1 00:00:01,760 --> 00:00:04,240 Speaker 1: This is Bloomberg day Break Weekend, our global look at 2 00:00:04,240 --> 00:00:06,280 Speaker 1: the top stories in the coming week from our day 3 00:00:06,280 --> 00:00:08,600 Speaker 1: Break anchors all around the world, and straight ahead on 4 00:00:08,640 --> 00:00:11,160 Speaker 1: the program A look Ahead, there's some key economic data 5 00:00:11,200 --> 00:00:15,440 Speaker 1: in the US, plus testimony to Congress from Federal Reserve 6 00:00:15,520 --> 00:00:19,239 Speaker 1: Chair Jerome Powell, and a look at earnings from retail 7 00:00:19,280 --> 00:00:21,720 Speaker 1: giant Nike. I'm Tom Busby in New York. 8 00:00:21,880 --> 00:00:24,440 Speaker 2: I'm calling Hecker here in London, where we're asking if 9 00:00:24,520 --> 00:00:27,960 Speaker 2: financial services can deliver for the UK and what the 10 00:00:28,000 --> 00:00:29,240 Speaker 2: city needs to thrive. 11 00:00:29,640 --> 00:00:31,840 Speaker 3: I'm dek Prisner looking at what it will take for 12 00:00:31,920 --> 00:00:34,640 Speaker 3: an economic recovery to take hold in China. 13 00:00:37,600 --> 00:00:41,640 Speaker 4: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 14 00:00:41,680 --> 00:00:45,360 Speaker 4: eleven to three year, New York, Bloomberg ninety nine to one, Washington, DC, 15 00:00:45,880 --> 00:00:50,120 Speaker 4: Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 16 00:00:50,520 --> 00:00:53,720 Speaker 4: Sirius XM one twenty one, and around the world on 17 00:00:53,800 --> 00:00:56,880 Speaker 4: Bloomberg Radio, dot Com and the Bloomberg Business App. 18 00:01:01,200 --> 00:01:01,800 Speaker 5: Good day to you. 19 00:01:01,880 --> 00:01:04,080 Speaker 1: I'm Tom Busby, and we begin today's program with some 20 00:01:04,200 --> 00:01:09,119 Speaker 1: key economic data in the US personal consumer Expenditure Price 21 00:01:09,160 --> 00:01:12,240 Speaker 1: Index from May on Friday and also we hear from 22 00:01:12,240 --> 00:01:16,440 Speaker 1: FED shaired Jerome Palace, he testifies to Congress about monetary policy. 23 00:01:16,480 --> 00:01:18,640 Speaker 1: For more on what to expect and how it could 24 00:01:18,640 --> 00:01:21,759 Speaker 1: impact FED policy. Moving forward, we're joined by Michael McKee, 25 00:01:21,959 --> 00:01:25,880 Speaker 1: Bloomberg International Economics and Policy correspondent. Well, Michael, let's get 26 00:01:25,920 --> 00:01:28,480 Speaker 1: the PCEE out of the way, then we'll talk about Powell. 27 00:01:29,000 --> 00:01:31,119 Speaker 1: This is the preferred measure of inflation for the Fed. 28 00:01:31,160 --> 00:01:32,840 Speaker 1: So what are you expecting to see for the month 29 00:01:32,880 --> 00:01:33,160 Speaker 1: of May. 30 00:01:33,280 --> 00:01:35,360 Speaker 6: Well, all right, kind of a survey shows that people 31 00:01:35,440 --> 00:01:37,679 Speaker 6: on Wall Street tend to think that we're going to 32 00:01:37,680 --> 00:01:40,679 Speaker 6: see prices go up a little bit to the PCE 33 00:01:40,959 --> 00:01:44,440 Speaker 6: Price Index headline to two point three from two point one, 34 00:01:45,080 --> 00:01:48,200 Speaker 6: and core two six from two to five, which would 35 00:01:48,200 --> 00:01:51,040 Speaker 6: fit with kind of the pattern of what's been expected 36 00:01:51,080 --> 00:01:54,360 Speaker 6: that we'll see an increase because of tariffs. But it 37 00:01:54,400 --> 00:01:57,040 Speaker 6: isn't clear that that's necessarily going to happen because we 38 00:01:57,160 --> 00:02:01,000 Speaker 6: saw the milder CPI and PPI. There was some terraff 39 00:02:01,040 --> 00:02:04,720 Speaker 6: related increases in some sectors, but not as broad as 40 00:02:04,720 --> 00:02:07,600 Speaker 6: people thought, so it'd be interesting to see what comes 41 00:02:07,680 --> 00:02:10,200 Speaker 6: out of that. We also get the income and spending 42 00:02:10,280 --> 00:02:14,080 Speaker 6: numbers and income after a big rise in April is 43 00:02:14,120 --> 00:02:16,000 Speaker 6: going to be only a small rise two tenths of 44 00:02:16,000 --> 00:02:18,880 Speaker 6: a percent from a spending two tents of a percent 45 00:02:18,960 --> 00:02:22,920 Speaker 6: same as for April. So consumers hanging in but not 46 00:02:23,280 --> 00:02:24,519 Speaker 6: overly enthusiastic. 47 00:02:24,880 --> 00:02:27,399 Speaker 1: And it looks like inflation is in check, at least 48 00:02:27,400 --> 00:02:27,800 Speaker 1: for now. 49 00:02:28,000 --> 00:02:31,600 Speaker 6: It's in check. And the Fed is kind of where 50 00:02:31,600 --> 00:02:36,000 Speaker 6: it wants to be. We saw that from their summary 51 00:02:36,040 --> 00:02:40,800 Speaker 6: of economic projections last week. They don't need to cut 52 00:02:40,880 --> 00:02:44,320 Speaker 6: rates right now for any reason or raise rates for 53 00:02:44,400 --> 00:02:46,280 Speaker 6: right now for any reason, so they're happy just to 54 00:02:46,320 --> 00:02:46,800 Speaker 6: sit there. 55 00:02:47,160 --> 00:02:47,359 Speaker 7: Well. 56 00:02:47,800 --> 00:02:51,000 Speaker 1: Chairman pal though afterwards did say he's still looking at 57 00:02:51,160 --> 00:02:54,640 Speaker 1: two rate decreases this year. Right, two cuts, That's what 58 00:02:54,720 --> 00:02:55,760 Speaker 1: the dot plot shows. 59 00:02:56,440 --> 00:02:58,840 Speaker 6: But I think if you watch the Fed closely, the 60 00:02:59,680 --> 00:03:02,640 Speaker 6: way it a lot of Fed watchers are interpreting this 61 00:03:02,840 --> 00:03:06,800 Speaker 6: is they don't have enough information to make a decision. 62 00:03:07,320 --> 00:03:10,120 Speaker 6: So based on what the economy is doing right now, 63 00:03:10,760 --> 00:03:12,000 Speaker 6: they could do two rate cuts. 64 00:03:12,040 --> 00:03:12,239 Speaker 8: Now. 65 00:03:12,360 --> 00:03:14,520 Speaker 6: By the time you get to the fall, or the 66 00:03:14,560 --> 00:03:17,600 Speaker 6: time they might start thinking about rad cuts, you can't 67 00:03:17,960 --> 00:03:21,320 Speaker 6: do too or maybe you need more because the economy 68 00:03:21,360 --> 00:03:26,239 Speaker 6: has collapsed. I think the basic message from Powell to reporters, 69 00:03:26,400 --> 00:03:28,760 Speaker 6: which I'm sure he will repeat to members of Congress, 70 00:03:28,840 --> 00:03:31,480 Speaker 6: is that there's not a lot of conviction among the 71 00:03:31,560 --> 00:03:34,800 Speaker 6: Fed people about their forecasts. They're thinking this is what 72 00:03:34,920 --> 00:03:37,280 Speaker 6: could happen, but not what will happen. 73 00:03:37,480 --> 00:03:40,000 Speaker 1: Wow, Well, let's talk more about Powell. So he addresses 74 00:03:40,360 --> 00:03:44,160 Speaker 1: the House on Tuesday, Senate a banking committee or Senate 75 00:03:44,160 --> 00:03:48,160 Speaker 1: Banking Committee on Wednesday. What is it going to be 76 00:03:48,240 --> 00:03:50,760 Speaker 1: like for him? We've seen this theater by President Trump 77 00:03:50,840 --> 00:03:51,760 Speaker 1: again last week. 78 00:03:52,120 --> 00:03:54,000 Speaker 6: You know, Trump has been doing this for a while, 79 00:03:54,000 --> 00:03:56,680 Speaker 6: but the last time he testified on Powell testified on 80 00:03:56,840 --> 00:04:01,360 Speaker 6: Capitol Hill that hadn't begun. This new rend. I will 81 00:04:01,400 --> 00:04:04,640 Speaker 6: insult youse. It'll be interesting to see if Republicans follow 82 00:04:04,760 --> 00:04:07,680 Speaker 6: up on that. They will probably give Powell a hard 83 00:04:07,680 --> 00:04:12,240 Speaker 6: time for not cutting rates because the president wants them to, 84 00:04:12,400 --> 00:04:16,599 Speaker 6: and they do what the President wants. But it'll be 85 00:04:16,640 --> 00:04:20,039 Speaker 6: interesting to see how political they get. They're in the 86 00:04:20,040 --> 00:04:23,680 Speaker 6: middle of the one big, beautiful bill, the big budget 87 00:04:23,720 --> 00:04:26,279 Speaker 6: and tax bill, and the issue with that is going 88 00:04:26,320 --> 00:04:30,000 Speaker 6: to be that Powell doesn't talk about fiscal policy, and 89 00:04:30,040 --> 00:04:33,040 Speaker 6: he will dodge that question as much as possible. Both 90 00:04:33,080 --> 00:04:35,360 Speaker 6: sides will try to get him to take a position 91 00:04:35,440 --> 00:04:37,720 Speaker 6: that they can then say, well, see he supports us, 92 00:04:38,120 --> 00:04:40,240 Speaker 6: and he will do his best not to comment on that, 93 00:04:40,279 --> 00:04:43,200 Speaker 6: which leaves monetary policy, and as we know, there's not 94 00:04:43,320 --> 00:04:45,160 Speaker 6: much going on in that right now. 95 00:04:45,200 --> 00:04:48,840 Speaker 1: And even lawmakers have to understand. President Trump pushed off 96 00:04:48,880 --> 00:04:52,159 Speaker 1: these tariffs to July ninth, for now, could be pushed 97 00:04:52,160 --> 00:04:55,839 Speaker 1: off even further. Most of them the data that he needs, 98 00:04:55,880 --> 00:04:58,640 Speaker 1: and he always says, maintains every time this is all 99 00:04:58,720 --> 00:05:02,560 Speaker 1: data dependent. Everything I say, everything we do. It could 100 00:05:02,560 --> 00:05:04,760 Speaker 1: be months down the line, right absolutely. 