaker 11: the economy where tariffs are taking the world, Yes, I 509 00:28:41,560 --> 00:28:44,680 Speaker 11: think you can conclude that they are worried about it. 510 00:28:45,120 --> 00:28:48,320 Speaker 11: And if we have a step back into the reverse 511 00:28:48,320 --> 00:28:51,560 Speaker 11: for the economy in the first quarter, then the tariffs 512 00:28:51,640 --> 00:28:54,680 Speaker 11: hit in the second quarter. I think we're at risk 513 00:28:55,240 --> 00:28:59,000 Speaker 11: of a technical recession in Japan, which is not going 514 00:28:59,080 --> 00:29:02,320 Speaker 11: to be a good look for Prime Minister Ishiba as 515 00:29:02,320 --> 00:29:04,760 Speaker 11: he faces an Upper House election in the summer. 516 00:29:05,080 --> 00:29:09,200 Speaker 4: Well, industrial production certainly has been under pressure. What sectors 517 00:29:09,240 --> 00:29:11,800 Speaker 4: are driving that trend and is there any sign of 518 00:29:11,840 --> 00:29:13,000 Speaker 4: a potential turnound? 519 00:29:13,480 --> 00:29:17,760 Speaker 11: Well, I think we saw in Asia we saw a 520 00:29:17,840 --> 00:29:21,880 Speaker 11: kind of boost in auto output once you know, the 521 00:29:22,240 --> 00:29:25,200 Speaker 11: Donald Trump was talking about putting these twenty five percent 522 00:29:25,280 --> 00:29:29,800 Speaker 11: tariffs on autos, and we saw in other countries like 523 00:29:30,120 --> 00:29:34,720 Speaker 11: a huge jump in auto exports starting in February and 524 00:29:34,760 --> 00:29:38,040 Speaker 11: also taking place in March. But what we've seen is 525 00:29:38,840 --> 00:29:42,160 Speaker 11: while that trend was similar in Japan in February, in March, 526 00:29:42,280 --> 00:29:45,960 Speaker 11: the output of auto's was not as strong as you 527 00:29:45,960 --> 00:29:49,240 Speaker 11: would have expected with you'd be expecting some front loading 528 00:29:49,320 --> 00:29:52,320 Speaker 11: right ahead of those tariffs. And I think this takes 529 00:29:52,400 --> 00:29:55,720 Speaker 11: us to one of the key fears for Japan and 530 00:29:55,760 --> 00:30:00,320 Speaker 11: policymakers here is that the tariffs on the auto's that's 531 00:30:00,480 --> 00:30:05,240 Speaker 11: really gonna hurt Japan. I mean, the auto sector employees 532 00:30:05,400 --> 00:30:09,560 Speaker 11: eight percent of Japan's workforce, and about a third of 533 00:30:09,640 --> 00:30:14,360 Speaker 11: Japan's exports to the US are car car related. 534 00:30:14,800 --> 00:30:18,960 Speaker 4: Now, there was that Nikay report recently that Japan's government 535 00:30:19,160 --> 00:30:24,240 Speaker 4: was mulling leveraging shipbuilding in tariff negotiations with the Trump administration. 536 00:30:24,680 --> 00:30:28,040 Speaker 4: How did tariffs play into the broader outlook, Well. 537 00:30:27,920 --> 00:30:32,480 Speaker 11: The broader outlook careerly, it's that auto sector is the 538 00:30:32,560 --> 00:30:39,120 Speaker 11: key thing that Japan wants a US to dial back autos. 539 00:30:39,120 --> 00:30:42,120 Speaker 11: That's going to have huge implications for the economy, as 540 00:30:42,120 --> 00:30:46,120 Speaker 11: I've mentioned, just for the sheer scale of those exports 541 00:30:46,120 --> 00:30:48,400 Speaker 11: to the US and the number of people it employees 542 00:30:49,080 --> 00:30:52,680 Speaker 11: in Japan. So in these trade negotiations. We've already had 543 00:30:52,720 --> 00:30:56,680 Speaker 11: two rounds. You know, Japan is going to have to 544 00:30:56,760 --> 00:31:04,440 Speaker 11: give Trump something in return for maybe pegging back the 545 00:31:04,520 --> 00:31:08,640 Speaker 11: tariffs on autos. And what can Japan do. I mean, 546 00:31:08,920 --> 00:31:12,720 Speaker 11: offering some shipbuilding help could be won. Buying some more 547 00:31:13,040 --> 00:31:18,040 Speaker 11: agricultural goods from the US might be another. The cards 548 00:31:18,160 --> 00:31:21,479 Speaker 11: another thing they can offer the US to try and 549 00:31:22,560 --> 