WEBVTT - Daybreak Weekend: Apple Earnings, Jobs Report, Central Banks 0:00:02.480 --> 0:00:04.920 This is Bloomberg day Break Weekend, our global look at 0:00:04.960 --> 0:00:06.920 the top stories in the coming week from our day 0:00:06.920 --> 0:00:09.400 Break anchors all around the world. Straight ahead on the 0:00:09.440 --> 0:00:12.920 program of busy week for investors on Wall Street, Apple, 0:00:13.200 --> 0:00:16.759 Microsoft leading the earnings cavalcade, and we'll also get a 0:00:16.800 --> 0:00:20.439 FED decision and the January jobs report. I'm Tom Busby 0:00:20.520 --> 0:00:21.120 in New York. 0:00:21.320 --> 0:00:23.880 I'm callin Hedge in London, where we're looking ahead to 0:00:23.880 --> 0:00:27.120 the Bank of Eglins first rate decision of twenty twenty four. 0:00:27.280 --> 0:00:29.520 I'm Ryan Curtisy in Hong Kong. We look ahead to 0:00:29.640 --> 0:00:33.320 China's BMI so weather recent support measures. He can turn 0:00:33.400 --> 0:00:35.680 the tide in the Chinese too. 0:00:37.159 --> 0:00:41.239 That's all straight ahead on Bloomberg Daybreak Weekend. The business 0:00:41.280 --> 0:00:45.240 news you need to wrap up your week, available on Apple, Spotify, 0:00:45.400 --> 0:00:48.720 the Bloomberg Business Appen everywhere you get your podcasts. 0:00:53.120 --> 0:00:53.680 Good day to you. 0:00:53.760 --> 0:00:56.320 I'm Tom Busby. We begin today's program with a very 0:00:56.360 --> 0:00:59.560 busy week ahead for earnings on Wall Street. We'll hear 0:00:59.600 --> 0:01:01.840 from more than one hundred companies in the S and 0:01:01.920 --> 0:01:05.120 P five hundred with big tech leading the way. Results 0:01:05.120 --> 0:01:09.840 from Apple, Microsoft, Amazon, Alphabet and Meta Platforms, among others. 0:01:10.360 --> 0:01:11.440 For a closer look at. 0:01:11.319 --> 0:01:14.360 What to expect from the two three trillion dollar giants 0:01:14.400 --> 0:01:17.440 Apple and Microsoft. We're pleased to bring in anurag Rana, 0:01:17.560 --> 0:01:22.160 senior tech analyst with Bloomberg Intelligence, now anorog. Let's start 0:01:22.160 --> 0:01:25.000 with Apple, which has been a lot of headlines lately 0:01:25.280 --> 0:01:28.280 for its new Vision Pro mixed reality headset, trouble with 0:01:28.319 --> 0:01:32.000 the smart watch, app store commissions, challenges for the iPhone 0:01:32.040 --> 0:01:35.280 sales in China. So what are you expecting to see 0:01:35.760 --> 0:01:37.800 from Apple's Q one on Wednesday? 0:01:39.000 --> 0:01:42.240 Listen. I hope they give some good news about China because, 0:01:42.280 --> 0:01:44.880 as you said, you know, for I mean, it's an 0:01:44.880 --> 0:01:47.400 amazing company. But all I can say is in lust 0:01:47.800 --> 0:01:50.120 two months, all I've heard is just negative news come 0:01:50.160 --> 0:01:52.600 out for Apple. So it's a you know, for their sake, 0:01:52.640 --> 0:01:54.640 I hope they come out and give some good comments 0:01:54.680 --> 0:01:57.720 about China and they can you know, grow the smartphones 0:01:57.720 --> 0:02:00.760 in that particular market, because that is the single biggest 0:02:00.800 --> 0:02:03.640 factor that can dictate how they're going to grow this year. 0:02:04.600 --> 0:02:07.680 So that's that's that's forefront on our mind right now. 0:02:08.320 --> 0:02:10.720 Well, we did get a surprise to the upside though 0:02:10.760 --> 0:02:13.440 for twenty twenty three in iPhone sales in China though, 0:02:13.480 --> 0:02:15.480 didn't We yes, But. 0:02:15.480 --> 0:02:17.680 At the same time, I think expectations were so low. 0:02:18.000 --> 0:02:20.240 But you know, I still have to see how things 0:02:20.280 --> 0:02:22.840 shape up in twenty twenty four because you know, we 0:02:22.919 --> 0:02:26.320 have seen that Quahwei's phone was doing pretty well around 0:02:26.320 --> 0:02:28.560 the holidays, so we you know, we still need to 0:02:29.680 --> 0:02:31.639 figure out how December shapes up. 0:02:31.880 --> 0:02:35.200 And how about iPhone sales everywhere? Everywhere else but China. 