WEBVTT - Bloomberg Daybreak Weekend: Apple, ECB Decision, China 0:00:02.240 --> 0:00:04.680 This is Bloomberg day Break Weekend, our global look at 0:00:04.720 --> 0:00:07.080 the top stories in the coming week from our Daybreak 0:00:07.120 --> 0:00:09.080 anchors all around the world, and straight. 0:00:08.840 --> 0:00:09.959 Ahead on the program. 0:00:10.000 --> 0:00:14.120 Apple set to launch the iPhone fifteen this week. I'm 0:00:14.160 --> 0:00:15.360 Tom Busby in New York. 0:00:15.680 --> 0:00:18.400 I'm Carolyn hege Hair in London, where we're looking ahead 0:00:18.440 --> 0:00:21.479 to the crucial ECB interest rate decision. 0:00:21.720 --> 0:00:24.600 I'm Brian Curtis in Hong Kong. We look at upcoming 0:00:24.680 --> 0:00:27.800 data in China and what might serve as a catalyst 0:00:27.880 --> 0:00:29.000 for a market recovery. 0:00:29.080 --> 0:00:31.639 I'm Keilly Lines in Washington, where the House is returning 0:00:31.640 --> 0:00:34.919 from its August recess and racing to avoid a government shutdown. 0:00:35.479 --> 0:00:39.440 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:39.479 --> 0:00:43.280 Eleve Them three own New York, Bloomberg ninety nine to one, Washington, DC, 0:00:43.600 --> 0:00:47.600 Bloomberg one O six one, Boston, Bloomberg nine sixty, San Francisco, 0:00:47.880 --> 0:00:52.080 DAB Digital Radio London, Sirius XM one nineteen and around 0:00:52.159 --> 0:00:54.800 the world on Bloomberg Radio dot Com and via the 0:00:54.800 --> 0:00:56.000 Bloomberg Business App. 0:01:00.200 --> 0:01:02.880 I'm Tom Busby, and we begin today's program with Apple 0:01:03.080 --> 0:01:06.679 and it's new product unveiling next week, which risks being 0:01:06.680 --> 0:01:11.240 overshadowed by a growing government iPhone ban in China, Apple's 0:01:11.319 --> 0:01:14.360 largest market outside the US. Now for all things Apple, 0:01:14.560 --> 0:01:17.800 we're joined by Bloomberg Technology co host ed Ludlow in 0:01:17.880 --> 0:01:18.600 San Francisco. 0:01:18.760 --> 0:01:18.800 Ed. 0:01:18.840 --> 0:01:21.039 Thanks for joining us, Thank you for having me. Wow 0:01:21.080 --> 0:01:22.600 what a week. Oh yeah. 0:01:22.680 --> 0:01:25.240 Now, before we talk about the upcoming iPhone fifteen and 0:01:25.280 --> 0:01:29.120 Apple Watch upgrades, let's start with last week and what 0:01:29.480 --> 0:01:32.840 happened with the iPhone in China what that did to 0:01:32.959 --> 0:01:35.720 Apple shares this past week on Wall Street. 0:01:35.800 --> 0:01:37.840 I mean, the reality is that the news was so 0:01:37.840 --> 0:01:42.160 significant that on Wednesday and Thursday, across two sessions, Apple 0:01:42.240 --> 0:01:45.119 lost almost two hundred billion dollars in market cap, which 0:01:45.120 --> 0:01:47.400 for Apple, that just doesn't happen, you know, It's it's 0:01:47.480 --> 0:01:51.080 kind of this steady ship technology giant. But the news 0:01:51.640 --> 0:01:54.320 is kind of a see saw of things that The 0:01:54.360 --> 0:01:58.440 headline is that, according to Bloomberg sources, China's government is 0:01:58.520 --> 0:02:03.240 telling other government agents and state backed corporations that their 0:02:03.320 --> 0:02:07.320 staff cannot use iPhone and they cannot use handsets from 0:02:07.320 --> 0:02:11.960 other non Chinese handset makers. And what that looks like, 0:02:12.560 --> 0:02:15.799 you know, is similar to what we saw a year ago, 0:02:15.919 --> 0:02:18.040 actually in May of twenty twenty two, when the Chinese 0:02:18.080 --> 0:02:21.359 government said a similar thing about personal computers or PCs. 0:02:21.400 --> 0:02:24.520 They basically said, you have two years to transition from 0:02:24.560 --> 0:02:27.600 a foreign brand to a Chinese brand, and you have 0:02:27.680 --> 0:02:31.240 to use a you have to use a Chinese PC. 0:02:31.480 --> 0:02:36.200 And they're now replicating that playbook with smartphones. 