1 00:00:00,240 --> 00:00:07,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:10,119 --> 00:00:12,520 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:12,560 --> 00:00:15,000 Speaker 2: the top stories in the coming week from our Daybreak 4 00:00:15,040 --> 00:00:17,600 Speaker 2: anchors all around the world, and straight ahead on the program, 5 00:00:17,680 --> 00:00:20,800 Speaker 2: well look ahead to this week's monetary policy decision from 6 00:00:20,800 --> 00:00:24,680 Speaker 2: the Fed. Also earnings for more of text Magnificent seven. 7 00:00:24,960 --> 00:00:26,479 Speaker 2: I'm Tom Busby in New York. 8 00:00:26,640 --> 00:00:29,200 Speaker 3: I'm callin Hepget in London, where we're asking if President 9 00:00:29,320 --> 00:00:32,879 Speaker 3: Charump's Scottish golf trip can yield any political wins. 10 00:00:33,000 --> 00:00:35,839 Speaker 4: I'm got Prisner looking at the Chinese economy ahead of 11 00:00:35,920 --> 00:00:38,080 Speaker 4: fresh PMI reports in the coming week. 12 00:00:38,400 --> 00:00:42,440 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 13 00:00:42,479 --> 00:00:46,160 Speaker 1: eleven three zero, New York, Bloomberg ninety nine to one, Washington, DC, 14 00:00:46,680 --> 00:00:50,920 Speaker 1: Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 15 00:00:51,360 --> 00:00:54,560 Speaker 1: Sirius XM one twenty one, and around the world on 16 00:00:54,600 --> 00:00:57,760 Speaker 1: Bloomberg Radio, dot Com and the Bloomberg Business app. 17 00:01:02,520 --> 00:01:03,000 Speaker 5: Good day to you. 18 00:01:03,120 --> 00:01:05,400 Speaker 2: I'm Tom Busby, and we begin today's program with this 19 00:01:05,440 --> 00:01:09,680 Speaker 2: week's Federal Reserve policy meeting. The Federal issue its latest 20 00:01:09,680 --> 00:01:12,600 Speaker 2: decision on interest rates on Wednesday, with a press conference 21 00:01:12,640 --> 00:01:16,520 Speaker 2: expected from FED chair Jay Powell to follow what will 22 00:01:16,560 --> 00:01:19,880 Speaker 2: the Fed decide and what's behind the central banks thinking? 23 00:01:19,920 --> 00:01:22,959 Speaker 2: And for more. We're joined by Edward Harrison, senior editor 24 00:01:22,959 --> 00:01:27,400 Speaker 2: at Bloomberg, author of Bloomberg's Everything Risk newsletter. Well, Edward, 25 00:01:27,480 --> 00:01:31,200 Speaker 2: a critical decision from the Fed. What are you expecting 26 00:01:31,200 --> 00:01:32,559 Speaker 2: to see happen this week? 27 00:01:33,000 --> 00:01:36,040 Speaker 6: Hey, Tom? Yes, it is a critical decision because of 28 00:01:36,080 --> 00:01:39,800 Speaker 6: the political pressure that we've seen applied to the Federal Reserve. 29 00:01:40,640 --> 00:01:44,680 Speaker 6: The market widely expects interest rates to stay the same, 30 00:01:44,800 --> 00:01:49,880 Speaker 6: in particular because we haven't implemented the final round of 31 00:01:49,920 --> 00:01:53,280 Speaker 6: tariffs yet, we don't know how the economy's going to 32 00:01:53,320 --> 00:01:56,240 Speaker 6: react to that. If you look at the pricing from 33 00:01:56,520 --> 00:02:00,440 Speaker 6: the market, it's expecting not just this meeting to be 34 00:02:00,480 --> 00:02:04,960 Speaker 6: the same. But there's only a slight chance, maybe a 35 00:02:05,040 --> 00:02:08,240 Speaker 6: sixty percent chance that we get a cut in September. 36 00:02:08,360 --> 00:02:11,640 Speaker 6: It's first in October when the next rate cut will come. 37 00:02:11,840 --> 00:02:14,920 Speaker 2: Wow, that's well, that's a change. But Chairman Palth has 38 00:02:14,960 --> 00:02:17,320 Speaker 2: said time and again he has said it's all about 39 00:02:17,320 --> 00:02:19,639 Speaker 2: the data and that the Central Bank has to see 40 00:02:19,639 --> 00:02:22,760 Speaker 2: the impact of the Trump tariffs on inflation. So it 41 00:02:22,800 --> 00:02:24,600 Speaker 2: really is too soon to make a move because we 42 00:02:24,760 --> 00:02:27,800 Speaker 2: just don't know. There's so many moving parts with these tariffs. Correct. 43 00:02:28,760 --> 00:02:30,919 Speaker 6: Yeah, and you know, the interesting bit is is when 44 00:02:31,000 --> 00:02:35,480 Speaker 6: the Fed actually moved to lower interest rates in twenty 45 00:02:35,600 --> 00:02:39,880 Speaker 6: twenty four, the market's reaction was that this took all 46 00:02:39,960 --> 00:02:43,000 Speaker 6: of the risk of a recession off the table, so 47 00:02:43,120 --> 00:02:47,440 Speaker 6: much so that interest rates actually went up. So they 48 00:02:47,680 --> 00:02:51,600 Speaker 6: lowered the short term interest rates, but they yields on 49 00:02:51,800 --> 00:02:56,480 Speaker 6: longer term bonds, the ones that actually matter to people 50 00:02:56,480 --> 00:02:58,680 Speaker 6: when they're getting a mortgage and so forth, those are 51 00:02:58,680 --> 00:03:01,600 Speaker 6: the ones that went up. And so it was because 52 00:03:02,000 --> 00:03:06,240 Speaker 6: the recession risk receded that you actually had a situation 53 00:03:06,320 --> 00:03:09,320 Speaker 6: where the Fed was acting one way and long term 54 00:03:09,400 --> 00:03:12,080 Speaker 6: yields went the actual opposite direction. 55 00:03:13,000 --> 00:03:15,120 Speaker 2: Well, I think you know on Wall Street we have 56 00:03:15,160 --> 00:03:17,600 Speaker 2: seen the major averages add or near all time highs 57 00:03:17,600 --> 00:03:20,720 Speaker 2: the last few weeks. Inflation still above the Fed's target, 58 00:03:20,800 --> 00:03:23,960 Speaker 2: but it has eased about two point seven percent, the 59 00:03:24,120 --> 00:03:28,680 Speaker 2: labor market, resilient, jobless rate, four percent initial jobs. Everything 60 00:03:28,760 --> 00:03:33,200 Speaker 2: is working. The Fed's plans have been working. So the 61 00:03:33,360 --> 00:03:35,840 Speaker 2: argument could be, well, why not lower interest rates, But 62 00:03:35,840 --> 00:03:38,560 Speaker 2: there's a very good reason why they wouldn't correct just 63 00:03:38,600 --> 00:03:41,600 Speaker 2: for that reason you were talking about with long term yields. 64 00:03:41,440 --> 00:03:45,520 Speaker 6: Right exactly. They just they don't know if, for instance, 65 00:03:45,640 --> 00:03:49,320 Speaker 6: they were to lower interest rates whether or not, suddenly 66 00:03:49,720 --> 00:03:52,600 Speaker 6: we would get inflation coming back in, not just because 67 00:03:53,120 --> 00:03:58,160 Speaker 6: the tariffs created more inflation, but actually because the economy 68 00:03:58,200 --> 00:04:01,440 Speaker 6: was running hot enough to create inflation on its own. 69 00:04:01,480 --> 00:04:03,800 Speaker 6: And then suddenly they'd be in a situation where they 70 00:04:03,840 --> 00:04:07,360 Speaker 6: made an error and that error would be taken on 71 00:04:07,480 --> 00:04:13,200 Speaker 6: by markets to increase interest rates, increase yields across the curve, 72 00:04:13,520 --> 00:04:17,279 Speaker 6: expecting the Fed to eventually have to undo that error. 