00:31:26,800 Speaker 11: convince the officials there to lower these tariffs. Now so far, 550 00:31:26,880 --> 00:31:29,760 Speaker 11: what we're hearing in local media reports is that the 551 00:31:29,880 --> 00:31:35,400 Speaker 11: US is pretty firm on those auto tariffs, the reciprocal tariffs. Okay, 552 00:31:35,520 --> 00:31:39,040 Speaker 11: we'll lower those, but that twenty five percent on autos 553 00:31:39,360 --> 00:31:41,520 Speaker 11: is staying. That's what we're hearing now and that's a 554 00:31:41,600 --> 00:31:44,480 Speaker 11: big concern for policymakers here, Paul. 555 00:31:44,520 --> 00:31:47,600 Speaker 4: Looking ahead to we've got data coming up on producer prices. 556 00:31:47,600 --> 00:31:51,080 Speaker 4: They have been sticky. How are businesses coping with input 557 00:31:51,160 --> 00:31:54,160 Speaker 4: costs and could that data shape the Bank of Japan's 558 00:31:54,200 --> 00:31:54,680 Speaker 4: next move. 559 00:31:55,560 --> 00:31:59,160 Speaker 11: Well, we've seen these input costs around about the growing 560 00:31:59,320 --> 00:32:02,520 Speaker 11: around about the four percent mark up. So if you've 561 00:32:02,520 --> 00:32:07,040 Speaker 11: got inflation, overall inflation's three point six percent. Core inflation, 562 00:32:07,200 --> 00:32:09,880 Speaker 11: which is focused on by the central bank is three 563 00:32:09,920 --> 00:32:12,840 Speaker 11: point two percent, so you can see those input prices 564 00:32:12,920 --> 00:32:17,240 Speaker 11: are higher than consumer inflation levels. So what that tells 565 00:32:17,280 --> 00:32:20,160 Speaker 11: you is that producers are taking a squeeze, they're taking 566 00:32:20,160 --> 00:32:23,959 Speaker 11: a hit as they're trying to absorb those costs. Now, 567 00:32:24,560 --> 00:32:28,000 Speaker 11: on the one hand, that sounds bad, but in terms 568 00:32:28,040 --> 00:32:31,160 Speaker 11: of the optics the dynamics of Japan's economy, we've seen 569 00:32:31,200 --> 00:32:33,800 Speaker 11: a lot of change here over the last two or 570 00:32:33,800 --> 00:32:36,920 Speaker 11: three years. This is an economy that has seen very 571 00:32:36,920 --> 00:32:41,280 Speaker 11: little inflation for decades. Now we've had three years of 572 00:32:41,360 --> 00:32:44,640 Speaker 11: inflation of two percent or more, which is the Bank 573 00:32:44,640 --> 00:32:47,920 Speaker 11: of Japan's goal. And what we've seen is businesses have 574 00:32:48,040 --> 00:32:52,080 Speaker 11: gone from having to absorb almost all of those input 575 00:32:52,120 --> 00:32:55,600 Speaker 11: cost increases to being able to spread most of the 576 00:32:55,640 --> 00:33:01,800 Speaker 11: input costs increases onto consumers now, not all, but most. 577 00:33:02,080 --> 00:33:06,479 Speaker 11: So these are positive developments for the economy. The question 578 00:33:06,760 --> 00:33:12,840 Speaker 11: is is can consumers up their spending in real terms, 579 00:33:12,920 --> 00:33:17,040 Speaker 11: not just keeping up with inflation, but expand their spending, 580 00:33:17,080 --> 00:33:20,480 Speaker 11: which will be a sign that they're getting comfortable with 581 00:33:20,640 --> 00:33:22,880 Speaker 11: the new reality of Japan's economy. 582 00:33:23,120 --> 00:33:25,280 Speaker 4: I've got another major question for you, then, having to 583 00:33:25,280 --> 00:33:28,400 Speaker 4: deal with uncertainty, not just for the economic data here 584 00:33:28,400 --> 00:33:31,640 Speaker 4: in the US very tough to make planning decisions, either 585 00:33:31,680 --> 00:33:34,320 Speaker 4: at the corporate level the individual level. Do you go 586 00:33:34,360 --> 00:33:37,480 Speaker 4: out and buy something now because of potential tariffs? Certainly 587 00:33:37,480 --> 00:33:41,160 Speaker 4: one of the big questions for investors how much of 588 00:33:41,240 --> 00:33:44,400 Speaker 4: the incoming data do you think is already priced into 589 00:33:44,480 --> 00:33:46,240 Speaker 4: markets given all of the uncertainty. 