1 00:00:02,920 --> 00:00:12,639 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg day 2 00:00:12,640 --> 00:00:15,000 Speaker 1: Break Weekend, our global look at the top stories in 3 00:00:15,080 --> 00:00:17,479 Speaker 1: the coming week from our day Break anchors all around 4 00:00:17,520 --> 00:00:19,680 Speaker 1: the world, and straight ahead on the program, we'll look 5 00:00:19,680 --> 00:00:23,840 Speaker 1: towards next week's BED meeting and its monetary policy going forward. 6 00:00:24,120 --> 00:00:25,640 Speaker 1: I'm Tom Busby in New York. 7 00:00:26,000 --> 00:00:28,600 Speaker 2: I'm callin Hepget in London, where we're looking ahead to 8 00:00:28,680 --> 00:00:30,200 Speaker 2: the UK's great decision. 9 00:00:30,440 --> 00:00:32,680 Speaker 3: I'm Brian Curtis in Hong Kong. I'll take a look 10 00:00:32,720 --> 00:00:36,199 Speaker 3: at the upcoming results from China's ten cent holdings and 11 00:00:36,280 --> 00:00:39,640 Speaker 3: whether a little less regulation is producing dividends. 12 00:00:43,880 --> 00:00:48,160 Speaker 4: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg Eyleod, 13 00:00:48,200 --> 00:00:51,720 Speaker 4: The Free Own, New York, Bloomberg ninety nine to one, Washington, DC, 14 00:00:52,000 --> 00:00:56,080 Speaker 4: Bloomberg one O six one, Boston, Bloomberg nine sixty, San Francisco, 15 00:00:56,320 --> 00:01:00,560 Speaker 4: DAB Digital Radio, London, Sirius XM one nineteen and around 16 00:01:00,600 --> 00:01:03,200 Speaker 4: the world on Bloomberg Radio dot Com and via the 17 00:01:03,240 --> 00:01:04,400 Speaker 4: Bloomberg Business App. 18 00:01:08,800 --> 00:01:10,640 Speaker 1: Good day to you. I'm Tom Busby, and we begin 19 00:01:10,720 --> 00:01:13,880 Speaker 1: today's program with the Federal Reserve. This coming week, the 20 00:01:13,920 --> 00:01:16,039 Speaker 1: FED hosts a two day meeting on interest rates and 21 00:01:16,120 --> 00:01:20,480 Speaker 1: monetary policy, with a decision out on Wednesday. Will the 22 00:01:20,520 --> 00:01:23,920 Speaker 1: Fed leave its benchmark lending rate unchanged for the fifth 23 00:01:24,000 --> 00:01:27,520 Speaker 1: meeting in a row, and if so, why for more 24 00:01:27,560 --> 00:01:31,360 Speaker 1: we're joined by Michael McKee. He's Bloomberg's international economics and 25 00:01:31,440 --> 00:01:35,120 Speaker 1: policy correspondent. So Michael, what do you expect to see 26 00:01:35,160 --> 00:01:37,319 Speaker 1: happen this week and what do you see in the 27 00:01:37,319 --> 00:01:39,280 Speaker 1: Fed's dot plot forecast? 28 00:01:39,640 --> 00:01:41,360 Speaker 5: Well, that's the right way to look at it, because 29 00:01:41,400 --> 00:01:42,920 Speaker 5: the Fed's not going to do anything in terms of 30 00:01:43,000 --> 00:01:46,319 Speaker 5: its policy rate. It'll leave it where it is a 31 00:01:46,400 --> 00:01:47,880 Speaker 5: range of five and a quarter five and a half 32 00:01:47,920 --> 00:01:50,720 Speaker 5: percent because they basically told us that for the last 33 00:01:50,760 --> 00:01:52,880 Speaker 5: three weeks and they're not going to go back on 34 00:01:52,920 --> 00:01:55,960 Speaker 5: that and surprise the markets. They also are looking for 35 00:01:56,040 --> 00:01:57,960 Speaker 5: more data, but the dot plot is going to be 36 00:01:57,960 --> 00:02:01,000 Speaker 5: the interesting one, along with the summary of economic projections, 37 00:02:01,000 --> 00:02:03,640 Speaker 5: because are they going to raise their projection for inflation 38 00:02:03,880 --> 00:02:07,320 Speaker 5: and how would that affect their view of rake cuts 39 00:02:07,360 --> 00:02:10,880 Speaker 5: This year, since the last FED meeting on January thirty first, 40 00:02:11,120 --> 00:02:15,360 Speaker 5: we have seen CPI inflation and PPI inflation come in 41 00:02:15,760 --> 00:02:20,200 Speaker 5: stronger than expected, and so the question is do we 42 00:02:20,520 --> 00:02:23,320 Speaker 5: think that this is the new trend, that we're going 43 00:02:23,400 --> 00:02:27,440 Speaker 5: to be stuck with inflation that is stickier and harder 44 00:02:27,480 --> 00:02:30,800 Speaker 5: to bring down than the Fed anticipated, or do they 45 00:02:30,800 --> 00:02:34,040 Speaker 5: think this is kind of one off seasonal adjustment around 46 00:02:34,080 --> 00:02:35,880 Speaker 5: the first of the year. That's going to be the 47 00:02:35,919 --> 00:02:37,160 Speaker 5: real question now. 48 00:02:37,200 --> 00:02:40,600 Speaker 1: But in fairness, June of twenty twenty two, inflation nine 49 00:02:40,600 --> 00:02:43,799 Speaker 1: point one percent. Just last week we saw it down 50 00:02:43,840 --> 00:02:46,160 Speaker 1: to three point two percent, So it has accelerated a 51 00:02:46,200 --> 00:02:49,040 Speaker 1: little bit from the months prior, but and we still 52 00:02:49,080 --> 00:02:51,320 Speaker 1: got a long way to go to its two percent target, 53 00:02:51,360 --> 00:02:54,720 Speaker 1: but it is still sort of trending the right way. 54 00:02:54,960 --> 00:02:56,840 Speaker 5: Well, it depends on what you're trying to accomplish. If 55 00:02:56,880 --> 00:02:59,119 Speaker 5: j Powell were running for president, he could tout going 56 00:02:59,120 --> 00:03:02,239 Speaker 5: from nine to three. But since he's got to get 57 00:03:02,240 --> 00:03:04,720 Speaker 5: it down to the two percent target, the fact that 58 00:03:04,760 --> 00:03:07,239 Speaker 5: it's going the wrong way now is not necessarily good 59 00:03:07,240 --> 00:03:10,560 Speaker 5: news for them, and that will influence their views. If 60 00:03:10,560 --> 00:03:13,280 Speaker 5: they think that we are going to see a stickier 61 00:03:14,080 --> 00:03:18,760 Speaker 5: kind of inflation, then that might lead them to change 62 00:03:18,800 --> 00:03:21,240 Speaker 5: the dot plot. The dot plot that came out in 63 00:03:21,280 --> 00:03:24,679 Speaker 5: December the last time they did one, suggested three rate 64 00:03:24,760 --> 00:03:29,160 Speaker 5: cuts this year between the meetings, we've had several FED 65 00:03:29,200 --> 00:03:32,840 Speaker 5: officials suggest that if inflation proves to be a problem, 66 00:03:32,880 --> 00:03:35,640 Speaker 5: that maybe there will be fewer It would only take 67 00:03:35,680 --> 00:03:39,680 Speaker 5: two to move their dots up to change the consensus forecast. 68 00:03:39,920 --> 00:03:43,200 Speaker 6: So we're going to be watching that very closely now. 69 00:03:43,240 --> 00:03:45,680 Speaker 1: A few weeks ago, in testimony to Congress, FED Chair 70 00:03:45,760 --> 00:03:48,440 Speaker 1: Jerome pal did say he thinks rates are at their 71 00:03:48,480 --> 00:03:51,600 Speaker 1: peak right now, twenty three year high, and it would 72 00:03:51,840 --> 00:03:55,880 Speaker 1: quote likely be appropriate to begin dialing back policy at 73 00:03:55,920 --> 00:03:56,720 Speaker 1: some point this year. 74 00:03:57,600 --> 00:04:00,360 Speaker 5: Yeah, and asked about what it would take to do that. 75 00:04:00,480 --> 00:04:04,119 Speaker 5: He basically said, we need continued good news on inflation. 76 00:04:04,520 --> 00:04:06,880 Speaker 5: He said, we didn't need to have it be better 77 00:04:07,040 --> 00:04:10,560 Speaker 5: each month, go down significantly each month, as it did 78 00:04:10,640 --> 00:04:13,120 Speaker 5: during most of twenty twenty three, but it had to 79 00:04:13,120 --> 00:04:15,440 Speaker 5: be going in the right direction, and right now it's 80 00:04:15,440 --> 00:04:18,000 Speaker 5: not going in the right direction. So I imagine we will 81 00:04:18,000 --> 00:04:20,360 Speaker 5: get a caution from him that even if they don't 82 00:04:20,440 --> 00:04:24,440 Speaker 5: change the dot pot, that they are aware and watching 83 00:04:25,120 --> 00:04:29,560 Speaker 5: inflation right now, and that if they needed to do something, 84 00:04:29,640 --> 00:04:32,520 Speaker 5: they would. I don't think that rate increases are on 85 00:04:32,560 --> 00:04:35,560 Speaker 5: the table right now, but cutting back on the number 86 00:04:35,600 --> 00:04:37,919 Speaker 5: of rate cuts are pushing them back later in the 87 00:04:38,040 --> 00:04:40,719 Speaker 5: year is certainly a possibility now. 88 00:04:40,720 --> 00:04:44,560 Speaker 1: Inflation obviously the headline measure, but there's also job creation, 89 00:04:44,640 --> 00:04:49,200 Speaker 1: which has been unexpectedly robust. Housing and retail sales a 90 00:04:49,279 --> 00:04:52,080 Speaker 1: little uneven here and there, sometimes up, sometimes down. So 91 00:04:52,520 --> 00:04:55,400 Speaker 1: is it job creation that really has the Fed optimistic 92 00:04:55,440 --> 00:04:56,320 Speaker 1: about the economy? 