101 00:05:05,040 --> 00:05:09,960 Speaker 6: The Chairman was asked in his most recent press conference 102 00:05:10,160 --> 00:05:12,279 Speaker 6: and he said it could be September before we have 103 00:05:12,360 --> 00:05:14,840 Speaker 6: any real indication. We'll get the June data in July, 104 00:05:15,000 --> 00:05:18,599 Speaker 6: July data in August. That might give them a better 105 00:05:18,920 --> 00:05:21,960 Speaker 6: idea of which way the economy is going, which way 106 00:05:22,000 --> 00:05:27,200 Speaker 6: inflation's going, and which way the unemployment rate is going, 107 00:05:27,200 --> 00:05:29,960 Speaker 6: which will be their proxy for how the economy is doing. 108 00:05:30,440 --> 00:05:33,440 Speaker 1: It puzzled me. Just on Friday, we heard from Fed 109 00:05:33,480 --> 00:05:37,559 Speaker 1: Governor Christopher Waller, who told CNBC that he doesn't expect 110 00:05:37,600 --> 00:05:41,320 Speaker 1: tariffs to boost inflation significantly, but he also hinted we 111 00:05:41,360 --> 00:05:44,039 Speaker 1: could see an interest rate cut at the July meeting, 112 00:05:44,040 --> 00:05:46,279 Speaker 1: which is the end of July twenty ninth and thirtieth, Right, 113 00:05:46,839 --> 00:05:48,400 Speaker 1: Does that puzzle you as much? 114 00:05:48,920 --> 00:05:51,440 Speaker 6: It doesn't puzzle me coming from Chris, because he's been 115 00:05:51,560 --> 00:05:53,960 Speaker 6: sort of the dove on the board and the one 116 00:05:53,960 --> 00:05:57,159 Speaker 6: who is most certain about what he thinks will happen, 117 00:05:57,240 --> 00:05:59,520 Speaker 6: which is that we will get a one time rise 118 00:05:59,760 --> 00:06:03,480 Speaker 6: in prices because of tariffs, but it won't be continuing, 119 00:06:03,520 --> 00:06:07,120 Speaker 6: so it won't be an ongoing inflation problem. He was 120 00:06:07,320 --> 00:06:10,240 Speaker 6: asked about July, and I think that's always important to 121 00:06:10,240 --> 00:06:13,840 Speaker 6: put that in context, because he didn't volunteer the idea 122 00:06:13,920 --> 00:06:16,560 Speaker 6: of July. He was asked, is it possible, and he 123 00:06:16,600 --> 00:06:19,840 Speaker 6: said it's possible, but at least as far as he 124 00:06:19,880 --> 00:06:21,920 Speaker 6: was concerned. But he added he didn't think the rest 125 00:06:21,920 --> 00:06:24,600 Speaker 6: of the committee would go along. So I don't think 126 00:06:24,680 --> 00:06:28,760 Speaker 6: that's a realistic possibility because they'll have the June inflation data, 127 00:06:28,800 --> 00:06:33,200 Speaker 6: but that's it. They won't have anything beyond that, so 128 00:06:33,400 --> 00:06:35,440 Speaker 6: they'll still be flying pretty blind. 129 00:06:35,760 --> 00:06:39,400 Speaker 1: Well, Well, may PCE is out this coming Friday. We 130 00:06:39,480 --> 00:06:42,359 Speaker 1: hear from the Chairman of the Federal Reserve on Tuesday 131 00:06:42,400 --> 00:06:45,520 Speaker 1: and Wednesday testifying to Congress, and our thanks to Michael McKee, 132 00:06:45,600 --> 00:06:49,440 Speaker 1: Bloomberg International Economics and Policy correspondent. We moved next to 133 00:06:49,440 --> 00:06:52,359 Speaker 1: corporate earnings with fourth quarter results from Nike, the world's 134 00:06:52,400 --> 00:06:55,479 Speaker 1: biggest sneaker in sportswear maker. Those results out after the 135 00:06:55,480 --> 00:06:58,360 Speaker 1: closing bell on Thursday. For more on what to expect 136 00:06:58,720 --> 00:07:02,680 Speaker 1: Nike's turnaround effort and how the Trump tariffs may already 137 00:07:02,720 --> 00:07:06,200 Speaker 1: be impacting the company, We're joined by Punam Goyle, senior 138 00:07:06,279 --> 00:07:10,679 Speaker 1: US e commerce and retail analysts at Bloomberg Intelligence. Well, Punham, 139 00:07:10,720 --> 00:07:13,680 Speaker 1: thank you for being here. So what are you expecting 140 00:07:13,680 --> 00:07:16,040 Speaker 1: to see in Nike's fourth quarter results? And have we 141 00:07:16,120 --> 00:07:19,880 Speaker 1: already begun seeing tariffs and the broader economic uncertainty affects 142 00:07:19,880 --> 00:07:21,720 Speaker 1: sales and its results? 143 00:07:22,200 --> 00:07:24,360 Speaker 8: Thank you so for Nike, I think we have two 144 00:07:24,360 --> 00:07:27,600 Speaker 8: things going on, which is why you won't necessarily see 145 00:07:27,600 --> 00:07:31,080 Speaker 8: the impact of tariffs directly in the fiscal four Q 146 00:07:31,240 --> 00:07:33,840 Speaker 8: results that they're reporting. So two things are going on. One, 147 00:07:33,880 --> 00:07:37,320 Speaker 8: we're expecting a steep decline in sales. Sales are going 148 00:07:37,320 --> 00:07:40,160 Speaker 8: to be down in the mid teens across all regions 149 00:07:40,520 --> 00:07:43,800 Speaker 8: and down even more in China by twenty percent. So 150 00:07:44,400 --> 00:07:46,920 Speaker 8: how do you factor in what's happening with tariffs and 151 00:07:46,960 --> 00:07:49,320 Speaker 8: all of this, it's kind of going to get muddled. 152 00:07:49,360 --> 00:07:51,840 Speaker 8: But the real impact from tariffs is going to be 153 00:07:51,960 --> 00:07:56,040 Speaker 8: seen in their fiscal first quarter guidance for twenty twenty six. 154 00:07:56,520 --> 00:07:59,600 Speaker 8: Our tariffs impacting them is what we're looking to see. 155 00:07:59,720 --> 00:08:05,200 Speaker 8: We do know that they have instituted price increases across 156 00:08:05,240 --> 00:08:08,720 Speaker 8: items that are over one hundred dollars, so we're waiting 157 00:08:08,760 --> 00:08:11,800 Speaker 8: to hear from them how that's been received, what impact 158 00:08:11,840 --> 00:08:14,760 Speaker 8: they have from tariffs. There will be some impact, undoubtedly, 159 00:08:15,400 --> 00:08:18,680 Speaker 8: but we think Nike can weather that with these price increases. 160 00:08:19,200 --> 00:08:21,680 Speaker 1: Now, Nike has had a lot of missteps past few years, 161 00:08:21,720 --> 00:08:25,600 Speaker 1: a botched director consumer sales rollout, a lot of management 162 00:08:25,680 --> 00:08:28,960 Speaker 1: changes or restructuring that led to hundreds of layoffs, and 163 00:08:29,040 --> 00:08:30,840 Speaker 1: boy have we seen a slump in sales and a 164 00:08:30,880 --> 00:08:34,320 Speaker 1: tumble in shares. Is its new CEO, Elliott Hill, who 165 00:08:34,360 --> 00:08:36,560 Speaker 1: came out of retirement last year, is he the guy 166 00:08:36,600 --> 00:08:37,880 Speaker 1: that really turned things around? 167 00:08:38,559 --> 00:08:41,080 Speaker 8: He can definitely do it. In our mind, it's just 168 00:08:41,120 --> 00:08:43,679 Speaker 8: a matter of timing right now. You know, we had 169 00:08:43,720 --> 00:08:46,920 Speaker 8: expected originally the turnaround to take hold in fiscal twenty 170 00:08:46,960 --> 00:08:49,800 Speaker 8: twenty six, the back half of it, but with terriffs 171 00:08:49,880 --> 00:08:53,000 Speaker 8: and consumer uncertainty going into the back half of this 172 00:08:53,200 --> 00:08:56,559 Speaker 8: calendar year, I think it prolongs the turnaround a little. 