0:02:36.320 --> 0:02:39.600 So is this like an opening salvo by Beijing in 0:02:39.680 --> 0:02:43.280 a crackdown on all US technology? Also it comes at 0:02:43.280 --> 0:02:45.440 the same time a new Huawei phone comes out. 0:02:45.560 --> 0:02:48.239 Yes, So I would note that there are several cell 0:02:48.280 --> 0:02:52.919 side analysts that point out, despite the headline and all 0:02:52.960 --> 0:02:56.760 of the news reports, it's likely that the Chinese government, 0:02:56.800 --> 0:02:59.440 as a matter of policy, you know, has been telling 0:02:59.720 --> 0:03:04.200 govvernment workers, agencies, and state back corporations for some time, like, hey, 0:03:04.200 --> 0:03:08.000 come on, let's be using Chinese brands, not our own brands, 0:03:08.000 --> 0:03:11.120 domestic brands, not a foreign or international brand. 0:03:11.880 --> 0:03:13.320 So it's hard to gauge like what. 0:03:13.360 --> 0:03:16.360 Kind of impact that would have. Next week, and I 0:03:16.360 --> 0:03:18.000 know we'll get into it is the launch of the 0:03:18.080 --> 0:03:20.880 iPhone fifteen, and this is kind of the most substantive 0:03:21.400 --> 0:03:25.600 and significant technology upgrade to the iPhone handset for some time. 0:03:25.840 --> 0:03:29.000 But go back to the Chinese consumer. China Greater China 0:03:29.040 --> 0:03:32.239 is about twenty percent of Apple's revenues, and in the 0:03:32.480 --> 0:03:36.560 quarter just gone, the June quarter, Apple actually grew in 0:03:36.640 --> 0:03:40.680 China eight percent, whereas overall sales declined. So if you're 0:03:40.720 --> 0:03:43.840 a consumer in China and your government is telling you like, hey, 0:03:44.240 --> 0:03:46.200 if you work for the government or a government agency 0:03:46.280 --> 0:03:48.560 or a state back corporation, we don't want using iPhone, 0:03:48.800 --> 0:03:51.520 and then Apple brings out a new iPhone, what are 0:03:51.520 --> 0:03:53.240 you going to do? And that is the part that 0:03:53.280 --> 0:03:55.560 the market and the analysts and that all of us 0:03:55.600 --> 0:03:58.440 tech journalists are finally hard to quantify, like what the 0:03:58.480 --> 0:04:01.320 impact will be? And you absolutely right. The surprise of 0:04:01.400 --> 0:04:05.200 last week was Huawei, that's been out of the handset 0:04:05.240 --> 0:04:08.240 game for a little while, bringing to market a mysterious 0:04:08.320 --> 0:04:12.080 new smartphone which we literally lifted the lid on. 0:04:13.120 --> 0:04:17.200 Now there's Mate sixty Pro five G capable updated. It 0:04:17.279 --> 0:04:19.839 sounds like they are really pushing this to take the 0:04:19.839 --> 0:04:21.320 place of all those Apple products. 0:04:21.480 --> 0:04:23.240 Yes, so I talked about that tit for tat and 0:04:23.240 --> 0:04:27.000 the geopolitics. The Commerce Secretary, Gina Romondo was in China 0:04:27.160 --> 0:04:31.000 week before this, right last week and time to that 0:04:31.279 --> 0:04:34.960 this mysterious phone hits the market, and it's mysterious because 0:04:35.000 --> 0:04:37.640 it's not registered. The specs are not registered with the 0:04:37.720 --> 0:04:42.280 China regulator, which is highly unusual. It on paper is 0:04:43.200 --> 0:04:47.599 competitive with the leading smartphones. What Bloomberg did is we 0:04:47.640 --> 0:04:50.480 actually got hold of one because it sold out within hours, 0:04:51.000 --> 0:04:53.279 and we took it to a specialist tech insights and 0:04:53.279 --> 0:04:57.080 they tore the thing apart and what they discovered is, yes, okay, 0:04:57.200 --> 0:04:59.920 it's more technologically advanced than we thought. China was cap 0:05:00.080 --> 0:05:03.080 of love. It has a seven animeter processor, but that 0:05:03.200 --> 0:05:06.159 is still two generations behind the cutting edge of chip making. 0:05:06.400 --> 0:05:10.000 But it raised all these alarm bells about whether China 0:05:10.080 --> 0:05:12.599 is breaching sanctions that the US currently has in place. 0:05:13.120 --> 0:05:15.040 But the point, as it relates to Apple is will 0:05:15.040 --> 0:05:17.920 hold on. This has come out of nowhere? Could Huawei 0:05:17.920 --> 0:05:20.960 take some market share from Apple at the same time 0:05:21.040 --> 0:05:24.120 that the government is cracking down on products like the iPhone? 