93 00:04:56,480 --> 00:04:59,760 Speaker 5: It is, and also the idea that companies are spending 94 00:04:59,800 --> 00:05:03,480 Speaker 5: money in a little more than they had been as 95 00:05:04,120 --> 00:05:08,240 Speaker 5: they get perhaps some of the federal government's fiscal assistance 96 00:05:08,360 --> 00:05:11,080 Speaker 5: in the Infrastructure Act and the Chips Act. There is 97 00:05:11,120 --> 00:05:13,359 Speaker 5: a concern that maybe the economy gets too hot, but 98 00:05:13,600 --> 00:05:17,000 Speaker 5: it's not proving out. We're seeing strong job creation, we're 99 00:05:17,000 --> 00:05:21,200 Speaker 5: seeing weak jobless claims. They went down again this last week, 100 00:05:21,839 --> 00:05:25,000 Speaker 5: but we are not seeing strong retail sales at this point. Now, 101 00:05:25,040 --> 00:05:28,920 Speaker 5: retail sales are pretty much only goods, and so we'll 102 00:05:28,920 --> 00:05:30,679 Speaker 5: have to wait till the end of the month after 103 00:05:30,720 --> 00:05:32,920 Speaker 5: the FED meeting to see whether people are spending on 104 00:05:33,040 --> 00:05:36,800 Speaker 5: services and how strong consumer spending overall is. 105 00:05:37,320 --> 00:05:40,440 Speaker 6: But it doesn't suggest that the consumer. 106 00:05:39,960 --> 00:05:43,600 Speaker 5: Spending, which is two thirds of the economy, is benefiting 107 00:05:43,640 --> 00:05:44,600 Speaker 5: from any of this yet. 108 00:05:44,839 --> 00:05:45,000 Speaker 3: Now. 109 00:05:45,040 --> 00:05:48,120 Speaker 1: In housing, we've seen rates this past week go down 110 00:05:48,120 --> 00:05:50,279 Speaker 1: below seven percent. If there was ever a time of 111 00:05:50,320 --> 00:05:53,000 Speaker 1: the year right now March April May when we're going 112 00:05:53,080 --> 00:05:55,760 Speaker 1: to see housing accelerate a little bit, This is it, 113 00:05:55,880 --> 00:05:58,719 Speaker 1: So I imagine that is being very closely watched as well. 114 00:05:58,960 --> 00:05:59,880 Speaker 6: It's being closely watched. 115 00:05:59,880 --> 00:06:02,360 Speaker 5: But the general feeling is that people really won't come 116 00:06:02,400 --> 00:06:04,800 Speaker 5: out to buy houses until you get mortgage rates down 117 00:06:05,360 --> 00:06:07,760 Speaker 5: close to four percent. It's going to be a while 118 00:06:08,440 --> 00:06:11,320 Speaker 5: until we get there. They aren't going to come down 119 00:06:11,360 --> 00:06:12,839 Speaker 5: to where they were. You're not going to get a 120 00:06:12,960 --> 00:06:16,039 Speaker 5: three percent mortgage anymore, but you might get one between 121 00:06:16,080 --> 00:06:19,719 Speaker 5: four and five if inflation continues to fall, and. 122 00:06:19,800 --> 00:06:21,440 Speaker 6: That's what we have to watch. 123 00:06:21,760 --> 00:06:24,560 Speaker 5: There isn't expectation that we're going to see at Gangbuster's 124 00:06:24,880 --> 00:06:27,599 Speaker 5: housing market this spring, even though it is the time 125 00:06:27,640 --> 00:06:29,080 Speaker 5: of year when you normally do. 126 00:06:29,120 --> 00:06:32,279 Speaker 1: Well our thanks to Michael McKee, Bloomberg inter National Economics 127 00:06:32,320 --> 00:06:36,240 Speaker 1: and Policy Correspondent. Now we move next to the athletic 128 00:06:36,240 --> 00:06:40,000 Speaker 1: footwear and apparel giant Nike, the Dow component, reporting third 129 00:06:40,120 --> 00:06:44,000 Speaker 1: quarter results this coming Thursday. Many analysts are wondering whether 130 00:06:44,080 --> 00:06:47,520 Speaker 1: economic headwinds in China will impact the company's sales and 131 00:06:47,600 --> 00:06:50,799 Speaker 1: for more. We're joined by Poonam Goyle, senior US e 132 00:06:50,839 --> 00:06:53,760 Speaker 1: commerce and retail analysts at Bloomberg Intelligence. 133 00:06:53,760 --> 00:06:56,000 Speaker 6: Poonum, thanks for being here, Thanks for having me. 134 00:06:56,320 --> 00:06:58,720 Speaker 1: Well, what are you expecting to see from the sneaker 135 00:06:58,760 --> 00:07:02,040 Speaker 1: in sportswear giant and how big a role will sales 136 00:07:02,080 --> 00:07:03,320 Speaker 1: in China play into that? 137 00:07:03,760 --> 00:07:07,119 Speaker 7: Sure, the fiscal third quarter, which is largely in line 138 00:07:07,160 --> 00:07:10,000 Speaker 7: with the fourth quarter for most other retailers, for Nike, 139 00:07:10,520 --> 00:07:14,440 Speaker 7: we expect sales to fall slightly. That's largely a function 140 00:07:14,600 --> 00:07:18,320 Speaker 7: of just lackluster consumer demand, largely on the apparel side. 141 00:07:18,320 --> 00:07:20,760 Speaker 7: I would say, not as much on the footwaar side. 142 00:07:21,080 --> 00:07:24,960 Speaker 7: And where we're seeing weakness is across the board. Really, 143 00:07:25,600 --> 00:07:28,160 Speaker 7: we're expecting Emia to be weak. It's expected to be 144 00:07:28,240 --> 00:07:31,480 Speaker 7: downlow single digits. North America as well, and these two 145 00:07:31,520 --> 00:07:36,280 Speaker 7: markets collectively are the largest markets for Nike. That said, 146 00:07:36,560 --> 00:07:39,160 Speaker 7: China is important, and you know you asked how important 147 00:07:39,280 --> 00:07:42,480 Speaker 7: is China's about fifteen percent of their sales and we're 148 00:07:42,520 --> 00:07:45,080 Speaker 7: only expecting to see a low single digit gain about 149 00:07:45,080 --> 00:07:47,920 Speaker 7: two percent in China, So that's not as robust as 150 00:07:47,920 --> 00:07:50,960 Speaker 7: you would have expected earlier last year, when you know 151 00:07:51,120 --> 00:07:54,800 Speaker 7: China had ended at zero COVID policy. So things are 152 00:07:55,160 --> 00:07:58,000 Speaker 7: a little markye, but I would say that that's all 153 00:07:58,080 --> 00:08:01,040 Speaker 7: near term. I do think the Nike still remains a 154 00:08:01,080 --> 00:08:04,520 Speaker 7: solid brand, fifty billion dollars plus in sales, the largest 155 00:08:04,560 --> 00:08:07,600 Speaker 7: sportswear brand in the world, and we don't think its 156 00:08:07,600 --> 00:08:09,520 Speaker 7: position is at risk at all. 157 00:08:09,680 --> 00:08:13,120 Speaker 1: Well, let's talk about Nike's initiative on direct to consumer sales. 158 00:08:13,200 --> 00:08:16,120 Speaker 1: Has it made a material impact and has the affected 159 00:08:16,120 --> 00:08:17,840 Speaker 1: some of the retailers that it supplies. 160 00:08:18,240 --> 00:08:21,120 Speaker 7: So Nike had a few years ago made a big 161 00:08:21,160 --> 00:08:23,880 Speaker 7: push towards DTC, you know, pulling out a lot of 162 00:08:23,960 --> 00:08:28,000 Speaker 7: key wholesale accounts, including moderating its exposure to some of 163 00:08:28,000 --> 00:08:31,040 Speaker 7: the department stores as well as Footlocker. We saw that 164 00:08:31,200 --> 00:08:33,480 Speaker 7: flip on its heels last year, right when they said 165 00:08:33,520 --> 00:08:37,560 Speaker 7: that they're going back into Footlocker in a more strategic way. 166 00:08:37,880 --> 00:08:42,040 Speaker 7: They're also entering thes W and they're pushing more so 167 00:08:42,280 --> 00:08:45,120 Speaker 7: in wholesale. Now what does this mean? Right? You know, 168 00:08:45,400 --> 00:08:49,160 Speaker 7: DTC has higher margins and therefore when they had announced 169 00:08:49,200 --> 00:08:52,640 Speaker 7: this move a few years back, it was good for margin. 170 00:08:52,720 --> 00:08:55,600 Speaker 7: And now as they're pulling away, I wouldn't say they're 171 00:08:55,600 --> 00:08:57,559 Speaker 7: pulling away from DTC, but I would say they're leaning 172 00:08:57,600 --> 00:09:01,160 Speaker 7: more into wholesale. The margins do have a headwind from 173 00:09:01,240 --> 00:09:03,960 Speaker 7: that mixshift, kind of flip flopping, but I would say 174 00:09:03,960 --> 00:09:07,640 Speaker 7: wholesale is important. Their partnership with foot Locker is important 175 00:09:07,679 --> 00:09:10,360 Speaker 7: because if you live in the suburbs of New Jersey 176 00:09:10,440 --> 00:09:13,600 Speaker 7: like I do, it's hard to get to a Nike store. 177 00:09:13,920 --> 00:09:16,880 Speaker 7: Right The flagship store in New York City is great, 178 00:09:16,960 --> 00:09:19,680 Speaker 7: but it's two hours to get there. So where do 179 00:09:19,760 --> 00:09:23,920 Speaker 7: you buy good Nike product? The outlets have usually, you know, 180 00:09:24,000 --> 00:09:26,360 Speaker 7: product that came out maybe a year ago or six 181 00:09:26,400 --> 00:09:29,760 Speaker 7: months ago, or stuff that's left over. And the only 182 00:09:29,800 --> 00:09:32,640 Speaker 7: place really that you can find compelling Nike product in 183 00:09:32,720 --> 00:09:36,200 Speaker 7: a suburb is at Dick's Sporting Goods. So coming back 184 00:09:36,240 --> 00:09:38,960 Speaker 7: to some of these wholesale accounts, I think is a 185 00:09:38,960 --> 00:09:42,200 Speaker 7: good move for Nike as it will make it be 186 00:09:42,320 --> 00:09:44,720 Speaker 7: available to all of America. Again. 