Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Daybreak Weekend,
Speaker 1: our global look at the top stories in the coming
Speaker 1: week from our Daybreak anchors all around the world, and
Speaker 1: straight ahead on the program, a look at the struggling
Speaker 1: US housing market. I'm Tom Busby in New York.
Speaker 2: I'm Stephen carlon London, where we're looking ahead to how
Speaker 2: issues around trade and the war in Ukraine will feature
Speaker 2: at the upcoming meeting of G seven finance ministers and
Speaker 2: central bankers in Italy.
Speaker 3: I'm Brian Curtis in Hong Kong. We look ahead to
Speaker 3: the inauguration of Taiwan President elect Lyiching Da and what
Speaker 3: it means for Taiwan, US and China relations.
Speaker 4: That's all straight ahead on Bloomberg day Break Weekend on
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Speaker 5: Good day to you.
Speaker 1: I'm Tom Busby, and we begin today's program with home
Speaker 1: sales for the month of April, the heart of the
Speaker 1: spring home buying season. We get existing home sales on Wednesday,
Speaker 1: new home sales on Thursday. What will these reports tell
Speaker 1: us about the health of the US housing market, about
Speaker 1: housing affordability and the overall economy? For more, we're joined
Speaker 1: by Drew Redding, Bloomberg Intelligence US home Building Analysts. Drew,
Speaker 1: thanks for being here.
Speaker 6: Travl me.
Speaker 1: All right, so what do you expect to see this week?
Speaker 6: Well, I think some context is important here. We've been
Speaker 6: describing the housing market as a tail to markets. Existing
Speaker 6: home sales finally broke back about four million annalyzed run
Speaker 6: rate two months ago, and we think we'll probably remain
Speaker 6: above those levels. But what you have to keep in
Speaker 6: mind is the data that we're seeing now still reflects
Speaker 6: a period where rates were in that high six percent range.
Speaker 6: Subsequently rates rose to over you know, seven and a
Speaker 6: half percent, So we think that date is going to
Speaker 6: trickle in into the next couple of months. We expect
Speaker 6: some volatility on the existing home front side, you know,
Speaker 6: over the next couple of months and through the summer.
Speaker 6: But big picture, you know, it's It's difficult to get
Speaker 6: too excited about a significant rebound in existing home sales
Speaker 6: when you have mortgage rates that are still hovering around
Speaker 6: seven percent. We just actually fell below that for the
Speaker 6: first time since April. We're at about six point nine
Speaker 6: right now, so you know that will add a little
Speaker 6: momentum to the market. But big picture, we're not expecting
Speaker 6: any type of significant, you know, rebound maybe until we
Speaker 6: get to twenty twenty five and even into twenty twenty six.
Speaker 6: Now you can trust that what we're seeing in the
Speaker 6: new home market. Demand in the new home sign has
Speaker 6: been a lot stronger, and that's because builders have been
Speaker 6: successful in pulling the levers in terms of financing incentives,
Speaker 6: closing costs, assistance, and things like that. So you know,
Speaker 6: they've been able to make the monthly payment a little
Speaker 6: more palatable than what you see on the resale side.
Speaker 1: Well, that's the problem, isn't it. Home affordability. You've got
Speaker 1: rates near seven percent, You've got record high prices for
Speaker 1: new and used homes. Plus you know there's just a
Speaker 1: lack of homes on the market. I mean, how are
Speaker 1: people affording this?
Speaker 6: It's one hundred percent all about afford affordability is, you know,
Speaker 6: hovering near the worst levels on record. We were looking
Speaker 6: at some data from redfind It actually shows the medium
Speaker 6: monthly payment is about twenty nine hundred dollars, which is
Speaker 6: fourteen percent above last month, and that's more than double
Speaker 6: where we were prior to the pandemic. You've had prices
Speaker 6: which increased more than fifty percent since the beginning of
Speaker 6: twenty twenty, and you know, depending on the index that
Speaker 6: you look at, we're either pretty close to those levels now,
Speaker 6: if not higher. And there's been certainly been some momentum
Speaker 6: of late with pricing, and part of that has to
Speaker 6: do with what you mentioned. Inventory in the resale market,
Speaker 6: we're still at about three months of supply, which is
Speaker 6: historically low, and that's putting a floor on the prices.
Speaker 6: There's there's demand out there and there's not a whole
Speaker 6: lot of inventory that's pushing prices up.
Speaker 3: Now.
Speaker 6: We have seen inventory in some markets start to rise,
Speaker 6: which is something we where to keep our eye on.
Speaker 6: You look at markets in Florida, a couple of markets
Speaker 6: in Texas like Austin, so that could have implications for
Speaker 6: prices should inventories continue to rise. But but you're right
Speaker 6: at this point, it's just difficult for the consumer to
Speaker 6: afford a house, and that's really what's held the market back.
Speaker 1: Now, this has also impacted the troubles in housing the
Speaker 1: broader economy not always bad or not all bad, but
Speaker 1: like home builders, home renovation still going pretty strong, but
Speaker 1: people aren't buying big ticket appliances. Home Depot confirming that
Speaker 1: high margin items grills, power washers, refrigerators. You know, it's
Speaker 1: really impacting a lot of other businesses.