173 00:08:56,840 --> 00:08:59,319 Speaker 8: That said, is he doing the right things to get 174 00:08:59,360 --> 00:09:03,120 Speaker 8: the turnaround going. Absolutely, He's focused on what matters in 175 00:09:03,160 --> 00:09:06,720 Speaker 8: retail most, and that is product. He is bringing back 176 00:09:06,800 --> 00:09:09,559 Speaker 8: innovation in a more meaningful way, not just a new 177 00:09:09,600 --> 00:09:15,080 Speaker 8: wave of colors. He is rationalizing inventory. Inventories were not 178 00:09:15,600 --> 00:09:18,040 Speaker 8: down as much as we'd like them to be given 179 00:09:18,080 --> 00:09:20,840 Speaker 8: the sales declines that we've seen, but we do expect 180 00:09:20,840 --> 00:09:25,040 Speaker 8: them to continue to decline through markdowns, and that will 181 00:09:25,040 --> 00:09:27,760 Speaker 8: take time. And as soon as that happens, I think 182 00:09:27,840 --> 00:09:30,280 Speaker 8: that's when you can begin to see the turnaround take 183 00:09:30,320 --> 00:09:31,280 Speaker 8: shape and. 184 00:09:31,280 --> 00:09:33,920 Speaker 1: Sales start to go up. Now, Nike makes about half 185 00:09:33,960 --> 00:09:36,880 Speaker 1: its footwear, nearly a third of its apparel in Vietnam, 186 00:09:37,320 --> 00:09:39,079 Speaker 1: a good chunk of it in China. The US and 187 00:09:39,160 --> 00:09:41,560 Speaker 1: Vietnam aren't talks on a trade deal, but boy, we 188 00:09:41,600 --> 00:09:44,440 Speaker 1: have this looming deadline July ninth for higher tariffs to 189 00:09:44,480 --> 00:09:47,000 Speaker 1: kick back in. Do you know where it stands now 190 00:09:47,040 --> 00:09:49,679 Speaker 1: and what that could really mean to Nike. 191 00:09:50,240 --> 00:09:53,280 Speaker 8: So if we go back to the April second tariffs, 192 00:09:53,679 --> 00:09:57,200 Speaker 8: that is a big headwind for Nike and really everyone 193 00:09:57,200 --> 00:10:00,520 Speaker 8: else in the apparel space in retail because they will 194 00:10:00,559 --> 00:10:03,240 Speaker 8: not be able to offset that level of tariffs with 195 00:10:03,440 --> 00:10:06,240 Speaker 8: cost efficiencies or with price increases. 196 00:10:05,800 --> 00:10:08,679 Speaker 1: Which was forty six percent, right, that's what just high. 197 00:10:09,000 --> 00:10:11,800 Speaker 8: Yeah, exactly, it's just too high. They can't do that. 198 00:10:12,480 --> 00:10:14,480 Speaker 8: But if they stay at ten percent, right, if there's 199 00:10:14,520 --> 00:10:17,240 Speaker 8: an extension or if there is an agreement to that 200 00:10:17,320 --> 00:10:19,640 Speaker 8: ten percent is what we're looking at. I think they 201 00:10:19,640 --> 00:10:22,320 Speaker 8: have the checks and balances in place to whether that 202 00:10:22,400 --> 00:10:25,160 Speaker 8: with the select price increases that they've already talked about. 203 00:10:25,400 --> 00:10:29,280 Speaker 1: And also Vietnam, I would imagine, in the eyes of 204 00:10:29,320 --> 00:10:33,600 Speaker 1: the Trump administration a very favorable alternative to having all 205 00:10:33,640 --> 00:10:34,800 Speaker 1: that stuff made in China. 206 00:10:35,120 --> 00:10:37,600 Speaker 8: That's well, they've already done that, yeah, I mean, I mean, 207 00:10:37,600 --> 00:10:39,719 Speaker 8: they've done that. If you look at their sourcing exposure, 208 00:10:39,880 --> 00:10:42,160 Speaker 8: a lot of what they make is already in Vietnam, 209 00:10:42,280 --> 00:10:46,040 Speaker 8: China is in the teams. So do they need China 210 00:10:46,160 --> 00:10:48,720 Speaker 8: for the US? You know, I would argue that a 211 00:10:48,760 --> 00:10:51,240 Speaker 8: lot of the inventory that they make in China could 212 00:10:51,240 --> 00:10:53,800 Speaker 8: be used for regions outside of the US. Nike does 213 00:10:53,840 --> 00:10:56,840 Speaker 8: have a global presence, so they don't need to ship 214 00:10:56,960 --> 00:11:00,000 Speaker 8: everything they make in China to the US, and Vietnam 215 00:11:00,200 --> 00:11:03,920 Speaker 8: and the other countries matter a lot more. If tariffs 216 00:11:04,000 --> 00:11:07,680 Speaker 8: do rise, notably in Vietnam, it is going to be 217 00:11:07,800 --> 00:11:12,040 Speaker 8: hard for any footwear retailer to offset that headwind because 218 00:11:12,120 --> 00:11:14,680 Speaker 8: Vietnam is where the shoes are made largely. 219 00:11:15,240 --> 00:11:18,760 Speaker 1: Now does Nike have an image problem? It's sales have 220 00:11:19,160 --> 00:11:22,080 Speaker 1: dropped almost double digits in the last couple of years. 221 00:11:22,800 --> 00:11:25,720 Speaker 1: You talked about innovation, and they are always innovating products. 222 00:11:25,720 --> 00:11:29,040 Speaker 1: They have this new Airmax phenomena, sneaker low for hybrid, 223 00:11:29,120 --> 00:11:33,480 Speaker 1: they're three D printing. I mean, they are always innovating. 224 00:11:33,760 --> 00:11:36,080 Speaker 1: But is the brand suffering? 225 00:11:36,440 --> 00:11:40,280 Speaker 8: So Nike is still the leading footwear brand globally. They 226 00:11:40,400 --> 00:11:43,080 Speaker 8: definitely have not lost their lead, and they still have 227 00:11:43,200 --> 00:11:46,679 Speaker 8: the mind share with consumers. We ran a survey last 228 00:11:46,760 --> 00:11:51,079 Speaker 8: fall and Nike was a clear standout, the number one 229 00:11:51,440 --> 00:11:54,920 Speaker 8: still brand when you're thinking about shopping for sneakers. But 230 00:11:55,000 --> 00:11:59,000 Speaker 8: what's happened in the last five years, especially through the pandemic, 231 00:11:59,559 --> 00:12:02,640 Speaker 8: is that Nike pulled out of wholesale in a meaningful way. 232 00:12:02,920 --> 00:12:05,120 Speaker 8: It's gone back in now, but when it pulled out, 233 00:12:05,480 --> 00:12:09,880 Speaker 8: a left open shelf space for newcomers or emerging brands 234 00:12:09,960 --> 00:12:14,320 Speaker 8: like Hoka on others, It's all come back full circle 235 00:12:14,640 --> 00:12:17,319 Speaker 8: and we're focused back on product. I think as long 236 00:12:17,360 --> 00:12:20,560 Speaker 8: as the product pipeline stays fresh and true and real, 237 00:12:20,920 --> 00:12:24,439 Speaker 8: not just another color wave, they can reignite. 238 00:12:24,480 --> 00:12:28,080 Speaker 1: Demanded Nike fourth quarter earnings out after the closing bell 239 00:12:28,160 --> 00:12:31,440 Speaker 1: this coming Thursday are thanks to Punham Goyle, Senior US 240 00:12:31,440 --> 00:12:34,800 Speaker 1: e Commerce and retail analyst at Bloomberg Intelligence, and coming 241 00:12:34,840 --> 00:12:36,880 Speaker 1: up on Bloomberg day Break Weekend, we'll look at whether 242 00:12:37,120 --> 00:12:40,600 Speaker 1: financial services can deliver for the UK and what the 243 00:12:40,640 --> 00:12:44,120 Speaker 1: City of London needs to thrive. I'm Tom Busby and 244 00:12:44,200 --> 00:12:53,480 Speaker 1: this is Bloomberg. This is Bloomberg day Break Weekend, our 245 00:12:53,480 --> 00:12:55,800 Speaker 1: global look ahead at the top stories for investors in 246 00:12:55,840 --> 00:12:59,079 Speaker 1: the coming week. I'm Tom Busby in New York. Up 247 00:12:59,160 --> 00:13:01,400 Speaker 1: later in our program I'm a look ahead to Bloomberg's 248 00:13:01,559 --> 00:13:05,120 Speaker 1: China Economic Survey. But first in the coming days, the 249 00:13:05,160 --> 00:13:07,720 Speaker 1: great and good of the City of London descending on 250 00:13:07,760 --> 00:13:11,080 Speaker 1: Westminster for the City UK's annual conference and their aim 251 00:13:11,480 --> 00:13:13,960 Speaker 1: to chart a path for business leaders and politicians to 252 00:13:14,000 --> 00:13:17,160 Speaker 1: work together in the pursuit of economic growth. But can 253 00:13:17,200 --> 00:13:20,000 Speaker 1: the UK keep up and present itself as an attractive 254 00:13:20,080 --> 00:13:23,960 Speaker 1: investment destination against an uncertain backdrop. For more, let's go 255 00:13:24,000 --> 00:13:27,560 Speaker 1: to London and bring in Bloomberg Daybreak europanker Caroline hepgar. 