Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg day Break Weekend, our global look at
Speaker 2: the top stories in the coming week from our Daybreak
Speaker 2: anchors all around the world. Straight ahead on the program,
Speaker 2: what this week's September jobs report could tell the Federal Reserve.
Speaker 2: I'm Tom Busby in New York.
Speaker 3: I'm Caline Hecker here in London, where we're shining a
Speaker 3: spotlight on the women's shaping our global economic future.
Speaker 4: I'm dek Prisner looking at whether China's pro growth pivot
Speaker 4: is succeeding.
Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 2: Good day to you. I'm Tom Busby, and we begin
Speaker 2: today's program with the September jobs report out this Friday.
Speaker 2: What might another anemic report mean just weeks ahead of
Speaker 2: another Federal Reserve rate decision? And for more, we welcome
Speaker 2: Stuart paul Us, Economists with Bloomberg Economics. Stuart, thank you
Speaker 2: so much for being here. Now let's start with some
Speaker 2: good news, and there was good news. Q two economic
Speaker 2: growth a lot better than forecasts three point eight percent,
Speaker 2: consumer spending strong in August, even if inflation was still
Speaker 2: a little sticky, and Wall Street up until this past week,
Speaker 2: had been hitting one all time high after another. All
Speaker 2: good news. But it's not all good news, is it.
Speaker 2: There's a lot of worries out there.
Speaker 5: Well.
Speaker 6: The thing that everybody seems to be anchoring on with
Speaker 6: the Q two GDP data was this major upward revision
Speaker 6: to headline GDP growth and to household spending, and household
Speaker 6: spending ended up growing at an annualized rate of about
Speaker 6: two and a half percent in the second quarter. As
Speaker 6: you mentioned when we finally got the August personal consumption
Speaker 6: expenditures report. It even looks like household spending continued growing
Speaker 6: into the third quarter. So that's all good news there.
Speaker 6: What I'm thinking most about, though, from the last week,
Speaker 6: is that corporate profits for the second quarter were revised
Speaker 6: down pretty significantly. Corporate profits only grew about seven billion
Speaker 6: dollars in the second quarter. That's down from an initial
Speaker 6: estimate of nearly seventy billion dollars, and if that's the case,
Speaker 6: that's a big revision. If that's the case, you would
Speaker 6: have to think that expansion, investment and hiring plans are
Speaker 6: going to start to simmer. And when we look at
Speaker 6: let's say small business surveys, capital expenditure plans have never
Speaker 6: been this low outside of a recession. Capex plans are low,
Speaker 6: investment and expansion plans are low. Hiring plans are also low.
Speaker 6: So the thing that I'm thinking most about in the
Speaker 6: outlook is the currently tenuous labor market balance between supply
Speaker 6: and demand for labor and what that means for the
Speaker 6: pace of hiring going forward. Now, when we think about
Speaker 6: the September jobs report coming out this coming Friday, we
Speaker 6: think there is going to be about fifty five thousand
Speaker 6: jobs added during the month. But one thing that we
Speaker 6: need to continue keeping in mind is that a lot
Speaker 6: of workers are going to be rolling off government payrolls.
Speaker 6: These are the folks who took the buy out earlier
Speaker 6: in the year because of DOGE cuts. And when that's
Speaker 6: the case, the pace of hiring could resume slowing to
Speaker 6: the pace that we saw earlier this summer. This is
Speaker 6: a very tenuous balance between labor supply and labor demand,
Speaker 6: which makes us very cautious about the growth and spending
Speaker 6: outlook as we head into year end.
Speaker 2: And just those federal workers, you're talking thousands or tens
Speaker 2: of thousands, not just in Washington and Baltimore, but in
Speaker 2: National Park services across the US, and adjuncts of the
Speaker 2: Social Security Administration all over.
Speaker 6: That's right. This is not the sort of thing that's regionally.
Speaker 6: I this is the sort of thing that affects workers
Speaker 6: around the country. And so I think that when we
Speaker 6: think about consumer spending, this is not something that just
Speaker 6: affects businesses locally in Washington. This is something that materially
Speaker 6: affects or outlook for spending growth.
Speaker 2: Now, let's talk more about the jobs, not just those
Speaker 2: federal jobs, because we know about those, but we've seen manufacturing,
Speaker 2: despite the Trump administrations, you know, promoting and touting of
Speaker 2: more manufacturing jobs coming back here, Manufacturing, construction, energy, especially
Speaker 2: in oil, all seeing declines. And that's not good.
Speaker 6: It's not It's basically every month since April, the manufacturing
Speaker 6: industry has been shedding jobs. And look, Tom, that's the
Speaker 6: normal state of affairs in an economy that's increasingly services oriented.
Speaker 6: That's not the state of affairs that policymakers want when
Speaker 6: they are pursuing industrial policy and protectionism. So there is
Speaker 6: a part of me that thinks, look, the effect of towers,
Speaker 6: the effect of industrial policy. We're just not quite feeling
Speaker 6: it yet. We're not seeing any sort of boost to
Speaker 6: manufacturing and construction yet. We should wait to see the
Speaker 6: effects of the policies that the administration is rolling out.