0:05:24.160 --> 0:05:26.400 And so that was part of the nervousness in the 0:05:26.440 --> 0:05:28.840 market and one reason that Apple share has fell. 0:05:29.520 --> 0:05:30.800 Oh boy did they fall. Now. 0:05:31.000 --> 0:05:33.919 Some analysts, though, I mean JP Morgan Chase says this 0:05:34.080 --> 0:05:37.000 is bad not you know, the high valuation for the 0:05:37.040 --> 0:05:39.960 company and the risks with this band. But some like 0:05:40.080 --> 0:05:43.599 Dan Ives had Wedbush Security saying this band is really 0:05:43.640 --> 0:05:45.359 nothing to worry about. Let's hear what he said to 0:05:45.400 --> 0:05:47.000 Bloomberg this just on Friday. 0:05:47.360 --> 0:05:50.040 In my opinion, Barcelot worse than bite. I mean, there's 0:05:50.160 --> 0:05:54.440 essentially been a pseudo ban of government employse for Apple 0:05:54.440 --> 0:05:56.960 in terms of iPhones the last two years. Now, maybe 0:05:57.000 --> 0:05:59.280 there was a little more restrictions here, but we're still 0:05:59.279 --> 0:06:02.640 talking about what we with five hundred thousand iPhones max. 0:06:03.320 --> 0:06:05.200 Relative to a week, We've going to be forty five 0:06:05.279 --> 0:06:08.800 million sold in China in the next year. 0:06:09.400 --> 0:06:11.960 And let's face it, ed Apple still valued at around 0:06:11.960 --> 0:06:15.200 two point eight trillion dollars, the most valuably valuable publicly 0:06:15.240 --> 0:06:16.920 traded company in the US. 0:06:17.160 --> 0:06:19.599 So there's two things here. Whether the bark is worse 0:06:19.640 --> 0:06:22.760 than its bite in the context of China's government, and 0:06:22.800 --> 0:06:25.279 it's its attitude towards Apple, we don't know. You know, 0:06:25.600 --> 0:06:28.680 Dan talked about this sort of unit volume that could 0:06:28.680 --> 0:06:31.560 be impacted. Think about it a slightly different way, think 0:06:31.560 --> 0:06:35.120 about how it might impact the broad suite of Apple products. 0:06:35.160 --> 0:06:37.720 The iPhone is still everything for Apple, but if you're 0:06:37.720 --> 0:06:41.200 a consumer, and again, you know that your government is saying, hey, 0:06:41.240 --> 0:06:43.320 we don't want you using iPhone. In the context of 0:06:43.320 --> 0:06:46.279 a government agency or a state backed corporation, do you 0:06:46.360 --> 0:06:48.680 then hold off on buying an Apple Watch or a 0:06:48.680 --> 0:06:52.080 MacBook or using other Apple products. So that's the unquantifiable 0:06:52.120 --> 0:06:54.240 side of it. I'll tell you what we know, and 0:06:54.279 --> 0:06:57.280 the data is really important. That the June quarter was 0:06:57.320 --> 0:07:00.479 a record for Apple in Greater China, and what Tim 0:07:00.520 --> 0:07:03.880 Cook said was responsible for that was what he called switches. 0:07:04.520 --> 0:07:07.400 Switches are consumers that are buying an iPhone for the 0:07:07.480 --> 0:07:12.680 first time, or they're switching from another handset maker to iPhone. 0:07:12.680 --> 0:07:15.360 Maybe they've had one in the past, but they're switches. 0:07:15.800 --> 0:07:18.320 And so what we concluded from that was China was 0:07:18.320 --> 0:07:21.480 growing because people were moving to iPhone and this story 0:07:21.560 --> 0:07:25.480 in literally the last week or so has changed that narrative. 0:07:25.800 --> 0:07:28.560 And as Dan kind of pointed out, we don't know 0:07:28.640 --> 0:07:31.600 the number of handsets. You can try to calculate, but 0:07:31.760 --> 0:07:33.800 it's going to be interesting to see how the Chinese 0:07:33.800 --> 0:07:34.679 consumer reacts. 0:07:34.920 --> 0:07:37.080 Let's face it, we have a few months here before 0:07:37.120 --> 0:07:39.680 the holidays, we have these new products coming out. It 0:07:39.720 --> 0:07:42.920 could really change things. Let's talk about what is happening 0:07:42.920 --> 0:07:46.000 at Apple headquarters that's coming Tuesday. What are you expecting 0:07:46.040 --> 0:07:47.840 to see in these new products. 