0:02:36.560 --> 0:02:38.880 See the problem with everywhere else is and I'm going 0:02:38.919 --> 0:02:41.120 to talk about developed markets. You know, markets like the 0:02:41.240 --> 0:02:46.040 US and Western Europe, it is relatively mature or I 0:02:46.040 --> 0:02:49.240 would say stagnant. So when you see those markets, the 0:02:49.520 --> 0:02:51.760 install base of the number of people to have phone, 0:02:52.000 --> 0:02:54.600 that's only going to grow gradually, let's say in the 0:02:54.680 --> 0:02:57.280 rate of about two to three percent. That's not much 0:02:57.320 --> 0:03:00.000 to really, you know, boost the top line of the company. 0:03:00.560 --> 0:03:03.320 It was really China as the growth growth engine right 0:03:03.320 --> 0:03:06.440 now because when you look at the number of units there, 0:03:06.520 --> 0:03:10.000 China has about one billion smartphones out there. Apple has 0:03:10.040 --> 0:03:12.720 an you know, about an eighteen percent market share or 0:03:12.720 --> 0:03:14.959 somewhere and that range. So we still have a long 0:03:15.000 --> 0:03:17.800 way to go for Rabert to grow in that market. 0:03:18.680 --> 0:03:21.120 And I think that really was was, you know, my 0:03:21.280 --> 0:03:24.200 hope that if they can continue to grow well in China, 0:03:24.600 --> 0:03:26.640 then the next big market over the next three to 0:03:26.680 --> 0:03:28.640 five years is going to be India and so forth. 0:03:28.800 --> 0:03:30.560 So that kind of gives you like a ten year 0:03:31.200 --> 0:03:34.679 growth driver. But if China's going to slow down, you're 0:03:34.680 --> 0:03:37.080 not going to see massive, massive growth there. Then it 0:03:37.120 --> 0:03:39.120 brings down the growth rate of the entire company. 0:03:39.640 --> 0:03:40.000 Yeah. 0:03:40.040 --> 0:03:45.760 Wow, Well another possible generator of revenue the Vision Pro 0:03:45.920 --> 0:03:51.800 mixed reality headset. What not yet, but there was a 0:03:51.840 --> 0:03:54.840 burst of enthusiasm when when pre orders came out just 0:03:55.160 --> 0:03:55.880 this past week. 0:03:55.920 --> 0:03:57.360 But what do you see there? 0:03:58.040 --> 0:04:01.000 Yeah, it's three thousand and five hundred dollars. I mean, 0:04:01.040 --> 0:04:03.360 it's not a needle mover to me because you know, 0:04:03.560 --> 0:04:06.000 to be very honest, how many how many units can 0:04:06.040 --> 0:04:08.880 you sell any year? Let's say you sell half a 0:04:09.040 --> 0:04:12.160 million units, that's about one billion dollars or one and 0:04:12.160 --> 0:04:14.960 a half billion dollars in sales. So it's really not 0:04:15.480 --> 0:04:17.640 it's not something that I think it's going to add 0:04:17.680 --> 0:04:20.760 to the big top line of the company. Because remember 0:04:20.760 --> 0:04:24.120 Apple's revenue bases four hundred billion dollars. So even if 0:04:24.160 --> 0:04:27.200 you can go out and sell let's say one million units, 0:04:27.200 --> 0:04:30.360 it's not one million is way above anybody is expecting. 0:04:30.640 --> 0:04:32.800 That's like, you know, one percent of the revenue of 0:04:32.839 --> 0:04:34.520 the less than one percent of the revenue of the 0:04:34.560 --> 0:04:37.359 total company. So it's it's a lot of good discussion. 0:04:37.440 --> 0:04:39.240 We'll have a lot of fun when it's out there 0:04:39.240 --> 0:04:41.120 and people are going to play around with it, but 0:04:41.560 --> 0:04:43.680 it's really not a needle mover when you look at 0:04:43.720 --> 0:04:45.040 some financial analysis. 0:04:45.520 --> 0:04:50.440 And another hit that Apple's taking is the regulatory challenges 0:04:50.480 --> 0:04:53.159 to its commission on it to app developers on the 0:04:53.160 --> 0:04:57.440 app store. What's the latest there, because that could yeah billions, right. 