WEBVTT - Daybreak Weekend: Netflix Earnings, ECB Preview, TSMC 0:00:02.960 --> 0:00:08.360 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.000 --> 0:00:13.440 This is Bloomberg day Break Weekend, our global look at 0:00:13.440 --> 0:00:15.680 the top stories in the coming week from our Daybreak 0:00:15.680 --> 0:00:18.320 anchors all around the world. Straight Ahead on the program, 0:00:18.320 --> 0:00:20.840 a look ahead to US retail sales and what the 0:00:20.960 --> 0:00:24.160 numbers might reveal about the health of the consumer. I'm 0:00:24.200 --> 0:00:25.560 Tom Busby in New York. 0:00:25.720 --> 0:00:28.280 I'm Karlin Hepge here in London, where the ECB looks 0:00:28.440 --> 0:00:31.480 likely to cut rates again face with a weak economic 0:00:31.600 --> 0:00:34.200 fact job in the continent's biggest economies. 0:00:34.360 --> 0:00:36.680 I'm Brian Curtisy in Hong Kong. We look ahead to 0:00:36.720 --> 0:00:41.120 whether China is all in on stimulus or wavering, and 0:00:41.280 --> 0:00:43.680 we preview TSMC's earnings. 0:00:44.000 --> 0:00:48.000 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:48.000 --> 0:00:50.519 E Love Them Free Ow New York, Bloombergen ninety nine 0:00:50.560 --> 0:00:54.279 to one, Washington, DC, Bloomberg ninety two to nine, Boston, 0:00:54.680 --> 0:00:58.680 DAB Digital Radio, London, Sirius XM one twenty one, and 0:00:58.760 --> 0:01:01.600 around the world on Bloomberg Radio dot Com and via 0:01:01.680 --> 0:01:03.040 the Bloomberg Business App. 0:01:08.560 --> 0:01:09.160 Good day to you. 0:01:09.240 --> 0:01:11.520 I'm Tom Busby, and we begin today's program with some 0:01:11.640 --> 0:01:15.120 key economic data out this week. US retail sales for 0:01:15.240 --> 0:01:18.759 September eight thirty am Wall Street Time on Thursday. So 0:01:18.800 --> 0:01:20.720 what will the numbers reveal about the health of the 0:01:20.720 --> 0:01:24.160 consumer and as we head toward the holiday season? Is 0:01:24.160 --> 0:01:26.800 stubbornly high inflation keeping a lid on spending for a 0:01:26.840 --> 0:01:30.160 lot of Americans. Well for more, we're joined by Michael McKee, 0:01:30.200 --> 0:01:35.559 Bloomberg International Economics and Policy correspondent. Well, Michael, retail sales 0:01:35.640 --> 0:01:37.600 rose just a tenth of a percent in August, but 0:01:38.200 --> 0:01:41.000 that was better than forecast. What are you expecting to 0:01:41.040 --> 0:01:42.080 see in September. 0:01:43.040 --> 0:01:45.720 Well, what e kindom is surveyed by Bloomberger expecting to 0:01:45.720 --> 0:01:48.960 see is more progress in that regard. The forecast is 0:01:49.000 --> 0:01:53.560 for a two tenths advanced month over month X autos 0:01:53.720 --> 0:01:56.680 just a tenth, but the control group, which is basically 0:01:56.720 --> 0:02:00.840 what goes into GDP up three tenths is last month, 0:02:00.880 --> 0:02:05.040 which would be a fairly strong performance. Americans still are shopping. 0:02:05.080 --> 0:02:10.800 We haven't seen a major impact on confidence in the 0:02:10.840 --> 0:02:13.240 fact that they can pay for these things. So at 0:02:13.240 --> 0:02:16.280 this point we're expecting to see some strong growth. 0:02:16.800 --> 0:02:19.240 Well, let's talk about why we have that strong growth. 0:02:19.280 --> 0:02:22.680 We have a very solid labor market, surprisingly strong numbers 0:02:22.960 --> 0:02:26.480 the last month. Higher incomes as well. We've seen gas 0:02:26.520 --> 0:02:31.400 prices low this past summer, still pretty low. Inflation has eased, 0:02:32.040 --> 0:02:34.000 and it won't have much of an impact on the 0:02:34.040 --> 0:02:36.600 sales data that we'll see this week. But lower interest 0:02:36.680 --> 0:02:37.640 rates right, all. 0:02:37.480 --> 0:02:41.040 That right definitely won't have an impact on the data 0:02:41.080 --> 0:02:44.600 we see this week. Credit Card rates have not come down. 0:02:45.120 --> 0:02:48.200 I don't think anybody be surprised by that. They're very sticky. 