Speaker 6: But right now, yes, the manufacturing industry is shedding jobs.
Speaker 6: Thinking back to the August industrial production report, and this
Speaker 6: is a win for the administration. There is accelerating auto production,
Speaker 6: there's accelerating steel production, there's accelerating pharmaceutical production, and accelerating
Speaker 6: textile production. Those are all winds, but those are very recent.
Speaker 6: It's too early to say that there's been material progress
Speaker 6: shown in domestic production as a consequence of tariffs. Instead,
Speaker 6: it looks like the growth negative consequences of uncertainty are
Speaker 6: weighing on aggregate economic activity and aggregate hiring. Until we
Speaker 6: see those isolated benefits booying domestic production, it's really it's
Speaker 6: really just a growth negative story right now, and.
Speaker 2: We won't know if the latest tariffs that the President
Speaker 2: announced on pharmaceutic was one hundred percent, twenty five percent
Speaker 2: on heavy duty trucks, thirty percent on sofas and upholstered furniture.
Speaker 2: It's just too soon to tell. That could be months
Speaker 2: down the road before we see any impact of that domestically, right.
Speaker 6: That's right. So again August, from an industrial production perspective,
Speaker 6: it looks like those favorite industries were doing relatively well.
Speaker 6: But I'm not going to read too much into one
Speaker 6: month's data. It's going to take some time to see
Speaker 6: the full effects of those specific those industry specific tariffs.
Speaker 2: Now, this past week, FED Chairman Jerome Powell, he said
Speaker 2: there are serious risks to the economy involving inflation, which
Speaker 2: we know is well above the target two point nine percent,
Speaker 2: but it hasn't gotten any worse, but also the weakening
Speaker 2: labor market. What does he see? Did he see all
Speaker 2: these things? Is he seeing months out that I'm not seeing?
Speaker 2: Maybe even you're not seeing that. We are going to
Speaker 2: see things continue to digress in the labor market.
Speaker 6: Which is really difficult right now, is that labor supply
Speaker 6: and labor demand have this really treacherous balancing acts right now,
Speaker 6: where growth in labor supply is very slow and labor
Speaker 6: demand is waning. If we rewind the clock, let's say
Speaker 6: a year ago, there were about ten percent more job
Speaker 6: openings than there were unemployed or available workers. Now there
Speaker 6: are just slightly fewer job openings than there are available workers.
Speaker 6: We expect looking ahead to next week when we get
Speaker 6: the job openings and labor turnover survey data, we expect
Speaker 6: the number of job openings to fall further. It's about
Speaker 6: seven point one five million, So again, now we're going
Speaker 6: to have almost five percent fewer job openings.
Speaker 2: The September Jobs report out this Friday, eight thirty am
Speaker 2: Wall Street Time. Our thanks to Stuart Paul, us economists
Speaker 2: with Bloomberg Economics. Well, next, we turn to a big
Speaker 2: change coming this week to the US auto industry, the
Speaker 2: end of the seventy five hundred dollars federal tax credit
Speaker 2: for EV buyers. What will for EV makers and for
Speaker 2: EV prices? What about Detroit's Big Three who spent billions
Speaker 2: preparing for an electric engine future? For more, and on
Speaker 2: who wins and who loses? We're joined by Steve Man,
Speaker 2: Bloomberg Intelligence, Global Autos and Industrials Research analysts. Well, Steve,
Speaker 2: thank you so much for being here. Can you tell us,
Speaker 2: can you just set it up what happens this week
Speaker 2: with that Biden era tax credit and what that program?
Speaker 2: What has it meant to the EV industry.
Speaker 5: Yeah, the seventy five hundred dollars Biden tax credit is
Speaker 5: set to expire at the end of September, and the
Speaker 5: tax credit has been very helpful to the industry. It
Speaker 5: helpful to the automakers, helpful to the consumers, and sales
Speaker 5: of EV's have been growing until you know, recent on
Speaker 5: the last couple of years, and you know, when it falls,
Speaker 5: I think EV sales is going to fall off the cliff.
Speaker 5: And a lot of automakers are actually preparing for that
Speaker 5: drop off after September thirtieth.
Speaker 2: And how are they preparing for that drop off and
Speaker 2: expected drop off in sales?
Speaker 5: You know a few examples. You know, GM have already
Speaker 5: announced that you know, they're probably gonna stop EV production
Speaker 5: for the month of December. Uh, and then they're also
Speaker 5: rolling out they do have plans to roll out a
Speaker 5: very popular subcompact compact EV called a Bolt, which sold
Speaker 5: really well for them in the past. But instead of
Speaker 5: you know, going full on production for for that new EV.
Speaker 5: This is going to start with one shift and then
Speaker 5: maybe ramp it up to two shifts in the new year,
Speaker 5: depending on demand. And then the couple others, the Japanese
Speaker 5: automakers are actually discontinuing, Acuras discontinuing their one of their
Speaker 5: evs as well as Nissan in the North American market.