Speaker 6: It's certainly been a challenging backdrop for the consumer. You
Speaker 6: have to remember, you know, they're battling the cumulative impact
Speaker 6: of inflation. So you know, even when you see inflation
Speaker 6: coming down to three percent, it's still inflation and it's
Speaker 6: been going on for years. So it's really the cumulative
Speaker 6: impact that we're seeing. You're seeing credit card balances rise,
Speaker 6: and you know, when you talk about some of the
Speaker 6: names that we cover, like A Home Depot and A Lows,
Speaker 6: they're really seeing it on the discretionary side and on
Speaker 6: the big ticket products in particular. You know, they've got
Speaker 6: a little bit of a unique situation in that, you know,
Speaker 6: some of the products they sell are what they call
Speaker 6: one time purchases. So if you think about, you know,
Speaker 6: the early days of the pandemic, people loaded up on
Speaker 6: you know, grill's patio furniture, lawn mowers and things like that,
Speaker 6: and that's just something that you don't need to replace
Speaker 6: as frequently. So they've been contending with that. But at
Speaker 6: the same time, something they mentioned this quarter that was
Speaker 6: pretty interesting is that they're seeing weakness in projects that
Speaker 6: are typically debt financed, which goes back to that mortgage
Speaker 6: rate or the interest rate dynamic, and that it's just
Speaker 6: a lot more expensive to get these projects done. So
Speaker 6: we're seeing you know, kitchens and bath projects being deferred,
Speaker 6: or we're seeing projects, you know, kind of being toned
Speaker 6: down in size. We've heard that from home DEEPO, We've
Speaker 6: heard that some from a handful of the building product
Speaker 6: manufacturers as well.
Speaker 1: Yeah you need a new roof, you've got to get
Speaker 1: a new roof, but maybe not a new kitchen. Looking ahead,
Speaker 1: do you see or can you see any green shoots
Speaker 1: later in the year or into twenty twenty five or
Speaker 1: does it all depend on maybe what the FED does
Speaker 1: with interest rates.
Speaker 6: Yeah, well, look, I think that I think Holsing Broadley
Speaker 6: is going to continue to EBB and flow with what
Speaker 6: happens with interest rates. That being said, I mean, if
Speaker 6: you could call this a bright picture, I mean, existing
Speaker 6: home sales are the lowest level they's been in you know,
Speaker 6: two decades, so we think we've probably reached are very
Speaker 6: close to trough levels. So we do think that if
Speaker 6: rates start to pull back a little bit and you
Speaker 6: get to that mid six percent range, you know, you
Speaker 6: could start to see some growth towards the back end
Speaker 6: of this year and as we get into twenty twenty five.
Speaker 6: So the way we look at it now is there's
Speaker 6: not a whole lot of downside risk with where the
Speaker 6: economy stands now, with where employment stands now. You know,
Speaker 6: obviously if those things deteriorate further, that's a concern, you know,
Speaker 6: But looking ahead, we think you could start to build
Speaker 6: a little bit momentum looking into next year. And on
Speaker 6: the remodeling side, we think that a lot of these projects,
Speaker 6: as we mentioned, are being deferred, So we think there's
Speaker 6: a lot of pent up demand that starts to get
Speaker 6: unleashed in twenty twenty five and twenty twenty six. As
Speaker 6: rates pull back, people are able to tap that record
Speaker 6: amount of home equity they have, and we think that
Speaker 6: that'll ultimately support a rebound in big ticket spending.
Speaker 1: So if you're a painter or a drywall guide, just
Speaker 1: told on tight Well our thanks to Drew Redding, Bloomberg
Speaker 1: Intelligence US home building analyst. We move now to big
Speaker 1: tech and chip maker and Video, which has been on
Speaker 1: a roll, seeing its market value balloon thanks to demand
Speaker 1: for its artificial intelligence chips, also its data center and
Speaker 1: gaming offerings. What does it all mean for the company's
Speaker 1: earnings out this Wednesday. Well for more, we're joined by
Speaker 1: Kunjan Sobanni, Bloomberg Intelligence Senior semiconductor analyst, Konjohn Thanks for
Speaker 1: joining us. Why don't you start right away? What do
Speaker 1: you expect to see in vidious first quarter earnings?
Speaker 7: Well, just similar to what we have been seeing for
Speaker 7: the past almost six plus quarters, We again expect a
Speaker 7: solid beaten race coming into this earnings. Throughout the quarter,
Speaker 7: we have seen multiple strong demand signals, namely its largest
Speaker 7: cloud and hyperscaled customers all upsiding their hapexpend guidance for
Speaker 7: AI for twenty twenty four and twenty five. Second, we
Speaker 7: have seen strong demand from outside of the cloud players,
Speaker 7: namely Sogn, Wild Government, entities, other enterprises, large enterprises like
Speaker 7: the deal we saw about Elon purchasing about ten billion
Speaker 7: dollars of AI capacity from Oracle, etc.
Speaker 6: So and all the same.
Speaker 7: Time, we have seen the h one hundred lean times
Speaker 7: continue to shrink. What that means is supply continue to
Speaker 7: keeps up for that product family. So the combination of
Speaker 7: all of this gives us confidence again they will be
Speaker 7: coming out with US Beta.
Speaker 1: DACE now in video appears to be far ahead of
Speaker 1: a lot of US competitors on AI. And how important
Speaker 1: is that for this earnings and for the company?
Speaker 7: I mean, it is important, and that's why you see
Speaker 7: this level of positive sentiment around the stock and what
Speaker 7: you've seen in the return. I mean, it still continues
Speaker 7: to be the market leader and has a market share
Speaker 7: in the mid nineties, which we expected to continue at
Speaker 7: least for the foreseeable future. So that is definitely a
Speaker 7: big part of the story right now.
Speaker 1: And to keep up with that demand, How is it growing?
