1 00:00:02,279 --> 00:00:04,640 Speaker 1: This is Bloomberg day Break Weekend, our global look at 2 00:00:04,640 --> 00:00:06,720 Speaker 1: the top stories in the coming week from our day 3 00:00:06,720 --> 00:00:09,440 Speaker 1: Break anchors all around the world. Straight Ahead on the program, 4 00:00:09,440 --> 00:00:11,640 Speaker 1: we look ahead to the August Jobs Report, what it 5 00:00:11,720 --> 00:00:15,520 Speaker 1: could mean for FED policy moving forward. I'm Tom Busby 6 00:00:15,600 --> 00:00:16,200 Speaker 1: in New York. 7 00:00:16,680 --> 00:00:18,959 Speaker 2: I'm Carolin het Gahe in London. Well, we're thinking about 8 00:00:18,960 --> 00:00:20,680 Speaker 2: the future of yous banking industry. 9 00:00:21,200 --> 00:00:23,759 Speaker 3: I'm deg Krisner looking at the power of the rally 10 00:00:23,800 --> 00:00:26,920 Speaker 3: in Chinese tech shares and how much steam is left. 11 00:00:28,800 --> 00:00:32,840 Speaker 4: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 12 00:00:32,840 --> 00:00:36,560 Speaker 4: eleventh Yo, New York, Bloomberg ninety nine to one, Washington, DC, 13 00:00:37,080 --> 00:00:42,080 Speaker 4: Bloomberg ninety two nine, Boston, Dad Digital Radio, London, Syria 14 00:00:42,200 --> 00:00:45,880 Speaker 4: six M one one, and around the world on Bloomberg Radio, 15 00:00:45,960 --> 00:00:48,160 Speaker 4: dot Com and the Bloomberg Business App. 16 00:00:52,880 --> 00:00:55,040 Speaker 1: Good day to you. I'm Tom Busby. We begin today's 17 00:00:55,040 --> 00:00:58,000 Speaker 1: program with the August Jobs Report, non farm payroll numbers 18 00:00:58,000 --> 00:01:01,720 Speaker 1: out this Friday eight thirty am Wall Street Time, and 19 00:01:01,760 --> 00:01:06,039 Speaker 1: with another read showing inflation stubbornly Hi, what could a 20 00:01:06,120 --> 00:01:08,759 Speaker 1: further possible slow down in the US labor market mean 21 00:01:08,800 --> 00:01:10,920 Speaker 1: for the hopes of a FED rate cut at its 22 00:01:11,000 --> 00:01:14,280 Speaker 1: next meeting. For more, we're joined by Michael McKee, Bloomberg 23 00:01:14,319 --> 00:01:19,120 Speaker 1: International Economics and Policy correspondent. Michael, thanks for being here. 24 00:01:19,240 --> 00:01:21,919 Speaker 1: Just this past week we got that July PCE, another 25 00:01:21,920 --> 00:01:26,319 Speaker 1: confirmation inflation not going away. Let's talk about that report, 26 00:01:26,640 --> 00:01:29,520 Speaker 1: what it means to the FED, and how important this 27 00:01:29,600 --> 00:01:31,360 Speaker 1: Friday's August jobs report is going to be. 28 00:01:31,480 --> 00:01:33,560 Speaker 5: Oh, let's start with the PCE and say that it 29 00:01:33,760 --> 00:01:37,199 Speaker 5: is important but not definitive for the FED. 30 00:01:37,319 --> 00:01:39,280 Speaker 1: It does show that inflation is not. 31 00:01:39,360 --> 00:01:42,520 Speaker 5: Going down, and on a year over year basis, the 32 00:01:42,680 --> 00:01:45,880 Speaker 5: core rate actually rose to two point nine percent from 33 00:01:45,920 --> 00:01:48,440 Speaker 5: two point eight percent, which is going in the wrong 34 00:01:48,520 --> 00:01:51,440 Speaker 5: direction if your target is two percent. On the other hand, 35 00:01:51,680 --> 00:01:54,840 Speaker 5: the month over month figures did not show any deterioration. 36 00:01:55,600 --> 00:01:59,080 Speaker 5: So it really is kind of picked your story here, 37 00:01:59,360 --> 00:02:02,800 Speaker 5: and we know that those who think that we should 38 00:02:02,840 --> 00:02:06,080 Speaker 5: be cutting rates in September have stuck to that story 39 00:02:06,120 --> 00:02:09,560 Speaker 5: and this wouldn't deter them in any way. The rest 40 00:02:09,560 --> 00:02:12,800 Speaker 5: of the fad is open to the idea of a 41 00:02:12,880 --> 00:02:15,720 Speaker 5: rate cut. In fact, Jay Pole basically opened the door 42 00:02:16,120 --> 00:02:21,000 Speaker 5: to it at his speech in Jackson Hole, and so 43 00:02:21,040 --> 00:02:24,320 Speaker 5: they're waiting on data yet to come, and that'll be 44 00:02:24,360 --> 00:02:27,040 Speaker 5: the Jobs report this Friday and the CPI report that 45 00:02:27,639 --> 00:02:32,760 Speaker 5: comes on September eleventh. And the question is do we 46 00:02:32,800 --> 00:02:36,760 Speaker 5: see a significant weakening in the unemployment rate? Does it 47 00:02:36,840 --> 00:02:40,120 Speaker 5: go up? I guess whether you call that strengthening or weakening. 48 00:02:40,320 --> 00:02:41,079 Speaker 1: Does it go up? 49 00:02:41,400 --> 00:02:46,160 Speaker 5: And do we see a continued week hiring the kind 50 00:02:46,160 --> 00:02:49,000 Speaker 5: of hiring that we saw in the July report and 51 00:02:49,080 --> 00:02:51,160 Speaker 5: the revisions to May and June. 52 00:02:51,480 --> 00:02:54,080 Speaker 1: Well, there may also be seasonal reasons for if we 53 00:02:54,120 --> 00:02:56,840 Speaker 1: see a big jump or a big decline in August. 54 00:02:56,960 --> 00:03:00,520 Speaker 5: Right, Well, yes, you get into the school year beginning, 55 00:03:00,720 --> 00:03:04,080 Speaker 5: and ever since COVID we've had some trouble with adjustments 56 00:03:04,080 --> 00:03:08,919 Speaker 5: for that. Also in many states have changed their school 57 00:03:09,000 --> 00:03:11,359 Speaker 5: year beginning times. And a lot of this doesn't have 58 00:03:11,400 --> 00:03:12,840 Speaker 5: to do with teachers. It has to do with the 59 00:03:12,960 --> 00:03:16,560 Speaker 5: supplementary workers at the schools, of janitors, the cooks, everybody else. 60 00:03:17,520 --> 00:03:21,120 Speaker 5: So we may have that issue, but economists and the 61 00:03:21,120 --> 00:03:24,919 Speaker 5: FED will look through that and see what's been happening, 62 00:03:25,040 --> 00:03:28,440 Speaker 5: especially with private sector jobs, and see if we see 63 00:03:28,480 --> 00:03:31,720 Speaker 5: the same kind of decline. The forecast at the moment 64 00:03:31,840 --> 00:03:36,040 Speaker 5: is for seventy five thousand jobs to be created, which 65 00:03:36,080 --> 00:03:40,120 Speaker 5: is not that different from last month. But we may 66 00:03:40,120 --> 00:03:42,640 Speaker 5: see that changed during the week as we get more data, 67 00:03:42,640 --> 00:03:44,560 Speaker 5: because this is the first week of the month and 68 00:03:44,680 --> 00:03:46,520 Speaker 5: it's the week where we get. 69 00:03:46,480 --> 00:03:49,520 Speaker 1: Tons of data. Yeah, and how about the unemployment rate? 70 00:03:49,960 --> 00:03:51,600 Speaker 1: Could we see that go a little higher? 71 00:03:51,640 --> 00:03:54,440 Speaker 5: We could see that go a little bit higher. Right now, 72 00:03:54,520 --> 00:03:58,320 Speaker 5: we're waiting to see what happens with the unemployment rate 73 00:03:58,400 --> 00:04:01,880 Speaker 5: because the forecast is for to rise just a little 74 00:04:01,920 --> 00:04:04,280 Speaker 5: bit to four point three percent from four point two percent. 75 00:04:05,160 --> 00:04:09,840 Speaker 5: That is not unacceptable to the Fed. They have expected 76 00:04:09,840 --> 00:04:12,360 Speaker 5: it to rise. Their forecast is for to maybe hit 77 00:04:12,480 --> 00:04:15,440 Speaker 5: four and a half percent, but it's a speed at 78 00:04:15,480 --> 00:04:18,040 Speaker 5: which it moves. So if it's higher than four point 79 00:04:18,200 --> 00:04:23,719 Speaker 5: three percent, then you're going to have some concern expressed 80 00:04:23,720 --> 00:04:24,720 Speaker 5: down at twentieth and. 81 00:04:24,640 --> 00:04:27,000 Speaker 1: Six Street in Washington. Yeah, from four to two to 82 00:04:27,000 --> 00:04:29,120 Speaker 1: four to four if it went Now, so we have 83 00:04:29,200 --> 00:04:32,080 Speaker 1: the CPI coming out, we have the jobs number coming out. 84 00:04:32,080 --> 00:04:35,400 Speaker 1: But last week we got some very encouraging news. We 85 00:04:35,480 --> 00:04:38,320 Speaker 1: got a three point three percent, although it's a preliminary 86 00:04:38,360 --> 00:04:43,000 Speaker 1: reading on GDP was growing. Also consumer spending and consumer 87 00:04:43,000 --> 00:04:46,320 Speaker 1: incomes good news there as well. Right, better good news 88 00:04:46,360 --> 00:04:49,320 Speaker 1: in the incomes and spending number. The GDP number is 89 00:04:49,320 --> 00:04:51,480 Speaker 1: for the second quarter and that ended at the end 90 00:04:51,520 --> 00:04:54,719 Speaker 1: of June, so now we're two months into the third quarter, 91 00:04:54,839 --> 00:04:57,200 Speaker 1: so it doesn't tell you all that much. The one 92 00:04:57,200 --> 00:04:59,640 Speaker 1: bit of good news was that we saw more business 93 00:04:59,640 --> 00:05:04,719 Speaker 1: investm don't have a lot of explanation for that because 94 00:05:04,760 --> 00:05:07,640 Speaker 1: companies have been telling the Fed and telling us that 95 