Speaker 1: This is Bloomberg day Break Weekend, our global look at
Speaker 1: the top stories in the coming week from our day
Speaker 1: Break anchors all around the world, and straight ahead on
Speaker 1: the program. Another big week coming for bank earnings. I'm
Speaker 1: Tom Busby in New York.
Speaker 2: I'm Stephen Carolin London with a Prime Minister and the
Speaker 2: Bank of England. We'll be hoping there won't be another
Speaker 2: unpleasant inflation surprise in store.
Speaker 3: I'm Brian Curtis in Hong Kong. We look ahead the
Speaker 3: Tesla's earnings and the company's progress in China.
Speaker 4: I'm Kayleie Lyones in Washington, where we're getting ready for
Speaker 4: Congress to come back to the capital after two week recess.
Speaker 4: Watch for fireworks when they return.
Speaker 5: That's all straight ahead on Bloomberg day Break Weekend on
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Speaker 1: Good day to you. I'm Tom Busby, and we begin
Speaker 1: today's program with all the first quarterbank earnings that began
Speaker 1: this past Friday and continue in the coming week. Bloomberg
Speaker 1: Wall Street reporter Shanalie Basic joining me now for some insight. Hello,
Speaker 1: shanale I, am all right. Well, let's start with some
Speaker 1: of the good news that we heard on Friday, particularly
Speaker 1: upside earning surprises from the biggies, JP Morgan, Chase and
Speaker 1: City Group.
Speaker 6: Yeah, there are a few things. For JP Morgan in particular,
Speaker 6: not only did they beat on revenue, they also had
Speaker 6: some really interesting items within different lines of the banks. So,
Speaker 6: for example, they said they were going to make billions
Speaker 6: of dollars more in net interest income than was initially expected.
Speaker 6: Another thing that happened though, was that they beat on
Speaker 6: fixed income trading, and so you also saw an institutional
Speaker 6: business do very well here relative to what was expected.
Speaker 6: That was similar for Citygroup as well. Remember, the markets
Speaker 6: are still very volatile, so the fact that they're still
Speaker 6: making money from institutional clients are a big deal as
Speaker 6: we watch some of the cracks in the market and
Speaker 6: how they affect both the consumer and institutional clients.
Speaker 1: Now, speaking of those cracks, JP Morgan, Chase CEO Jamie
Speaker 1: Dimond told investors, you can count the number of troubled
Speaker 1: banks on your hands. What does that tell us?
Speaker 6: You know, nobody wants to be in a banking crisis.
Speaker 6: Or you can use what Muhammad Alarian would say, and
Speaker 6: he says it's a banking tremor, not a banking crisis.
Speaker 6: And even with the struggles we're seeing with the likes
Speaker 6: of Silicon Valley Bank, a lot of questions still around
Speaker 6: for as Republic. But JP Morgan and City Group are
Speaker 6: telling you that this is fairly contained. Now. JP Morgan
Speaker 6: banks hundreds of banks in America as well. They're more
Speaker 6: than four thousand of them. And there's a consensus here
Speaker 6: among even the largest banks which have benefited a lot
Speaker 6: from this kind of banking tremor crisis, whatever you want
Speaker 6: to call it. The thing here is those regional banks
Speaker 6: are really what touches a lot of America. They have
Speaker 6: a lot of exposure to commercial real estate, for example,
Speaker 6: small businesses which employ a lot of the American economy.
Speaker 6: So if those regional banks face a lot of pressure,
Speaker 6: which is really what we're going to see the bulk
Speaker 6: of in terms of their earning cycle, the next couple
Speaker 6: of weeks there could be ripple effects to any pains
Speaker 6: those banks, the smaller banks would feel.
Speaker 1: And in the earnings that we that we just had
Speaker 1: on Friday, do we see the movement of a lot
Speaker 1: of money, a lot of deposits coming out of those
Speaker 1: regional banks and into the biggiaest.
Speaker 6: It was most notable at JP Morgan, where they supposed
Speaker 6: they posted a surprise increase in deposits. They had been
Speaker 6: drawing down for the last couple of quarters here because
Speaker 6: interest rates are still very high, people moving into money
Speaker 6: market funds instead. JP Morgan is telling you that don't
Speaker 6: expect this kind of increase in deposits to continue, even
Speaker 6: what they took in in the wake of kind of
Speaker 6: the Silicon Valley bank issue. They say that these are
Speaker 6: not necessarily sticky deposits. They can go out the door
Speaker 6: just as easily as they've come in. Of course, we
Speaker 6: don't worry about deposits at JP Morgan. You know, I
Speaker 6: want to say that their deposit base is probably bigger
Speaker 6: here than the GDP of France. It's two point three
Speaker 6: seven trillion dollars we're talking about in deposits at JP Morgan.
Speaker 6: But again, you know, does that deposit movement cause fragilities
Speaker 6: in the smaller banks. That's where it becomes more of
Speaker 6: a question.