Speaker 1: Where is Nvidia expanding here in the US and worldwide?
Speaker 7: I mean it is global at this point if you
Speaker 7: think about it. Look, it's the only sort of almost
Speaker 7: the only game in the town, and the town being globally,
Speaker 7: if you want to set up a high end AI
Speaker 7: server to train model, there's only really one go to
Speaker 7: full tax solution right now.
Speaker 6: We just in media.
Speaker 7: We do have AMD, which has entered the game, but
Speaker 7: again the scale is significantly different.
Speaker 6: Here in Media's making is going to.
Speaker 7: Be generating about in the sort of between fifty to
Speaker 7: eighty billion dollars from its data center it's here, and
Speaker 7: on the contrast, AMD is projected to generate about four
Speaker 7: billion from its cview business. So, I mean, look, the
Speaker 7: demand is globally now when it comes to allocation. When
Speaker 7: it comes to where its customers are residing, a big
Speaker 7: portion majority is in US in the West, but it
Speaker 7: is also trying to allocate as much as it can
Speaker 7: to most of its consider outside of US.
Speaker 1: Well, that brings me to the next point, the growing
Speaker 1: trade war between the US and China. There was a
Speaker 1: ban on advanced chips selling them another technology to China,
Speaker 1: implemented last year. We know that President Biden just last
Speaker 1: week up the nite with a whole bunch of tariffs
Speaker 1: on all kinds of Chinese products. How has that impacted
Speaker 1: in video and the wider chip you know, semiconductor market
Speaker 1: here in the US.
Speaker 7: Yeah, it has impacted Nvidia, I would say the most.
Speaker 7: If you actually go back almost two years back, the
Speaker 7: very first ban in this data center space came on
Speaker 7: in media specific chips. So from that time when China
Speaker 7: represented about mid twenties percentage of revenue of its data
Speaker 7: center segment, all the way to now this year, we
Speaker 7: expected to be somewhere between mid single digit to high
Speaker 7: single digits. So that gives you a magnitude that it
Speaker 7: has lost the potential that it could have been shipped
Speaker 7: in absence of these bands and billions of dollars to China.
Speaker 7: So that's the company that has most been impacted. And
Speaker 7: I think a lot of restrictions and bands have heavily
Speaker 7: focused on in media chips initially. What you're seeing now
Speaker 7: is sort of those bands get ex span, their range
Speaker 7: getting expand As again, regulation always runs behind technology, So
Speaker 7: what you're seeing is now out those impacting in other
Speaker 7: players like Intel, like Caulcom and AMD, etc.
Speaker 1: And Vidia's the big name, and in Vidia's first quarter
Speaker 1: earnings out this Wednesday. Our thanks to Kunjan Sobanni, Bloomberg
Speaker 1: Intelligence Senior semiconductor analyst, coming up on Bloomberg Day Break
Speaker 1: weekend to look ahead to the upcoming meeting of G
Speaker 1: seven finance ministers and central bankers in Italy. I'm Tom
Speaker 1: Busby and this is Bloomberg. This is Bloomberg day Break weekend,
Speaker 1: our global look ahead at the top stories for investors
Speaker 1: in the coming week. I'm Tom Busby in New York.
Speaker 1: Up later on our program, we look ahead to the
Speaker 1: inauguration of Taiwan President elect Ley ching Da and what
Speaker 1: it means for Taiwan, the US and China relations. But first,
Speaker 1: G seven finance ministers meeting this week in the northern
Speaker 1: Italian town of Stressa as representatives to reflect on the
Speaker 1: fragmentation of global trade. For more, Let's go to London
Speaker 1: and bring in Bloomberg Daybreak. Europe Banker Stephen Carroll.
Speaker 2: Tom, Italy's Finance Minister and Central Bank governor, will be
Speaker 2: hosting this G seven meeting on the banks of Lake Majore.
Speaker 2: It's a majestic setting to discuss some weighty topics, not
Speaker 2: least the latest ratcheting up of trade tensions between the
Speaker 2: United States and China, as well as Russia's war in
Speaker 2: Ukraine and the Ukrainian Finance Minister will be attending with
Speaker 2: issues around the use of frozen Russian assets on the agenda.
Speaker 2: Both the United States and the European Union have struggled
Speaker 2: to mobilize the help that Kiev needs to defend itself,
Speaker 2: as AID has been caught up in other political debates
Speaker 2: in the EU. There's also a discussion about how best
Speaker 2: to bolster the European defense industry. Here's what European Investment
Speaker 2: Bank President Nadia Calvino told Bloomberg that her institution is
Speaker 2: doing about this.
Speaker 8: I think it's quite clear that we need to step
Speaker 8: up our support to Europe's security and defense industry. We
Speaker 8: need to reinforce our capacity in this area, and the
Speaker 8: European Investment Bank is ready to play its role in
Speaker 8: supporting Europe's defense industry.
Speaker 9: From this point of view.
Speaker 8: What we have done is put forward an action plan
Speaker 8: which has been endorsed by our board last week and
Speaker 8: this up and running since first of May, and which
Speaker 8: will indeed allow us to finance dual use technologies and infrastructures,
Speaker 8: removing a constraint that existed which required that more than
Speaker 8: fifty percent of future revenues should come from the civil
Speaker 8: use side for it to be.
Speaker 10: Financed right, and so now it's zero percent, but there
Speaker 10: still is this mandate of dual use. So just for
Speaker 10: to understand better how this actually works, because this doesn't
Speaker 10: mean that you can, for example, invest in something that
Speaker 10: produces a ammunition, which isn't what is in high sort
Speaker 10: of need right now for Ukraine and in Europe.
