Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 2: top stories in the coming week from our Daybreak anchors
Speaker 2: all around the world. Straight Ahead on the program, we
Speaker 2: look ahead to FED Chair Kevin Worsh's first address in
Speaker 2: Jackson Hall. I'm Nathan Hager in Washington.
Speaker 3: I'm Stephen Caroln London. We're looking ahead to a key
Speaker 3: meeting of French business leaders as they count down to
Speaker 3: the pivotal presidential election in France.
Speaker 4: I'm Doug Chrisner, looking at how overall inflation in Japan
Speaker 4: compares with price increases in Tokyo.
Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 2: I'm Nathan Hager, and we begin today's program with an
Speaker 2: eye on the Grand Tetons. Central bankers from around the
Speaker 2: world are headed to Jackson Hole once again for the
Speaker 2: Kansas City Fed's annual Economic Policy Symposium. It is going
Speaker 2: to be the first appearance for new FED Chairman Kevin Worsh,
Speaker 2: so there is heavy anticipation for what he has to
Speaker 2: say at his keynote address later this week. Bloomberg International
Speaker 2: Economics and Policy correspondent Michael McKee is going to be
Speaker 2: in Jackson Hole once again as part of our team
Speaker 2: covering the event this year. But Mike is here with
Speaker 2: me now in our Washington studio to preview what the
Speaker 2: chairman might have to say, given that he's told market
Speaker 2: participants that he doesn't want the FED saying as much.
Speaker 5: So what are we expecting, Well, we're expecting something, but
Speaker 5: we're not exactly sure what. The title of this or
Speaker 5: the subject of this symposium is payment systems, which would
Speaker 5: attract a very small subset of the people out there
Speaker 5: in the markets. So the original thought was because he
Speaker 5: didn't want to say a thing, he might stick to
Speaker 5: that subject. But now that he's had trouble with the
Speaker 5: markets and the question of FED credibility, there is a
Speaker 5: feeling he's going to want to say something that will
Speaker 5: make him seem more credible, that will enable the markets
Speaker 5: to take him more seriously when he says he's going
Speaker 5: to make sure they get back to the two percent
Speaker 5: inflation target. It's a bit of a threading the needle
Speaker 5: because he doesn't want to do any kind of forward guidance.
Speaker 5: But if he emphasizes the FED maybe would use all
Speaker 5: its tools in the event, that kind of speech that
Speaker 5: might get some attention as well.
Speaker 2: Is that the kind of thing that would be enough
Speaker 2: for market participants just to say that the Fed is
Speaker 2: willing to use all its tools when I think the
Speaker 2: markets have kind of gotten used to the idea that
Speaker 2: the FED at least under pass chair and have been
Speaker 2: a little bit more specific about saying that they could
Speaker 2: go ahead and raise rates, lower rates, that sort of thing.
Speaker 5: That's the trade off Worsh is working on. He doesn't
Speaker 5: want the markets to take their cues from the Fed.
Speaker 5: He wants the markets to take their cues from the
Speaker 5: data and the news out there, and then the FED
Speaker 5: would follow along. Basically, So how far can he go
Speaker 5: and build credibility again without going farther than he wants
Speaker 5: to and setting a precedent that then he'd have to
Speaker 5: live up to going on with future guidance on what
Speaker 5: they're going to do. Now, he does have some other
Speaker 5: things he could talk about. He could certainly talk about
Speaker 5: the task forces that he's put in place and what
Speaker 5: he hopes to get out of them, and maybe in general,
Speaker 5: what he hopes to accomplish as a FED chairman who's
Speaker 5: going to bring radical change, as he's put it to
Speaker 5: the Central Bank.
Speaker 2: Well, you're not expecting then, that the Chairman is sort
Speaker 2: of feverishly reworking his remarks given the action that we've
Speaker 2: seen in the markets these last few days and weeks
Speaker 2: when it comes to rising bond yields.
Speaker 5: I think at this point he would be just still
Speaker 5: writing it, because he told us on July twenty ninth
Speaker 5: that he hadn't started writing it yet. So maybe it's
Speaker 5: in the first draft or second draft stage. But no,
Speaker 5: the problem here is the same thing, the same problem
Speaker 5: we have all the time with this administration. In places,
Speaker 5: the news changes so quickly that trying to keep up
Speaker 5: with it is very difficult. So I suspect that he
Speaker 5: would be speaking more in general terms rather than in
Speaker 5: specific terms. Now, we did have last week the Treasury
Speaker 5: Department announcing its plan to double the buybacks increased liquidity,
Speaker 5: basically to try to keep people able to buy treasuries.
Speaker 5: The yields obviously worrying the Treasury Secretary, and that could
Speaker 5: have an impact on the Fed. It could mean that
Speaker 5: the Fed wants to cut to raise rates on the
Speaker 5: short end to build credibility, and that would then send
Speaker 5: long yields lower. But that's something that's probably too specific
Speaker 5: for him to get into because that would amount to
Speaker 5: forward guidance.
Speaker 2: It raises an interesting point, given that the chairman has
Speaker 2: said he doesn't want to give forward guidance to the
Speaker 2: market necessarily, could he give a little bit more clarity
Speaker 2: when it comes to whether the Fed and the Treasury
Speaker 2: are going to be working a little more closely together
Speaker 2: going forward.