73 00:04:17,600 --> 00:04:21,720 Speaker 6: And this is the dilemma that they faced. So they've decided, look, 74 00:04:21,760 --> 00:04:23,520 Speaker 6: you know, we're in a good enough position at this 75 00:04:23,560 --> 00:04:28,600 Speaker 6: point in time that we can actually wait to do this. 76 00:04:28,960 --> 00:04:31,200 Speaker 6: You know what's interesting if you look at the last 77 00:04:31,240 --> 00:04:35,400 Speaker 6: FED decision, they released a summary of economic projections and 78 00:04:35,520 --> 00:04:38,400 Speaker 6: sort of a by and modal distribution, there are actually 79 00:04:38,680 --> 00:04:43,000 Speaker 6: seven of the Fed governors and presidents who think that 80 00:04:43,040 --> 00:04:46,960 Speaker 6: they shouldn't lower interest rates at all this year, whereas 81 00:04:47,360 --> 00:04:50,440 Speaker 6: nine think that they should lower them two times this year. 82 00:04:50,440 --> 00:04:53,839 Speaker 6: And there are four others that are in there, but 83 00:04:54,080 --> 00:04:57,800 Speaker 6: you know the total number that the reason that we 84 00:04:57,880 --> 00:05:01,400 Speaker 6: have an expectation for two interest rates. It's being lowered 85 00:05:01,640 --> 00:05:04,400 Speaker 6: is because of those I think it's eight FED members 86 00:05:04,440 --> 00:05:07,279 Speaker 6: who believe that interest rate should be lowered by two, 87 00:05:07,320 --> 00:05:10,240 Speaker 6: but they are a decent number who think, you know, 88 00:05:10,279 --> 00:05:12,240 Speaker 6: there shouldn't be any interest rate cuts this year. 89 00:05:12,680 --> 00:05:15,440 Speaker 2: And there's been a lot of pressure, obviously from President 90 00:05:15,480 --> 00:05:17,920 Speaker 2: Trump on Jerome Palell, a lot of criticism, a lot 91 00:05:17,960 --> 00:05:20,880 Speaker 2: of pressure about what the FED is going to do. 92 00:05:21,120 --> 00:05:24,240 Speaker 2: And it goes into what you just said, He's not 93 00:05:24,279 --> 00:05:26,280 Speaker 2: the only one designing. I mean, there are twelve voting 94 00:05:26,320 --> 00:05:29,400 Speaker 2: members of the FOMC. You have all these other governors 95 00:05:29,440 --> 00:05:31,960 Speaker 2: and vice presidents and presidents of banks. I mean, it 96 00:05:32,040 --> 00:05:33,839 Speaker 2: is not a unilateral decision, is it. 97 00:05:34,120 --> 00:05:37,520 Speaker 6: No, it's not. And the interesting thing about that bimodal 98 00:05:37,560 --> 00:05:42,200 Speaker 6: distribution is that obviously we don't know which of the 99 00:05:42,440 --> 00:05:47,560 Speaker 6: nineteen dots in this summary are of voting members, but 100 00:05:47,800 --> 00:05:52,760 Speaker 6: there are enough members that if the data turned towards 101 00:05:52,760 --> 00:05:57,240 Speaker 6: the more inflationary side, you could get the FOMC outside 102 00:05:57,279 --> 00:06:00,920 Speaker 6: of Jerome Pale saying no, we don't even want two 103 00:06:01,040 --> 00:06:03,839 Speaker 6: interest rate cuts this year. We want one and perhaps 104 00:06:03,920 --> 00:06:08,200 Speaker 6: even zero. Because all it takes is us to get 105 00:06:08,320 --> 00:06:12,120 Speaker 6: three more dots up into that number, you know, to 106 00:06:12,160 --> 00:06:15,000 Speaker 6: go from seven to ten, and then suddenly we don't 107 00:06:15,040 --> 00:06:18,039 Speaker 6: have any interest rate cuts at all in twenty twenty five. 108 00:06:18,240 --> 00:06:20,240 Speaker 2: Well, the FETCH two day policy meeting kicks off this 109 00:06:20,360 --> 00:06:24,080 Speaker 2: Tuesday at Decision Wednesday, expected at two pm Wall Street time. Then, 110 00:06:24,120 --> 00:06:26,479 Speaker 2: of course we're going to hear from fedchair Jerome Powell. 111 00:06:26,800 --> 00:06:29,840 Speaker 2: Our thanks to Edward Harrison, senior editor at Bloomberg, author 112 00:06:29,880 --> 00:06:34,880 Speaker 2: of Bloomberg's Everything Risk newsletter. We move next to corporate earning. 113 00:06:34,960 --> 00:06:37,920 Speaker 2: Some of the Magnificent seven's biggest names reporting this week 114 00:06:38,040 --> 00:06:41,960 Speaker 2: meta platforms, Microsoft, Apple, and Amazon, and for more on 115 00:06:42,000 --> 00:06:46,000 Speaker 2: what to expect. We're joined by Mandeep Singh, Bloomberg Intelligence, 116 00:06:46,200 --> 00:06:49,440 Speaker 2: senior tech industry analysts. Man Deep, thank you so much 117 00:06:49,440 --> 00:06:52,359 Speaker 2: for being here. I want to start though, by looking backward, 118 00:06:52,480 --> 00:06:54,919 Speaker 2: because last week we got the latest results from Tesla 119 00:06:55,279 --> 00:06:59,719 Speaker 2: and Alphabet, very different results. Tesla miss earnings, sales fell 120 00:07:00,680 --> 00:07:04,359 Speaker 2: difficult times ahead what Alphabet. There was a real upside surprise, 121 00:07:04,440 --> 00:07:04,920 Speaker 2: wasn't there. 122 00:07:05,240 --> 00:07:08,560 Speaker 7: Yeah, And also going into earnings, I think the narrative 123 00:07:08,839 --> 00:07:13,560 Speaker 7: was that Google Search has been under a lot of 124 00:07:13,920 --> 00:07:17,720 Speaker 7: competitive threat from the likes of Chat GPT and just 125 00:07:18,320 --> 00:07:21,960 Speaker 7: what's going on in the LLM space and the numbers 126 00:07:22,080 --> 00:07:25,880 Speaker 7: proved otherwise, I mean the fact that Google grow search 127 00:07:26,160 --> 00:07:29,800 Speaker 7: double digits at a run rate of two hundred ten 128 00:07:29,880 --> 00:07:33,200 Speaker 7: billion dollars. That just goes to show you know, how 129 00:07:33,280 --> 00:07:37,840 Speaker 7: much momentum they have in terms of just their integrating 130 00:07:37,960 --> 00:07:42,960 Speaker 7: Gemini with their search page. So AI overviews has actually 131 00:07:43,520 --> 00:07:47,640 Speaker 7: helped you know, the number of queries. And then the monetization, 132 00:07:47,800 --> 00:07:52,280 Speaker 7: I mean ad monetization for Google is really, you know, 133 00:07:52,360 --> 00:07:55,000 Speaker 7: something that no one else has been able to even 134 00:07:55,080 --> 00:07:57,760 Speaker 7: come close to. And look, we're talking about Meta coming 135 00:07:57,840 --> 00:08:00,360 Speaker 7: up as well. So to me, what what will be 136 00:08:00,360 --> 00:08:05,360 Speaker 7: interesting is whether Meta shows you know, high teens or 137 00:08:05,440 --> 00:08:09,080 Speaker 7: twenty percent plus growth, because that's the sort of expectation 138 00:08:09,280 --> 00:08:11,800 Speaker 7: Google has set up with its print. You know, YouTube 139 00:08:11,800 --> 00:08:16,240 Speaker 7: did really well. In fact, YouTube plus cloud is almost 140 00:08:16,280 --> 00:08:19,760 Speaker 7: one hundred and fifteen billion dollars rundrate growing at over 141 00:08:19,840 --> 00:08:23,760 Speaker 7: twenty percent, and so a lot of positives in that 142 00:08:23,840 --> 00:08:26,120 Speaker 7: Google print. The one thing I would call out is 143 00:08:26,120 --> 00:08:29,600 Speaker 7: a capex pense. So Google ded raise their capex by 144 00:08:29,680 --> 00:08:32,760 Speaker 7: ten billion for this year, and they said twenty twenty 145 00:08:32,800 --> 00:08:36,040 Speaker 7: six would be another growth year for capex and that 146 00:08:37,160 --> 00:08:40,839 Speaker 7: some investors could say would be a Dragon free cash flow, 147 00:08:41,080 --> 00:08:43,480 Speaker 7: But I would compare that to a Meta which has 148 00:08:43,559 --> 00:08:48,160 Speaker 7: already guided to a higher CAPEX and they are not 149 00:08:48,480 --> 00:08:52,040 Speaker 7: monetizing at the same level as Google is with their 150 00:08:52,080 --> 00:08:54,720 Speaker 7: cloud business. So that is where it'd be interesting to 151 00:08:54,760 --> 00:08:59,199 Speaker 7: see how the market reacts to Meta talking up capex 152 00:08:59,200 --> 00:09:01,040 Speaker 7: for second half twenty twenty six. 153 00:09:01,640 --> 00:09:04,640 Speaker 2: Another horse in this race Microsoft, Yeah, which you know 154 00:09:04,880 --> 00:09:08,720 Speaker 2: with their open AI commitments and still expected to see 155 00:09:08,760 --> 00:09:12,640 Speaker 2: Azure a big, big revenue gainer. How about you know 156 00:09:12,679 --> 00:09:15,400 Speaker 2: the rest of the company. Where's Microsoft stand? Because we're 157 00:09:15,400 --> 00:09:16,439 Speaker 2: out Wednesday as well. 158 00:09:16,520 --> 00:09:20,360 Speaker 7: I think one thing was clear from google'sprint is Microsoft 159 00:09:20,440 --> 00:09:23,600 Speaker 7: Azure business is going to put up another strong quarter. 160 00:09:23,679 --> 00:09:27,319 Speaker 7: We are talking another mid thirty five, like mid thirty 161 00:09:27,320 --> 00:09:31,920 Speaker 7: percent growth for an Azure, which was a real surprise 162 00:09:32,040 --> 00:09:35,120 Speaker 7: last quarter. But now the numbers have gone up for Azure, 163 00:09:35,200 --> 00:09:40,320 Speaker 7: so you will see another strong quarter for Azure. But overall, look, 164 00:09:40,400 --> 00:09:44,640 Speaker 7: Microsoft has been one of the biggest beneficiaries of this 165 00:09:44,880 --> 00:09:49,520 Speaker 7: AI infrastructure spend and the cloud business that it has benefited. 