1 00:00:00,280 --> 00:00:07,240 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:09,960 --> 00:00:13,119 Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the 3 00:00:13,119 --> 00:00:16,720 Speaker 2: top stories in the coming week from our Daybreak anchors 4 00:00:16,760 --> 00:00:19,400 Speaker 2: all over the world. Straight Ahead on the program, a 5 00:00:19,480 --> 00:00:22,439 Speaker 2: look at some key inflation and retail sales data in 6 00:00:22,520 --> 00:00:24,959 Speaker 2: the US. I'm Maybe Morris in Washington. 7 00:00:25,040 --> 00:00:27,480 Speaker 3: I'm callin hetkit Hay in London, where we're looking at 8 00:00:27,520 --> 00:00:30,880 Speaker 3: Europe's wind energy sector with the Trump administration's roll back 9 00:00:31,000 --> 00:00:31,920 Speaker 3: on maneuables. 10 00:00:32,200 --> 00:00:34,279 Speaker 4: I'm Charlie Pellock with a look at what we can 11 00:00:34,360 --> 00:00:38,080 Speaker 4: expect from the Reserve Bank of Australia when they issue 12 00:00:38,120 --> 00:00:40,720 Speaker 4: their August Great decision next week. 13 00:00:41,280 --> 00:00:45,320 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 14 00:00:45,320 --> 00:00:49,040 Speaker 1: eleven three zero, New York, Bloomberg ninety nine to one, Washington, DC, 15 00:00:49,520 --> 00:00:53,760 Speaker 1: Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 16 00:00:54,200 --> 00:00:57,440 Speaker 1: Sirius XM one twenty one, and around the world on 17 00:00:57,480 --> 00:01:00,720 Speaker 1: Bloomberg Radio, dot Com and the Bloomberg Business. 18 00:01:00,360 --> 00:01:07,920 Speaker 2: Opp Good day to you. I'm Amy Morris. We begin 19 00:01:08,000 --> 00:01:11,560 Speaker 2: today's program with some key economic data in the US. 20 00:01:11,840 --> 00:01:15,720 Speaker 2: We get USCPI data on Tuesday, the Producer Price Index 21 00:01:15,840 --> 00:01:19,360 Speaker 2: is released on Thursday and retail sales data on Friday. 22 00:01:19,840 --> 00:01:23,000 Speaker 2: How is this data going to impact FED policy as 23 00:01:23,000 --> 00:01:26,520 Speaker 2: we move forward? For more, we are joined by Michael McKee, 24 00:01:26,560 --> 00:01:31,040 Speaker 2: Bloomberg International Economics and Policy correspondent Mike always a pleasure 25 00:01:31,160 --> 00:01:34,000 Speaker 2: want to start with PPI and take a peek back 26 00:01:34,040 --> 00:01:37,360 Speaker 2: at this past week which saw some weaknesses revealed in 27 00:01:37,400 --> 00:01:40,920 Speaker 2: the PMI data for July, plus reciprocal tariffs kicked in. 28 00:01:41,120 --> 00:01:44,000 Speaker 2: With all of that in mind, what should we be 29 00:01:44,080 --> 00:01:46,160 Speaker 2: looking for from the PPI coming up? 30 00:01:47,200 --> 00:01:49,640 Speaker 5: Well, we're going to be looking, certainly in terms of 31 00:01:49,680 --> 00:01:54,480 Speaker 5: PPI at whether we have nascent inflation coming from tariffs, 32 00:01:54,480 --> 00:01:57,280 Speaker 5: and we'll be looking at the things within the producer 33 00:01:57,320 --> 00:02:02,880 Speaker 5: price indix that are considered intermediate goods, things that companies 34 00:02:02,920 --> 00:02:06,000 Speaker 5: buy to make other things. And if we see prices 35 00:02:06,040 --> 00:02:09,320 Speaker 5: going up there, which we should, then it'll be a 36 00:02:09,400 --> 00:02:11,560 Speaker 5: question of how much do they go up? Does it 37 00:02:11,600 --> 00:02:14,320 Speaker 5: suggest that we're going to have an outbreak of inflation? 38 00:02:14,880 --> 00:02:17,400 Speaker 5: And when you look at the CPI you're going to 39 00:02:17,480 --> 00:02:21,200 Speaker 5: have the same sort of questions. But therefore finished goods 40 00:02:21,240 --> 00:02:23,880 Speaker 5: for things that consumers are buying, what is it telling 41 00:02:23,960 --> 00:02:27,680 Speaker 5: us about the tariff impact on the economy, and that's 42 00:02:27,680 --> 00:02:30,160 Speaker 5: why I'll have a big effect for the Fed. It 43 00:02:30,200 --> 00:02:32,399 Speaker 5: will matter a lot to the Fed, more than we've 44 00:02:32,440 --> 00:02:38,120 Speaker 5: had most CPI and PPI indicators this year because they 45 00:02:38,160 --> 00:02:40,959 Speaker 5: put everything on hold waiting to see what the inflation 46 00:02:41,480 --> 00:02:43,160 Speaker 5: outcome is from tariffs. 47 00:02:43,360 --> 00:02:45,320 Speaker 2: So these numbers are going to have more of an impact. 48 00:02:45,360 --> 00:02:48,040 Speaker 2: Do you think maybe than normally historically they would. 49 00:02:48,639 --> 00:02:52,280 Speaker 5: Yes, they will have an impact one of two ways. 50 00:02:52,320 --> 00:02:56,400 Speaker 5: Either they will show inflation is picking up, which will 51 00:02:56,480 --> 00:02:59,520 Speaker 5: lead the Fed to be more cautious going into their 52 00:02:59,520 --> 00:03:02,600 Speaker 5: next meeting, or they'll show that things are pretty quiet, 53 00:03:02,639 --> 00:03:07,360 Speaker 5: as the President insists, and the idea that the jobs 54 00:03:07,360 --> 00:03:12,239 Speaker 5: report we had last week shows weakness in the economy 55 00:03:12,280 --> 00:03:14,440 Speaker 5: would give them more license to cut rates. 56 00:03:14,800 --> 00:03:18,120 Speaker 2: Should we bring up the issue of stagflation? Is there 57 00:03:18,240 --> 00:03:21,080 Speaker 2: any risk of a stagflation in our future? 58 00:03:21,720 --> 00:03:23,680 Speaker 5: Well, that's kind of what we're looking at at the 59 00:03:23,680 --> 00:03:26,720 Speaker 5: moment now. The problem is is people tend to think 60 00:03:26,760 --> 00:03:29,440 Speaker 5: of stagflation in the way we had it in the 61 00:03:29,520 --> 00:03:33,920 Speaker 5: nineteen seventies, where inflation was very high and growth was 62 00:03:34,080 --> 00:03:37,520 Speaker 5: very low. But it can just basically mean that the 63 00:03:37,560 --> 00:03:40,920 Speaker 5: economy is not growing particularly fast and inflation is picking 64 00:03:41,000 --> 00:03:44,920 Speaker 5: up a bit, so you could have maybe four percent 65 00:03:45,640 --> 00:03:49,520 Speaker 5: inflation or three and a half percent inflation and growth 66 00:03:49,600 --> 00:03:51,960 Speaker 5: of a half percentage point or something like that, and 67 00:03:52,040 --> 00:03:55,160 Speaker 5: it would still qualify as stagflation. And that's kind of 68 00:03:55,200 --> 00:03:58,480 Speaker 5: what the data are pointing at right now. And we 69 00:03:58,520 --> 00:04:01,040 Speaker 5: say that because of the jobs the fact that they 70 00:04:01,040 --> 00:04:03,640 Speaker 5: were so weak, as a suggestion that maybe consumers won't 71 00:04:03,680 --> 00:04:08,400 Speaker 5: be spending as much money and the economy will slow down. 72 00:04:09,240 --> 00:04:12,960 Speaker 5: And obviously we're watching the CPIPPI to see if there 73 00:04:13,040 --> 00:04:16,360 Speaker 5: is the flation part of stagflation exactly. 74 00:04:16,960 --> 00:04:20,080 Speaker 2: Let's turn to the retail sales figures, then are we shopping? 75 00:04:20,360 --> 00:04:22,800 Speaker 2: What are you watching for from that? Because everything you 76 00:04:22,920 --> 00:04:25,280 Speaker 2: just explained tells me it's sort of all dovetails. 