00:05:07,680 --> 00:05:10,799 Speaker 1: they're sitting on the sidelines, but they did increase business investment, 96 00:05:10,800 --> 00:05:13,080 Speaker 1: which is probably a reflection of what's been going on 97 00:05:13,360 --> 00:05:16,640 Speaker 1: in the AI space now. The income and spending numbers 98 00:05:16,640 --> 00:05:20,239 Speaker 1: were pretty good. Income maybe a little less than meets 99 00:05:20,240 --> 00:05:23,120 Speaker 1: the eye and that it went up, but it is 100 00:05:24,400 --> 00:05:30,359 Speaker 1: it's mostly automobile spending on the good side. So the 101 00:05:30,400 --> 00:05:32,560 Speaker 1: auto companies have said they're going to raise prices when 102 00:05:32,600 --> 00:05:34,760 Speaker 1: they get to the new model year, so that may 103 00:05:34,760 --> 00:05:38,560 Speaker 1: be something that has pulled forward some spending. The income 104 00:05:38,640 --> 00:05:42,560 Speaker 1: numbers were better in that they rose, but if you 105 00:05:42,560 --> 00:05:47,640 Speaker 1: look under the hood, the wages and salaries component went 106 00:05:47,760 --> 00:05:50,280 Speaker 1: up six tenths of a percent after just a one 107 00:05:50,360 --> 00:05:53,680 Speaker 1: tenth rise the month before. So Americans still have money 108 00:05:53,880 --> 00:05:58,000 Speaker 1: coming in question of whether they want to keep spending 109 00:05:58,000 --> 00:05:59,720 Speaker 1: it or not, and so far they're spending it. 110 00:06:00,000 --> 00:06:02,120 Speaker 5: Oh, they're spending it. But we also had another number 111 00:06:02,120 --> 00:06:03,760 Speaker 5: that came in that was interesting, and that was the 112 00:06:03,839 --> 00:06:08,080 Speaker 5: trade deficit. We saw a big rise in imports again 113 00:06:08,120 --> 00:06:11,680 Speaker 5: in July, as we did in the first quarter in 114 00:06:11,880 --> 00:06:14,479 Speaker 5: or January and February of this year, ahead of the 115 00:06:14,480 --> 00:06:17,480 Speaker 5: president's tariff announcement, and now maybe ahead of the tariffs. 116 00:06:18,000 --> 00:06:20,680 Speaker 5: That's what we also saw, so companies trying to stock 117 00:06:20,800 --> 00:06:23,000 Speaker 5: up on lower price goods to sell them as long 118 00:06:23,040 --> 00:06:26,440 Speaker 5: as they can before they have to raise prices. That 119 00:06:26,520 --> 00:06:30,520 Speaker 5: may be also something that factors into the Fed's decision 120 00:06:30,600 --> 00:06:34,400 Speaker 5: if they think that definitely inflation is going to rise 121 00:06:34,480 --> 00:06:36,040 Speaker 5: significantly in the months to come. 122 00:06:37,120 --> 00:06:40,080 Speaker 1: Now, you are just back this past week from Jackson 123 00:06:40,080 --> 00:06:43,200 Speaker 1: Hold the symposium. You spoke to a lot of FED officials. 124 00:06:43,560 --> 00:06:48,080 Speaker 1: Great sound. Some of them are insisting that the extra 125 00:06:48,120 --> 00:06:50,320 Speaker 1: consumer costs from the Trump tariffs are just a one 126 00:06:50,400 --> 00:06:54,479 Speaker 1: time bump, and that you know, yes it's inflationary, Yes 127 00:06:54,480 --> 00:06:56,440 Speaker 1: it's a lot of pressure, but it's going to go away. 128 00:06:56,839 --> 00:06:58,679 Speaker 1: A lot of others don't see it that way at all. 129 00:06:58,880 --> 00:07:00,080 Speaker 1: How do you feel about. 130 00:06:59,800 --> 00:07:03,680 Speaker 5: That, Well, historically tariffs have been a one time bump. 131 00:07:03,960 --> 00:07:06,640 Speaker 5: But historically they've also been applied in a different way. 132 00:07:06,720 --> 00:07:09,920 Speaker 5: Congress passes a tariff increase and sets a date, and 133 00:07:09,960 --> 00:07:12,880 Speaker 5: it goes into effect and prices go up on that date. 134 00:07:13,320 --> 00:07:16,280 Speaker 5: With Donald Trump, it's been a whole bunch of different 135 00:07:16,360 --> 00:07:20,560 Speaker 5: tariffs on different dates. Sometimes they're raised, sometimes they're lowered, 136 00:07:21,080 --> 00:07:25,520 Speaker 5: and the application dates vary. So there's two things. 137 00:07:25,280 --> 00:07:25,800 Speaker 1: At work here. 138 00:07:25,880 --> 00:07:28,120 Speaker 5: One is the idea that this is going to go 139 00:07:28,120 --> 00:07:30,520 Speaker 5: on for a while because he's talked about imposing more 140 00:07:30,600 --> 00:07:35,080 Speaker 5: tariffs on pharmaceuticals and on semiconductors and things like that. 141 00:07:35,200 --> 00:07:40,320 Speaker 5: So we could see a rolling increase in tariffs and 142 00:07:40,400 --> 00:07:44,240 Speaker 5: that would perhaps feed into inflationary psychology that would raise 143 00:07:44,280 --> 00:07:48,120 Speaker 5: people's inflation expectations, and that's what the FED doesn't want 144 00:07:48,160 --> 00:07:50,880 Speaker 5: to see happen. So you have Christopher Waller and Mickey 145 00:07:50,920 --> 00:07:54,040 Speaker 5: Bowman saying one time increase and we don't have to 146 00:07:54,040 --> 00:07:57,440 Speaker 5: worry about it. Other FED officials saying yes, but it 147 00:07:57,480 --> 00:08:00,120 Speaker 5: could feed into this other dynamic that we would. 148 00:07:59,880 --> 00:08:03,520 Speaker 1: Have to worry about. Well, well, a lot of inflationary pressures. 149 00:08:03,840 --> 00:08:05,640 Speaker 1: We get the CPI in a couple of weeks. The 150 00:08:05,680 --> 00:08:08,400 Speaker 1: August Jobs report out this Friday, ahead of wall Street's 151 00:08:08,400 --> 00:08:12,280 Speaker 1: opening bell our thanks to Michael McKee, Bloomberg International Economics 152 00:08:12,320 --> 00:08:15,120 Speaker 1: and Policy correspondent. We move now to earnings from the 153 00:08:15,160 --> 00:08:19,760 Speaker 1: cloud based software company and Dow Jones Industrial average component Salesforce, 154 00:08:19,840 --> 00:08:23,360 Speaker 1: coming out after Wall Street's closing bell on Wednesday. How 155 00:08:23,400 --> 00:08:26,800 Speaker 1: has the explosive boom and AI at other software companies 156 00:08:27,160 --> 00:08:31,080 Speaker 1: impacted Salesforce's growth? For more, we're joined by aniog Rana, 157 00:08:31,120 --> 00:08:35,679 Speaker 1: Bloomberg Intelligence technology analyst. Now, honurrog thank you so much 158 00:08:35,720 --> 00:08:38,800 Speaker 1: for being here. Salesforce investors have not had a lot 159 00:08:38,840 --> 00:08:41,319 Speaker 1: to cheer about. Shares are down about twenty five percent 160 00:08:41,400 --> 00:08:44,559 Speaker 1: so far this year as other software companies have invested 161 00:08:44,600 --> 00:08:48,040 Speaker 1: a lot more in AI. What are you looking to 162 00:08:48,040 --> 00:08:49,520 Speaker 1: see in its second quarter results? 163 00:08:50,559 --> 00:08:53,079 Speaker 6: So, Tom, when you look at a company like Salesforce, 164 00:08:53,559 --> 00:08:57,720 Speaker 6: you know it is very different than Nvidia or codeb 165 00:08:57,960 --> 00:09:02,000 Speaker 6: for Oracle, frankly, because it's the application side of software, 166 00:09:02,400 --> 00:09:05,000 Speaker 6: and in this area we are still not seeing at 167 00:09:05,040 --> 00:09:09,440 Speaker 6: the level of implementation of AI. Because even though for example, 168 00:09:09,520 --> 00:09:13,120 Speaker 6: Salesforce has some really good products that can help out 169 00:09:13,679 --> 00:09:19,440 Speaker 6: with their AI journey, the macro spending on technology is 170 00:09:19,520 --> 00:09:22,320 Speaker 6: still weak, which is companies are not spending at that 171 00:09:22,400 --> 00:09:26,320 Speaker 6: same level as they were on non AI tech spending, 172 00:09:26,600 --> 00:09:29,840 Speaker 6: which is having an impact on the order book of salesforce, 173 00:09:30,120 --> 00:09:32,840 Speaker 6: and that has been the story for the last let's say, 174 00:09:33,000 --> 00:09:35,720 Speaker 6: twelve to eighteen months, and we think a little bit 175 00:09:35,760 --> 00:09:38,880 Speaker 6: of that will come back again when they report next week. 176 00:09:39,040 --> 00:09:41,200 Speaker 1: So what do you think they will say then about 177 00:09:41,360 --> 00:09:45,000 Speaker 1: growth and demand trends? If you know, maybe they're a 178 00:09:45,040 --> 00:09:48,360 Speaker 1: little behind in the AI spending and the AI products. 179 00:09:48,400 --> 00:09:51,160 Speaker 1: They do have Agent Force and Data Cloud, but what 180 00:09:51,200 --> 00:09:52,720 Speaker 1: do you think they're going to tell the vests. 181 00:09:53,080 --> 00:09:55,320 Speaker 6: No, you're right, I mean they will talk about those 182 00:09:55,360 --> 00:09:58,880 Speaker 6: two products quite aggressively in how the adoption rate is 183 00:09:58,960 --> 00:10:02,360 Speaker 6: very strong, and believe that that both data Cloud and 184 00:10:02,440 --> 00:10:04,520 Speaker 6: Agent for Us will do well. But again as a 185 00:10:04,559 --> 00:10:07,520 Speaker 6: percentage of the entire company, it's a very small portion 186 00:10:07,559 --> 00:10:10,439 Speaker 6: of total sales. On the other side of the equation, 187 00:10:10,559 --> 00:10:14,040 Speaker 6: we do anticipate them talking about, you know, tougher business 188 00:10:14,040 --> 00:10:18,199 Speaker 6: conditions and elongation of cycles in order to complete orders. 