0:04:57.680 --> 0:05:00.280 Yeah, yeah, that is I think the single biggest shoe 0:05:00.400 --> 0:05:04.120 right now. It's just everything that's legal, legal challenges and 0:05:04.160 --> 0:05:08.080 regulatory challenges around their app store and around the services 0:05:08.120 --> 0:05:10.360 business in general. I mean not just the app store. 0:05:10.400 --> 0:05:12.479 You know, the money that they receive from Google. There's 0:05:12.520 --> 0:05:15.080 a lot of discussion around it, and I think that 0:05:15.320 --> 0:05:18.479 is something that we spend most of our time looking into. 0:05:19.240 --> 0:05:22.240 We recently had a webinar topic talking about this topic. 0:05:22.279 --> 0:05:24.440 We have a podcast on it, so we you know, 0:05:24.520 --> 0:05:27.240 we this is a this is a serious, serious stuff 0:05:27.279 --> 0:05:30.000 because not is remember one thing. A dollar that you 0:05:30.120 --> 0:05:33.680 generate on the app store probably has operating margins of 0:05:33.720 --> 0:05:37.320 seventy five percent. This is very high margin business. So 0:05:37.640 --> 0:05:39.760 if there are issues around you know, how much fees 0:05:39.800 --> 0:05:42.080 can they charge, how much it's going to go down, 0:05:42.440 --> 0:05:45.240 all sorts of stuff that really does have you know, 0:05:45.320 --> 0:05:48.400 hamper not just the top line revenue, but also the 0:05:49.320 --> 0:05:50.719 profitability of the company. 0:05:51.400 --> 0:05:55.720 Oh boy, well, now let's move to Microsoft then, which 0:05:55.720 --> 0:05:59.280 has made big bets on artificial intelligence and cloud computing, 0:05:59.320 --> 0:06:01.320 and they see need to be paying off pretty well. 0:06:01.320 --> 0:06:01.880 What do you think? 0:06:02.920 --> 0:06:05.159 I think? You know, they are probably one of the 0:06:05.200 --> 0:06:09.280 better positioned companies in technology right now in you know, 0:06:09.440 --> 0:06:12.000 I would say in a holistic way because it's they 0:06:12.000 --> 0:06:15.560 have so many businesses, but the really big driver, at 0:06:15.640 --> 0:06:17.360 least for the near term, is going to be their 0:06:17.360 --> 0:06:20.240 cloud infrastructure business. Now, if you look at you know, 0:06:20.240 --> 0:06:23.279 open ai as a company, open AI's back end is 0:06:23.480 --> 0:06:27.440 Microsoft's cloud infrastructure, so you use a lot more check GPT. 0:06:27.880 --> 0:06:30.280 Microsoft makes more money off of it. So that's that's 0:06:30.400 --> 0:06:32.680 the way you want to think about it. Last time, 0:06:32.680 --> 0:06:36.200 when their cloud infrastructure numbers came out, they had about 0:06:36.200 --> 0:06:41.320 three hundred three percentage points contribution from AI in general, 0:06:41.520 --> 0:06:44.640 we think that number climbs throughout the year. That's an 0:06:44.640 --> 0:06:47.200 area where we are most optimistic that it is going 0:06:47.240 --> 0:06:50.839 to lead to a good recovery for Microsoft's organic growth 0:06:50.880 --> 0:06:53.720 rate in the second half. We have already seen from 0:06:54.000 --> 0:06:57.040 you know, results from IBM that things are actually looking 0:06:57.120 --> 0:07:01.080 rosy for the tech industry and videos done well. TSMC 0:07:01.200 --> 0:07:04.839 talked about a good year this in twenty twenty four. 0:07:05.080 --> 0:07:08.200 So we feel confident that, you know, Microsoft growth rates 0:07:08.240 --> 0:07:11.240 will improve as the year progressive because when you look 0:07:11.280 --> 0:07:14.920 at overall technology spending, you know, companies have been under 0:07:14.960 --> 0:07:17.160 investing for the last two years. You know, they really 0:07:17.200 --> 0:07:19.680 did well the five years before that, but you know, 0:07:19.720 --> 0:07:22.120 we have seen a pause in the last two years. 0:07:22.120 --> 0:07:24.080 So we think twenty twenty four could be the year 0:07:24.320 --> 0:07:26.200 where we see a revival in tech spending. 