187 00:09:45,040 --> 00:09:48,080 Speaker 1: Now to that point you've written about Nike finally getting 188 00:09:48,080 --> 00:09:51,960 Speaker 1: control of its pandemic era inventory and supply chain problems. 189 00:09:52,240 --> 00:09:55,000 Speaker 1: Are things back where they should be and is it 190 00:09:55,040 --> 00:09:57,239 Speaker 1: supplying all this new product for consumers? 191 00:09:57,520 --> 00:09:59,520 Speaker 7: I think supply is back and where it should be, 192 00:09:59,520 --> 00:10:02,120 Speaker 7: so we don't for see any supply chain disruptions at 193 00:10:02,200 --> 00:10:06,199 Speaker 7: Nike this year. In terms of supply within the marketplace, 194 00:10:06,280 --> 00:10:09,520 Speaker 7: I think that's a little next. There are still excess 195 00:10:09,559 --> 00:10:13,160 Speaker 7: inventories in the wholesale channels, so in North America specifically, 196 00:10:13,240 --> 00:10:16,559 Speaker 7: we do think that that headman will persist at least 197 00:10:16,880 --> 00:10:19,400 Speaker 7: through the first half of this calendar year or for 198 00:10:19,520 --> 00:10:23,400 Speaker 7: Nike's fiscal fourth quarter. But around the world, as inventories 199 00:10:23,440 --> 00:10:26,400 Speaker 7: are stabilized and the supply chains are operating at i 200 00:10:26,400 --> 00:10:29,480 Speaker 7: would say near normal levels, we do think that there 201 00:10:29,520 --> 00:10:32,360 Speaker 7: are tailwinds from this to be had in the second 202 00:10:32,440 --> 00:10:34,800 Speaker 7: half of the calendar year twenty twenty four. 203 00:10:35,120 --> 00:10:38,920 Speaker 1: And Nike is already the biggest women's athletic apparel and 204 00:10:38,960 --> 00:10:41,720 Speaker 1: shoe brands, So are they banking a lot of growth 205 00:10:41,840 --> 00:10:43,400 Speaker 1: on women customers. 206 00:10:43,800 --> 00:10:46,800 Speaker 7: Yeah, So women's is actually a very very important category, 207 00:10:46,880 --> 00:10:48,800 Speaker 7: not just for Nike but really for all the at 208 00:10:48,880 --> 00:10:52,480 Speaker 7: leisure brands. It's a growing category and Nike does have 209 00:10:52,520 --> 00:10:54,360 Speaker 7: a lead there. But I would say when you look 210 00:10:54,400 --> 00:10:57,880 Speaker 7: at women's versus total sports, where the lead that Nike has, 211 00:10:58,240 --> 00:11:01,319 Speaker 7: the gap between that is very different. So Nike is 212 00:11:01,960 --> 00:11:05,040 Speaker 7: by far the largest sportswear brand and it has a 213 00:11:05,160 --> 00:11:08,520 Speaker 7: large lead to its competitors, but when you look at 214 00:11:08,640 --> 00:11:12,199 Speaker 7: women's the lead isn't as wide, right, So to me, 215 00:11:12,400 --> 00:11:15,679 Speaker 7: the woman's playing field is anyone's game. So Nike is 216 00:11:15,720 --> 00:11:18,360 Speaker 7: a leader today, but that doesn't mean that it will 217 00:11:18,400 --> 00:11:22,040 Speaker 7: stay a leader forever if others also step up their 218 00:11:22,120 --> 00:11:25,920 Speaker 7: efforts because they don't have a wide margin lead versus 219 00:11:25,960 --> 00:11:27,040 Speaker 7: the rest of the competition. 220 00:11:27,360 --> 00:11:29,800 Speaker 1: And how is it compared to like Lulu Lemon, which 221 00:11:29,960 --> 00:11:32,200 Speaker 1: you know here in New York you see on all 222 00:11:32,200 --> 00:11:36,920 Speaker 1: over women wearing everything right, Lulu Lemon also some athleta 223 00:11:36,960 --> 00:11:40,040 Speaker 1: that's the gap brand is Nike moving into those types 224 00:11:40,080 --> 00:11:42,600 Speaker 1: of products, the yoga pants, the stuff you wear to 225 00:11:42,640 --> 00:11:44,719 Speaker 1: the supermarket or wherever they are. 226 00:11:44,840 --> 00:11:49,560 Speaker 7: So the push for lifestyle athleticware has been something that 227 00:11:49,679 --> 00:11:52,800 Speaker 7: most at leisure brands, including Nike, have been going after. 228 00:11:53,440 --> 00:11:55,960 Speaker 7: It's a little different of a customer still, you know, 229 00:11:56,000 --> 00:11:59,439 Speaker 7: we think where Lululemon shines is that it understands the 230 00:11:59,440 --> 00:12:01,400 Speaker 7: women custom and are probably better than any of the 231 00:12:01,440 --> 00:12:04,480 Speaker 7: other brands because that is where they shine. They have 232 00:12:04,600 --> 00:12:06,920 Speaker 7: the right fit, they have the right material, they have 233 00:12:06,960 --> 00:12:09,880 Speaker 7: the right function, they know how it works and they 234 00:12:09,960 --> 00:12:14,120 Speaker 7: understand it. Nike has performance built into its women's war, 235 00:12:14,440 --> 00:12:17,000 Speaker 7: but I don't know if it has the fashion right. 236 00:12:17,200 --> 00:12:18,720 Speaker 7: Not to say that it's wrong, but I think it 237 00:12:18,800 --> 00:12:21,680 Speaker 7: leans more towards performance versus where you have a little 238 00:12:21,800 --> 00:12:25,360 Speaker 7: lemon yoga pant. It's performance and fashion. So I think 239 00:12:25,480 --> 00:12:28,320 Speaker 7: that intersection is where Nike is trying to go to 240 00:12:28,400 --> 00:12:31,120 Speaker 7: as well with women's but I think that will take time. 241 00:12:31,160 --> 00:12:32,800 Speaker 7: It's not something that they can do overnight. 242 00:12:33,200 --> 00:12:35,640 Speaker 1: Well, we're going to find out a lot more on Thursday. Well, 243 00:12:35,640 --> 00:12:38,840 Speaker 1: our thanks to Blunham Goyle. She's senior US e Commerce 244 00:12:38,840 --> 00:12:42,480 Speaker 1: and retail analysts at Bloomberg Intelligence and coming up on 245 00:12:42,480 --> 00:12:44,840 Speaker 1: Bloomberg day Break weekend, a big decision this week on 246 00:12:44,920 --> 00:12:48,199 Speaker 1: interest rates from the Bank of England. I'm Tom Busby 247 00:12:48,280 --> 00:13:02,240 Speaker 1: and this is Bloomberg. This is Bloomberg day Break Weekend, 248 00:13:02,280 --> 00:13:04,640 Speaker 1: our global look ahead at the top stories for investors 249 00:13:04,720 --> 00:13:07,200 Speaker 1: in the coming week. I'm Tom Busby in New York. 250 00:13:07,440 --> 00:13:10,080 Speaker 1: Up later in our program, earnings from one of China's 251 00:13:10,120 --> 00:13:13,440 Speaker 1: biggest names in technology, and a look ahead to the 252 00:13:13,480 --> 00:13:16,880 Speaker 1: next move from Australia's Central Bank. But first, with UK 253 00:13:17,000 --> 00:13:19,840 Speaker 1: interest rates at historic highs, pressure is mounting on the 254 00:13:19,880 --> 00:13:23,439 Speaker 1: Bank of England. While recent economic data suggests the economy 255 00:13:23,480 --> 00:13:26,120 Speaker 1: may be moving in the right direction, one wrong move 256 00:13:26,240 --> 00:13:29,160 Speaker 1: could undo all the progress made to date. The situation 257 00:13:29,240 --> 00:13:32,280 Speaker 1: makes for a difficult choice for central bank policymakers who 258 00:13:32,320 --> 00:13:35,160 Speaker 1: will vote where to move rates in the coming days. 259 00:13:35,160 --> 00:13:36,880 Speaker 1: And for more, let's go to London and bring in 260 00:13:36,920 --> 00:13:40,360 Speaker 1: Bloomberg daybreak, europe Banker Caroline hepger Tom. 261 00:13:40,400 --> 00:13:42,120 Speaker 2: The last time we heard from the Bank of England 262 00:13:42,160 --> 00:13:44,280 Speaker 2: Governor Andrew Bailey, he told us that when it comes 263 00:13:44,320 --> 00:13:47,280 Speaker 2: to cutting interest rates in the UK, it's a question 264 00:13:47,480 --> 00:13:49,040 Speaker 2: of when, not if. 265 00:13:49,360 --> 00:13:54,040 Speaker 8: I think we've now changed the question really from how 266 00:13:54,080 --> 00:13:56,520 Speaker 8: restrictive do we need to be for how long do 267 00:13:56,600 --> 00:13:59,160 Speaker 8: we need to be restricted? That's important. We've also tokened 268 00:13:59,200 --> 00:14:03,880 Speaker 8: the upside bias off. We haven't cleared a risk, by 269 00:14:03,920 --> 00:14:06,040 Speaker 8: the way, a new risk actually, which is we're really 270 00:14:06,040 --> 00:14:08,520 Speaker 8: reflecting obviously tragic events of them at least and the 271 00:14:08,559 --> 00:14:12,840 Speaker 8: impact that can have through the Red Sea effects. So 272 00:14:12,880 --> 00:14:15,520 Speaker 8: I think now the question is for us as really 273 00:14:15,679 --> 00:14:17,599 Speaker 8: is for how long do we need to maintain the 274 00:14:17,720 --> 00:14:20,600 Speaker 8: stance going forwards? You know I've said a number of 275 00:14:20,640 --> 00:14:24,840 Speaker 8: times going We're not making predictions at this point we're 276 00:14:24,840 --> 00:14:27,920 Speaker 8: setting up the framework. The things that we think are 277 00:14:27,960 --> 00:14:31,840 Speaker 8: important to look at really haven't changed. Actually, so services, inflation, 278 00:14:32,280 --> 00:14:35,680 Speaker 8: aspects of the labor market, the domestic drivers of inflation. 