77 00:04:25,720 --> 00:04:27,679 Speaker 5: Well, it's going to be a kind of a weird one, 78 00:04:28,160 --> 00:04:32,240 Speaker 5: as July usually is, because July we have the Amazon 79 00:04:32,320 --> 00:04:37,159 Speaker 5: Prime Days and the other retailers like Walmart who match 80 00:04:37,240 --> 00:04:42,160 Speaker 5: their discounts, and so you could get more people buying 81 00:04:42,279 --> 00:04:48,599 Speaker 5: stuff than we normally would expect under the economic conditions 82 00:04:48,600 --> 00:04:51,800 Speaker 5: that we have. It may not reflect yet that people 83 00:04:51,880 --> 00:04:55,280 Speaker 5: are concerned about the economy and pulling back on their spending, 84 00:04:55,360 --> 00:04:56,960 Speaker 5: because everybody likes a deal. 85 00:04:57,520 --> 00:05:00,200 Speaker 2: Forgive me, but Amazon Prime Days really have that much 86 00:05:00,200 --> 00:05:01,760 Speaker 2: of an impact they can. 87 00:05:04,160 --> 00:05:08,440 Speaker 5: The way they calculate all of this is through dollar volume, 88 00:05:09,120 --> 00:05:14,640 Speaker 5: and the Prime days and the other discounters would be 89 00:05:14,760 --> 00:05:17,320 Speaker 5: charging less. But what ends up happening is a lot 90 00:05:17,360 --> 00:05:20,039 Speaker 5: of people buy stuff they weren't intending to buy that 91 00:05:20,200 --> 00:05:24,280 Speaker 5: isn't necessarily on sale, and so you do get an increase, 92 00:05:24,320 --> 00:05:27,760 Speaker 5: particularly in the category of online shopping, and so that's 93 00:05:27,760 --> 00:05:31,920 Speaker 5: something to keep an eye on. We also are looking 94 00:05:32,400 --> 00:05:35,480 Speaker 5: always looking at gasoline prices, which came down and then 95 00:05:35,600 --> 00:05:38,680 Speaker 5: started going back up again, so those will have an 96 00:05:38,720 --> 00:05:42,440 Speaker 5: impact as well. And we had better than expected auto 97 00:05:42,480 --> 00:05:46,440 Speaker 5: sales in July, so that may also suggest that we're 98 00:05:46,480 --> 00:05:48,680 Speaker 5: going to have a little more strength in retail sales 99 00:05:49,160 --> 00:05:51,240 Speaker 5: than we might otherwise have expected. 100 00:05:51,440 --> 00:05:53,599 Speaker 2: Well, Mike, the President did fire the head of the 101 00:05:53,600 --> 00:05:57,480 Speaker 2: Bureau of Labor Statistics, and the concern there is that 102 00:05:57,520 --> 00:06:02,080 Speaker 2: any suggestion of political bias can and destroy trust, especially 103 00:06:02,080 --> 00:06:06,600 Speaker 2: in these numbers. How important is it for the American people, economists, 104 00:06:06,720 --> 00:06:09,640 Speaker 2: those who watch this data to have trust in these 105 00:06:09,720 --> 00:06:11,000 Speaker 2: numbers that we're going to see. 106 00:06:11,160 --> 00:06:13,719 Speaker 5: Oh, it's vital because we rely on them for so much. 107 00:06:13,760 --> 00:06:16,400 Speaker 5: It's not just me sitting here reading the eco go 108 00:06:16,680 --> 00:06:20,680 Speaker 5: page on the Bloomberg. They're used in adjusting contracts, the 109 00:06:20,760 --> 00:06:26,360 Speaker 5: cost of living. Social security companies make plans on investment 110 00:06:26,440 --> 00:06:28,560 Speaker 5: based on what they think the inflation rate is going 111 00:06:28,560 --> 00:06:32,560 Speaker 5: to be. So they're very important numbers, and obviously they 112 00:06:32,600 --> 00:06:35,679 Speaker 5: matter a lot to the FED, and so being able 113 00:06:35,760 --> 00:06:39,120 Speaker 5: to believe in them is very important. Now we know 114 00:06:39,240 --> 00:06:46,280 Speaker 5: that the numbers have become a little more less accurate, 115 00:06:46,360 --> 00:06:50,599 Speaker 5: but sort of the margin of error has widened because 116 00:06:50,760 --> 00:06:56,479 Speaker 5: they're having much fewer responses to their surveys, and they've 117 00:06:56,520 --> 00:06:59,880 Speaker 5: also cut back the government's Congress and the presidents of 118 00:07:00,240 --> 00:07:02,599 Speaker 5: back on spending on these numbers. So it's been difficult 119 00:07:02,640 --> 00:07:04,760 Speaker 5: for the agencies, but they do their best to produce 120 00:07:05,240 --> 00:07:10,080 Speaker 5: the gold standard of data, and I don't think anybody 121 00:07:10,160 --> 00:07:14,160 Speaker 5: is looking for that to change the way they've set 122 00:07:14,200 --> 00:07:19,200 Speaker 5: it up. The commissioner of the BLS doesn't get into 123 00:07:19,280 --> 00:07:22,840 Speaker 5: the report, so the fact that the President fired somebody 124 00:07:22,840 --> 00:07:26,200 Speaker 5: who's not ultimately actually responsible for the report won't make 125 00:07:26,280 --> 00:07:28,000 Speaker 5: much of a change. So I don't think Wall Street's 126 00:07:28,040 --> 00:07:30,440 Speaker 5: too worried yet. It would be if somebody came in 127 00:07:30,440 --> 00:07:33,120 Speaker 5: and started making major changes in the way they compile 128 00:07:33,200 --> 00:07:34,640 Speaker 5: the data that you'd have to worry. 129 00:07:34,920 --> 00:07:36,920 Speaker 2: Okay, and we're going to leave it there. Michael McKee, 130 00:07:36,920 --> 00:07:40,960 Speaker 2: Bloomberg International Economics and Policy Correspondent, Always a pleasure. Thank 131 00:07:40,960 --> 00:07:43,440 Speaker 2: you so much for your insight. All right, we move 132 00:07:43,560 --> 00:07:47,080 Speaker 2: next to corporate earnings from the networking bellwether Cisco. They 133 00:07:47,160 --> 00:07:50,360 Speaker 2: report earnings after the market close on Wednesday. For more, 134 00:07:50,400 --> 00:07:54,520 Speaker 2: we're joined by Woujin Hoo, Bloomberg Intelligence Senior Technology analyst. 135 00:07:54,880 --> 00:07:57,880 Speaker 2: Woujin what are you looking for from Cisco's earnings report? 136 00:07:58,320 --> 00:08:01,920 Speaker 6: Yeah, thanks for having me on. Look. I am actually 137 00:08:01,960 --> 00:08:05,400 Speaker 6: looking for a fantastic quarter coming out of coming from Cisco. 138 00:08:05,920 --> 00:08:08,480 Speaker 6: There's a couple of high level things that we need 139 00:08:08,520 --> 00:08:11,880 Speaker 6: to take into consideration. The enterprise it spending has been 140 00:08:11,920 --> 00:08:15,360 Speaker 6: a little bit more resilient than I had anticipated, so 141 00:08:15,440 --> 00:08:17,840 Speaker 6: they should easily or I believe they should come at 142 00:08:17,920 --> 00:08:21,559 Speaker 6: least come in the high end of the fourteen point 143 00:08:21,600 --> 00:08:25,600 Speaker 6: five to fourteen point seven billion dollar guidance for the quarter. 144 00:08:25,960 --> 00:08:30,920 Speaker 6: But more importantly, they've actually navigated their tariff situation pretty well, 145 00:08:31,800 --> 00:08:35,480 Speaker 6: so there should be you know, minimal downside risk to 146 00:08:35,720 --> 00:08:39,720 Speaker 6: earning expectations heading into the print. But more importantly, I 147 00:08:39,760 --> 00:08:42,200 Speaker 6: think the focus going into the quarter is going to 148 00:08:42,200 --> 00:08:45,320 Speaker 6: be more along the lines of their guidance for fiscal 149 00:08:45,320 --> 00:08:49,120 Speaker 6: twenty twenty six. You know, their long term guidance there 150 00:08:49,400 --> 00:08:54,920 Speaker 6: is four to six percent, and they have a lot 151 00:08:54,920 --> 00:08:57,400 Speaker 6: of tailwinds to help them go to the top end 152 00:08:57,480 --> 00:08:59,040 Speaker 6: of that guidance range. 153 00:08:59,160 --> 00:09:01,160 Speaker 2: Yeah, I want to ask about that, how they're able 154 00:09:01,200 --> 00:09:04,520 Speaker 2: to maintain stable demand and steady growth in this current 155 00:09:04,600 --> 00:09:08,200 Speaker 2: AI environment because this is the pool everybody's jumping into. 156 00:09:08,520 --> 00:09:11,840 Speaker 2: So how can Cisco maintain all of that set itself apart? 