0:07:27.440 --> 0:07:30.400 Well, let's talk just for a minute about Microsoft's gaming 0:07:30.440 --> 0:07:33.160 division and reports last week that it's laying off nearly 0:07:33.400 --> 0:07:37.880 two thousand workers at its recently acquired Activision, Blizzard unit, 0:07:37.920 --> 0:07:41.960 and Xbox unit. Is this just a redundancy of jobs 0:07:42.280 --> 0:07:45.960 or is it indicative of more trimming down at Microsoft? 0:07:45.960 --> 0:07:48.440 Now it's just I mean, normally when you make a 0:07:48.520 --> 0:07:51.960 very large acquisition. They bought Activision for sixty nine billion 0:07:52.000 --> 0:07:55.200 dollars and Activision at the end of twenty twenty two 0:07:55.240 --> 0:07:58.560 had thirteen thousand people. So when you look at the article, 0:07:58.560 --> 0:08:02.520 I saw that that said they had about combined about 0:08:02.520 --> 0:08:06.000 twenty two thousand people. So you would expect some redundancies 0:08:06.040 --> 0:08:09.720 from an acquisition. That's the cost energies. Whenever you have duplication, 0:08:10.080 --> 0:08:12.160 you will see a little bit of that. I don't 0:08:12.160 --> 0:08:15.160 see that as an indication that the business conditions are bad. 0:08:15.480 --> 0:08:18.480 This is more so right sizing and changing demondgin structure 0:08:18.520 --> 0:08:19.120 of the company. 0:08:19.200 --> 0:08:20.800 There is a lot to look forward to. 0:08:20.840 --> 0:08:21.040 Well. 0:08:21.040 --> 0:08:25.679 Our thanks to anaag Rana, Bloomberg Intelligence Senior Technology analyst. 0:08:25.720 --> 0:08:28.520 Thank you for joining us. We now turn our attention 0:08:28.720 --> 0:08:31.520 to the US economy. Two big events this week, a 0:08:31.560 --> 0:08:34.360 two day FED meeting and a decision on interest rates. 0:08:34.400 --> 0:08:37.440 Also the January jobs report, and for a preview, let's 0:08:37.440 --> 0:08:42.200 bring in Michael McKee, Bloomberg International Economics and Policy correspondent. Michael, 0:08:42.240 --> 0:08:45.160 thank you, and well let's start with that FOMC meeting. 0:08:45.200 --> 0:08:47.440 And after three meetings in a row of leaving the 0:08:47.440 --> 0:08:50.800 federal funds rate unchanged, what are you expecting to see 0:08:50.880 --> 0:08:52.000 on Wednesday. 0:08:52.559 --> 0:08:55.920 I'm expecting to see the Federal Open Market Committee leave 0:08:56.000 --> 0:09:00.679 infrastrates unchanged four meetings in a row. We went into 0:09:00.679 --> 0:09:05.720 the blackout period saying that they basically were looking at 0:09:05.840 --> 0:09:09.120 not moving interest rates because they're waiting for more data 0:09:09.480 --> 0:09:13.480 and so they're not going to surprise the markets that 0:09:13.600 --> 0:09:15.760 we've gotten a lot more data that are interesting, but 0:09:15.840 --> 0:09:18.160 they're not anything that would move the Fed to any 0:09:18.240 --> 0:09:22.040 kind of emergency change in plans. But the question that 0:09:22.160 --> 0:09:25.199 everybody's going to be asking is what about the March 0:09:25.320 --> 0:09:27.320 meeting or what about the May meeting? 0:09:27.440 --> 0:09:28.480 Jay Poll not going to. 0:09:28.920 --> 0:09:32.000 Really answer those, but will he push back against the 0:09:32.040 --> 0:09:36.560 market expectations of at least cut in May. 0:09:37.080 --> 0:09:39.200 Well, let's talk about the data. Then that will lead 0:09:39.240 --> 0:09:42.640 to what you expect to see unchanged. About the economy, 0:09:42.679 --> 0:09:46.240 we got some pretty good encouraging news last week about inflation, 0:09:46.320 --> 0:09:47.080 about jobs. 0:09:47.520 --> 0:09:49.800 Yeah, the economic data that came in during the last week, 0:09:49.880 --> 0:09:52.280 during the blackout period when we can't ask them about 0:09:52.320 --> 0:09:56.319 it was extraordinarily strong. Fourth quarter GDP at three point 0:09:56.360 --> 0:10:01.680 three percent, much higher than the anticipated number and not 0:10:01.880 --> 0:10:04.040 down all that much from what we saw in the 0:10:04.080 --> 0:10:08.360 third quarter. Consumer spending with strong business investment picked up, 0:10:08.640 --> 0:10:12.720 and those would make the argument that