256 00:13:27,840 --> 00:13:30,840 Speaker 2: Tom twenty twenty five kicked off in less than ideal 257 00:13:31,000 --> 00:13:34,880 Speaker 2: style for the London market, with research suggesting the Stock 258 00:13:34,960 --> 00:13:38,520 Speaker 2: Exchange had lost twenty five percent of its companies over 259 00:13:38,600 --> 00:13:42,000 Speaker 2: the last decade. That was in January of this year. 260 00:13:42,520 --> 00:13:46,520 Speaker 2: Since then, several important businesses have shifted their focus away 261 00:13:46,600 --> 00:13:50,840 Speaker 2: from the city, including the money transfer firm Wise, which 262 00:13:50,880 --> 00:13:53,920 Speaker 2: announced this month plans to shift its main listing to 263 00:13:54,040 --> 00:13:59,440 Speaker 2: the US, citing extra liquidity and visibility. The latest blow 264 00:13:59,480 --> 00:14:03,240 Speaker 2: to London comes after months of US markets steadily picking 265 00:14:03,320 --> 00:14:07,160 Speaker 2: off London's prize listings. One by one. The former fifty 266 00:14:07,200 --> 00:14:12,880 Speaker 2: one hundred constituent, the construction firm CRH Ferguson Enterprises, and 267 00:14:13,040 --> 00:14:18,880 Speaker 2: also Flutter Entertainment have all relocated. The exodus is particularly 268 00:14:19,000 --> 00:14:23,440 Speaker 2: acute in Britain's tech sector. Artificial intelligence pioneer deep Mind 269 00:14:23,560 --> 00:14:27,080 Speaker 2: was acquired by Google in twenty fourteen. The chip designer 270 00:14:27,360 --> 00:14:31,640 Speaker 2: arm holding Solder SoftBank in twenty sixteen, which really set 271 00:14:31,720 --> 00:14:35,800 Speaker 2: the tone. Recently, UK regulators and lawmakers have tried to 272 00:14:35,880 --> 00:14:39,120 Speaker 2: make it easier for FinTechs to raise the money that 273 00:14:39,240 --> 00:14:43,360 Speaker 2: they need here, looking at dual class share structures, also 274 00:14:43,720 --> 00:14:47,760 Speaker 2: private share sales, and the Labour government's been pushing pension 275 00:14:47,880 --> 00:14:51,560 Speaker 2: funds to allocate more capital to private markets and to 276 00:14:51,720 --> 00:14:55,880 Speaker 2: the domestic economy. London's prospects, though, are something that my 277 00:14:55,960 --> 00:14:59,640 Speaker 2: colleague Francine Lackwitt has been discussing with Blackstone CEO Steve 278 00:14:59,680 --> 00:15:04,000 Speaker 2: schwat Wortzman. He sees the city and the country's potential. 279 00:15:04,760 --> 00:15:06,760 Speaker 7: You know, we started here with no one. We now 280 00:15:06,880 --> 00:15:10,320 Speaker 7: have six hundred and fifty people here in our office 281 00:15:10,360 --> 00:15:14,480 Speaker 7: in London. We're building a very significant new headquarters in 282 00:15:14,560 --> 00:15:18,440 Speaker 7: Berkley Square that's probably going to be the nicest office 283 00:15:18,520 --> 00:15:24,120 Speaker 7: building that's been built really since the wonderful Bloomberg headquarters 284 00:15:24,200 --> 00:15:28,480 Speaker 7: here in London. So that's worked out. We're in a 285 00:15:28,560 --> 00:15:34,040 Speaker 7: lot of different business lines and we're very positive view 286 00:15:34,160 --> 00:15:39,040 Speaker 7: of the future here in Europe. We think we're going 287 00:15:39,080 --> 00:15:43,720 Speaker 7: to be able to invest five hundred billion dollars over 288 00:15:43,800 --> 00:15:47,560 Speaker 7: the next decade in Europe. We see it as a 289 00:15:47,640 --> 00:15:53,560 Speaker 7: major opportunity for us. They're starting to change their approach here, 290 00:15:54,360 --> 00:16:00,280 Speaker 7: which we think could result in higher growth rates. This 291 00:16:00,400 --> 00:16:03,000 Speaker 7: has worked out amazingly well for us. 292 00:16:03,520 --> 00:16:06,880 Speaker 2: That was Bloomberg's Francin and Laquaz speaking to Blackstone CEO 293 00:16:07,000 --> 00:16:11,239 Speaker 2: Steve Schwartzman. So cal London make good on its prospects. 294 00:16:11,640 --> 00:16:15,120 Speaker 2: It's something I've been discussing with Bloomberg's European asset management 295 00:16:15,200 --> 00:16:21,080 Speaker 2: reporter Leo Kenshpper and our UK economics editor Julian Harris. Leo, 296 00:16:21,160 --> 00:16:24,080 Speaker 2: thank you so much for being with me. So firstly 297 00:16:24,200 --> 00:16:26,720 Speaker 2: to you, could you talk us through the landscape. Then 298 00:16:27,320 --> 00:16:30,920 Speaker 2: companies have obviously been leaving London. Are we at a 299 00:16:31,000 --> 00:16:34,560 Speaker 2: tipping point? Why are they going? There's been this issue 300 00:16:34,640 --> 00:16:38,240 Speaker 2: rumbling on for a long time. This year seems quite acute. 301 00:16:38,920 --> 00:16:42,480 Speaker 9: Yes, thank you, Caroline. So if we're just focusing on 302 00:16:42,560 --> 00:16:45,640 Speaker 9: the stock market, it's really fair to say that London's 303 00:16:45,640 --> 00:16:49,960 Speaker 9: equity market is really seeing a deep and structural malaise 304 00:16:50,000 --> 00:16:52,760 Speaker 9: and it has been going on for years actually, but 305 00:16:53,320 --> 00:16:57,680 Speaker 9: just over the past few weeks. If you remember, Wis, 306 00:16:58,200 --> 00:17:02,280 Speaker 9: the money transfer firm, the one big London listed fintech 307 00:17:02,440 --> 00:17:05,359 Speaker 9: star said it will move its primary listing to the 308 00:17:05,480 --> 00:17:08,760 Speaker 9: US and just the week before we had reports that Chian, 309 00:17:09,200 --> 00:17:12,560 Speaker 9: the you know, the Chinese fast fashion company, which you know, 310 00:17:12,760 --> 00:17:15,400 Speaker 9: was expected to have a valuation in the tens of billions, 311 00:17:15,920 --> 00:17:19,240 Speaker 9: is now looking to list in Hong Kong instead of London. 312 00:17:19,760 --> 00:17:24,400 Speaker 9: So that's two really prominent reason examples here, and there's 313 00:17:24,440 --> 00:17:27,480 Speaker 9: a couple of underlying problems to that. First of all, 314 00:17:27,880 --> 00:17:31,359 Speaker 9: it's weak demand by UK investors. You know, the one 315 00:17:31,400 --> 00:17:34,040 Speaker 9: example that fund managers always bring up with me and 316 00:17:34,080 --> 00:17:37,680 Speaker 9: also asset management executives is, you know, in the US, 317 00:17:37,800 --> 00:17:40,200 Speaker 9: everyone talks about the stocks they hold in their for 318 00:17:40,480 --> 00:17:43,800 Speaker 9: one case savings plans, and in the UK that's just 319 00:17:43,920 --> 00:17:46,639 Speaker 9: not the case. And it's that's also true for Europe 320 00:17:46,680 --> 00:17:49,240 Speaker 9: by the way. And then the other issue is that 321 00:17:49,359 --> 00:17:53,760 Speaker 9: pension funds also don't really invest in UK stocks because 322 00:17:53,800 --> 00:17:56,879 Speaker 9: they prefer fixed income and government bonds, and this is 323 00:17:56,960 --> 00:18:00,359 Speaker 9: driven by accounting regulation. There was in used in the 324 00:18:00,560 --> 00:18:05,000 Speaker 9: two thousands and essentially forced pension funds to move out 325 00:18:05,040 --> 00:18:08,239 Speaker 9: of equities. And the trend was then also reinforced by 326 00:18:08,480 --> 00:18:11,680 Speaker 9: you know, millions of workers retiring, millions of workers who 327 00:18:12,200 --> 00:18:16,760 Speaker 9: would get defined benefit pensions, and as a result, pension 328 00:18:16,840 --> 00:18:20,720 Speaker 9: funds moved into even more government bonds to make sure 329 00:18:20,800 --> 00:18:25,360 Speaker 9: they have these guaranteed cash flows to match these liabilities 330 00:18:25,440 --> 00:18:28,320 Speaker 9: to pensioners. And yeah, so these are some of the 331 00:18:28,359 --> 00:18:31,360 Speaker 9: structural problems facing the UK stock market. And this has 332 00:18:31,600 --> 00:18:33,800 Speaker 9: led to the perception that listed companies in the UK 333 00:18:34,400 --> 00:18:39,400 Speaker 9: faced low valuations, low liquidity and also a high takeover risk. 334 00:18:39,480 --> 00:18:42,200 Speaker 9: And this has led to this visual cycle that you know, 335 00:18:42,400 --> 00:18:47,320 Speaker 9: fewer companies want to list, valuations fall further, and investor 336 00:18:47,480 --> 00:18:48,879 Speaker 9: interest has drilled up pretty much. 337 00:18:49,240 --> 00:18:49,400 Speaker 8: Well. 338 00:18:49,440 --> 00:18:52,359 Speaker 2: The Labor government is trying to take steps, and so 339 00:18:52,960 --> 00:18:55,920 Speaker 2: did the previous Conservative government. Also they've taken a number 340 00:18:55,920 --> 00:18:59,439 Speaker 2: of steps to try to turn this kind of tanker 341 00:18:59,600 --> 00:19:03,840 Speaker 2: around owned and return the London Stock Exchange and London 342 00:19:03,880 --> 00:19:07,200 Speaker 2: as a kind of financial center back to the top, 343 00:19:07,280 --> 00:19:10,160 Speaker 2: I suppose. And also I'll just give you a quote 344 00:19:10,160 --> 00:19:12,320 Speaker 2: from David Schrimmer, who is the chief executive of the 345 00:19:12,359 --> 00:19:14,760 Speaker 2: London Stock Exchange Group, who says that if you take 346 00:19:14,800 --> 00:19:16,680 Speaker 2: a look at the companies that have gone from the 347 00:19:16,800 --> 00:19:18,960 Speaker 2: UK to list in New York over the last ten years, 348 00:19:19,160 --> 00:19:21,800 Speaker 2: it's about twenty companies. Of those four are trading up, 349 00:19:21,920 --> 00:19:25,760 Speaker 2: nine are delisted, and the rest are trading down. So 350 00:19:26,240 --> 00:19:28,400 Speaker 2: he gave that quote to a newspaper in the UK. 351 00:19:28,680 --> 00:19:31,600 Speaker 2: I mean it's not really necessarily a silver bullet for 352 00:19:31,640 --> 00:19:34,640 Speaker 2: businesses to list in the US, is it not necessarily? 