0:02:48.760 --> 0:02:51.040 They go off a lot faster than they come down, 0:02:51.480 --> 0:02:54.640 so Americans are still paying that. But what we're looking 0:02:54.680 --> 0:03:00.079 at is the higher wages people are getting is helping 0:03:00.120 --> 0:03:02.600 because people tend to spend what they make and make 0:03:02.600 --> 0:03:06.720 their spending decisions on what they make. They've had a 0:03:06.760 --> 0:03:08.960 lot of money in savings for a while, and the 0:03:08.960 --> 0:03:13.440 savings rate was revised higher, But it's the wages and 0:03:13.520 --> 0:03:17.280 salaries that sort of determine the momentum that we see 0:03:17.280 --> 0:03:20.200 in spending, and since they have been relatively strong, people 0:03:20.240 --> 0:03:22.320 are still feeling like they can afford it. 0:03:23.280 --> 0:03:26.080 Now as we move into the holiday season. Do you 0:03:26.160 --> 0:03:28.720 think there's indications this is going to continue on. 0:03:29.400 --> 0:03:32.200 It's beginning to look that way. The forecasts earlier this 0:03:32.280 --> 0:03:34.640 year were that we would see a fall off in 0:03:34.680 --> 0:03:38.000 the fourth quarter, and so far we haven't seen that. 0:03:38.600 --> 0:03:43.400 This is September numbers that were getting next on Thursday, 0:03:44.440 --> 0:03:48.040 and that's the third quarter, but it will set us 0:03:48.120 --> 0:03:49.720 up for the fourth quarter. We'll see what kind of 0:03:49.760 --> 0:03:52.680 momentum we have going into the fourth quarter, and so 0:03:52.840 --> 0:03:54.800 far there doesn't seem to be a reason to think 0:03:54.880 --> 0:03:58.480 people are pulling back. As you noted, gasoline prices are 0:03:58.560 --> 0:04:01.680 down even though oil pres are up. We're in the 0:04:01.720 --> 0:04:05.480 winter driving season the beginning of that and less demand 0:04:05.560 --> 0:04:09.240 out there for fuel, and we've got some surpluses that 0:04:09.520 --> 0:04:13.920 have built up in the USL Company's tanks out in Oklahoma. 0:04:14.840 --> 0:04:17.880 So as long as people feel like they've got the 0:04:17.920 --> 0:04:20.480 money and they don't have to put it to gasoline, 0:04:21.480 --> 0:04:23.320 they should continue to spend. 0:04:23.760 --> 0:04:26.599 Now, another surprise help is that dock workers strike. It 0:04:26.680 --> 0:04:28.720 lasted three days and then put on pause. 0:04:29.480 --> 0:04:31.560 That's a big help to the economy overall, because we 0:04:31.600 --> 0:04:33.560 would have had a lot of people who were out 0:04:33.560 --> 0:04:37.039 of work, and that would have slowed the economy and 0:04:37.240 --> 0:04:40.560 probably raised prices after a couple of weeks because we'd 0:04:40.560 --> 0:04:43.440 have shortages of things coming in we did see in 0:04:43.480 --> 0:04:47.239 the CPI last week that food prices food at home 0:04:47.600 --> 0:04:50.560 went up by four tenths, the most in eight months. 0:04:51.040 --> 0:04:54.719 And that's the kind of thing that would have been 0:04:54.760 --> 0:04:59.400 affected fruits and vegetables coming in other foods if the 0:04:59.400 --> 0:05:02.360 port strike continued, and we might have seen a sort 0:05:02.360 --> 0:05:06.160 of a negative jobs report because this week is coming 0:05:06.240 --> 0:05:10.640 up as the reference week for the October payrolls. And 0:05:10.680 --> 0:05:13.280 if you had all those dock workers on strike, along 0:05:13.320 --> 0:05:16.160 with the Boeing workers on strike and the people who 0:05:16.160 --> 0:05:18.920 are out of work because of the hurricanes, we could 0:05:18.920 --> 0:05:21.960 have had a negative print for October, which would probably 0:05:21.960 --> 0:05:23.719 not go over well with public opinion. 0:05:24.320 --> 0:05:26.719 Well and those hurricanes. At least we're going to see 0:05:26.720 --> 0:05:32.400 a big pickup in home building, construction, roads, schools. I mean, 0:05:32.400 --> 0:05:35.400 we're going to see hopefully, hopefully very soon. 0:05:35.839 --> 0:05:41.040 That's the paradox of these natural disasters. You can never 0:05:42.000 --> 0:05:45.400 make light of the suffering of the individual people who 0:05:45.800 --> 0:05:47.840 have gone through this, who've lost their homes and all 0:05:47.880 --> 0:05:51.880 the things that matter to them. But on a macro 0:05:52.120 --> 0:05:56.560 national basis, natural disasters like this are good for the 0:05:56.640 --> 0:06:00.680 economy because of all that spending on new stuff, and 0:06:01.400 --> 0:06:05.400 it adds to GDP, so we will see that effect. 