the Fed wants 0:10:12.800 --> 0:10:17.880 to keep interest rates unchanged for longer, except that the 0:10:18.840 --> 0:10:22.480 inflation numbers have continued to go down, which suggests that 0:10:22.559 --> 0:10:26.480 maybe they can cut So now it gives them even 0:10:26.480 --> 0:10:28.800 more reason to say, we want more data to confirm 0:10:29.160 --> 0:10:31.200 what we're seeing, because if they had to make a 0:10:31.200 --> 0:10:34.960 great decision this time, it would be a close call. 0:10:35.000 --> 0:10:37.319 And that more data that they're going to get we're 0:10:37.320 --> 0:10:39.200 going to see on Friday. 0:10:39.280 --> 0:10:42.280 Yeah, and that's kind of interesting because we're going to 0:10:42.280 --> 0:10:47.760 see a slower job creation number, at least according to 0:10:48.240 --> 0:10:52.000 what the Bloomberg consensus of the survey is one hundred 0:10:52.000 --> 0:10:55.120 and sixty eight thousand. Now we'll see next week when 0:10:55.120 --> 0:10:58.120 we get some additional data from ADP and the ism 0:10:58.200 --> 0:11:03.920 numbers whether that changes people's But the unemployment rate is 0:11:03.920 --> 0:11:06.360 expected to rise a little to three point eight percent 0:11:06.400 --> 0:11:09.320 now the Fed is predicting that. But the wild card 0:11:09.360 --> 0:11:13.439 here is remember all those storms we had earlier in January, 0:11:14.160 --> 0:11:17.320 did they keep anyone from going to work? That's going 0:11:17.400 --> 0:11:19.960 to be an interesting question because you basically only have 0:11:20.040 --> 0:11:24.640 to show up or zoom in. I guess once during 0:11:24.640 --> 0:11:28.080 the week and you're counted as employed. So some people 0:11:28.120 --> 0:11:31.720 think that we may see this lower number because we 0:11:31.840 --> 0:11:35.280 had weather interruptions. But it's pretty hard for weather to 0:11:35.520 --> 0:11:38.319 make a huge difference in the overall number. So it's 0:11:38.360 --> 0:11:40.840 going to be interesting to see what we get and 0:11:40.880 --> 0:11:43.200 then what the Fed thinks of that. They want to 0:11:43.240 --> 0:11:46.000 see a slow down. If we don't get it, then 0:11:46.000 --> 0:11:48.079 that adds weight to the idea of higher for. 0:11:48.080 --> 0:11:49.360 Longer, higher for longer. 0:11:49.440 --> 0:11:52.240 Well, some jobs, certainly, I mean January is always volatile, 0:11:52.400 --> 0:11:54.800 as you've said before, but some jobs like housing, you 0:11:54.840 --> 0:11:57.040 have a big ice storm, I mean that just shuts 0:11:57.080 --> 0:11:57.839 down for two weeks. 0:11:58.040 --> 0:12:00.680 Yeah, well, it's going to be I hate to say 0:12:01.200 --> 0:12:03.920 interesting again because I've been saying that a lot, but 0:12:04.120 --> 0:12:06.160 it's going to be interesting again because we also got 0:12:06.160 --> 0:12:08.839 new home sales last week and they were stronger than 0:12:09.240 --> 0:12:13.080 anticipated in the month of December. But people don't go 0:12:13.120 --> 0:12:16.079 out looking for houses when there's a lot of snow 0:12:16.120 --> 0:12:19.319 on the ground or weather is bad or something like that. 0:12:19.440 --> 0:12:21.080 So they just had the holiday. 0:12:20.720 --> 0:12:23.200 So we may see a weather effect on that, and 0:12:23.400 --> 0:12:29.200 also on construction building starts, because it's hard during a 0:12:29.200 --> 0:12:32.280 blizzard to start digging a hole and putting up two 0:12:32.360 --> 0:12:35.439 by fours. So there may be some weather affected data, 0:12:35.880 --> 0:12:39.880 but it won't it won't be decisive for the fit. 0:12:40.000 --> 0:12:41.200 Oh a lot to look forward to. 0:12:41.240 --> 0:12:44.560 Well, our thanks to Michael McKee, Bloomberg International Economics and 0:12:44.640 --> 0:12:48.320 Policy Correspondent, and coming up on Bloomberg day Break weekend, 0:12:48.559 --> 0:12:51.040 we head to Europe for a preview of a policy 0:12:51.120 --> 0:12:53.319 decision coming from the Bank of England. 