189 00:10:18,520 --> 00:10:20,880 Speaker 6: And I think that's where you know, we would be 190 00:10:20,960 --> 00:10:23,920 Speaker 6: those comments would be looking for. There is a particular 191 00:10:23,960 --> 00:10:29,680 Speaker 6: metric called remaining performance obligations or current remaining performance obligation, 192 00:10:29,800 --> 00:10:32,160 Speaker 6: and that's an area where it gives us an idea 193 00:10:32,200 --> 00:10:36,640 Speaker 6: about the the growth rate of the orders. They have 194 00:10:36,760 --> 00:10:40,320 Speaker 6: guided down that number to be go down from eleven 195 00:10:40,360 --> 00:10:43,439 Speaker 6: percent to nine percent in this quarter. Based on the 196 00:10:43,480 --> 00:10:45,880 Speaker 6: results we saw from Workstay, we think they should be 197 00:10:45,920 --> 00:10:49,040 Speaker 6: able to do better than that. But again, till we 198 00:10:49,200 --> 00:10:55,359 Speaker 6: get this hangover of tariffs and you know, economic uncertainty 199 00:10:55,440 --> 00:10:59,000 Speaker 6: out of the way, we don't see that number accelerating 200 00:10:59,240 --> 00:11:02,520 Speaker 6: and perhaps that can only happen next year. At this point, now, do. 201 00:11:02,520 --> 00:11:05,520 Speaker 1: You see that as more of a broader pullback and 202 00:11:05,559 --> 00:11:09,280 Speaker 1: spending on it or is it your companies are just 203 00:11:09,320 --> 00:11:11,600 Speaker 1: spending on other products from other companies. 204 00:11:12,000 --> 00:11:14,360 Speaker 6: No, no, no, this is absolutely broader. This is not 205 00:11:14,480 --> 00:11:17,960 Speaker 6: just salesforce specific. We say the same thing for Workday. 206 00:11:18,320 --> 00:11:21,640 Speaker 6: We are seeing the same aspect for consulting companies, whether 207 00:11:21,679 --> 00:11:25,920 Speaker 6: it's IBM consulting or Accenture for that matter. So this 208 00:11:26,000 --> 00:11:29,840 Speaker 6: is a broad based phenomenon where companies are being measured 209 00:11:29,880 --> 00:11:32,600 Speaker 6: in the way they are spending on technology, and for 210 00:11:32,800 --> 00:11:36,600 Speaker 6: right now, they are spending more on AI related products 211 00:11:36,679 --> 00:11:40,280 Speaker 6: or AI related infrastructure, which is you know, AI servers 212 00:11:40,320 --> 00:11:43,640 Speaker 6: and chips and models and trying to set things up. 213 00:11:43,960 --> 00:11:46,320 Speaker 6: Those are that's where a lot of the spending is 214 00:11:46,320 --> 00:11:47,120 Speaker 6: going at this point. 215 00:11:47,600 --> 00:11:50,400 Speaker 1: And what we saw just this past week in Nvidia's 216 00:11:50,480 --> 00:11:52,960 Speaker 1: latest earnings, I mean, what does that tell you about 217 00:11:54,679 --> 00:11:59,079 Speaker 1: AI spending, ANI infrastructure spending. Is there a possibility of 218 00:11:59,120 --> 00:12:02,000 Speaker 1: a slowdown in demand in the future or is this 219 00:12:02,200 --> 00:12:03,760 Speaker 1: maybe just a blip. 220 00:12:04,080 --> 00:12:07,880 Speaker 6: Well, things are looking good for almost the entire ecosystem, 221 00:12:08,160 --> 00:12:10,760 Speaker 6: and with n Video obviously there's there's a case of 222 00:12:10,880 --> 00:12:14,240 Speaker 6: you know, elevated expectations and what they did. I mean, 223 00:12:14,280 --> 00:12:16,520 Speaker 6: I think the results are pretty good, but when you 224 00:12:16,640 --> 00:12:18,880 Speaker 6: look at it, you know, Oracle will report over the 225 00:12:18,880 --> 00:12:21,280 Speaker 6: next couple of weeks. We think they're going to you know, 226 00:12:21,320 --> 00:12:24,520 Speaker 6: go and talk about a similar you know, increase in 227 00:12:24,720 --> 00:12:28,240 Speaker 6: order book for them from companies like open Ai trying 228 00:12:28,280 --> 00:12:31,640 Speaker 6: to get more of their cloud infrastructure to train their models. 229 00:12:31,800 --> 00:12:35,640 Speaker 6: So we do anticipate a good season for companies that 230 00:12:35,720 --> 00:12:39,480 Speaker 6: are more on the software infrastructure side. I think it's 231 00:12:39,520 --> 00:12:41,440 Speaker 6: going to be tougher to see what happens on the 232 00:12:41,440 --> 00:12:42,520 Speaker 6: application side. 233 00:12:42,640 --> 00:12:44,640 Speaker 1: Well, a lot of growth, a lot of changes. Sell 234 00:12:44,760 --> 00:12:48,240 Speaker 1: Force Q two earnings after the closing bill is coming Wednesday, 235 00:12:48,520 --> 00:12:52,360 Speaker 1: are thanks to Anna rog Rana Bloomberg Intelligence Technology analyst 236 00:12:52,760 --> 00:12:54,800 Speaker 1: and coming up on Bloomberg day Break weekend, we hear 237 00:12:54,800 --> 00:13:08,440 Speaker 1: about the future of Europe's banking industry. This is Bloomberg 238 00:13:08,520 --> 00:13:10,440 Speaker 1: day Break weekend, our global look ahead at the top 239 00:13:10,480 --> 00:13:13,360 Speaker 1: stories for investors in the coming week. I'm Tom Busby 240 00:13:13,400 --> 00:13:16,000 Speaker 1: in New York. Coming up on Bloomberg day Break weekend. 241 00:13:16,080 --> 00:13:19,880 Speaker 1: China steps up its technology rivalry against the US, but 242 00:13:20,000 --> 00:13:22,640 Speaker 1: first in the coming days, the banking industry gathers in 243 00:13:22,679 --> 00:13:26,560 Speaker 1: Germany for a couple of major banking conferences. European banks 244 00:13:26,600 --> 00:13:29,480 Speaker 1: have seen their share prices on a tear in recent months, 245 00:13:29,920 --> 00:13:33,480 Speaker 1: but there are tests ahead from US tariff's, political instability 246 00:13:33,600 --> 00:13:37,080 Speaker 1: and the extent of interest rate cuts. How will insiders 247 00:13:37,120 --> 00:13:39,720 Speaker 1: navigate the landscape for more, Let's go to London and 248 00:13:39,720 --> 00:13:43,080 Speaker 1: bring in Bloomberg Daybreak europe banker Caroline hepgar. 249 00:13:43,080 --> 00:13:46,080 Speaker 2: Tom European banks on the SOCK six hundred Banks index 250 00:13:46,080 --> 00:13:48,840 Speaker 2: have surged since twenty twenty two to a seventeen year 251 00:13:48,920 --> 00:13:52,160 Speaker 2: high versus the lows of late twenty twenty two, but 252 00:13:52,240 --> 00:13:55,280 Speaker 2: there are risks gathering for the second half of this year. 253 00:13:55,480 --> 00:13:58,439 Speaker 2: Deutsche Bank and Comments Bank, top performers on the index, 254 00:13:58,600 --> 00:14:02,439 Speaker 2: have recently been downgraded by Goldman Sachs analysts. The outlook 255 00:14:02,480 --> 00:14:05,600 Speaker 2: for the industry is something Deutsche Bank's CEO Christian Saving 256 00:14:05,679 --> 00:14:09,360 Speaker 2: discussed recently on Bloomberg Television. He says there is still 257 00:14:09,440 --> 00:14:12,880 Speaker 2: a big opportunity for his firm and for others well. 258 00:14:12,880 --> 00:14:14,360 Speaker 7: I do think what we see in this world is 259 00:14:14,400 --> 00:14:19,840 Speaker 7: with all the geopolitical uncertainties, with all the also economic uncertainties, 260 00:14:20,000 --> 00:14:23,880 Speaker 7: there is one trend which is the same across the 261 00:14:23,920 --> 00:14:27,400 Speaker 7: world that our clients want to have a European alternative 262 00:14:27,400 --> 00:14:29,640 Speaker 7: to the US banks. We have very strong US banks, 263 00:14:29,720 --> 00:14:32,480 Speaker 7: very capable of US banks, but in this world of 264 00:14:32,520 --> 00:14:37,280 Speaker 7: geopolitical uncertainties, they want to have a capable global European player, 265 00:14:37,880 --> 00:14:40,680 Speaker 7: and there are not so many European banks left with 266 00:14:40,800 --> 00:14:42,840 Speaker 7: a full investment bank, with a full corporate bank, with 267 00:14:42,920 --> 00:14:46,040 Speaker 7: a global network in over sixty countries. That's the role 268 00:14:46,080 --> 00:14:49,280 Speaker 7: we can play now. This role we not only want 269 00:14:49,320 --> 00:14:52,040 Speaker 7: to play because we feel ourselves as a global bank, 270 00:14:52,080 --> 00:14:55,200 Speaker 7: but it's obviously much easier to do that if you 271 00:14:55,240 --> 00:14:59,040 Speaker 7: are coming from a country which is economically increasing, which 272 00:14:59,080 --> 00:15:01,880 Speaker 7: is economically on the right pass and which is also 273 00:15:01,920 --> 00:15:04,880 Speaker 7: pulling now Europe, and therefore I think we have a 274 00:15:05,000 --> 00:15:07,960 Speaker 7: unique chance, not only as Germany and Europe, but also 275 00:15:08,000 --> 00:15:11,880 Speaker 7: as Deutsche Bank to actually be the one who is 276 00:15:11,920 --> 00:15:15,160 Speaker 7: facilitating and who is contributing to our clients growth around 277 00:15:15,200 --> 00:15:20,120 Speaker 7: the world. The diversification also in banking not only to 278 00:15:20,160 --> 00:15:22,960 Speaker 7: rely on one bank, but on many banks, and that 279 00:15:23,720 --> 00:15:26,480 Speaker 7: from a regional perspective has never been bigger than around 280 00:15:26,520 --> 00:15:26,680 Speaker 7: And you. 281 00:15:26,760 --> 00:15:29,320 Speaker 8: Touch about diversifying, and just another question to you, is 282 00:15:29,360 --> 00:15:31,800 Speaker 8: this by Europe trend? Is this a lasting thing? Is 283 00:15:31,800 --> 00:15:35,040 Speaker 8: this something that you're seeing from investors that you talk 284 00:15:35,080 --> 00:15:37,680 Speaker 8: to that they're wanting to make a meaningful commitment to 285 00:15:38,200 --> 00:15:39,920 Speaker 8: Europe And what does that actually look like in terms 286 00:15:39,960 --> 00:15:41,480 Speaker 8: of numbers from where you're setting. 