Speaker 11: Correct.
Speaker 8: Well, we are an investment bank and the mandate from
Speaker 8: European leaders was cleared that we should step up our
Speaker 8: support to europe security and defense industry while safeguarding our
Speaker 8: financing capacity.
Speaker 9: And this is what we have been doing. This is
Speaker 9: what we are doing.
Speaker 8: The reaction of financial markets is confirming that we're on
Speaker 8: the right track, and our Board of Directors endorsed our
Speaker 8: strategy as recently as last week. And so now we
Speaker 8: have this action plan which should allow us to speed
Speaker 8: up with the investment of the six billion euros which
Speaker 8: are already earmarked for this industry.
Speaker 10: Yeah, and so those also, I mean six billion is
Speaker 10: also quite a small proportion of the entire fund. Are
Speaker 10: you looking at potentially boosting that over the years, just
Speaker 10: given the scale of the need that there is in
Speaker 10: European defense.
Speaker 9: We have six billion euros.
Speaker 8: Actually the program was had eight billion euros ear marked,
Speaker 8: we have only invested two billion euros. We're focusing right
Speaker 8: now in speeding up the investment of these six billion
Speaker 8: euros and also getting up and running a capital investment
Speaker 8: of one hundred and seventy five million euros in startups,
Speaker 8: innovative startups also in this area.
Speaker 10: And for those two billion, was it just because there
Speaker 10: wasn't demand for the loans or is it because there
Speaker 10: were all these rules around and you hope that that
Speaker 10: capital can get to work well.
Speaker 8: Obviously, we are now expanding, enlarging the scope of projects
Speaker 8: that we can finance. We are also speeding up these
Speaker 8: divestments with a single stop shop with a dedicated team,
Speaker 8: and we're going to be proactively reaching out.
Speaker 9: Actually, we have launched a call for.
Speaker 8: Projects, and so our expectation is that in the second
Speaker 8: part of the year there will be more projects, more
Speaker 8: demand as you named it, and that we will be
Speaker 8: able to step up our support to europe security and
Speaker 8: defense industry while safeguarding our financing capacity, which is the
Speaker 8: mandate from MARS.
Speaker 10: When you say safeguarding your financing capacity is to do
Speaker 10: with the credit rating, you think that could be jeopardized
Speaker 10: by investing in these sorts of companies, what exactly is
Speaker 10: the relationship there?
Speaker 8: Well, obviously rating agencies, but also investors are looking carefully
Speaker 8: at many areas that have to do with our financing capacity.
Speaker 8: So far, as I was saying, financial markets are responding
Speaker 8: as we had anticipated, and our Board of Directors indoors
Speaker 8: last week our action plan which will allow us to
Speaker 8: step up our support.
Speaker 10: And in terms of the eb's rule and rebuilding Ukraine
Speaker 10: and funding that, how do you imagine the ib's role
Speaker 10: in that.
Speaker 9: Well, we're playing a very important role already.
Speaker 8: We're probably the key financing investor partner to the Ukrainian government.
Speaker 9: We're very close contact.
Speaker 8: Only some weeks ago I signed a memorandrov of understanding
Speaker 8: with Prime Minister Smichael, and I hope that in June
Speaker 8: we will be able to already sign some specific projects
Speaker 8: and speed up our investments on the ground in large
Speaker 8: infrastructures energy transport, also in municipal and local projects having
Speaker 8: to do with restoring and renovating, rebuilding schools, hospital houses,
Speaker 8: and also supporting the private sector. Many of these projects
Speaker 8: are already ongoing and as of the signature of the
Speaker 8: memorandum of understanding, I think we will be able to
Speaker 8: do more while the war is unfortunately going on. I
Speaker 8: hope we will be able to step up our support
Speaker 8: with the rebuilding of the country once the war is over.
Speaker 2: That's the European Investment Bank President Nadia Calvino there speaking
Speaker 2: to Bloomberg's Oliver Crook in recent days. Now, Oliver will
Speaker 2: also be attending the G seven meeting in Straisa along
Speaker 2: with finance ministers and central bankers. I've been speaking to
Speaker 2: him about it and started by asking him how much
Speaker 2: the latest announcement of increased US tariffs on Chinese goods
Speaker 2: will be weighing on ministers' minds.
Speaker 10: I think it'll be weighing on their minds very very much,
Speaker 10: in part because it's so fresh and it just sort
Speaker 10: of dropped just you know, just before the meeting. And
Speaker 10: then on the other side of the meeting, of course,
Speaker 10: you're going to get the initial report from the EU
Speaker 10: in terms of the ev probe that they're going into China.
Speaker 10: So trade is really going to be front and center
Speaker 10: for both the finance ministers and the central bankers, who
Speaker 10: are both present there. For the central bankers, obviously this
Speaker 10: is also a big question in terms of inflation because
Speaker 10: if we're dealing with just one off things, that's one thing.
Speaker 10: If we're talking about basically the beginning of another kind
Speaker 10: of trade war and tit for tat, this could have
Speaker 10: huge implications for inflation to what degrees. So they'll be
Speaker 10: exchanging notes, you know, it's the ec be the FED
Speaker 10: will be there much. The FED is setting the tone
Speaker 10: for global interest rates, and of course the question will
Speaker 10: be will China retaliate. Biden has been quite targeted in
Speaker 10: terms of this. These sounds like a lot of import
Speaker 10: tariffs on the evs, you know, quadrupling, but really it's
Speaker 10: only touching about eighteen billion dollars a trade because obviously
Speaker 10: he's very conscious of not wanting to get those prices
Speaker 10: going up, particularly in an election year.