353 00:19:34,680 --> 00:19:39,440 Speaker 9: There's certainly data that show that basically your valuation doesn't 354 00:19:39,640 --> 00:19:43,960 Speaker 9: necessarily go up when you list there. I think it's 355 00:19:44,000 --> 00:19:47,080 Speaker 9: still fair to say that the US office with London 356 00:19:47,200 --> 00:19:51,520 Speaker 9: increasingly doesn't you know, it's high liquidity, it's growth oriented investors, 357 00:19:51,560 --> 00:19:54,800 Speaker 9: investors who want to take more risk, better analyst coverage 358 00:19:55,320 --> 00:19:58,720 Speaker 9: and better valuations as a result on the whole, and 359 00:19:58,840 --> 00:20:03,080 Speaker 9: of course are around executive pay, which is definitely higher 360 00:20:03,119 --> 00:20:06,359 Speaker 9: in the US and of course helps you attract more 361 00:20:06,480 --> 00:20:07,240 Speaker 9: and better leaders. 362 00:20:07,840 --> 00:20:11,040 Speaker 2: Yes, talent is also a big issue, isn't it, Julian. 363 00:20:11,119 --> 00:20:13,840 Speaker 2: Let me bring you into this conversation. It is a 364 00:20:13,960 --> 00:20:18,000 Speaker 2: huge issue, isn't it. The government wants economic growth. They 365 00:20:18,080 --> 00:20:21,639 Speaker 2: have targeted the financial services sector as one area that 366 00:20:21,720 --> 00:20:24,119 Speaker 2: could deliver that, although they've talked about a lot of 367 00:20:24,160 --> 00:20:27,280 Speaker 2: sectors doing that. It is hugely important for Britain to 368 00:20:27,359 --> 00:20:29,959 Speaker 2: get business investment, to get companies listing. 369 00:20:30,320 --> 00:20:32,040 Speaker 9: What do you think it really is? 370 00:20:32,200 --> 00:20:32,400 Speaker 6: Yeah? 371 00:20:32,600 --> 00:20:36,760 Speaker 10: I think Reeves has done well to target the city. Obviously, 372 00:20:36,880 --> 00:20:40,760 Speaker 10: she has a former city lobbyist on her team, which 373 00:20:40,840 --> 00:20:43,439 Speaker 10: is not always the greatest political look, but it doesn't 374 00:20:43,600 --> 00:20:46,680 Speaker 10: necessarily make it a bad thing. Like we have a 375 00:20:46,760 --> 00:20:50,200 Speaker 10: bit of a political habit in this country of really 376 00:20:50,600 --> 00:20:56,359 Speaker 10: liking our industries that are smaller or less productive and 377 00:20:56,520 --> 00:21:01,360 Speaker 10: politically giving a lot of weight to areas fishing, for example, 378 00:21:02,480 --> 00:21:07,000 Speaker 10: whereas you know the areas that do well like finance 379 00:21:07,119 --> 00:21:11,280 Speaker 10: in the city. Of course, life sciences, like the arts, 380 00:21:11,480 --> 00:21:16,679 Speaker 10: like high level tech, these are often not sometimes can 381 00:21:16,760 --> 00:21:20,480 Speaker 10: be politically neglected, or can even be politically very unpopular. 382 00:21:20,680 --> 00:21:23,080 Speaker 10: So I think in a way Reeves has do. I 383 00:21:23,119 --> 00:21:25,760 Speaker 10: think she's caught the moment well. I think the financial 384 00:21:25,840 --> 00:21:29,399 Speaker 10: crisis is far enough in the past that she has 385 00:21:29,520 --> 00:21:32,879 Speaker 10: been able to give this sort of positive focus on 386 00:21:32,960 --> 00:21:36,160 Speaker 10: the city, and indeed it's one of the only areas 387 00:21:36,560 --> 00:21:39,720 Speaker 10: where she's been well received in the last year. When 388 00:21:39,760 --> 00:21:42,760 Speaker 10: she went to Mansion House, it went down fairly well, 389 00:21:43,200 --> 00:21:46,760 Speaker 10: whereas her other meetings with businesses have not gone well 390 00:21:46,880 --> 00:21:51,119 Speaker 10: given the twenty six billion pound tax hike that she 391 00:21:51,400 --> 00:21:54,920 Speaker 10: imposed on them, and that seems to have had its 392 00:21:54,960 --> 00:21:59,400 Speaker 10: own economic effect. Obviously, the economy started the year very 393 00:21:59,480 --> 00:22:03,480 Speaker 10: well and in April it went backwards and the effect 394 00:22:03,640 --> 00:22:06,879 Speaker 10: and that tax hit seems to have had a big 395 00:22:06,960 --> 00:22:10,639 Speaker 10: effect on jobs. Of course what's happening with Trump and 396 00:22:10,720 --> 00:22:13,399 Speaker 10: as tariffs has not helped either. But all of that 397 00:22:13,720 --> 00:22:18,120 Speaker 10: just shows how important it is that labor does target 398 00:22:18,320 --> 00:22:22,480 Speaker 10: the areas that could drive growth and could improve productivity, 399 00:22:22,840 --> 00:22:25,679 Speaker 10: and that the city is certainly one of those, at 400 00:22:25,760 --> 00:22:26,440 Speaker 10: least in theory. 401 00:22:27,040 --> 00:22:29,560 Speaker 2: And that's why the City UK event in some sense 402 00:22:29,680 --> 00:22:33,680 Speaker 2: is very important because it is financial services across the 403 00:22:33,800 --> 00:22:37,639 Speaker 2: UK gathered together in Westminster, so the heart of politics, 404 00:22:38,160 --> 00:22:41,119 Speaker 2: which I think is quite interesting Leo, in terms of 405 00:22:41,400 --> 00:22:44,200 Speaker 2: how the UK is faring. Then as an investment destination, 406 00:22:44,440 --> 00:22:47,720 Speaker 2: always a place to, you know, list a business versus 407 00:22:47,800 --> 00:22:51,840 Speaker 2: neighbors in Europe. Does the freedom from the EU come 408 00:22:51,920 --> 00:22:53,080 Speaker 2: with any perks? 409 00:22:53,600 --> 00:22:57,119 Speaker 9: Yeah, that's a very good question. I mean, by and large, 410 00:22:57,200 --> 00:23:00,200 Speaker 9: the soorbering answer is that executives in the cities will 411 00:23:00,320 --> 00:23:01,640 Speaker 9: see it as a net negative. 412 00:23:01,960 --> 00:23:02,119 Speaker 8: You know. 413 00:23:02,359 --> 00:23:04,040 Speaker 9: Just over the last few weeks we had the government 414 00:23:04,480 --> 00:23:07,040 Speaker 9: laying out new immigration rules you know that will make 415 00:23:07,880 --> 00:23:10,879 Speaker 9: make it take ten years for immigrants to to receive 416 00:23:10,960 --> 00:23:14,399 Speaker 9: preferential status independent leave to remain and it used to 417 00:23:14,480 --> 00:23:19,280 Speaker 9: be five years previously. And of course, this uncertainty really 418 00:23:19,359 --> 00:23:22,000 Speaker 9: piles on onto high, highly skilled workers and makes it 419 00:23:22,080 --> 00:23:26,119 Speaker 9: harder for finance firms to attract talent. One example I 420 00:23:26,160 --> 00:23:28,760 Speaker 9: would like to point out here is the insurance industry. 