Speaker 1: Now I want to touch on something you spoke about,
Speaker 1: and that is higher interest rates and how these banks
Speaker 1: benefited from the what's it been nine in a row
Speaker 1: of increases from the Federal Reserve and maybe one or
Speaker 1: two more to come.
Speaker 6: The interesting thing about this is that if you look
Speaker 6: at City Group and if you look at JP Morgan,
Speaker 6: a lot of this is coming from their credit card portfolios.
Speaker 6: So they're really getting more because people are borrowing more
Speaker 6: from on their credit card debt. That's not the same,
Speaker 6: by the way, as we know for a lot of
Speaker 6: the regionals and for Wells Fargo, which is more heavily
Speaker 6: tilted towards, for example, the mortgage market, which has been
Speaker 6: facing a lot of pressures in this higher interest rate environment.
Speaker 1: Oh yeah, and we just saw, speaking of credit cards,
Speaker 1: retail sales dipping last last month. But still it's a
Speaker 1: big pot that you know, we're spending a lot of money.
Speaker 6: Americans, and it makes total sense. You see them in
Speaker 6: the bank numbers. Also you see card spending up at
Speaker 6: these banks. How long that continues for remember a couple
Speaker 6: times this year. Jamie Diamond has said that the consumer
Speaker 6: will start to hit a cliff at the end of
Speaker 6: this year. So you have city groups saying that you
Speaker 6: can expect kind of a soft or shallow recession, if
Speaker 6: you will, maybe in the second half of this year.
Speaker 6: But then you also have to take into account what
Speaker 6: Jamie Diamond and JP Morgan has said about the uncertainties
Speaker 6: that bake into twenty twenty four into next year. So
Speaker 6: we're talking about a long horizon of uncertainty here.
Speaker 1: So so despite the upbeat earnings, they are very cautious.
Speaker 1: They are being cautious. They're telling investors it's not over.
Speaker 6: Yet, certainly not. And even in their numbers alone, you
Speaker 6: see them really preparing with higher provisions for credit losses,
Speaker 6: even higher charge offs. The ninety day delinquency rate on
Speaker 6: for example, JP Morgan's credit card book has ticked a
Speaker 6: little higher.
Speaker 7: They're well blow.
Speaker 6: Levels we've seen that would be considered alarming. They're well
Speaker 6: below that. JP Morgan calls it a normalization. We're getting
Speaker 6: back to more normal levels. You're going to get more
Speaker 6: losses as you're lending more. But all in all, I
Speaker 6: mean JP Morgan is very profitable. In fact, in terms
Speaker 6: of revenue, they just had a record corridor. So that
Speaker 6: is pretty incredible considering all the worries that we had
Speaker 6: gone into the quarter with.
Speaker 1: Right, and now the cavalcade of earnings continues this coming
Speaker 1: week and we hear from some the rest of the biggies,
Speaker 1: a lot of the regional banks, even the small ones.
Speaker 1: So what are we expecting to hear from Bank of America,
Speaker 1: from Golden Sechs, from Morgan Stanley on the Bank.
Speaker 6: Of of America front. I think it'll be interesting to
Speaker 6: see what they say on that interesting income, given that
Speaker 6: there's such a big lender to the American economy. Do
Speaker 6: they say the same things as JP Morgan that they
Speaker 6: expect more? Remember City Group didn't really change their outlook
Speaker 6: for the year, and also JP Morgan City Group in particular,
Speaker 6: their headcount has risen over the past year. How about
Speaker 6: Bank of America Wages have risen also, so we know
Speaker 6: that expenses tied to pay are rising, but how much
Speaker 6: can banks really take on with that much uncertainty ahead?
Speaker 6: There's also Schwab on Monday. Remember Schwab will be very
Speaker 6: interesting because they've had a large sell off. They you know,
Speaker 6: are very concerned and their investors rather are concerned about
Speaker 6: people moving from deposits to money market funds. It's not
Speaker 6: a question of viability of the firm necessarily, it's a
Speaker 6: question of profitability and what will cause more pressures at
Speaker 6: a place like Schwab. You also have Goldman, Zachs and
Speaker 6: Morgan Stanley in the coming days after that. Like I said,
Speaker 6: the institutions invest in banking fees are way down, but
Speaker 6: Goldman in particular, if they find the same fixed income
Speaker 6: trading figures or beats that JP Morgan and Citygroup had,
Speaker 6: you know, their bankers are just fine. Let's put it
Speaker 6: that way.
Speaker 7: Now.
Speaker 1: Some of the others, though, so that have truest is
Speaker 1: one that we just heard news from them last week.
Speaker 1: Fifth third key corpse, some of the second level or
Speaker 1: third level of banks, and are we seeing a similar thing.
Speaker 1: That's what you talked about. The ones that are the
Speaker 1: regional banks that are really vital to smaller communities.
Speaker 6: This is where it gets so stressful. The big banks
Speaker 6: this quarter are they're very easy stories more or less.