287 00:15:41,800 --> 00:15:43,880 Speaker 7: Well, for the first time, we see obviously since the 288 00:15:43,960 --> 00:15:47,360 Speaker 7: last three or four months, a quite significant reallocation from 289 00:15:47,400 --> 00:15:52,000 Speaker 7: funds in particular into Europe. The interest is huge. Whenever 290 00:15:52,040 --> 00:15:55,480 Speaker 7: we talk with investors, they really want to understand what's 291 00:15:55,520 --> 00:15:58,200 Speaker 7: going on in Germany, what's going on in Europe. By 292 00:15:58,240 --> 00:16:01,520 Speaker 7: the way, already in doubles this year, six months ago, 293 00:16:02,000 --> 00:16:05,720 Speaker 7: most of the investors said micro Germany is really good, 294 00:16:05,840 --> 00:16:09,560 Speaker 7: and with that they mean the German corporates, the German companies, Macro, 295 00:16:10,160 --> 00:16:13,640 Speaker 7: You need to do in improvements and that's exactly what 296 00:16:13,680 --> 00:16:16,560 Speaker 7: we want to try now. Of course the government stepped 297 00:16:16,640 --> 00:16:19,640 Speaker 7: up with the fiscal program, but also with the reforms. 298 00:16:20,000 --> 00:16:22,640 Speaker 7: If we now actually do something sort of say together, 299 00:16:22,760 --> 00:16:25,640 Speaker 7: if we march in parallel, we have a huge chance. 300 00:16:25,640 --> 00:16:28,800 Speaker 7: And then I do believe with further reforms to come 301 00:16:28,920 --> 00:16:32,160 Speaker 7: and that is necessary. I do believe that this trend 302 00:16:32,200 --> 00:16:36,000 Speaker 7: of reallocating funds to Europe will not stop if we 303 00:16:36,080 --> 00:16:39,600 Speaker 7: are not doing further reforms and just rely on fiscal debt. 304 00:16:40,160 --> 00:16:42,400 Speaker 7: That doesn't help. We need the fiscal reforms. 305 00:16:43,440 --> 00:16:45,960 Speaker 2: That was Deutsche Bank CEO Christian Savings speaking. 306 00:16:46,000 --> 00:16:46,200 Speaker 4: Then. 307 00:16:46,360 --> 00:16:49,560 Speaker 2: So in the coming days, academics, professionals and leaders from 308 00:16:49,600 --> 00:16:53,000 Speaker 2: the world of banking and fintech will convene in Germany 309 00:16:53,280 --> 00:16:57,680 Speaker 2: to discuss topics ranging from preparing for geopolitical uncertainty to 310 00:16:57,720 --> 00:17:02,360 Speaker 2: optimizing productivity through AI. But just how uncertain is the 311 00:17:02,400 --> 00:17:05,120 Speaker 2: path ahead? Jointly mean now to discuss this Bluebags EU 312 00:17:05,160 --> 00:17:08,520 Speaker 2: Finance report A Nicholas Comfort and Stephen Aaron's, our team 313 00:17:08,600 --> 00:17:11,520 Speaker 2: leader for EU Finance. Welcome to both of you. Nick, 314 00:17:11,560 --> 00:17:13,760 Speaker 2: can I start with you? Feels like back to school, 315 00:17:13,800 --> 00:17:15,720 Speaker 2: back to confidence season, doesn't it. What do you think 316 00:17:15,840 --> 00:17:18,320 Speaker 2: is going to be on the minds of these bankers 317 00:17:18,359 --> 00:17:21,800 Speaker 2: and academics and the industry as we get into confidence season. 318 00:17:22,359 --> 00:17:24,879 Speaker 9: In short, I'd say D and D. Do you regulation 319 00:17:25,080 --> 00:17:27,919 Speaker 9: and deals as the two big things that the bankers 320 00:17:27,920 --> 00:17:31,000 Speaker 9: will be focusing on. Do you regulation something that affects 321 00:17:31,040 --> 00:17:34,200 Speaker 9: all all of the banks? Regulars later call it simplification 322 00:17:34,440 --> 00:17:36,840 Speaker 9: rather than deregulation. But what the bankers are really after 323 00:17:36,920 --> 00:17:40,080 Speaker 9: is sort of is either a wholesale shredding of certain 324 00:17:40,160 --> 00:17:43,280 Speaker 9: rules or a tweaking of them in order to free 325 00:17:43,359 --> 00:17:46,600 Speaker 9: up some capital here and there, which they argue they 326 00:17:46,640 --> 00:17:49,160 Speaker 9: can put to better use, for example, to a lending 327 00:17:49,280 --> 00:17:53,879 Speaker 9: for whether it's renewal, energy or defense or technology, whichever 328 00:17:53,920 --> 00:17:56,600 Speaker 9: your pickers. And on the deals front too, yeah, I 329 00:17:56,600 --> 00:18:00,840 Speaker 9: mean it's not it affects more individual banks, but everyone's 330 00:18:00,840 --> 00:18:04,600 Speaker 9: interested in what's happening around around BNP, PAR and UniCredit especially. 331 00:18:04,640 --> 00:18:06,120 Speaker 9: That's what's on people's minds. 332 00:18:05,880 --> 00:18:06,320 Speaker 10: At the moment. 333 00:18:07,800 --> 00:18:12,119 Speaker 2: Stephen. Why has Europe's financial services sector done so well 334 00:18:12,160 --> 00:18:14,320 Speaker 2: over the past four years? I mean, you look at 335 00:18:14,320 --> 00:18:17,719 Speaker 2: those leading bank stocks are absolutely stellar performance. 336 00:18:19,600 --> 00:18:23,639 Speaker 11: Absolutely, I mean the performance of banking stocks for the 337 00:18:23,680 --> 00:18:26,040 Speaker 11: past four years especially since the beginning of this year 338 00:18:26,080 --> 00:18:29,120 Speaker 11: has been absolutely stunning, and the reason for that's been 339 00:18:29,200 --> 00:18:32,480 Speaker 11: the extremely dismal performance of banking stocks the previous years. 340 00:18:32,560 --> 00:18:36,720 Speaker 11: As you may remember, there was an era of negative 341 00:18:36,720 --> 00:18:39,439 Speaker 11: interest rates in Europe for a long time set by 342 00:18:39,480 --> 00:18:42,399 Speaker 11: the European Central Bank, and that caused a decline of 343 00:18:42,440 --> 00:18:45,639 Speaker 11: profitability in many European banks. That was reversed in twenty 344 00:18:45,760 --> 00:18:48,920 Speaker 11: twenty two, and since then European banking stocks have been 345 00:18:48,960 --> 00:18:52,120 Speaker 11: on a tear, boosted since the beginning of the year 346 00:18:52,240 --> 00:18:56,280 Speaker 11: by especially in Germany for Dutch Bank, Commerce Bank, by 347 00:18:56,320 --> 00:19:00,000 Speaker 11: the prospect of stepped up spending public spending on defense 348 00:19:00,040 --> 00:19:02,760 Speaker 11: and infrastructure. So that's kicking a nail and that is 349 00:19:02,760 --> 00:19:08,040 Speaker 11: probably the bad explanation for this extremely good performance. 350 00:19:08,520 --> 00:19:12,000 Speaker 2: Yeah, okay, so Nicholas, what then are the biggest risks 351 00:19:12,040 --> 00:19:15,800 Speaker 2: going forwards? Because things don't look quite so bright maybe 352 00:19:16,200 --> 00:19:18,520 Speaker 2: for the second half of this year. Is it the 353 00:19:18,640 --> 00:19:22,520 Speaker 2: risks of rates not coming down much further? Is it 354 00:19:22,560 --> 00:19:27,159 Speaker 2: about fed independence or the hit to economic growth in Europe? 355 00:19:27,160 --> 00:19:29,200 Speaker 2: Maybe that's going to come from US tariffs. 356 00:19:30,920 --> 00:19:32,440 Speaker 1: I'd say definitely tariffs. 357 00:19:32,520 --> 00:19:34,120 Speaker 9: That's the main thing. If you're if you're a chief 358 00:19:34,200 --> 00:19:36,240 Speaker 9: risk officer in European bank at the moment, that's the 359 00:19:36,320 --> 00:19:39,840 Speaker 9: number one thing you've got on your mind in terms 360 00:19:39,880 --> 00:19:43,600 Speaker 9: of what does it mean for my corporate lending portfolio 361 00:19:44,200 --> 00:19:47,199 Speaker 9: the companies I lend to. Are they going to be 362 00:19:47,200 --> 00:19:48,920 Speaker 9: in trouble? Are they going to are they just going 363 00:19:49,000 --> 00:19:51,680 Speaker 9: to to Are they going to see losses on these 364 00:19:51,720 --> 00:19:56,680 Speaker 9: loans because they because they see large younger, their revenue dissipated. 