Speaker 5: Well, that's an interesting possibility because he has said all
Speaker 5: along before he was the chair and since he's been
Speaker 5: chair that he wants to work on a so called
Speaker 5: Treasury Accord, an updated Treasury Accord, And the idea generally
Speaker 5: is that the Fed would try to align its securities buying,
Speaker 5: because it still is not new Q right now, but
Speaker 5: it's still buying securities to keep up with the rise
Speaker 5: and the money supply and demand for money, and so
Speaker 5: align that with what Treasury is issuing. And right now
Speaker 5: Treasury is moving to shorten its maturities. They haven't done
Speaker 5: anything besides the buybacks in terms of an announcement, but
Speaker 5: markets are expecting one in a reasonable amount of time,
Speaker 5: and in that case, then he might make it more
Speaker 5: clear that the Fed is much more interested in having
Speaker 5: a portfolio structured towards the short end and towards bills,
Speaker 5: which would work together with Treasury.
Speaker 2: Well, thanks for being at least a part of this
Speaker 2: bit of the build up. Mike really appreciates you coming
Speaker 2: in with us. That's Bloomberg International Economics and Policy Correspondent
Speaker 2: Michael McKee. We invite you to stay with us for
Speaker 2: special coverage of Jackson Hall and Chairman Warsh's keynote on
Speaker 2: a special edition of Bloomberg Surveillance this Friday, nine am
Speaker 2: Wall Street Time from Jackson Hall on Bloomberg Radio, Television
Speaker 2: and the Bloomberg Business App. Let's take a look now,
Speaker 2: add some stocks making news in the week ahead. I'm
Speaker 2: Nathan Hager, joined by Bloomberg Intelligence Global Head of Tech
Speaker 2: Research Mandeep Singh. Because we have some major tech earnings
Speaker 2: coming up this week, including the big one from in Vidia.
Speaker 2: Is in Nvidia still the big one man deep when
Speaker 2: it comes to the AI trade and earnings.
Speaker 6: Absolutely. I mean, if there is you know, one company
Speaker 6: that really has carried through the mantle when it comes
Speaker 6: to this AI build out, it is in Nvidia, and
Speaker 6: it shows up in their numbers when you look at
Speaker 6: you know, growth expectations of close to mid ninety percent
Speaker 6: and actually their revenue seems to be accelerating. So it
Speaker 6: just goes to show that, you know, this company with
Speaker 6: over a three hundred and fifty billion dollars run rate
Speaker 6: now is really executing very well and it is at
Speaker 6: the front and center of this big AI infrastructure building.
Speaker 2: It's incredible the run that Nvidia's had literally for years now,
Speaker 2: and just now this latest announcement of a one hundred
Speaker 2: and five billion dollar data center investment in Ohio for
Speaker 2: Open AI, it just speaks to so much of the
Speaker 2: outperformance that we've seen for in Vidia for quite some time.
Speaker 2: And I guess the question still of you know, whether
Speaker 2: circular investment is still an issue for this company? Is
Speaker 2: it for you?
Speaker 4: Well?
Speaker 6: So, the thing that has changed with Nvidia now versus
Speaker 6: a couple of years back is it's got a really
Speaker 6: strong balance sheet with a ton of cash to invest,
Speaker 6: and so what it is doing now is with these
Speaker 6: big data center deals, it is helping you know, the
Speaker 6: likes of open Ai and Tropic and other companies neo
Speaker 6: clouds finance this build out where if they want to
Speaker 6: set up a data center and Vidia will be that
Speaker 6: backstop and terms of filling in some of the investment
Speaker 6: requirements and then helping these labs raise funding from private
Speaker 6: capital and other sources. But in Ridia is really flexing
Speaker 6: its balance sheet in terms of making sure there is
Speaker 6: a robust ecosystem around it and all of them are
Speaker 6: able to raise financing, because that's the hard thing now,
Speaker 6: as these numbers get bigger and bigger, not every company
Speaker 6: will be able to raise financing for one hundred billion
Speaker 6: dollar data center. So that's where in Vidia comes in
Speaker 6: and kind of helps and be that backstop. And Google
Speaker 6: is doing the same thing, by the way, So all
Speaker 6: these major players who are training the models are kind
Speaker 6: of using their balance sheet in an effective way to
Speaker 6: prop up the ecosystem around them.
Speaker 2: Okay, so we're definitely looking forward to those earnings results
Speaker 2: from Nvidia on Wednesday. We're also going to hear from
Speaker 2: CrowdStrike the cybersecurity firm. A lot of debate about this
Speaker 2: pany's valuation heading into the print. How do you see it?
Speaker 6: I would agree that they have been a beneficiary of,
Speaker 6: you know, the entropic Mythos release and all the kind
Speaker 6: of anxiety around every company being at risk of a
Speaker 6: cyber attack because Mythos exposed all the vulnerabilities. But to
Speaker 6: my mind, CrowdStrike hasn't really shown that in their numbers.