0:12:53.520 --> 0:12:55.480 I'm Tom Busby, and this is Blue. 0:13:05.679 --> 0:13:08.400 This is Bloomberg Daybreak Weekend, our global look ahead at 0:13:08.400 --> 0:13:11.000 the top stories for investors in the coming week. I'm 0:13:11.040 --> 0:13:13.679 Tom Busby in New York. Up later in our program 0:13:13.679 --> 0:13:16.400 we get an update on the health of the Chinese economy. 0:13:16.440 --> 0:13:19.720 But first, after the ECB and the Bank of Japan, 0:13:20.200 --> 0:13:22.920 investors will be looking for their first clues about the 0:13:22.960 --> 0:13:25.600 path for interest rates from the Bank of England in 0:13:25.640 --> 0:13:28.120 the coming days. Markets are expecting the first move in 0:13:28.160 --> 0:13:31.720 the summer, but Governor Andrew Bailey is not convinced the 0:13:31.720 --> 0:13:34.880 fight against inflation is over just yet. For more, let's 0:13:34.880 --> 0:13:38.840 go to London and bring in Bloomberg Daybreak eurobanker Caroline Hepger. 0:13:38.720 --> 0:13:41.679 Tom the latest inflation figures for the UK showed an 0:13:41.679 --> 0:13:45.000 optic in December, complicating the path ahead for the Bank 0:13:45.040 --> 0:13:48.240 of England. Whilst the BOE was the first major global 0:13:48.280 --> 0:13:51.520 central bank to start hiking interest rates, some analysts think 0:13:51.559 --> 0:13:54.960 that it'll be the loss to start cutting. The question 0:13:55.080 --> 0:13:58.640 of when is still the main preoccupation for markets, though 0:13:59.000 --> 0:14:01.040 we've been discussing this with many of our guests on 0:14:01.040 --> 0:14:04.320 Bloomberg Radio. Now here's what Charlotte Ryland, the head of 0:14:04.400 --> 0:14:09.080 investment at CCLA Investment Management, told us about her expectations 0:14:09.200 --> 0:14:10.559 for the Bank of England decision. 0:14:10.880 --> 0:14:12.480 Clearly they were a little late to the party in 0:14:12.559 --> 0:14:15.400 terms of sort of pushing the rates up. The UK 0:14:15.480 --> 0:14:18.400 economy seems to be somewhat more inflationary than others, and 0:14:18.440 --> 0:14:20.480 I imagine part of that is, you know, some of 0:14:20.520 --> 0:14:22.520 the dislocations we've had from the back of Brexit, the 0:14:22.560 --> 0:14:24.880 sort titled labor market that we have, which to do 0:14:24.960 --> 0:14:28.040 with migration as well, so you know, it's been a 0:14:27.560 --> 0:14:32.080 more difficult position for them, and it's clearly a much 0:14:32.120 --> 0:14:34.920 more vulnerable economy in terms of you know, the consumer 0:14:35.000 --> 0:14:38.080 as well. So it's a delicate to typrope theicult a 0:14:38.120 --> 0:14:41.960 balance between the inflationary pressure and not completely derailing the economy. 0:14:42.160 --> 0:14:45.280 So that's Charlotte Ryland's view. Now let's hit from Sam 0:14:45.360 --> 0:14:48.600 Linton Brown from BNP Parryber. He's talked to us about 0:14:48.600 --> 0:14:51.240 how the Bank of England is in a different position 0:14:51.280 --> 0:14:53.240 to other major global central banks. 0:14:53.520 --> 0:14:56.240 The Bank of England potentially could prove to be a 0:14:56.280 --> 0:14:59.120 little bit more of an idiosyncratic narrative this year because 0:14:59.160 --> 0:15:03.640 one could argue that the stickiness of inflation will prove 0:15:03.840 --> 0:15:07.040 to be more persistent than elsewhere. Our central case is 0:15:07.080 --> 0:15:09.080 that the Bank of England will begin cutting rates around 0:15:09.080 --> 0:15:10.960 the middle of this year, cut by one hundred and 0:15:11.000 --> 0:15:13.600 twenty five basis points. That's not too different to what 0:15:13.680 --> 0:15:16.520 market's currently pricing. But I'd say if there's a risk 0:15:16.840 --> 0:15:20.720 on the three ECB fed Bank of England where they 0:15:20.760 --> 0:15:23.560 actually end up doing less tightening because of inflation or 0:15:23.640 --> 0:15:25.960 less easy I should say because of inflation, I'd say 0:15:25.960 --> 0:15:27.200 it's the Bank of England. 