0:06:06.160 --> 0:06:09.400 Seems like from Aleen, the stuff in the Carolinas may 0:06:09.440 --> 0:06:12.480 take longer to fix because a lot of roads are 0:06:12.720 --> 0:06:15.760 out and broken and that'll take a while to do. 0:06:16.160 --> 0:06:18.000 But in a year or two you would look at 0:06:18.000 --> 0:06:20.679 the GDP figures and you wouldn't see a real dip. 0:06:20.920 --> 0:06:24.360 Well, well, you know, let's talk more about housing broader, 0:06:24.440 --> 0:06:29.600 not just from Helene and Milton, but housing prices still 0:06:29.600 --> 0:06:31.880 making home ownership a little tough for a lot of people, 0:06:31.880 --> 0:06:34.800 and that has certainly got to impact retail sales and 0:06:34.880 --> 0:06:37.960 impact and you say, you know, inflation. 0:06:37.600 --> 0:06:40.560 Also, it's something to watch. We did see in the 0:06:40.600 --> 0:06:45.840 CPI report that owner's equivalent rent, which is the weird 0:06:45.880 --> 0:06:50.880 statistical way the government accounts for home prices. We're at 0:06:50.920 --> 0:06:53.600 the lowest in about seven or eight months, just up 0:06:53.680 --> 0:06:55.960 three tenths, and that's what the Fed has been waiting for. 0:06:56.040 --> 0:06:59.360 If that continues, that's good news. It will help prices 0:06:59.520 --> 0:07:02.680 level off. But prices have been going up and the 0:07:02.720 --> 0:07:05.559 big reason for that is that there's not enough homes 0:07:05.560 --> 0:07:09.000 for sale because interest rates are high still for mortgages 0:07:09.400 --> 0:07:10.520 and people don't want to move. 0:07:10.640 --> 0:07:14.400 Well, yeah, it's a cruel cycle, though September retail spending 0:07:14.600 --> 0:07:17.520 data out this Thursday are thanks to Michael McKee, Bloomberg 0:07:17.560 --> 0:07:22.000 International Economics and Policy correspondent. We move next to corporate 0:07:22.000 --> 0:07:25.720 earnings from the world's leading streaming TV service, Netflix, posting 0:07:25.760 --> 0:07:28.840 its third quarter results this Thursday. What will they reveal 0:07:28.880 --> 0:07:33.000 about subscriber growth, revenue from advertising, possible plans to hike 0:07:33.080 --> 0:07:37.160 subscription fees for more. We're joined by Geetha Raganathan, Bloomberg 0:07:37.200 --> 0:07:40.920 Intelligence Analysts on US media. Geitha, Well, two hundred and 0:07:40.920 --> 0:07:44.600 seventy eight million subscribers worldwide can't all be wrong. What 0:07:44.640 --> 0:07:47.320 do you expect to see from Netflix's earnings this week? 0:07:48.040 --> 0:07:49.800 Yeah, Tom, thank you so much for having me so. 0:07:49.920 --> 0:07:53.440 As always, you know, Netflix is still very much a 0:07:53.480 --> 0:07:58.640 subscriber story. Consensus current currently expects about four point three 0:07:58.800 --> 0:08:02.720 million new subscribers ADS for the third quarter, and that 0:08:02.880 --> 0:08:05.400 momentum is expected to kind of continue into the fourth 0:08:05.480 --> 0:08:10.040 quarter with them having lots of heavily anticipated content with 0:08:10.120 --> 0:08:12.120 about seven million gains. So if you kind of just 0:08:12.200 --> 0:08:16.760 look at the overall picture for Netflix, Tom, what we 0:08:16.840 --> 0:08:19.800 saw was we saw a tremendous slow down in subscriber 0:08:19.840 --> 0:08:23.440 growth in twenty twenty two, but twenty twenty three and 0:08:23.480 --> 0:08:26.880 twenty twenty four we're seeing them add close to almost 0:08:27.160 --> 0:08:31.120 sixty million subscribers, so thirty million subscribers in each of 0:08:31.160 --> 0:08:33.880 those years. So I think, really, as investors kind of 0:08:34.000 --> 0:08:36.920 start to think about the story, it's really about where 0:08:37.040 --> 0:08:40.640 is subscriber growth? What is a normal level of subscriber 0:08:40.720 --> 0:08:45.480 growth once you have taken into account these two initiatives 0:08:45.480 --> 0:08:49.440 that they introduced, which was the advertising based tier as 0:08:49.480 --> 0:08:52.040 well as the password sharing crackdown, And so I think 0:08:52.040 --> 0:08:53.760 that is going to be one of the biggest questions 0:08:54.080 --> 0:08:56.480 apart from, of course what you said, which was the 0:08:56.520 --> 0:08:59.880 price increases, we are really banking on a big price entrase. 