421 00:23:28,920 --> 00:23:31,120 Speaker 9: You know, it's a it's a quarter of the city's 422 00:23:31,160 --> 00:23:36,720 Speaker 9: economic output, but of course arguably less glamorous then say 423 00:23:36,760 --> 00:23:39,320 Speaker 9: investment banking, and it makes it even harder for them 424 00:23:39,359 --> 00:23:42,320 Speaker 9: to attract talent in the city. That's what they what 425 00:23:42,400 --> 00:23:47,120 Speaker 9: they keep telling me. And if you're looking for perks, 426 00:23:47,240 --> 00:23:50,800 Speaker 9: I think or Brexit dividends as the government would call it, 427 00:23:51,359 --> 00:23:55,359 Speaker 9: I would point out Keystama's early trade deal with the 428 00:23:55,720 --> 00:23:58,320 Speaker 9: with the Trump administration. I mean it was the first 429 00:23:58,359 --> 00:24:02,840 Speaker 9: deal sort of sealed by Trump following April second, and 430 00:24:03,920 --> 00:24:06,760 Speaker 9: I think that can be fairly it can be you 431 00:24:06,840 --> 00:24:09,480 Speaker 9: can be touted as a as a whim in terms 432 00:24:09,560 --> 00:24:10,399 Speaker 9: of how. 433 00:24:10,359 --> 00:24:12,760 Speaker 2: The government is trying to fix what is still a 434 00:24:12,920 --> 00:24:17,200 Speaker 2: slow moving UK economy. Julian, what are the factors here 435 00:24:17,240 --> 00:24:19,440 Speaker 2: at play? What's the thinking at this point? 436 00:24:20,560 --> 00:24:24,639 Speaker 10: Yeah, that deal is I mean, it's it's positive that 437 00:24:24,800 --> 00:24:27,639 Speaker 10: exist that it exists. I think this is what Andrew 438 00:24:27,680 --> 00:24:30,520 Speaker 10: Bailey says, and he's right, But there is always a 439 00:24:30,640 --> 00:24:35,040 Speaker 10: danger in overstating it. It is still an extremely thin deal. 440 00:24:35,520 --> 00:24:38,320 Speaker 10: There's still a huge amount of uncertainty over steel, which 441 00:24:38,440 --> 00:24:41,200 Speaker 10: was supposed to be the main point in doing the 442 00:24:41,359 --> 00:24:46,040 Speaker 10: deal in the first place. So I mean there's a 443 00:24:46,160 --> 00:24:49,320 Speaker 10: vast amount in general for the government to fix around 444 00:24:49,359 --> 00:24:52,880 Speaker 10: the economy, of which I think they're aware. Our productivity 445 00:24:53,000 --> 00:24:54,480 Speaker 10: is still absolutely abysmal. 446 00:24:54,920 --> 00:24:57,440 Speaker 2: Leo ken Scherper and Julian Harris, thank you so much 447 00:24:57,520 --> 00:25:00,520 Speaker 2: for both being with me. I'll be reporting low from 448 00:25:00,880 --> 00:25:04,439 Speaker 2: the City UK conference in London in the next few days. 449 00:25:04,840 --> 00:25:06,960 Speaker 2: In the meantime, though, I'm callin Hepkin. You can catch 450 00:25:07,000 --> 00:25:09,639 Speaker 2: us every weekday morning for Bloomberg Daybreak you at beginning 451 00:25:09,640 --> 00:25:12,320 Speaker 2: at six am in London. That's one am on Wall Street. 452 00:25:12,440 --> 00:25:15,479 Speaker 1: Tom, thank you, Caroline, and coming up on Bloomberg day 453 00:25:15,480 --> 00:25:17,320 Speaker 1: Break weekend to look at how things are looking in 454 00:25:17,400 --> 00:25:21,280 Speaker 1: the world's second largest economy. I'm Tom Busby, and this 455 00:25:21,760 --> 00:25:35,560 Speaker 1: is Bloomberg. This is Bloomberg day Break Weekend, our global 456 00:25:35,600 --> 00:25:37,560 Speaker 1: look ahead at the top stories for investors in the 457 00:25:37,600 --> 00:25:40,680 Speaker 1: coming week. I'm Tom Busby in New York. This week 458 00:25:40,920 --> 00:25:43,359 Speaker 1: we get a fresh perspective on how things are looking 459 00:25:43,560 --> 00:25:47,120 Speaker 1: in the world's second largest economy, China. For more, let's 460 00:25:47,119 --> 00:25:49,800 Speaker 1: get to the host of the Daybreak Asia podcast, Doug 461 00:25:49,880 --> 00:25:51,080 Speaker 1: Krisner Tom. 462 00:25:51,160 --> 00:25:54,160 Speaker 3: In the coming days, Bloomberg will be releasing it's China 463 00:25:54,240 --> 00:25:57,280 Speaker 3: Economic Survey now. To be fair, a great deal is 464 00:25:57,320 --> 00:26:01,040 Speaker 3: already understood. The Chinese economy is struck. Yes, there have 465 00:26:01,240 --> 00:26:05,639 Speaker 3: been some upside surprises in recent official data. I'm thinking 466 00:26:05,720 --> 00:26:09,160 Speaker 3: here of the latest retail sales reading. But the property 467 00:26:09,240 --> 00:26:12,040 Speaker 3: market is still a massive problem and the story on 468 00:26:12,160 --> 00:26:16,200 Speaker 3: defallation has been persistently worrisome. Joining me now for a 469 00:26:16,240 --> 00:26:19,120 Speaker 3: look at what's happening on the mainland is Bloomberg's Eric Zeu. 470 00:26:19,640 --> 00:26:22,680 Speaker 3: Eric is an economist covering China and Hong Kong for 471 00:26:22,800 --> 00:26:25,840 Speaker 3: Bloomberg Economics. It's been a while. Thank you for making 472 00:26:25,920 --> 00:26:28,639 Speaker 3: time to chat with me. What's so curious to me 473 00:26:28,840 --> 00:26:31,480 Speaker 3: is that the government has been painfully aware of all 474 00:26:31,560 --> 00:26:35,399 Speaker 3: of the issues plaguing the economy. Steps have been taken 475 00:26:35,520 --> 00:26:39,960 Speaker 3: to provide support, but still something is holding a recovery back. 476 00:26:40,040 --> 00:26:42,920 Speaker 3: Do you have a sense of what that may be, Eric, Yeah. 477 00:26:42,760 --> 00:26:43,800 Speaker 5: Thank you for having me so. 478 00:26:44,240 --> 00:26:44,440 Speaker 4: Yeah. 479 00:26:44,440 --> 00:26:46,720 Speaker 5: I think there's a lung stand the issue, and many 480 00:26:46,720 --> 00:26:49,680 Speaker 5: people are still struggling, you know, trying to understand why, 481 00:26:50,480 --> 00:26:53,320 Speaker 5: you know, despise some stimulus effort from the government. But 482 00:26:53,520 --> 00:26:57,920 Speaker 5: they called me still looks struggling. I think fundamentally, I 483 00:26:58,000 --> 00:27:01,760 Speaker 5: think even from observation on the ground, I think many 484 00:27:02,480 --> 00:27:07,160 Speaker 5: you know, business, many households, it's still the crucial thing 485 00:27:07,240 --> 00:27:10,480 Speaker 5: is missing that they they don't have a strong sentiment 486 00:27:10,920 --> 00:27:14,280 Speaker 5: or you know, consumer confidence or business confidence, whatever you call. 487 00:27:14,359 --> 00:27:17,720 Speaker 5: I think it's still quite you know, it's not there yet. 488 00:27:17,920 --> 00:27:21,399 Speaker 5: I mean they think now the government is definitely you know, 489 00:27:21,640 --> 00:27:25,840 Speaker 5: pivoting to more growth support. But from what government is 490 00:27:26,119 --> 00:27:29,879 Speaker 5: doing or saying, it doesn't sound like that, you know, 491 00:27:30,000 --> 00:27:34,280 Speaker 5: they're making whatever it takes. Okay, the students is coming, 492 00:27:34,400 --> 00:27:38,600 Speaker 5: but it's it's not really that massively changes things. I 493 00:27:38,680 --> 00:27:41,359 Speaker 5: mean it's it's it's more like they're putting a flaw 494 00:27:41,440 --> 00:27:44,639 Speaker 5: on the recurrier. We want like five percent growth. We 495 00:27:45,000 --> 00:27:48,600 Speaker 5: just don't want to slide. But it's it's we're not 496 00:27:48,720 --> 00:27:51,960 Speaker 5: going to you know, make whatever it takes to lift 497 00:27:52,119 --> 00:27:55,119 Speaker 5: growth to like a five point five or six percent. 498 00:27:55,280 --> 00:27:59,680 Speaker 5: So it's not exactly like what the market or you know, 499 00:27:59,800 --> 00:28:02,520 Speaker 5: men people are expecting. I think they are they are 500 00:28:02,560 --> 00:28:07,600 Speaker 5: more like a managing some you know, crisis crisis managing mode, right, 501 00:28:07,720 --> 00:28:10,560 Speaker 5: So they don't want to have a crisis. They want 502 00:28:10,600 --> 00:28:14,800 Speaker 5: to prevent a sharp slow down. But it's okay. You know, 503 00:28:15,000 --> 00:28:18,600 Speaker 5: with five percent growth, economy is still holding up as 504 00:28:18,640 --> 00:28:19,920 Speaker 5: long it's not a crisis. 505 00:28:20,200 --> 00:28:22,640 Speaker 3: Do you have a sense of the degree to which 506 00:28:22,800 --> 00:28:26,080 Speaker 3: the trade war with the US has really been impacting centiment. 