Speaker 6: But the regional banks, line by line number my number,
Speaker 6: if I take a look at P and C all
Speaker 6: through Friday had been kind of up and down in
Speaker 6: the stock market. They were up, they were down, and
Speaker 6: remember they were stable in their actual numbers. When you
Speaker 6: looked at the deposit flows, they actually did better than
Speaker 6: what Wallstreet had expected. So do we see the same
Speaker 6: from M and T and Fifth Third and all of
Speaker 6: these other regionals or did they for whatever reason face
Speaker 6: stiffer outputs and deposits from their clients? You know, P
Speaker 6: and C is based in Pittsburgh, some of them. Some
Speaker 6: people say that these are regional differences. It tended to
Speaker 6: be a lot of the California banks. People were concerned
Speaker 6: about the concentration and some of those you know, First
Speaker 6: Republic and Silicon Valley Bank kind of stories and their
Speaker 6: balance sheets. But do you see those same pressures really
Speaker 6: start to come across from the client base, at least
Speaker 6: from a lot of these regionals. And then you have
Speaker 6: to add the other question of what did their loan
Speaker 6: books look like, which is another question that will continue
Speaker 6: to be a worry throughout the year. Is if you're
Speaker 6: worried about credit quality deteriorating, and some.
Speaker 1: Of those regional banks obviously maybe on Jamie Diamond's list.
Speaker 1: You know, we saw wild fluctuations at PacWest, a big
Speaker 1: lender in the Los Angeles area, you know, which it
Speaker 1: could be spillover from Silicon Valley Bank. But do we
Speaker 1: have any idea what some of these where some of
Speaker 1: these banks are are? Which banks he may be referring to.
Speaker 6: Eh, which ones know? And you don't want to say
Speaker 6: them either, because you don't want to cause any alarm.
Speaker 6: But you know, it's interesting you named pac West. Something
Speaker 6: interesting about PacWest was one thing they did to kind
Speaker 6: of cooled down the market was they said that they
Speaker 6: instead of going out to the market and raising money,
Speaker 6: they got essentially, you know, credit facility from a private
Speaker 6: firm named Atlas sp. This is a firm those started
Speaker 6: by Apollo in the wake of credit sue and they
Speaker 6: basically lent the money against a series of assets to
Speaker 6: weather the storm. And so you know, we could see
Speaker 6: more deals like that. It was a very interesting deal
Speaker 6: that I know that a lot of investors wanted to model.
Speaker 6: And it also showed you another thing that if these
Speaker 6: banks want to tap the capital markets, if they want
Speaker 6: to raise money. You know, when Silicon Valley Bank happened,
Speaker 6: that wasn't possible. The market was closed to these banks.
Speaker 6: But now they're finding other folks comes at a cost,
Speaker 6: but they could raise money to make it through this
Speaker 6: difficult environment if they need to.
Speaker 1: An alternative means of raising money. Yeah from the past,
Speaker 1: Thank you, Shanali. That was Bloomberg Wall Street reporter Shanali
Speaker 1: Bassic And coming up on Bloomberg day Break weekend in
Speaker 1: the UK, some key data coming our way ahead of
Speaker 1: the Bank of England's next interest rate decision. I'm Tom Busby.
Speaker 1: This is Bloomberg. This is Bloomberg Daybreak weekend, our global
Speaker 1: look ahead at the top stories for investors in the
Speaker 1: coming week. I'm Tom Busby in New York. Up later
Speaker 1: in our program, watch for a lot of drama as
Speaker 1: members of Congress get ready to return to Capitol Hill.
Speaker 1: But first in the UK, we'll get some key data
Speaker 1: in the coming days which will factor into the Bank
Speaker 1: of England's next interest rate decision. Like the FED, the
Speaker 1: UK Central Bank is thought to be close to ending
Speaker 1: a hiking cycle, although the economic situation in Britain does
Speaker 1: look quite different. Now for more, let's head to London
Speaker 1: and bring in Bloomberg Daybreak Europe Banker Stephen Carroll, Stephen Tom.
Speaker 2: The Prime Minister Iscisinak named halving the race of inflation
Speaker 2: as one of his five key priorities for this year.
Speaker 2: He'll be hoping that the CPI print from March starts
Speaker 2: to show that trend after we had a surprise uptake
Speaker 2: to ten point four percent in February. To discuss this
Speaker 2: and some more of the data points we'll be unpacking
Speaker 2: from the UK in the coming days, I'm joined by Boomberg,
Speaker 2: senior UK economist Dan Hansen, and our UK correspondent Lizzi
Speaker 2: Burdeness in studio with us as well. Dan, this February
Speaker 2: CPI number was a shocker. Remind us what drove that?
Speaker 8: Yeah, so we had we had to pick up in
Speaker 8: a little well quite a big pickup actually. The surprising
Speaker 8: core goods inflation, so clothing and footwear and also in
Speaker 8: food inflation as well. They were the sources of surprises.
Speaker 8: And we were expecting a reading of nine point nine percent.
Speaker 8: It came in ten point four percent. The Bank of
Speaker 8: England was expecting a reading of nine point nine percent.
Speaker 8: So you're right, it was a big surprise. Looking ahead,
Speaker 8: I think it will probably be seen as a blip.