0:09:00.480 --> 0:09:03.720 Now besides the paid sharing members, the new ones you 0:09:03.760 --> 0:09:08.000 know after that crackdown. Now, do you see more international growth? 0:09:08.040 --> 0:09:10.520 Are there new countries for Netflix to conquer? 0:09:11.400 --> 0:09:14.520 Yeah? So majority of the growth tom is in the 0:09:14.559 --> 0:09:18.160 international markets. You know, that makes up two thirds of 0:09:18.440 --> 0:09:21.200 you know, the subscriber base. Most of the growth, of course, 0:09:21.280 --> 0:09:23.959 is coming internationally. Not to say that the US market 0:09:24.000 --> 0:09:26.640 is not growing. It has actually grown really well after 0:09:26.640 --> 0:09:29.520 they introduced both the ads as well as the paid 0:09:29.520 --> 0:09:32.960 sharing initiative. But yes, as they kind of expand to 0:09:33.120 --> 0:09:37.640 more markets, we definitely expect you know, growth long growth 0:09:37.720 --> 0:09:41.040 runway in a lot of these international markets. Remember, penetration 0:09:41.200 --> 0:09:44.600 for Netflix in the US is very, very high, but 0:09:44.679 --> 0:09:47.400 it is pretty low in some other markets. So if 0:09:47.440 --> 0:09:51.439 you kind of look at Latin America again, penetation is high, 0:09:51.480 --> 0:09:54.000 but if you look at you know, Asia Pacific, it's 0:09:54.040 --> 0:09:56.640 only at about twenty one or twenty two percent. If 0:09:56.679 --> 0:09:58.760 you look at Europe again, it's pretty low. So there 0:09:58.880 --> 0:10:03.000 is substantial for growth. You know, it's just going to 0:10:03.160 --> 0:10:06.080 depend on what are all the different subscription tiers that 0:10:06.120 --> 0:10:09.080 they introduce there to kind of really rev up growth 0:10:09.120 --> 0:10:10.880 in some of those markets now. 0:10:10.920 --> 0:10:15.080 And other growth is advertising revenue, and I know you 0:10:15.080 --> 0:10:17.160 could talk about a couple of deals that they have 0:10:17.800 --> 0:10:20.920 with with major sports networks that's coming up won't be 0:10:20.960 --> 0:10:23.120 reflected in the numbers we're going to see just you know, 0:10:23.200 --> 0:10:26.400 this week, but looking ahead it could really explode. 0:10:26.559 --> 0:10:30.200 Absolutely. So they have kind of downplayed the role of advertising, 0:10:30.600 --> 0:10:32.880 you know, at least for the near term, but we 0:10:33.080 --> 0:10:36.520 know that they are doing so many things that is 0:10:36.600 --> 0:10:39.360 really going to kind of turbo charge that business. So 0:10:39.400 --> 0:10:42.240 one of the big things that the industry is kind 0:10:42.240 --> 0:10:46.040 of looking for, is that Netflix is entering the sports arena. 0:10:46.440 --> 0:10:49.920 They have two NFL games on Christmas Day. Now that 0:10:50.200 --> 0:10:53.160 is going to be big, not just in terms of viewership, 0:10:53.360 --> 0:10:55.560 but obviously they are going to those are That's a 0:10:55.640 --> 0:11:00.760 highly anticipated content when it comes to you know, advertising, 0:11:00.840 --> 0:11:03.800 So you know that is obviously creating a lot of buzz. 0:11:04.200 --> 0:11:07.839 Then you have the much anticipated Mike Tyson versus Jake 0:11:07.960 --> 0:11:10.720 Paul boxing event which is going to happen sometime in November. 