279 00:14:36,240 --> 00:14:39,160 Speaker 2: That was Andrew Bailey speaking to Bloomberg Television after the 280 00:14:39,320 --> 00:14:43,520 Speaker 2: last rates decision. Now, in the meantime, recent economic data 281 00:14:44,120 --> 00:14:47,480 Speaker 2: signals really a step in the right direction, the Rank 282 00:14:47,520 --> 00:14:51,520 Speaker 2: of England having emphasized its data driven approach. The UK 283 00:14:51,600 --> 00:14:55,640 Speaker 2: economy rebounded in January after falling into a technical recession 284 00:14:55,640 --> 00:14:59,000 Speaker 2: in the second half of last year. In addition to that, 285 00:14:59,120 --> 00:15:04,680 Speaker 2: Britain's jobs market, which fueled inflationary pay rises immediately after 286 00:15:04,720 --> 00:15:08,880 Speaker 2: the pandemic, does seem to be cooling, and cooling pretty sharply, 287 00:15:09,120 --> 00:15:14,320 Speaker 2: with the first increase in unemployment since July. Despite those signs, though, 288 00:15:14,360 --> 00:15:17,280 Speaker 2: the recent communication has suggested that the Bank of England 289 00:15:17,360 --> 00:15:20,520 Speaker 2: is really in no hurry to ease policy, and signs 290 00:15:20,520 --> 00:15:23,520 Speaker 2: of a rebound give it cover to wait a little 291 00:15:23,520 --> 00:15:27,320 Speaker 2: bit longer for confirmation that inflation is on course for 292 00:15:27,400 --> 00:15:31,760 Speaker 2: the durabile return to the two percent target. Now, Northern 293 00:15:31,800 --> 00:15:34,920 Speaker 2: Trust chief economist Carl Tannenbaum has told us that the 294 00:15:34,920 --> 00:15:38,760 Speaker 2: Bank of England does now have a difficult choice to make. 295 00:15:39,200 --> 00:15:41,440 Speaker 9: I think it's the most complicated of the Big three. 296 00:15:41,840 --> 00:15:44,040 Speaker 9: Even the Bank of Japan, which you'll meet later this month, 297 00:15:44,560 --> 00:15:47,840 Speaker 9: is right pleased with what they're seeing on their inflation numbers. 298 00:15:47,960 --> 00:15:49,840 Speaker 9: Most of us think that rates will be in positive 299 00:15:49,960 --> 00:15:52,920 Speaker 9: territory before long. But the Bank of England, certainly a 300 00:15:53,000 --> 00:15:55,480 Speaker 9: last monetary policy committee was the first that I can 301 00:15:55,520 --> 00:15:57,880 Speaker 9: ever remember. They had votes for a hike, voste to 302 00:15:57,920 --> 00:16:02,480 Speaker 9: remain stable and votes to cut, signifying that within the 303 00:16:02,480 --> 00:16:05,440 Speaker 9: group there is a lot of disagreement over the diagnosis 304 00:16:05,440 --> 00:16:09,480 Speaker 9: of inflation. I can understand why, given the conflicting signals 305 00:16:09,480 --> 00:16:11,080 Speaker 9: that we're getting from labor markets. 306 00:16:11,600 --> 00:16:14,760 Speaker 2: How would you characterize the state of the UK economy now? 307 00:16:15,720 --> 00:16:18,400 Speaker 9: Stand still at best, I would say the quarterlyase have 308 00:16:18,960 --> 00:16:22,440 Speaker 9: barely been a positive effectslight negative, I believe, and certainly 309 00:16:22,440 --> 00:16:25,000 Speaker 9: the momentum that we're seeing in the United States is 310 00:16:25,040 --> 00:16:28,320 Speaker 9: not present here in Europe. Part of that is attributable 311 00:16:28,360 --> 00:16:30,680 Speaker 9: to the massive amount of fiscal spending that has been 312 00:16:30,720 --> 00:16:33,480 Speaker 9: done still in the United States, even past the pandemic. 313 00:16:33,880 --> 00:16:36,000 Speaker 9: That is an option that has not been available to 314 00:16:36,040 --> 00:16:40,000 Speaker 9: Europe where budget constraints. Certainly that's around Jeremy Hunt's budget 315 00:16:40,040 --> 00:16:43,800 Speaker 9: proposal illustrate how hard it will be to achieve any 316 00:16:43,880 --> 00:16:46,000 Speaker 9: kind of fiscal expansion in Europe. 317 00:16:46,560 --> 00:16:49,479 Speaker 2: That was the chief economist at Northern Trust, Carl Tannembaum, 318 00:16:49,560 --> 00:16:53,680 Speaker 2: speaking to me on Bloomberg Radio. It's also worth considering 319 00:16:53,760 --> 00:16:56,680 Speaker 2: how the decisions of international central banks will affect the 320 00:16:56,720 --> 00:16:59,680 Speaker 2: policy makers here in the UK. So recently, the US 321 00:16:59,720 --> 00:17:02,880 Speaker 2: treasure Sexuary Janet Yellen said that it is unlikely that 322 00:17:02,960 --> 00:17:07,600 Speaker 2: market interest rates will return to levels that prevailed before 323 00:17:07,680 --> 00:17:12,520 Speaker 2: the COVID nineteen pandemic. Bloomberg's chief UK economist, Dan Hansen 324 00:17:12,600 --> 00:17:16,560 Speaker 2: tells me that the UK could see a sustained raft 325 00:17:16,680 --> 00:17:20,560 Speaker 2: of rate cuts to come, but probably not at the 326 00:17:20,600 --> 00:17:21,440 Speaker 2: next meeting. 327 00:17:22,040 --> 00:17:22,240 Speaker 6: Yeah. 328 00:17:22,280 --> 00:17:23,800 Speaker 10: I mean, I think this one's going to be a 329 00:17:23,840 --> 00:17:27,560 Speaker 10: relatively they're say, boring meeting in the sense that no 330 00:17:27,600 --> 00:17:30,200 Speaker 10: one's expecting any action. There was quite a big shift 331 00:17:30,240 --> 00:17:34,560 Speaker 10: I think between November December and then to February. You know, 332 00:17:34,640 --> 00:17:37,240 Speaker 10: the bank dropped its tightening bias, we got to vote 333 00:17:37,240 --> 00:17:39,679 Speaker 10: for a cut, So we've had quite a big had 334 00:17:39,720 --> 00:17:42,680 Speaker 10: quite a big shift, and now they've made it very clear. 335 00:17:42,720 --> 00:17:45,359 Speaker 10: I mean you mentioned they're the communication they've made it 336 00:17:45,440 --> 00:17:49,359 Speaker 10: very clear that they're pretty patient about the timing of 337 00:17:49,400 --> 00:17:51,760 Speaker 10: the first rate cut and they're looking to the data. 338 00:17:52,080 --> 00:17:53,760 Speaker 10: And I think that that will continue to be the 339 00:17:53,760 --> 00:17:56,040 Speaker 10: story at this meeting, that they're just waiting for more information. 340 00:17:56,400 --> 00:17:59,520 Speaker 2: Yeah, we saw that three way split quite unusual, didn't 341 00:17:59,520 --> 00:18:02,679 Speaker 2: we about of England hawks, doves and some in the middle. 342 00:18:03,320 --> 00:18:07,840 Speaker 2: Is that likely to return in future meetings? How much 343 00:18:08,119 --> 00:18:10,240 Speaker 2: do you think that these individuals are going to coalesce 344 00:18:10,280 --> 00:18:11,320 Speaker 2: around the decision making. 345 00:18:11,600 --> 00:18:13,639 Speaker 10: Yeah, I mean, I actually think that's the thing to 346 00:18:13,720 --> 00:18:16,720 Speaker 10: watch at this meeting. So remember back in February we 347 00:18:16,760 --> 00:18:19,080 Speaker 10: had two for a hike, so Catherine Mann and Jonathan Haskell, 348 00:18:19,080 --> 00:18:21,840 Speaker 10: one for a cut, Swatidinger and the rest went for 349 00:18:21,880 --> 00:18:25,280 Speaker 10: a hold. We thought in February Jonathan Haskell would go 350 00:18:25,400 --> 00:18:28,080 Speaker 10: for a hold. I think with what's happened to the 351 00:18:28,119 --> 00:18:32,720 Speaker 10: pay data, there's a chance that he'll move to a hold. 352 00:18:33,280 --> 00:18:37,080 Speaker 10: He's been very focused on the labor market. We get 353 00:18:37,119 --> 00:18:39,760 Speaker 10: a CPI print the day before the decision that will 354 00:18:39,800 --> 00:18:42,400 Speaker 10: be very important, particularly what happens to service his inflation. 355 00:18:42,640 --> 00:18:45,040 Speaker 10: So our base case for the meeting is that he 356 00:18:45,080 --> 00:18:46,959 Speaker 10: does go for a hold, So we get a slight 357 00:18:47,119 --> 00:18:50,080 Speaker 10: shift in the makeup of the vote split. But to 358 00:18:50,119 --> 00:18:52,919 Speaker 10: sort of answer your question directly, there will still be 359 00:18:52,960 --> 00:18:55,120 Speaker 10: this three way split where you've got Catherine Mann going 360 00:18:55,160 --> 00:18:57,800 Speaker 10: for a hike, seven of them going for a hold, 361 00:18:57,920 --> 00:19:00,000 Speaker 10: and Swortidinger continuing to call for a cup. 362 00:19:00,000 --> 00:19:02,600 Speaker 2: But I mean that the labor market and the wage 363 00:19:02,640 --> 00:19:05,639 Speaker 2: data is so important. The ECB has said similar also, 364 00:19:06,440 --> 00:19:09,000 Speaker 2: the labor market in the UK does seem to be cooling. 365 00:19:09,680 --> 00:19:12,719 Speaker 2: We notice, for example, redundancies have started to tick up, 366 00:19:12,760 --> 00:19:15,479 Speaker 2: okay from a low base, but they have, but the 367 00:19:15,520 --> 00:19:18,680 Speaker 2: wage pressure is still there. There's still you know, some 368 00:19:18,800 --> 00:19:20,879 Speaker 2: sizeable wage gains being offered. 