590 00:33:46,680 --> 00:33:51,400 Speaker 11: Well, I mean that really is a very difficult question 591 00:33:51,480 --> 00:33:54,280 Speaker 11: to answer. I mean, if we look at how stocks 592 00:33:54,280 --> 00:33:57,680 Speaker 11: have been performing over the year, we started around the 593 00:33:57,760 --> 00:34:00,680 Speaker 11: forty thousand mark for the nie K, and I think 594 00:34:00,720 --> 00:34:05,400 Speaker 11: when the real fear and concern over the tariffs hit 595 00:34:05,560 --> 00:34:08,480 Speaker 11: in April, we got down to about the thirty one 596 00:34:08,600 --> 00:34:12,680 Speaker 11: thousand marks. I mean, that's quite quite a downward move. 597 00:34:13,080 --> 00:34:16,840 Speaker 11: So where are we now. We're about thirty seven thousand marks, 598 00:34:16,840 --> 00:34:20,520 Speaker 11: so we've you know, retraced most of those losses, so 599 00:34:20,560 --> 00:34:23,279 Speaker 11: we're nearly, you know, we're heading back to where we were, 600 00:34:23,320 --> 00:34:26,880 Speaker 11: but we're still definitely below I would say there's a 601 00:34:27,000 --> 00:34:31,040 Speaker 11: huge amount of uncertainty here. We've seen Donald Trump in 602 00:34:31,080 --> 00:34:34,839 Speaker 11: his first presidency and again this time round. You know, 603 00:34:34,880 --> 00:34:38,840 Speaker 11: he can change tach very quickly. The implications can be 604 00:34:38,960 --> 00:34:43,920 Speaker 11: huge for economies. So I think the big fear we're 605 00:34:44,040 --> 00:34:48,719 Speaker 11: over that there is a general understanding that he is 606 00:34:48,760 --> 00:34:53,040 Speaker 11: a deal maker. So you know, the top end level 607 00:34:53,160 --> 00:34:56,440 Speaker 11: figures of these tariffs, that feels like, you know, the 608 00:34:56,480 --> 00:34:59,759 Speaker 11: worst it could be and will be likely negotiated down. 609 00:35:00,200 --> 00:35:03,800 Speaker 11: But the devil is in the detail. How much lower 610 00:35:04,200 --> 00:35:09,120 Speaker 11: can Japanese policymakers bring those tariff levels down to protect 611 00:35:09,160 --> 00:35:09,880 Speaker 11: its economy? 612 00:35:10,200 --> 00:35:15,280 Speaker 4: Paul Jackson, Asia ecogov editor for Bloomberg News in Tokyo 613 00:35:15,800 --> 00:35:19,520 Speaker 4: switching gears now, Hong Kong's economy has expanded at the 614 00:35:19,560 --> 00:35:22,799 Speaker 4: fastest pace in more than a year, benefiting from a 615 00:35:22,840 --> 00:35:27,160 Speaker 4: recovery in tourism and an export bump before Donald Trump's 616 00:35:27,239 --> 00:35:31,359 Speaker 4: drastic tariff hikes. The upbeat result may vindicate efforts by 617 00:35:31,440 --> 00:35:35,319 Speaker 4: policymakers to make the city an attractive destination again after 618 00:35:35,400 --> 00:35:39,480 Speaker 4: its image suffered from strict pandemic measures and a crackdown 619 00:35:39,520 --> 00:35:42,359 Speaker 4: on freedoms. And for a closer look, we heard from 620 00:35:42,520 --> 00:35:47,440 Speaker 4: Rosanna Law, Hong Kong's Culture, Sports and Tourism secretary, and 621 00:35:47,520 --> 00:35:49,640 Speaker 4: she spoke with Bloomberg's Steven Engel. 622 00:35:50,640 --> 00:35:56,640 Speaker 10: I actually see pretty handsome increase of visitors from outside 623 00:35:56,719 --> 00:36:01,759 Speaker 10: of Asia or within the shorthold of Asia. For our 624 00:36:01,800 --> 00:36:05,319 Speaker 10: long haul, which primarily means a flight more than five 625 00:36:05,400 --> 00:36:08,760 Speaker 10: hours for the long haul visitors. We see double digit 626 00:36:08,840 --> 00:36:12,680 Speaker 10: growth last year and this year thirty one percent growth 627 00:36:12,680 --> 00:36:17,279 Speaker 10: from Australia. I think close to twenty percent growth for 628 00:36:18,640 --> 00:36:23,560 Speaker 10: the US and the UK for example. I think these 629 00:36:23,600 --> 00:36:27,080 Speaker 10: are signs that people are actually still traveling, and with 630 00:36:27,360 --> 00:36:33,080 Speaker 10: the resumption of flight capacity, the subsequent or consequential drop 631 00:36:33,120 --> 00:36:37,760 Speaker 10: in air flight ticket affairs, and also the fully operational 632 00:36:37,840 --> 00:36:41,520 Speaker 10: free runway system of Hong Kong. Actually we see that 633 00:36:41,600 --> 00:36:43,719 Speaker 10: our overseas visitors are coming back. 634 00:36:43,840 --> 00:36:46,200 Speaker 8: Are you doing enough to attract those non Chinese visitors? 