WEBVTT - Daybreak Weekend: US CPI, UK Real Estate, Asia Tech Earnings 0:00:02.960 --> 0:00:13.240 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Daybreak Weekend, 0:00:13.320 --> 0:00:15.280 our global look at the top stories in the coming 0:00:15.320 --> 0:00:17.919 week from our Daybreak anchors all around the world, and 0:00:18.000 --> 0:00:19.959 straight ahead on the program, we look ahead to some 0:00:20.079 --> 0:00:23.480 key inflation and retail sales data here in the US. 0:00:23.840 --> 0:00:25.599 I'm Tom Busby in New York. 0:00:25.840 --> 0:00:28.560 I'm Stephen Carolyn London for We're digging into the challenges 0:00:28.600 --> 0:00:32.120 facing commercial and residential real estate out of a major 0:00:32.200 --> 0:00:34.600 conference in the French Riviera. 0:00:34.000 --> 0:00:36.519 And I'm Brian Curtis in Hong Kong. We look ahead 0:00:36.520 --> 0:00:40.640 to earnings from China's contemporarate Apparax technology, number one in 0:00:40.680 --> 0:00:44.000 its industry. How is it doing in navigating China? 0:00:45.680 --> 0:00:49.680 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg. 0:00:49.720 --> 0:00:52.199 He Love on Free Own, New York, Bloomberg ninety nine 0:00:52.200 --> 0:00:55.600 to one, Washington, d C, Bloomberg one O six one, Boston, 0:00:55.680 --> 0:01:00.520 Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Serrius 0:01:00.600 --> 0:01:03.840 XM one nineteen and around the world on Bloomberg Radio 0:01:03.960 --> 0:01:06.280 dot com and via the Bloomberg Business App. 0:01:09.520 --> 0:01:11.280 Good day to you. I'm Tom Busby, and we begin 0:01:11.319 --> 0:01:15.440 today's program with inflation. We get key CPI data for 0:01:15.480 --> 0:01:18.920 the month of February this coming week, which could potentially 0:01:19.200 --> 0:01:22.399 influence what the FED does at its March meeting. Joining 0:01:22.520 --> 0:01:26.240 us now is Stuart Paul, Us, economist with Bloomberg Economics. 0:01:26.360 --> 0:01:27.280 Thank you for joining us. 0:01:27.400 --> 0:01:29.520 Thank you for having me. Tom. Yes, we are looking 0:01:29.520 --> 0:01:32.600 forward to getting our February CPI data, and we are 0:01:32.640 --> 0:01:34.679 also going to end up getting retail sales data for 0:01:34.680 --> 0:01:37.600 the month of February in this coming week. And our 0:01:37.680 --> 0:01:40.720 basic view is that bit of a resurgence in spending 0:01:41.080 --> 0:01:43.480 helped to create a bit of an inflationary impulse. We 0:01:43.560 --> 0:01:47.880 are expecting to see the headline CPI index increase zero 0:01:47.920 --> 0:01:50.480 point four percent month on month for the month of February. 0:01:50.800 --> 0:01:53.320 That's the same as what we saw in January, and 0:01:53.360 --> 0:01:57.560 that is a very hot print and definitely inconsistent with 0:01:57.560 --> 0:02:00.000 the Fed's two percent target. That's going to hold annual 0:02:00.240 --> 0:02:02.840 inflation at three point one percent. It's year over year 0:02:03.240 --> 0:02:06.480 core inflation. We're expecting to register zero point three percent 0:02:06.560 --> 0:02:09.560 month on month, allowing headline inflation to fall to three 0:02:09.600 --> 0:02:12.720 point seven percent year over year. We are expecting to 0:02:12.720 --> 0:02:16.480 see some disinflation and core goods, with use auto prices 0:02:16.520 --> 0:02:20.400 declining about two percent during the month, but consumers are 0:02:20.440 --> 0:02:23.600 still spending and that will support nominal retail sales growth 0:02:23.680 --> 0:02:24.240 during the month. 0:02:24.360 --> 0:02:27.320 All right, So one bright spot you mentioned was use 0:02:27.400 --> 0:02:32.720 cars a little lower. However, housing gasoline and food, I 0:02:32.760 --> 0:02:34.720 know they fluctuate, but they have been a little higher 0:02:34.720 --> 0:02:36.840 than usual. Is that kind of driving a lot of 0:02:36.840 --> 0:02:38.720 that inflationary pressure. 0:02:38.560 --> 0:02:41.720 That's right, So driving the headline really is gasoline prices. 