Speaker 8: And there are sort of two parts of this. One
Speaker 8: part is you're just going to get these what economists
Speaker 8: called base effects. So these these effects, these big price
Speaker 8: rises last year falling out of the annual comparison, and
Speaker 8: that's going to be part of the story in March.
Speaker 8: It's going to become a more significant story in April
Speaker 8: and later in the year when we get the falls
Speaker 8: the rises in gas prices falling out of the annual comparison.
Speaker 8: But I think looking to the March number we're going
Speaker 8: to we think we're going to see drop back from
Speaker 8: ten point four percent. We actually think we're going to
Speaker 8: fall a little bit beneath ten percent. So it looks
Speaker 8: like it's going to be a temporary blit a February figure.
Speaker 2: Okay, And you mentioned the energy prices there, of course
Speaker 2: one of the big drivers that pushed inflation up to
Speaker 2: these levels in the end towards the end of last year.
Speaker 2: Where is inflation looking stickier now or where within the
Speaker 2: detail of the numbers should we be thinking about it?
Speaker 8: Yes, I mean this is I mean it goes to
Speaker 8: the Bank of England's thinking as well. So you've got
Speaker 8: you've got this, You're right, you've got this energy component.
Speaker 8: And over the course of this year, if wholesale energy
Speaker 8: prices stay where they are at the moment, over the
Speaker 8: course of this year, you're going to get about four
Speaker 8: and a half percentage points off the headline rate of inflation,
Speaker 8: So you're at ten point four at the moment. That's
Speaker 8: going to get you to six, partly mechanically through base effects,
Speaker 8: partly because we've had this fall in gas wholesale gas
Speaker 8: prices since the start of the year. Where the stickiness
Speaker 8: then comes, I think there are actually two bits of it.
Speaker 8: One is is services inflation, and that's what the Bank
Speaker 8: has said it's very focused on. But actually what has
Speaker 8: probably been a bit stickier than most, including us, have
Speaker 8: expected is the good side of the basket and where
Speaker 8: the supply chain disruption really was the source of that inflation.
Speaker 8: But actually it hasn't come down as quickly as we'd
Speaker 8: been expecting all the Bank of England has been expecting,
Speaker 8: So there is some stickiness there which is cause for concern.
Speaker 8: But I think the really key area to watch in
Speaker 8: terms of persistence, and going to your question, is services
Speaker 8: and services inflation, which again jump back up in February.
Speaker 8: We think it's going to ease slightly in March.
Speaker 2: I mentioned as you see an max premise of having
Speaker 2: inflation by the end of the year. Your colleague Jamie
Speaker 2: Ross is scincly put it that you could put a
Speaker 2: suttling pig in charge of the economy and inflation would
Speaker 2: still fall by half by the end of the year.
Speaker 2: How does the pig look a little bit further out
Speaker 2: in terms of inflation.
Speaker 8: Well, Jamie's got a much better wife of words.
Speaker 2: I think he was a bit embarrassed after that.
Speaker 8: Actually should be. It's not very becoming. But look, I
Speaker 8: think I think he's going to get He's going to
Speaker 8: meet his target. So I think Jamie's right, You're going
Speaker 8: to get there predominantly through these base effects as as
Speaker 8: we've mentioned, but I think there's going to be there
Speaker 8: is going to be somewhat of a slowdown in other components.
Speaker 8: So I think core goods will continue to ease in
Speaker 8: terms of inflation.
Speaker 5: There.
Speaker 8: Food inflation I think will come off a little bit.
Speaker 8: It's it's extremely high at the moment, and it's probably
Speaker 8: going to pick up again in the March report. But
Speaker 8: I think it's going to come off and on our
Speaker 8: forecast you get to three percent by the end of
Speaker 8: the year headline inflation. But I think what that masks
Speaker 8: is core inflation, which we think is going to end
Speaker 8: the year about four and a half percent, so significantly higher.
Speaker 8: And that again reflects this mainly reflects services inflation, but
Speaker 8: also what I'm on the good side as well.
Speaker 2: Another piece of the economic puzzle that we're going to
Speaker 2: learn more about next week is the labor market. We've
Speaker 2: got jobs data out the UK's had a particular problem
Speaker 2: with participation post the pandemic as well. Are we likely
Speaker 2: to see any improvement in that front?
Speaker 8: So I think what you're going to see from the
Speaker 8: jobs the job's data is a steady unemployment rate. So
Speaker 8: this has been a bit of a theme this year
Speaker 8: of the economy doing a little bit better, the labor
Speaker 8: market's staying a little bit tighter than people thought and
Speaker 8: not cooling as quickly. But the sort of the interesting
Speaker 8: side of this is how quickly wage growth seems to
Speaker 8: be cooling. So if you look on if you look
Speaker 8: at the headline measures of wage growth, we think private
Speaker 8: sector regular pay is going to fall from seven percent
Speaker 8: to six and a half percent, which is a big
Speaker 8: drop down. But actually if you look on an underlying basis,
Speaker 8: so the headline measures a year on year three months
Speaker 8: moving average. It takes a long time for the numbers
Speaker 8: to sort of call and fall off. But if you
Speaker 8: look at sort of more timely time, more timely picture
Speaker 8: of the underlying wage picture, actually it's actually calling very quickly.