Speaker 2: And how about Ford, I mean, Ford made a big
Speaker 2: splash with the F one fifty lightning the Mustang Mocky,
Speaker 2: but have things uh you know, have things really dialed back?
Speaker 7: Uh?
Speaker 5: Yeah, I mean Ford, Ford continues to lose a lot
Speaker 5: of money on their EV business. They do sell the Mocky.
Speaker 5: You know, electric pickup truck is not resonating with the
Speaker 5: US consumer at all. So but you know, they are
Speaker 5: still planning to launch a more affordable pickup truck, but
Speaker 5: that's not until twenty twenty seven. So they've delayed those
Speaker 5: plants a number of times already. So now it's twenty
Speaker 5: twenty seven, we'll have to go. We'll have to see
Speaker 5: what the demand is like in twenty twenty six. You know,
Speaker 5: wouldn't be surprised if they pushed that out even further.
Speaker 2: And Stilantis they have, you know, earmarked a jeep that'll
Speaker 2: be all electric. Is that still in the pipeline or
Speaker 2: is that being pushed back?
Speaker 5: It looks like it's going to be pushed back. Also, Ram,
Speaker 5: which is their pickup truck division, they've they've stopped. They
Speaker 5: basically not going to roll out that electric pickup truck
Speaker 5: that they was slated for next year.
Speaker 2: All right, So that's Detroit's big three. Let's talk about
Speaker 2: the companies that only make EV's. The big one of
Speaker 2: course on everyone's Tesla, but also Rivian, Lucid, we have Faraday,
Speaker 2: There's a whole bunch of smaller ones. What will it
Speaker 2: mean Let's just talk about Tesla, that's the one everybody knows.
Speaker 5: Yeah, Look, I think I think the the seventy five
Speaker 5: hundred dollars EV credit going away is actually a transition
Speaker 5: period for the EV industry in a couple of ways.
Speaker 5: One is definitely consolidation. We've we've talked about some of
Speaker 5: the automaker's discontinuing sale of EV's in the North American market.
Speaker 5: But what it means is, uh, you know, probably more
Speaker 5: business for the likes of Tesla and Rivian. You know,
Speaker 5: their their business is only EV's and uh SO choices
Speaker 5: for consumers are are dwindling and the really the only
Speaker 5: ones that consumer can look to to buy EV's or
Speaker 5: or the likes of these peer plays. The other thing
Speaker 5: with this EV credit going on way is a transition
Speaker 5: period for the EV industry. Now the consumer cannot rely
Speaker 5: or the automaker. The industry cannot rely on monetary incentives
Speaker 5: to drive demand anymore. It really now needs to go
Speaker 5: back to the basic. The industry needs to address a
Speaker 5: lot of the concern that the consumers have with evs,
Speaker 5: which is high costs, high prices, as well as the
Speaker 5: lack of charging infrastructure. We actually put out a deep
Speaker 5: dive report recently looking at the EVE charging industry and
Speaker 5: we actually think there's still continued to be a lot
Speaker 5: of investment in that thirty billion to be exact, between
Speaker 5: now and twenty thirty five.
Speaker 2: Well, the federal tax credit for buyers of new end
Speaker 2: used evs expiring this Tuesday. Our thanks to Steve Mann,
Speaker 2: Bloomberg Intelligence Global Autos and Industrials research analysts and coming
Speaker 2: up on Bloomberg day Break weekend will shine a spotlight
Speaker 2: on the women shaping our global economic future. I'm Tom
Speaker 2: Busby And this is Bloomberg. This is Bloomberg day Break weekend,
Speaker 2: our global look ahead at the top stories for investors
Speaker 2: in the coming week. I'm Tom Busby in New York.
Speaker 2: Up later in our program, we'll try to gauge the
Speaker 2: health of the Chinese economy with the release of official
Speaker 2: PMI data. But first, Bloomberg's Women Money Power Conference returns
Speaker 2: to London this week, bringing together some of the most
Speaker 2: influential names in finance, business, and sport to discuss the
Speaker 2: major issues facing the world, including AI and other new technologies.
Speaker 2: For more, Let's go to London and bring in Bloomberg
Speaker 2: day Break Europe anchor Caroline Hepgar Tom.