0:02:41.840 --> 0:02:44.919 On a seasonally adjusted basis. We have gasoline prices rising 0:02:44.919 --> 0:02:48.160 about four percent during the month, so that's after accounting 0:02:48.240 --> 0:02:52.840 for the seasonal adjustment factor. Is that typically would account 0:02:53.040 --> 0:02:56.000 for the increase in gasoline prices In februaries people start 0:02:56.080 --> 0:02:58.320 driving once again as they clear snow off the streets, 0:02:58.320 --> 0:03:02.280 for example, so in some places, so not only is 0:03:02.400 --> 0:03:06.800 gasoline driving headline, inflation is also driving nominal retail sales. 0:03:07.000 --> 0:03:09.839 We are expecting to see retail sales growth about zero 0:03:09.919 --> 0:03:12.320 point eight percent month on month. A big part of 0:03:12.320 --> 0:03:14.320 that is gasoline, and we need to account for that. 0:03:14.639 --> 0:03:17.960 If we look at a narrower control group, however, which 0:03:18.000 --> 0:03:21.440 strips out autos, strips out gasoline, strips out building, materials 0:03:21.680 --> 0:03:24.880 and food services, which is very heavily influenced by foot traffic, 0:03:25.120 --> 0:03:28.280 which can be affected by weather, for example, as we 0:03:28.320 --> 0:03:31.000 saw in January, very affected by weather. If we focus 0:03:31.040 --> 0:03:33.480 on that control group, we have a much more modest 0:03:33.480 --> 0:03:36.280 growth of zero point two percent month on month in February. 0:03:36.400 --> 0:03:39.320 Well, are some of the retailers doing better? But then 0:03:39.680 --> 0:03:42.280 now January, we know that was a very rough month 0:03:42.320 --> 0:03:44.600 for retail sales. Could have been a hangover from the 0:03:44.680 --> 0:03:48.720 holiday season. But February you're expecting a little bump ahead, 0:03:48.840 --> 0:03:51.320 a little bump up, not a decline like we saw 0:03:51.320 --> 0:03:54.920 in January. Who are the winners in that besides gas stations. 0:03:55.400 --> 0:03:58.240 So if we look at credit card transaction data and 0:03:58.240 --> 0:04:01.080 we look at debit card transactions and just strictly count 0:04:01.120 --> 0:04:04.680 the number of swipes at credit card processing terminals at 0:04:04.720 --> 0:04:08.320 the point of sale, we do see big box retailers, 0:04:08.720 --> 0:04:12.440 We do see some just general merchandisers showing some of 0:04:12.480 --> 0:04:16.200 the most impressive growth month over month. But we need 0:04:16.240 --> 0:04:18.520 to be a bit cautious in how we read through 0:04:18.560 --> 0:04:22.080 from that one month of improved credit card transactions data 0:04:22.400 --> 0:04:24.680 and what that means for the broader economy. We are 0:04:24.760 --> 0:04:29.120 seeing some headcount reductions at retailers. That typically was something 0:04:29.120 --> 0:04:33.000 that was concentrated just in more high skilled services. But 0:04:33.080 --> 0:04:35.640 if it's making its way to retailers, that could be 0:04:35.760 --> 0:04:38.039 a signal of retailers feeling a little bit of the 0:04:38.040 --> 0:04:41.200 pain or anticipating a slow down and spending, which is 0:04:41.200 --> 0:04:43.120 actually what we expect throughout twenty twenty four. 0:04:43.279 --> 0:04:46.600 Well, let's go back to inflation. Just not even two 0:04:46.680 --> 0:04:49.520 years ago, the inflation rate was nine point one percent. 0:04:49.839 --> 0:04:52.160 Right now we're expecting a year of a year rate 0:04:52.200 --> 0:04:54.159 of about three point one percent. 0:04:53.960 --> 0:04:56.839 Or three c three point one percent for the headline 0:04:56.839 --> 0:04:58.080 three point seven for core. 0:04:58.080 --> 0:05:00.880 So we're moving in the right direction. Last week, FED 0:05:00.960 --> 0:05:03.520 Chair Jerome pal and his semi annual testimony to Congress. 