Speaker 8: Now that's obviously not consistent with a title what you
Speaker 8: would expect in a tight labor market and with expectations
Speaker 8: inflation expectations, pay expectations up at sort of five percent
Speaker 8: mark at least in the near term. But there is
Speaker 8: a story there that is really important, particularly for the
Speaker 8: Bank of England, and that's something that we're going to
Speaker 8: be really focused on in the next jobs release.
Speaker 2: Yeah, At Lizziebriddan, you've been waiting patiently to listening into
Speaker 2: this conversation as well. But I know the story that
Speaker 2: you've been following is that the change in the makeup
Speaker 2: of the Bank of Englands Monetary Policy Committee won't affect
Speaker 2: the next meeting. But tell us about Meghan Green who's
Speaker 2: joining the NPC.
Speaker 9: Yeah, not the meeting after that. It's the replacement for
Speaker 9: Silvana ten Reiro. She is currently Global Chief Economist at
Speaker 9: the Crawl Institute. She's got a background in financial services,
Speaker 9: also in academia, and you know, it's a difficult, delicate
Speaker 9: moment to be joining the MPC because we're nearing the
Speaker 9: end of the tightening cycle. You've had eleven straight hikes
Speaker 9: so far. And this debate currently is between Silvana Tanrairo,
Speaker 9: who Green's replacing, and Swatti Dingra at the duvish end,
Speaker 9: and then at the hawkish end of the spectrum Catherine
Speaker 9: Mann about whether it's time to pause. As Dan says,
Speaker 9: Dan I noted putting a foot in both camps, whether
Speaker 9: it's going to be a hold or a hike. But
Speaker 9: fortunately Megan Green is a regular on Bloomberg TV and radio,
Speaker 9: so we've had a bit of an insight into her
Speaker 9: thoughts already. Recently she's said that she's concerned about the
Speaker 9: impact of tightening monetary policy on the banking system, and
Speaker 9: she said it more in the context of the US,
Speaker 9: but it's very applicable in the UK as well, because
Speaker 9: of course we've had the fallout of Credit Swee and
Speaker 9: Silicon Valley Bank. This was a question that was raised
Speaker 9: around the last meeting at the Bank of England. Have
Speaker 9: financial conditions tightened so much that the work of the
Speaker 9: Bank of England has been done for it and so
Speaker 9: it's interesting that she has already had this view out there,
Speaker 9: and given her financial services background, we know that she's
Speaker 9: very aware of it.
Speaker 2: How will her appointment affect the balance then on the committee?
Speaker 9: I mean it's hard. I think as Dan's colleague Anna
Speaker 9: noted to be more dubvish than Silvana Tenreiro. She's voted
Speaker 9: to hold at the past three meetings. She's even been
Speaker 9: talking about cutting rates before she leaves the committee. So
Speaker 9: it seems that this appointment can be nothing but a
Speaker 9: tilt to the hawkish side, no matter how duvish Meghan.
Speaker 8: Green may be.
Speaker 9: But the reality is she isn't going to take her
Speaker 9: seat until two meetings time. As I say, the hiking
Speaker 9: cycle could be over by then. More interesting perhaps for
Speaker 9: our UK listeners then is her open criticism of Brexit
Speaker 9: on Twitter, and she might have to rein that in
Speaker 9: if she joins the now that she's joining the MPC.
Speaker 2: Okay, Lizzie Burden, thank you very much, a UK correspondent
Speaker 2: under senior UK economist Dan Hansen as well. I'm Stephen
Speaker 2: CA in London. You can catch us every weekday morning
Speaker 2: here for Bloomberg Daybreak. You're at beginning at six am
Speaker 2: in London and one am on Wall Streets.
Speaker 1: Tom, thank you Steven, and coming up on Bloomberg day
Speaker 1: Break weekend. Could be a contentious week on Capitol Hill,
Speaker 1: and we'll tell you why. I'm Tom Busby and this is.
Speaker 5: Bloomberg Broadcasting live from the Bloomberg It a active brokers
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Speaker 5: in Bloomberg Radio dot Com. This is Bloomberg Daybreak Weekend.
Speaker 1: I'm Tom Busby in New York with your global look
Speaker 1: ahead at the top stories for investors in the coming week.
Speaker 1: A lot of travel this weekend for many Senators and
Speaker 1: representatives as they make their way back to Capitol Hill
Speaker 1: after more than two weeks of spring and Easter break.
Speaker 1: The House and Senate will be back this week for
Speaker 1: what could be a ten session. Now for more, let's
Speaker 1: head to our Bloomberg ninety nine One newsroom in Washington
Speaker 1: and Bloomberg Sound on host Kaylee Lines.
Speaker 4: Kaylee, thanks Tom, that's right. Guess who's back back again? Almost.