Speaker 6: They're still growing top line at mid twenty percent, which
Speaker 6: is healthy, but nothing like what you know we talked
Speaker 6: about and Vidio growing at mid ninety percent, and you know,
Speaker 6: some of the other companies in the chip space are
Speaker 6: growing triple digits. So mid twenty percent growth for a
Speaker 6: company of CrowdStrike size doesn't seem that impressive. And it's
Speaker 6: already trading at a very premium valuation multiple, So from
Speaker 6: that perspective, the expectations are higher. But maybe they come
Speaker 6: out and talk about, you know, how all the enterprises
Speaker 6: have started increase using their cybersecurity spend Postmethos, and that
Speaker 6: will be a good narrative. I think that may help
Speaker 6: the stock sentiment.
Speaker 2: And before we hear from crowdstriking, Nvidia on Tuesday, we're
Speaker 2: going to get earnings from Marvel Technologies off the back
Speaker 2: of their announcement of a twelve point two billion dollar
Speaker 2: share purchase deal with Google. What's that say about where
Speaker 2: Marvel is in the chip raise?
Speaker 6: I mean, all these chip companies I think have really
Speaker 6: benefited in a big way from you know, the CAPEX
Speaker 6: increases that we keep hearing about, and Marvel is exposed
Speaker 6: to all the custom silicon development and now they are
Speaker 6: partnering with Google. Earlier they were predominantly working with Amazon.
Speaker 6: So the fact that Google is working with Broadcom and
Speaker 6: now they are working with Marvel to expand their TPU
Speaker 6: kind of unit chhipments suggests to me that, you know, Marvell,
Speaker 6: we'll see accelerating top line as well. And they have
Speaker 6: more customers now and they had previously, and Google is
Speaker 6: obviously a big customer. I was a little surprised with
Speaker 6: the stock warrant aspect of this deal, like why they
Speaker 6: had to give that, But we have seen that kind
Speaker 6: of you know, deal with between AMD and Meta and
Speaker 6: MD and open aiy, So it's not that unusual these
Speaker 6: days to you know, give warrants if you have a
Speaker 6: big customer lined up all.
Speaker 2: Right, Man Deep, Thanks as always. That's Man Deep Saying,
Speaker 2: Global head of Tech Research at Bloomberg Intelligence, and coming
Speaker 2: up on Bloomberg day Break weekend, we'll look ahead to
Speaker 2: a key meeting of French business leaders as they count
Speaker 2: down to a pivotal presidential election. I'm Nathan Hager, and
Speaker 2: this is Bloomberg. This is Bloomberg day Break Weekend, our
Speaker 2: global look ahead at the top stories for investors in
Speaker 2: the coming week. I'm Nathan Hager in Washington. Later in
Speaker 2: the program, we'll look ahead to the latest reading on
Speaker 2: Tokyo inflation. But first minds in Europe are starting to
Speaker 2: turn to the election cycle. In France, Emanuel mccrannt leaves
Speaker 2: office next year after a decade in office, and many
Speaker 2: are wondering what might come next. Bloomberg Daybreak Europe banker
Speaker 2: Stephen Carroll's been looking into one of France's biggest business conferences.
Speaker 3: Nathan Franz's business leaders will be gathering at the home
Speaker 3: of the Roland Garross tennis tournament in the coming days,
Speaker 3: with a very different kind of contest in mind. The
Speaker 3: country's biggest business lobby group, MEDEF, is holding its annual
Speaker 3: end of summer conference the last before next year's presidential election.
Speaker 3: This event has been traditionally a moment for potential candidates
Speaker 3: to rub shoulders with business leaders and prove their credentials
Speaker 3: when it comes to managing the economy and the challenges
Speaker 3: there are major. Passing a budget in France has become
Speaker 3: a hugely fraud affair politically, leading to the toppling of
Speaker 3: two prime ministers in the last two years. Campaigning for
Speaker 3: the French presidential election will begin to pick up on
Speaker 3: the coming weeks as well. The outcome is being closely
Speaker 3: watched across Europe and the consequences that it may have
Speaker 3: in the wider European Union. Joining us now to discuss
Speaker 3: is our powers correspondent Carolyn Connell and Rich Bravo, who
Speaker 3: leads our team covering governments across Western Europe, who joins
Speaker 3: us from Brussels. Carolyn, First of all, this is a
Speaker 3: moment where French businesses get to lay out their priorities
Speaker 3: for the next president. What are we expecting to hear
Speaker 3: from them?
Speaker 7: Yeah, first, as you know, it's just getting back from
Speaker 7: the summer rereg but clearly this is a bit different
Speaker 7: because in eight months from now we have the French
Speaker 7: presidential elections, so they're going to be on everyone's mind.
Speaker 7: The Prime Minister Sebastian Conny first needs to pass a
Speaker 7: budget by the end of this year. That's going to
Speaker 7: be difficult as well, is going to be present it
Speaker 7: by the end of the months. And remember, as you
Speaker 7: were mentioning, the past two budgets ended up with prime
Speaker 7: ministers being ousted in votes of no confidence, so that's
Speaker 7: a risk for executives over the next few months. The uncertainty,
Speaker 7: the volatility is going to come back. Some companies we've
Speaker 7: been speaking with over the past few weeks and months,
Speaker 7: I've been saying they're either holding or delaying some of
Speaker 7: their investments due to this uncertainty. And of course we'll
Speaker 7: wait to hear from the various programs of every candidates
Speaker 7: and the potential new taxes on companies and businesses.