0:05:03.560 --> 0:05:06.240 He said that central bank no rush to start lowering rates, 0:05:06.440 --> 0:05:10.800 but he hinted that when policymakers feel inflation is under control, 0:05:11.160 --> 0:05:14.440 could happen later this year with no firm timetable. Is 0:05:14.480 --> 0:05:17.120 he being optimistic? Is he looking at the data? It's 0:05:17.120 --> 0:05:19.640 all data driven according to the Fed. Are we heading 0:05:19.640 --> 0:05:20.440 toward that now? 0:05:20.640 --> 0:05:24.200 I think we are. We're anticipating seeing headline inflation reaching 0:05:24.240 --> 0:05:27.039 about two point five percent year over year at the 0:05:27.160 --> 0:05:30.640 end of twenty twenty four, As headline inflation comes down, 0:05:31.240 --> 0:05:33.799 the balance of risks that the Fed has to weigh 0:05:33.880 --> 0:05:37.760 between achieving its maximum employment mandate and its price stability 0:05:37.839 --> 0:05:41.080 mandate come into better alignment. And so as we see 0:05:41.080 --> 0:05:44.360 the pace of hiring cooling, as we see the pace 0:05:44.360 --> 0:05:47.560 of inflation cooling, the Fed has to take its employment 0:05:47.720 --> 0:05:50.200 mandate a bit more seriously, has to put a bit 0:05:50.240 --> 0:05:52.520 more weight on it. And so we do expect the 0:05:52.560 --> 0:05:56.760 Fed to begin cutting rates this summer. Again, economic activity cooling, 0:05:57.040 --> 0:05:59.840 inflation cooling, and the labor market at cooling would allow 0:05:59.880 --> 0:06:01.200 for that pivot in policy. 0:06:01.560 --> 0:06:04.000 And the next FED meeting the nineteenth and twentieth of 0:06:04.040 --> 0:06:07.680 this month, So we should not expect any rate cut. 0:06:07.760 --> 0:06:10.440 But you think we'll get a little more clarity from 0:06:10.480 --> 0:06:12.000 the Fed about what they're thinking. 0:06:12.400 --> 0:06:14.200 I think that we'll get a little bit more clarity 0:06:14.279 --> 0:06:17.599 on the pace of quantitative tightening, for example. But I 0:06:17.640 --> 0:06:19.800 expect the Fed to actually maintain a bit of a 0:06:19.839 --> 0:06:23.480 hawkish tone in its policy statement. It did remove its 0:06:23.520 --> 0:06:28.080 quote unquote hawkish bias in its January policy statement, but 0:06:28.200 --> 0:06:31.440 I expect the Fed to use language that would prevent 0:06:31.520 --> 0:06:34.000 people from reading too deeply into the idea that rate 0:06:34.040 --> 0:06:36.719 cuts are imminent, or from expecting rate cuts to be 0:06:36.800 --> 0:06:41.159 imminent less financial market conditions start easing too swiftly, and 0:06:41.200 --> 0:06:44.680 the Fed would have to then treat loosening financial conditions, 0:06:45.120 --> 0:06:49.040 perhaps with more restricted policy or higher for longer policy. 0:06:49.120 --> 0:06:51.320 Oh boy, well we'll get ready for that. Well, our 0:06:51.320 --> 0:06:55.520 thanks to Stuart paul Us economists with Bloomberg Economics, turning 0:06:55.560 --> 0:06:58.280 now to too closely watched earnings reports that are out 0:06:58.279 --> 0:07:00.480 this week, which will offer investors a glie limps into 0:07:00.520 --> 0:07:04.560 the mania surrounding artificial intelligence technology and for more on 0:07:04.600 --> 0:07:07.920 what to expect from Oracle and Adobe. We welcome Bloomberg 0:07:07.960 --> 0:07:12.680 Intelligence technology analyst anarag Rana. Thank you for being here at. 0:07:12.800 --> 0:07:14.280 RAG Oh I'm happy to be here. 0:07:14.400 --> 0:07:17.360 Oh good. Well let's start with Adobe, which may be 0:07:17.360 --> 0:07:21.160 best known for its Photoshop editing software Acrobat Reader and 0:07:21.200 --> 0:07:23.960 its PDF but boy as it transformed itself into a 0:07:23.960 --> 0:07:28.720 cloud computing giant with its generative AI product Firefly. So 0:07:28.840 --> 0:07:31.280 what are you expecting to see in the first quarter 0:07:31.280 --> 0:07:33.600 earnings out on Wednesday? And why Yeah? 0:07:33.640 --> 0:07:35.840 So you know, when you look at somebody like Adobe 0:07:35.840 --> 0:07:40.280 that dominate the creative space with the Photoshop and other 0:07:40.360 --> 0:07:43.840 products that go into it. They also dominate the document 0:07:44.200 --> 0:07:48.120 cloud business or digital documents with PDF. So those are 0:07:48.160 --> 0:07:51.360 the two areas where we see strength going into the QUOTO. 