0:11:11.200 --> 0:11:15.920 That should drive the subscriber editions, it should enhance Netflix's 0:11:15.960 --> 0:11:19.680 overall reach. So all of those, you know, they're basically 0:11:19.720 --> 0:11:22.480 prepping for advertising to take off in a big way. 0:11:22.480 --> 0:11:26.319 And then remember, starting in January, you have WWE content 0:11:26.360 --> 0:11:29.600 that is going to come to the platform globally for 0:11:29.640 --> 0:11:33.000 the very first time. So they're really investing heavily in 0:11:33.320 --> 0:11:37.720 sports content and sports adjacent content and that should be 0:11:37.920 --> 0:11:40.800 a big draw for the advertising community. 0:11:41.960 --> 0:11:45.480 Now, since Netflix last hiked prices it's a first standard 0:11:45.520 --> 0:11:48.479 tier January of twenty twenty two, a number of competitors 0:11:48.720 --> 0:11:51.760 have done the same. Do you think Netflix is poised 0:11:51.800 --> 0:11:53.960 to increase the cost of both of its tiers? The 0:11:54.000 --> 0:11:56.920 standard and the ad supported one more revenue coming in. 0:11:57.480 --> 0:11:59.679 So I think right now, if you kind of look 0:11:59.679 --> 0:12:02.000 at con census estimates and if you just look at 0:12:02.200 --> 0:12:05.640 sentiment in general, everybody is kind of banking on this 0:12:05.760 --> 0:12:09.960 price increase. They are definitely overdue for a price hike 0:12:10.160 --> 0:12:12.560 on the standard tier, that is the one that costs 0:12:12.559 --> 0:12:15.640 about fifteen and a half dollars in the US. They 0:12:15.720 --> 0:12:18.560 haven't raised prices for almost three years, as you just 0:12:18.600 --> 0:12:22.040 pointed out, Tom, and remember before that they had a 0:12:22.040 --> 0:12:25.160 steady cadence of price increases. It was coming every eighteen 0:12:25.200 --> 0:12:27.640 months or so. It was about a ten to eleven 0:12:27.679 --> 0:12:30.080 percent price increase. So we are definitely looking for a 0:12:30.080 --> 0:12:33.600 pretty big bump this time around. They have the content 0:12:33.920 --> 0:12:37.720 to support it. All of their competitors are raising prices, 0:12:37.960 --> 0:12:41.800 and we know that in general the competitive intensity across 0:12:41.840 --> 0:12:43.680 the board has come down quite a bit. 0:12:43.840 --> 0:12:47.079 Okay, third quarter earnings from Netflicks out this Thursday, are 0:12:47.160 --> 0:12:51.479 thanks to Geet the raganathin Bloomberg Intelligence Analysts on US media. 0:12:51.600 --> 0:12:53.839 Coming up on Bloomberg Day Break weekend, we'll look ahead 0:12:53.840 --> 0:12:56.920 to a meeting of European Central Bank policy makers and 0:12:56.960 --> 0:13:00.720 whether another rate cut may be in the cards, Tom Busby, 0:13:00.760 --> 0:13:14.840 and this is Bloomberg. This is Bloomberg Daybreak weekend, our 0:13:14.880 --> 0:13:17.120 global look ahead at the top stories for investors in 0:13:17.160 --> 0:13:20.319 the coming week. I'm Tom Busby in New York. Up 0:13:20.400 --> 0:13:22.960 later in our program look ahead to a cavalcade of 0:13:22.960 --> 0:13:25.800 economic data out of China and earnings from one of 0:13:25.840 --> 0:13:29.160 Asia's biggest chip makers. But first, the European Central Bank 0:13:29.200 --> 0:13:32.120 has already cut interest rates twice in this cycle, and 0:13:32.200 --> 0:13:36.360 markets are expecting another move lower when policymakers meet this week. 0:13:36.440 --> 0:13:40.120 As inflation slows and near's the ECB's target focus has 0:13:40.160 --> 0:13:43.800 shifted to the weakness in Europe's biggest economies. For more, 0:13:43.880 --> 0:13:46.199 Let's go to London and bring in Bloomberg Daybreak Europe 0:13:46.200 --> 0:13:48.439 Banker Caroline hepgar Tom. 0:13:48.480 --> 0:13:51.760 The European Central Bank has not delivered many surprises on 0:13:51.800 --> 0:13:54.960 its rates cutting journey. The first move in June was 0:13:55.000 --> 0:13:59.640 widely telegraphed, as was the second in September. Now, as 0:13:59.679 --> 0:14:02.480 we can out down to the next meeting, all signs 0:14:02.520 --> 0:14:06.880 point to another twenty five basis point move lower. September's 0:14:06.920 --> 0:14:10.120 Euro Area inflation print came in at one point eight percent. 