Speaker 3: Yeah, and indeed that's going to be difficult questions to answer. Now,
Speaker 3: as I mentioned, this is the moment where you guess
Speaker 3: often potential candidates coming out and trying to prove themselves
Speaker 3: to the great and good of the French business community
Speaker 3: as well in terms of who's expected to be there.
Speaker 3: Is this going to be a big political event.
Speaker 7: So in fact, if you look at this year's edition,
Speaker 7: there's not so many candidates that are going to be
Speaker 7: physically there. I saw David Listener, the mayor of can
Speaker 7: but he's basically at one one point five percent in
Speaker 7: the polls, so very low. Also Fabrian Roussel, the head
Speaker 7: of the Communist Party, who's preparing his candidacy. And then
Speaker 7: of course we've got some members of the government but
Speaker 7: not current a candidate. For examples, Curl the current finance
Speaker 7: minister who has the big task of presenting this budget
Speaker 7: by the end of the month. Saint Bruno Lamire, the
Speaker 7: former finance minister Macon for seven years, who's actually going
Speaker 7: to talk about political bravery. I thought that was an
Speaker 7: interesting subject ahead of these elections.
Speaker 3: Yes, perhaps, and what a moment it's going to be rich.
Speaker 3: I want to turn to you in Brussels next. This
Speaker 3: is an event that really, as the European political season
Speaker 3: picks back up, is going to be on everyone's minds.
Speaker 3: What is going to happen in France next year and
Speaker 3: what it means for the European Union. How are politicians
Speaker 3: and officials in Brussels feeling about the end of Emmanuel
Speaker 3: Macron's term in office and the election well.
Speaker 8: Officially, the European Commission will never weigh in on upcoming
Speaker 8: elections or take a stance it appears to influence a
Speaker 8: campaign or give any kind of preferential guidance. But obviously, France,
Speaker 8: being one of the core members of the EU, wields
Speaker 8: outside influence on policy matters across the board, and a
Speaker 8: la Penn presidency would obviously represent a massive change for
Speaker 8: the EU and would likely upend the status quo as
Speaker 8: we know it. Lapenn is an unrepentant eurosceptic. She likely
Speaker 8: wouldn't adhere to EU fiscal rules. She has said that
Speaker 8: she would seek to send less money into the EU's
Speaker 8: budget and would try to undo things like climate policy
Speaker 8: and the current migration rules. But more importantly, she would
Speaker 8: hold a veto in the European Council, meaning that she
Speaker 8: could hold certain policy matters such as sanctions and trade hostage.
Speaker 8: This was a tactic utilized for years by Victor Orbon,
Speaker 8: and he would withhold his support for something like sanctions
Speaker 8: against Russia in exchange for some domestic policy matter that
Speaker 8: was important to Hungary, and these two issues wouldn't be
Speaker 8: related in any way, but he was able to users
Speaker 8: to create great, great effectiveness.
Speaker 3: What's the French business view of Marian Dapan Caroline, given
Speaker 3: that we're thinking about the party leading in the polls,
Speaker 3: and of course there's been so many questions over her
Speaker 3: counters the up until now.
Speaker 7: Yeah, Marine Open and Jordan Bardela, who she said will
Speaker 7: be her prime minister if she wents, clearly have been
Speaker 7: leading in the polls. They are at around thirty thirty
Speaker 7: five percent in the first round in most polls, and
Speaker 7: you know, given they perhaps have a big shot at
Speaker 7: winning this election next year, executives have been increasingly courting
Speaker 7: the party, meeting some of the national value advisors behind
Speaker 7: closed doors, but not only We saw Bardela, for example,
Speaker 7: appearing publicly at the two hundred year party of Lufigaro
Speaker 7: newspaper The mid f Business may Be actually organized a
Speaker 7: dinner with Marin Open last spring in order to discuss priorities,
Speaker 7: perhaps a way for executives to also influence some of
Speaker 7: the programs. And if you look at the French papers,
Speaker 7: the executives who were there physically at this dinner, where
Speaker 7: the likes of LVMH total A Corno Axa.
Speaker 3: Angi so all the companies in France, this is.
Speaker 7: Not taboo anymore. You can meet with Marinupen, you can
Speaker 7: meet with Jordan Bardella. Marinupen has actually recruited a millionaire
Speaker 7: investment phone manager who's been advising her on debates and speeches.
Speaker 7: Even though, of course a lot of these meetings for
Speaker 7: the executive their aim is to try and influence a program.
Speaker 7: We don't know much details yet about their economic program
Speaker 7: because they haven't published their manifesto and.
Speaker 3: Rich in terms of how Brussels is preparing for the
Speaker 3: potential of La pan presidency as well, I mean, can
Speaker 3: they work with Marion Depen given that she has been
Speaker 3: very critical of the EU in the past.