166 00:09:49,640 --> 00:09:52,840 Speaker 7: And in Google's case, you know, it's a fifty billion 167 00:09:52,880 --> 00:09:56,720 Speaker 7: dollars run rate business cloud growing almost you know, thirty 168 00:09:56,760 --> 00:10:00,720 Speaker 7: percent plus now, so that could double to hundred billion 169 00:10:00,760 --> 00:10:04,040 Speaker 7: in two years. In Microsoft's case, it's the same kind 170 00:10:04,040 --> 00:10:08,080 Speaker 7: of momentum, and that's why cloud is the real beneficiary 171 00:10:08,440 --> 00:10:11,400 Speaker 7: of this AI infrastructure spent. On one hand, we call 172 00:10:11,480 --> 00:10:14,679 Speaker 7: out how Nvidia is benefited on the chip side. On 173 00:10:14,720 --> 00:10:17,560 Speaker 7: the software side, it's the cloud companies. And that's where 174 00:10:17,600 --> 00:10:20,960 Speaker 7: I would put Microsoft and Google. Amazon, which is another 175 00:10:21,679 --> 00:10:25,320 Speaker 7: one reporting next week and has expoture to cloud, I 176 00:10:25,360 --> 00:10:29,400 Speaker 7: think their growth rates are still way down compared to 177 00:10:30,280 --> 00:10:33,280 Speaker 7: Google and Microsoft Cloud, which is growing you know, thirty 178 00:10:33,280 --> 00:10:37,080 Speaker 7: percent plus. Amazon's growth may still be around that's seventeen 179 00:10:37,160 --> 00:10:38,440 Speaker 7: to twenty percent. 180 00:10:38,720 --> 00:10:41,439 Speaker 2: And still strong, still very strong. 181 00:10:41,120 --> 00:10:44,120 Speaker 7: For a business of over one hundred billion dollar run rate. 182 00:10:44,240 --> 00:10:49,440 Speaker 7: It's very good growth when you compare them share in cloud. 183 00:10:49,800 --> 00:10:52,960 Speaker 7: I do think, you know, Microsoft and Google seem to 184 00:10:53,000 --> 00:10:57,120 Speaker 7: be taking share because of this AI workloud shift, and 185 00:10:57,480 --> 00:11:01,280 Speaker 7: that's where Amazon has to kind step up in terms 186 00:11:01,360 --> 00:11:04,560 Speaker 7: of how they will increase the growth rate for their 187 00:11:04,559 --> 00:11:05,479 Speaker 7: cloud business. 188 00:11:05,720 --> 00:11:09,280 Speaker 2: Now the outlier in this horse race for AI, Apple 189 00:11:09,720 --> 00:11:12,920 Speaker 2: also next week, has been way behind, has no sign 190 00:11:12,960 --> 00:11:16,040 Speaker 2: of even catching up except for partnerships it's making. But 191 00:11:17,040 --> 00:11:19,200 Speaker 2: what do you expect there. I mean, the iPhone sixteen 192 00:11:19,240 --> 00:11:22,520 Speaker 2: is smash hit. We have services have been very strong, 193 00:11:22,840 --> 00:11:25,800 Speaker 2: but are they still behind. They're still going to make 194 00:11:25,800 --> 00:11:27,520 Speaker 2: a ton of money, there's no doubt. 195 00:11:27,760 --> 00:11:32,040 Speaker 7: I think with Apple now announcing they're getting into insurance business. 196 00:11:32,160 --> 00:11:36,560 Speaker 7: The twenty dollars per month for three devices, that's just 197 00:11:36,720 --> 00:11:41,280 Speaker 7: aimed at improving the services run rate. To me, everyone 198 00:11:41,360 --> 00:11:44,760 Speaker 7: looks up to Apple for what they will do on 199 00:11:44,840 --> 00:11:48,520 Speaker 7: the AI side, and that is a big question mark 200 00:11:48,559 --> 00:11:52,640 Speaker 7: whether they have a compelling AI strategy. I think they 201 00:11:52,640 --> 00:11:55,800 Speaker 7: are going to go to the partnership route, but right 202 00:11:55,840 --> 00:11:58,600 Speaker 7: now we have no signs to suggest there will be 203 00:11:58,640 --> 00:12:03,000 Speaker 7: a big upgrade or refresh cycle for their devices because 204 00:12:03,120 --> 00:12:06,840 Speaker 7: AI right now is still being used on the cloud. 205 00:12:07,360 --> 00:12:11,920 Speaker 7: People are not really using AI assistant that's installed on 206 00:12:11,960 --> 00:12:15,600 Speaker 7: the phone. Because these lms are called large anglid models 207 00:12:15,600 --> 00:12:18,880 Speaker 7: for a reason. They require a lot of compute and 208 00:12:19,000 --> 00:12:22,600 Speaker 7: memory that you can't have on device, and so that's 209 00:12:22,679 --> 00:12:27,440 Speaker 7: where Apple has to strike partnerships. They have to enhance 210 00:12:27,480 --> 00:12:31,240 Speaker 7: their hardware to run AI on device, and we are 211 00:12:31,280 --> 00:12:34,479 Speaker 7: talking about at least at twelve to twenty four month timeframes, 212 00:12:34,559 --> 00:12:38,520 Speaker 7: so you're not gonna see anything that investors will find exciting, 213 00:12:38,559 --> 00:12:40,000 Speaker 7: at least in this print. 214 00:12:40,000 --> 00:12:42,520 Speaker 2: Well, a lot to look forward to. Meta and Microsoft 215 00:12:42,600 --> 00:12:45,600 Speaker 2: earnings out this Wednesday. Amazon and Apple on Thursday are 216 00:12:45,600 --> 00:12:49,840 Speaker 2: thanks to Mandeep Sing, Bloomberg Intelligence Senior Tech industry analyst. 217 00:12:50,280 --> 00:12:52,400 Speaker 2: And coming up on Bloomberg day Break weekend, we'll look 218 00:12:52,400 --> 00:12:55,400 Speaker 2: at whether President Trump's Scottish golf trip can yield any 219 00:12:55,520 --> 00:13:09,880 Speaker 2: political wins. I'm Tom Busby and this is Bloomberg. This 220 00:13:10,000 --> 00:13:12,240 Speaker 2: is Bloomberg day Break weekend, our global look ahead at 221 00:13:12,280 --> 00:13:14,920 Speaker 2: the top stories for investors in the coming week. I'm 222 00:13:14,960 --> 00:13:17,920 Speaker 2: Tom Busby in New York. Up later in our program 223 00:13:17,920 --> 00:13:20,439 Speaker 2: and look at some key economic data coming out of 224 00:13:20,440 --> 00:13:24,520 Speaker 2: the world's second largest economy. But first, fresh from a 225 00:13:24,520 --> 00:13:27,120 Speaker 2: flurry of trade deal announcements, President Trump is in the 226 00:13:27,200 --> 00:13:30,480 Speaker 2: UK in Scotland. His trip will be a mixture of 227 00:13:30,480 --> 00:13:33,160 Speaker 2: business and pleasure. But in the coming days the President 228 00:13:33,200 --> 00:13:35,600 Speaker 2: has set to hold meetings with UK Prime Minister Kure 229 00:13:35,679 --> 00:13:40,080 Speaker 2: Starmer and John Swinney, First Minister of Scotland. Can the 230 00:13:40,160 --> 00:13:43,920 Speaker 2: duo sweet talk Trumpet to further trade concessions For more, 231 00:13:44,080 --> 00:13:46,040 Speaker 2: Let's go to London and bring in Bloomberg day Break 232 00:13:46,040 --> 00:13:48,280 Speaker 2: Europe anchor Caroline Hepgar. 233 00:13:48,480 --> 00:13:52,440 Speaker 3: Tom President Donald Trump Count's Scottish ancestry as part of 234 00:13:52,480 --> 00:13:55,800 Speaker 3: his heritage. His mother, Mary Anne MacLeod, was one of 235 00:13:55,840 --> 00:13:58,600 Speaker 3: thousands of Scotts who left for the US and Canada 236 00:13:58,800 --> 00:14:01,240 Speaker 3: at the beginning of the last century in a bid 237 00:14:01,280 --> 00:14:05,600 Speaker 3: to escape economic hardship at home. But despite the family ties, 238 00:14:05,720 --> 00:14:09,560 Speaker 3: the US President's relationship with the country is a complicated one. 239 00:14:09,760 --> 00:14:12,640 Speaker 3: During his last visit to Scotland in twenty eighteen, the 240 00:14:12,679 --> 00:14:16,719 Speaker 3: President was booed during an afternoon golf game by demonstrators 241 00:14:16,760 --> 00:14:20,160 Speaker 3: at his resort in Turnbury, and the entire trip was 242 00:14:20,240 --> 00:14:24,120 Speaker 3: dogged by protests of thousands of people in Glasgow, Edinburgh 243 00:14:24,200 --> 00:14:28,400 Speaker 3: and Aberdeen. This time round, controversial White House policies could 244 00:14:28,440 --> 00:14:31,720 Speaker 3: make for a similar reception as Trump visits his two 245 00:14:31,760 --> 00:14:35,360 Speaker 3: Scottish golf properties. His plan for international trade is also 246 00:14:35,440 --> 00:14:39,560 Speaker 3: something the White House Press Secretary Caroline Leavitt expanded on recently. 