369 00:19:21,119 --> 00:19:21,880 Speaker 6: Yeah, there are. 370 00:19:21,920 --> 00:19:25,040 Speaker 10: And that's the combination of that and services inflation, of 371 00:19:25,080 --> 00:19:27,359 Speaker 10: the two things that they're just looking for information on 372 00:19:27,440 --> 00:19:30,639 Speaker 10: and some more to gain the confidence to cut. I 373 00:19:30,640 --> 00:19:32,640 Speaker 10: actually think looking at the wage data that we had 374 00:19:32,680 --> 00:19:35,760 Speaker 10: the most recent wage data, it came in pretty weak 375 00:19:35,840 --> 00:19:38,000 Speaker 10: actually on an underlying basis. I know, on a headline 376 00:19:38,040 --> 00:19:39,920 Speaker 10: basis we're still up at six percent, which is way 377 00:19:39,960 --> 00:19:43,399 Speaker 10: too high for the Bank of England to tolerate. But 378 00:19:43,480 --> 00:19:45,879 Speaker 10: actually if you look at sort of underlying measures of 379 00:19:45,920 --> 00:19:49,479 Speaker 10: pay and more timely measures of pay within that data set, 380 00:19:50,080 --> 00:19:52,440 Speaker 10: things are calling off pretty quickly, and I think we're 381 00:19:52,440 --> 00:19:54,960 Speaker 10: heading for an undershoot. On the Bank's February forecast on 382 00:19:55,000 --> 00:19:58,480 Speaker 10: private sector regular pay, quite a big undershoot. The big 383 00:19:58,560 --> 00:20:00,679 Speaker 10: risk on the horizon is the h in the national 384 00:20:00,680 --> 00:20:01,639 Speaker 10: minimum wage. 385 00:20:02,920 --> 00:20:03,360 Speaker 2: April. 386 00:20:03,560 --> 00:20:06,880 Speaker 10: Yeah, yeah, exactly, so that that will be something that 387 00:20:06,920 --> 00:20:09,720 Speaker 10: they're going to have they're going to be focused on. 388 00:20:09,800 --> 00:20:11,239 Speaker 10: I think they're going to want to see data on 389 00:20:11,280 --> 00:20:15,159 Speaker 10: that before they go ahead and cut. So, but I 390 00:20:15,160 --> 00:20:17,080 Speaker 10: think the news on pay has been actually since the 391 00:20:17,080 --> 00:20:19,560 Speaker 10: start of the year, and on inflation generally has been 392 00:20:19,880 --> 00:20:23,240 Speaker 10: been pretty good. Things are tracking their forecast, if anything, 393 00:20:23,280 --> 00:20:25,840 Speaker 10: coming in slightly below it, so that's that's good news. 394 00:20:27,119 --> 00:20:29,920 Speaker 2: In terms of cuts them for the rest of the year. 395 00:20:30,280 --> 00:20:32,720 Speaker 2: You know, we're pricing in less for the Bank of 396 00:20:32,760 --> 00:20:35,600 Speaker 2: England than for other major central backs. Do you think 397 00:20:35,640 --> 00:20:36,840 Speaker 2: that that holds this year? 398 00:20:36,880 --> 00:20:39,000 Speaker 10: That view, so we have a slightly different view on 399 00:20:39,040 --> 00:20:42,040 Speaker 10: all of this. I think one interesting thing with market 400 00:20:42,080 --> 00:20:44,120 Speaker 10: pricing is that you have to remember it's a mean 401 00:20:44,240 --> 00:20:49,080 Speaker 10: or an average, so that that could potentially be reflecting 402 00:20:49,080 --> 00:20:51,479 Speaker 10: two scenarios, one where they don't cut a tool and 403 00:20:51,480 --> 00:20:53,600 Speaker 10: one where they actually cut quite a lot. And actually 404 00:20:53,680 --> 00:20:57,040 Speaker 10: we're in that second camp. So we're in the view 405 00:20:57,040 --> 00:20:59,720 Speaker 10: that once they start, at least for a time, they'll 406 00:20:59,760 --> 00:21:02,199 Speaker 10: cut once a meeting, they'll probably get the base rate 407 00:21:02,240 --> 00:21:05,280 Speaker 10: down to about four percent, and then they'll take stock. 408 00:21:05,320 --> 00:21:08,720 Speaker 10: Because the question really with this easing cycle is where 409 00:21:08,720 --> 00:21:11,560 Speaker 10: it's neutral, like where is the sort of long term rate, 410 00:21:11,600 --> 00:21:14,560 Speaker 10: where long term level where rates will settle, And there's 411 00:21:14,560 --> 00:21:17,639 Speaker 10: obviously an enormous amount of uncertainty about that. But I 412 00:21:17,640 --> 00:21:19,439 Speaker 10: think the reason why they will be able to go 413 00:21:19,480 --> 00:21:21,040 Speaker 10: one A meeting, one of the big reasons they'll be 414 00:21:21,080 --> 00:21:22,919 Speaker 10: able to go one A meeting is that in the 415 00:21:22,920 --> 00:21:24,879 Speaker 10: second half of or from the spring and into the 416 00:21:24,880 --> 00:21:26,760 Speaker 10: second half of the year, inflation is likely to be 417 00:21:26,760 --> 00:21:29,320 Speaker 10: below two percent because of what we're going to see 418 00:21:29,320 --> 00:21:32,080 Speaker 10: with energy prices. Yes, there's going to be core inflation 419 00:21:32,200 --> 00:21:34,920 Speaker 10: still going to be around three percent, but I think 420 00:21:35,280 --> 00:21:38,960 Speaker 10: the sort of risk to inflation expectations has gone. Bailey 421 00:21:39,040 --> 00:21:41,640 Speaker 10: sort of hinted at that in his recent comments that 422 00:21:42,119 --> 00:21:45,440 Speaker 10: they're less worried about second round effects. So I think 423 00:21:45,480 --> 00:21:48,520 Speaker 10: there is a case of taking away some of that restrictiveness, 424 00:21:48,520 --> 00:21:50,680 Speaker 10: and in argue, even if you're at four percent, the 425 00:21:50,840 --> 00:21:52,800 Speaker 10: monetary party would still be weighing on the economy, it 426 00:21:52,800 --> 00:21:54,919 Speaker 10: would still be restrictive. So I think there is a 427 00:21:54,960 --> 00:21:58,440 Speaker 10: case for bringing rates down relatively quickly and then taking stock. 428 00:21:58,840 --> 00:21:59,439 Speaker 6: Yeah. 429 00:22:00,080 --> 00:22:03,560 Speaker 2: Interesting, I mean that sort of reflected in what Janet 430 00:22:03,600 --> 00:22:06,080 Speaker 2: Yellen and the US Treasury sectory has been talking about 431 00:22:06,119 --> 00:22:09,040 Speaker 2: in recent days. You know that we would be unlikely 432 00:22:09,080 --> 00:22:12,040 Speaker 2: to return to pre pandemic levels in terms of yields. 433 00:22:12,119 --> 00:22:14,520 Speaker 2: US treasure yields in the twenty ten on average two 434 00:22:14,560 --> 00:22:16,880 Speaker 2: point three nine percent, but we're not likely to get 435 00:22:16,880 --> 00:22:18,840 Speaker 2: back to that. But interesting that you say, you know, 436 00:22:18,880 --> 00:22:21,120 Speaker 2: for five and a quarter to come down to four 437 00:22:21,200 --> 00:22:24,040 Speaker 2: is the expectation. Do you think that the Bank of 438 00:22:24,080 --> 00:22:28,320 Speaker 2: England will be influenced decisively by the Federal Reserve? I mean, 439 00:22:28,400 --> 00:22:30,159 Speaker 2: history surely would say yes. 440 00:22:31,000 --> 00:22:33,440 Speaker 10: I don't know about that. So I think the market 441 00:22:33,440 --> 00:22:38,040 Speaker 10: perception is that the Fed leads the way in this 442 00:22:38,119 --> 00:22:41,000 Speaker 10: inflation cycle. You can see why that would be the 443 00:22:41,080 --> 00:22:44,359 Speaker 10: case because inflation is about six months ahead in the US. 444 00:22:44,400 --> 00:22:46,800 Speaker 10: The sort of pro the disinflationary process is about six 445 00:22:46,840 --> 00:22:49,440 Speaker 10: months ahead. The challenge to it, I guess, would be 446 00:22:49,600 --> 00:22:51,720 Speaker 10: what happened in at the end of twenty twenty one, 447 00:22:51,720 --> 00:22:54,160 Speaker 10: where the Bank started its hiking cycle, and the FED 448 00:22:54,200 --> 00:22:58,280 Speaker 10: didn't start until early twenty twenty two, so it's not 449 00:22:59,119 --> 00:23:00,560 Speaker 10: completely bound either FED. 450 00:23:00,600 --> 00:23:01,240 Speaker 6: I mean it can't. 451 00:23:01,440 --> 00:23:04,080 Speaker 10: Obviously, it can't completely disconnect purely because of the sort 452 00:23:04,080 --> 00:23:06,199 Speaker 10: of what might happen to the exchange rate as a result. 453 00:23:07,200 --> 00:23:11,080 Speaker 10: But I think it the economic picture, the sort of 454 00:23:11,080 --> 00:23:14,640 Speaker 10: growth picture is very different in the UK, and as 455 00:23:14,680 --> 00:23:16,920 Speaker 10: I say, there's going to be this story around below 456 00:23:16,960 --> 00:23:19,679 Speaker 10: two percent inflation here. Granted it's as a result of 457 00:23:19,760 --> 00:23:23,760 Speaker 10: energy prices, but nonetheless that that changes the picture dramatically. 458 00:23:24,200 --> 00:23:26,320 Speaker 10: And I think the other thing to play in. You've 459 00:23:26,359 --> 00:23:28,000 Speaker 10: got the FED on one side, you've got the political 460 00:23:28,040 --> 00:23:30,639 Speaker 10: picture of the domestic political picture on the other, and 461 00:23:30,680 --> 00:23:34,680 Speaker 10: the noises coming from MPs. If inflation is below two 462 00:23:34,680 --> 00:23:36,560 Speaker 10: percent and the Bank of England isn't seen to be 463 00:23:36,600 --> 00:23:39,080 Speaker 10: sort of doing something about that and responding to it, 464 00:23:39,600 --> 00:23:40,560 Speaker 10: the pressure is going to mount. 