507 00:28:26,160 --> 00:28:29,480 Speaker 3: You talked about the weak sentiment among consumers, but I'm 508 00:28:29,520 --> 00:28:33,239 Speaker 3: going to imagine that businesses have been adversely impacted by 509 00:28:33,280 --> 00:28:33,880 Speaker 3: the trade war. 510 00:28:34,280 --> 00:28:37,680 Speaker 5: I think it's probably not as broad as many you know, 511 00:28:38,040 --> 00:28:42,360 Speaker 5: offshore was sinc. I think definitely it's affecting some business, 512 00:28:42,440 --> 00:28:45,560 Speaker 5: but I think it's more about export or rinked business, 513 00:28:45,800 --> 00:28:49,720 Speaker 5: especially those more exposed to US markets. But I think 514 00:28:49,800 --> 00:28:53,800 Speaker 5: for many business which may not directly be exposed to 515 00:28:54,160 --> 00:28:57,680 Speaker 5: trade war, I think they still feel the same issue 516 00:28:57,680 --> 00:29:00,080 Speaker 5: even without trade war. You know, they comet can be 517 00:29:00,160 --> 00:29:02,880 Speaker 5: still struggling, you know, the housing sector, you know, the 518 00:29:03,360 --> 00:29:06,840 Speaker 5: we consume a sentiment. I don't think the trade war has, 519 00:29:07,200 --> 00:29:09,520 Speaker 5: you know, have a big influence on that. I think 520 00:29:09,600 --> 00:29:14,560 Speaker 5: it's more about the domestic structure issues and they are 521 00:29:14,640 --> 00:29:18,280 Speaker 5: not expecting the government to quickly changing that. So I 522 00:29:18,320 --> 00:29:21,080 Speaker 5: don't think even a terrible truth or you know, some 523 00:29:21,480 --> 00:29:24,360 Speaker 5: trade framework with the US would help a lot of that. 524 00:29:24,680 --> 00:29:28,040 Speaker 5: Of course, it's going to ease some pressure on the 525 00:29:28,120 --> 00:29:32,280 Speaker 5: external front, right, the exports might be you know, slump 526 00:29:32,400 --> 00:29:36,600 Speaker 5: less than without trade war, but I think still the 527 00:29:36,680 --> 00:29:40,920 Speaker 5: domestic issues dominate for many businesses who are not directly 528 00:29:41,000 --> 00:29:42,320 Speaker 5: exposed to trade war. 529 00:29:42,560 --> 00:29:45,000 Speaker 3: You mentioned the property market a moment ago, and I 530 00:29:45,240 --> 00:29:49,080 Speaker 3: remember the recent data on home prices, both new and 531 00:29:49,400 --> 00:29:52,600 Speaker 3: used home prices. It seems like the price declinents have 532 00:29:52,920 --> 00:29:55,320 Speaker 3: been accelerating a little bit, and I would imagine that 533 00:29:55,440 --> 00:29:57,800 Speaker 3: that's very concerning to Beijing. 534 00:29:58,480 --> 00:30:01,640 Speaker 5: We don't read too much on the official housing prices 535 00:30:01,760 --> 00:30:04,800 Speaker 5: because I think it's sometimes different from what we observe 536 00:30:05,240 --> 00:30:07,720 Speaker 5: on the market, but we don't really have very good 537 00:30:07,840 --> 00:30:11,240 Speaker 5: data set, you know, to measuring the actual price movement. 538 00:30:11,360 --> 00:30:14,680 Speaker 5: But in any case, we think you know, the maze 539 00:30:14,960 --> 00:30:19,280 Speaker 5: housing sector data, you know, sales investment prices. It does 540 00:30:19,360 --> 00:30:24,680 Speaker 5: seem like suggesting that the stronger support since the last 541 00:30:24,760 --> 00:30:29,080 Speaker 5: quarter of last year, it begin to you know, winning 542 00:30:29,160 --> 00:30:32,880 Speaker 5: off right, So it's it does raise some concern that 543 00:30:33,200 --> 00:30:35,960 Speaker 5: the government needs to do more, you know, to keep 544 00:30:36,320 --> 00:30:40,080 Speaker 5: the recovering momentum going. I mean, there's still some side progress. 545 00:30:40,200 --> 00:30:44,760 Speaker 5: If you look at the jobs in home sales this year, 546 00:30:45,120 --> 00:30:48,160 Speaker 5: it's definitely you know, smaller than last year, right, So 547 00:30:48,440 --> 00:30:52,040 Speaker 5: it shows some progress on the policy support, but it's 548 00:30:52,080 --> 00:30:55,640 Speaker 5: not strong enough. I mean, given its momentum is showing 549 00:30:55,720 --> 00:30:58,600 Speaker 5: some signs of weakening. April and May, I think the 550 00:30:58,640 --> 00:31:01,760 Speaker 5: government needs to you know, prop up with even a 551 00:31:01,840 --> 00:31:04,560 Speaker 5: quicker delivery of the existing measures or come up with 552 00:31:04,680 --> 00:31:07,880 Speaker 5: some new supporting measures to keep the momentum going. 553 00:31:08,080 --> 00:31:11,000 Speaker 3: When you look at the flow of foreign capital, how 554 00:31:11,120 --> 00:31:14,000 Speaker 3: is that moving? Is it really trying to leave China 555 00:31:14,120 --> 00:31:16,720 Speaker 3: right now or is capital coming into the economy. 556 00:31:17,160 --> 00:31:22,440 Speaker 5: I think ironically actually this year that the young currency. 557 00:31:22,840 --> 00:31:24,720 Speaker 5: I think at the beginning of the year, most people 558 00:31:24,840 --> 00:31:27,720 Speaker 5: are expecting, you know, a depression of the UN this year, 559 00:31:27,800 --> 00:31:30,840 Speaker 5: deal too, you know, the US Chinnel conflicts, probably a 560 00:31:31,280 --> 00:31:34,440 Speaker 5: trade war is happening. But actually I think if you 561 00:31:34,560 --> 00:31:37,400 Speaker 5: look at the movements so far this year, that the 562 00:31:37,520 --> 00:31:41,080 Speaker 5: anti currency is actually appreciating against you. I think it's 563 00:31:41,200 --> 00:31:44,440 Speaker 5: more related to some you know, see America, so people 564 00:31:44,600 --> 00:31:47,760 Speaker 5: lost some confidence on the US dollar, etcetera. But I 565 00:31:47,840 --> 00:31:52,200 Speaker 5: think overall. Now, given the currency is actually stronger than 566 00:31:52,280 --> 00:31:55,720 Speaker 5: many expected, I think this actually is helping, you know, 567 00:31:55,960 --> 00:31:59,760 Speaker 5: the capital pressure because it's actually to export that we 568 00:32:00,080 --> 00:32:04,600 Speaker 5: think recent data show that actually many experts that they're 569 00:32:04,640 --> 00:32:08,080 Speaker 5: willing to settle you know, the US dollar because they're worried. 570 00:32:08,280 --> 00:32:12,360 Speaker 5: Maybe I'm be well appreciate even further. So I think 571 00:32:12,760 --> 00:32:17,040 Speaker 5: to some balance, these actually ease some pressure on the 572 00:32:17,120 --> 00:32:19,760 Speaker 5: China side. I think about captol Offlow. 573 00:32:19,720 --> 00:32:22,200 Speaker 3: We've been very aware for some time about the weakness 574 00:32:22,240 --> 00:32:25,600 Speaker 3: in the labor market, especially for young people on the mainland, 575 00:32:25,640 --> 00:32:29,560 Speaker 3: and I'm wondering how that's beginning to affect them as 576 00:32:29,680 --> 00:32:33,160 Speaker 3: they look at the economy, the lack of opportunity, How 577 00:32:33,280 --> 00:32:35,480 Speaker 3: is this translating, and how is it kind of moving 578 00:32:35,560 --> 00:32:38,480 Speaker 3: through the economy their feelings about the outlook. 579 00:32:38,880 --> 00:32:43,120 Speaker 5: I think that's for me and for many economists, I 580 00:32:43,200 --> 00:32:48,480 Speaker 5: think that's actually a quite a big issue because it's 581 00:32:48,560 --> 00:32:52,720 Speaker 5: definitely actually affecting you know, the young people's demand for 582 00:32:52,880 --> 00:32:57,320 Speaker 5: many things, including housing, you know, including because they have 583 00:32:57,480 --> 00:33:00,720 Speaker 5: less desire for even marriage, for even having a baby. 584 00:33:00,880 --> 00:33:04,680 Speaker 5: So actually it's affecting lots of demand in the future. Right, 585 00:33:04,840 --> 00:33:08,520 Speaker 5: So probably the contraction in the agriate demand will be 586 00:33:08,640 --> 00:33:11,640 Speaker 5: more than we had expected, given you know, the lower 587 00:33:11,720 --> 00:33:15,160 Speaker 5: desire for young people about the future. So that's probably 588 00:33:15,320 --> 00:33:19,120 Speaker 5: posing some a big threat on the long term economic outlook. 589 00:33:19,480 --> 00:33:22,240 Speaker 5: They might have some new demand you think, you think 590 00:33:22,280 --> 00:33:26,200 Speaker 5: about la bubu, those kind of things. That's because young 591 00:33:26,240 --> 00:33:28,920 Speaker 5: people probably shifting you know, the traditional demand to some 592 00:33:29,160 --> 00:33:33,200 Speaker 5: new the so called emotion consumption. Right, they care more 593 00:33:33,200 --> 00:33:37,160 Speaker 5: about how these things can satisfy that emotion, but they 594 00:33:37,640 --> 00:33:41,080 Speaker 5: care less about a new family, you know, new children. 