0:07:47.960 --> 0:07:51.160 Yeah, we're excited to be down in Cupertino at Apple HQ. 0:07:51.360 --> 0:07:53.800 The event is called wonder Lust. We actually don't have 0:07:53.840 --> 0:07:56.000 a really clear handle on why, but this is the 0:07:56.040 --> 0:07:58.120 biggest event of the year, and it's all about the 0:07:58.160 --> 0:08:01.320 iPhone fifteen. And like Apple was done with prior generations, 0:08:01.320 --> 0:08:05.320 there will be four individual submodels of the fifteen generation. 0:08:05.720 --> 0:08:09.360 Two base models iPhone fifteen and iPhone fifteen plus a 0:08:09.440 --> 0:08:12.320 plus sized version six point seven inch screen, and then 0:08:12.360 --> 0:08:15.080 the Pro models. And the Pro model is everything. It's 0:08:15.120 --> 0:08:19.960 so important. Higher average selling price consumers tend to favor 0:08:20.000 --> 0:08:24.120 those kind of very tech heavy, substantive upgrades. And you 0:08:24.160 --> 0:08:26.280 know with the Pro you will get an iPhone fifteen 0:08:26.360 --> 0:08:30.000 Pro and an iPhone fifteen Pro Max. All according to 0:08:30.040 --> 0:08:32.520 Bloomberg's reporting, and in particular, I shout out my good 0:08:32.520 --> 0:08:35.080 friend and colleague Mark German because he always scoops this 0:08:35.120 --> 0:08:38.520 stuff ahead of time. And there are two key things 0:08:38.559 --> 0:08:40.640 about the iPhone on the Pro side, the Pro and 0:08:40.720 --> 0:08:44.120 Pro Max, higher spec materials. We're going to have titanium 0:08:44.160 --> 0:08:48.120 around the edges instead of aluminum or stainless steel, so 0:08:48.200 --> 0:08:52.080 a higher quality but lighter weight product, a slightly wider screen. 0:08:52.520 --> 0:08:55.079 They're called bezels, the sort of edge of the phone 0:08:55.120 --> 0:08:58.439 the screen will stretch further. But then I'm a geek, right, 0:08:58.480 --> 0:09:01.400 I love the compute, I love the processors to look 0:09:01.440 --> 0:09:04.480 out for what they talk about, the proprietary silicon and 0:09:04.520 --> 0:09:08.120 again what drives upgrades in the smartphone market. It's real 0:09:08.200 --> 0:09:11.720 cutting edge tech. In this generation of iPhone fifteen Pro, 0:09:11.800 --> 0:09:15.800 we expect Apple's own a seventeen processor, the latest processor 0:09:15.800 --> 0:09:19.880 they do, built on three nanometer technology that will give 0:09:19.880 --> 0:09:23.440 it faster processing. It will give a greater memory bandwidth 0:09:23.440 --> 0:09:27.280 in conjunction with the memory chips. But also we're looking 0:09:27.320 --> 0:09:30.000 at the next generation of RF or radio frequency chip 0:09:30.040 --> 0:09:31.840 as well, the U two across all of them Pro 0:09:31.960 --> 0:09:34.440 and the base model fifteen's that will give it just 0:09:34.480 --> 0:09:39.880 better connectivity and in short medium range, which if you 0:09:40.360 --> 0:09:44.600 care about those things, right, and beyond that, some OS 0:09:44.600 --> 0:09:45.960 and functionality update as well. 0:09:46.320 --> 0:09:50.160 Also a refreshed Apple Watch AirPods. There may be news there. 0:09:50.679 --> 0:09:52.320 Yeah, so the air pods are kind of getting a 0:09:52.360 --> 0:09:54.360 slight refresh. I think the big thing we missed on 0:09:54.400 --> 0:09:56.640 iPhone and I apologize I should have got to it sooner. 0:09:56.679 --> 0:09:58.800 But is that we're going to go back to us 0:09:59.000 --> 0:10:02.600 or we're going too USBC charging, So everyone out there 0:10:02.679 --> 0:10:06.840 that's sort of insanely furious, like HI about how many 0:10:06.880 --> 0:10:09.199 different charges you have to use every day? Apple is 0:10:09.240 --> 0:10:13.000 moving the iPhone to USBC, which is substantive, right, It's 0:10:13.040 --> 0:10:18.520 going from thirty pen to lightning to now USBC, and 0:10:18.559 --> 0:10:21.600 the air pods will also get that USBC upseight and 0:10:21.640 --> 0:10:23.839 that's pretty much it beyond the software at the AirPods 0:10:23.880 --> 0:10:27.480 and then very modest changes to Apple Watch two updated 0:10:27.520 --> 0:10:31.320 lines series nine forty one millimeter forty five millimeter and 0:10:31.320 --> 0:10:34.560 then a second generation Ultra forty nine millimeter in size. 0:10:34.559 --> 0:10:36.800 So it's slight tweaks, but the real updates are in 0:10:36.840 --> 0:10:37.280 the iPhone. 