465 00:23:40,640 --> 00:23:45,719 Speaker 2: I think, yeah, election general election expected in the coming months. 466 00:23:45,720 --> 00:23:48,520 Speaker 2: Of course, do you think that it could be good 467 00:23:48,560 --> 00:23:51,879 Speaker 2: news for UK equities if we get right cuts of 468 00:23:51,920 --> 00:23:53,560 Speaker 2: the magnitude that you've talked about. 469 00:23:54,680 --> 00:23:58,520 Speaker 10: I mean I would, I would differentiate between cyclical and 470 00:23:58,560 --> 00:24:01,040 Speaker 10: structural here. So when you when you cut rates. It's 471 00:24:01,080 --> 00:24:03,280 Speaker 10: a cyclical boost to the economy, and I guess it 472 00:24:03,320 --> 00:24:06,639 Speaker 10: goes to the problem why UKs have underperformed even if 473 00:24:06,640 --> 00:24:08,760 Speaker 10: it's one hundred basis points of rate cuts two hundred 474 00:24:08,760 --> 00:24:10,520 Speaker 10: basis points of raightcuts. Are we going to get a 475 00:24:10,520 --> 00:24:13,360 Speaker 10: cyclical boost to the economy. Does that change the underlying 476 00:24:13,400 --> 00:24:16,880 Speaker 10: structural picture of wheat productivity growth? No, so, I don't 477 00:24:16,920 --> 00:24:18,440 Speaker 10: think it's going to be a long term boost to 478 00:24:18,800 --> 00:24:19,520 Speaker 10: the exity picture. 479 00:24:19,560 --> 00:24:19,720 Speaker 7: Now. 480 00:24:20,000 --> 00:24:23,240 Speaker 2: That was Bloomberg's chief for UK economist Dan Hanson discussing 481 00:24:23,320 --> 00:24:26,240 Speaker 2: the path ahead for UK rates as we await the 482 00:24:26,320 --> 00:24:30,000 Speaker 2: twenty first of March Bank of England decision. I'm Caroline 483 00:24:30,000 --> 00:24:32,520 Speaker 2: Hepgar here in London. You can catch us every weekday 484 00:24:32,560 --> 00:24:36,000 Speaker 2: morning for Bloomberg Daybreak. You're at beginning at five am 485 00:24:36,080 --> 00:24:38,399 Speaker 2: in London and one am on Wall Street. 486 00:24:38,680 --> 00:24:39,040 Speaker 7: Tom. 487 00:24:39,359 --> 00:24:42,480 Speaker 1: Thank you, Caroline, and coming up on Bloomberg day Break weekend. 488 00:24:42,760 --> 00:24:45,680 Speaker 1: What could be a big move from Australia's Central Bank 489 00:24:45,720 --> 00:24:49,399 Speaker 1: this week and earnings from one of China's biggest tech companies. 490 00:24:49,720 --> 00:25:04,479 Speaker 1: I'm Tom Busby and this is Bloomberg. I'm Tom Busby 491 00:25:04,480 --> 00:25:06,119 Speaker 1: in New York with your global look ahead at the 492 00:25:06,119 --> 00:25:09,040 Speaker 1: top stories for investors in the coming week. The Reserve 493 00:25:09,080 --> 00:25:12,280 Speaker 1: Bank of Australia set to announce its next decision on 494 00:25:12,440 --> 00:25:15,800 Speaker 1: interest rates. We'll have more shortly with Doug Chrisner, but 495 00:25:15,920 --> 00:25:19,479 Speaker 1: first let's head to Hong Kong and Brian Curtis. 496 00:25:19,240 --> 00:25:22,080 Speaker 3: Tom we look ahead to earnings from ten cent holdings. 497 00:25:22,520 --> 00:25:24,480 Speaker 3: It might be a little early, but we want to 498 00:25:24,520 --> 00:25:27,639 Speaker 3: see if a little less scrutiny on the regulatory front 499 00:25:28,000 --> 00:25:31,359 Speaker 3: might grease the wheels a bit four ten cent In China, 500 00:25:31,400 --> 00:25:34,240 Speaker 3: the NPC approved a ten percent increase in the budget 501 00:25:34,280 --> 00:25:38,600 Speaker 3: for science and technology, and policymakers are desperate to unleash 502 00:25:38,680 --> 00:25:43,440 Speaker 3: what's referred to as quality productive forces. Bloomberg Intelligence says 503 00:25:43,440 --> 00:25:46,120 Speaker 3: that ten Cents should be able to increase revenues by 504 00:25:46,119 --> 00:25:49,600 Speaker 3: double digits in twenty twenty four. To talk a little 505 00:25:49,640 --> 00:25:53,639 Speaker 3: bit about the earnings, were joined by Robert Lee, Bloomberg. 506 00:25:53,119 --> 00:25:54,680 Speaker 6: Intelligence Senior analyst. 507 00:25:55,440 --> 00:25:58,000 Speaker 3: Thanks very much Robert for being with us. So ten 508 00:25:58,040 --> 00:26:00,720 Speaker 3: Cents third quarter revenue was twenty one point five billion 509 00:26:00,760 --> 00:26:03,920 Speaker 3: dollars and that was up ten percent year over a year. 510 00:26:04,840 --> 00:26:07,199 Speaker 3: Let's start off with this, what are you expecting on 511 00:26:07,320 --> 00:26:10,360 Speaker 3: revenue and profit in this latest reporting period. 512 00:26:10,160 --> 00:26:13,639 Speaker 11: So I don't expect any major surprises from the results 513 00:26:13,720 --> 00:26:16,639 Speaker 11: when we hear them next week. The company should have 514 00:26:16,720 --> 00:26:20,800 Speaker 11: experienced a solid rebound driven by the reopening of China's economy, 515 00:26:21,119 --> 00:26:24,719 Speaker 11: with earnings increasing in the thirty percent plus range, so 516 00:26:25,040 --> 00:26:27,560 Speaker 11: that you know they're set to report strong figures. But 517 00:26:27,680 --> 00:26:30,200 Speaker 11: clearly the stock market's always looking ahead into this year, 518 00:26:30,440 --> 00:26:32,960 Speaker 11: and as you already said in your introduction, whilst the 519 00:26:33,040 --> 00:26:35,760 Speaker 11: growth is likely to normalize this year, this is a 520 00:26:35,800 --> 00:26:40,080 Speaker 11: company that's still capable of delivering solid double digit free 521 00:26:40,080 --> 00:26:42,720 Speaker 11: cash flow growth for the next three years at least. 522 00:26:42,840 --> 00:26:45,880 Speaker 3: So you're more constructive obviously on the company now than 523 00:26:45,920 --> 00:26:47,879 Speaker 3: you have been over the past year. What's at the 524 00:26:47,880 --> 00:26:48,399 Speaker 3: center of that. 525 00:26:48,480 --> 00:26:51,600 Speaker 11: When we launched coverage on ten Cent approximately a year ago, 526 00:26:52,000 --> 00:26:55,520 Speaker 11: I think there were very high expectations, driven by the 527 00:26:55,640 --> 00:26:58,720 Speaker 11: optimism that came with the reopening of China's economy, and 528 00:26:58,760 --> 00:27:00,280 Speaker 11: there was a view out there in the market that 529 00:27:00,320 --> 00:27:02,760 Speaker 11: the company we'd be back to business as usual. We 530 00:27:02,800 --> 00:27:06,760 Speaker 11: didn't believe that view, and core thesis focused on some 531 00:27:06,960 --> 00:27:12,159 Speaker 11: medium term structural headwinds that the company's likely to experience. 532 00:27:12,240 --> 00:27:16,440 Speaker 11: So we maintain that view. But since we launched coverage 533 00:27:16,440 --> 00:27:17,480 Speaker 11: on them close. 534 00:27:17,280 --> 00:27:17,880 Speaker 6: To a year ago. 535 00:27:17,960 --> 00:27:21,560 Speaker 11: The stock prices as substantially underperformed. I mean it's down 536 00:27:21,600 --> 00:27:25,280 Speaker 11: over thirty percent in absolute terms. And also there's been 537 00:27:25,520 --> 00:27:28,440 Speaker 11: a rebalancing of expectations in the market, and I think 538 00:27:28,480 --> 00:27:31,240 Speaker 11: the market is taking a more realistic view as to 539 00:27:31,400 --> 00:27:35,040 Speaker 11: what level of growth this company can realistically deliver over 540 00:27:35,400 --> 00:27:37,840 Speaker 11: as I said, the next few years. So to expect 541 00:27:37,840 --> 00:27:40,800 Speaker 11: this company to deliver double digit cash growth in the 542 00:27:40,920 --> 00:27:44,520 Speaker 11: low to mid teen rage is totally appropriate. And I 543 00:27:44,520 --> 00:27:47,120 Speaker 11: think there's now you know, things are more imbalanced, which 544 00:27:47,119 --> 00:27:49,760 Speaker 11: is why we recently added it to our focus list 545 00:27:49,800 --> 00:27:51,000 Speaker 11: as an idea. 546 00:27:51,200 --> 00:27:55,360 Speaker 3: I mentioned a possible lighter touch from regulators that might 547 00:27:55,400 --> 00:27:55,919 Speaker 3: be coming. 548 00:27:55,960 --> 00:27:57,280 Speaker 6: What are you hearing on that level? 