Speaker 3: In the midst of a massive reallocation of capital and
Speaker 3: tech driven changes to the global financial system, women are
Speaker 3: controlling a greater share of wealth and making more of
Speaker 3: the key financial decisions now. In the coming days, Bloomberg's
Speaker 3: Women Money and Power Event will convene the most influential
Speaker 3: voices from across the global finance industry for the second
Speaker 3: year to debate and discuss the critical issues facing the
Speaker 3: future of investing, real estate, consumer banking, and private markets,
Speaker 3: as well as philanthropists, owners and CEOs, it's an issue
Speaker 3: that is fast rising up the global agenda. In the UK,
Speaker 3: this year, Bloomberg analysis found that the average woman working
Speaker 3: in the UK financial sector earns about a fifth less
Speaker 3: than their male colleagues, a reflection of how the gender
Speaker 3: pay gap has stubbornly persisted even during a period when
Speaker 3: businesses have pledged to address workplace inequality through diversity, equity
Speaker 3: and inclusion schemes. At the same time, women a rising
Speaker 3: in terms of the world of wealth. A little more
Speaker 3: than a decade ago, think that they controlled less than
Speaker 3: a third of total US assets. Now by twenty thirty,
Speaker 3: that's expected to jump to thirty eight percent, reaching an
Speaker 3: estimated thirty four trillion dollars. That disparity is likely to
Speaker 3: feature heavily in discussions at the upcoming Bloomberg Women, Money
Speaker 3: and Power Conference. At last year's gathering, participants anticipated a
Speaker 3: bumper m and a year in twenty twenty five, optimistic
Speaker 3: that deal making would pick up due to an anticipated
Speaker 3: loosening of regulations under President Trump's administration. While those hopes
Speaker 3: have only partially materialized, there is perhaps more uncertainty in
Speaker 3: the market now than was expected. Either way, women remain
Speaker 3: at the forefront of change. Just this month, Citygroup CEO
Speaker 3: Jane Fraser told Bloomberg her clients have been much more
Speaker 3: active in cattle markets, investing, and deal making after getting
Speaker 3: greater clarity on taxes, tariffs, and deregulation. Here is Jane
Speaker 3: Fraser speaking to Bloomberg's Jimana Bissetci.
Speaker 7: You've got to look at the collective impact of the
Speaker 7: tax policy, what's been happening with tariffs, and indeed the
Speaker 7: increasing deregulation that we're seeing, and they work together as
Speaker 7: a package, I think the most important piece for a
Speaker 7: corporate clarity. We hate uncertainty, We like clarity. And our
Speaker 7: client base now is really starting to act with more
Speaker 7: confidence now that we've got clarity on those three fronts.
Speaker 7: So active in the capital market, arena in financing, active
Speaker 7: in much more active in investing, less sitting on the sidelines.
Speaker 7: And M and A has been very very active indeed,
Speaker 7: as we talked about, and on the consumer side, pretty
Speaker 7: robust spending through the summer, and we saw that really
Speaker 7: across all categories. Helped a bit by lower gas prices,
Speaker 7: but the consumers being fiscally responsible, being more mindful around
Speaker 7: some spend, but still the spending levels were very pleasing.
Speaker 8: So the momentum was pretty strong across all lines of
Speaker 8: your business in the second quarter. And of course, you know,
Speaker 8: I don't want to precipitate upcoming earnings, but can that
Speaker 8: momentum continue into the end of the year, just in
Speaker 8: terms of you know what you're seeing an advisory in
Speaker 8: deal making and in trading because there was a very
Speaker 8: strong quarter for trading as well.
Speaker 7: It was exceptional for us on all fronts. I still
Speaker 7: see very strong pipelines, I see high level of engagement
Speaker 7: from clients. I see a sense of urgency as well.
Speaker 7: Given the speed with which industry structures are changing and
Speaker 7: there is still growth opportunity. I think growth will be
Speaker 7: a notch lower. We're keeping an eye on the labor market.
Speaker 7: It's a low churn market, so not everything is rosy,
Speaker 7: but we don't see a recession on the horizon.
Speaker 8: The city increasing in a global bank, obviously establishing here,
Speaker 8: your presence over here as well. But at the same time,
Speaker 8: we talk about ultiple geopolitical shocks that we were speaking
Speaker 8: about the latest Russian incursion into Poland's We talk about
Speaker 8: geopolitical of here, we talk about tensions between US and China.
Speaker 8: As a bank, how do you navigate all of those
Speaker 8: potential geopolitical sensitivities and the barriers that are going up
Speaker 8: around the world.
Speaker 7: We were in doing business in about one hundred and
Speaker 7: sixty countries around the world. We have local banking license
Speaker 7: people on the ground in almost one hundred and we've
Speaker 7: been in many of these countries for a very very
Speaker 7: long time. So this isn't classic suitcase bankers fly and
Speaker 7: fly out, and there's a really deep knowledge of what's
Speaker 7: going on and a lot of the kit services we
Speaker 7: provide are what helped the economies and the companies do
Speaker 7: business every single day. So for us, there is a
Speaker 7: mission to make sure that we are operating with resiliency
Speaker 7: and with rigor to support our clients. And we tend
Speaker 7: to move activity around the world as clients ebb and
Speaker 7: flow in fring geographies. So the Middle East is probably
Speaker 7: on a rip for the next decade or so in
Speaker 7: terms of how much investment and new industries new clients
Speaker 7: coming in. Other areas will probably see some more diminishment
Speaker 7: in so we just we flex where it is. Our
Speaker 7: people were globally minded. They move around the world as
Speaker 7: to where opportunities are and it's a moment where City shines,
Speaker 7: where there is volatility, the clients need us.