157 00:09:12,000 --> 00:09:15,000 Speaker 2: Is it navigating their own tariff deal or is there 158 00:09:15,040 --> 00:09:15,520 Speaker 2: more to it? 159 00:09:16,800 --> 00:09:19,520 Speaker 6: Well, you know, one one of the things that Cisco 160 00:09:19,559 --> 00:09:23,000 Speaker 6: has done over the past several years since since the 161 00:09:23,360 --> 00:09:28,520 Speaker 6: COVID period is essentially distribute their supply chain to be 162 00:09:28,800 --> 00:09:32,040 Speaker 6: less concentrated outside of China. But a couple of things 163 00:09:32,040 --> 00:09:36,160 Speaker 6: that do help them. They do have some Mexico manufacturing, 164 00:09:36,559 --> 00:09:39,520 Speaker 6: so they can get some cover under the U. S. 165 00:09:39,600 --> 00:09:41,760 Speaker 6: M c A, so some of their products are going 166 00:09:41,800 --> 00:09:45,000 Speaker 6: to be exempt from tariffs. And I think some of 167 00:09:45,040 --> 00:09:49,600 Speaker 6: the new tariff rules that came into you know, the 168 00:09:49,600 --> 00:09:52,679 Speaker 6: the August first deadline, that's going to help them actually 169 00:09:53,520 --> 00:09:57,720 Speaker 6: make their products a little bit more favorable from a 170 00:09:57,880 --> 00:10:01,560 Speaker 6: from a tariff perspective, So net net, they'll they'll be 171 00:10:01,559 --> 00:10:04,040 Speaker 6: fine from a tire perspective. The one thing that I 172 00:10:04,080 --> 00:10:07,720 Speaker 6: will tell you, they're more highly exposed from a revenue 173 00:10:07,760 --> 00:10:14,559 Speaker 6: perspective on enterprise spending. Roughly half their revenue come from 174 00:10:15,000 --> 00:10:19,760 Speaker 6: commercial businesses. Think about your typical small medium businesses with 175 00:10:19,880 --> 00:10:23,280 Speaker 6: over a thousand employees and also your campus networks and 176 00:10:23,320 --> 00:10:27,079 Speaker 6: stuff that you know that connects the the PCs in 177 00:10:27,160 --> 00:10:31,040 Speaker 6: our desk. That really hasn't pulled back at all. If 178 00:10:31,080 --> 00:10:34,320 Speaker 6: I look at other companies, they've actually at least met 179 00:10:34,360 --> 00:10:37,079 Speaker 6: expectations and also beaten expectations. And as a tech bell 180 00:10:37,120 --> 00:10:40,120 Speaker 6: whether I do think that they're going to benefit as well. 181 00:10:40,760 --> 00:10:43,800 Speaker 2: They also have an ongoing relationship with Nvidia. How has 182 00:10:43,880 --> 00:10:44,320 Speaker 2: that helped? 183 00:10:44,760 --> 00:10:47,760 Speaker 6: Yeah, you know, it's it's a it's a new relationship 184 00:10:47,760 --> 00:10:51,559 Speaker 6: that they announced that their users conference. If anything, that 185 00:10:52,520 --> 00:10:57,040 Speaker 6: actually thrust them deeper into the to the AI story. 186 00:10:57,360 --> 00:10:59,720 Speaker 6: A couple of things here. You know, you're not going 187 00:10:59,800 --> 00:11:04,040 Speaker 6: to see the multi billion dollar AI deals coming like 188 00:11:04,640 --> 00:11:10,120 Speaker 6: a Dell or super Micro, but as corporate enterprises get 189 00:11:10,240 --> 00:11:16,599 Speaker 6: into the AI, Cisco and their broad enterprise channel, the 190 00:11:17,160 --> 00:11:19,400 Speaker 6: small medium business as well as enterprises that I just 191 00:11:19,400 --> 00:11:23,320 Speaker 6: spoke about that will actually help Nvidia get into those 192 00:11:23,360 --> 00:11:29,040 Speaker 6: accounts that Nvidia typically cannot get access to. So there 193 00:11:29,080 --> 00:11:32,280 Speaker 6: is a channel relationship that helps. That's one and number two, 194 00:11:32,360 --> 00:11:36,480 Speaker 6: it is symbiotic because there is a networking component in AI. 195 00:11:36,880 --> 00:11:40,520 Speaker 6: Cisco is a networking leader and they can actually get 196 00:11:41,160 --> 00:11:47,280 Speaker 6: Nvidia networking gear with Cisco equipment into a lot of 197 00:11:47,320 --> 00:11:50,760 Speaker 6: these data center as well as enterprise accounts. That will help. 198 00:11:51,480 --> 00:11:53,320 Speaker 2: This is going to be fun to watch those numbers 199 00:11:53,320 --> 00:11:57,400 Speaker 2: coming out on Wednesday. Wou Jinjo, Bloomberg Intelligence Senior technology analyst, 200 00:11:57,440 --> 00:12:00,080 Speaker 2: thank you so much for talking with us about this. Take. 201 00:12:00,400 --> 00:12:03,360 Speaker 2: Coming up on Bloomberg Daybreak weekend, we'll look at Europe's 202 00:12:03,400 --> 00:12:06,400 Speaker 2: wind energy sector and now it's being impacted by the 203 00:12:06,400 --> 00:12:10,480 Speaker 2: Trump administration's roll back on renewables. I'm Amy Morris. This 204 00:12:10,640 --> 00:12:25,040 Speaker 2: is Bloomberg. This is Bloomberg Daybreak Weekend, our global look 205 00:12:25,080 --> 00:12:28,000 Speaker 2: ahead at the top stories for investors in the coming week. 206 00:12:28,160 --> 00:12:31,559 Speaker 2: I'm Amy Morris in Washington. Up later in our program, 207 00:12:31,720 --> 00:12:34,960 Speaker 2: we'll look ahead to a monetary policy decision from the 208 00:12:35,000 --> 00:12:38,320 Speaker 2: Reserve Bank of Australia but first in the coming days, 209 00:12:38,520 --> 00:12:42,080 Speaker 2: the Danish wind turbine maker Vestus will report earnings. It 210 00:12:42,200 --> 00:12:45,640 Speaker 2: is expected to solidify its position as Europe's largest wind 211 00:12:45,640 --> 00:12:49,920 Speaker 2: turbine manufacturer and the world's second largest by shipments. But 212 00:12:50,000 --> 00:12:53,440 Speaker 2: the renewable energy sector faces big political challenges in the 213 00:12:53,559 --> 00:12:56,480 Speaker 2: US and in Europe. For more, let's go to London 214 00:12:56,559 --> 00:13:00,280 Speaker 2: and bring in Bloomberg Daybreak Europe anchor Caroline hepger Amy. 215 00:13:00,360 --> 00:13:03,959 Speaker 3: It's thought that tariff uncertainty will have hit Vestas's orders 216 00:13:03,960 --> 00:13:07,079 Speaker 3: in the second quarter, but that may be an issue 217 00:13:07,200 --> 00:13:11,840 Speaker 3: largely for Europe because paradoxically, Vestus has seen a surge 218 00:13:11,920 --> 00:13:15,160 Speaker 3: in US orders. Has developers rushed to get ahead of 219 00:13:15,200 --> 00:13:19,400 Speaker 3: President Trump's deadline to end certain tax credits for new 220 00:13:19,640 --> 00:13:24,320 Speaker 3: clean energy projects. When Bloomberg spoke to Vestas's CEO Henrik 221 00:13:24,400 --> 00:13:27,760 Speaker 3: Anderson back in May, he had a blunt warning for 222 00:13:27,880 --> 00:13:33,680 Speaker 3: Europe either adopt bolder industrial policy or risk watching business 223 00:13:33,920 --> 00:13:39,320 Speaker 3: drift elsewhere. Anderson noted that the European Union's fragmented approach 224 00:13:39,360 --> 00:13:43,560 Speaker 3: to the sector was jeopardizing the region's chances of achieving 225 00:13:43,720 --> 00:13:49,239 Speaker 3: energy independence and competing against other global manufacturers. He emphasized 226 00:13:49,240 --> 00:13:53,120 Speaker 3: the need to protect and support the wind energy sector 227 00:13:53,160 --> 00:13:57,240 Speaker 3: that Europe has built through its universities and testing sites. 228 00:13:58,240 --> 00:14:01,080 Speaker 7: It's quite interesting and maybe it comes with age. I 229 00:14:01,120 --> 00:14:04,439 Speaker 7: don't know, but I'm saying stay calm because there are 230 00:14:04,440 --> 00:14:08,000 Speaker 7: some of these things that will be probably spontaneous, probably 231 00:14:08,880 --> 00:14:12,320 Speaker 7: fast measures that then will try to find solutions on 232 00:14:12,520 --> 00:14:16,120 Speaker 7: over time. And if I look back and also forward, 233 00:14:16,360 --> 00:14:18,920 Speaker 7: is we have been and we have created factories and 234 00:14:19,000 --> 00:14:22,080 Speaker 7: localization in the US for more than two decades. So 235 00:14:22,120 --> 00:14:24,160 Speaker 7: for somebody to sit here and god a really nerve 236 00:14:24,160 --> 00:14:27,080 Speaker 7: wrecking Monday morning and now on Friday, we're going to 237 00:14:27,120 --> 00:14:29,480 Speaker 7: relocate some of it, that's just not the right thing, 238 00:14:30,040 --> 00:14:33,720 Speaker 7: because whatever we do, we still see the demand cycle 239 00:14:33,840 --> 00:14:36,880 Speaker 7: for entity. We still see the building and the ramp 240 00:14:36,920 --> 00:14:39,680 Speaker 7: up we are doing in the US, and therefore for 241 00:14:39,760 --> 00:14:43,240 Speaker 7: that to suddenly be hit by and I often call 242 00:14:43,280 --> 00:14:46,680 Speaker 7: it a bit the emotional spirit of this And if 243 00:14:46,720 --> 00:14:50,040 Speaker 7: I could encourage still anything out of this, remain a 244 00:14:50,080 --> 00:14:54,840 Speaker 7: bit calm, take some responsibility, because direction of setting for 245 00:14:55,000 --> 00:14:57,680 Speaker 7: your organization needed right now, because they get off in 246 00:14:57,720 --> 00:15:00,920 Speaker 7: the morning, they see news like this and they all 247 00:15:01,000 --> 00:15:03,520 Speaker 7: see the world is coming a bit apart. It's being 248 00:15:03,560 --> 00:15:06,800 Speaker 7: more fragmented, So I think, actually, as CEOs, one of 249 00:15:06,840 --> 00:15:10,160 Speaker 7: the most important thing right now is stick to the direction. 