549 00:27:57,400 --> 00:27:59,680 Speaker 11: Okay, I think on that again. Winding the clock back 550 00:27:59,720 --> 00:28:03,120 Speaker 11: to two three years ago, China's tech sectors dominated by 551 00:28:03,160 --> 00:28:06,720 Speaker 11: these two internet LIFs so Tencent and Ali Baba, which 552 00:28:06,720 --> 00:28:09,840 Speaker 11: have been arguably become too powerful. I mean they had 553 00:28:09,880 --> 00:28:11,880 Speaker 11: fingers in a lot of pies. They dominated a lot 554 00:28:11,880 --> 00:28:15,760 Speaker 11: of industries, with allegations that they potentially abuse their power 555 00:28:15,800 --> 00:28:18,200 Speaker 11: in some way, you know, trying to shut out competition 556 00:28:18,280 --> 00:28:20,440 Speaker 11: or whatever. So I think of a lot of regulation 557 00:28:20,520 --> 00:28:22,200 Speaker 11: that we've seen come through in the last couple of 558 00:28:22,320 --> 00:28:24,720 Speaker 11: years as being trying to level the playing field. That's 559 00:28:24,760 --> 00:28:27,440 Speaker 11: one thing. I think the second focus that the regulator 560 00:28:27,680 --> 00:28:31,600 Speaker 11: has been to protect the more vulnerable in society, particularly children, etc. 561 00:28:32,560 --> 00:28:34,399 Speaker 11: So all of that has now worked through and I 562 00:28:34,400 --> 00:28:37,280 Speaker 11: think we're you know, we're entering a period of more 563 00:28:37,320 --> 00:28:40,960 Speaker 11: stability on the regulatory front, and particularly given the economic 564 00:28:41,000 --> 00:28:44,080 Speaker 11: challenges that China faces, I think the Chinese government has 565 00:28:44,120 --> 00:28:46,520 Speaker 11: now come to realize that actually we need the support 566 00:28:46,560 --> 00:28:49,080 Speaker 11: of these two companies and you know, their core to 567 00:28:49,320 --> 00:28:52,320 Speaker 11: the future direction of the tech sector and you know, 568 00:28:52,400 --> 00:28:55,000 Speaker 11: major drivers of economic growth. So I think we've seen 569 00:28:55,000 --> 00:28:58,720 Speaker 11: a more constructive tone from central government and expect that 570 00:28:58,760 --> 00:29:00,840 Speaker 11: to continue over the next few years. 571 00:29:01,160 --> 00:29:04,640 Speaker 3: What have we seen with game approvals by the authorities 572 00:29:05,160 --> 00:29:07,920 Speaker 3: and also how tough are the curbs that are in 573 00:29:08,000 --> 00:29:11,720 Speaker 3: place on trying to monetize from withinside these games. 574 00:29:11,800 --> 00:29:16,360 Speaker 11: We've seen a normalization of the game approvals, having previously experienced, 575 00:29:16,440 --> 00:29:19,960 Speaker 11: you know, a couple of hiatus where the approvals completely stopped. 576 00:29:20,440 --> 00:29:22,760 Speaker 11: So we're now back to a run rate of around 577 00:29:22,760 --> 00:29:25,600 Speaker 11: one hundred or so approvals a month, which is still 578 00:29:25,680 --> 00:29:27,960 Speaker 11: well down on where we were two or three years ago. 579 00:29:28,240 --> 00:29:29,800 Speaker 11: But as I said, I think we've hit a steady 580 00:29:29,800 --> 00:29:32,680 Speaker 11: state on that front. Ten Cent and its closest competitive 581 00:29:32,760 --> 00:29:35,520 Speaker 11: net Ease are picking up a reasonable number of approvals, 582 00:29:35,800 --> 00:29:39,080 Speaker 11: which helps give you some confidence that this business can 583 00:29:39,120 --> 00:29:42,760 Speaker 11: again achieve double digit earnings growth over the next few years. Now, 584 00:29:42,800 --> 00:29:46,720 Speaker 11: again that does not match the strong twenty thirty percent 585 00:29:46,800 --> 00:29:50,440 Speaker 11: growth they delivered two three years ago, and again tying 586 00:29:50,480 --> 00:29:54,120 Speaker 11: in with the structural headwinds that I hinted at a 587 00:29:54,160 --> 00:29:56,440 Speaker 11: few minutes ago, I think the business is entering a 588 00:29:56,480 --> 00:30:00,200 Speaker 11: period of slower growth. But still I don't I think 589 00:30:00,200 --> 00:30:02,640 Speaker 11: there's any major concern with a business that can grow 590 00:30:02,720 --> 00:30:05,000 Speaker 11: double digit So I think, you know, we're seeing more 591 00:30:05,040 --> 00:30:06,120 Speaker 11: stability on that front. 592 00:30:06,640 --> 00:30:10,000 Speaker 3: Most companies are somewhat reliant on the general levels of 593 00:30:10,080 --> 00:30:13,840 Speaker 3: growth in the country in which they operate. With ten Cent, 594 00:30:13,960 --> 00:30:16,440 Speaker 3: it has so many irons in the fire, from cloud 595 00:30:16,480 --> 00:30:21,560 Speaker 3: computing to gaming to fintech. I'm kind of curious when 596 00:30:21,600 --> 00:30:24,960 Speaker 3: we look at the total pie. Does Tencent move and 597 00:30:25,000 --> 00:30:28,560 Speaker 3: groove more on how the economy is doing, or do 598 00:30:28,600 --> 00:30:31,560 Speaker 3: they have enough separate drivers that they can if they're 599 00:30:31,600 --> 00:30:34,400 Speaker 3: relatively left alone by the regulators that they can make 600 00:30:34,480 --> 00:30:37,240 Speaker 3: money even during difficult times. How do you see that balance. 601 00:30:37,520 --> 00:30:41,200 Speaker 11: That's a great question. I mean, first observation is whilst 602 00:30:41,200 --> 00:30:44,400 Speaker 11: again people often mentioned Ali Baba and Tenset and the 603 00:30:44,480 --> 00:30:48,560 Speaker 11: same breadth breath, they're very different businesses. Ali Baba's far 604 00:30:48,600 --> 00:30:52,080 Speaker 11: more focused on the e commerce side, which is a 605 00:30:52,080 --> 00:30:55,640 Speaker 11: smaller element with intencent So I think relative to Ali 606 00:30:55,640 --> 00:30:58,160 Speaker 11: Baba and some of the e commerce peers who are 607 00:30:58,160 --> 00:31:02,840 Speaker 11: suffering from heightened competition from low cost new entrance, that's 608 00:31:02,880 --> 00:31:04,720 Speaker 11: not an issue for ten Cents. It's a far more 609 00:31:04,760 --> 00:31:09,080 Speaker 11: diversified business with the benefits from stronger technical barriers to 610 00:31:09,200 --> 00:31:12,240 Speaker 11: entry in its core markets. So it's a much better, 611 00:31:12,320 --> 00:31:15,840 Speaker 11: more diversified story. It is still tied to economic growth. 612 00:31:15,920 --> 00:31:18,520 Speaker 11: But again if you look at their fintech business and 613 00:31:18,600 --> 00:31:21,000 Speaker 11: you look at their waihin or we Chat super app, 614 00:31:21,280 --> 00:31:24,000 Speaker 11: I mean, this is a ubiquitous part of life in China. 615 00:31:24,160 --> 00:31:26,920 Speaker 11: If you look at the process that everyday payments, so 616 00:31:27,400 --> 00:31:30,920 Speaker 11: buying coffees, buying taxis, you know, eating out restaurants, So 617 00:31:30,960 --> 00:31:34,560 Speaker 11: it's sort of every day spend which is still sensitive 618 00:31:34,640 --> 00:31:37,200 Speaker 11: to the overall economic outlook to some degree. But I 619 00:31:37,240 --> 00:31:40,200 Speaker 11: would argue is less sensitive than the pure e commerce 620 00:31:40,240 --> 00:31:45,040 Speaker 11: plays who are more dependent on larger purchases, which are 621 00:31:45,120 --> 00:31:47,880 Speaker 11: things that people could cut back on if they're looking 622 00:31:47,880 --> 00:31:48,880 Speaker 11: to tighten their belts. 623 00:31:49,040 --> 00:31:53,400 Speaker 3: Robert, Thank you, Robert Lee, Bloomberg Intelligence Senior Analyst. Now 624 00:31:53,480 --> 00:31:54,640 Speaker 3: let's get too Doug. 625 00:31:54,520 --> 00:31:58,360 Speaker 12: Grisner, Thanks Brian. Australia's Central Bank will be meeting in 626 00:31:58,400 --> 00:32:01,280 Speaker 12: the weak ahead, and policy makers down Under will consider 627 00:32:01,360 --> 00:32:04,360 Speaker 12: whether now is the time to begin lowering interest rates. 628 00:32:04,760 --> 00:32:08,320 Speaker 12: Let's preview the meeting with Bloomberg's James McIntyre, our economist 629 00:32:08,440 --> 00:32:12,960 Speaker 12: covering Australia and New Zealand. I'm wondering, James, whether now 630 00:32:13,080 --> 00:32:15,600 Speaker 12: is the time to talk about a rate cut or 631 00:32:15,680 --> 00:32:16,640 Speaker 12: maybe it's too soon. 632 00:32:16,760 --> 00:32:18,760 Speaker 13: Well, in our of you, we think it's too soon. 633 00:32:19,480 --> 00:32:22,400 Speaker 13: So the RBA has received some data that they that 634 00:32:22,440 --> 00:32:26,000 Speaker 13: they've liked. Over since their February meeting. We're on the 635 00:32:26,080 --> 00:32:29,120 Speaker 13: new eight meetings a year, no longer monthly meeting schedule 636 00:32:29,160 --> 00:32:32,000 Speaker 13: for the RBA, so our next meeting won't come before May, 637 00:32:32,440 --> 00:32:36,800 Speaker 13: and they've had GDP data CPI data. They've said in 638 00:32:36,880 --> 00:32:39,640 Speaker 13: comments that they've been broadly in line with what they 639 00:32:39,640 --> 00:32:43,560 Speaker 13: are expecting and what their February forecast suggested, So there's 640 00:32:43,720 --> 00:32:46,280 Speaker 13: likely to be nothing that's really going to give them 641 00:32:46,280 --> 00:32:48,360 Speaker 13: any kind of burning platform or push them to do 642 00:32:48,400 --> 00:32:50,920 Speaker 13: anything other than stay on hold of this meeting. 643 00:32:50,720 --> 00:32:52,520 Speaker 12: Here in the US, one of the debates that we're 644 00:32:52,560 --> 00:32:55,440 Speaker 12: having is whether or not there is a risk that 645 00:32:55,480 --> 00:32:58,640 Speaker 12: the Fed may need to remain higher for longer because 646 00:32:58,720 --> 00:33:02,160 Speaker 12: inflation is just too sticky, too stubborn. Is there the 647 00:33:02,200 --> 00:33:03,960 Speaker 12: same risk in Australia. 