635 00:36:46,200 --> 00:36:48,719 Speaker 10: We are doing more and more. Actually, the Hong Kong 636 00:36:48,760 --> 00:36:51,600 Speaker 10: Tourism BARD has been doing quite a lot in these 637 00:36:51,920 --> 00:36:55,040 Speaker 10: US in countries. I actually just now led the delegation 638 00:36:55,120 --> 00:37:00,160 Speaker 10: to the Middle East. I went to Dubai, abudah b 639 00:37:00,320 --> 00:37:06,560 Speaker 10: and Rearb and UH. We were doing a UH trade 640 00:37:06,640 --> 00:37:13,800 Speaker 10: delegation visit to the Arabic traffic market. And I think 641 00:37:14,120 --> 00:37:19,280 Speaker 10: we are keeping and increasing our work in the traditional markets, 642 00:37:19,480 --> 00:37:23,600 Speaker 10: that's no question about it. We are also exploring new markets. 643 00:37:23,640 --> 00:37:27,319 Speaker 10: So the figure, the figures actually speaks for themselves. What 644 00:37:27,360 --> 00:37:28,720 Speaker 10: are you doing for the US market? 645 00:37:29,239 --> 00:37:32,319 Speaker 9: The US market because there's threats that perhaps those Hong 646 00:37:32,440 --> 00:37:34,440 Speaker 9: Kong trade offices might be closed. 647 00:37:34,600 --> 00:37:35,839 Speaker 8: We all know about the trade war. 648 00:37:35,960 --> 00:37:38,800 Speaker 10: Well, we are doing nothing to the US. We we 649 00:37:39,320 --> 00:37:44,440 Speaker 10: maintained a zero tariff, separate customs territory, a founding member 650 00:37:44,520 --> 00:37:48,040 Speaker 10: of the w t O UH. We have not imposed 651 00:37:48,120 --> 00:37:52,600 Speaker 10: any reciprocal reciprocal tariffs. I don't know how is simplical. 652 00:37:52,680 --> 00:37:56,319 Speaker 10: That is because Hong Kong adopts zero tariff, so we're 653 00:37:56,320 --> 00:38:01,880 Speaker 10: doing nothing. We basically did nothing to under my any 654 00:38:01,960 --> 00:38:06,239 Speaker 10: of it. On the other hand, we actually welcome everybody. 655 00:38:06,440 --> 00:38:10,160 Speaker 10: Hong Kong store is always open and you can see 656 00:38:10,160 --> 00:38:14,000 Speaker 10: for yourself the increase in the visitors from the United States. 657 00:38:14,200 --> 00:38:17,160 Speaker 10: You can see that Hollywood movies are now still being 658 00:38:17,239 --> 00:38:21,400 Speaker 10: staged in Hong Kong all the time, even when we 659 00:38:21,640 --> 00:38:27,960 Speaker 10: are faced with different Fritz or fritsoft tariff or other things. 660 00:38:28,560 --> 00:38:29,840 Speaker 10: Hong Kong we makes a free. 661 00:38:29,680 --> 00:38:34,480 Speaker 4: Pot rose andne law. Hong Kong's Culture, Sports and Tourism Secretary, 662 00:38:34,560 --> 00:38:37,800 Speaker 4: and I'm Charlie Pellette. Tune in weekdays to the Daybreak 663 00:38:37,800 --> 00:38:41,719 Speaker 4: Asia podcast for a look at the story shaping markets, finance, 664 00:38:41,760 --> 00:38:47,040 Speaker 4: and geopolitics in the Asia Pacific region. It's available wherever 665 00:38:47,160 --> 00:38:48,400 Speaker 4: you get your podcasts. 666 00:38:48,719 --> 00:38:51,439 Speaker 2: Tom, Thanks Charlie, and that does it for this edition 667 00:38:51,480 --> 00:38:54,080 Speaker 2: of Bloomberg day Break Weekend. Join us again Monday morning 668 00:38:54,080 --> 00:38:55,920 Speaker 2: at five am Wall Street Time for the latest on 669 00:38:56,040 --> 00:38:59,040 Speaker 2: markets overseas and the news you need to start your day. 670 00:38:59,360 --> 00:39:02,680 Speaker 2: I'm Tom. Stay with us. Top stories and global business 671 00:39:02,680 --> 00:39:04,319 Speaker 2: headlines are coming up right now.