0:14:10.200 --> 0:14:13.760 That's below the ECB's target, but that good news has 0:14:13.800 --> 0:14:17.880 come with much less positive information when it comes to 0:14:17.920 --> 0:14:21.640 the continued weakness in the major economies in Europe, in 0:14:21.680 --> 0:14:25.480 France and Germany. Now we've been discussing this with Eric 0:14:25.520 --> 0:14:28.800 why Tennis, who is the EMEA head of investment strategy 0:14:28.840 --> 0:14:32.360 at JP Morgan Private Bank, and we began by asking 0:14:32.440 --> 0:14:36.520 him why markets are not currently pricing a recession for 0:14:36.600 --> 0:14:37.480 Europe right now. 0:14:37.680 --> 0:14:43.200 There's definitely been an unfortunate loss of momentum. Economic surprises 0:14:43.280 --> 0:14:49.000 have been surprising to the downside. However, the overall trajectory 0:14:49.040 --> 0:14:52.480 of the economy I would categorize as remaining buoyant enough. 0:14:52.720 --> 0:14:55.560 What happens with the consumer is going to be key 0:14:55.640 --> 0:14:59.840 as we go forward. The ECB likely support with interest 0:15:00.080 --> 0:15:03.120 rates to the downside is also likely to help keep 0:15:03.160 --> 0:15:07.680 things afloat. Linkages to the US are also constructive. The 0:15:07.800 --> 0:15:12.680 US economy has been outperforming most expectations across the board, 0:15:12.800 --> 0:15:16.040 so the degree of linkages across the pond should also 0:15:16.080 --> 0:15:20.120 be at least relatively helpful to keeping Europe, you know, 0:15:20.160 --> 0:15:23.600 sort of carrying forward through, albeit with a lower level 0:15:23.640 --> 0:15:26.360 of growth relative to the US and and other key 0:15:26.480 --> 0:15:27.440 economic areas. 0:15:27.960 --> 0:15:30.160 So what markets are pricing in is sort of quarter 0:15:30.240 --> 0:15:32.640 steady pace of quarter points rate cuts from the European 0:15:32.680 --> 0:15:35.520 Central Bank. Does that tally with how you think that 0:15:35.560 --> 0:15:38.880 the response should go given the weakness in the European economy. 0:15:38.560 --> 0:15:41.440 Yeah, it basically does. The you know, the Europeans have 0:15:41.600 --> 0:15:45.400 the more singular focus on you know, price stability i e. 0:15:45.440 --> 0:15:49.400 Battling inflation. In the US they categorize it more so 0:15:49.480 --> 0:15:53.680 as both price stability i e. Battling inflation and additionally 0:15:54.080 --> 0:15:58.240 helping to ensure full employment. So by that methodology, it 0:15:58.320 --> 0:16:01.640 suggests that the Europeansentral Bank really should just be focusing 0:16:01.680 --> 0:16:05.440 on inflation and inflation alone. But I guess the reason 0:16:05.480 --> 0:16:07.640 I bring that up is even though it's not officially 0:16:07.680 --> 0:16:10.920 part of their mandate to help facilitate the labor markets 0:16:10.920 --> 0:16:14.239 and try to be cognizant of supporting the regional economy, 0:16:14.560 --> 0:16:17.720 I do think that they have that lens and do 0:16:17.840 --> 0:16:20.680 want to try to be helpful if inflation allows them to. 0:16:20.840 --> 0:16:23.880 And the subsiding of inflation in the region and on 0:16:23.880 --> 0:16:27.200 a global level is really helpful because it allows central 0:16:27.240 --> 0:16:31.000 banks to become more accommodative with softer interest rate policy, 0:16:31.040 --> 0:16:31.800 which should. 0:16:31.520 --> 0:16:35.680 Help how far behind the curve is the ECB? What 0:16:35.840 --> 0:16:38.400 is the neutral rate? Has that shifted to your mind? 0:16:38.840 --> 0:16:41.080 I actually think they're doing okay. We don't believe that 0:16:41.560 --> 0:16:44.400 they're behind the curve, and we think that a steady 0:16:44.400 --> 0:16:47.960 as she goes pace feels reasonable to us. There was 0:16:48.000 --> 0:16:50.280 certainly an argument that the FED was behind the curve 0:16:50.720 --> 0:16:54.240 looking over there in many forecasters' minds, and that's part 0:16:54.280 --> 0:16:57.160 of why they did that kind of quote jumbo sized 0:16:57.240 --> 0:17:01.720 cut of fifty basis points. Most recently, I would more 0:17:01.720 --> 0:17:05.520 so categorize that one as not necessarily being behind the curve, 0:17:05.600 --> 0:17:07.560 but a little bit of a twenty five plus twenty 0:17:07.560 --> 0:17:10.760 five catch up there. So now that they are kind 0:17:10.800 --> 0:17:15.360 of started with that larger initial sized cut, I think 0:17:15.400 --> 0:17:17.959 that you know, both major central banks probably can go 0:17:18.040 --> 0:17:20.480 with a bit of a steady as she goes regular 0:17:20.560 --> 0:17:21.640 type of cadence. 