Speaker 4: Congress is going to get back to work here in
Speaker 4: Washington next week after a two week hiatus around the
Speaker 4: Easter and Passover holidays. But as we well know, there
Speaker 4: are a lot of issues that Republicans and Democrats don't
Speaker 4: agree on, so there remains a question of how much
Speaker 4: work really can get done. We're joined now by Bloomberg
Speaker 4: Government reporter Emily Wilkins for a look at the top
Speaker 4: priorities as we get back to business on the Hill.
Speaker 4: And Emily, I say the Hill, and I'm talking about
Speaker 4: lawmakers being back in DC. But actually we're going to
Speaker 4: start the week with one key lawmaker in New York.
Speaker 4: How Speaker Kevin McCarthy getting said to give a speech
Speaker 4: to the New York Stock Exchange at ten am on Monday.
Speaker 7: Why so, I think with the debt limit coming up,
Speaker 7: it is certainly the biggest news in Washington, and I
Speaker 7: think McCarthy is really trying to make that clear connection
Speaker 7: to Wall Street and to Washington to say, hey, look,
Speaker 7: this thing's coming up. Republicans are going to hold firm.
Speaker 7: We absolutely demand that's spending be cut, and that's the
Speaker 7: only way that we're going to move a deal forward.
Speaker 7: So this is him kind of doing a little bit
Speaker 7: of expectations setting really kind of think going up to
Speaker 7: Wall Street, because sometimes I think Wall Street and DC
Speaker 7: don't always communicate as well as they could with each other,
Speaker 7: and I think McCarthy is really trying to make a
Speaker 7: statement here by delivering this speech up in New York.
Speaker 7: At the same point. You know, we learned last week
Speaker 7: that Republicans are planning on putting out a more detailed
Speaker 7: debt limit proposal. It'll be packed with conservative priorities. We
Speaker 7: certainly don't think that this is going to be the
Speaker 7: thing that actually winds up raising the debt limit. But
Speaker 7: Republicans say, hey, we're going to put something together. We'll
Speaker 7: put it out there, and then the ball is in
Speaker 7: the White House's court. They really want Biden and Kevin
Speaker 7: McCarthy to sit down again and begin negotiating, and the
Speaker 7: White House said, hey, if you want to negotiate, we
Speaker 7: need an actual plan. And so this is the Republicans
Speaker 7: working to deliver on that.
Speaker 4: Okay, so maybe maybe a first step forward I will
Speaker 4: bring the focus to Washington, specifically Emily, I promise, but
Speaker 4: we have to talk about the other thing that's going
Speaker 4: to happen in New York. Also at the beginning of
Speaker 4: the week, Jim Jordan and House Judiciary Republicans holding a
Speaker 4: field hearing in Manhattan, talking in theory about the crime
Speaker 4: policies of District Attorney Alvin Bragg. But this is basically
Speaker 4: about the Trump indictment, right, This.
Speaker 7: Is absolutely about the Trump indictment. Alvin Bragg was not
Speaker 7: something that Jim Jordan was interested in before the indictment
Speaker 7: came down. And this is really what Republicans strategy has
Speaker 7: been in terms of how they are addressing the fact
Speaker 7: that one of the leading nominees for their party's presidential
Speaker 7: can and it is currently under the process of being indicted.
Speaker 7: And so with that, they've they've really honed in on
Speaker 7: Alvin Bragg. They've really honed in on his policies. And
Speaker 7: it's also interesting to note, Kayley, the strategy that Republicans
Speaker 7: have taken up of doing these field hearings. This is
Speaker 7: the thought that Republicans have had sort of making sure
Speaker 7: that they are going out to various communities and places
Speaker 7: around the country that they're kind of getting FaceTime with voters,
Speaker 7: that they're able to have these events. This is kind
Speaker 7: of a way, you know, Republicans, they're not going to
Speaker 7: be able to move a lot of their priorities through
Speaker 7: with the Democratic Senate and of course Biden in the
Speaker 7: White House, and so this is a way for them
Speaker 7: to kind of almost in a way, hit the campaign
Speaker 7: trail early. And of course New York is absolutely key
Speaker 7: for Republicans. Republicans would not have the majority that they
Speaker 7: have right now if a number of Republicans representing New
Speaker 7: York had flipped seats, and so it's really a key
Speaker 7: state for them. It's not surprising that that they picked
Speaker 7: to go there, and certainly with Alvin Bragg, that plays
Speaker 7: right into the narrative that Republicans are trying to put,
Speaker 7: which is kind of lots of a focus on what
Speaker 7: Trump did and more of a focus on what Alvin
Speaker 7: Bragg has done and whether or not he should have
Speaker 7: pressed those charges to be in with.
Speaker 4: Okay, so if the House Judiciary Committee is focused on
Speaker 4: Alvin Bragg and the Trump issue, let's talk about what
Speaker 4: the Senate Judiciary Committee may be focused on as well,
Speaker 4: and whether or not that really translates to the House.