250 00:15:10,640 --> 00:15:14,280 Speaker 3: That was Vestas CEO Henrik Anderson there speaking to Bloomberg's 251 00:15:14,280 --> 00:15:18,000 Speaker 3: Ana Edwards critic group to and Guy Johnson back in May. 252 00:15:18,440 --> 00:15:22,240 Speaker 3: His comments came as the EU is struggling to cut 253 00:15:22,360 --> 00:15:27,120 Speaker 3: carbon emissions whilst more broadly addressing struggling growth and a 254 00:15:27,240 --> 00:15:31,840 Speaker 3: crisis of competitiveness. So what are the challenges that Europe's 255 00:15:31,880 --> 00:15:36,440 Speaker 3: renewable sector face and what do expect from Vestas in particular. 256 00:15:36,800 --> 00:15:39,880 Speaker 3: It's something that I've been discussing with Bloomberg's Climate Change 257 00:15:39,920 --> 00:15:44,440 Speaker 3: and Renewable Energy reporter Will Mathis and Bloomberg Intelligence Equity 258 00:15:44,480 --> 00:15:49,520 Speaker 3: Research Senior Associate Ales master Andrea Well, can I start 259 00:15:49,600 --> 00:15:50,000 Speaker 3: with you? 260 00:15:50,400 --> 00:15:50,880 Speaker 2: What are we. 261 00:15:51,000 --> 00:15:53,360 Speaker 3: Expecting from Vestas's earnings? 262 00:15:54,680 --> 00:15:58,400 Speaker 8: Well, I think we're expecting crucially and the first updates 263 00:15:58,440 --> 00:16:03,080 Speaker 8: since the changes to the American tax law that was 264 00:16:03,480 --> 00:16:07,240 Speaker 8: extremely detrimental to the wind energy sector. It had been 265 00:16:07,280 --> 00:16:11,160 Speaker 8: primed for huge growth because of President Biden's Inflation Reduction Act, 266 00:16:11,440 --> 00:16:13,760 Speaker 8: and then a lot of the support that the wind 267 00:16:13,800 --> 00:16:16,000 Speaker 8: industry was going to get has been paired back. So 268 00:16:16,000 --> 00:16:18,800 Speaker 8: now we're going to get an update from Vestas about 269 00:16:18,960 --> 00:16:21,760 Speaker 8: what does that mean for wind in the US for 270 00:16:21,800 --> 00:16:26,720 Speaker 8: their turbine business there, and also what impact is this 271 00:16:26,800 --> 00:16:31,040 Speaker 8: going to have on costs for electricity for the American market. 272 00:16:31,680 --> 00:16:34,320 Speaker 3: So this is the winding back that President Trump has 273 00:16:34,360 --> 00:16:39,440 Speaker 3: announced around those tax credits for clean energy projects? What 274 00:16:39,560 --> 00:16:42,520 Speaker 3: about them, what we're expecting in terms of orders, especially 275 00:16:42,560 --> 00:16:47,440 Speaker 3: for Germany now that it is focused on investment spending. 276 00:16:47,960 --> 00:16:51,240 Speaker 8: Yeah, I think Germany, especially with onshore wind, has been 277 00:16:51,480 --> 00:16:53,920 Speaker 8: one of the strongest markets. They've really done a lot 278 00:16:54,040 --> 00:16:58,520 Speaker 8: since the energy crisis to restart the onshore wind market 279 00:16:58,520 --> 00:17:02,160 Speaker 8: which had been sort of stagnant for a while. And 280 00:17:03,520 --> 00:17:06,160 Speaker 8: I think that it's going to be an extremely important 281 00:17:06,160 --> 00:17:09,040 Speaker 8: market for Vestas and other wind turbine makers, you know, 282 00:17:09,119 --> 00:17:10,800 Speaker 8: in the next for the rest of this decade. 283 00:17:12,400 --> 00:17:14,560 Speaker 3: And let's say that's a little taste of what we're 284 00:17:14,600 --> 00:17:17,880 Speaker 3: expecting them from Vestas. How important a business is vest 285 00:17:17,960 --> 00:17:20,359 Speaker 3: Us though, actually in Denmark. 286 00:17:20,480 --> 00:17:24,000 Speaker 9: I think it's it's huge. So we're actually in Copenhagen 287 00:17:24,080 --> 00:17:26,720 Speaker 9: a couple of weeks ago, and you know, as soon 288 00:17:26,760 --> 00:17:29,240 Speaker 9: as you land, as you're landing, you see a bunch 289 00:17:29,280 --> 00:17:34,160 Speaker 9: offshore wind farms there's signs everywhere for vestas it's one 290 00:17:34,160 --> 00:17:38,160 Speaker 9: of the key businesses in the region and more importantly 291 00:17:38,320 --> 00:17:39,440 Speaker 9: just in Europe overall. 292 00:17:39,880 --> 00:17:43,560 Speaker 3: Okay, and the environment then for clean energy firms in 293 00:17:43,640 --> 00:17:47,400 Speaker 3: Europe that are doing business with the US given this 294 00:17:47,480 --> 00:17:50,240 Speaker 3: kind of anti renewable Trump administration. 295 00:17:51,040 --> 00:17:53,919 Speaker 9: Yeah, So in the US, like we were saying, we 296 00:17:53,920 --> 00:17:55,280 Speaker 9: were kind of waiting to see what was going to 297 00:17:55,320 --> 00:17:58,320 Speaker 9: happen with the one big, beautiful bill, and now that 298 00:17:58,359 --> 00:18:01,159 Speaker 9: we have clarity, we have orders. It announced for Q 299 00:18:01,280 --> 00:18:03,359 Speaker 9: two or only about one point one gigawatts, but we 300 00:18:03,480 --> 00:18:06,800 Speaker 9: saw that coming in the week since then, we've already 301 00:18:06,840 --> 00:18:09,280 Speaker 9: seen a gigawat worth of orders just in the first 302 00:18:09,280 --> 00:18:12,359 Speaker 9: month of three q and five hundred megawatts so that 303 00:18:12,520 --> 00:18:15,480 Speaker 9: are in the US. So we are seeing that now 304 00:18:15,480 --> 00:18:17,600 Speaker 9: we have at least a bit of certainty even though 305 00:18:17,600 --> 00:18:19,920 Speaker 9: it's not exactly what we wanted that there's still going 306 00:18:19,960 --> 00:18:21,800 Speaker 9: to be a build out in the US. 307 00:18:22,680 --> 00:18:24,879 Speaker 3: So the order flow is coming in and you're starting 308 00:18:24,920 --> 00:18:28,160 Speaker 3: to get a bit more visibility on that in terms 309 00:18:28,160 --> 00:18:31,880 Speaker 3: of how Europe then is thinking about clean energy policy 310 00:18:31,960 --> 00:18:36,200 Speaker 3: given I mean, it's an increasingly sharp elbowed global economy, 311 00:18:36,200 --> 00:18:40,160 Speaker 3: isn't it. It's less cooperative, it's more self sufficient. And 312 00:18:40,240 --> 00:18:43,119 Speaker 3: this big change in the US. How much influence is 313 00:18:43,119 --> 00:18:45,879 Speaker 3: that having. How's Europe thinking about clean energy now? 314 00:18:46,080 --> 00:18:48,119 Speaker 9: So in Europe you can't exactly have something like the 315 00:18:48,119 --> 00:18:50,400 Speaker 9: Inflation Production Act where you can give tax and centerves 316 00:18:50,440 --> 00:18:54,720 Speaker 9: because it is individual states. Yes, however, there are two 317 00:18:55,119 --> 00:18:58,399 Speaker 9: major policy initiatives that have kind of helped spur along 318 00:18:58,960 --> 00:19:01,639 Speaker 9: wind and clear and energy growth overall. So you have 319 00:19:01,720 --> 00:19:05,600 Speaker 9: Repower EU and the europe Win Action Plan, and those 320 00:19:05,600 --> 00:19:07,520 Speaker 9: were really made to kind of cut the red tape 321 00:19:07,560 --> 00:19:10,320 Speaker 9: because a lot of what's stopping wind build out is 322 00:19:10,359 --> 00:19:13,800 Speaker 9: the bureaucracy to get the permits to get these projects going. 323 00:19:14,000 --> 00:19:17,000 Speaker 9: Because overall it only takes one to two years to 324 00:19:17,040 --> 00:19:19,840 Speaker 9: build an onshore wind farm. The biggest part is the 325 00:19:19,840 --> 00:19:20,720 Speaker 9: bureaucracy piece. 326 00:19:21,240 --> 00:19:22,280 Speaker 3: Where's that worst? 