0:17:22.160 --> 0:17:25.320 Thinking about the start of earning season in Europe, I 0:17:25.400 --> 0:17:29.280 wonder where you'll be looking for signals around the European consumer, 0:17:29.359 --> 0:17:31.600 given you know what you've just been selling us about 0:17:31.600 --> 0:17:33.920 their centralgy to the European economic picture. 0:17:33.960 --> 0:17:38.119 Consumer always matters that it really matters in the US. 0:17:37.920 --> 0:17:40.520 It for sure matters here in this region as well. 0:17:40.920 --> 0:17:44.919 There has been some softness across the board in conjunction 0:17:45.080 --> 0:17:48.600 with what you know, the general trajectory of economic growth 0:17:48.720 --> 0:17:53.600 has been. Wages have been solid though, and ideally, you know, 0:17:53.840 --> 0:17:57.880 robust enough wages allow consumers to continue to do their 0:17:57.920 --> 0:18:01.800 thing and consume, which is going to be incredibly important 0:18:01.800 --> 0:18:04.520 for how this earning season goes. It is still a 0:18:04.600 --> 0:18:07.600 very nice story in terms of equity market performance on 0:18:08.160 --> 0:18:12.440 a mostly global level in twenty twenty four, so it's 0:18:12.480 --> 0:18:17.000 going to be very contingent upon earning's delivery or lack thereof, 0:18:17.480 --> 0:18:19.520 to see how we do in the remaining two and 0:18:19.520 --> 0:18:21.240 a half months or so of the year. 0:18:21.640 --> 0:18:24.199 That was Eric why Tennis in me ahead of investment 0:18:24.240 --> 0:18:27.880 strategy at JP Morgan Private Bank, speaking to me Andrew 0:18:27.920 --> 0:18:33.000 Bloomberg Stephen Cowell on Bloomberg Radio. So that's an investor 0:18:33.040 --> 0:18:36.800 perspective on the economics here in Europe. Let's hear now 0:18:36.840 --> 0:18:40.399 from Bloomberg Economics on this as we look ahead to 0:18:40.480 --> 0:18:43.400 the next European Central Bank decision just in the next 0:18:43.440 --> 0:18:46.879 few days. I've been speaking to our senior your area economist, 0:18:47.200 --> 0:18:50.520 David Powell. David, is there any doubt over whether the 0:18:50.560 --> 0:18:53.320 ECP will actually cut by twenty five basis points. 0:18:53.600 --> 0:18:56.840 The markets have completely pricedt and we think that's going 0:18:56.880 --> 0:19:00.560 to happen. And those expectations have been reinf forced by 0:19:00.600 --> 0:19:03.560 words from members of the Governing Council. Even some of 0:19:03.560 --> 0:19:06.240 the most hawkish members of the Governing Council in recent 0:19:06.320 --> 0:19:09.800 days have come out saying they support a cut in October. 0:19:10.800 --> 0:19:13.240 So it's pretty clear that that's going to come. 0:19:13.480 --> 0:19:13.760 Okay. 0:19:13.800 --> 0:19:15.760 So any potential surprises. 0:19:15.240 --> 0:19:19.000 Then well, I think what people are going to be 0:19:19.000 --> 0:19:22.959 focusing on is what's said at the press conference, in 0:19:23.040 --> 0:19:28.080 particular where the ECB sees the risks and their risk 0:19:28.160 --> 0:19:32.560 assessment to GDP growth and inflation. Up until now, they 0:19:32.560 --> 0:19:36.200 have seen the risks to inflation as balanced, listing both 0:19:36.280 --> 0:19:39.040 upside and downside risks. I think the biggest surprise might 0:19:39.080 --> 0:19:42.080 be something like if the ECB were to emphasize to 0:19:42.119 --> 0:19:45.800 a greater extent downside risks to inflation given the economic 0:19:45.840 --> 0:19:47.040 weakness in the Euro Area. 0:19:47.359 --> 0:19:49.439 Yeah, that has been the real concern, isn't it the 