Speaker 3: That was City Group's Jane Fraser there. She's one of
Speaker 3: a host of senior women leading teams who are at
Speaker 3: the forefront of the global economy this year, many of
Speaker 3: whom will be in London for Bluemberg's Women Money and
Speaker 3: Power Conference. Also taking part is Blueberg's Lizzie Burden. We've
Speaker 3: been speaking about the key themes on the agenda, what
Speaker 3: she's most looking forward to at the event, who the
Speaker 3: big players are going to be in attendance.
Speaker 5: Sol I.
Speaker 9: We've rustled up some of the most influential voices from
Speaker 9: across global finance. We're going to hear from Julia Hoggett,
Speaker 9: the CEO of the London Stock Exchange. I'll be sitting
Speaker 9: down with her. We've got Emma Walmsley, the CEO of GSK,
Speaker 9: the Bank of England's Catherine Mann, Maggie Murphy, managing director
Speaker 9: of aston Villa Women's Football Club, and Victoria Bateman, who
Speaker 9: you might know just wrote this book Economica, a Global
Speaker 9: History of Women, Wealth and Power. It's almost as if
Speaker 9: she knew that we were going to have this event again,
Speaker 9: but hosting these conversations, we're also going to have the
Speaker 9: best of our Bloomberg journalists. We've got Stephanie Flanders, head
Speaker 9: of Economics and Government, Michelle Hussein, our new editor at
Speaker 9: large of Bloomberg Weekend, Ruth David Arlunda bureau chief. Danny
Speaker 9: Berger is in from New York. Shamanamaset she's in from Dubai.
Speaker 9: So it's a global affair this one. And then in
Speaker 9: the audience we'll have hundreds of senior finance professionals who've
Speaker 9: taken part in our New Voices program, which, if you
Speaker 9: haven't heard of, it is a Bloomberg initiative that funds
Speaker 9: all this intensive media training around the world to amplify
Speaker 9: expert views. I'm really proud of that. And they'll be
Speaker 9: in amongst all the C suite executives as well.
Speaker 3: Yeah, so, then of all of these leading women, what
Speaker 3: do you think the topics for conversation are going to
Speaker 3: be all about?
Speaker 9: Well, let me say this clearly. What this is not
Speaker 9: is a conference about women in leadership or gender focus issues.
Speaker 9: They're really important issues. But what this is is a
Speaker 9: global finance conference that just happens to have all female
Speaker 9: panelists and moderators. So we're going to tackle the critical
Speaker 9: issues that are facing the finance industry at the moment,
Speaker 9: whether that's real estate, consumer banking, private markets, investing. Are
Speaker 9: also going to be hearing the future for philanthropists, owners
Speaker 9: and CEOs as well.
Speaker 3: And in terms of major developments since last year's conference.
Speaker 9: There's a small matter of the man in the White House.
Speaker 9: Of course, he's changed all of everything that I've just
Speaker 9: talked about. We are in the middle of a stock
Speaker 9: market rally. Views on whether that can continue, whether this
Speaker 9: is the new normal, whether it's a bubble, and look,
Speaker 9: we have the wars in Gaza and Ukraine rumbling on,
Speaker 9: while at the same time private markets are on a
Speaker 9: tare bringing together those themes.
Speaker 3: And when it comes to central banking around the world,
Speaker 3: there are more women than ever who are making global
Speaker 3: monetary policy decisions and some under pressure. What's the significance
Speaker 3: of that.
Speaker 9: Yeah, well, let me take you through some of those,
Speaker 9: because we've got Christine Lagarde often pointing out the underrepresentation
Speaker 9: of women in senior roles in economics, finance and central banks.
Speaker 9: In fact, her and Isabelle Schnabel at the ECB, as
Speaker 9: seen as real thought leaders on the Governing Council, and
Speaker 9: you especially watch what they say. Even if Schnarbile is
Speaker 9: a known hawk, she's especially respected as an influential voice
Speaker 9: on the Governing Council. Here at the Bank of England
Speaker 9: across the road we have Claire Lombardelli, a Deputy governor.
Speaker 9: Remember she dissented in that last but one vote when
Speaker 9: they had to vote again. She's particularly worried about food inflation.
Speaker 9: And we're also, as I say, talking to Catherine Mann
Speaker 9: at this event, she's seen as a bit of a
Speaker 9: maverick on the monetary policy. She went from hawk to
Speaker 9: dove and then kind of back again. So we look
Speaker 9: forward to hearing what she has been thinking about the
Speaker 9: UK economy recently. She's definitely bold in her opinions and
Speaker 9: she's kind of at the end of the spectrum a
Speaker 9: thought leader again. Finally at the Fed, of course, we
Speaker 9: lost Adriana Cougler, we don't really know why, and Lisa
Speaker 9: Cook remains under threat from President Trump. So, as you say, Caroline,
Speaker 9: women on global monetary policy committees really significant in the
Speaker 9: news right now, So looking forward to hearing particularly from
Speaker 9: Catherine Mann.
Speaker 3: And then you mentioned that you're going to be speaking
Speaker 3: to Julia Hoggart at the London Stock Exchange. Of course
Speaker 3: at this event now, delistings are surely going to be
Speaker 3: something that you'll mention a primary concern for her.