Speaker 8: The short answer is that the Commission doesn't really have
Speaker 8: a choice. It just remains to be seen how antagonistic
Speaker 8: this relationship will be. I mean, if you think back
Speaker 8: to when Maloney first came down office, the expectation was
Speaker 8: that she would be a disruptive force in Brussels and
Speaker 8: push a really far right agenda that obviously never came
Speaker 8: to pass. And now she's seen as a right wing
Speaker 8: politician who isn't completely out of step with center right politicians.
Speaker 8: The big question is if Marine Leapenn wins, does she
Speaker 8: try to emulate Maloney and work with the Brussels structure
Speaker 8: or does she lean more toward the Orbon paradigm and
Speaker 8: really try to disrupt things.
Speaker 3: We're talking a lot about mind the Penn because of
Speaker 3: her position in the polls as well. But Caroline, what
Speaker 3: do we know about the other candidates who are in
Speaker 3: the field. We don't have a full field yet. We
Speaker 3: should say there's still a long way to go, but
Speaker 3: this moment and I should remind actually in twenty sixteen,
Speaker 3: it was during this conference that Emmanuel Macron resigned from
Speaker 3: his position as Economy Minister and announced that he was
Speaker 3: setting up his own political movement. So things do happen
Speaker 3: at this time of year, but give us a sense
Speaker 3: of where the field is at the moment.
Speaker 7: And I interviewed him at the time then he was
Speaker 7: not even a candidate quite yet. I would say, at
Speaker 7: the moment of the condidate who's got like be the
Speaker 7: best shot at winning against either Marinupan or Jeanjean. The
Speaker 7: far left candidate is Edwar Philipps. So this former Prime
Speaker 7: minister under Macon during the COVID, during the Pandemic is
Speaker 7: at fifteen twenty percent in the polls. Meloshan currently is
Speaker 7: at around twelve fifteen percent depending on the posse, so
Speaker 7: it's still tight. Meno Shan could possibly also make it
Speaker 7: to a runoff, which obviously would be the scarier scenario
Speaker 7: for the markets and for businesses to see a runoff
Speaker 7: between both extremes, the far left and the far right.
Speaker 7: But Edwar Philip maybe at the moment best positions. However,
Speaker 7: we've seen in pass elections a lot can change between
Speaker 7: now and then. You've got Gabrielletal also in ambush, also
Speaker 7: from the centrist party of Renaissance. You've got francois Land,
Speaker 7: the former president Socialist, who can actually possibly appear as
Speaker 7: a reassuring figure for the center left. And then of
Speaker 7: course you have these smaller candidates Brunootai from the Republican Party,
Speaker 7: who is also perhaps waiting to see if Edward Phillips
Speaker 7: can really have this momentum over the next few months.
Speaker 3: And just coming back a little bit more into the
Speaker 3: immediate challenges, there's another budget coming up. We've mentioned how
Speaker 3: difficult to day is to try and get a budget passed.
Speaker 3: How difficult are looking this time around for Sebastian Leconne,
Speaker 3: the current Prime minister, it's.
Speaker 7: Exactly the same situation. The Parliament is fragmented into three blocks.
Speaker 7: I spoke with the Finance mister Ronaldis came back in
Speaker 7: ex Provence at the beginning of July. He was saying,
Speaker 7: we'll bring the deficit back to five percent, which is
Speaker 7: basically the same thing as last year. So it's really
Speaker 7: not an ambitious plan. It's very unclear as well, exactly
Speaker 7: how these candidates potential candidates are going to cut the
Speaker 7: deficits over the next few years, are going to cut debt.
Speaker 7: And there is also I got to mention this little
Speaker 7: music going on about if and once Sebastian McConnell has
Speaker 7: indeed managed to pass a budget bay the end of
Speaker 7: this year, whether he himself would potentially be a candidate.
Speaker 3: Yeah, because I mean that would be a pretty good
Speaker 3: momentum going into that as well, if he did manage
Speaker 3: to do what so many others have failed to do.
Speaker 3: And we saw how difficult it was last year for
Speaker 3: Sebastian Leconano when we thought he was going to I mean,
Speaker 3: he did try to resign several times during that process.
Speaker 3: As I recall, so a pretty bumpy path ahead rich
Speaker 3: from a Brussels point of view. If the leaders are
Speaker 3: looking ahead to that change, whoever it may be that
Speaker 3: takes over from Emmanuel Macron next year, is there a
Speaker 3: list of things that they want to try and get
Speaker 3: done while Emmanuel Macron, who while not everyone may like him,
Speaker 3: he's certainly someone that they know well in Brussels, is
Speaker 3: there a to do list they want to try before
Speaker 3: his term finishes.
Speaker 8: Yeah, for sure. There are definitely parts of the EU
Speaker 8: that are trying to take preventative measures now, given as
Speaker 8: you mentioned earlier, the strength of the national rally in
Speaker 8: the early polls, which do show Marine Lapenn with a
Speaker 8: strong position heading into the first round. In some circles
Speaker 8: they refer this as the Penn proof the EU. The
Speaker 8: biggest example will probably be the EU's trillion euro budget. Now,
Speaker 8: this budget needs to be re upped every seven years.