365 00:19:57,200 --> 00:19:59,359 Speaker 1: But also, I mean you can see the positive there 366 00:19:59,400 --> 00:19:59,720 Speaker 1: as well. 367 00:19:59,760 --> 00:20:03,200 Speaker 9: I mean, if these companies are going to be investing 368 00:20:03,240 --> 00:20:05,200 Speaker 9: in the United States, for example, to build new factories, 369 00:20:05,240 --> 00:20:08,480 Speaker 9: then that's where the chief risk officer's colleagues over in 370 00:20:08,520 --> 00:20:11,280 Speaker 9: commercial banking will be jumping in and trying to give 371 00:20:11,320 --> 00:20:14,800 Speaker 9: them more loans. But yes, tariffs is the number one 372 00:20:14,800 --> 00:20:16,240 Speaker 9: thing which they probably have on their mind. 373 00:20:17,080 --> 00:20:20,080 Speaker 2: Stephen, we heard from Christian Saving earlier. They're saying that 374 00:20:20,440 --> 00:20:25,000 Speaker 2: Europe's banks will fare well because investors could potentially flee 375 00:20:25,280 --> 00:20:30,240 Speaker 2: US turbulence. Is that true given recent political developments in 376 00:20:30,280 --> 00:20:32,400 Speaker 2: Europe and especially in France. 377 00:20:33,880 --> 00:20:37,159 Speaker 11: It seems to have been true at least so we 378 00:20:37,280 --> 00:20:42,560 Speaker 11: did see a strong flow of institutional investment out of 379 00:20:42,560 --> 00:20:46,360 Speaker 11: the UF into Europe during the first half of the year, 380 00:20:46,440 --> 00:20:51,440 Speaker 11: especially after the US administration unbuilt the tariff's plan in April. 381 00:20:51,680 --> 00:20:54,840 Speaker 11: That is now probably something that people will look at. 382 00:20:54,920 --> 00:20:57,680 Speaker 11: You're right, there is political instability, especially in France, and 383 00:20:57,720 --> 00:21:01,360 Speaker 11: there's also political instability in the Netherlands, a small economy 384 00:21:01,359 --> 00:21:04,320 Speaker 11: but still an important one, and so Europe isn't sort 385 00:21:04,359 --> 00:21:08,120 Speaker 11: of in the clear. It's too early to say, but yes, 386 00:21:08,280 --> 00:21:10,600 Speaker 11: I would imagine that people will look at this. Again, 387 00:21:11,520 --> 00:21:13,960 Speaker 11: so far, we don't have any indications that that flow 388 00:21:14,040 --> 00:21:16,600 Speaker 11: from USA Europe has reversed. It's still going on. 389 00:21:16,680 --> 00:21:22,359 Speaker 2: Apparently, Nicholas look that the nice glowing hands that people 390 00:21:22,400 --> 00:21:25,840 Speaker 2: have required maybe of the summer holidays might be starting 391 00:21:25,880 --> 00:21:30,520 Speaker 2: to fade in September, but the French Prime minister reportedly 392 00:21:30,560 --> 00:21:33,359 Speaker 2: didn't take a holiday. How prominently do you expect the 393 00:21:33,400 --> 00:21:36,240 Speaker 2: issue of political instability in Europe to be on the 394 00:21:36,280 --> 00:21:37,399 Speaker 2: agenda as you see it? 395 00:21:39,520 --> 00:21:41,359 Speaker 9: Yeah, I mean I saw an interesting analyst note the 396 00:21:41,400 --> 00:21:43,280 Speaker 9: other day saying sort of that this is I mean, 397 00:21:43,600 --> 00:21:46,480 Speaker 9: it's kind of the normal. We've we've gotten used to 398 00:21:46,480 --> 00:21:49,360 Speaker 9: it at this stage. I mean, the so in terms 399 00:21:49,400 --> 00:21:52,040 Speaker 9: of immediate impact on banks from there, let's say, their 400 00:21:52,119 --> 00:21:55,120 Speaker 9: holdings of French sovereign bonds. I don't think that's something 401 00:21:55,119 --> 00:21:58,400 Speaker 9: which is going to be eroding capital levels too much, 402 00:21:58,440 --> 00:22:02,760 Speaker 9: for example, But yeah, I mean maybe more in the 403 00:22:02,840 --> 00:22:05,320 Speaker 9: in the longer term, if you're if you're a bank 404 00:22:05,359 --> 00:22:09,399 Speaker 9: catering to to companies in France, then these companies are worried, 405 00:22:09,440 --> 00:22:11,600 Speaker 9: and these companies aren't necessarily going to be making investment 406 00:22:11,600 --> 00:22:14,480 Speaker 9: decisions and that they're not gonna be borrowing, they're not 407 00:22:14,520 --> 00:22:18,000 Speaker 9: going to be doing M and A transactions, and so 408 00:22:18,080 --> 00:22:20,239 Speaker 9: that's really maybe a threat also to the to the 409 00:22:20,280 --> 00:22:23,760 Speaker 9: revenue that the banks exposed to France stand to make. 410 00:22:24,840 --> 00:22:27,119 Speaker 9: But I mean in terms of real, big, sort of 411 00:22:27,240 --> 00:22:30,440 Speaker 9: hard hitting financial impacts on on on capital, on their 412 00:22:30,480 --> 00:22:33,360 Speaker 9: financial strength, I'd be be less concerned. 413 00:22:34,119 --> 00:22:36,000 Speaker 2: So Nick, in terms of M and A, are we 414 00:22:36,080 --> 00:22:39,199 Speaker 2: going to see more meaningful consolidation seems to always be 415 00:22:39,240 --> 00:22:41,399 Speaker 2: a kind of waiting game in Europe to see big 416 00:22:42,320 --> 00:22:44,200 Speaker 2: consolidation cross border. 417 00:22:45,800 --> 00:22:48,399 Speaker 9: Yes, definitely, So, I mean deals in Europe take a 418 00:22:48,480 --> 00:22:51,200 Speaker 9: long time, and they have been I mean cross border 419 00:22:51,240 --> 00:22:55,000 Speaker 9: deals certainly have been few and far between. I think 420 00:22:55,040 --> 00:22:58,000 Speaker 9: the the experiences of the of UNI credit shows that 421 00:22:58,040 --> 00:23:00,240 Speaker 9: you have to be persistent and you have to also 422 00:23:00,280 --> 00:23:03,040 Speaker 9: have maybe multiple options ahead of you if you want 423 00:23:03,040 --> 00:23:08,840 Speaker 9: to be doing deals with UniCredit and comments Bank, for example. 424 00:23:08,920 --> 00:23:12,000 Speaker 9: That seems to be a waiting game over for Andre Rhl, 425 00:23:12,119 --> 00:23:12,600 Speaker 9: the CEO. 426 00:23:13,680 --> 00:23:14,600 Speaker 4: It could be. 427 00:23:14,520 --> 00:23:18,240 Speaker 9: That we see something happen on that in the months. 428 00:23:17,960 --> 00:23:19,040 Speaker 4: Or year ahead. 429 00:23:19,480 --> 00:23:22,560 Speaker 9: But it's a lot of the stuff which would really 430 00:23:23,640 --> 00:23:26,879 Speaker 9: support those cross border transactions that you that you mentioned. 431 00:23:27,119 --> 00:23:30,120 Speaker 9: A lot of the architecture is missing. But then maybe 432 00:23:30,440 --> 00:23:32,119 Speaker 9: banker has been complained there for a long time, so 433 00:23:32,280 --> 00:23:35,040 Speaker 9: they need to jump over their shadows you'd say in German, 434 00:23:35,400 --> 00:23:37,800 Speaker 9: and just and crack on with it if they really 435 00:23:37,800 --> 00:23:38,840 Speaker 9: want to pursue that growth. 436 00:23:39,160 --> 00:23:41,240 Speaker 2: Oh, I don't know what the translation of that phrase 437 00:23:41,320 --> 00:23:46,439 Speaker 2: is into an English idiom. Interesting Steven. In terms of 438 00:23:46,480 --> 00:23:50,359 Speaker 2: the impact though, of the political pressure in the US 439 00:23:50,359 --> 00:23:52,240 Speaker 2: that we're seeing on the Federal Reserve, on the Central Bank, 440 00:23:52,280 --> 00:23:53,680 Speaker 2: I mean, is there going to be any banker that's 441 00:23:53,720 --> 00:23:57,400 Speaker 2: not thinking about that or is it more about the 442 00:23:57,480 --> 00:24:02,159 Speaker 2: Trump administration's deregulation drive in the US. Is that what 443 00:24:02,440 --> 00:24:05,600 Speaker 2: the European banking sector will be thinking about. 444 00:24:05,840 --> 00:24:08,439 Speaker 11: I think it's a mix of both. The FED is 445 00:24:08,480 --> 00:24:12,320 Speaker 11: certainly the current development that will dominate talks for as 446 00:24:12,320 --> 00:24:15,439 Speaker 11: long as it's going on. Whatever the FED, whatever happens 447 00:24:15,440 --> 00:24:18,600 Speaker 11: at the FED, and how that impacts the interest rates 448 00:24:18,640 --> 00:24:21,919 Speaker 11: set by the FED in the US has global ramifications, 449 00:24:22,160 --> 00:24:25,840 Speaker 11: especially on banks and especially on Europe, and so everyone 450 00:24:25,840 --> 00:24:29,000 Speaker 11: will be watching very very carefully without really having any 451 00:24:29,000 --> 00:24:32,480 Speaker 11: precedent to judge what could lead to and so it 452 00:24:32,520 --> 00:24:35,879 Speaker 11: will dominate conversations. But everyone will just agree in Europe 453 00:24:35,920 --> 00:24:38,120 Speaker 11: that there's little they can do and they're just bystanders 454 00:24:38,400 --> 00:24:41,960 Speaker 11: on deregulation. It's something that's been going on. We haven't 455 00:24:42,000 --> 00:24:44,760 Speaker 11: really seen very tangible results in the US yet, but 456 00:24:44,800 --> 00:24:47,720 Speaker 11: there is sort of a move to soften a package 457 00:24:47,720 --> 00:24:50,520 Speaker 11: known as Basil, which is really important for banks globally. 