0:10:37.520 --> 0:10:39.640 Well, there is a lot to look forward to, ED, 0:10:39.760 --> 0:10:42.800 and be sure to tune into Bloomberg Technology weekdays at 0:10:42.840 --> 0:10:45.560 noon on Bloomberg Television, and ED is going to be 0:10:45.600 --> 0:10:49.160 in Cooper Tino at Apple Headquarters this Tuesday, following all 0:10:49.240 --> 0:10:52.720 the action on Bloomberg TV. Coming up on Bloomberg Day 0:10:52.760 --> 0:10:55.160 Break weekend, we head to Europe and preview the upcoming 0:10:55.240 --> 0:10:56.520 ECB decision. 0:10:56.800 --> 0:10:58.840 I'm Tom Busby. This is Bloomberg. 0:11:09.280 --> 0:11:11.960 This is Bloomberg Daybreak, weekend, our global look ahead at 0:11:11.960 --> 0:11:14.640 the top stories for investors in the coming week. I'm 0:11:14.679 --> 0:11:16.920 Tom Busby in New York. And up later in our 0:11:16.960 --> 0:11:19.959 program a look at the market recovery in China. But first, 0:11:20.240 --> 0:11:22.760 the European Central Bank meets in the coming days, where 0:11:22.800 --> 0:11:25.760 policymakers will decide whether or not to prolong the most 0:11:25.760 --> 0:11:29.960 aggressive bout of monetary tightening in its history. Investors are 0:11:30.000 --> 0:11:32.880 split on whether or not the ECB will pause, as 0:11:32.920 --> 0:11:36.000 the latest data show the pace of price increases are 0:11:36.160 --> 0:11:39.560 slowing along with the downturn in the services sector. 0:11:39.920 --> 0:11:40.760 For more, let's go. 0:11:40.720 --> 0:11:43.840 To London and bring in Bloomberg Daybreak europe Banker Caroline 0:11:43.880 --> 0:11:44.800 Hepger Tom. 0:11:44.840 --> 0:11:47.320 To pause or not to pause is the question that 0:11:47.400 --> 0:11:50.680 ECB policymakers will be mulling in the run up two 0:11:50.679 --> 0:11:55.640 thursdays rate decision. A chorus of Governing Council members have 0:11:55.800 --> 0:11:59.360 in recent days been reiterating their desire to hike interest 0:11:59.440 --> 0:12:03.240 rate in another point, to bring down inflation in Europe, 0:12:03.600 --> 0:12:06.280 but there are others who are worried that the effects 0:12:06.320 --> 0:12:09.120 of the last nine hikes are starting to take their 0:12:09.240 --> 0:12:13.320 toll on the economy well. Economic growth remains resilient in 0:12:13.360 --> 0:12:16.360 the second quarter. In the twenty member euro Area, the 0:12:16.480 --> 0:12:21.160 latest PMI surveys have shown the services sector following manufacturing 0:12:21.320 --> 0:12:25.640 into a downturn. I've been discussing this with Bloomberg's ECB 0:12:25.800 --> 0:12:30.400 reporter Jana Randau and our senior Euro Area economist David Powell. 0:12:30.720 --> 0:12:35.800 I started by talking to Yanna about her expectations, having 0:12:36.040 --> 0:12:39.880 spoken to the Dutch Central Bank governor class Not, who 0:12:39.880 --> 0:12:43.959 told Bloomberg that investors betting against the rate hike maybe 0:12:44.080 --> 0:12:46.720 underestimating the likelihood of it happening. 0:12:46.880 --> 0:12:52.480 Well, I think he actually describes the controversy or the 0:12:52.840 --> 0:12:58.000 challenges rather well. He didn't say raids will rise, nor 0:12:58.080 --> 0:13:02.640 did he say raids will be on hold. Reading between 0:13:02.679 --> 0:13:06.880 the lines, I sensed a slight preference for another hike, 0:13:07.320 --> 0:13:11.080 but he was very clear in saying it is complicated. Right, 0:13:12.240 --> 0:13:17.960 the inflation outlook proves to be disappointing. It's sticky, it's 0:13:18.040 --> 0:13:20.760 not coming down as quickly as they want. At the 0:13:20.800 --> 0:13:25.959 same time, economic surveys point to a very quick deterioration 0:13:26.080 --> 0:13:29.520 in the economic outlook. Hard data is so far, he 0:13:29.640 --> 0:13:35.600 