Speaker 8: The next iteration of the budget will will need to
Speaker 8: be completed by next year. But a lot of people
Speaker 8: in the EU, a lot of leaders, are trying to
Speaker 8: get this done before the end of this year. And
Speaker 8: one of the big assumptions is that they're doing this
Speaker 8: to front run the French election because they just they
Speaker 8: don't want to carry out those budget negotiations with a marine,
Speaker 8: potentially with marine lapenn.
Speaker 3: Yeah, I mean that's going to present difficulties when it
Speaker 3: comes to those already extremely complex negotiations and the ambition
Speaker 3: from the European Council President to try and bring that
Speaker 3: seven year budget negotiation to a conclusion by the end
Speaker 3: of this year. This, as you say, Rich, adding another
Speaker 3: sense of the urgency to that. Budgets here, budgets there,
Speaker 3: budgets everywhere. It sounds like I've got basicly a couple of
Speaker 3: months ahead for all of us as we're thinking about
Speaker 3: where the campaign goes from here. Thank you to you both,
Speaker 3: to Rich Bravo and Brussels, our European Government editor leading
Speaker 3: our team covering governments across Western Europe, and to our
Speaker 3: Paris correspondent Carolyne Connaugh, who will be monitoring all of
Speaker 3: the developments in the French presidential election and we'll be
Speaker 3: bringing you many of her interviews between now and the
Speaker 3: vote next year, as well as, of course we're monitoring
Speaker 3: in the coming days the events at the MEDAF Business
Speaker 3: conference in Paris. I'm Stephen Carroll in London, You can
Speaker 3: catch us every weekday morning here for Bloomberg Daybreak Europe,
Speaker 3: beginning at six am in London and one am on
Speaker 3: Wall Street.
Speaker 2: Nathan, Thanks Steven, and coming up on Bloomberg day Break Weekend,
Speaker 2: we'll look ahead to some key economic data in Japan.
Speaker 2: I'm Nathan Hager, and this is Bloomberg. This is Bloomberg
Speaker 2: day Break Weekend, our global look ahead at the top
Speaker 2: stories for investors in the coming week. I'm Nathan Hagar
Speaker 2: in Washington. We go to Japan next, where we'll get
Speaker 2: the latest reading on Tokyo infleetion in the coming days.
Speaker 2: For a preview, here's Doug Krisner, host of the Bloomberg
Speaker 2: Daybreak Asia podcast.
Speaker 4: Nathan will get the August reading on inflation for the
Speaker 4: city of Tokyo in the coming week. Now markets view
Speaker 4: Tokyo CPI as a leading indicator of what may be
Speaker 4: seen nationally. For a closer look, I'm joined by Bloomberg's
Speaker 4: Brian Fowler. Brian covers North Asia economies and government, and
Speaker 4: he joins from our studios in Tokyo. Thank you for
Speaker 4: being here. I want to talk about the Tokyo CPI
Speaker 4: reading for the month of August but maybe we can
Speaker 4: begin the conversation by looking rearward to the retail inflation
Speaker 4: data that we had for the month of July that
Speaker 4: was released just a few days ago. Overall CPI up
Speaker 4: at an annual rate of one point nine percent. Does
Speaker 4: that mean inherently that the Bank of Japan is on
Speaker 4: track for another hiken interest rates, at least in the
Speaker 4: near term, Doug.
Speaker 9: I think it definitely puts us on track for an
Speaker 9: interest rate hike, either in September or October. If you
Speaker 9: look look at that headline number, it's just below the
Speaker 9: boj's target, so you might think, okay, well, it's actually
Speaker 9: just where they want it to be. But Governor Uato,
Speaker 9: when he talks about policy, is going to cite underlying inflation,
Speaker 9: the underlying trend, which is kind of an ambiguous concept
Speaker 9: that gives them some wiggle room. And he can do
Speaker 9: that because there have been a few factors that have
Speaker 9: been distorting the data to the downside.
Speaker 4: So we know that Japan is a big energy importer,
Speaker 4: and I'm wondering about the extent to which higher energy
Speaker 4: costs have been a big contributor to what's going on.
Speaker 9: Well, energy costs are definitely soaring. So we had some
Speaker 9: trade data a few days back last week that showed
Speaker 9: volumes of imports rising by a single digit number, while
Speaker 9: as the energy imports were rising by huge percentage eighty
Speaker 9: percent or so. It's definitely a factor, but the government
Speaker 9: has taken steps to sort of mitigate that impact on
Speaker 9: households and companies by rolling out a lot of steps
Speaker 9: utility subsidies as well as tax cuts on gasoline.
Speaker 4: So we have seen a lot of weakness in the
Speaker 4: Japanese currency lately, the intervention that was coordinated between the
Speaker 4: US and Japan. Notwithstanding, where are we right now in
Speaker 4: understanding the end's role and what the baj may do next.
Speaker 9: Yeah, so the weekend is definitely a factor. Uita will
Speaker 9: probably try to avoid making a direct line. He'll often
Speaker 9: say that policy does not aim at any specific currency rate.
Speaker 9: At the same time, he will say that currency rates
Speaker 9: are having a bigger impact on prices than in the past,
Speaker 9: and we know that authorities are concerned about the weekend. Obviously,
Speaker 9: the end fell to a forty year low in July
Speaker 9: just ahead of that coordinated intervention we saw with the US.