0:07:51.440 --> 0:07:55.040 So document cloud, I think that's done very well. We 0:07:55.120 --> 0:07:59.040 continue to expect strong results on that segment. The big 0:07:59.080 --> 0:08:02.040 discussion is going to be on the creative part of 0:08:02.080 --> 0:08:05.800 it because there is a lot of chatter around what's 0:08:05.840 --> 0:08:09.320 going to happen to companies like Adobe when you have 0:08:09.440 --> 0:08:13.280 products that are you know, launched by companies like open Ai. 0:08:13.760 --> 0:08:17.559 So I would recommend if anybody hasn't seen the Open 0:08:17.600 --> 0:08:22.400 Eye's latest demo of their product called Sora, I would 0:08:22.400 --> 0:08:24.840 would recommend go to YouTube and check that out. It's 0:08:24.880 --> 0:08:29.560 a phenomenal product where you just write down the tex stuff. 0:08:29.920 --> 0:08:32.360 Let's say, you know, two armies fighting in a in 0:08:32.440 --> 0:08:35.520 a battlefield, it will create a video for you and 0:08:35.679 --> 0:08:37.760 that's done. I mean, you can use that. Now. There 0:08:37.800 --> 0:08:40.320 are a lot of concerns about privacy and copyright and 0:08:40.320 --> 0:08:42.280 other things, but we can you know, that's that could 0:08:42.280 --> 0:08:45.560 be settled later. But since that video was released, Adobe 0:08:45.640 --> 0:08:48.360 has been a lot under pressure. So I think on 0:08:48.400 --> 0:08:51.480 the conference call, we do expect management to talk a 0:08:51.520 --> 0:08:55.440 lot about what they're doing with their AI capabilities, et cetera. 0:08:55.960 --> 0:08:59.080 You mentioned Firefly. Firefly is an interesting product, but it's 0:08:59.160 --> 0:09:03.240 mostly to pictures, which is text to you can write 0:09:03.280 --> 0:09:05.480 down a text to say, you know, create a picture 0:09:05.520 --> 0:09:08.559 of a dog playing piano in the in a forest, 0:09:08.800 --> 0:09:11.280 and it'll create that for you. They have done a 0:09:11.280 --> 0:09:14.280 good job of, you know, rink fencing that issue by 0:09:14.360 --> 0:09:17.600 launching their own product, Firefly, And on top of that, 0:09:17.640 --> 0:09:22.200 they actually have agreements with the creative professionals who own 0:09:22.280 --> 0:09:25.440 a lot of those underlying pictures on which these models 0:09:25.480 --> 0:09:28.920 are trained. So they're basically telling companies you can use 0:09:28.960 --> 0:09:32.400 the pictures generated from our system and nobody's going to 0:09:32.440 --> 0:09:34.880 sue you for it because we have rink fenced it 0:09:34.920 --> 0:09:37.000 with copyright issues. So I think is going to be 0:09:37.040 --> 0:09:40.280 a lot of discussion on that topic. But i Adobe, 0:09:40.360 --> 0:09:42.800 in our view is on the right path of jen 0:09:42.880 --> 0:09:45.680 ai and over the next few years we should see 0:09:46.120 --> 0:09:48.000 significant improvement in their products. 0:09:48.160 --> 0:09:51.360 And over those next few years is their main competition 0:09:51.520 --> 0:09:54.760 going to be the open ais and other AI startups 0:09:54.800 --> 0:09:55.319 of the world. 0:09:55.520 --> 0:09:57.960 It is a mix of open ai and other startups 0:09:57.960 --> 0:10:00.120 of the world. There is another startup in Australia that 0:10:00.200 --> 0:10:03.640 has been behind them called Canva. We just had their 0:10:03.679 --> 0:10:07.480 co founder on our podcast. That's a good product and 0:10:07.520 --> 0:10:10.080 also it's a slightly cheaper product. So it's going to 0:10:10.080 --> 0:10:12.040 be hard for Adobe over the next few years to 0:10:12.200 --> 0:10:16.080 put in new price increases through their ecosystem. They have 0:10:16.280 --> 0:10:19.120 been growing well with price increases over the last I 0:10:19.160 --> 0:10:21.040 would say, a couple of years, but I think it's 0:10:21.080 --> 0:10:22.520 going to be challenging going forward. 