247 00:14:40,320 --> 00:14:42,240 Speaker 8: Look, I can tell you the trade team and the 248 00:14:42,240 --> 00:14:45,360 Speaker 8: President himself continue to be very engaged with countries around 249 00:14:45,360 --> 00:14:48,280 Speaker 8: the world when it comes to our trade agreements. But 250 00:14:48,320 --> 00:14:51,520 Speaker 8: the August first deadline is just really the start date 251 00:14:51,920 --> 00:14:54,480 Speaker 8: for when the United States of America will begin collecting 252 00:14:54,520 --> 00:14:56,680 Speaker 8: this revenue from all of the countries around the world 253 00:14:56,800 --> 00:14:58,640 Speaker 8: who the President has sent these letters to. 254 00:14:59,000 --> 00:15:00,440 Speaker 5: You could see some more years. 255 00:15:00,240 --> 00:15:02,720 Speaker 8: Before August first, John, you could have some more trade 256 00:15:02,720 --> 00:15:06,080 Speaker 8: announcements as well. I can tell you the President, Secretary 257 00:15:06,080 --> 00:15:09,440 Speaker 8: of Treasury, Secretary of Commerce, Ambassador Greer all continue to 258 00:15:09,480 --> 00:15:11,440 Speaker 8: be in constant communication with our trading partners. 259 00:15:12,040 --> 00:15:15,640 Speaker 3: The White House is Caroline Levitt speaking to reporters there. Well, 260 00:15:15,680 --> 00:15:16,120 Speaker 3: do you know what I mean? 261 00:15:16,120 --> 00:15:16,280 Speaker 7: Now? 262 00:15:16,280 --> 00:15:19,680 Speaker 3: It's Bloomberg's Edinburgh based reporter James Laden and our White 263 00:15:19,680 --> 00:15:23,000 Speaker 3: House correspondent Skyla Woodhouse. Welcome to both of you. Thank 264 00:15:23,000 --> 00:15:25,920 Speaker 3: you for speaking to me. James, Maybe can I start 265 00:15:25,960 --> 00:15:30,119 Speaker 3: with you. Trump has long been i'll say, infatuated with Scotland. 266 00:15:30,320 --> 00:15:33,160 Speaker 3: The Scot's perhaps a bit less so with him. Just 267 00:15:33,240 --> 00:15:36,240 Speaker 3: talk us through the perceptions of President Donald Trump on 268 00:15:36,280 --> 00:15:36,640 Speaker 3: the ground. 269 00:15:36,720 --> 00:15:40,920 Speaker 9: Now, Yeah, in your intro you did mention how there 270 00:15:40,960 --> 00:15:44,400 Speaker 9: were some demos against him when you was here last 271 00:15:44,720 --> 00:15:48,800 Speaker 9: I think those demos were more personality based, whereas I 272 00:15:48,800 --> 00:15:53,400 Speaker 9: think the demos that are being planned are both personality 273 00:15:53,560 --> 00:15:58,360 Speaker 9: and politics based. So there's a subtle difference there. One 274 00:15:58,360 --> 00:16:00,880 Speaker 9: thing I think that you need to sort of remind 275 00:16:00,920 --> 00:16:04,280 Speaker 9: yourselves about the Scottish psyche if you like, is that 276 00:16:06,320 --> 00:16:09,920 Speaker 9: someone who shall we say, is kind of fairy, brash 277 00:16:09,960 --> 00:16:12,960 Speaker 9: and a showman. That doesn't necessarily go down very well 278 00:16:13,160 --> 00:16:18,400 Speaker 9: here in Scotland. They tend to admire people who are 279 00:16:18,440 --> 00:16:22,160 Speaker 9: a bit more understated. And also Scotland does have a 280 00:16:22,200 --> 00:16:27,080 Speaker 9: reputation of cheering for the underdog over the years, and 281 00:16:27,120 --> 00:16:31,520 Speaker 9: certainly having a slightly larger big brother, shall we say, 282 00:16:31,960 --> 00:16:35,040 Speaker 9: to the South that's been dominating proceedings for several centuries. 283 00:16:35,720 --> 00:16:39,320 Speaker 9: That also probably explains why Scott's they prefer the underdog 284 00:16:39,480 --> 00:16:40,800 Speaker 9: rather than the top dog. 285 00:16:41,360 --> 00:16:45,520 Speaker 3: H Okay Skyler. And President Trump's also coming to the 286 00:16:45,640 --> 00:16:48,400 Speaker 3: UK for full proper state visit in only a few 287 00:16:48,440 --> 00:16:51,360 Speaker 3: weeks time. Why do you think he's making this trip 288 00:16:51,440 --> 00:16:52,560 Speaker 3: to Scotland now? 289 00:16:53,080 --> 00:16:55,000 Speaker 10: I mean the White House is saying, you know, this 290 00:16:55,080 --> 00:16:58,320 Speaker 10: is a moment for the President and Prime Minister Starmer 291 00:16:58,480 --> 00:17:02,280 Speaker 10: to refine the trade deal from just a few months ago. 292 00:17:02,720 --> 00:17:05,119 Speaker 10: You know, we'll hopefully we'll get an update on what's 293 00:17:05,119 --> 00:17:07,360 Speaker 10: maybe some more of the fine print details of that 294 00:17:07,400 --> 00:17:10,560 Speaker 10: trade agreement are. And there's obviously a lot happening in 295 00:17:10,600 --> 00:17:13,600 Speaker 10: the world right now there's you know, Ukraine and Russia 296 00:17:13,640 --> 00:17:15,960 Speaker 10: that has been you know, front and center for President Trump, 297 00:17:16,040 --> 00:17:18,040 Speaker 10: and you know, so we're you know, looking to see 298 00:17:18,080 --> 00:17:21,199 Speaker 10: if we could see any sort of maybe new agreement 299 00:17:21,920 --> 00:17:24,080 Speaker 10: between the two countries there or just sort of what 300 00:17:24,119 --> 00:17:26,960 Speaker 10: the strategy you know, might look like. So there's a 301 00:17:26,960 --> 00:17:29,480 Speaker 10: lot of talk around national security right now. 302 00:17:29,720 --> 00:17:29,919 Speaker 5: You know. 303 00:17:30,000 --> 00:17:32,840 Speaker 10: So it's kind of a mix of you know, the 304 00:17:32,880 --> 00:17:37,359 Speaker 10: presidents who we all know loves to golf and you 305 00:17:37,400 --> 00:17:40,359 Speaker 10: know frequently he'll be in Florida, you know, golfing and 306 00:17:40,400 --> 00:17:42,840 Speaker 10: things like that. But you know, we're expecting to see 307 00:17:43,280 --> 00:17:47,000 Speaker 10: probably a more refined trade deal than what we saw earlier. 308 00:17:47,080 --> 00:17:49,480 Speaker 3: Yeah, absolutely, entire it's hugely important, I mean, both the 309 00:17:49,560 --> 00:17:51,800 Speaker 3: kised arma of the UK as a whole and Scotland 310 00:17:51,840 --> 00:17:55,200 Speaker 3: in particular as well. Is there going to be any 311 00:17:55,280 --> 00:17:58,840 Speaker 3: expectation actually of any progress in terms of trade discussions? 312 00:17:58,840 --> 00:17:59,359 Speaker 2: Do you think? 313 00:18:00,119 --> 00:18:03,080 Speaker 10: I think one thing that's particularly interesting with the trade 314 00:18:03,080 --> 00:18:06,960 Speaker 10: agreements that we've just been seeing across the board, Obviously, 315 00:18:07,000 --> 00:18:10,840 Speaker 10: this is something that President Trump is very passionate about 316 00:18:10,880 --> 00:18:15,720 Speaker 10: and is definitely dominating his second term and as president. 317 00:18:16,480 --> 00:18:19,040 Speaker 10: You know, so I think it'll be interesting to watch 318 00:18:19,440 --> 00:18:24,480 Speaker 10: what the fine print looks like. We've we're approaching that 319 00:18:24,600 --> 00:18:28,080 Speaker 10: August first deadline with a plethora of countries and we're 320 00:18:28,080 --> 00:18:32,359 Speaker 10: starting to see you know, the rates coming in you know, 321 00:18:32,400 --> 00:18:35,000 Speaker 10: a different level. So I think it'll be interesting to 322 00:18:35,040 --> 00:18:40,520 Speaker 10: see what maybe has changed from the you know, the 323 00:18:40,560 --> 00:18:43,320 Speaker 10: deal that was presented a few months ago to now 324 00:18:43,480 --> 00:18:45,919 Speaker 10: and to compare and contrast what has changed or what 325 00:18:45,960 --> 00:18:46,760 Speaker 10: has not changed. 326 00:18:47,400 --> 00:18:49,760 Speaker 3: James, what do you think the Scottish First Minister John 327 00:18:49,800 --> 00:18:52,840 Speaker 3: Swinney is likely to cover maybe try to press with 328 00:18:52,920 --> 00:18:54,120 Speaker 3: the US President. 329 00:18:54,880 --> 00:18:56,760 Speaker 9: Well, I guess so the biggest thing here is whiskey. 