Speaker 4: So obviously we have the Tokyo CPI reading and the
Speaker 4: week ahead, And I'm wondering how inflation distributes across the
Speaker 4: count tree and how ordinary people in Japan are regarding
Speaker 4: higher prices right now. First of all, does it usually
Speaker 4: follow the urban areas like Tokyo experience inflation in a
Speaker 4: different way than other parts of the country.
Speaker 9: The reports can be very different depending on what the
Speaker 9: governments are doing in order to kind of mitigate inflationary pressure.
Speaker 9: So we've seen in Tokyo, for example, the local government
Speaker 9: rolling out subsidies for education, and that actually has had
Speaker 9: a big factor on families. And that's not a nationwide thing.
Speaker 9: So we've had cases where the Tokyo CPI was rising
Speaker 9: at a slower pace than the national trend, and we've
Speaker 9: had to point out that nationwide is obviously the bigger
Speaker 9: issue for the BOJ.
Speaker 4: So we touched a moment ago on the impact of
Speaker 4: higher energy cost I'm interested in food prices because there
Speaker 4: is a version of the Japanese CPI that excludes fresh food.
Speaker 4: It was up at an annual rate of one point
Speaker 4: eight percent in July. What's going on with food prices
Speaker 4: right now in Japan?
Speaker 9: So food prices continue to rise, and yet the impact
Speaker 9: on the index is actually to exert a drag. And
Speaker 9: to unpack this, you got to understand that food prices
Speaker 9: have been rising for quite a while, and last year
Speaker 9: they were rising at an even bigger pace, faster pace
Speaker 9: than this year. So, for example, we saw processed food
Speaker 9: prices rise three percent in the latest month in the
Speaker 9: national figures. By historical standards, that's a pretty fast pace,
Speaker 9: but it's slower than the pace we saw in the
Speaker 9: previous month, and it compares with an eight percent surge
Speaker 9: a year ago. So the food prices are actually pulling
Speaker 9: the CPI lower, even though the pace of increase is
Speaker 9: quite high for families.
Speaker 4: So what is the government of Prime Minister Takeiichi saying
Speaker 4: about inflation right now and the degree to which the
Speaker 4: government would essentially not be critical of any move that
Speaker 4: the boj might make to type right now in the
Speaker 4: near term.
Speaker 9: We feel pretty confident that the government is on board
Speaker 9: with at least one more hike. Can we expect that
Speaker 9: hike probably in September, but if not then certainly by October.
Speaker 9: We think the government might not be keen to see
Speaker 9: much after that. For Takaichi, inflation is kind of a
Speaker 9: plus in the sense that it helps her work on
Speaker 9: the debt to GDP ratio helps he gives her a
Speaker 9: little bit of fiscal flexibility. At the same time, it
Speaker 9: also raises costs on households that compels the government to
Speaker 9: roll out these costly steps to mitigate that impact, including
Speaker 9: subsidies for utilities, but also the sales tax cut on
Speaker 9: food purchases that she plans to roll out from April
Speaker 9: next year.
Speaker 4: So take a step back last question before I let
Speaker 4: you go, and help me understand how well the Japanese
Speaker 4: economy is performing.
Speaker 10: Overall.
Speaker 9: The Japanese economy is feeling pretty solid right now. We've
Speaker 9: seen a slew of data that sort of support that idea.
Speaker 9: The Boj's Hong Kong for the recent quarter performed to
Speaker 9: the upside, and that of course measures corporate sentiment across
Speaker 9: a lot of industries. We've seen industrial output doing pretty
Speaker 9: well better than expected. The weekend obviously is a problem
Speaker 9: for inflation, but it's definitely boosting exporters and giving them
Speaker 9: better profits, and that allows them to continue raising wages.
Speaker 9: So the positive cycle doesn't seem that far off the
Speaker 9: cycle of wage hikes feeding into domestic demand and demand
Speaker 9: led price growth. So at this point, it looks like
Speaker 9: take is doing the right thing from at least, you know,
Speaker 9: to the extent that we can see in the data.
Speaker 4: Brian, we'll leave it there, Thank you so very much.
Speaker 4: Bloomberg's Brian Fowler. He covers North Asian economies and government.
Speaker 4: Joining from our studios in Tokyo, we go next to Australia,
Speaker 4: where mining giant BHP recently reported a full year underlying
Speaker 4: profit above expectations, fuel in part by higher copper prices.
Speaker 4: We had the chance to speak with BHP CEO Brandon Craig.
Speaker 4: He spoke with Bloomberg TV host Heidi Stroud Watts.
Speaker 11: So in a sense, this.
Speaker 10: Is kind of the easy earning season for you, right,
Speaker 10: not only are the numbers good, but this wasn't a
Speaker 10: year where you were in charge. What's your view on
Speaker 10: these numbers then?
Speaker 11: Well, I think for BHP it's been a fantastic set
Speaker 11: of results if you actually have a look at the market.