327 00:19:22,440 --> 00:19:25,040 Speaker 9: Do you think right now? It's kind of overall, I 328 00:19:25,040 --> 00:19:27,800 Speaker 9: can say where it's getting better. So you know, Denmark 329 00:19:27,840 --> 00:19:29,200 Speaker 9: is trying to cut a lot of that red tape, 330 00:19:29,720 --> 00:19:31,720 Speaker 9: but it's a bit of a double edged sword because 331 00:19:32,480 --> 00:19:35,240 Speaker 9: a lot of countries are also scaling back their offshore segment. 332 00:19:36,160 --> 00:19:39,320 Speaker 9: We see this in the US. The Biden administration had 333 00:19:39,320 --> 00:19:42,240 Speaker 9: a target of thirty gigawatts offshore win by twenty thirty. 334 00:19:42,840 --> 00:19:44,959 Speaker 9: The Trump administration basically came in and shut the door 335 00:19:45,000 --> 00:19:47,000 Speaker 9: on that and we might only get about five gigawatts. 336 00:19:47,760 --> 00:19:51,520 Speaker 3: Okay. Well, in terms of how well Europe's renewable energy 337 00:19:51,560 --> 00:19:54,719 Speaker 3: sector is doing in terms of earnings overall this quarter, 338 00:19:54,960 --> 00:19:56,800 Speaker 3: have there been big takeaways to you? 339 00:19:58,080 --> 00:20:03,359 Speaker 8: I think that a lot of the noise has been 340 00:20:03,400 --> 00:20:06,120 Speaker 8: about what's been happening in the US. It has been 341 00:20:06,240 --> 00:20:11,200 Speaker 8: a huge growth market for renewable energy, especially offshore wind 342 00:20:11,560 --> 00:20:14,080 Speaker 8: in recent years with the Biden administration, and now that's 343 00:20:14,080 --> 00:20:16,600 Speaker 8: been really pulled back. So you know, on the same 344 00:20:16,680 --> 00:20:20,720 Speaker 8: day the Vestas reports or Stead, another Danish renewable energy giant, 345 00:20:20,760 --> 00:20:25,000 Speaker 8: is going to post their results. They've had huge problems 346 00:20:25,040 --> 00:20:28,320 Speaker 8: in the US with cost overruns and now with some 347 00:20:28,440 --> 00:20:32,439 Speaker 8: of their projects essentially just being put on ice, and 348 00:20:32,480 --> 00:20:34,920 Speaker 8: definitely that they have like seabed leases which are just 349 00:20:35,080 --> 00:20:37,560 Speaker 8: areas kind of like a couple of years ago, would 350 00:20:37,560 --> 00:20:41,520 Speaker 8: been considered assets and now they're essentially worthless because there's 351 00:20:41,600 --> 00:20:46,159 Speaker 8: really no pathway to growth. While there's a Republican administration 352 00:20:46,240 --> 00:20:49,560 Speaker 8: in the White House, and that's going to be another 353 00:20:49,840 --> 00:20:53,600 Speaker 8: key view into what does this all mean for European 354 00:20:53,680 --> 00:20:56,119 Speaker 8: companies that have gone big in the US based on 355 00:20:56,200 --> 00:20:59,600 Speaker 8: policy and now are trying to recalibrate and figure out 356 00:20:59,760 --> 00:21:02,520 Speaker 8: what their next steps are in this Trump administration. 357 00:21:04,960 --> 00:21:08,960 Speaker 3: Has there been a rush though to get the to 358 00:21:09,000 --> 00:21:12,680 Speaker 3: get wind power projects actually done and completed because the 359 00:21:12,720 --> 00:21:15,280 Speaker 3: tax credits are going to run out? But it's actually 360 00:21:15,920 --> 00:21:18,359 Speaker 3: in some months, it's basically in a year to two 361 00:21:18,440 --> 00:21:21,160 Speaker 3: years time, right, twenty twenty seven. When so is there 362 00:21:21,160 --> 00:21:24,560 Speaker 3: a rush happening now or has that sort of been abandoned? 363 00:21:24,720 --> 00:21:26,840 Speaker 8: Yeah, I mean that's one of the questions that I'm 364 00:21:26,840 --> 00:21:29,639 Speaker 8: going to be asking Henrik Anderson, the CEO of Vestas, 365 00:21:29,760 --> 00:21:32,120 Speaker 8: is you know, what are you doing to get these 366 00:21:32,160 --> 00:21:34,760 Speaker 8: turbines to your customers as quickly as possible? Because there's 367 00:21:34,800 --> 00:21:37,480 Speaker 8: a lot of people who've had developments that maybe they 368 00:21:37,480 --> 00:21:39,240 Speaker 8: were thinking, oh, I could build this in the next 369 00:21:39,320 --> 00:21:41,320 Speaker 8: five years, and now they're like, oh, I've got like 370 00:21:41,720 --> 00:21:45,919 Speaker 8: two years to get this substantially started, and that's going 371 00:21:45,960 --> 00:21:48,320 Speaker 8: to really depend on the supply of turbines whether they 372 00:21:48,359 --> 00:21:49,000 Speaker 8: can do it or not. 373 00:21:49,280 --> 00:21:52,639 Speaker 3: Yeah, speaking of turbines, I mean I was quite interested 374 00:21:52,720 --> 00:21:55,560 Speaker 3: to read that actually there's also an issue around the 375 00:21:55,760 --> 00:22:00,000 Speaker 3: energy mix for making this massive bit of equipment, right, 376 00:22:00,160 --> 00:22:02,600 Speaker 3: the kind of the energy that it takes to make 377 00:22:02,680 --> 00:22:06,320 Speaker 3: the steel that goes into the wind turbine. So sort 378 00:22:06,320 --> 00:22:11,680 Speaker 3: of wondering also about the energy efficiency and the sustainable 379 00:22:11,880 --> 00:22:15,240 Speaker 3: aspect of vestas his own business or just the business 380 00:22:15,240 --> 00:22:17,800 Speaker 3: of these wind turbine makers. What do you think of that, will? 381 00:22:18,440 --> 00:22:22,360 Speaker 8: I mean, wind turbines are big pieces of steel. Steel 382 00:22:22,960 --> 00:22:28,760 Speaker 8: is emissions intensive industry, but the emissions that are offset 383 00:22:28,840 --> 00:22:33,000 Speaker 8: by using the wind turbine very very quickly compensate for 384 00:22:33,680 --> 00:22:37,000 Speaker 8: the emissions inherent in the machines and the transport of 385 00:22:37,040 --> 00:22:39,560 Speaker 8: getting them to the market because they're also put on 386 00:22:39,600 --> 00:22:43,680 Speaker 8: ships that are powered by oil. But it's something that 387 00:22:44,400 --> 00:22:47,520 Speaker 8: those companies want to address. They are looking into like 388 00:22:47,600 --> 00:22:51,120 Speaker 8: green steel and other things that could bring down their 389 00:22:51,200 --> 00:22:55,280 Speaker 8: carbon footprint, and especially you know, Danish company, sustainability is 390 00:22:55,400 --> 00:22:59,280 Speaker 8: very important there. But for now there are emissions, but 391 00:22:59,400 --> 00:23:02,680 Speaker 8: it is you know, compared to the benefit of replacing 392 00:23:02,920 --> 00:23:05,879 Speaker 8: a qualified power station or a gas power station with 393 00:23:05,960 --> 00:23:07,560 Speaker 8: a wind turbine, you know. 394 00:23:07,560 --> 00:23:07,960 Speaker 6: It's. 395 00:23:09,280 --> 00:23:14,000 Speaker 8: Worth it, easily worth it to spend some emissions on 396 00:23:14,119 --> 00:23:16,199 Speaker 8: making these things to be able to use them in 397 00:23:16,200 --> 00:23:17,320 Speaker 8: the power mix, so the. 398 00:23:17,280 --> 00:23:20,280 Speaker 3: Industry kind of factors it in as it were, So 399 00:23:20,359 --> 00:23:25,359 Speaker 3: that goes to the energy security issue for Europe. Europe's 400 00:23:25,400 --> 00:23:28,720 Speaker 3: recently only had this scare around Iran threatening to close 401 00:23:28,720 --> 00:23:31,800 Speaker 3: the Straight of hor Moves and that would affect energy 402 00:23:31,960 --> 00:23:35,720 Speaker 3: supplies in Europe. There's also pressure on anyone buying Russian energy. 403 00:23:36,160 --> 00:23:40,920 Speaker 3: How big a concern is it around the energy infrastructure 404 00:23:40,920 --> 00:23:43,760 Speaker 3: that Europe has energy supplies currently? 405 00:23:44,160 --> 00:23:47,360 Speaker 9: Yeah, I think it's a massive focal point for why 406 00:23:47,359 --> 00:23:50,120 Speaker 9: the clean Andrey transition is so important. Yes, it's good 407 00:23:50,119 --> 00:23:53,880 Speaker 9: for the environment, but energy security is fundamental. We saw 408 00:23:54,240 --> 00:23:57,600 Speaker 9: Europe stepping up with repower EU after Russian vidd Ukraine. 