648 00:33:03,480 --> 00:33:05,320 Speaker 13: There has been that concern, and in fact, some of 649 00:33:05,320 --> 00:33:07,840 Speaker 13: the narrative that we've seen around the RBA is that 650 00:33:08,240 --> 00:33:10,880 Speaker 13: because they were late to the party on hiking rates 651 00:33:10,880 --> 00:33:12,640 Speaker 13: and haven't lifted as much as the fair that they 652 00:33:12,720 --> 00:33:16,120 Speaker 13: might be slow slow to begin easing as well, or 653 00:33:16,200 --> 00:33:18,680 Speaker 13: might be one of the laggards when the using cycle 654 00:33:18,720 --> 00:33:23,480 Speaker 13: eventually arises. Our viyw on that is that this pain 655 00:33:23,520 --> 00:33:28,360 Speaker 13: that is actually much much more effective when it comes 656 00:33:28,400 --> 00:33:31,480 Speaker 13: to monetary policy within the Australian economy is something that 657 00:33:31,560 --> 00:33:34,440 Speaker 13: means that well, even though the RBA might be seeing 658 00:33:34,960 --> 00:33:37,880 Speaker 13: inflation that they're not quite comfortable with, they know that 659 00:33:37,920 --> 00:33:41,000 Speaker 13: the damage that's being done to households is extreme enough 660 00:33:41,240 --> 00:33:44,200 Speaker 13: that will be guaranteeing inflation will be going where it 661 00:33:44,240 --> 00:33:47,920 Speaker 13: wants to. There's nothing like a pretty weak demand environment 662 00:33:48,240 --> 00:33:50,920 Speaker 13: to mean that some of that stickiness inflation actually becomes 663 00:33:50,960 --> 00:33:53,760 Speaker 13: a lot less sticky, and some of those price rises 664 00:33:53,880 --> 00:33:56,920 Speaker 13: or increases eroad a little bit fast than some are expecting. 665 00:33:57,080 --> 00:33:59,000 Speaker 13: We think that's where the economy is likely to go 666 00:33:59,040 --> 00:34:00,720 Speaker 13: down under the coming months. 667 00:34:00,800 --> 00:34:03,760 Speaker 12: So we've talked about the mortgage market, touched on households. 668 00:34:03,960 --> 00:34:06,720 Speaker 12: How are businesses feeling right now and what's showing up 669 00:34:06,760 --> 00:34:08,080 Speaker 12: when you look at the labor market. 670 00:34:08,160 --> 00:34:12,360 Speaker 13: Well, business confidence, it's okay, some of the conditions are soft. 671 00:34:12,680 --> 00:34:15,880 Speaker 13: We did get a reading from businesses about their investment 672 00:34:15,920 --> 00:34:19,919 Speaker 13: plans and they are actually indicating that things are very 673 00:34:20,000 --> 00:34:22,960 Speaker 13: very strong, quite good, especially in the non mining sector, 674 00:34:23,160 --> 00:34:25,160 Speaker 13: which is something that the RBA has been wanting to 675 00:34:25,160 --> 00:34:28,000 Speaker 13: see for close to a decade now, since the mining 676 00:34:28,000 --> 00:34:31,080 Speaker 13: of the previous mining boom peaked back in twenty twelve 677 00:34:31,120 --> 00:34:34,719 Speaker 13: twenty thirteen, looking for those non mining firms to step up. 678 00:34:35,040 --> 00:34:38,319 Speaker 13: A population boom has seen them step up, But we 679 00:34:38,360 --> 00:34:41,319 Speaker 13: are still at this point where I think that you know, 680 00:34:41,360 --> 00:34:44,359 Speaker 13: even though things are looking good, you can still have 681 00:34:44,440 --> 00:34:47,799 Speaker 13: a good old fashioned demand downturn that could see those 682 00:34:47,800 --> 00:34:52,520 Speaker 13: businesses decide that a prospective investment plan might not make sense, 683 00:34:52,800 --> 00:34:55,239 Speaker 13: and if they all pull back on mass with the 684 00:34:55,280 --> 00:34:58,680 Speaker 13: economy looking potentially a bit weaker than many might have suggested, 685 00:34:59,080 --> 00:35:03,000 Speaker 13: that's that's the RBA could create by staying too high 686 00:35:03,000 --> 00:35:04,759 Speaker 13: for too long, and it's one that we think that 687 00:35:04,760 --> 00:35:06,839 Speaker 13: they'll want to avoid. And that's why we think that 688 00:35:06,880 --> 00:35:09,480 Speaker 13: some of that softening on rates will come through, maybe 689 00:35:09,520 --> 00:35:12,719 Speaker 13: not this month, but definitely when we see them meet 690 00:35:12,760 --> 00:35:14,359 Speaker 13: again later in May. 691 00:35:14,520 --> 00:35:16,520 Speaker 12: Well, that was my next question. If you could kind 692 00:35:16,520 --> 00:35:19,560 Speaker 12: of lay out the pivoting. Let's accept your notion right 693 00:35:19,600 --> 00:35:22,879 Speaker 12: now and the notion that Bloomberg Economics is operating under, 694 00:35:23,120 --> 00:35:25,320 Speaker 12: which is that the cash rate will be held steady 695 00:35:25,440 --> 00:35:27,840 Speaker 12: at four point three five percent in the coming week 696 00:35:28,360 --> 00:35:31,760 Speaker 12: when it's time to pivot, can we talk about magnitude 697 00:35:31,800 --> 00:35:34,239 Speaker 12: and trajectory. What might that look like? 698 00:35:34,360 --> 00:35:36,360 Speaker 13: Look it really depends how the economy is shaping up. 699 00:35:36,440 --> 00:35:36,600 Speaker 3: Right. 700 00:35:36,680 --> 00:35:40,040 Speaker 13: We could have a scenario where if there is some 701 00:35:40,080 --> 00:35:42,240 Speaker 13: sort of shock that comes out of left field, obviously 702 00:35:42,239 --> 00:35:44,800 Speaker 13: not our base case, then we could see the RBA 703 00:35:44,920 --> 00:35:48,000 Speaker 13: move quite sharply. That's what they've done before, even with 704 00:35:48,080 --> 00:35:52,200 Speaker 13: inflation outcomes in the rear view mirror remaining quite high. 705 00:35:52,440 --> 00:35:55,800 Speaker 13: They still cut and cut aggressively. But let's talk about 706 00:35:56,160 --> 00:35:59,120 Speaker 13: not the kind of hypothetical risk case, but what is 707 00:35:59,680 --> 00:36:02,560 Speaker 13: more our base case scenario. Well, we see the RBA 708 00:36:02,719 --> 00:36:07,480 Speaker 13: beginning to deliver our more gradual twenty five basis points 709 00:36:07,520 --> 00:36:10,719 Speaker 13: maybe once a quarter hikes as sorry cuts, I should say, 710 00:36:11,080 --> 00:36:13,400 Speaker 13: as the easing cycle goes through. So we think that 711 00:36:13,840 --> 00:36:17,800 Speaker 13: could begin in May. However, the next sort of set 712 00:36:17,960 --> 00:36:21,000 Speaker 13: of opportunities we think would then be if they decide 713 00:36:21,040 --> 00:36:23,400 Speaker 13: to stay on hold in May and see what's going 714 00:36:23,400 --> 00:36:25,719 Speaker 13: on through the middle of the year in Australia, That 715 00:36:25,800 --> 00:36:29,680 Speaker 13: around about August could be the next opportunity. That February, May, 716 00:36:29,800 --> 00:36:32,320 Speaker 13: August and November they're those key meetings where the RBA 717 00:36:32,440 --> 00:36:35,879 Speaker 13: does their big quarterly forecast reviews, and we think that 718 00:36:35,960 --> 00:36:38,880 Speaker 13: once they do do the review this time around, it 719 00:36:38,880 --> 00:36:41,399 Speaker 13: could be enough to justify a cut. If not, we'll 720 00:36:41,440 --> 00:36:44,920 Speaker 13: see that cut coming in August and a steady stream 721 00:36:45,000 --> 00:36:48,759 Speaker 13: of ongoing twenty five basis point cuts. If there's no 722 00:36:49,160 --> 00:36:53,359 Speaker 13: emergency situation which suggesting that demand is really really weak 723 00:36:53,480 --> 00:36:55,160 Speaker 13: and they need to do a lot more and a 724 00:36:55,160 --> 00:36:56,080 Speaker 13: lot more in a hurry. 725 00:36:56,239 --> 00:36:58,960 Speaker 12: Great insights. James, thanks for stopping by to help us 726 00:36:58,960 --> 00:37:03,359 Speaker 12: set up the ring. In the coming week, Bloomberg's James McIntyre, 727 00:37:03,760 --> 00:37:08,000 Speaker 12: our economist covering Australia and New Zealand. I'm Doug Prisner. 728 00:37:08,000 --> 00:37:10,920 Speaker 12: You can join Brian Curtis and myself weekdays here from 729 00:37:10,920 --> 00:37:13,839 Speaker 12: Bloomberg day Break Asia, beginning at eight am in Hong 730 00:37:13,960 --> 00:37:16,360 Speaker 12: Kong eight pm on Wall Street. 731 00:37:16,600 --> 00:37:19,239 Speaker 1: Tom, Thank you, Doug, and that does it for this 732 00:37:19,400 --> 00:37:22,120 Speaker 1: edition of Bloomberg day Break Weekend. Join us again Monday 733 00:37:22,160 --> 00:37:24,240 Speaker 1: morning at five am Wall Street time for the latest 734 00:37:24,239 --> 00:37:26,680 Speaker 1: on markets overseas and the news you need to start 735 00:37:26,680 --> 00:37:29,600 Speaker 1: your day. I'm Tom Buzzby. Stay with us. Top stories 736 00:37:29,600 --> 00:37:32,000 Speaker 1: and global business headlines are coming up right now.