330 00:18:57,200 --> 00:19:02,439 Speaker 9: Personally not a fan, but I mean it's it's the 331 00:19:02,440 --> 00:19:07,320 Speaker 9: biggest export that we have up here, and any potential 332 00:19:08,160 --> 00:19:11,000 Speaker 9: reducing the tariffs on whiskey I think would go a 333 00:19:11,000 --> 00:19:13,560 Speaker 9: long way up here. But at the end of the day, 334 00:19:13,600 --> 00:19:16,000 Speaker 9: the personal sign the document is going to be starmer, 335 00:19:16,240 --> 00:19:20,960 Speaker 9: So there's a slight set of dichotomy there. Otherwise, I 336 00:19:21,000 --> 00:19:24,600 Speaker 9: mean Swinny he is involved a little bit in the 337 00:19:25,800 --> 00:19:29,760 Speaker 9: long running staga about whether Turnbury, one of Trump's golf sites, 338 00:19:29,800 --> 00:19:33,000 Speaker 9: will ever host the Open again, so there will be 339 00:19:33,040 --> 00:19:36,119 Speaker 9: some chat on that, I dare say, But at the 340 00:19:36,200 --> 00:19:38,960 Speaker 9: end of the day, the decision comes down to the 341 00:19:39,320 --> 00:19:43,400 Speaker 9: rural ancient golf club in Saint Andrew's RNA. But there 342 00:19:43,440 --> 00:19:46,359 Speaker 9: will be pressure from Swinny and also from Starma to 343 00:19:46,440 --> 00:19:48,199 Speaker 9: try to make this happen. But then to make it 344 00:19:48,200 --> 00:19:51,840 Speaker 9: happen you kind of need to have much better communications. 345 00:19:51,840 --> 00:19:54,520 Speaker 9: You must have much better roads and rail systems, and 346 00:19:54,680 --> 00:19:56,560 Speaker 9: to get that you're going to have to get the 347 00:19:56,600 --> 00:19:58,919 Speaker 9: tax player to stump up for it very properly, and 348 00:19:59,000 --> 00:20:00,119 Speaker 9: that will be a big. 349 00:20:00,160 --> 00:20:05,240 Speaker 3: Problem in terms of travel. It's obviously quite a privileged 350 00:20:05,280 --> 00:20:08,000 Speaker 3: position for the UK to be in and Scotland in 351 00:20:08,040 --> 00:20:10,440 Speaker 3: some ways to be hosting, you know, a visit, even 352 00:20:10,480 --> 00:20:13,080 Speaker 3: an informal visit from the US president, given how much 353 00:20:13,160 --> 00:20:15,560 Speaker 3: is riding on this and President Trump's actually got some 354 00:20:15,600 --> 00:20:18,640 Speaker 3: cousins who still live on the kind of ancestral island 355 00:20:18,680 --> 00:20:22,120 Speaker 3: where his mother came from. How important do you think 356 00:20:22,240 --> 00:20:25,160 Speaker 3: the relationship is at the moment, Skyler, between the US 357 00:20:25,200 --> 00:20:28,200 Speaker 3: and the UK as we see these really quite fraught 358 00:20:28,320 --> 00:20:31,600 Speaker 3: negotiations with many countries rushing to try to make the 359 00:20:31,640 --> 00:20:33,439 Speaker 3: August first deadline. 360 00:20:33,760 --> 00:20:38,240 Speaker 10: I think one thing the traupid administration, you know, they 361 00:20:38,240 --> 00:20:40,239 Speaker 10: do a lot of things differently, But ultimately I do 362 00:20:40,240 --> 00:20:43,040 Speaker 10: think there is an understanding that the relationship with the 363 00:20:43,160 --> 00:20:45,840 Speaker 10: UK is a very important one that obviously has a 364 00:20:45,920 --> 00:20:50,840 Speaker 10: very long standing history, you know, so I do think 365 00:20:50,920 --> 00:20:54,360 Speaker 10: the administration is looking to sort of continue to keep 366 00:20:54,400 --> 00:20:57,880 Speaker 10: that relationship intact and whatever way that might be. I mean, 367 00:20:57,880 --> 00:21:00,959 Speaker 10: but it's still very interesting that of the trade deals, 368 00:21:01,040 --> 00:21:04,520 Speaker 10: the UK was one of the first to see a 369 00:21:04,600 --> 00:21:07,760 Speaker 10: deal and an agreement and there was the Oval event 370 00:21:07,840 --> 00:21:10,560 Speaker 10: where Starmar I believed, phoned in, you know, so you know, 371 00:21:10,640 --> 00:21:14,479 Speaker 10: they're definitely trying to show a united front between the 372 00:21:14,480 --> 00:21:19,440 Speaker 10: two countries, which on the global stage could be very 373 00:21:19,480 --> 00:21:21,679 Speaker 10: telling that you know, we have the US and the 374 00:21:21,800 --> 00:21:24,960 Speaker 10: UK sort of you know, aligned, even if there are 375 00:21:25,200 --> 00:21:27,679 Speaker 10: differences you know, on some things. But now do you 376 00:21:27,680 --> 00:21:30,639 Speaker 10: think administration is you know looking to sort of you know, 377 00:21:30,640 --> 00:21:33,560 Speaker 10: make sure that that relationship continues to remain stable. 378 00:21:33,920 --> 00:21:37,120 Speaker 3: Yeah, in terms of what you expect then also from 379 00:21:37,160 --> 00:21:39,280 Speaker 3: the State visit in September and how important that is. 380 00:21:39,320 --> 00:21:42,520 Speaker 3: We've had out the for example, the car and truck 381 00:21:42,600 --> 00:21:45,960 Speaker 3: manufacturing figures for the UK. That's a very important market 382 00:21:46,200 --> 00:21:49,800 Speaker 3: for Britain, the US sending vehicles there. It's actually just 383 00:21:49,840 --> 00:21:52,080 Speaker 3: below the relationship with the EU, but it's still very 384 00:21:52,119 --> 00:21:54,920 Speaker 3: important and actually we've seen a big kind of cratering 385 00:21:55,000 --> 00:21:57,800 Speaker 3: in terms of the numbers of vehicles that are being 386 00:21:57,920 --> 00:22:01,200 Speaker 3: exported and in fact just rolling off the lines here 387 00:22:01,240 --> 00:22:04,920 Speaker 3: in the UK. How important is this kind of other 388 00:22:05,080 --> 00:22:09,240 Speaker 3: sector issues between the US and the UK And do 389 00:22:09,280 --> 00:22:12,240 Speaker 3: you think anything might change, let's say, in the September 390 00:22:12,280 --> 00:22:15,080 Speaker 3: State visit. How is that being seen in the US? 391 00:22:15,359 --> 00:22:17,679 Speaker 10: Yeah, I know, it's a good point to mention the 392 00:22:17,800 --> 00:22:21,520 Speaker 10: sectors because that's something we're watching very closely in the 393 00:22:21,560 --> 00:22:24,600 Speaker 10: mix of all of the trade deals. But when you 394 00:22:24,640 --> 00:22:28,040 Speaker 10: boil it down to the sectors, whether it's autos pharmaceuticals, 395 00:22:28,280 --> 00:22:30,600 Speaker 10: that's a space you know where we're you know, trying 396 00:22:30,640 --> 00:22:32,640 Speaker 10: to see if there's any movement there because we still 397 00:22:32,680 --> 00:22:36,119 Speaker 10: haven't really seen a lot of details in the pharma space, 398 00:22:36,160 --> 00:22:39,640 Speaker 10: but it has been something the President talks about pretty frequently. 399 00:22:40,040 --> 00:22:42,200 Speaker 10: So we're definitely watching that space. But I think in 400 00:22:42,280 --> 00:22:45,360 Speaker 10: the US in terms of perception, you know, one thing, 401 00:22:45,520 --> 00:22:47,040 Speaker 10: you know, what we've been seeing a lot right now 402 00:22:47,080 --> 00:22:49,800 Speaker 10: is there's just a lot of back and forth, and 403 00:22:49,920 --> 00:22:51,960 Speaker 10: you know, with this administration, they definitely keep us on 404 00:22:51,960 --> 00:22:56,240 Speaker 10: our toes. But you know, they move forward with one 405 00:22:56,320 --> 00:23:00,880 Speaker 10: thing and then there can be a shift the policy 406 00:23:00,960 --> 00:23:04,199 Speaker 10: a little bit, whether it's more or less, and that 407 00:23:04,320 --> 00:23:06,240 Speaker 10: is something we're you know, I think folks are really 408 00:23:06,280 --> 00:23:10,280 Speaker 10: paying attention to you because it does shake up what 409 00:23:10,480 --> 00:23:12,960 Speaker 10: exactly is going on if you say one thing and 410 00:23:13,000 --> 00:23:17,159 Speaker 10: then you know it changes. But the President continues to 411 00:23:17,200 --> 00:23:21,200 Speaker 10: say that, you know, if you accept you know, American 412 00:23:21,240 --> 00:23:24,440 Speaker 10: products and we can you know, enter that market. You know, well, 413 00:23:24,560 --> 00:23:26,679 Speaker 10: we want tearif you or tear affe less. So you 414 00:23:26,720 --> 00:23:30,200 Speaker 10: know that's what Trump has been negotiating with around that. 415 00:23:30,480 --> 00:23:36,040 Speaker 3: Yeah, absolutely, James. A thought then from the perspective in Edinburgh. 