409 00:23:58,440 --> 00:24:00,480 Speaker 9: The threat of the closing the sh trade of horror 410 00:24:00,480 --> 00:24:03,440 Speaker 9: Moves is maybe not an immediate threat for Europe because 411 00:24:03,480 --> 00:24:07,040 Speaker 9: only four percent of gas it comes from Qatar, but 412 00:24:07,160 --> 00:24:10,919 Speaker 9: twenty percent of flows go through that strait of Hormuves, 413 00:24:11,000 --> 00:24:13,800 Speaker 9: so it would make any imports from other countries more expensive. 414 00:24:14,359 --> 00:24:17,240 Speaker 9: And then I think the third piece of that fundamental 415 00:24:17,320 --> 00:24:19,439 Speaker 9: part of why the transition is so important is the 416 00:24:19,440 --> 00:24:21,000 Speaker 9: build out of AI data centers. 417 00:24:21,400 --> 00:24:25,280 Speaker 3: Yeah, absolutely, because how power intensive they are, aren't they? Well, 418 00:24:25,320 --> 00:24:28,639 Speaker 3: my thanks to Bloomberg's Climate Change and Renewable Energy reporter 419 00:24:28,760 --> 00:24:33,560 Speaker 3: Will Maths and Bloomberg Intelligence Equity Research Senior associate Alessio 420 00:24:33,880 --> 00:24:36,359 Speaker 3: Master Andrea for speaking to me, and we will have 421 00:24:36,520 --> 00:24:40,879 Speaker 3: full coverage and analysis of Vessus's second quarter earnings for 422 00:24:40,960 --> 00:24:44,000 Speaker 3: you here on Bloomberg. I'm Caroline Hepkee here in London. 423 00:24:44,000 --> 00:24:46,439 Speaker 3: You can catch us every weekday morning for Bloomberg Daybreak 424 00:24:46,480 --> 00:24:48,720 Speaker 3: here at beginning at six am in London. That's one 425 00:24:48,760 --> 00:24:49,840 Speaker 3: am on Wall Street. 426 00:24:50,040 --> 00:24:54,320 Speaker 2: Amy, Thank you, Caroline. Now coming up on Bloomberg Daybreak weekend, 427 00:24:54,440 --> 00:24:57,119 Speaker 2: we'll look ahead to an interest rate decision from the 428 00:24:57,160 --> 00:25:01,160 Speaker 2: Reserve Bank of Australia. I'm Amy Morris. This is Bloomberg. 429 00:25:11,720 --> 00:25:14,840 Speaker 2: This is Bloomberg Daybreak weekend, our global look ahead at 430 00:25:14,840 --> 00:25:17,880 Speaker 2: the top stories for investors in the coming week. I'm 431 00:25:17,880 --> 00:25:21,440 Speaker 2: Amy Morris in Washington. One month ago, the Reserve Bank 432 00:25:21,480 --> 00:25:24,439 Speaker 2: of Australia made one of its most surprising decisions in 433 00:25:24,520 --> 00:25:29,560 Speaker 2: recent memory by doing absolutely nothing. The Central Bank opted 434 00:25:29,600 --> 00:25:32,880 Speaker 2: to hold steady, much to the chagrin of OSSI economists. 435 00:25:33,200 --> 00:25:35,800 Speaker 2: For more on what they may do this time around, 436 00:25:36,040 --> 00:25:38,679 Speaker 2: let's go to Bloomberg's Charlie Pellett Amy. 437 00:25:38,840 --> 00:25:43,960 Speaker 4: Governor Michelle Bullock faced tough questions following the RBA's July decision, 438 00:25:44,440 --> 00:25:48,320 Speaker 4: including whether the central bank could betrayed households expecting a 439 00:25:48,440 --> 00:25:51,960 Speaker 4: rate cut. Bullock said the decision was about timing of 440 00:25:51,960 --> 00:25:55,399 Speaker 4: a move rather than the direction. So what's in store 441 00:25:55,640 --> 00:25:59,880 Speaker 4: when RBA policymakers meet next week? Let's take a closer look. 442 00:26:00,000 --> 00:26:04,600 Speaker 4: We are joined by Rebecca Jones, Bloomberg News Managing editor 443 00:26:04,680 --> 00:26:08,280 Speaker 4: for Australia and New Zealand, also the host of the 444 00:26:08,280 --> 00:26:13,280 Speaker 4: Bloomberg Australia podcast. Rebecca joins us from our bureau in Melbourne. 445 00:26:13,400 --> 00:26:15,959 Speaker 4: So looking ahead to next week, we raise the question, 446 00:26:16,160 --> 00:26:18,719 Speaker 4: are we in for another curve ball from the RBA? 447 00:26:19,400 --> 00:26:24,880 Speaker 10: Well, Charlie Gooday, and you're absolutely right. The RBA stunned everybody, 448 00:26:25,000 --> 00:26:28,440 Speaker 10: well almost everybody last month by holding interest rates here 449 00:26:28,440 --> 00:26:32,400 Speaker 10: in Australia. It was largely an unexpected move. So when 450 00:26:32,440 --> 00:26:35,760 Speaker 10: we start thinking about next week's call, there's really two 451 00:26:36,040 --> 00:26:39,080 Speaker 10: massive pieces of the puzzle to consider. Well for any 452 00:26:39,080 --> 00:26:42,000 Speaker 10: central bank, of course, but for the RBA it is 453 00:26:42,080 --> 00:26:45,720 Speaker 10: the labor market here and also how inflation's doing now. 454 00:26:45,800 --> 00:26:48,399 Speaker 10: Back in July, we only had a partial read on 455 00:26:48,520 --> 00:26:51,399 Speaker 10: inflation in Australia, and I was actually suggesting that it 456 00:26:51,480 --> 00:26:55,520 Speaker 10: was pretty weak, weaker than thought, and that got markets 457 00:26:55,560 --> 00:26:57,399 Speaker 10: and a lot of people here jumping on the idea 458 00:26:57,400 --> 00:26:59,560 Speaker 10: that hey, well that's going to be enough to pull 459 00:26:59,600 --> 00:27:02,320 Speaker 10: the Reserve Bank over the line. On the other hand, 460 00:27:02,440 --> 00:27:05,199 Speaker 10: the labor market data one month ago suggested that the 461 00:27:05,240 --> 00:27:09,760 Speaker 10: unemployment rate was below projections from the RBA. Ultimately, the 462 00:27:09,840 --> 00:27:13,360 Speaker 10: RBA's held the rate. But looking ahead now to next week, 463 00:27:13,920 --> 00:27:16,680 Speaker 10: we've got more information, right, like, we've got a full 464 00:27:16,760 --> 00:27:20,480 Speaker 10: read on inflation and that's backed up what happened last month. 465 00:27:20,920 --> 00:27:24,439 Speaker 10: And we also have the jobs data and that is 466 00:27:24,480 --> 00:27:27,320 Speaker 10: telling quite a different story too. Just thirty days ago, 467 00:27:27,720 --> 00:27:30,680 Speaker 10: we've had a couple of revisions there, Charlie, and that's 468 00:27:30,720 --> 00:27:34,240 Speaker 10: indicating that the unemployment rate is now at four point 469 00:27:34,240 --> 00:27:36,240 Speaker 10: three percent, which is the highest in a couple of 470 00:27:36,359 --> 00:27:39,280 Speaker 10: years for Australia. I know that that number to people 471 00:27:39,280 --> 00:27:41,840 Speaker 10: listening around the world might not seem that bad, but 472 00:27:41,920 --> 00:27:46,000 Speaker 10: here we've got an unemployment rate that's not only trending high, 473 00:27:46,040 --> 00:27:49,360 Speaker 10: but it's also above what our Central Bank has been projecting. 474 00:27:49,440 --> 00:27:52,280 Speaker 10: So it does look like it's not going to be 475 00:27:52,320 --> 00:27:55,560 Speaker 10: the curveball of last month, and I just checked the 476 00:27:55,560 --> 00:27:59,560 Speaker 10: Bloomberg and all twenty seven economists that we survey are 477 00:27:59,560 --> 00:28:02,200 Speaker 10: predicted that we're going to get that twenty five basis 478 00:28:02,200 --> 00:28:03,040 Speaker 10: point cut. 479 00:28:03,440 --> 00:28:06,320 Speaker 4: All right, So that is the August decision. What's the 480 00:28:06,520 --> 00:28:10,520 Speaker 4: trajectory from here specifically then onto the November meeting. 