458 00:24:50,960 --> 00:24:53,879 Speaker 11: The EU banks have been taken a queue from that 459 00:24:54,000 --> 00:24:57,120 Speaker 11: and have been putting pressure on regulators here in Europe 460 00:24:57,480 --> 00:25:00,680 Speaker 11: to take a similar approach because they save the US 461 00:25:00,680 --> 00:25:04,840 Speaker 11: that's for deregulation that's not replicated in the EU that 462 00:25:04,880 --> 00:25:08,119 Speaker 11: would put them at a competitive disadvantage. So they're actually 463 00:25:08,320 --> 00:25:10,520 Speaker 11: happy about the deregulation drap in the US because it 464 00:25:10,560 --> 00:25:12,880 Speaker 11: gives them a reason to say we want the same 465 00:25:13,040 --> 00:25:14,200 Speaker 11: in the in Europe. 466 00:25:15,320 --> 00:25:18,240 Speaker 2: So lots for Europe's bankers to be discussing in the 467 00:25:18,280 --> 00:25:21,560 Speaker 2: next few days. Well, my thanks to Bloomberg's EU Finance 468 00:25:21,640 --> 00:25:25,080 Speaker 2: reporter Nicholas Comfort, and to Stephen Aroons, who leads our 469 00:25:25,119 --> 00:25:28,679 Speaker 2: team covering EU finance based in Frankfurt, for joining me. 470 00:25:29,000 --> 00:25:31,399 Speaker 2: I'm Caroline hepkeare here in London. You can catch us 471 00:25:31,440 --> 00:25:34,080 Speaker 2: every weekday morning for Bloomberg Daybreak here at the beginning 472 00:25:34,080 --> 00:25:36,679 Speaker 2: at six am in London. That's one am on Wall Street. 473 00:25:36,760 --> 00:25:40,399 Speaker 1: Tom, Thanks Caroline and coming up on Bloomberg day Break Weekend. 474 00:25:40,480 --> 00:25:44,600 Speaker 1: China steps up its technology rivalry against the US. I'm 475 00:25:44,640 --> 00:25:57,840 Speaker 1: Tom Busby, and this is Bloomberg. This is Bloomberg day 476 00:25:57,840 --> 00:26:00,000 Speaker 1: Break Weekend, our global look ahead at the top store 477 00:26:00,200 --> 00:26:02,840 Speaker 1: for investors in the coming week. I'm Tom Busby in 478 00:26:02,920 --> 00:26:06,639 Speaker 1: New York. A new China buys China narrative taking shape 479 00:26:06,640 --> 00:26:09,679 Speaker 1: as Beijing steps up its tech rivalry with the US. 480 00:26:10,119 --> 00:26:12,760 Speaker 1: Chinese tech in disease have seen a boom that runs 481 00:26:12,840 --> 00:26:16,520 Speaker 1: contrary to concerns about the world's second largest economy. For more, 482 00:26:16,880 --> 00:26:19,280 Speaker 1: Let's get to the host of the Daybreak Asia podcast, 483 00:26:19,560 --> 00:26:20,320 Speaker 1: Doug Krisner. 484 00:26:20,480 --> 00:26:23,480 Speaker 3: Tom China's main stock markets have been soaring in the 485 00:26:23,520 --> 00:26:26,639 Speaker 3: month of August especially where tech shares are concerned. The 486 00:26:26,720 --> 00:26:29,720 Speaker 3: tech heavy China X index outperformed the S and P 487 00:26:29,800 --> 00:26:32,520 Speaker 3: five hundred by a mile thanks to a rally in 488 00:26:32,600 --> 00:26:36,520 Speaker 3: Chinese artificial intelligence stocks. Key question here how much more 489 00:26:36,560 --> 00:26:39,320 Speaker 3: can we expect? Well, that's a good question for my guest, 490 00:26:39,359 --> 00:26:43,240 Speaker 3: Bloomberg opinion columnist juley Ren, who joins us from Hong 491 00:26:43,359 --> 00:26:45,760 Speaker 3: Kong Shuly. Thank you so much. It's always a pleasure. 492 00:26:46,320 --> 00:26:49,000 Speaker 3: I think because of your expertise in markets, we can 493 00:26:49,080 --> 00:26:53,560 Speaker 3: agree that attempting to predict the direction of any market 494 00:26:53,720 --> 00:26:57,400 Speaker 3: is extraordinarily difficult. One of the things that you point out, 495 00:26:57,400 --> 00:27:01,080 Speaker 3: though in your piece is that a parallel might be 496 00:27:01,240 --> 00:27:03,080 Speaker 3: useful here help me understand that. 497 00:27:03,960 --> 00:27:07,840 Speaker 12: So people are looking at the twenty five versus twenty fifteen. 498 00:27:08,520 --> 00:27:11,199 Speaker 12: If we recall twenty fifteen was a crazy year for 499 00:27:11,359 --> 00:27:14,919 Speaker 12: China store market. In the first half there was a 500 00:27:15,160 --> 00:27:18,840 Speaker 12: new for it rally like with the benchmarkin that's up 501 00:27:18,920 --> 00:27:22,439 Speaker 12: fifty percent, and in the second half or that fifty percent, 502 00:27:22,520 --> 00:27:27,040 Speaker 12: King was given away and then the Chinese government had 503 00:27:27,040 --> 00:27:30,679 Speaker 12: to scramble to bring in the national team to support 504 00:27:30,720 --> 00:27:35,200 Speaker 12: the store market. So people think that the twenty twenty 505 00:27:35,280 --> 00:27:40,360 Speaker 12: five has very similar economic dropback as twenty fifteen, because 506 00:27:40,560 --> 00:27:44,080 Speaker 12: just like a decade ago, the economy is in the deflation. 507 00:27:44,440 --> 00:27:49,359 Speaker 12: We have almost three years of producers deflation, which does 508 00:27:49,400 --> 00:27:52,879 Speaker 12: not bode well for corporate profits, right, and the twenty 509 00:27:52,960 --> 00:27:56,240 Speaker 12: fifteen we were seeing the similar things. So the question 510 00:27:56,440 --> 00:27:59,879 Speaker 12: is how can the store market be doing so well 511 00:28:00,119 --> 00:28:03,080 Speaker 12: when the economy is so bad. And a lot of 512 00:28:03,080 --> 00:28:06,920 Speaker 12: people have pointed out that this is liquidity driven rally, 513 00:28:07,080 --> 00:28:09,720 Speaker 12: just like twenty fifteen, but I have to say it's 514 00:28:09,760 --> 00:28:10,840 Speaker 12: a little bit more than that. 515 00:28:11,240 --> 00:28:13,200 Speaker 3: One of the things that I think is very interesting 516 00:28:13,359 --> 00:28:16,120 Speaker 3: is that the mainline Chinese markets really have a great 517 00:28:16,160 --> 00:28:20,920 Speaker 3: deal of retail participation, and in many cases these investors 518 00:28:20,960 --> 00:28:24,879 Speaker 3: have felt the pain of the Chinese housing market, have 519 00:28:24,960 --> 00:28:27,920 Speaker 3: they not? And I'm curious to know whether or not 520 00:28:28,080 --> 00:28:32,120 Speaker 3: they're particularly susceptible if there's a kind of a pullback here, 521 00:28:32,160 --> 00:28:35,040 Speaker 3: and they may be a bit one more time. 522 00:28:35,760 --> 00:28:41,400 Speaker 12: Well, the Chinese government suddenly wants a slow running bull 523 00:28:41,440 --> 00:28:44,800 Speaker 12: market kind of like what you see in is in p. 524 00:28:44,920 --> 00:28:47,560 Speaker 12: Five hundred, you know, ten twenty percent rise every year, 525 00:28:47,680 --> 00:28:50,320 Speaker 12: which is quite nice, right, but that's not what's going 526 00:28:50,360 --> 00:28:53,440 Speaker 12: to happen with China. Like what you said China. China 527 00:28:53,480 --> 00:28:56,920 Speaker 12: stock market has heavy retail participation, so it can never 528 00:28:57,000 --> 00:28:59,640 Speaker 12: be a slow bal What you will always see is 529 00:28:59,720 --> 00:29:02,360 Speaker 12: a bit is a create mac bob basically like you 530 00:29:02,360 --> 00:29:06,480 Speaker 12: can see big rallies in individual stocks twenty thirty percent 531 00:29:06,520 --> 00:29:06,920 Speaker 12: per day. 532 00:29:07,360 --> 00:29:09,360 Speaker 3: So what about the deep Seek moment. We talk a 533 00:29:09,360 --> 00:29:11,720 Speaker 3: lot about that. We talk a little bit about the 534 00:29:11,800 --> 00:29:16,360 Speaker 3: artificial intelligence wave that is cresting in China. But it's 535 00:29:16,440 --> 00:29:19,280 Speaker 3: kind of interesting because some of that has been powered 536 00:29:19,280 --> 00:29:23,959 Speaker 3: by advanced semiconductors, some of which have been manufactured by Nvidia. 537 00:29:24,000 --> 00:29:26,560 Speaker 3: And I'm thinking of the H twenty AI chip, which 538 00:29:26,640 --> 00:29:30,600 Speaker 3: is tailor made for the Chinese market. But recently Beijing 539 00:29:30,720 --> 00:29:33,000 Speaker 3: seemed to change its tone when it comes to the 540 00:29:33,240 --> 00:29:36,240 Speaker 3: H twenty, and I'm wondering whether that could be maybe 541 00:29:36,240 --> 00:29:40,480 Speaker 3: a catalyst for some difficulty in AI stocks in China. 