0:10:22.720 --> 0:10:22.960 Wow. 0:10:23.120 --> 0:10:26.240 Okay, Well, on Thursday we hear from the enterprise software 0:10:26.280 --> 0:10:29.360 giant Oracle what are you looking for in its Q 0:10:29.559 --> 0:10:30.200 three report. 0:10:31.120 --> 0:10:31.320 Yeah. 0:10:31.400 --> 0:10:34.440 Oracles actually a very interesting story because it has two 0:10:34.480 --> 0:10:38.800 big businesses. One is the application portfolio of software company 0:10:38.880 --> 0:10:42.560 or software products such as HR software, or customer relationship 0:10:42.640 --> 0:10:46.439 software or finance software. And the other part is the 0:10:46.480 --> 0:10:50.319 infrastructure business, which is their database business as well as 0:10:50.360 --> 0:10:53.040 they also do a bit of cloud computing. I think 0:10:53.080 --> 0:10:57.320 they given such strong demand for a cloud infrastructure to 0:10:57.440 --> 0:11:01.840 run these large language models, the biggest focus for everybody 0:11:01.920 --> 0:11:04.920 is going to be what happens in their Oracle cloud 0:11:04.960 --> 0:11:09.400 infrastructure numbers. I think last quarter investors were a little 0:11:09.440 --> 0:11:12.319 disappointed by the growth rata that and the company came 0:11:12.320 --> 0:11:14.320 out and said, well, listen, we don't have a problem 0:11:14.400 --> 0:11:17.439 with demand. The issue we are having is we don't 0:11:17.480 --> 0:11:20.839 have that much capacity to run that demand. Whether it's 0:11:20.880 --> 0:11:24.560 in the reason, could be the data center expansion is 0:11:24.559 --> 0:11:27.719 a bit slow, or they don't have enough chips from 0:11:27.800 --> 0:11:32.480 Nvidia to run those workloads. So I think then everything 0:11:32.559 --> 0:11:35.880 is going to rotate around what's the capacity right now 0:11:35.920 --> 0:11:38.880 for them to run that work But other than that, 0:11:38.960 --> 0:11:41.040 I think it should be a normal quarter for them. 0:11:41.559 --> 0:11:44.319 I'm not expecting any major surprises other than the topic 0:11:44.360 --> 0:11:44.960 we discussed. 0:11:45.320 --> 0:11:48.280 Well, you said that supply not demand may be an issue. 0:11:48.320 --> 0:11:52.320 Does that mean also businesses are still spending, still growing. 0:11:52.679 --> 0:11:55.440 Yeah, it's a very good question. I think by and large, 0:11:55.480 --> 0:11:59.360 businesses are stabilized in the downdraft of it spending that 0:11:59.400 --> 0:12:02.280 has been going on for two years, which means it's 0:12:02.280 --> 0:12:05.920 not getting worse, but it's also not getting faster at 0:12:05.960 --> 0:12:09.679 a quicker rate. The one area that's not you know, 0:12:09.720 --> 0:12:12.640 in that bucket is anything that's spent on AI. So 0:12:12.679 --> 0:12:15.160 they are spending a lot on AI, but they may 0:12:15.160 --> 0:12:17.360 not be spending on other areas such as you know, 0:12:17.480 --> 0:12:23.080 sales automation or marketing, advertising, et cetera. Those software products, 0:12:23.120 --> 0:12:25.520 but as far as AI products are concerned, there is 0:12:25.559 --> 0:12:26.920 a pickup and spending. 0:12:26.679 --> 0:12:28.559 Well, a lot to look forward to and our thanks 0:12:28.559 --> 0:12:32.559 to Bloomberg Intelligence technology analyst anurag Rana, and coming up 0:12:32.559 --> 0:12:35.280 on Bloomberg day Break weekend, we'll dig into the challenges 0:12:35.360 --> 0:12:39.160 facing commercial and residential real estate ahead of a major 0:12:39.240 --> 0:12:42.840 conference on the French Riviera. I'm Tom Busby and this 0:12:43.160 --> 0:12:56.800 is Bloomberg. This is Bloomberg day Break weekend, our global 0:12:56.840 --> 0:12:58.920 look ahead at the top stories for investors in the 0:12:58.920 --> 0:13:02.160 coming week. Tom Busby in New York. Up later in 0:13:02.200 --> 0:13:04.480 the program will look ahead to earnings from a couple 0:13:04.480 --> 0:13:08.160 of key tech manufacturers in Asia. But first, the real 0:13:08.280 --> 0:13:12.280 estate world, both commercial and residential, has been struggling under 0:13:12.320 --> 0:13:15.000 