481 00:28:11,280 --> 00:28:14,800 Speaker 10: So the market at the moment has been predicting at 482 00:28:14,880 --> 00:28:18,520 Speaker 10: least one more rate cut for twenty twenty five. That's 483 00:28:18,520 --> 00:28:21,879 Speaker 10: where it stands today. That may well change after we 484 00:28:21,960 --> 00:28:25,280 Speaker 10: hear what Governor Michelle Bullock has to say next Tuesday, 485 00:28:25,680 --> 00:28:28,560 Speaker 10: but for the time being, markets are pricing in at 486 00:28:28,680 --> 00:28:32,119 Speaker 10: least one more cut for twenty twenty five. It is 487 00:28:32,240 --> 00:28:35,680 Speaker 10: really just about the timing and the nuance. And one 488 00:28:35,760 --> 00:28:39,040 Speaker 10: other thing that is brand new last month is that 489 00:28:39,080 --> 00:28:41,760 Speaker 10: we now know how each of the members of the 490 00:28:41,800 --> 00:28:45,240 Speaker 10: Reserve Bank Board are voting. Last month it was a 491 00:28:45,320 --> 00:28:48,920 Speaker 10: vote of six people saying hold out of the nine 492 00:28:49,080 --> 00:28:53,520 Speaker 10: people on the board, and that may well sway the 493 00:28:53,560 --> 00:28:56,640 Speaker 10: projections from economists going forward for the rest of twenty 494 00:28:56,760 --> 00:29:01,840 Speaker 10: twenty five, depending on how the many members vote come Tuesday. 495 00:29:02,280 --> 00:29:07,520 Speaker 4: Now, what about major Australian banks CBA, Westpac, NAB and 496 00:29:07,600 --> 00:29:10,000 Speaker 4: a NZ. Are they pretty much in agreement on what 497 00:29:10,080 --> 00:29:11,880 Speaker 4: to expect for next week's meeting. 498 00:29:12,760 --> 00:29:15,360 Speaker 10: Well, the thing about the Big four banks, and indeed 499 00:29:15,400 --> 00:29:17,080 Speaker 10: we call them the Big four banks here and will 500 00:29:17,080 --> 00:29:21,080 Speaker 10: add Macquarie in as well they're a huge Australian company, 501 00:29:21,480 --> 00:29:24,320 Speaker 10: is that most mortgage holders, most of the mortgage business 502 00:29:24,360 --> 00:29:27,320 Speaker 10: here in Australia is on a variable interest right, and 503 00:29:27,360 --> 00:29:31,040 Speaker 10: that's quite unique to Australia, certainly the opposite in the US. 504 00:29:31,520 --> 00:29:35,600 Speaker 10: So whenever there is a hike or indeed a cut, 505 00:29:35,800 --> 00:29:39,520 Speaker 10: the banks are very quick to pass that on whether 506 00:29:39,520 --> 00:29:42,000 Speaker 10: it's good news or bad news for the person holding 507 00:29:42,040 --> 00:29:44,200 Speaker 10: the mortgage at the end of that So for the 508 00:29:44,240 --> 00:29:47,240 Speaker 10: most part, banks had a cracking year in twenty twenty four. 509 00:29:47,640 --> 00:29:51,640 Speaker 10: They really have already priced in these kind of fluctuations 510 00:29:51,680 --> 00:29:56,200 Speaker 10: from Australia Central Bank into their forecast for the coming year. 511 00:29:56,360 --> 00:29:59,880 Speaker 10: So no surprises really, I would say from the CU 512 00:30:00,120 --> 00:30:03,920 Speaker 10: of the Big four bank, I would I has it 513 00:30:03,960 --> 00:30:06,360 Speaker 10: a guess they do have their own economists as well, 514 00:30:06,640 --> 00:30:08,800 Speaker 10: that they're one of the twenty seven that are predicting 515 00:30:09,280 --> 00:30:11,080 Speaker 10: the cut on Tuesday. 516 00:30:10,880 --> 00:30:14,120 Speaker 4: Rebecca, how closely does the RBA mirror what's happening with 517 00:30:14,600 --> 00:30:17,960 Speaker 4: sentiments surrounding the Federal Reserve in the United States. 518 00:30:18,320 --> 00:30:21,200 Speaker 10: That's a really interesting question. And I think that we've 519 00:30:21,240 --> 00:30:24,600 Speaker 10: seen since the since Michelle Bullock has taken the reins 520 00:30:24,600 --> 00:30:27,320 Speaker 10: here in Australia, which you know, she's been in the 521 00:30:27,360 --> 00:30:30,040 Speaker 10: job for quite a while, that we are really doing 522 00:30:30,080 --> 00:30:33,040 Speaker 10: our own thing, marching by the beat of our own drum. 523 00:30:33,600 --> 00:30:35,600 Speaker 10: A lot of other countries are doing that. We have 524 00:30:35,800 --> 00:30:40,840 Speaker 10: seen globally less group think from our central bankers. They 525 00:30:40,880 --> 00:30:46,160 Speaker 10: are really splitting on their philosophy around good policy. We've 526 00:30:46,160 --> 00:30:49,200 Speaker 10: seen the Federal Reserve has stood part throughout the first 527 00:30:49,200 --> 00:30:53,280 Speaker 10: half of twenty twenty five, while others like the European 528 00:30:53,320 --> 00:30:56,520 Speaker 10: Central Bank, the Bank of Canada, the Bank of England, etc. 529 00:30:56,920 --> 00:31:00,480 Speaker 10: All easing in recent months, and Australia in that two 530 00:31:00,720 --> 00:31:03,640 Speaker 10: we've had the two cuts already in twenty twenty five. 531 00:31:04,160 --> 00:31:10,640 Speaker 10: So is there direct relationship there less so than perhaps historically. 532 00:31:10,960 --> 00:31:14,080 Speaker 4: Big picture, how are every day ausies feeling about all 533 00:31:14,120 --> 00:31:17,240 Speaker 4: of this? How's the Australian economy holding up, specifically in 534 00:31:17,320 --> 00:31:18,480 Speaker 4: terms of the labor market. 535 00:31:19,360 --> 00:31:23,000 Speaker 10: Well, what we can see is that consumers who participants 536 00:31:23,000 --> 00:31:25,280 Speaker 10: in the labor market, you know, they're not a very 537 00:31:25,320 --> 00:31:28,200 Speaker 10: happy bunch at the moment. And what's showing up in 538 00:31:28,440 --> 00:31:33,160 Speaker 10: things like retail and household spending data is what consumers 539 00:31:33,360 --> 00:31:35,840 Speaker 10: are doing, and that is that they're not spending. They're 540 00:31:35,840 --> 00:31:39,959 Speaker 10: going out and earning their wage, but they're not spending 541 00:31:40,040 --> 00:31:43,800 Speaker 10: it in ways that perhaps they used to be consumers. 542 00:31:43,800 --> 00:31:47,360 Speaker 10: When you ask them how things are going, one of 543 00:31:47,400 --> 00:31:52,120 Speaker 10: the things that they cite is the cost of everyday things. 544 00:31:52,640 --> 00:31:58,320 Speaker 10: Aside from things like fuel and core food items, households 545 00:31:58,360 --> 00:32:01,840 Speaker 10: are still really really struggle. So to sort of set 546 00:32:01,840 --> 00:32:04,640 Speaker 10: the scene for you a little bit, the median price 547 00:32:04,840 --> 00:32:08,120 Speaker 10: of a house in Sydney is one point seven million 548 00:32:08,240 --> 00:32:11,720 Speaker 10: Aussie dollars. It's up four point two percent this year, 549 00:32:12,760 --> 00:32:17,080 Speaker 10: so that's roughly one point one million in US dollars. 550 00:32:17,560 --> 00:32:19,920 Speaker 10: And we're not talking more to front homes here, Charlie. 551 00:32:19,920 --> 00:32:24,520 Speaker 10: These are modest, modest dwellings. So it's really showing up 552 00:32:24,560 --> 00:32:28,640 Speaker 10: in terms of discretionary spending, where people are choosing to 553 00:32:29,280 --> 00:32:33,360 Speaker 10: use the extra pennies that they they have. It's most 554 00:32:33,400 --> 00:32:37,800 Speaker 10: likely going into the essentials like paying the mortgage, covering education, 555 00:32:38,040 --> 00:32:40,000 Speaker 10: the cost of childcare and so on. 556 00:32:40,360 --> 00:32:43,600 Speaker 4: Now Australia is an export driven economy, and there's one 557 00:32:43,640 --> 00:32:47,720 Speaker 4: economy that's closely monitored in Australia that is China. What 558 00:32:47,800 --> 00:32:52,040 Speaker 4: are the underlying assumptions being made about the Chinese economy. 