416 00:23:36,119 --> 00:23:38,080 Speaker 3: I mean, I know that you know quite a bit 417 00:23:38,119 --> 00:23:40,600 Speaker 3: about golf and all the golf courses that are up 418 00:23:40,640 --> 00:23:42,919 Speaker 3: in Scotland. I mean, how important do you think that 419 00:23:43,040 --> 00:23:46,399 Speaker 3: the trip is for the US person to spend time 420 00:23:46,480 --> 00:23:49,240 Speaker 3: in Scotland? As Skylar is sort of pointing out, the 421 00:23:49,359 --> 00:23:53,000 Speaker 3: US person is known for being changeable and maybe that 422 00:23:53,119 --> 00:23:55,919 Speaker 3: offers a kind of opening in terms of influence. 423 00:23:56,520 --> 00:23:59,480 Speaker 9: Yeah, it does a bit. It's easier for him certainly 424 00:23:59,560 --> 00:24:03,359 Speaker 9: to come to Scotland rather than England. He can't hide 425 00:24:03,359 --> 00:24:06,199 Speaker 9: so much if you like in England if he wanted to, 426 00:24:07,280 --> 00:24:10,520 Speaker 9: and he does have these two golf properties up here 427 00:24:10,880 --> 00:24:15,040 Speaker 9: which are very high profile. They're also very good courses. 428 00:24:15,440 --> 00:24:19,680 Speaker 9: But and then he is having that that's an idea 429 00:24:19,680 --> 00:24:23,359 Speaker 9: about Look, I'm here in my homeland of Scotland. I 430 00:24:23,359 --> 00:24:25,480 Speaker 9: mean leaving aside the fact that it would take you 431 00:24:25,480 --> 00:24:28,320 Speaker 9: what eight hours to get from his site in Aberdeen 432 00:24:28,359 --> 00:24:31,000 Speaker 9: to where his mother was born on Lewis. It's kind 433 00:24:31,000 --> 00:24:33,760 Speaker 9: of a long long way away. But he will play 434 00:24:33,840 --> 00:24:36,960 Speaker 9: up this idea about him, you know, coming home sort 435 00:24:37,000 --> 00:24:40,320 Speaker 9: of thing, which you have to say is taken with 436 00:24:40,400 --> 00:24:43,640 Speaker 9: a very large salt from many of the local populace 437 00:24:44,280 --> 00:24:47,399 Speaker 9: on that. But that's an idea about him coming to 438 00:24:47,520 --> 00:24:51,159 Speaker 9: where he thinks his roots are. That probably makes it 439 00:24:51,240 --> 00:24:54,760 Speaker 9: easier for him to feel in a way that he 440 00:24:54,960 --> 00:24:59,320 Speaker 9: is negotiating or talking with Starmer on something of a 441 00:24:59,800 --> 00:25:03,080 Speaker 9: level playing field, you know what I mean. Yes, he's 442 00:25:03,080 --> 00:25:06,640 Speaker 9: a visitor, but he also gets the Scottish thing. 443 00:25:07,160 --> 00:25:09,960 Speaker 3: James, thank you so much for being with me today Brimberg, 444 00:25:10,040 --> 00:25:12,880 Speaker 3: James Lordon and to skylar Woodhouse on your first trip 445 00:25:12,920 --> 00:25:16,000 Speaker 3: to Scotland and here in the UK. Thank you very 446 00:25:16,040 --> 00:25:18,159 Speaker 3: much for your time. I'm Caroline hepget here in London. 447 00:25:18,320 --> 00:25:20,640 Speaker 3: You can catch us every weekday morning for Bloomberg day Break. 448 00:25:20,640 --> 00:25:22,119 Speaker 3: You at the beginning at six am in London. 449 00:25:22,320 --> 00:25:22,680 Speaker 7: That's one. 450 00:25:22,720 --> 00:25:24,320 Speaker 3: I am on Wall Street, Tom. 451 00:25:24,400 --> 00:25:27,120 Speaker 2: Thank you Caroline, and coming up on Bloomberg day Break 452 00:25:27,119 --> 00:25:29,680 Speaker 2: weekend to look ahead to some fresh economic data out 453 00:25:29,720 --> 00:25:43,399 Speaker 2: of China. I'm Tom Busby and this is Bloomberg. This 454 00:25:43,440 --> 00:25:45,760 Speaker 2: is Bloomberg day Break weekend, our global look ahead at 455 00:25:45,760 --> 00:25:48,400 Speaker 2: the top stories for investors in the coming week. I'm 456 00:25:48,440 --> 00:25:51,879 Speaker 2: Tom Busby in New York. Market watchers turn to fresh 457 00:25:51,960 --> 00:25:54,399 Speaker 2: economic data this week for a temperature check on the 458 00:25:54,400 --> 00:25:57,919 Speaker 2: world's second largest economy. For more, let's get to the 459 00:25:57,920 --> 00:26:00,760 Speaker 2: host of the Daybreak Asia podcast, Doug Crisler. 460 00:26:01,200 --> 00:26:04,920 Speaker 4: Tom. The outlook for the Chinese economy is showing promise, 461 00:26:04,960 --> 00:26:08,639 Speaker 4: and recently Bloomberg Economics raised its full year growth forecast 462 00:26:08,720 --> 00:26:11,719 Speaker 4: for China to an annual rate of four point eight percent. Now, 463 00:26:11,760 --> 00:26:15,240 Speaker 4: to be fair, hurdles do remain and there is still 464 00:26:15,320 --> 00:26:18,240 Speaker 4: the need for policy support. In the week ahead, we'll 465 00:26:18,240 --> 00:26:21,080 Speaker 4: get a clearer understanding of where things stand with the 466 00:26:21,119 --> 00:26:25,480 Speaker 4: release of several PMI readings. They'll help capture sentiment among 467 00:26:25,560 --> 00:26:30,040 Speaker 4: Chinese manufacturers and services providers alike to help us look ahead. 468 00:26:30,119 --> 00:26:33,000 Speaker 4: I am joined by David Chu. He is China economist 469 00:26:33,240 --> 00:26:36,760 Speaker 4: for Bloomberg Economics. David joins us from our studios in 470 00:26:36,840 --> 00:26:39,640 Speaker 4: Hong Kong. David, thank you so much for taking time 471 00:26:39,680 --> 00:26:42,760 Speaker 4: to chat with me. Can you begin by giving me 472 00:26:43,320 --> 00:26:45,359 Speaker 4: kind of your view on what we may learn this 473 00:26:45,400 --> 00:26:47,119 Speaker 4: week from the PMI data for China. 474 00:26:47,680 --> 00:26:47,840 Speaker 6: Ah. 475 00:26:47,920 --> 00:26:51,280 Speaker 11: Yes, What we can say is that we expected the 476 00:26:51,840 --> 00:26:58,600 Speaker 11: manufacturing PMI to soften the BIDA from last months because 477 00:26:58,880 --> 00:27:03,040 Speaker 11: we saw some leading indicators and African indicators pointing to 478 00:27:03,960 --> 00:27:09,159 Speaker 11: the slow, marginal slowed down in the manufacturing activities. I 479 00:27:09,160 --> 00:27:12,520 Speaker 11: think one of the reasons is that the ft loading export, 480 00:27:13,080 --> 00:27:17,280 Speaker 11: it's somehow it has slowed a bit after the peak 481 00:27:17,440 --> 00:27:20,560 Speaker 11: in the in June, so I think that is the reason. 482 00:27:20,880 --> 00:27:25,080 Speaker 11: Another reason is that we think the cloud of the 483 00:27:25,119 --> 00:27:28,000 Speaker 11: trade wall is still there so that people are not 484 00:27:28,080 --> 00:27:34,640 Speaker 11: so confident to expand capacity, so that the overall manufacturing 485 00:27:34,960 --> 00:27:40,879 Speaker 11: activity should slow down after acceleration in June. 486 00:27:41,160 --> 00:27:44,320 Speaker 4: So when it comes to the services economies in China, 487 00:27:44,359 --> 00:27:46,040 Speaker 4: how is domestic demand right now? 488 00:27:46,600 --> 00:27:49,879 Speaker 11: Well for July because it is a summer holiday season, 489 00:27:50,000 --> 00:27:53,520 Speaker 11: so that we think the service side will be supportive 490 00:27:53,880 --> 00:27:58,159 Speaker 11: to the to the non manufacturing PMI as well. But 491 00:27:58,400 --> 00:28:01,320 Speaker 11: on the other hand, we think the the construction is 492 00:28:01,359 --> 00:28:05,600 Speaker 11: still steady compared with June. So overall speakning, we think 493 00:28:05,640 --> 00:28:11,240 Speaker 11: the non manufacturing activity should accelerate a bit from June. 494 00:28:11,560 --> 00:28:14,159 Speaker 4: Give me your sense of the extent to which the 495 00:28:14,200 --> 00:28:17,440 Speaker 4: property market, as negative as it has been, is still 496 00:28:17,440 --> 00:28:19,800 Speaker 4: a major drag on the economy. Is that beginning to 497 00:28:19,920 --> 00:28:21,440 Speaker 4: change even slightly? 