Speaker 2: Yeah, indeed, that's a big concern for them too. Around
Speaker 2: the G seven table though, Ali, how much divergence is
Speaker 2: there on the approach, the approach to China and trades.
Speaker 10: So I think it's interesting if you look at just
Speaker 10: the United States and Europe, you know what I mean.
Speaker 10: I mean, you have them sort of singing a bit
Speaker 10: from the same hymn sheet in terms of the sort
Speaker 10: of general message, which is that China has engaged in
Speaker 10: unfair trade practices. But ma Cole, for example, has really
Speaker 10: kept the door open saying that he's not going to
Speaker 10: be dragged in around the world by US foreign policy,
Speaker 10: which is sort of an allusion to Taiwan and the
Speaker 10: evidence of that. That's a message that's kind of resounded
Speaker 10: with Hashijiping because he came to France. You know, he
Speaker 10: came to Europe for the first time in five years.
Speaker 10: He came to France, but he also came to Hungary,
Speaker 10: which is another country that kind of takes us to
Speaker 10: the within Europe question of China. You know, China has
Speaker 10: had huge manufacturing production in Hungary. The you know, c
Speaker 10: atl the battery manufacturer, has opened up a factory. Now
Speaker 10: we understand byd is there the Europeans are looking at
Speaker 10: this because Hungary is often a political outlier. Could this
Speaker 10: drive a further wedge within Europe and could it get
Speaker 10: really China a seat at the table politically within there?
Speaker 10: And there's also a disagreement even between Schultz and macohone right,
Speaker 10: Schultz was even saying that listen, we want to put
Speaker 10: these ev tariffs up. Okay, but let's think about the
Speaker 10: consequences here. Half of the EV's coming into Europe from
Speaker 10: China are not Chinese, they are Europeans.
Speaker 4: Yeah.
Speaker 2: Indeed, I mean the Ukraine's finance minister is going to
Speaker 2: be attending this meeting as well. What will he be
Speaker 2: looking to hear from his counterparts?
Speaker 10: Well, I think a lot of it is going to
Speaker 10: be a message of reassurance, right, and we saw that
Speaker 10: with Blincoln when he was in Kiev saying that you know,
Speaker 10: we're still here, We're still supporting Ukraine. And the reason
Speaker 10: that there is you know, potentially some desire to doubt
Speaker 10: that is because of how long that aid package took
Speaker 10: to get to Ukraine. Remember that was stalled in the
Speaker 10: House for six months. That sixty billion dollar package eventually
Speaker 10: got there and that will mean you know, some military
Speaker 10: relief and some financial relief for Ukraine, but it's cost
Speaker 10: them very dearly on the battlefield. We've seen infrastructure behead there,
Speaker 10: swatting very a lot fewer of the missiles out of
Speaker 10: the skies. And the question for the G seven going
Speaker 10: forward is how do you get the financing for Ukraine
Speaker 10: on sustainable footing? And that will be one of the
Speaker 10: direct and central conversations there.
Speaker 2: Yeah, because the U ass is proposed seizing the Russian
Speaker 2: assets that were frozen by the G seven after the
Speaker 2: invasion of Ukraine. Is that a proposal that has much support.
Speaker 10: So it doesn't have that much support in Europe solicited.
Speaker 10: To be clear about what we're talking about here, What
Speaker 10: the Europeans favor is they want to take the proceeds
Speaker 10: from the Russian assets being sold that are kind of
Speaker 10: accruing interests and making profits. They want to take those
Speaker 10: and give that to Ukraine. But that's only about three
Speaker 10: billion dollars a year. The United States is very keen
Speaker 10: on taking the underlying assets. We're talking about three hundred
Speaker 10: billion dollars of Russian central bank assets that are scattered
Speaker 10: across the world that are currently being held. They want
Speaker 10: to bring that directly to Ukraine. The Europeans have resistant
Speaker 10: to that. What has been interesting is some of the
Speaker 10: debates on how to maybe do it to make everyone happy.
Speaker 10: The United States, for example, has suggested these so called
Speaker 10: freedom bonds, you know, and putting American branding on it,
Speaker 10: which basically is issuing bonds and using the underlying assets
Speaker 10: as collateral, so you don't touch the underlying asset, but
Speaker 10: you can still monetize it and get more of that
Speaker 10: money to Ukraine.
Speaker 2: Now, central bankers, as you mentioned Oli, will be attending
Speaker 2: this meeting as well. Of course, inflations still a big
Speaker 2: question for these major global economies. Should we expect to
Speaker 2: hear much about the broader issues around the path I
Speaker 2: had for interest rights?
Speaker 10: I would think so. I mean, wherever there are central
Speaker 10: bankers there is a rate debate, and if Bloomberg is
Speaker 10: there will certainly be chasing it and we may be
Speaker 10: speaking to a few of them. I can't tell you
Speaker 10: who exactly because we haven't confirmed it, but there will
Speaker 10: be certainly a conversation about what the stance is on
Speaker 10: rate policy going forward. And of course, how does this
Speaker 10: trade question now front and center? How does that read through?
Speaker 10: I mean, the debate forming at the ECB is not
Speaker 10: whether or not the going to be a cut, it's
Speaker 10: what happens after the cut. What is the default sort
Speaker 10: of stance for the ECB? Does it have a neutral
Speaker 10: bias or an easing bias? And you have people on
Speaker 10: either side of that. You have Panetta from Italy who's
Speaker 10: saying that really we should have an easing bias, maybe
Speaker 10: pushing that for it. In the Nogle from the Bundesbag
Speaker 10: saying no, we need to stay neutral until we see
Speaker 10: what happens.