Speaker 4: While Congress was away, the pro publica peace on Supreme
Speaker 4: Court Justice Clarence Thomic ethics around him and his dealings
Speaker 4: with a billionaire. We know that the Senate Judiciary is
Speaker 4: saying they want to hold hearings about it. They are
Speaker 4: highly engaged with this, it seems, but the House is
Speaker 4: under different leaderships, so could anything really happen there.
Speaker 7: I'm not really sure we're going to see a big
Speaker 7: focus on this in the House. Republicans have plenty of
Speaker 7: other things that they'd like to focus on at this
Speaker 7: point in time, and I just don't really see what motivation,
Speaker 7: if any, they would have now. Certainly that kind of
Speaker 7: when we're talking in terms of hearings an official legislation
Speaker 7: moving on the floor, I would not be surprised at
Speaker 7: all if Democrats tried to make this a talking point,
Speaker 7: if you saw them reintroduce legislation that deals with transparency
Speaker 7: and reporting for judges in terms of what donations they're getting,
Speaker 7: kind of trying to bring some more transparency there. There
Speaker 7: was something that was discussed in the previous Congress. It
Speaker 7: didn't wind up go moving through, partly because there are
Speaker 7: just so many other priorities at this point, but it
Speaker 7: certainly could be something that we wind up hearing more about.
Speaker 7: I just think at this time, between the debt limit,
Speaker 7: between border security, between nominees that need to go through
Speaker 7: the Senate, between just other issues in general, this is
Speaker 7: one that I can easily see falling through the cracks.
Speaker 4: Yeah, it's a very good point on how there's all
Speaker 4: these competing priorities here potentially. But it strikes me as well, Emily,
Speaker 4: that the piece about Clarence Thomas was just one of
Speaker 4: the real kind of news making events that happened while
Speaker 4: we While Congress was on recess, you also had a
Speaker 4: meeting between McCarthy and Taiwan's president saying Wang. You had
Speaker 4: another mass shooting in Louisville, Kentucky. You had the expelling
Speaker 4: of lawmakers in the Tennessee House, who of course now
Speaker 4: have returned. There has been so many things, including competing
Speaker 4: court rulings on abortion pills as well. Is any of
Speaker 4: that likely to get immediate attention in Congress or are
Speaker 4: these bigger, overarching issues that have been hanging over their
Speaker 4: heads for a while going to take priority.
Speaker 7: I think at this point, when we look at what
Speaker 7: we know that the House that Senate are going to
Speaker 7: be handling next week. They're kind of almost picking up
Speaker 7: where they left off several weeks ago. So these are
Speaker 7: things where the House they're planning on doing a vote
Speaker 7: on a bill about transgender student athletes, trying to ban
Speaker 7: them from playing sports and schools that receive federal funding
Speaker 7: or at least you know, not on the it would
Speaker 7: have to be to the team to the gender that
Speaker 7: they were born rather than the gender that they identif
Speaker 7: fi as, And you know, that's something that you know
Speaker 7: isn't really you know, one of the big things that
Speaker 7: happened over the last two weeks. I mean, we know
Speaker 7: that the Senate is going to be holding some hearings
Speaker 7: on trained derailment bills. They still have to deal with
Speaker 7: that from a couple months ago. And we know that
Speaker 7: they're taking a look at authorization for military funding. So
Speaker 7: a lot of this stuff, I think sometimes with the
Speaker 7: House and the Senate just Congress in general, it takes
Speaker 7: a while to get up and running, especially since everyone
Speaker 7: wants to go through regular orders. So they hold the
Speaker 7: hearings and the bills go through committee and then they
Speaker 7: come to the floor. It just takes a little bit
Speaker 7: of time, So I don't think we can count out
Speaker 7: that we're not going to be seen or hearing anything
Speaker 7: about some of these issues. I think, particularly in terms
Speaker 7: of the pristone pill, the pill that is used in
Speaker 7: some medically induced abortions, that might be something that we
Speaker 7: well see taken up by Democrats in the Senate and
Speaker 7: potentially becomes a rallying point for Democrats in the House
Speaker 7: as well.
Speaker 10: But just in terms of what we're going to.
Speaker 7: See with the next couple weeks, I think, you know,
Speaker 7: the priorities that we're already on the play are going
Speaker 7: to be big.
Speaker 10: And I think of course the dead limit too.
Speaker 7: You know, Republicans are serious that they want to move
Speaker 7: something within the coming month.
Speaker 10: They have vowed to do so via regular order. That's
Speaker 10: going to take a couple of weeks to get legislation together,
Speaker 10: move it through the process, get it to the floor,
Speaker 10: do the amendments like that, that's really going to have
Speaker 10: to be their main focus rather than a number of
Speaker 10: the news events that we've seen.
Speaker 4: But on the subject of the dead limit, Emily, I mean,
Speaker 4: really we're not quite at crunch time in theory right
Speaker 4: If we're talking about an X state in the summer.
Speaker 4: So does that take some of the pressure off or
Speaker 4: is this just self inflicted pressure Now?