498 00:28:22,160 --> 00:28:26,879 Speaker 11: Not yet. Based on the sales data, we think the 499 00:28:26,960 --> 00:28:29,920 Speaker 11: activity in the housing sector is still drag and it 500 00:28:30,040 --> 00:28:34,200 Speaker 11: may be even worse than the last month based on 501 00:28:34,280 --> 00:28:38,800 Speaker 11: the new home sales data so far. So looking forward, 502 00:28:38,920 --> 00:28:43,719 Speaker 11: we don't see any scene that you know, for the 503 00:28:43,760 --> 00:28:47,440 Speaker 11: housing sector to rebund soon, even though we have seen 504 00:28:47,520 --> 00:28:51,400 Speaker 11: some stimulus by the government over the past several months, 505 00:28:51,400 --> 00:28:52,600 Speaker 11: but still it's soft. 506 00:28:52,880 --> 00:28:55,080 Speaker 4: If you had to point to a bright spot for 507 00:28:55,120 --> 00:28:57,160 Speaker 4: the Chinese economy right now, what would be. 508 00:28:58,040 --> 00:29:01,360 Speaker 11: I think the production side is all is resilient, although 509 00:29:01,720 --> 00:29:04,520 Speaker 11: if you look at the PMI it is still underwater. 510 00:29:05,040 --> 00:29:09,560 Speaker 11: But if you look at the production side of the 511 00:29:09,680 --> 00:29:14,000 Speaker 11: China economy over the past several quarters, it's still resilient. 512 00:29:14,200 --> 00:29:18,320 Speaker 11: But on the other hand, is what drives the economy 513 00:29:18,760 --> 00:29:20,840 Speaker 11: or what is the key for the economy is the 514 00:29:20,840 --> 00:29:26,160 Speaker 11: consumption side, So that now we emphasize the importance of 515 00:29:26,320 --> 00:29:30,520 Speaker 11: consumption one more so that what we are looking at 516 00:29:30,640 --> 00:29:33,760 Speaker 11: now is the consumption, not the strong part, which is 517 00:29:34,120 --> 00:29:34,840 Speaker 11: good production. 518 00:29:35,120 --> 00:29:37,600 Speaker 4: When I think of the production side, though, I think 519 00:29:37,640 --> 00:29:41,040 Speaker 4: of the tendency for there's still to be a little 520 00:29:41,040 --> 00:29:43,600 Speaker 4: bit of over capacity in the system. Is that being 521 00:29:43,680 --> 00:29:45,560 Speaker 4: taken out slowly and steadily. 522 00:29:46,360 --> 00:29:50,040 Speaker 11: Yes, there has been more and more talks about the 523 00:29:50,080 --> 00:29:53,480 Speaker 11: removal of the overcapacity, but we have to say that 524 00:29:53,640 --> 00:29:58,040 Speaker 11: over capacity means it is more than demand, so that 525 00:29:58,400 --> 00:30:01,440 Speaker 11: I think the government needs to do more in the 526 00:30:01,480 --> 00:30:04,920 Speaker 11: consumption side of the boost demand, so that to reduce 527 00:30:06,520 --> 00:30:09,680 Speaker 11: the difference or the overcapacity on the one hand, I 528 00:30:09,680 --> 00:30:14,000 Speaker 11: mean the relative over capacity compared with the demand site, 529 00:30:14,120 --> 00:30:17,520 Speaker 11: but as well we think the government is doing something 530 00:30:17,560 --> 00:30:22,560 Speaker 11: to we call it anti involution, so that to reduce 531 00:30:22,680 --> 00:30:26,520 Speaker 11: some of the capacity in some way and also let 532 00:30:26,600 --> 00:30:30,840 Speaker 11: people have more time to spending so that they can 533 00:30:31,880 --> 00:30:32,680 Speaker 11: spend more money. 534 00:30:33,160 --> 00:30:36,240 Speaker 4: We know that the overall economy has been in deflation, 535 00:30:36,400 --> 00:30:39,760 Speaker 4: particularly at the wholesale level where you're looking at factory 536 00:30:39,800 --> 00:30:43,600 Speaker 4: gate inflation, to what extent do you believe authorities in 537 00:30:43,680 --> 00:30:47,120 Speaker 4: China are very concerned about this right now, the stubbornness 538 00:30:47,160 --> 00:30:50,400 Speaker 4: of the deflationary story, and I realize that maybe on 539 00:30:50,440 --> 00:30:54,720 Speaker 4: the consumer level it's more disinflationary rather than deflationary, but 540 00:30:55,360 --> 00:30:58,520 Speaker 4: still there seems to be this overall pull that has 541 00:30:58,560 --> 00:31:00,000 Speaker 4: to do with declining prices. 542 00:31:01,240 --> 00:31:05,880 Speaker 11: Yes, I think the government is concerned about the definition 543 00:31:06,000 --> 00:31:11,120 Speaker 11: a lot because the PPI is quite correlated with the 544 00:31:11,160 --> 00:31:15,720 Speaker 11: profitability of the manufacturing sector. So that you may know 545 00:31:15,960 --> 00:31:21,560 Speaker 11: that many of the China's biggest manufacturers, they are ISOs, 546 00:31:21,720 --> 00:31:26,400 Speaker 11: they stayed owned enterprises, so that the if they're making 547 00:31:26,480 --> 00:31:31,320 Speaker 11: a lot of financial losses, that the government must be 548 00:31:31,360 --> 00:31:33,880 Speaker 11: worried about that. I think that is one of the 549 00:31:33,920 --> 00:31:39,520 Speaker 11: reasons why the government UH is considering taking some effort 550 00:31:39,680 --> 00:31:43,640 Speaker 11: to remove some of the over capacities, based on our 551 00:31:43,760 --> 00:31:50,840 Speaker 11: experience in the twenty eighteen round the carting over capacity. 552 00:31:51,320 --> 00:31:56,800 Speaker 11: This would raise the PPI effectively, so that to raise 553 00:31:56,880 --> 00:32:01,320 Speaker 11: the profitability. But the still the problem is that that 554 00:32:02,400 --> 00:32:07,240 Speaker 11: this inflation in the consumption side will probably be still there, 555 00:32:07,760 --> 00:32:11,640 Speaker 11: based also based on the experience from twenty eighteen. 556 00:32:12,160 --> 00:32:14,160 Speaker 4: David, thank you so very much. For making time to 557 00:32:14,240 --> 00:32:17,040 Speaker 4: chat with us. That is David Chu, China economist for 558 00:32:17,080 --> 00:32:21,840 Speaker 4: Bloomberg Economics, joining from our studios in Hong Kong, shifting 559 00:32:21,840 --> 00:32:24,960 Speaker 4: gears to tech now and the Chinese consumer. I spoke 560 00:32:25,000 --> 00:32:28,560 Speaker 4: with Stephanie Leung, the chief investment officer at Stashaway. We 561 00:32:28,680 --> 00:32:33,880 Speaker 4: discussed how developments in artificial intelligence are shaping her investment strategy. 562 00:32:34,280 --> 00:32:35,680 Speaker 4: Here's part of that conversation. 563 00:32:36,120 --> 00:32:40,040 Speaker 12: If you look at the latest economic data, it doesn't 564 00:32:40,080 --> 00:32:44,040 Speaker 12: look like that the China consumer is doing a v 565 00:32:44,080 --> 00:32:44,880 Speaker 12: shape recovery. 566 00:32:45,400 --> 00:32:47,840 Speaker 5: And I think that's because of a few reasons. 567 00:32:47,960 --> 00:32:51,000 Speaker 12: Number one is that, of course, if you look at 568 00:32:51,120 --> 00:32:54,160 Speaker 12: kind of where the where a lot of Chinese consumer 569 00:32:54,720 --> 00:32:57,680 Speaker 12: hold the wealth is still in the real estate sector 570 00:32:58,120 --> 00:33:01,400 Speaker 12: and say sex sector is still in a very very 571 00:33:01,400 --> 00:33:04,080 Speaker 12: long row to recovery. And I mean without that, actually 572 00:33:04,080 --> 00:33:06,920 Speaker 12: most Chinese consumers are kind of tightening their belts, right, 573 00:33:06,920 --> 00:33:10,480 Speaker 12: They're not really spending that much. However, if you look 574 00:33:10,480 --> 00:33:14,080 Speaker 12: into kind of I think some of the pockets where 575 00:33:14,160 --> 00:33:16,080 Speaker 12: people are spending, and those tends to be kind of 576 00:33:16,200 --> 00:33:17,920 Speaker 12: lower ticket items. 577 00:33:18,480 --> 00:33:20,120 Speaker 5: By that, I mean, for example. 578 00:33:19,960 --> 00:33:23,560 Speaker 12: Uh just kind of uh tea drinks for example, or 579 00:33:24,480 --> 00:33:28,560 Speaker 12: uh these uh I guess play, I guess. 580 00:33:28,680 --> 00:33:31,320 Speaker 5: Uh, these are like sort of figures. 581 00:33:31,520 --> 00:33:31,760 Speaker 9: Uh. 582 00:33:31,800 --> 00:33:33,600 Speaker 5: For example, one of one. 583 00:33:33,520 --> 00:33:36,960 Speaker 12: Of the companies La Boobooh has has Labou, which is 584 00:33:37,040 --> 00:33:39,640 Speaker 12: very very popular kind of figure in China, and the 585 00:33:39,720 --> 00:33:43,120 Speaker 12: I mean people are are crazy about these. I mean 586 00:33:43,120 --> 00:33:46,000 Speaker 12: these are kind of lower ticket items that that that 587 00:33:46,200 --> 00:33:48,400 Speaker 12: gets very very popular in China. So I think these 588 00:33:48,440 --> 00:33:51,280 Speaker 12: are themes that you can still play within the Chinese 589 00:33:51,400 --> 00:33:52,560 Speaker 12: Chinese consumer sector. 