Speaker 2: Yes, that's another debate that's going to be happening at
Speaker 2: the G seven two. I mean more broadly, Oliver, is
Speaker 2: the G seven a forum that's fit for purpose. We're
Speaker 2: talking about some of very diverse issues being discussed at
Speaker 2: this forum as well, but does it actually produce concrete decision?
Speaker 10: Well, let's think about what this forum is, right, the
Speaker 10: G seven. For a very long time, this was the
Speaker 10: G eight, right, and now it is the G seven,
Speaker 10: And that happened ten years ago. And I was actually
Speaker 10: just looking at a picture of the last G eight,
Speaker 10: you know, meeting. It's sort of astounding. You see fonswau Land, Obama,
Speaker 10: David Cameron smiling, Merkle is there and Putin is there.
Speaker 4: Right.
Speaker 10: And in the last sort of ten years, ever since
Speaker 10: the sort of invasion of Crimea, we've seen a real bifurcation,
Speaker 10: of fragmentation of global order. So there's the question of
Speaker 10: the broader G twenty in the sort of breakoff of
Speaker 10: the bricks, as you mentioned, you know, there's this you know,
Speaker 10: G came to Europe and then Putin went to Beijing
Speaker 10: saying that they're going to have a very good relationship
Speaker 10: for generations to come. So there's a question of how
Speaker 10: much influence the G seven has over others. But even
Speaker 10: within the G seven there is all this talk about
Speaker 10: sort of protectionistic policies of China, the G seven itself
Speaker 10: within there is being protectionist itself. I mean the Inflation
Speaker 10: Reduction Act. There's not a lot of talk going on
Speaker 10: around it. But this hits Europe very very hard. And
Speaker 10: you're not hearing so much about the American European relationship.
Speaker 10: You know, post pandemic, it was all about friend shoring
Speaker 10: and securing supply chains that way. But really even under Biden,
Speaker 10: you're hearing a slightly more America first kind of policy
Speaker 10: and Europe alone, and that is really hanging over this
Speaker 10: G seven meeting.
Speaker 2: Thanks to our correspondent Oliver Crook, who will be bringing
Speaker 2: us coverage on Bloomberg Radio and television of the G
Speaker 2: seven finance ministers meeting in Italy in the coming days,
Speaker 2: I'm Stephen Carol in London. You can count us every
Speaker 2: weekday morning here for Bloomberg Daybreak Europe, beginning out six
Speaker 2: am in London and what am on Wall Streets.
Speaker 1: Tom, thank you Steven, and coming up on Bloomberg day
Speaker 1: Break weekend, we look ahead to the inauguration of Taiwan's
Speaker 1: president elect. I'm Tom Busby and this is Bloomberg. I'm
Speaker 1: Tom Busby in New York with your global look ahead
Speaker 1: at the top stories for investors in the coming week.
Speaker 1: Taiwan's president elect Lee Ching Da will be inaugurated in
Speaker 1: the coming week. Let's go to Bloomberg Daybreak Asia host
Speaker 1: Brian Curtis and Doug Krisner for more.
Speaker 3: Tom William Lai takes office at a critical time, with
Speaker 3: tensions running high. In recent days, China said live faces
Speaker 3: a choice between peace and confrontation. On Wednesday, Beijing said
Speaker 3: that it would sanction five taiwan political commentators and roll
Speaker 3: out a new law to punish separatists.
Speaker 12: In addition, Taiwan finds itself in the middle of worsening
Speaker 12: relations between the US and China. Now on the economic side,
Speaker 12: President Biden just slapped new tariffs on Chinese imports and
Speaker 12: accused China of cheating on trade. Then there's the political front.
Speaker 12: China's Foreign Ministry bristled it reports on the US and
Speaker 12: Taiwan conducting naval drills last month.
Speaker 3: Additionally, the US will send a delegation of former officials
Speaker 3: to the inauguration. The fact that their former officials may
Speaker 3: placate China to a certain degree, but Beijing still won't
Speaker 3: be happy as such, Doug and I thought it would
Speaker 3: be a good time to take a closer look at
Speaker 3: the trilateral relationship and see how it might change under
Speaker 3: the presidency of Lei ching Dug. We asked John Liu,
Speaker 3: Bloomberg Executive editor in Beijing, if Taiwan is at a crossroads.
Speaker 13: Taiwan is definitely the most dangerous flashpoint in this relationship
Speaker 13: between the United States and China. Whether William Lae's ascendence
Speaker 13: to the presidential office will be the spark that sets
Speaker 13: off some sort of conflict, I think that looks relatively
Speaker 13: unlikely at the moment. We are expecting him to stick
Speaker 13: to the line from the previous administration of Tiing I.
Speaker 13: He has said that publicly he plans to be a
Speaker 13: continuity president of anything. I think the speech that he
Speaker 13: will be giving at his inauguration will be tuned to
Speaker 13: try and both show him and his party is defending Taiwan,
Speaker 13: but also not to cause any upsetness in Beijing or Washington.
Speaker 3: Bloomberg Executive editor in Beijing, John Liu, Now for discussion
Speaker 3: on this. We're joined by Bloomberg's Type A bureau chief
Speaker 3: Samson Ellis and deputy Bureau chief Cindy Wong. So, Sam,
Speaker 3: let me go to you first. Is John Wright there
Speaker 3: that Lai is likely to be pragmatic and push for continuity.