said on quite showing that yet the second quarter GDP 0:13:35.760 --> 0:13:40.000 figures were actually rather promising. The labor market is holding up, 0:13:40.040 --> 0:13:44.520 the housing market seems to have bottomed out. So so 0:13:44.679 --> 0:13:48.920 a very very tricky situation. And we've heard, of course, 0:13:48.920 --> 0:13:52.640 from from policymakers from from across the spectrum. We've had 0:13:53.080 --> 0:13:58.679 the very hawkish people, the Slovak Central Bank governor speaking 0:13:59.120 --> 0:14:04.120 about the need for one more hike and preferably preferably 0:14:04.520 --> 0:14:08.760 in September. We heard from Mario sent In or the 0:14:09.040 --> 0:14:12.960 Portuguese saying downside rescus some materializing. So the spectrum is 0:14:13.040 --> 0:14:17.080 rather wide and it's very difficult, but I think not 0:14:17.600 --> 0:14:22.840 view of ever so slightly preferring a move in September, 0:14:23.280 --> 0:14:25.440 that is where I would put my. 0:14:25.440 --> 0:14:29.720 Money, Okay, really between the lines and of the ECB officials, David, 0:14:29.800 --> 0:14:33.000 Inflation has been slowing in the Euro Area, but the 0:14:33.040 --> 0:14:36.200 economy is slowing down to how difficult a balancing act 0:14:36.400 --> 0:14:38.280 is the ECB facing. 0:14:38.480 --> 0:14:42.080 Well, the ECB's primary focus, in fact only focus really 0:14:42.160 --> 0:14:44.840 is inflation, unlike the Federal Reserve. So it's going to 0:14:44.840 --> 0:14:48.600 be it's going to look at that most and as 0:14:48.680 --> 0:14:52.360 Jhanna said, inflation remains very high. In fact, it is 0:14:52.520 --> 0:14:57.160 higher than they forecast when they last released their forecast 0:14:57.240 --> 0:15:01.320 in June. And also inflation expectation are very high despite 0:15:01.360 --> 0:15:04.640 the slow down in the economy. So we think they're 0:15:04.680 --> 0:15:10.119 going to hike again in September. And as Jana also highlighted, 0:15:10.200 --> 0:15:13.400 the some of the hawkish members have been speaking about 0:15:13.440 --> 0:15:17.040 that preference for a hike in September, and they probably 0:15:17.080 --> 0:15:19.480 know the window of opportunity will soon close to get 0:15:19.480 --> 0:15:22.440 a last hike in It's clear that the economy is 0:15:22.520 --> 0:15:25.360 facing a period of significant weakness and that's probably going 0:15:25.400 --> 0:15:27.280 to get worse in the second half of this year. 0:15:27.600 --> 0:15:30.840 There's not only the surveys, there's more forward looking indicators 0:15:30.920 --> 0:15:34.640 like the ECB's bank lending survey and data and credit 0:15:34.720 --> 0:15:39.120 that show the picture is getting worse. So they'll probably 0:15:39.160 --> 0:15:41.280 try to push this through now because it may be 0:15:41.360 --> 0:15:42.760 the last opportunity to do so. 0:15:43.040 --> 0:15:46.080 Yeah, Okay, Yana, how divided you think that the Council 0:15:46.240 --> 0:15:48.160 will be though on this decision? 0:15:48.840 --> 0:15:54.120 I would say the times when everybody agrees easily and 0:15:54.800 --> 0:15:57.960 is very happy with the outcome, those times are over. 0:15:58.760 --> 0:16:03.520 Do I expect big, big fight? Probably not, but but 0:16:03.760 --> 0:16:08.880 you do see different opinions emerging, and and very much 0:16:08.920 --> 0:16:11.560 along the Hawkish and Dorvish lines. You would you would 0:16:11.600 --> 0:16:16.440 expect with those in the dobbage camp really looking at 0:16:16.480 --> 0:16:21.200 the economy, at the risks, at at how demand is slowing, 0:16:21.400 --> 0:16:25.920 how the slowdown in China is affecting manufacturing, which if 0:16:25.920 --> 0:16:29.240 you believe the the p M I S is really 0:16:29.280 --> 0:16:32.560 really doing poorly. And and of course now that weakness 0:16:32.640 --> 0:16:35.200 is building into services to some extent. So the the 0:16:35.400 --> 0:16:38.960 eyes of the doves are really on those indicators, whereas 0:16:39.000 --> 0:16:44.600 the hawks do pay attention to to inflation expectations a 0:16:44.600 --> 0:16:48.520 little more uh to to the risk that that there 0:16:48.560 --> 0:16:51.680 is there is still upset risk to the inflation outlook. 