542 00:29:40,560 --> 00:29:44,640 Speaker 12: It absolutely is a catalyst. The interesting thing about China's 543 00:29:44,680 --> 00:29:46,920 Speaker 12: deep Seak moment is that earlier in the year we 544 00:29:47,240 --> 00:29:51,200 Speaker 12: found out deep Seek was quite good at making large 545 00:29:51,280 --> 00:29:55,840 Speaker 12: language models right. And interestingly enough, the biggest beneficiary is 546 00:29:55,840 --> 00:29:58,920 Speaker 12: not mainland China's stock market, but Hong Kong stock market, 547 00:29:59,000 --> 00:30:02,400 Speaker 12: because the Hong Kong star market has the biggest consumer 548 00:30:02,440 --> 00:30:06,360 Speaker 12: tech companies, for instance, Ali, Baba, Tens and by do right, 549 00:30:06,560 --> 00:30:10,280 Speaker 12: all these consumer tech companies, they were basically piggybacking on 550 00:30:10,320 --> 00:30:14,280 Speaker 12: the deepc's reasoning models and coming up with their big 551 00:30:15,000 --> 00:30:18,440 Speaker 12: generative AI models of their own. So basically, investors, so 552 00:30:18,600 --> 00:30:22,200 Speaker 12: oh okay, China's consumer tech companies are going to become 553 00:30:22,680 --> 00:30:25,480 Speaker 12: like US Microsoft all matter. 554 00:30:25,640 --> 00:30:25,840 Speaker 6: Right. 555 00:30:26,040 --> 00:30:28,280 Speaker 12: And then what you saw was that in the first 556 00:30:28,280 --> 00:30:30,120 Speaker 12: half of the year, the Hong Kong market had a 557 00:30:30,120 --> 00:30:33,520 Speaker 12: big run, whereas the mainland China market was not doing much. 558 00:30:33,760 --> 00:30:36,760 Speaker 12: But now the story has flipped a little bit in 559 00:30:36,840 --> 00:30:40,080 Speaker 12: that it seems quite clear that the Chinese government not 560 00:30:40,160 --> 00:30:43,640 Speaker 12: only wants to have big AI models but also to 561 00:30:43,760 --> 00:30:46,280 Speaker 12: power them with their own chips. Right, and then the 562 00:30:46,360 --> 00:30:49,640 Speaker 12: chip companies happened to be listed in Shanghai and Chinchin, 563 00:30:49,760 --> 00:30:52,040 Speaker 12: not in Hong Kong. That's why we are seeing a 564 00:30:52,080 --> 00:30:53,800 Speaker 12: big run in the mainland stocks. 565 00:30:54,080 --> 00:30:56,479 Speaker 3: So you said a moment ago that Chinese once again 566 00:30:56,720 --> 00:31:00,440 Speaker 3: entering a liquidity driven bubble. Where is this liquidity coming from? 567 00:31:00,560 --> 00:31:04,120 Speaker 3: Is this all due to PBOC policy? 568 00:31:04,560 --> 00:31:08,320 Speaker 12: No, this time is quite different. So since COVID, like 569 00:31:08,400 --> 00:31:11,600 Speaker 12: the Chinese people have been saving a lot. A lot 570 00:31:11,640 --> 00:31:14,000 Speaker 12: of it is well, it started with the lawdowns, right, 571 00:31:14,280 --> 00:31:17,320 Speaker 12: you have nowhere to go, so you basically save a 572 00:31:17,320 --> 00:31:20,600 Speaker 12: lot of your income. And then the housing market didn't 573 00:31:20,640 --> 00:31:23,240 Speaker 12: do well and people got even more cautious. And now 574 00:31:23,320 --> 00:31:27,560 Speaker 12: the term, a popular term in China is that don't 575 00:31:27,640 --> 00:31:31,160 Speaker 12: charge me iq text. People are very cautious on what 576 00:31:31,280 --> 00:31:33,440 Speaker 12: they want to spend and they want value for money, 577 00:31:33,640 --> 00:31:35,880 Speaker 12: and that means that they're saving a lot more, right, 578 00:31:36,160 --> 00:31:38,240 Speaker 12: and how much of that money is going to go 579 00:31:39,040 --> 00:31:41,440 Speaker 12: in the last couple of years. They basically put that 580 00:31:41,560 --> 00:31:45,240 Speaker 12: money into the bank deposit. But the bank deposit rates 581 00:31:45,240 --> 00:31:48,400 Speaker 12: are getting lower and lower, and if you have a catalyst, 582 00:31:48,560 --> 00:31:51,280 Speaker 12: all that money that's earning like one or two percent 583 00:31:51,360 --> 00:31:54,240 Speaker 12: in the bank deposits, they can come into the store market. 584 00:31:54,440 --> 00:31:56,640 Speaker 3: So you mentioned kind of low infrast rates there. That 585 00:31:56,720 --> 00:31:59,280 Speaker 3: takes me to the notion of margin and whether or 586 00:31:59,320 --> 00:32:02,520 Speaker 3: not retail investors are using margin as a way to 587 00:32:02,600 --> 00:32:05,440 Speaker 3: try to create a bit of leverage in the equity market. 588 00:32:06,360 --> 00:32:09,520 Speaker 12: I think a retail investors everywhere in the world likes 589 00:32:09,560 --> 00:32:12,680 Speaker 12: to They like to use margins if they can to 590 00:32:13,440 --> 00:32:16,040 Speaker 12: get a little bit to choose up the return. 591 00:32:16,760 --> 00:32:18,800 Speaker 3: Is that happening right now on the mainline to a 592 00:32:18,840 --> 00:32:19,520 Speaker 3: great degree. 593 00:32:19,800 --> 00:32:24,440 Speaker 12: Yes, yes, but they're not as crazy as before. It's 594 00:32:24,520 --> 00:32:27,680 Speaker 12: true that the margin trank sessions is at the highest 595 00:32:27,760 --> 00:32:30,840 Speaker 12: level since twenty fifteen, but the store market is also 596 00:32:30,840 --> 00:32:35,320 Speaker 12: fifty percent bigger. I just want to close some statistics. 597 00:32:35,480 --> 00:32:39,560 Speaker 12: The margin transaction is about ten percent of daily trading volume. 598 00:32:39,840 --> 00:32:44,040 Speaker 12: In twenty fifteen. At the craziest time, it was thirty percent. 599 00:32:44,280 --> 00:32:46,480 Speaker 12: So it's getting crazy, but not so crazy. 600 00:32:46,560 --> 00:32:48,840 Speaker 3: Do you think the government's concerned about everything that we're 601 00:32:48,880 --> 00:32:52,400 Speaker 3: talking about here and the potential damage that let's say, 602 00:32:52,840 --> 00:32:54,760 Speaker 3: the bursting of a bubble may bring about. 603 00:32:55,760 --> 00:32:59,400 Speaker 12: Oh absolutely, Because twenty fifteen presidents she had to do 604 00:32:59,480 --> 00:33:04,240 Speaker 12: a lot to calm down. That the stock crash, right like, 605 00:33:05,080 --> 00:33:08,560 Speaker 12: the government was definitely scrambling, and that they don't want 606 00:33:08,640 --> 00:33:11,920 Speaker 12: this kind of crazy met bull market again. So they 607 00:33:11,960 --> 00:33:16,480 Speaker 12: are getting concerned, and that there are market the rumors 608 00:33:16,520 --> 00:33:19,040 Speaker 12: that the government is cracking down our margin landing. 609 00:33:19,400 --> 00:33:22,200 Speaker 3: So that's a very interesting point. And I'm curious about 610 00:33:22,200 --> 00:33:24,680 Speaker 3: the way that the government may work through the various 611 00:33:25,080 --> 00:33:28,240 Speaker 3: brokerages in China. Do they carry kind of a heavy 612 00:33:28,240 --> 00:33:32,160 Speaker 3: hand here and telling what brokers to do yeah, and. 613 00:33:32,280 --> 00:33:35,280 Speaker 12: There's this thing called the window guidance. They don't officially 614 00:33:35,400 --> 00:33:39,200 Speaker 12: post a noticeing, oh, you know, you cannot have more 615 00:33:39,240 --> 00:33:42,160 Speaker 12: than say, fifty percent leverage or whatever, but they will 616 00:33:42,200 --> 00:33:44,720 Speaker 12: tell their brokers not to give out those margin loans. 617 00:33:44,720 --> 00:33:48,080 Speaker 12: So much so the brokers they get it right, like 618 00:33:48,320 --> 00:33:51,040 Speaker 12: they get that they will go into trouble. So they 619 00:33:51,120 --> 00:33:55,160 Speaker 12: will they will try to ring in margin trading. Having 620 00:33:55,200 --> 00:33:58,400 Speaker 12: said that lending is good business for them as well, 621 00:33:58,600 --> 00:34:02,760 Speaker 12: so they have to play a pretty delicate balancing act. 622 00:34:03,040 --> 00:34:05,800 Speaker 3: We'll leave it there with that delicate balancing act. Truly, 623 00:34:05,880 --> 00:34:08,200 Speaker 3: thank you so very much for joining us. Bloomberg Opinion 624 00:34:08,239 --> 00:34:11,239 Speaker 3: columnist Truly ran on the line from Hong Kong, so 625 00:34:11,360 --> 00:34:13,120 Speaker 3: let's stay with the tech story. 626 00:34:13,160 --> 00:34:13,640 Speaker 1: In Asia. 627 00:34:13,719 --> 00:34:16,799 Speaker 3: We caught up with Carrie Craig, global market strategist at 628 00:34:16,840 --> 00:34:20,400 Speaker 3: JP Morgan Asset Management. He spoke to our TV colleagues, 629 00:34:20,440 --> 00:34:23,560 Speaker 3: Paul Allen and April Hong on the Asia trade. 630 00:34:23,800 --> 00:34:26,279 Speaker 10: We're seeing Asia stalks. They seem to be running a 631 00:34:26,280 --> 00:34:29,560 Speaker 10: bit higher at the moment. We have the tariff backdrop 632 00:34:29,600 --> 00:34:33,600 Speaker 10: as well. India facing double the rate. South Korea came 633 00:34:33,640 --> 00:34:36,600 Speaker 10: away with the meeting in the US from a positive 634 00:34:36,640 --> 00:34:39,680 Speaker 10: tone deals bonanza. I think we're hearing about some of 635 00:34:39,719 --> 00:34:44,280 Speaker 10: these Korean companies and their expansion plans in the US 636 00:34:44,320 --> 00:34:49,800 Speaker 10: as well. How are you playing South Korea, particularly related 637 00:34:49,880 --> 00:34:53,000 Speaker 10: to Taiwan. Do you see outperformance there potentially? 