Speaker 11: We've seen record copper production iron ore, which is another
Speaker 11: very important commodity for us. There's been pretty resilient prices
Speaker 11: as well, and then across the operations, we've delivered record
Speaker 11: through put through Escondida, which is the world's largest copper
Speaker 11: mine record productions from Olympic Dam, which is in Copper
Speaker 11: South Australia right here in Australia. And of course in
Speaker 11: the back of that really strong performance, coupled with the
Speaker 11: strong prices, it's really allowed BHP to deliver what is
Speaker 11: a stellar set of results. You can see the great
Speaker 11: divide which has resulted from that. So overall we're feeling
Speaker 11: pretty positive about where.
Speaker 6: We are right now looking forward.
Speaker 10: What's your strategy then, is it sort of continuity.
Speaker 11: Well, there's a couple of things we really want to
Speaker 11: focus on. The first being a mining company, safety is
Speaker 11: always fundamentally important, so we will be investing heavily in
Speaker 11: the safety of our workforce. But importantly, we also really
Speaker 11: want to accelerate the productivity agenda in VHP. We have
Speaker 11: an operating system in this company which is rarely supported.
Speaker 11: You're on your improvements and performance both on productivity but
Speaker 11: also across cost. And on the back of that performance,
Speaker 11: if we can couple technology with that, we believe we
Speaker 11: can push out the productivity frontier for this business even further.
Speaker 11: And then when you have a look at the state
Speaker 11: of the market in particular copper copper has huge demand
Speaker 11: at the moment. It's rarely a core to the whole
Speaker 11: digital revolution. We can see its core to the electrification
Speaker 11: trends we see across the world, and that's a commodity
Speaker 11: we really want to invest in. So accelerating a number
Speaker 11: of very attractive growth projects to deliver that copper is
Speaker 11: going to be very important for us. And then the
Speaker 11: final piece is really this is a very long term company.
Speaker 11: We measure performance in decades, not years, so it's really
Speaker 11: important that we also replenish that resource endowment we have
Speaker 11: for the future generations that are going to come beyond us.
Speaker 10: I want to talk quite a bit about copper because
Speaker 10: you say earlier you've just moved over from Chile, where
Speaker 10: of course your core copper assets are. There is concern
Speaker 10: from investors certainly that perhaps going forward that might be
Speaker 10: a failure to fully capture that opportunity because of the
Speaker 10: declining grades of copper from those assets. What's your strategy
Speaker 10: for that.
Speaker 11: Well, for large porphyry deposits, which es Gondida is one,
Speaker 11: and that's dominant and Chile grade decline is entirely normal,
Speaker 11: you have to continue to invest urine ur into these
Speaker 11: assets to continue to grow the volumes. So when you
Speaker 11: have a look at the plans we have underway currently
Speaker 11: at Escondida, we're going to be building a new concentrator.
Speaker 11: That new concentrator will allow us to more than offset
Speaker 11: the grade decline to be able to produce the copper
Speaker 11: that the world is going to need. And that's important
Speaker 11: because Escondida is the world's largest copper mine. You know,
Speaker 11: the world in some respects depends on the success of
Speaker 11: that business, so it's important that we make those investments successful.
Speaker 11: But in addition to s Condida, we also have very
Speaker 11: attractive projects in Argentina with a project called Vikunya to
Speaker 11: the joint venture with Lundin Mining, and we also have
Speaker 11: very attractive growth options right here in Australia through Olympic Dam.
Speaker 11: So you put all of that together and we're going
Speaker 11: to be able to put together a growth program over
Speaker 11: the next five years that will lift our production in
Speaker 11: cop of our fifty percent. And when you consider that
Speaker 11: we are already the world's largest copper producer, adding fifty
Speaker 11: percent to our production base over five years, that's pretty attractive.
Speaker 10: You've already said that the bar for copper M and
Speaker 10: A is going to be high. Are you restless for
Speaker 10: more assets or too focused on sort of execution versus
Speaker 10: more ambition.
Speaker 11: Well, when you look at the quality of the organic
Speaker 11: pipeline we have in BHP, the copper intensity of our
Speaker 11: investments ranges between sixteen thousand dollars a ton and thirty
Speaker 11: thousand dollars a ton. If you had to go and
Speaker 11: try and put and buy a pure play miner on
Speaker 11: the market today, together with a takeover premium, you'd have
Speaker 11: to pay eighty five thousand dollars a ton plus a
Speaker 11: takeover premium. So call it while over one hundred thousand
Speaker 11: dollars a ton relative building our own copper for twenty
Speaker 11: thousand dollars or thereabouts. So you're talking a factor of
Speaker 11: five to one, which I think rarely showcases, while the
Speaker 11: organic pathway we are choosing is is attractive to us.
Speaker 4: That was BHP CEO Brandon Craig speaking with Bloomberg TV
Speaker 4: host Heidi Stroud Watts. I'm Doug Prisner. You can catch
Speaker 4: us weekdays for the Daybreak Asia podcast. It's available wherever
Speaker 4: you get your podcast.
Speaker 2: Nathan, Thanks Doug, and that does it for this edition
Speaker 2: of Bloomberg Daybreak Weekend. Join us again Monday morning at
Speaker 2: five am Wall Street Time for the latest on markets
Speaker 2: overseas and the news you need to start your day.
Speaker 2: I'm Nathan Hager. Stay with US. Top stories and global
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