0:16:52.040 --> 0:16:54.840 So I think by the end of it we will 0:16:54.880 --> 0:16:58.480 come out with an agreement with with the consensus, but 0:16:58.640 --> 0:17:03.760 it will be very difficult called to communicate and accommodate 0:17:03.840 --> 0:17:07.080 all those views and all those concerns. So I would say, 0:17:07.440 --> 0:17:10.280 you know, a little bit more politics if you want, 0:17:11.280 --> 0:17:14.639 is what it takes from from the president, from Christine 0:17:14.680 --> 0:17:18.720 Lagard and brokering that consensus. It won't be as easy 0:17:19.320 --> 0:17:22.520 because the path forward is not as obvious as it 0:17:22.640 --> 0:17:23.040 used to be. 0:17:23.760 --> 0:17:27.240 David, do you think that the diversions you say, this 0:17:27.359 --> 0:17:29.399 might may be you know, the last sort of chance 0:17:29.440 --> 0:17:32.560 of the central bank in Europe to raise rays the divergence? 0:17:32.680 --> 0:17:34.879 Is that going to be an issue for the euro? 0:17:35.320 --> 0:17:38.480 What happens if the ECB pauses, Well, the. 0:17:38.440 --> 0:17:41.359 Federal Reserve is probably done hiking, and that will also 0:17:41.400 --> 0:17:45.000 give the EAC be another reason to think about whether 0:17:45.040 --> 0:17:48.200 they want to continue hiking. So they don't. They don't 0:17:48.240 --> 0:17:51.680 have to worry about a huge surge in the euro 0:17:52.440 --> 0:17:54.479 if they were to if they were to kind of 0:17:54.880 --> 0:17:58.199 continue hiking, although there probably would be a reaction in 0:17:58.200 --> 0:18:00.280 the market because right now the market is not expecting 0:18:00.280 --> 0:18:03.800 a hike in September. It's only about a twenty percent 0:18:04.000 --> 0:18:07.160 probability of that priced in. So the immediate market reaction 0:18:07.200 --> 0:18:09.760 will probably be a higher euro, but it wouldn't be 0:18:09.840 --> 0:18:13.160 the start of some kind of very long trend of divergence. 0:18:13.480 --> 0:18:16.639 And just in terms of the outlook economically for Europe, 0:18:16.720 --> 0:18:18.560 you know, as we go into the end of this year, 0:18:19.040 --> 0:18:23.200 more importantly, our view on the economic performance next year. 0:18:23.800 --> 0:18:27.199 Next year will be will be a difficult year. We 0:18:27.280 --> 0:18:30.399 have all of these problems at the euro areas facing 0:18:30.440 --> 0:18:32.760 and not only the area, but the rest of the 0:18:32.800 --> 0:18:36.600 Western world, the United States, the United Kingdom in terms 0:18:36.680 --> 0:18:39.560 of tighter monetary policy and the full impact of that 0:18:39.640 --> 0:18:41.960 finally being felt. There is a long lag that comes 0:18:41.960 --> 0:18:46.360 with raising interest rates, so the pain will be more 0:18:46.400 --> 0:18:49.359 obvious towards the end of this year and into next year. 0:18:50.119 --> 0:18:54.800 David Okay, very interesting, Yanna. In terms of the ECB's 0:18:54.880 --> 0:19:00.840 inflation expectations survey, it showed that consumers see inflation at 0:19:00.840 --> 0:19:03.320 three point four percent of the next twelve months. How 0:19:03.400 --> 0:19:05.479 much of a problem is it, you know that this 0:19:05.600 --> 0:19:10.920 is how embedded are inflation expectations becoming for consumers and businesses. 0:19:11.119 --> 0:19:14.879 Yeah, I mean the rate or the expectations for the 0:19:14.880 --> 0:19:18.080 next year. You would expect that to still be high, 0:19:18.800 --> 0:19:24.200 just because inflation is still high and even official forecasts 0:19:24.240 --> 0:19:27.080 don't see it coming back to two percent over the 0:19:27.160 --> 0:19:31.399 next twelve months. So the ECB will look at the 0:19:31.480 --> 0:19:35.479 trajectory and see how that measure has actually come down, 0:19:35.560 --> 0:19:38.119 and it has come down quite a bit. What's slightly 0:19:38.160 --> 0:19:42.080 more interesting is the three year horizon, and there we've 0:19:42.200 --> 0:19:45.639 seen that number up and down over the past months, 0:19:45.640 --> 0:19:49.560 but the last move was up slightly, so our consumers 0:19:50.840 --> 0:19:55.040 slightly raised their expectations for inflation in three years, and 0:19:55.080 --> 0:19:58.719 that rate also still is quite significantly above two percent. 