the weight of high interest rates, and the cracks are 0:13:15.040 --> 0:13:18.360 seeping into the financial world as well. Flexible working has 0:13:18.440 --> 0:13:21.760 changed demand for offices, while many European countries are struggling 0:13:22.080 --> 0:13:25.080 with a shortage of housing. All these issues and more 0:13:25.120 --> 0:13:27.280 will be in focus at a major real estate conference 0:13:27.280 --> 0:13:29.960 on the French Riviera in the coming days. For more, 0:13:30.080 --> 0:13:32.520 let's go to London and bring in Bloomberg Daybreak Europe 0:13:32.520 --> 0:13:35.040 anchor Stephen Carroll tom. 0:13:34.760 --> 0:13:38.280 It's a subject that has huge political and economic importance 0:13:38.440 --> 0:13:41.360 real estate. High interest rates have created cracks in the 0:13:41.360 --> 0:13:44.560 commercial property market that are now rippling into the financial world. 0:13:44.920 --> 0:13:48.120 Home Buyers are also dealing with higher borrowing costs, while 0:13:48.200 --> 0:13:50.840 at the same time facing a shortage of housing In 0:13:50.920 --> 0:13:53.880 many major cities in the UK. The latest data from 0:13:53.920 --> 0:13:57.559 morgus Lander Halifax shows a continuing small rebound in house 0:13:57.600 --> 0:14:00.439 prices despite higher rates. We spoke to Kim Kenny heard 0:14:00.440 --> 0:14:03.240 from Halifax about the risks that she sees in the 0:14:03.280 --> 0:14:04.199 market this year. 0:14:04.800 --> 0:14:08.440 I think mortgage rates clearly are focusing everybody's minds. We've 0:14:08.440 --> 0:14:12.560 seen real volatility in them, and we saw significant rate 0:14:12.679 --> 0:14:15.760 increases over the course of last year. We're starting to 0:14:15.760 --> 0:14:18.319 see that ease now and as we've said, there's bier 0:14:18.360 --> 0:14:21.960 confidence beginning to return. I think I would say, you know, 0:14:22.280 --> 0:14:25.720 more broadly, it's just we still remain in a fairly 0:14:25.960 --> 0:14:29.720 uncertain economic climate, so I think there are lots of 0:14:29.760 --> 0:14:31.920 things that we need to be thoughtful about. At the moment, 0:14:31.960 --> 0:14:37.160 we're seeing really good wage inflation, we're seeing low unemployment rates, 0:14:37.160 --> 0:14:39.320 and those are good indicators for us in terms of 0:14:39.360 --> 0:14:42.280 the long term performance of the market. But I think 0:14:42.360 --> 0:14:45.760 we've learnt over the last eighteen months or so that 0:14:45.800 --> 0:14:48.680 there is still uncertainty in the marketplace. So do you 0:14:48.720 --> 0:14:51.240 see the instability for the housing market in the next 0:14:51.240 --> 0:14:51.720 few months? 0:14:51.760 --> 0:14:53.720 Is that the prediction to the end of the year. 0:14:53.880 --> 0:14:56.280 As we're kind of facing into this year, I think, 0:14:56.280 --> 0:15:00.520 as we said, we think that house prices could by 0:15:00.600 --> 0:15:03.120 up to two percent. But clearly what we have seen 0:15:03.640 --> 0:15:07.600 in the last five months is consecutive growth, so that 0:15:07.680 --> 0:15:10.960 should be seen as a real positive and we hope 0:15:10.960 --> 0:15:13.600 that continues to grow and also that we can teach 0:15:13.640 --> 0:15:14.480 to see stability. 0:15:14.800 --> 0:15:17.320 So that's Kim Kennyhard from Halifax on the situation in 0:15:17.360 --> 0:15:19.960 the UK for home buyers from an investor's point of view. 0:15:19.960 --> 0:15:22.760 We've also been speaking to Michelle Scriminger, who is CEO 0:15:22.920 --> 0:15:26.080 of Legal and General Investment Management. She's been talking to 0:15:26.160 --> 0:15:29.160 us about the opportunities in the drive to build more 0:15:29.200 --> 0:15:32.080 homes in the UK, particularly affordable homes. 0:15:32.480 --> 0:15:35.440 We operate in different sectors of the market, so we 0:15:35.760 --> 0:15:39.000 are a house builder. We operate in the build to 0:15:39.040 --> 0:15:44.040 rent sector, we operate in the affordable homes sector. We 0:15:44.200 --> 0:15:49.840 also invest into commercial real estates on behalf of multiple investors. 