595 00:33:41,600 --> 00:33:44,240 Speaker 5: They don't want those. So I think this you have 596 00:33:44,400 --> 00:33:48,080 Speaker 5: to rethink about what's the future structure of the Call 597 00:33:48,240 --> 00:33:51,600 Speaker 5: me what's the long term prospect because we have definitely 598 00:33:51,640 --> 00:33:54,720 Speaker 5: have we have some part of demand will be contracting 599 00:33:54,840 --> 00:33:57,960 Speaker 5: very quickly, although there could be some new demand being created, 600 00:33:58,120 --> 00:34:01,160 Speaker 5: but I don't think that's that's going to offset the 601 00:34:01,480 --> 00:34:04,640 Speaker 5: contraction of the traditional demand part. 602 00:34:05,080 --> 00:34:06,880 Speaker 3: Eric will leave it there. It's always a pleasure. Thank 603 00:34:06,920 --> 00:34:09,400 Speaker 3: you so much for your time and insights into the 604 00:34:09,480 --> 00:34:12,480 Speaker 3: Chinese economy. He is Eric Ju. He covers China for 605 00:34:12,520 --> 00:34:16,960 Speaker 3: Bloomberg Economics, and we move now from economics to geopolitics. 606 00:34:17,239 --> 00:34:20,960 Speaker 3: In a recent piece for Bloomberg Opinion, columnist Karishma Vaswani 607 00:34:21,360 --> 00:34:25,080 Speaker 3: focused on the Trump administration's review of the Aucas Pact. 608 00:34:25,480 --> 00:34:28,520 Speaker 3: This is a security arrangement between the US, the UK 609 00:34:28,760 --> 00:34:33,080 Speaker 3: and Australia, and the review is rattling one of Washington's 610 00:34:33,320 --> 00:34:36,480 Speaker 3: closest alliances. I had the chance to catch up with 611 00:34:36,640 --> 00:34:38,200 Speaker 3: Karrishma earlier this week. 612 00:34:38,520 --> 00:34:42,200 Speaker 11: At the heart of this arrangement was an agreement signed 613 00:34:42,280 --> 00:34:45,200 Speaker 11: by President Biden in twenty twenty one that would help 614 00:34:45,400 --> 00:34:50,080 Speaker 11: Australia develop a fleet of nuclear powered submarines over a 615 00:34:50,200 --> 00:34:53,880 Speaker 11: thirty year period, and it would involve both the US 616 00:34:54,120 --> 00:34:58,799 Speaker 11: and the UK. America would provide superior technology, the UK 617 00:34:58,960 --> 00:35:04,080 Speaker 11: would help ast build these nuclear submarines. But ostensibly it 618 00:35:04,200 --> 00:35:07,360 Speaker 11: was also a way to counter China's growing influence in 619 00:35:07,480 --> 00:35:10,160 Speaker 11: the Indo Pacific, and at the time when it was announced, 620 00:35:10,239 --> 00:35:13,360 Speaker 11: China was very upset. It saw it as another example 621 00:35:13,480 --> 00:35:18,239 Speaker 11: of the American supremacy, the desire to maintain that in 622 00:35:18,320 --> 00:35:21,400 Speaker 11: the Indo Pacific, and as an attempt by the United 623 00:35:21,440 --> 00:35:26,160 Speaker 11: States to contain China's influence and military and naval power, 624 00:35:26,200 --> 00:35:30,280 Speaker 11: which has been, as we've talked about on your program before, growing, 625 00:35:30,719 --> 00:35:34,080 Speaker 11: you know, rapidly over the last few years. But now, 626 00:35:34,280 --> 00:35:37,640 Speaker 11: given that the White House has come out and said 627 00:35:37,800 --> 00:35:41,600 Speaker 11: that they're putting this agreement under review, they're going to 628 00:35:41,680 --> 00:35:46,240 Speaker 11: look at whether OCUS is aligned with the President's America 629 00:35:46,360 --> 00:35:49,680 Speaker 11: First agenda. I'm quoting from the Defense Department there, And 630 00:35:50,160 --> 00:35:54,600 Speaker 11: you know, that's really sort of making a lot of 631 00:35:54,880 --> 00:35:58,839 Speaker 11: allies and partners in the Indo Pacific nervous, not least 632 00:35:59,080 --> 00:36:02,960 Speaker 11: the Australians themselves, who are really counting on this commitment 633 00:36:03,080 --> 00:36:04,200 Speaker 11: from the United States. 634 00:36:04,520 --> 00:36:07,680 Speaker 3: So how do you think this is being viewed in Beijing? 635 00:36:08,280 --> 00:36:08,400 Speaker 8: Oh? 636 00:36:08,480 --> 00:36:12,120 Speaker 11: I think that this makes China very happy because for 637 00:36:12,239 --> 00:36:14,880 Speaker 11: the you know, on the one hand, there are now 638 00:36:15,040 --> 00:36:18,239 Speaker 11: real concerns over whether ORCUS will go ahead in its 639 00:36:18,280 --> 00:36:21,200 Speaker 11: original form. My views that it will. I think that 640 00:36:21,320 --> 00:36:26,680 Speaker 11: the United States would, even given the Trump administration's transactional nature. 641 00:36:27,000 --> 00:36:29,720 Speaker 11: I do not think that the White House would allow 642 00:36:29,880 --> 00:36:32,480 Speaker 11: this security agreement to fall by the wayside. 643 00:36:32,560 --> 00:36:32,960 Speaker 4: It would be. 644 00:36:33,200 --> 00:36:36,879 Speaker 11: Problematic and possibly embarrassing. But I think that there will 645 00:36:36,960 --> 00:36:40,080 Speaker 11: be compromises and concessions made on the part of the 646 00:36:40,160 --> 00:36:43,920 Speaker 11: Australians who will feel compelled to do some of the 647 00:36:44,040 --> 00:36:47,040 Speaker 11: things that the United States may be asking for behind 648 00:36:47,120 --> 00:36:51,600 Speaker 11: closed doors. And what that does is play into Beijing's 649 00:36:51,719 --> 00:36:56,360 Speaker 11: narrative that America first means other countries alone. And you know, 650 00:36:56,480 --> 00:37:01,600 Speaker 11: China has consistently positioned itself as the global, sensible, rational 651 00:37:01,760 --> 00:37:06,440 Speaker 11: leader in the Indo Pacific given what appears to be 652 00:37:06,600 --> 00:37:10,240 Speaker 11: sort of an erratic, you know behavior, the erratic nature 653 00:37:10,320 --> 00:37:13,320 Speaker 11: of how Donald Trump does business on the global stage. 654 00:37:14,239 --> 00:37:17,480 Speaker 11: And I think that these kinds of agreements and the 655 00:37:17,600 --> 00:37:21,920 Speaker 11: reviews of these agreements just add credits to that narrative. 656 00:37:22,120 --> 00:37:25,040 Speaker 11: And even if they're not saying it publicly, because you know, 657 00:37:25,080 --> 00:37:28,560 Speaker 11: the Australians have been very quick to sort of defend 658 00:37:28,640 --> 00:37:32,480 Speaker 11: the review and dismiss it as just business as usual. 659 00:37:32,560 --> 00:37:34,960 Speaker 11: I've spoken to diplomats who've said to me, well, it's 660 00:37:35,000 --> 00:37:37,920 Speaker 11: not a great look. And it does mean that countries 661 00:37:38,040 --> 00:37:40,640 Speaker 11: like Australia are going to have to think and are 662 00:37:40,719 --> 00:37:44,839 Speaker 11: already thinking about what this means in terms of future alliances. 663 00:37:44,960 --> 00:37:48,960 Speaker 11: So you're going to start to see you know, Japan, Australia, 664 00:37:49,040 --> 00:37:52,479 Speaker 11: South Korea coming together, maybe India as well, to sort 665 00:37:52,520 --> 00:37:57,080 Speaker 11: of find a way through working without the superpowers that is. 666 00:37:57,120 --> 00:38:01,120 Speaker 3: Bloomberg Opinion columnist Karishma of Oswan. You can read her 667 00:38:01,200 --> 00:38:04,799 Speaker 3: work on the Bloomberg terminal by typing OPI n than 668 00:38:04,840 --> 00:38:08,279 Speaker 3: the Green go Key, or online at Bloomberg dot com 669 00:38:08,560 --> 00:38:11,920 Speaker 3: slash Opinion. I'm Doug Christner. You can catch us weekdays 670 00:38:12,040 --> 00:38:15,440 Speaker 3: for the Daybreak Asia podcast. It's available wherever you get 671 00:38:15,520 --> 00:38:17,080 Speaker 3: your podcast. Tom. 672 00:38:17,520 --> 00:38:19,480 Speaker 1: Thank you Doug. And that does it for this edition 673 00:38:19,520 --> 00:38:22,279 Speaker 1: of Bloomberg day Break Weekend. Join us again Monday morning 674 00:38:22,320 --> 00:38:24,200 Speaker 1: at five am Wall Street Time for the latest on 675 00:38:24,360 --> 00:38:26,799 Speaker 1: markets overseas and the news you need to start your day. 676 00:38:27,200 --> 00:38:30,240 Speaker 1: I'm Tom Buzzby. Stay with us. Top stories and global 677 00:38:30,280 --> 00:38:32,399 Speaker 1: business headlines are coming up right now