Speaker 11: Those are certainly the indications we have right now. Obviously
Speaker 11: we're speaking before he has taken power, But over the
Speaker 11: past year he has strenuously emphasized that he will to
Speaker 11: size previous line of being willing to talk to China,
Speaker 11: but only on the basis of equality, that the two
Speaker 11: sides sit down and speak to each other as equals.
Speaker 11: That's obviously a condition that China is very unlikely to
Speaker 11: be able to accept. Plus he's also said that there
Speaker 11: will be no formal action for him to in some
Speaker 11: way formalize Taiwan's independent So I think that's his way
Speaker 11: of signaling to the United States and to Beijing and
Speaker 11: to the time Inese public and the world at large
Speaker 11: that there isn't going to be some kind of declaration
Speaker 11: of independence during his presidency to try and put people
Speaker 11: at ease that he's not going to be a troublemaker
Speaker 11: throughout his term.
Speaker 12: Cindy, from what I understand, William Lai took about forty
Speaker 12: percent of the popular vote. When you look at a
Speaker 12: number like that, you may conclude that the mandate that
Speaker 12: William Lai has is not that strong. Am I right
Speaker 12: about that?
Speaker 6: Yeah?
Speaker 14: Exactly. He only got forty percent of the vote in
Speaker 14: the general election, and that made him the first Taiwan
Speaker 14: president since year two thousand that didn't win an outright
Speaker 14: majority vote, So that's relatively weak man day. And also
Speaker 14: the Taiwanese voters just gave the majority of the legislature
Speaker 14: to the opposition KMT, hoping that there would be some
Speaker 14: check and balance in the government. So I think with
Speaker 14: that challenges that that means lies any policies or reforms
Speaker 14: is going to face the legislative hurdles. So going forward
Speaker 14: the next four years is going to be a very
Speaker 14: daunting tax ahead for him, Cindy.
Speaker 3: One would think that lie, given his past and sort
Speaker 3: of leaning toward Taiwan independence, that he would be even
Speaker 3: less popular with China than signing one was.
Speaker 14: Yeah, definitely. So just to give you a little bit
Speaker 14: of contest. The ruling Democratic Progressive Party or the DPP
Speaker 14: champion that strong sense of Taiwan identity distinct from China,
Speaker 14: and Lai used to being for his pro independent stance.
Speaker 14: He used to describe himself as a pragmatic worker of
Speaker 14: Taiwan independence. Although during the presidential campaign he has been
Speaker 14: very measured. He didn't talked about independence at all. Instead,
Speaker 14: he said Taiwan is already a de facto state and
Speaker 14: there's no need to declare independence. Still, the past comments
Speaker 14: and past records made him very unpopular with China. China
Speaker 14: revealed lie with deep suspicion and deep distrust, and China
Speaker 14: has already labeled him as an instigator of war or
Speaker 14: a separatist. So it is believed that going forward for
Speaker 14: the next four years, since China has already cut off
Speaker 14: all the communication with Taiwan since President's Hi took office
Speaker 14: in twenty sixteen, and for the next four years, it's
Speaker 14: unlikely that it would possibly resume any communication with Taiwan
Speaker 14: given their dis deep distrust of life. So one important
Speaker 14: thing to watch from lives inaugurate speed each would be
Speaker 14: if he has any comments or new narrative about the
Speaker 14: cross relations going forward, or if he is able to
Speaker 14: propose any kind of framework that could break the deadlock
Speaker 14: between China and Taiwan and resume the communication between the
Speaker 14: two sides.
Speaker 12: Again, Sam, the current President Sin Wing has been in
Speaker 12: office for eight years now, two terms term limited. During
Speaker 12: a big chunk of that period, since about twenty nineteen,
Speaker 12: I think that we have seen a much harder line
Speaker 12: from Beijing when it comes to Hong Kong, and I'm
Speaker 12: curious about possible ripple effects. Has a harder line on
Speaker 12: Hong Kong impacted the politics of Taiwan in any way.
Speaker 11: Well, it certainly did in twenty nineteen and twenty twenty,
Speaker 11: the last election, when Taiwan a resounding re election. You know,
Speaker 11: at that point we were at the height of the
Speaker 11: authorities cracked down against protesters in Hong Kong, and that
Speaker 11: definitely engendered a sense of sympathy from voters in Taiwan
Speaker 11: and a you know, no desire to move towards a
Speaker 11: friendlier stance with Beijing. But then there's the long term
Speaker 11: repercussions of that. Certainly that you know, China's offer for
Speaker 11: Taiwan essentially as you know, the same as to Hong
Speaker 11: Kong one country, two systems, except that you're part of
Speaker 11: China and will let you keep your democratic system and
Speaker 11: your way of life largely untouched. But the big lesson
Speaker 11: from Hong Kong obviously is that they promised to keep
Speaker 11: that for fifty years and then they didn't. They just
Speaker 11: swooped in and they have radically changed how things are
Speaker 11: run in Hong Kong, and that really has served as
Speaker 11: a lesson for Taiwan as a whole.
Speaker 3: And Taiwan people have spoken very clearly that that is
Speaker 3: not something that they can accept. But on the other hand, Samson,
Speaker 3: and this is something we've talked about before. We often
Speaker 3: hear that, you know, despite what you hear from pundits
Speaker 3: about all of this geopolitical fear and threats, Taiwan people
Speaker 3: are actually pretty relaxed. They've they've been dealing with this
Speaker 3: for more than seventy years. Is that likely to continue
Speaker 3: to think over the next four years underline?