0:19:49.520 --> 0:19:52.359 slowdown in the economy in terms of the hints that 0:19:52.400 --> 0:19:55.800 we get about what happens further down the road in 0:19:55.880 --> 0:19:58.680 terms of right cuts in Europe. What might we hear 0:19:59.000 --> 0:20:02.040 as for the the US, people are dialing back the 0:20:02.119 --> 0:20:03.800 idea of big rate cuts from the Fed. 0:20:04.280 --> 0:20:06.280 Well, there is a big difference between the US and 0:20:06.320 --> 0:20:09.280 the EU Area, which is a story that has persisted 0:20:09.280 --> 0:20:12.399 throughout this period of monetary tightening and now monetary loosening, 0:20:12.400 --> 0:20:15.000 and that is the US economy is held up much 0:20:15.119 --> 0:20:19.879 better than the Euro Area economy, and so we haven't 0:20:19.880 --> 0:20:22.720 had those positive economic surprises in Europe that the US 0:20:22.760 --> 0:20:25.320 has had, which kind of has reduced those expectations for easing. 0:20:25.560 --> 0:20:28.560 So a December cut is probably you know, it's essentially 0:20:28.600 --> 0:20:30.680 a done deal the markets of price that it's pretty 0:20:30.760 --> 0:20:34.679 much universally expected. And the reason that that is so 0:20:34.840 --> 0:20:38.520 expected is the ECB will have another quarter than of 0:20:39.000 --> 0:20:42.160 data from the National accounts on wage growth, in particular 0:20:42.200 --> 0:20:45.760 compensation per employee, which is the most comprehensive measure of 0:20:45.840 --> 0:20:49.040 wage growth, and in all likelihood that will have decelerated again, 0:20:49.480 --> 0:20:55.000 giving the ECB further confidence that price pressures are ebbing 0:20:55.320 --> 0:20:59.480 and that they can cut without doubts of inflation remaining 0:20:59.520 --> 0:20:59.920 at tark. 0:21:00.320 --> 0:21:02.760 Yeah, and of course inflation is the central mandate for 0:21:02.880 --> 0:21:05.160 the European Central Bag, so how much can they really 0:21:05.240 --> 0:21:09.000 consider growth as a factor given that mandate. 0:21:09.359 --> 0:21:12.520 Well, inflation is essentially determined by supply and demand, and 0:21:12.560 --> 0:21:17.520 growth is aggregate demands. So growth is the primary determinant 0:21:17.720 --> 0:21:18.400 of inflation. 0:21:18.920 --> 0:21:21.000 So while there are. 0:21:21.000 --> 0:21:25.560 Times when the two objectives are not are not calling 0:21:25.600 --> 0:21:30.760 for the same thing, boosting the economy and keeping inflation 0:21:30.840 --> 0:21:33.720 at target. And the ECB, unlike the Foot Reserve, does 0:21:33.840 --> 0:21:37.600 have a mandate of just inflation. They can't ignore growth 0:21:37.720 --> 0:21:39.840 because at the end of the day, if the economy 0:21:39.880 --> 0:21:43.320 remains weak, if aggurate demand remains weak, inflation will be 0:21:43.320 --> 0:21:45.840 below target. And that's something that we really only just 0:21:45.920 --> 0:21:48.679 got over at the time of the pandemic. Don't forget 0:21:48.680 --> 0:21:52.440 before that inflation was below target for nearly a decade 0:21:52.720 --> 0:21:56.199 and Droggy tried a lot of things in order to 0:21:56.359 --> 0:21:59.440 return inflation to target. And one thing we know from 0:21:59.520 --> 0:22:03.119 the UAE is experienced even more clearly from the Japanese experience, 0:22:03.440 --> 0:22:06.240 is that when you have persistently low inflation for a 0:22:06.280 --> 0:22:09.280 long period of time, it becomes kind of embedded and 0:22:09.320 --> 0:22:11.320 that's a difficult situation to get out of. 0:22:11.480 --> 0:22:14.840 Oh yes, Japanification of Europe is a really big worry. 0:22:14.920 --> 0:22:17.679 Isn't it In terms of the economic picture. What is 0:22:17.720 --> 0:22:21.480 your assessment now of how weak Europe is in terms 0:22:21.480 --> 0:22:23.320 of France and Germany. I mean, we know there's been 0:22:23.359 --> 0:22:28.200 political uncertainty, there are enormous global pressures and geopolitical kind 0:22:28.200 --> 0:22:32.719 of tectonic plates that affect what's your concern around economic 0:22:32.800 --> 0:22:33.720