0:15:50.240 --> 0:15:52.200 We also learned as part of what we do here 0:15:52.240 --> 0:15:54.640 in the UK. We're not just doing it in the UK. 0:15:55.320 --> 0:15:58.720 But I think what we definitely see is continuing to 0:15:58.720 --> 0:16:03.240 see opportunity and that for us is super important. And 0:16:03.320 --> 0:16:06.640 as the regulations are changing, so Solignty two is a 0:16:06.720 --> 0:16:09.720 very big thing for Legal in general, and the ability 0:16:09.760 --> 0:16:12.120 for us to be able to deploy more capital we 0:16:12.160 --> 0:16:15.240 want to unlock the capital to invest means that we're 0:16:15.280 --> 0:16:18.200 going to be continuing to do that around the UK. 0:16:18.840 --> 0:16:22.000 So we think there is opportunity. Of course, the rates 0:16:22.120 --> 0:16:24.480 environment is it part of that. So you know, as 0:16:24.600 --> 0:16:28.000 rates become more stable then I think that does start 0:16:28.040 --> 0:16:31.080 to make people more confident and let's point to that 0:16:31.120 --> 0:16:34.560 as a point of resilience here for the UK on 0:16:34.640 --> 0:16:38.480 which we can leverage. But individuals are still being impacted 0:16:38.480 --> 0:16:41.040 by those high rates in terms of mortgages and fixed 0:16:41.120 --> 0:16:44.240 rate mortgages are a challenge, so that there is a balance, 0:16:44.680 --> 0:16:48.320 but longer term we do see a lot of potential here. 0:16:48.800 --> 0:16:52.000 That was Michelle Scomjo, CEO of Legal and General Investment Management, 0:16:52.000 --> 0:16:54.880 speaking to Bloomberg's Caroline Hepger that all of these issues 0:16:54.920 --> 0:16:57.200 are in focus at the MIP and real Estate conference 0:16:57.200 --> 0:16:59.320 that's happening in can on the French Riviera in the 0:16:59.360 --> 0:17:01.800 coming days. Our real estate reporter Jack Sitters will be 0:17:01.840 --> 0:17:04.400 there and he's been telling us about the big subjects 0:17:04.480 --> 0:17:05.359 up for a discussion. 0:17:05.520 --> 0:17:08.520 I'm fascinated to get out there because I guess if 0:17:08.560 --> 0:17:11.159 we wind back twelve months, I was there in can 0:17:11.800 --> 0:17:14.240 and at the start of the week, Silicon Valley Bank 0:17:14.280 --> 0:17:17.040 had just gone, and I was anticipating, you know, talking 0:17:17.040 --> 0:17:18.439 to investors about that all week, And by the end 0:17:18.480 --> 0:17:20.399 of the week, Credits Fist has gone as well, and 0:17:20.480 --> 0:17:22.920 so it was just it was incredibly chaotic, but also 0:17:23.000 --> 0:17:26.200 incredibly interesting revealing to be there with all those investors 0:17:26.240 --> 0:17:27.639 and get to see the wides of people's eyes and 0:17:27.680 --> 0:17:30.480 sit down with them as this madness was unfolding. Here 0:17:30.520 --> 0:17:33.560 we are twelve months later, and although that US regional 0:17:33.600 --> 0:17:36.080 banking situation has maybe calmed down somewhat or bit we'll 0:17:36.080 --> 0:17:38.600 see what happens with New York Community Bank or but 0:17:39.080 --> 0:17:41.359 the issues haven't gone away for real estate, and if anything, 0:17:41.640 --> 0:17:43.760 they'd come to the form more. It's such a slow 0:17:43.920 --> 0:17:46.840 moving asset class. Prices take a long time to correct. 0:17:47.240 --> 0:17:49.800 That means issues with over indebtedness take a long time 0:17:49.840 --> 0:17:51.800 to emerge, and then banks maybe take even longer to 0:17:51.840 --> 0:17:54.040 actually do something about it. What are the issues, Well, 0:17:54.640 --> 0:17:57.639 it's how much distress is really out there, how a 0:17:57.760 --> 0:17:59.879 lender's going to respond, how tough are they going to 0:18:00.080 --> 0:18:02.720 get with borrowers? What's that going to mean in terms 0:18:02.760 --> 0:18:05.840 of forced asset sales? You know, are we seeing funds 0:18:05.880 --> 0:18:07.560 that are under pressure with people trying to pull their 0:18:07.600 --> 0:18:10.800 