590 00:33:52,600 --> 00:33:54,280 Speaker 5: However, when you look at kind of. 591 00:33:54,200 --> 00:33:58,640 Speaker 12: The bigger ticket items for example auto for example, uh, 592 00:33:58,880 --> 00:34:01,160 Speaker 12: I mean even luxury, and these are kind of still 593 00:34:01,840 --> 00:34:03,880 Speaker 12: in sort of the role to recovery. 594 00:34:03,920 --> 00:34:05,920 Speaker 4: I would say, I'm going to play to one of 595 00:34:05,960 --> 00:34:11,400 Speaker 4: your strengths technology and particularly artificial intelligence. How do you 596 00:34:11,520 --> 00:34:15,520 Speaker 4: understand the risk of some of these AI back chat 597 00:34:15,520 --> 00:34:18,879 Speaker 4: bots posing some sort of risk to a business, even 598 00:34:18,920 --> 00:34:21,600 Speaker 4: for bay Do in China, which has around seventy percent 599 00:34:21,640 --> 00:34:24,879 Speaker 4: of the search market. Is AI a way for this 600 00:34:24,960 --> 00:34:27,719 Speaker 4: to be reimagined? Do you think and maybe does it 601 00:34:27,760 --> 00:34:29,080 Speaker 4: represent a near term risk? 602 00:34:29,880 --> 00:34:30,120 Speaker 2: Yeah? 603 00:34:30,200 --> 00:34:32,040 Speaker 12: I think, I mean you bring a very very good 604 00:34:32,040 --> 00:34:34,520 Speaker 12: point right in the sense that, of course, if you 605 00:34:34,520 --> 00:34:37,600 Speaker 12: think about the Internet era, search was of a very 606 00:34:37,640 --> 00:34:41,400 Speaker 12: profitable business and Google by do pretty much have like 607 00:34:41,440 --> 00:34:45,239 Speaker 12: a dominance or monopoly in these businesses. However, if we 608 00:34:45,400 --> 00:34:48,200 Speaker 12: enter the AI era, if you think about just what 609 00:34:48,320 --> 00:34:52,600 Speaker 12: people go to search engines to do, they're basically asking questions, 610 00:34:53,040 --> 00:34:55,399 Speaker 12: and you can ask these questions much more directly and 611 00:34:55,440 --> 00:34:59,520 Speaker 12: get much better answers by going to the LM chat 612 00:34:59,560 --> 00:35:03,600 Speaker 12: bots to ask the same questions, and they will give 613 00:35:03,640 --> 00:35:06,600 Speaker 12: you a much more comprehensive answer rather than just the 614 00:35:06,640 --> 00:35:09,560 Speaker 12: templu links that that Google would provide. And I think 615 00:35:09,560 --> 00:35:13,320 Speaker 12: that actually creates a sort of a dilemma for companies 616 00:35:13,360 --> 00:35:15,239 Speaker 12: like Google in a sense that I mean they know 617 00:35:15,400 --> 00:35:17,880 Speaker 12: that that's the direction that things are going. However, of 618 00:35:17,920 --> 00:35:21,280 Speaker 12: course they have existing sort of earnings to try to protect, 619 00:35:21,719 --> 00:35:23,840 Speaker 12: so they need to. I mean, they are trying to 620 00:35:23,840 --> 00:35:27,680 Speaker 12: actually strike a balance between like kind of not cannibalizing 621 00:35:27,719 --> 00:35:31,759 Speaker 12: the existing business, but meanwhile making efforts to make sure 622 00:35:31,840 --> 00:35:34,759 Speaker 12: that they don't get this kind of extinct in the 623 00:35:35,440 --> 00:35:38,000 Speaker 12: new AI era. So, for example, AI, if you go 624 00:35:38,080 --> 00:35:40,319 Speaker 12: to Google Search right now, you see that they will 625 00:35:40,360 --> 00:35:45,120 Speaker 12: provide a AI generated search summary, and that's sort of 626 00:35:45,160 --> 00:35:49,120 Speaker 12: some of the efforts to help the company that migrates. 627 00:35:49,719 --> 00:35:52,520 Speaker 4: So if you're looking at opportunities in AI and China. 628 00:35:52,560 --> 00:35:55,759 Speaker 4: Are you more focused on the software side or are 629 00:35:55,840 --> 00:35:59,160 Speaker 4: you looking at the hardware story and maybe semiconductors. How 630 00:35:59,200 --> 00:35:59,719 Speaker 4: do you play it? 631 00:36:00,520 --> 00:36:01,040 Speaker 1: I think. 632 00:36:02,360 --> 00:36:05,759 Speaker 12: If you look at the semiconductor or hardware side, it's 633 00:36:05,840 --> 00:36:09,200 Speaker 12: very very focused in a few kind of companies that 634 00:36:09,239 --> 00:36:11,800 Speaker 12: have the technology. So by that, I mean, for example, 635 00:36:11,840 --> 00:36:14,360 Speaker 12: n video, Nvidia has the chips that are kind of 636 00:36:14,360 --> 00:36:17,120 Speaker 12: ways ahead. And if you look at all the recent 637 00:36:17,239 --> 00:36:20,680 Speaker 12: kind of announcements from big big tech companies like for example, 638 00:36:21,280 --> 00:36:24,120 Speaker 12: Metas big announcement of the data centers, I mean they 639 00:36:24,120 --> 00:36:27,400 Speaker 12: are still predominantly using uh in video technology. 640 00:36:27,880 --> 00:36:28,000 Speaker 11: UH. 641 00:36:28,040 --> 00:36:29,800 Speaker 5: If you look at kind of in China. 642 00:36:30,480 --> 00:36:34,600 Speaker 12: Of course, recently uh President Trump lifted the restriction to 643 00:36:34,680 --> 00:36:38,520 Speaker 12: export H twenty chips to China, and I mean Nvidia 644 00:36:38,760 --> 00:36:41,360 Speaker 12: is receiving a lot of orders and I mean the 645 00:36:41,480 --> 00:36:42,799 Speaker 12: citing supply shortages. 646 00:36:43,239 --> 00:36:45,640 Speaker 5: So still Nvidia is the kind of the. 647 00:36:45,600 --> 00:36:50,040 Speaker 12: Dominant player in the infrastructure layer. Of course, like companies 648 00:36:50,080 --> 00:36:52,600 Speaker 12: like Huawei are catching up, but I think they are 649 00:36:53,360 --> 00:36:56,880 Speaker 12: still kind of somewhat behind on the application side. I 650 00:36:56,920 --> 00:36:59,319 Speaker 12: think that's where it gets more interesting, right, because it's 651 00:36:59,320 --> 00:37:04,400 Speaker 12: not it's not that kind of dominated by one. 652 00:37:04,320 --> 00:37:05,040 Speaker 5: Or two players. 653 00:37:05,120 --> 00:37:07,080 Speaker 12: I think in the application side you can see a 654 00:37:07,120 --> 00:37:11,719 Speaker 12: lot of very creative uses of the underlying technology in 655 00:37:11,840 --> 00:37:15,960 Speaker 12: terms of driving usage, driving revenue, or cutting costs. And 656 00:37:16,040 --> 00:37:18,359 Speaker 12: here I think you can see that in the US 657 00:37:18,400 --> 00:37:22,840 Speaker 12: there are different companies in different verticals kind of it 658 00:37:22,880 --> 00:37:26,520 Speaker 12: GUS making big strides and also in China right if 659 00:37:26,560 --> 00:37:28,879 Speaker 12: you look at kind of the software companies, I think 660 00:37:28,920 --> 00:37:31,320 Speaker 12: they are one of the first to benefit from these 661 00:37:31,640 --> 00:37:35,000 Speaker 12: AI coding agents, for example, and these actually benefit a 662 00:37:35,040 --> 00:37:37,560 Speaker 12: lot more companies than just the infrastructure. 663 00:37:37,600 --> 00:37:41,560 Speaker 4: Later that was definitely young the CIO at Stashaway, I'm 664 00:37:41,600 --> 00:37:44,799 Speaker 4: Doug Chrisner. Catch us weekdays for the Daybreak as your podcast. 665 00:37:45,040 --> 00:37:47,880 Speaker 4: It's available wherever you get your podcast. Tom. 666 00:37:48,360 --> 00:37:50,520 Speaker 2: Thank you Doug. And that does it for this edition 667 00:37:50,560 --> 00:37:53,640 Speaker 2: of Bloomberg day Break Weekend. Join us again Monday morning, 668 00:37:53,680 --> 00:37:56,000 Speaker 2: five am Wall Street Time for the latest on markets 669 00:37:56,040 --> 00:37:58,719 Speaker 2: overseas and the news you need to start your day. 670 00:37:59,160 --> 00:38:00,000 Speaker 2: I'm Tom Buzzby. 671 00:38:00,239 --> 00:38:00,879 Speaker 5: Stay with us. 672 00:38:01,200 --> 00:38:04,359 Speaker 2: Top stories and global business headlines are coming up right now.