638 00:34:53,840 --> 00:34:56,080 Speaker 13: Yeah, I think we're still quite favorable on North Asian 639 00:34:56,160 --> 00:34:58,719 Speaker 13: markets more broadly, with it's China, Taiwan, and Korea. I mean, 640 00:34:58,760 --> 00:35:01,400 Speaker 13: they have done very well this year in terms of 641 00:35:01,400 --> 00:35:03,600 Speaker 13: their performance, so I think that's something to bear in mind, 642 00:35:04,160 --> 00:35:06,680 Speaker 13: and valuations have moved up a little bit. I think 643 00:35:06,680 --> 00:35:09,080 Speaker 13: those the tech cycle still has more to go in 644 00:35:09,120 --> 00:35:11,880 Speaker 13: the carve outs we've seen around some of the semiconductors 645 00:35:11,920 --> 00:35:14,879 Speaker 13: been put into those deals, the offshore investment that will 646 00:35:14,880 --> 00:35:17,319 Speaker 13: go into the US from some of these companies being 647 00:35:17,360 --> 00:35:20,080 Speaker 13: something that will support that market. And I think secularly 648 00:35:20,080 --> 00:35:22,399 Speaker 13: that AI theme is still very prominent, so we would 649 00:35:22,480 --> 00:35:24,520 Speaker 13: argue that those are going to be the beneficiaries of it, 650 00:35:24,920 --> 00:35:28,200 Speaker 13: whether it's China or Korea. I think, you know, you're 651 00:35:28,200 --> 00:35:30,000 Speaker 13: really coming down to a couple of companies that are 652 00:35:30,080 --> 00:35:32,440 Speaker 13: driving that decision, So it's really more of a bottom 653 00:35:32,480 --> 00:35:34,160 Speaker 13: up view in terms of which of those companies you 654 00:35:34,200 --> 00:35:37,400 Speaker 13: think are better positioned in this environment rather than thinking 655 00:35:37,400 --> 00:35:39,520 Speaker 13: about those countries. So I think it's a couple of 656 00:35:39,520 --> 00:35:42,400 Speaker 13: stocks at really driving the decision between South Korea and 657 00:35:42,440 --> 00:35:45,560 Speaker 13: Taiwan in terms of relative performance, not really necessarily just 658 00:35:45,600 --> 00:35:46,799 Speaker 13: thinking about the country there. 659 00:35:47,760 --> 00:35:50,000 Speaker 14: Yeah, in terms of tech and China, we've seen a 660 00:35:50,040 --> 00:35:52,000 Speaker 14: pretty strong or run up there and in fact a 661 00:35:52,040 --> 00:35:55,760 Speaker 14: pretty strong rally in general when it comes to Chinese equities. 662 00:35:56,040 --> 00:35:57,719 Speaker 14: How's that looking to you? Do you feel there's a 663 00:35:57,800 --> 00:35:59,959 Speaker 14: risk of a correction here is the fundamental stuf? 664 00:36:01,200 --> 00:36:03,560 Speaker 13: Yeah, the fundamentals do look quite good to us. Obviously, 665 00:36:03,600 --> 00:36:05,759 Speaker 13: there was the valuation argument from earlier in the year, 666 00:36:05,800 --> 00:36:08,800 Speaker 13: and Chinese equities still look relatively well priced compared to 667 00:36:08,840 --> 00:36:12,359 Speaker 13: many developed market peers. There's some appealing characteristics to the 668 00:36:12,400 --> 00:36:15,320 Speaker 13: onshore market in China given the lower correlation they have 669 00:36:15,400 --> 00:36:17,160 Speaker 13: to the US equity So building in a bit of 670 00:36:17,360 --> 00:36:21,480 Speaker 13: a diversification of portfolio. But fundamentously, again thinking about that 671 00:36:21,560 --> 00:36:24,120 Speaker 13: tech theme, Chinese tech is a way to play it 672 00:36:24,160 --> 00:36:25,800 Speaker 13: that's not led to the US and some of the 673 00:36:25,880 --> 00:36:28,040 Speaker 13: risks that come with that, and we do see that 674 00:36:28,120 --> 00:36:30,840 Speaker 13: as being more prevalent. It is a little bit disconnected 675 00:36:30,840 --> 00:36:32,680 Speaker 13: from what we're seeing in the economy as well, given 676 00:36:32,719 --> 00:36:35,120 Speaker 13: the softness and some of the economic data and only 677 00:36:35,120 --> 00:36:37,880 Speaker 13: the slow movement in fiscal support coming through from the 678 00:36:37,960 --> 00:36:40,319 Speaker 13: Chinese government. So I think there's still room to go 679 00:36:40,360 --> 00:36:43,440 Speaker 13: into China. I think it becomes quite an active position 680 00:36:43,480 --> 00:36:46,319 Speaker 13: given the outlook for the economy. And again we've seen 681 00:36:46,320 --> 00:36:47,960 Speaker 13: that bit of a split between what we're seeing in 682 00:36:48,000 --> 00:36:50,920 Speaker 13: the offshore and the onshore market, where it's really the 683 00:36:50,960 --> 00:36:53,000 Speaker 13: offshore market we are seeing a lot of these tech 684 00:36:53,040 --> 00:36:55,640 Speaker 13: themes being more prominent, whereas the onshore market seems to 685 00:36:55,640 --> 00:36:58,040 Speaker 13: be a little bit more about dividend income some of 686 00:36:58,040 --> 00:37:00,279 Speaker 13: the performance in the financials. So I think there's very 687 00:37:00,320 --> 00:37:02,520 Speaker 13: much different ways to play China depending on what you're 688 00:37:02,520 --> 00:37:04,880 Speaker 13: looking for in terms of growth versus income at the moment. 689 00:37:05,120 --> 00:37:06,840 Speaker 13: But it is a market that we do continue to 690 00:37:07,000 --> 00:37:09,400 Speaker 13: like in terms of where we can find value around 691 00:37:09,400 --> 00:37:12,160 Speaker 13: the world and looking for continued performance. 692 00:37:12,800 --> 00:37:15,640 Speaker 14: Where are you seeing risk at the moment and how 693 00:37:15,640 --> 00:37:16,759 Speaker 14: are you hedging against that? 694 00:37:17,880 --> 00:37:20,120 Speaker 13: I mean, I think there's a way of framing how 695 00:37:20,200 --> 00:37:23,160 Speaker 13: investors a feeling, and that's a little bit of sort 696 00:37:23,200 --> 00:37:26,000 Speaker 13: of uncomfortably tolerant of what's out there at the moment. Obviously, 697 00:37:26,120 --> 00:37:28,799 Speaker 13: markets have run pretty hard since we send that sell 698 00:37:28,840 --> 00:37:32,000 Speaker 13: off in April. There are concerns around some of the 699 00:37:32,040 --> 00:37:35,319 Speaker 13: softer economic data that's coming out, obviously the political risk 700 00:37:35,360 --> 00:37:37,960 Speaker 13: that's still in there, but you know, fundamentally, we do 701 00:37:38,000 --> 00:37:41,320 Speaker 13: see a global economy that's improving and that should support 702 00:37:41,320 --> 00:37:44,239 Speaker 13: the outlook for both equities in terms of risk and 703 00:37:44,360 --> 00:37:47,600 Speaker 13: nominal growth. But also it's not huge growth. It is 704 00:37:47,640 --> 00:37:49,520 Speaker 13: subtree and growth around the world, and so we do 705 00:37:49,560 --> 00:37:52,400 Speaker 13: think about duration in terms of a hedge against that 706 00:37:52,440 --> 00:37:55,319 Speaker 13: growth shock and a portfolio, but also barbelling that with 707 00:37:55,360 --> 00:37:57,279 Speaker 13: a little bit more of the credit space in terms 708 00:37:57,320 --> 00:37:59,239 Speaker 13: of high yield given the carry that you're getting on 709 00:37:59,280 --> 00:38:02,920 Speaker 13: that are rather than owning outright duration the other hedges 710 00:38:02,960 --> 00:38:05,080 Speaker 13: against that inflation, I think that for us really does 711 00:38:05,120 --> 00:38:07,960 Speaker 13: to fall to things like alternatives and real assets. We're 712 00:38:08,040 --> 00:38:10,840 Speaker 13: gaining that less sensitivity to the economy, the good outcome, 713 00:38:10,880 --> 00:38:13,560 Speaker 13: and obviously some in built inflation protection as well. So 714 00:38:13,840 --> 00:38:16,440 Speaker 13: we need to think about a broader diversification of assets 715 00:38:16,440 --> 00:38:19,360 Speaker 13: within a portfolio to really counteract all the risks that 716 00:38:19,400 --> 00:38:20,880 Speaker 13: are out there in the global economy. 717 00:38:21,400 --> 00:38:24,520 Speaker 3: That's Kerry Craig. He is global market strategist at JP 718 00:38:24,640 --> 00:38:28,760 Speaker 3: Morgan Asset Management, speaking with Bloomberg TV host Paul Allen 719 00:38:28,960 --> 00:38:31,640 Speaker 3: and Avril Hong, and I'm Doug Krisner. You can catch 720 00:38:31,719 --> 00:38:35,320 Speaker 3: us weekdays for the Daybreak Asia podcast. It's available wherever 721 00:38:35,400 --> 00:38:38,319 Speaker 3: you get your podcast. Tom, thank you, Doug. 722 00:38:38,560 --> 00:38:40,759 Speaker 1: And that does it for this edition of Bloomberg day 723 00:38:40,760 --> 00:38:43,360 Speaker 1: Break Weekend. Join us again Monday morning at five am 724 00:38:43,400 --> 00:38:45,880 Speaker 1: Wall Street Time for the latest on markets overseas and 725 00:38:45,920 --> 00:38:48,720 Speaker 1: the news you need to start your day. I'm Tom Busby. 726 00:38:49,000 --> 00:38:51,880 Speaker 1: Stay with us. Top stories and global business headlines are 727 00:38:51,880 --> 00:38:53,920 Speaker 1: coming up right now.