559 00:32:53,000 --> 00:32:56,040 Speaker 10: So there has been a trend over the last couple 560 00:32:56,040 --> 00:33:00,840 Speaker 10: of years around different ways of accessing growth the Chinese 561 00:33:00,880 --> 00:33:04,600 Speaker 10: economy away from the traditional manufacturing route, and that has 562 00:33:04,720 --> 00:33:08,920 Speaker 10: real world implications for our economy here in Australia being 563 00:33:09,280 --> 00:33:15,680 Speaker 10: such a resource rich exporter, and our primary destination for 564 00:33:15,720 --> 00:33:18,240 Speaker 10: those exports, along with many other countries around the world, 565 00:33:18,560 --> 00:33:21,719 Speaker 10: is of course China. So we saw some you know, 566 00:33:21,840 --> 00:33:26,240 Speaker 10: interesting patterns occur with the price of iron ore throughout 567 00:33:26,240 --> 00:33:29,040 Speaker 10: the pandemic, and you know, certainly in the last five 568 00:33:29,160 --> 00:33:31,880 Speaker 10: or so years that's come off a lot with the 569 00:33:31,920 --> 00:33:37,880 Speaker 10: trade tensions between Australia and China forcing Australia to seek 570 00:33:38,000 --> 00:33:42,040 Speaker 10: alternative paths for some of these exports. I think what 571 00:33:42,280 --> 00:33:45,400 Speaker 10: was proven was that there is other places for these 572 00:33:45,440 --> 00:33:49,200 Speaker 10: exports to be sent to. But it's certainly our key 573 00:33:49,240 --> 00:33:52,640 Speaker 10: trading partner, China, and one that you know, as evidenced 574 00:33:52,680 --> 00:33:57,000 Speaker 10: by Albany'ese's recent six day trip to China, is going 575 00:33:57,080 --> 00:33:59,959 Speaker 10: to be very very important for us. Going forward. 576 00:34:00,480 --> 00:34:02,600 Speaker 4: Rebecca, thank you very much for taking time to break 577 00:34:02,640 --> 00:34:06,320 Speaker 4: this all down for US. Rebecca Jones, Bloomberg's managing editor 578 00:34:06,360 --> 00:34:09,480 Speaker 4: for Australia and New Zealand, also hosts of the Bloomberg 579 00:34:09,560 --> 00:34:15,120 Speaker 4: Australia podcast We Move Next. To Trade and Chips, President 580 00:34:15,160 --> 00:34:18,560 Speaker 4: Trump says he will impose a one hundred percent tariff 581 00:34:18,600 --> 00:34:22,920 Speaker 4: on semiconductor imports, though he would exempt companies moving production 582 00:34:23,239 --> 00:34:26,160 Speaker 4: back to the United States. Such a move would place 583 00:34:26,160 --> 00:34:30,280 Speaker 4: a heavy strain on the likes of Taiwan Semiconductor, Tokyo 584 00:34:30,400 --> 00:34:34,840 Speaker 4: Electron and sk Heinex. And For more on the potential impact, 585 00:34:35,080 --> 00:34:38,719 Speaker 4: we heard from Emily Benson, head of strategy at Minerva 586 00:34:38,840 --> 00:34:43,960 Speaker 4: Technology Futures. She spoke with Bloomberg's Haslinda Ahmen in Singapore. 587 00:34:44,680 --> 00:34:48,040 Speaker 11: Emily's all aboud bringing chip production back home. The thing 588 00:34:48,120 --> 00:34:51,879 Speaker 11: is the US is offshore that production to Asia since 589 00:34:51,920 --> 00:34:53,480 Speaker 11: the nineteen sixties. 590 00:34:53,520 --> 00:34:55,600 Speaker 2: It doesn't have the ability, the. 591 00:34:55,520 --> 00:34:58,880 Speaker 11: Capacity to do it, and it takes years to build 592 00:34:59,000 --> 00:35:00,160 Speaker 11: new chip fat. 593 00:35:00,840 --> 00:35:05,080 Speaker 12: That's absolutely right. With one exception, which is sort of 594 00:35:05,120 --> 00:35:08,120 Speaker 12: uncomfortable for people who don't really like the direction of 595 00:35:08,160 --> 00:35:12,080 Speaker 12: travel right now with US policy, is that TSMC's production 596 00:35:12,160 --> 00:35:16,200 Speaker 12: facilities in Arizona are actually beating expectations, and so I 597 00:35:16,239 --> 00:35:19,320 Speaker 12: do think the administration has been relatively clear eyed about 598 00:35:19,360 --> 00:35:23,400 Speaker 12: the timeline. That being said, they're willing to apply maximum 599 00:35:23,480 --> 00:35:27,480 Speaker 12: pressure to the likes of TSMC in order to expedite 600 00:35:27,680 --> 00:35:31,359 Speaker 12: what's already a very fast time frame. Again, I do 601 00:35:31,440 --> 00:35:34,040 Speaker 12: think there will be carve outs to extend the timeline 602 00:35:34,080 --> 00:35:37,400 Speaker 12: of implementation. If you talk to a lot of industry analysts, 603 00:35:37,480 --> 00:35:39,920 Speaker 12: I think the four to five to six year timeframe 604 00:35:40,360 --> 00:35:43,279 Speaker 12: is more menable for the industry. We also have to 605 00:35:43,320 --> 00:35:47,160 Speaker 12: remember that this will directly confront one of the administration's 606 00:35:47,280 --> 00:35:51,040 Speaker 12: other hallmark policies, and this was announced two weeks ago 607 00:35:51,160 --> 00:35:54,280 Speaker 12: in the AI Action Plan, And here the White House 608 00:35:54,360 --> 00:35:58,160 Speaker 12: is saying very publicly that it wants to prioritize AI 609 00:35:58,280 --> 00:36:01,400 Speaker 12: build out, it wants to double down on US infrastructure, 610 00:36:01,800 --> 00:36:05,239 Speaker 12: and very interestingly, it also wants to package a lot 611 00:36:05,280 --> 00:36:08,759 Speaker 12: of that AI tech stact into separate bundles that it 612 00:36:08,800 --> 00:36:12,400 Speaker 12: can then export abroad. It of course will need affordable 613 00:36:12,400 --> 00:36:15,040 Speaker 12: inputs at the baseline in order to be able to 614 00:36:15,080 --> 00:36:18,719 Speaker 12: export these packages, and very interested to see what the 615 00:36:18,800 --> 00:36:23,000 Speaker 12: ultimate price impact is on that particular corner of the 616 00:36:23,040 --> 00:36:24,800 Speaker 12: administration's policy. 617 00:36:25,440 --> 00:36:28,320 Speaker 11: And emily some say it is about quantity, it's also 618 00:36:28,360 --> 00:36:31,359 Speaker 11: about quality, and when it comes to both of them 619 00:36:31,560 --> 00:36:34,880 Speaker 11: Taiwan and South Korea asapause, what do you make off 620 00:36:35,080 --> 00:36:38,240 Speaker 11: perhaps equality and quantity that can be expected from the US. 621 00:36:39,000 --> 00:36:40,920 Speaker 12: A couple of weeks ago and the lead up to 622 00:36:40,960 --> 00:36:44,719 Speaker 12: the expiration of the reciprocal tariff pause, the Administration has 623 00:36:44,880 --> 00:36:48,360 Speaker 12: entered into these arrangements where foreign partners seem to be 624 00:36:48,560 --> 00:36:51,759 Speaker 12: under the assumption that they would only be subject to 625 00:36:52,080 --> 00:36:55,000 Speaker 12: a fifteen percent teriff freight, and that includes a lot 626 00:36:55,000 --> 00:36:58,799 Speaker 12: of these sectoral products like semiconductors. So one question will 627 00:36:58,840 --> 00:37:03,880 Speaker 12: actually be whether or not this announcement induces further development 628 00:37:04,600 --> 00:37:08,040 Speaker 12: on shore by those countries, or whether or not we'll 629 00:37:08,080 --> 00:37:12,480 Speaker 12: have to explore further negotiations. I also will note that 630 00:37:12,520 --> 00:37:15,640 Speaker 12: the United States actually does not import a lot of 631 00:37:15,640 --> 00:37:20,320 Speaker 12: semi conductors directly. Most semi conductors actually enter the United 632 00:37:20,320 --> 00:37:24,040 Speaker 12: States in finished goods. So these are items like iPhones 633 00:37:24,160 --> 00:37:27,000 Speaker 12: or laptops, and so it'll be interesting to see how 634 00:37:27,040 --> 00:37:30,920 Speaker 12: the Administration starts to calculate the actual value and whether 635 00:37:31,160 --> 00:37:33,520 Speaker 12: or not each finished item will be subject to that 636 00:37:33,560 --> 00:37:35,120 Speaker 12: one hundred percent care free. 637 00:37:35,320 --> 00:37:39,400 Speaker 4: Emily Benson, head of strategy at Minerva Technology Futures, in 638 00:37:39,480 --> 00:37:44,759 Speaker 4: conversation with Bloomberg's has Linda Ahmen. I'm Charlie Pelacascius weekdays 639 00:37:44,800 --> 00:37:49,200 Speaker 4: for the Daybreak Asia podcast. It's available wherever you get 640 00:37:49,200 --> 00:37:50,040 Speaker 4: your podcasts. 641 00:37:50,400 --> 00:37:53,279 Speaker 2: Amy, Thank you, Charlie. And that does it for this 642 00:37:53,480 --> 00:37:56,960 Speaker 2: edition of Bloomberg day Break Weekend. Join us again Monday morning, 643 00:37:57,040 --> 00:37:59,680 Speaker 2: five am Wall Street Time for the latest on markets 644 00:37:59,680 --> 00:38:02,439 Speaker 2: over sea and the news you need to start your day. 645 00:38:02,920 --> 00:38:05,960 Speaker 2: I Mammie Morris, stay with us. Top stories and global 646 00:38:05,960 --> 00:38:08,279 Speaker 2: business headlines are coming up right now