Speaker 9: Yeah, just in the past few days we've had Peters
Speaker 9: Hill looking to delist from the London Stock Exchange, so
Speaker 9: bad news there for Julia. Hoggart will be discussing how
Speaker 9: to prevent delistings, more of them from happening, but also
Speaker 9: how to encourage more companies to list in London. And
Speaker 9: I know that's something that she's got lots of views about,
Speaker 9: something that she's already working to wards. We've got the
Speaker 9: UK government forming a Listing's task Force, so I'm really
Speaker 9: interested to hear how the Capital Markets Industry task Force
Speaker 9: that she's on is going to join up with this
Speaker 9: new body from Rachel Reeves. And you've got the PISCES,
Speaker 9: the Private Intermittent Securities and Capital Exchange System bit of
Speaker 9: a mouthful that came in earlier this year. I'm interested
Speaker 9: to hear what kind of companies want to take part
Speaker 9: in that. Also what she wants to see out of
Speaker 9: Rachel Reeves's budget when it comes at the end of November.
Speaker 9: But there's the question of what pension funds do in
Speaker 9: terms of investing, and then there's the question of retail investing.
Speaker 9: How do you get that going When the latest research
Speaker 9: from Hargreave's Landsdowne shows that the number of Brits investing
Speaker 9: in the stock market is twenty three percent. In the
Speaker 9: US that's sixty one percent. How do you bridge that gap?
Speaker 3: Yeah, that's really significant, isn't it. How to make investing
Speaker 3: just more attractive? My thanks there to Bloomberg TV and
Speaker 3: UK correspondent Lizzie Burden. We will of course have full
Speaker 3: coverage of Bloomberg's second annual Women Money Power Conference. I'll
Speaker 3: be there, hope you'll be there too. I'm Caroline Hepga
Speaker 3: in London. You can catch us every weekday morning for
Speaker 3: Bloomberg Daybreak here at beginning at six am in London.
Speaker 3: That's one am on Wall Street.
Speaker 2: Tom, Thanks Caroline, and coming up on Bloomberg day Break weekend.
Speaker 2: Some key economic data out this week in China. I'm
Speaker 2: Tom Busby and this is Bloomberg. This is Bloomberg day
Speaker 2: Break weekend, our global look ahead at the top stories
Speaker 2: for investors in the coming week. I'm Tom Busby in
Speaker 2: New York. We'll be getting a closer look at China's
Speaker 2: economy this week is Beijing releases fresh PMI data. We
Speaker 2: get more from Doug Krisner, host of the Daybreak Asia podcast.
Speaker 4: Tom, it's been one year since the Chinese government changed
Speaker 4: course on economic policy. A clear pro growth plan was
Speaker 4: unveiled back in September twenty twenty four. This was shock
Speaker 4: and awe a package of monetary, fiscal, stock and housing policies.
Speaker 4: So we're a little curious about whether the plan produced
Speaker 4: the desired results. For a closer look, I'm joined by
Speaker 4: Bloomberg's John lu He is our Greater China correspondent based
Speaker 4: in Beijing. John, thank you so much for making time
Speaker 4: to chat with me about this. So what do you think?
Speaker 4: How have things been performing over the last twelve months.
Speaker 10: I would say the results, Doug, have been mixed, and
Speaker 10: they've been mixed in the sense that if you look
Speaker 10: at Chinese markets, I think Chinese stocks are up tremendously
Speaker 10: over the last year. We've seen a big pop, especially
Speaker 10: for tech names like Ali Baba, like Tencent, But if
Speaker 10: you look at the fundamental economic data, what we see
Speaker 10: is continued weakness and in some ways the economy actually
Speaker 10: getting even more weak and signs that potentially the government
Speaker 10: is even more alarmed.
Speaker 4: I mentioned the fact that we have the official PMI
Speaker 4: figures in the week ahead. How do you think we're
Speaker 4: going to understand sentiment on the part of businesses in
Speaker 4: China as a result of these numbers.
Speaker 10: I would expect the data that we will get coming
Speaker 10: up to show a continued weakness. So the PMI has
Speaker 10: been in contraction territory for the last five months in
Speaker 10: a row, and I would expect it will continue to
Speaker 10: be in contraction. That ultimately goes back to a new
Speaker 10: campaign that the Chinese government has undertaken. I don't know
Speaker 10: if you've heard about this anti evolution campaign, which it's
Speaker 10: a big word, it's hard to define, but essentially it
Speaker 10: means that Beijing is trying to rein in excessive competition
Speaker 10: and by doing that ultimately tackled the question of over
Speaker 10: capacity and then in turn the issue of deflation.
Speaker 4: So when I hear that, I'm reminded of the electric
Speaker 4: vehicle industry in China, and we know there's been tremendous
Speaker 4: overcapacity in that area. It's something that I think the
Speaker 4: government was concerned about, and many trading partners were very critical.
Speaker 4: But because for a while there it seemed as though
Speaker 4: Beijing was trying to export its way out of that
Speaker 4: overcapacity problem. Has that been addressed well.