0:19:58.880 --> 0:20:02.120 That was Brian Beg's DCB reporter Jana Vanda and our 0:20:02.200 --> 0:20:06.440 senior year area economist David Powell from Bloomberg Economics. I'm 0:20:06.480 --> 0:20:09.280 Caroline hepget here in London. You can catch us every 0:20:09.359 --> 0:20:12.200 weekday morning for Bloomberg Daybreak you at beginning at six 0:20:12.200 --> 0:20:14.919 am in London. That's one am on Wall Street. 0:20:15.040 --> 0:20:18.840 Tom coming up on Bloomberg day Break weekend. China's economy 0:20:19.000 --> 0:20:22.159 is it slumping toward I rebound? I'm Tom Busby and 0:20:22.320 --> 0:20:22.960 this is. 0:20:22.920 --> 0:20:37.080 Bloomberg Broadcasting live from the Bloomberg It a active brokers 0:20:37.160 --> 0:20:40.560 studio in New York. Bloomberg E Lemon Free Oh to Washington, 0:20:40.640 --> 0:20:43.960 d C, Bloomberg ninety nine one to Boston, Bloomberg one 0:20:44.000 --> 0:20:47.240 O six one to San Francisco, Bloomberg nine sixteen to 0:20:47.320 --> 0:20:51.080 the country, Syrius XM Channel one nineteen to London DAB 0:20:51.359 --> 0:20:54.680 Digital Radio, and around the globe the Bloomberg Business app 0:20:54.760 --> 0:20:59.040 in Bloomberg Radio dot Com. This is Bloomberg Daybreak Weekend. 0:21:05.119 --> 0:21:07.200 I'm Tom Busby in New York with your global look 0:21:07.200 --> 0:21:09.640 ahead at the top stories for investors in the coming week. 0:21:10.080 --> 0:21:13.760 Ahead of a slew of Chinese economic data coming out 0:21:13.760 --> 0:21:16.359 next week, we take a look at that country's lackluster 0:21:16.440 --> 0:21:21.000 economic recovery, will affading economic momentum, and danger China's growth 0:21:21.040 --> 0:21:23.919 target this year. For more, Let's get to Bloomberg Daybreak 0:21:23.960 --> 0:21:26.359 Asia host Ryan Curtis. 0:21:25.960 --> 0:21:30.679 To China's growth is slowing, the REMMBE is weakening, imports 0:21:30.680 --> 0:21:35.080 and exports are slower, prices are falling, and youth unemployment 0:21:35.119 --> 0:21:37.880 is running above twenty percent. And in the coming week 0:21:38.000 --> 0:21:42.080 we're expecting more data on retail sales, factory output, and 0:21:42.160 --> 0:21:46.240 fixed asset investment, and few are expecting any kind of 0:21:46.359 --> 0:21:50.280 dramatic turnaround in that set. Looming above all of this 0:21:50.400 --> 0:21:54.040 as well is the property crisis. We caught up with 0:21:54.040 --> 0:21:57.960 Bloomberg columnist John Authers, who said, as bad as things 0:21:58.000 --> 0:21:59.960 are now, they could be a lot worse. 0:22:00.400 --> 0:22:03.800 The concerns for China or the worries about Chinese growth 0:22:04.080 --> 0:22:07.119 aren't having as big an effect on the rest of 0:22:07.160 --> 0:22:10.119 the world as they used to. This looks like a 0:22:10.200 --> 0:22:13.880 much more serious situation for China than twenty fifteen, when 0:22:14.040 --> 0:22:18.119 they're badly handled Chinese evaluation really did lead to a 0:22:18.119 --> 0:22:20.119 minor crisis that got very scary. 0:22:20.600 --> 0:22:23.320 So to take a look at how investors are responding 0:22:23.359 --> 0:22:26.679 to this weakness in the Chinese economy. Joining me is 0:22:26.720 --> 0:22:32.120 Tu Laning, Bloomberg's managing editor for Asia Stocks Leanink. Some 0:22:32.240 --> 0:22:35.919 might argue that it is worse now that China seems 0:22:35.960 --> 0:22:40.320 to be in a kind of secular and cyclical decline. 0:22:40.359 --> 0:22:42.560 What are you hearing from investors. 0:22:42.160 --> 0:22:44.680 A bit of a mixed views. I think the predominant 0:22:44.840 --> 0:22:48.600 view is that people are a parish and that is 0:22:48.720 --> 0:22:52.000