0:15:28.240 --> 0:15:31.280 So that was Sam Linton Brown from BMP Parryber and 0:15:31.320 --> 0:15:34.440 those are some of the views from the markets in 0:15:34.560 --> 0:15:37.680 terms of the outlook for the Bank of England. On 0:15:37.720 --> 0:15:41.640 the data front, headline inflation was four percent in December 0:15:41.680 --> 0:15:45.400 for the UK. The PMI surveys for January brought better 0:15:45.440 --> 0:15:49.480 than expected readings, but the manufacturing sector still in contraction. 0:15:50.040 --> 0:15:52.680 So economists do widely expect the Bank of England to 0:15:52.920 --> 0:15:55.560 hold interest rates at their next meeting at five and 0:15:55.560 --> 0:15:57.760 a quarter of percent. So it is going to be 0:15:58.280 --> 0:16:01.360 the post meeting press conference which is going to have 0:16:01.400 --> 0:16:05.800 the potential to produce more answers. Perhaps. I've been discussing 0:16:05.840 --> 0:16:09.680 that with our senior economics reporter, Philip Aldrich. I started 0:16:09.720 --> 0:16:12.280 by asking him what he'll be watching out for in 0:16:12.360 --> 0:16:15.560 the decision from Governor Andrew Bailey and colleagues. 0:16:15.920 --> 0:16:18.600 Yeah, and I mean not just from Bailey, but so 0:16:18.680 --> 0:16:22.920 the whole nine member rate setting committee will they make 0:16:23.000 --> 0:16:27.680 their judgment. And the last meeting, which was about the 0:16:27.720 --> 0:16:30.800 second week of December, three of them voted for rate risers, 0:16:30.840 --> 0:16:33.840 the other six decided to cold rates. Now, since then, 0:16:33.880 --> 0:16:37.080 the inflation numbers have come down more quickly than expected. 0:16:37.120 --> 0:16:39.960 There's been a bit of a question of a few 0:16:40.040 --> 0:16:42.520 questions about whether we're going to have a brief technical recession. 0:16:43.120 --> 0:16:47.440 And these kind of messages or economic signals would suggest 0:16:47.440 --> 0:16:50.080 that the bankingland needs to start thinking about rate cards, 0:16:50.080 --> 0:16:54.200 and obviously that's what is happening in Europe at the 0:16:54.200 --> 0:16:56.440 European Central Bank and at the FED. So there is 0:16:56.480 --> 0:17:01.880 this So although we're not expecting anyone to well maybe 0:17:01.880 --> 0:17:04.480 one member may vote for a rate cut, we're not 0:17:04.520 --> 0:17:06.119 expecting the Committee as a whole to vote for a 0:17:06.200 --> 0:17:08.200 rate cut. This is going to It's something which which 0:17:08.320 --> 0:17:10.080 people are going to be looking out for for to 0:17:10.119 --> 0:17:12.520 see whether the Bank is now sort of following the 0:17:12.560 --> 0:17:14.720 other major central banks in sort of signaling that there 0:17:14.720 --> 0:17:15.760 may be a change of direction. 0:17:15.880 --> 0:17:16.040 Yeah. 0:17:16.040 --> 0:17:19.200 Absolutely, And the Bank of England decision comes fairly swiftly 0:17:19.240 --> 0:17:23.080 after the ECB interest rate decision. And yet is there 0:17:23.200 --> 0:17:25.800 a difference, a kind of gap opening up between the 0:17:25.840 --> 0:17:28.000 position of the UK and the Bank of England and 0:17:28.040 --> 0:17:28.960 as you say, the FED and. 0:17:28.880 --> 0:17:32.240 The ec well, the gap so the gap is it's 0:17:32.280 --> 0:17:34.280 not on the rate where the rate policy is I mean, 0:17:34.320 --> 0:17:36.720 obviously bank the Bank of England's up there with the 0:17:36.720 --> 0:17:39.920 FED and higher than the ECB. The gap is in 0:17:39.320 --> 0:17:44.720 in the future trajectory of policy. And the Fed has 0:17:44.840 --> 0:17:49.280 signaled that they are considering rate cuts. The ECB has, 0:17:49.520 --> 0:17:52.240 I mean the president of the ECB, Christine la Guard, 0:17:52.280 --> 0:17:54.840 said that the June May you know, there may be 0:17:55.000 --> 0:18:00.560 rate cuts starting in the summer, and obviously the market 0:18:00.720 --> 0:18:04.680 is now pricing these rate cuts in for all