Speaker 10: Exports have been growing continuously. China's on pace for a
Speaker 10: record trade surplus this year, somewhere in excess of a
Speaker 10: trillion US dollars. And so I think that is an
Speaker 10: ongoing issue that's not going to be resolved anytime shortly.
Speaker 10: But the underlying issue, the underlying problem is that the
Speaker 10: production capacity within China far exceeds its domestic consumption needs.
Speaker 10: And so all of this excess stuff, be it electric cars,
Speaker 10: be it solar panels, be it consumer electronics, that all
Speaker 10: has to go somewhere, and it is going overseas.
Speaker 4: John, Let's talk a little bit about trade tensions between
Speaker 4: Washington and Beijing. In the last week, President Trump formalized
Speaker 4: and agreement for a group of American investors to take
Speaker 4: control of the US operations of TikTok. I'm curious as
Speaker 4: to how this story fits into the broader narrative in
Speaker 4: terms of trade between these two countries.
Speaker 10: The negotiations between the United States and China have been
Speaker 10: sort of an ongoing, step by step process. I think
Speaker 10: when it comes to TikTok, I do get the sense
Speaker 10: that the US administration puts a lot more value on
Speaker 10: that as an issue than Beijing does. I think for
Speaker 10: Beijing it is the most important things when it comes
Speaker 10: to TikTok are that it shows a domestic audience that
Speaker 10: it is standing up for the rights of Chinese companies,
Speaker 10: that it's protecting Chinese interests, that it's not being cowed
Speaker 10: by threats from Washington DC. Ultimately, whether or not TikTok
Speaker 10: or Byte downs the company has a thriving business in
Speaker 10: the United States, I think is less important to Beijing,
Speaker 10: although I would say within that the ability of Bite
Speaker 10: Dance to hold on to that algorithm I think is
Speaker 10: very important to Beijing, because again it shows that Beijing
Speaker 10: is able to protect these assets of Chinese companies technologies
Speaker 10: owned by Chinese interests, and that I think is ultimately
Speaker 10: what Beijing wants to show coming out of this deal.
Speaker 4: But might not that be required to get some terra
Speaker 4: for relief from the United States.
Speaker 10: I'm sure that Beijing would have asked for some concession
Speaker 10: in return for helping close a TikTok deal. We don't
Speaker 10: have a great sense of what exactly that concession might be,
Speaker 10: and indeed, I think it's also possible that you know,
Speaker 10: Beijing is often playing the long game, and so maybe
Speaker 10: the concession is not something that's immediate. It might be
Speaker 10: something a bit further off, and we just don't have
Speaker 10: a great view of that at the moment.
Speaker 4: You mentioned domestic demand in China being as weak as
Speaker 4: it is right now, and obviously deflation is a big
Speaker 4: part of that story, whether you're looking at the wholesale
Speaker 4: or retail level. Any signs these days that things are improving.
Speaker 10: Unfortunately, Doug, I think the signs all point to things
Speaker 10: getting more severe, if anything. So we have had negative CPI,
Speaker 10: so deflationary consumer prices for five of the eight months
Speaker 10: that we've had data for in twenty twenty five. That
Speaker 10: is a big increase from last year when we only
Speaker 10: had one month where CPI came in negative. And so
Speaker 10: I think as policymakers in Beijing are looking across the economy,
Speaker 10: that is a real concern because everyone knows what happened
Speaker 10: in Japan. Everyone understands that as deflation gets more embedded
Speaker 10: into an economy. As people start to change their behavior
Speaker 10: because they expect prices to go down, it becomes really hard,
Speaker 10: much much harder to undo.
Speaker 4: So what's operating in the psychology here, I'm curious about that.
Speaker 4: We know that the housing market has been a big
Speaker 4: negative overhang. You mentioned the fact that the equity market
Speaker 4: has been performing reasonably well lately, and I'm thinking that
Speaker 4: maybe encouraged some animal spirits. But I'm trying to understand
Speaker 4: what's overhanging this negativity, where this is coming from, and
Speaker 4: how people's sentiment toward economic activity is so weak.
Speaker 10: So I would split up the question of deflation into
Speaker 10: a demand side issue and a supply side issue. Right, So,
Speaker 10: I think on the demand side, what you mentioned about
Speaker 10: real estate, that is the fundamental issue because so much
Speaker 10: of the population in China, so much of household wealth
Speaker 10: was saved in property in a family's home, that when
Speaker 10: the price of those homes, and I would say broadly
Speaker 10: across China, people have seen the price of their homes
Speaker 10: fall thirty or more percent from the peak in twenty
Speaker 10: twenty one or so everywhere, and so when people's biggest
Speaker 10: asset becomes worth a lot less money, everybody feels poorer,
Speaker 10: they feel like they need to save more for retirement,
Speaker 10: and so that really hits demand. At the same time,
Speaker 10: we've had a supply issue where we've had this overcapacity
Speaker 10: that we've talked about, and so people are churning out
Speaker 10: lots and lots of product and they're trying to sell
Speaker 10: all that product, and the way that they've been competing
Speaker 10: is they've been cutting prices, and so that's also fueled
Speaker 10: this expectation that prices are going to go down, and
Speaker 10: so Beijing has actually started this campaign anti involution to
Speaker 10: try and address the supply side in a way that
Speaker 10: they've never done before. They are going out to a
Speaker 10: provincial level, local level governments telling them not to provide
Speaker 10: the sort of subsidies that have helped these manufacturers churn
Speaker 10: out their goods. They've gone to companies themselves to say, hey,
Speaker 10: let's not do this cutthrough competition, and they've been pushing
Speaker 10: on that. It's partly why we've seen the weakness that
Speaker 10: we've seen in both manufacturing when it comes to PMI
Speaker 10: and also in fixed asset investment over the last couple
Speaker 10: of months. But the fact that Beijing is willing to
Speaker 10: do these things something that they've never done before. That's
Speaker 10: actually giving the stock market and financial markets a sense
Speaker 10: of optimism that we might have reached an inflection point,
Speaker 10: and that's why you've seen asset prices being as brilliant
Speaker 10: as they have been.