money out. So I'm anticipating, you know, the mood is 0:18:11.000 --> 0:18:13.840 likely to be as dour as real estate ever gets 0:18:13.960 --> 0:18:17.199 because I'm yet to meet anyone who property yeah, who 0:18:17.320 --> 0:18:20.680 isn't an internal optimist. So I'm definitely sure every broker 0:18:20.720 --> 0:18:22.639 I meet will tell me that we're right around the 0:18:22.680 --> 0:18:24.639 corner for good times and that you know, the market's 0:18:24.680 --> 0:18:26.480 going to bounce back, And to be fair to them, 0:18:26.880 --> 0:18:29.240 there is a good argument that maybe people like me 0:18:29.359 --> 0:18:32.720 will be focusing on some of the more painful distressed elements. 0:18:33.160 --> 0:18:36.600 That there's definitely this sense that with interest rates having 0:18:36.680 --> 0:18:39.320 peaked and cuts on the way, that there could be 0:18:39.440 --> 0:18:41.479 quite a big bounce back. So for those with capital 0:18:41.520 --> 0:18:43.359 to deploy, you know, they'll be out there looking to 0:18:43.440 --> 0:18:46.800 do deals they'll be excited to start deploying that capital. 0:18:46.600 --> 0:18:49.240 Because prices have come When you think about commercial estate, 0:18:49.320 --> 0:18:52.959 prices have come down significantly. I mean, where where are 0:18:53.040 --> 0:18:54.600 the bargains to be found for those. 0:18:54.480 --> 0:18:55.240 That do have the money? 0:18:55.640 --> 0:18:55.840 Yeah? 0:18:55.880 --> 0:18:58.879 Absolutely, Well, I guess it's a global event, but I 0:18:58.920 --> 0:19:01.240 guess it's dominated by by European investors. So if we 0:19:01.359 --> 0:19:04.359 if talking about Europe, the UK is probably corrected the 0:19:04.440 --> 0:19:07.240 most and the most quickly, which is what we normally see, 0:19:07.280 --> 0:19:09.480 and it's to do with sort of nuances around valuation 0:19:09.560 --> 0:19:13.800 approaches and whatnot. So you know, London, for example, prices 0:19:13.840 --> 0:19:17.480 have come down sharply and the issue really is about 0:19:17.560 --> 0:19:20.960 availability that that bid ask spread has narrowed. What what 0:19:21.119 --> 0:19:23.000 often happens at the start of a correction as you 0:19:23.160 --> 0:19:25.040 just get this huge bid ask spread. As you know, 0:19:25.160 --> 0:19:27.879 nobody wants to sell at a discount. They've got their 0:19:27.920 --> 0:19:30.320 sort of backward looking book valuations, but buyers want to 0:19:30.320 --> 0:19:32.520 pay a price that reflects where the risk free rate 0:19:32.680 --> 0:19:35.600 is now. Anyway, that process has sort of been unfolding 0:19:35.640 --> 0:19:37.840 in the UK for the last well almost two years now. 0:19:38.480 --> 0:19:40.879 So yeah, so the conditions are there potentially for a 0:19:40.920 --> 0:19:43.000 bit of a bounce back in terms of activity. Debts 0:19:43.000 --> 0:19:44.600 may be a little bit more available than it was, 0:19:44.640 --> 0:19:46.440 it's a little bit less costly than it was, so 0:19:46.520 --> 0:19:48.320 it can be a creative for some buyers. And that's 0:19:48.320 --> 0:19:50.600 you know, that's so important in real estate. If we 0:19:50.640 --> 0:19:53.200 look across other markets, I'd say Germany is probably the 0:19:53.280 --> 0:19:55.960 other end, and that's the other really big market in 0:19:56.080 --> 0:19:58.360 Europe that is at the other end of the spectrum. 0:19:58.440 --> 0:20:01.360 It things are still really great, see their huge gap 0:20:01.440 --> 0:20:04.920 between buyers and sellers. But we are seeing you know, 0:20:05.080 --> 0:20:09.640 more insolvencies, there more administrations and that will inevitably force transactions. 0:20:10.000 --> 0:20:12.440 Does that mean that we will actually see more deals activity? 0:20:12.480 --> 0:20:14.080 Are we picking up off a base there? 0:20:14.480 --> 0:20:14.680 Yeah? 0:20:15.119 --> 0:20:16.480 Off a base is the phrase. 0:20:16.760 --> 0:20:18.280 It's the space if you keep looking down. 0:20:18.920 --> 0:20:19.120 Yeah. 0:20:19.160 --> 0:20:22.000