Speaker 11: For sure. I mean, one of the remarkable things about
Speaker 11: being in Taiwan, living in Taiwan is seeing how much
Speaker 11: more nervous people outside of Taiwan are than people inside Taiwan.
Speaker 11: Will often, you know, get very worried phone calls from
Speaker 11: Hong Kong or Singapore or London on New York people
Speaker 11: worried of you know, is the invasion about to happen?
Speaker 11: How worried are you? And in Taiwan life goes on
Speaker 11: as normal, you know, people, as you say, they're very
Speaker 11: used to these threats or these tensions with China. As
Speaker 11: for how things will play out over the coming four years,
Speaker 11: that that's going to be very interesting to see. Sources
Speaker 11: do indicate to us that there's a good chance that
Speaker 11: China slowly starts to ratchet up the tension. As you
Speaker 11: pointed out at the beginning of this conversation, they appear
Speaker 11: to already be doing that with new sanctions against certain
Speaker 11: individuals in Taiwan. So these are the so called gray
Speaker 11: zone tactics that China deploys, like a range of measures
Speaker 11: that fall below the threshold of outright warfare that are
Speaker 11: designed to influence and coerce Taiwan to do Beijing's bidding.
Speaker 11: The thinking is that we're likely to see a big
Speaker 11: increase in these kinds of tactics over the coming four
Speaker 11: years in an effort to stop Taiwan and voted in
Speaker 11: particular from wanting to give the DPP another four year term.
Speaker 12: Cindy, It's remarkable when you look at the degree of
Speaker 12: concentration of semiconductor manufacturing in Taiwan. This is obviously a
Speaker 12: TSMC story, but we know one of the things that
Speaker 12: the US has been doing, to a lesser extent Europe
Speaker 12: addressing this perhaps over concentration and trying to diversify away
Speaker 12: from Taiwan. Is there concern about that when you look
Speaker 12: at the economics of the island.
Speaker 14: Yeah, there is certainly some concerns and bait within Taiwan
Speaker 14: about whether we should let TSMC to continue to broad
Speaker 14: its ship plants overseas. And that's also a question that
Speaker 14: we asked the incoming President Lighting the last August when
Speaker 14: we had a chance to sit down with him, and
Speaker 14: then Light said at that time that he won't stop
Speaker 14: TSMC from building more chip plants in the US or
Speaker 14: in other countries because he thinks Taiwan has a responsibility
Speaker 14: to the world and the fact that TSMC is diversifying
Speaker 14: its ship plans and building chip plants overseas, it's to
Speaker 14: show that Taiwan's economic advantage and the power of Taiwan.
Speaker 3: That said Cindy. We spoke with Sean Darby from the
Speaker 3: Zuho Securities and he said that the global trend of
Speaker 3: on shoring will actually mean that semiconductor output in Taiwan
Speaker 3: will slow. Now it'll still be TSMC to a certain
Speaker 3: degree and other companies, but jobs in Taiwan may suffer.
Speaker 5: The irony is that the competitive part of Taiwan's semiconductors
Speaker 5: is to some extent being hollowed out through this, you know,
Speaker 5: sort of on shoring in the developed world, and in
Speaker 5: that respect, you're not going to get the same level
Speaker 5: of output growth that you would have had in pre
Speaker 5: proceeding cycles. You know, sometime in two or three years
Speaker 5: from now, in fairness that time, one is going to
Speaker 5: sort of see below trend growth from twenty twenty five
Speaker 5: twenty six purely because they don't have that same facilities
Speaker 5: in situ.
Speaker 3: And Cindy, will that be a problem for a Taiwan
Speaker 3: that some of these jobs will move offshore.
Speaker 14: I think that's definitely something people will keep and close
Speaker 14: eye on from incoming present. Lyes in inaugura speech, it
Speaker 14: is believed that he will certainly talk about his plans
Speaker 14: to boost Taiwan's economy, and also he has already previously
Speaker 14: avowed to continue strengthening Taiwan's chip sectors. We know that
Speaker 14: before his inauguration, he's already set up meeting with representatives
Speaker 14: from the chip industry is trying to understand what would
Speaker 14: be the best policies for the industry and for the
Speaker 14: country as well. So we're sure that from his inaugural
Speaker 14: speech next Monday, we're going to hear more details about
Speaker 14: his plan to beef up Taiwan's economy and how to
Speaker 14: strengthen the chip industry going forward.
Speaker 12: Sam and Cindy, thank you so much for joining us
Speaker 12: and helping us set up the inauguration of Taiwan's new president,
Speaker 12: Light ching Da that will be happening in the week ahead.
Speaker 12: Samson Ellis is Bloomberg's Taipei bureau chief and Cindy Wong
Speaker 12: is deputy bureau chief. In our Taipay newsroom, I'm Dereg
Speaker 12: Krisner along with Brian Curtis in Hong Kong. You can
Speaker 12: catch us weekdays here for Bloomberg Day Break Asia beginning
Speaker 12: at eight am in Hong Kong eight pm on Wall Street. Tom.
Speaker 1: Thank you, Doug, and thank you Brian. And that does
Speaker 1: it for this edition of Bloomberg day Break Weekend. Join
Speaker 1: us again Monday morning at five am Wall Street Time
Speaker 1: for the latest on markets overseas and the news you
Speaker 1: need to start your day. I'm Tom Buzzby. Stay with us.
Speaker 1: Top stories and global business headlines are coming up right now.