Speaker 4: So I'm curious then if you were to take that
Speaker 4: analysis and kind of related to the way in which
Speaker 4: the labor market is holding up right now. Are things
Speaker 4: improving there or is the labor story in China very
Speaker 4: much a story of continued weakness.
Speaker 10: So unfortunately, again this is a point of weakness. And
Speaker 10: so in August, in the data that we got in
Speaker 10: the month of September for August, it actually showed an
Speaker 10: unexpected increase in unemployment in China, so up to five
Speaker 10: point three percent. The economists we're expecting five point two.
Speaker 10: And so it does show that as manufacturing is weakened,
Speaker 10: job prospects have also weakened. And so that again is
Speaker 10: another point of I think concern for the government. But
Speaker 10: when it comes to the stock market, the stock market
Speaker 10: is always looking forward, and I think they're thinking, hey,
Speaker 10: this bad news is good news because it's going to
Speaker 10: force the government to take action, and so that means
Speaker 10: the future prospects for the economy are getting brighter.
Speaker 4: You and I've spoken about the problem with youth unemployment
Speaker 4: in the past, and I'm sure that that continues to
Speaker 4: be a major negative. I'm wanting to find some positivity here,
Speaker 4: and I'm drawn to the artificial intelligence narrative, where we
Speaker 4: know the Deep Seek moment was enormously positive for tech
Speaker 4: in China, and I'm wondering how that's playing out these days.
Speaker 4: Still a lot of positivity as it relates to artificial
Speaker 4: intelligence and the industries maybe that could benefit from AI.
Speaker 10: There is and the most recent iteration of that positivity
Speaker 10: has been in the form of semiconductors, right, And so
Speaker 10: the big issue in the past was could China create
Speaker 10: AI if the US cut off access to Nvidia chips
Speaker 10: to all of these AI processors that would be necessary
Speaker 10: to train these large language models. And what we've seen
Speaker 10: are companies like Ali, Baba, Baidu, Huawei, a smaller startup
Speaker 10: named Cambra Con that have started to introduce chips that
Speaker 10: they say are able to get to a level that
Speaker 10: is getting nearer and nearer what an Nvidia chip can do.
Speaker 10: And so that has actually created a lot of optimism
Speaker 10: about the prospects for technology for AI and innovation in
Speaker 10: China going forward.
Speaker 4: When we talk about AI in the States, one of
Speaker 4: the things that comes up as a part of the
Speaker 4: conversation the demand for power, the demand for electricity to
Speaker 4: drive these data centers. How is China tackling that problem?
Speaker 4: Are they still using is a primary source for generating
Speaker 4: electricity or are they moving in other directions these days?
Speaker 10: Two parts to my answer. One is is there enough
Speaker 10: electricity for AI in China? And this is actually an
Speaker 10: area where China has a huge advantage and so it
Speaker 10: is growing very quickly. There is not the same concern
Speaker 10: about access to electricity that the hyperscalars in the US
Speaker 10: have at the moment. The other question is how is
Speaker 10: China generating that electricity. It is still dependent by far
Speaker 10: on fossil fuels, so coal and oil. It is using
Speaker 10: more natural gas, which is relatively cleaner. But at the
Speaker 10: same time, what China has done that what we've not
Speaker 10: seen in the US, especially under the Trump administration, there's
Speaker 10: been a real push for wind, for solar, for alternative energies.
Speaker 10: China is also building lots and lots of nuclear power plants,
Speaker 10: and so that of energy is moving very quickly towards
Speaker 10: cleaner sources, but still the vast majority today is created
Speaker 10: by burning coal and oil and fossil fuels.
Speaker 4: John will leave it there. Thank you so much for
Speaker 4: helping us understand what's happening these days in the Chinese
Speaker 4: economy as we look ahead to the official PMI figures
Speaker 4: in the week ahead. John lou is our Greater China
Speaker 4: correspondent based in Beijing. 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. Tom.
Speaker 2: Thanks Doug, and that does it for this edition of
Speaker 2: Bloomberg day Break Weekend. Join us again Monday morning at
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