three 0:18:04.960 --> 0:18:07.240 central banks. What we are not, what we've not heard 0:18:07.280 --> 0:18:09.639 from the Bank of England is any kind of hint 0:18:09.680 --> 0:18:12.320 that they're going to move in this direction. So the 0:18:12.400 --> 0:18:15.720 last communication they had was all about, you know, we 0:18:15.800 --> 0:18:19.160 need to worry about potential for further inflation. We've got 0:18:19.200 --> 0:18:21.679 to be vigilant these kind of you know, further tightening 0:18:21.680 --> 0:18:23.879 maybe on the cards. Three people did vote for a 0:18:23.960 --> 0:18:26.440 rate rise, so it's so there. So their language is 0:18:26.520 --> 0:18:29.200 kind of out of step with the sort of consensus 0:18:29.240 --> 0:18:33.480 thinking at the moment that you know, there have been 0:18:33.680 --> 0:18:36.399 you know, wages are still being proving a little bit 0:18:36.440 --> 0:18:38.920 stronger than we're expected. You know we've had we've had 0:18:39.040 --> 0:18:41.720 in the very later stad we've had the pmis the 0:18:41.760 --> 0:18:44.800 business activity numbers that they have been relatively strong, and 0:18:44.840 --> 0:18:48.000 so that so, you know, markets are beginning to think 0:18:48.040 --> 0:18:50.160 that there's not going to be just masses of rate 0:18:50.160 --> 0:18:51.960 cuts over this year. But the bank has got to 0:18:51.960 --> 0:18:55.399 start signaling that this this is something that is on 0:18:55.480 --> 0:18:56.560 the agenda now. 0:18:57.000 --> 0:18:59.000 In terms of the UK and you know, whether it's 0:18:59.000 --> 0:19:02.080 in a special position or in a different position to others. 0:19:02.400 --> 0:19:04.800 The Red Sea. How do we think about the inflationary 0:19:04.840 --> 0:19:07.200 pressures coming from the Red Sea? Obviously the UK and 0:19:07.280 --> 0:19:10.560 with the US and taking action against you know who, 0:19:10.640 --> 0:19:12.919 the militants, you know, which is the thing that is 0:19:13.119 --> 0:19:17.080 threatening shipping. Does that particularly affect the UK more than 0:19:17.119 --> 0:19:17.920 other places? 0:19:18.600 --> 0:19:22.760 No, the sort of the immediate effect on us is 0:19:23.480 --> 0:19:26.680 the direct effect on us is not is not enormous. 0:19:28.359 --> 0:19:31.359 We don't we There was I can't remember the specific numbers, 0:19:31.400 --> 0:19:33.720 but there was some economic study which showed that we 0:19:33.760 --> 0:19:37.840 don't actually get that much of our imports directly directly 0:19:37.880 --> 0:19:41.720 goods imports that are directly coming through the Red Sea 0:19:41.800 --> 0:19:44.520 and the Sewers Canal, but there is this sort of second, 0:19:45.160 --> 0:19:47.720 second round hit. So the stuff we are importing is 0:19:47.760 --> 0:19:51.280 coming from countries which are going to be feeling the 0:19:51.280 --> 0:19:54.840 effect of this or to a much larger degree. It 0:19:54.880 --> 0:19:56.920 clearly is a risk. I mean, what we learned through 0:19:56.960 --> 0:20:01.119 the COVID pandemic was that when supply chains get disrupted, 0:20:01.480 --> 0:20:05.000 that can be an enormous cost to business, and that 0:20:05.000 --> 0:20:07.760 that cost does get passed on and we have seen 0:20:07.840 --> 0:20:10.320 indications of that and as so in the stronger PMI 0:20:10.480 --> 0:20:14.200 data that came out this week. There was also evidence 0:20:14.240 --> 0:20:16.320 that costs have started to rise again and the and 0:20:16.400 --> 0:20:19.919 the acceleration in cost was notable. Now you could you 0:20:19.960 --> 0:20:23.560 can draw the draw the correlation the causation from the 0:20:23.640 --> 0:20:25.439 sort of red sea disruption in the HUTI. So it's 0:20:25.480 --> 0:20:28.920 it is, it's definitely on something which people are being 0:20:29.359 --> 0:20:32.320 their alert to the to the risk. And you probably 0:20:32.359 --> 0:20:35.480 we're already potentially going to have a little increase in 0:20:36.200 --> 0:20:39.000