Speaker 7: I think to a certain extent, some of the pressure
Speaker 7: is not on yet, And I wonder if that's kind
Speaker 7: of why McCarthy is headed up to New York when
Speaker 7: he is. Because Congress they love to move at the
Speaker 7: last minute, they love to move on a deadline. But
Speaker 7: McCarthy knows, and I think Biden knows that that's not great.
Speaker 7: That when we've moved too close to the deadline in
Speaker 7: the past on raising the debt limit, that's when the
Speaker 7: US credit gets hit and gets impacted.
Speaker 4: All right, Emily Wilkins of Bloomberg Government, thank you so much.
Speaker 4: We're excited for the next week coming up here in Washington, Tom,
Speaker 4: and I'll send it back over to you.
Speaker 1: Kaylee Lines, reporting from our Bloomberg ninety nine one news
Speaker 1: room in Washington. Thanks Kaylee, And coming up on Bloomberg
Speaker 1: day Break weekend, Tesla's coming earnings and how Elon Musk's
Speaker 1: company is faring in China. I'm Tom Busby, and this
Speaker 1: is Bloomberg. This is Bloomberg day Break weekend, our global
Speaker 1: look ahead at the top stories for investors in the
Speaker 1: coming week. I'm Tom Busby in New York. Some of
Speaker 1: the focus is going to be on Tesla's earnings in
Speaker 1: the company's big opportunities and challenges in China. For more,
Speaker 1: let's go to Hong Kong and Bloomberg Daybreak Asia host
Speaker 1: Brian Curtis and his colleague Doug Tom.
Speaker 3: We look forward to Tesla's earnings in the coming week,
Speaker 3: with at least part of the focus on China. The
Speaker 3: numbers of the commentary from executives will be coming after
Speaker 3: a slew of recent developments involving the company.
Speaker 11: Yes, we've seen big price cuts by Tesla and its competitors.
Speaker 11: We've also seen relentless gains in the share price of
Speaker 11: Tesla and recently the announcement of a new megapac battery
Speaker 11: plant in Shunghai. Now this will build seals for grid
Speaker 11: scale energy storage.
Speaker 3: In addition, the Biden administration is in the process of
Speaker 3: rolling out the toughest ever curbs in the United States
Speaker 3: on car pollution. Joining US now is Dana Hull, senior
Speaker 3: reporter in San Francisco covering Tesla and its chief Elon
Speaker 3: musk So. Dana Doug mentioned the price cuts and the
Speaker 3: stock price gains there are trying to put those two together.
Speaker 3: On the one hand, the cuts make the cars more
Speaker 3: competitive and more affordable, particularly in places like China, But
Speaker 3: then on the other hand, it speaks to perhaps weaker demand.
Speaker 3: How badly will these price cuts hit margins.
Speaker 12: The fact that they've cut prices, you know, so much
Speaker 12: in the first quarter and then again just last Thursday,
Speaker 12: does kind of spook people about the demand question, like
Speaker 12: how much farther are they going to go down? And
Speaker 12: if you're a consumer thinking of buying a Tesla, I mean,
Speaker 12: are you going to buy one now? Or are you
Speaker 12: going to wait to see if they lop off another
Speaker 12: one or five thousand dollars? I mean, that's that's sort
Speaker 12: of a big question for the consumer, like why, you know,
Speaker 12: I don't want to buy a car if Elon Musk
Speaker 12: is going to turn around and cut the prices again
Speaker 12: next week.
Speaker 11: One of the things that was also interesting in this
Speaker 11: note that I read is that the move here on
Speaker 11: the part of Tesla may be about expediting the demise
Speaker 11: of gasoline vehicles. And when I read that, I was
Speaker 11: reminded of what happened with some of these ride sharing
Speaker 11: companies where they were purposely under cutting the market for
Speaker 11: taxis as a way of pushing them out of business.
Speaker 3: Yeah.
Speaker 12: I mean, when you're when you're aggressively chasing volume, you
Speaker 12: will pull out all the stops to kind of gain
Speaker 12: as many customers as you can. And you know, policy
Speaker 12: incentives are on Tesla's side. I mean, the world is
Speaker 12: transitioning away from gas powered cars. Tesla doesn't make a
Speaker 12: gas powered car, so there's only sort of upside for them.
Speaker 12: And you know, at their investor day in March, they
Speaker 12: made a huge show of how they're going to relentlessly
Speaker 12: focus on costs across their supply chain in their operations,
Speaker 12: and you know, their average transaction price has been kind
Speaker 12: of you know, coming down over the years, and they
Speaker 12: and they really feel like that's the path that they're
Speaker 12: on and it's a part of their whole mission.
Speaker 3: I mentioned China in the intro. Byd is out selling
Speaker 3: a Tesla in China. How's that competition going.
Speaker 12: Certainly BYD is a formidable competitor in China, and you're
Speaker 12: seeing Tesla cut prices in China as well. I mean,
Speaker 12: Tesla does have kind of this aspirational brand allure in
Speaker 12: the country, and the fact that they just announced that
Speaker 12: they're building this megapac facility in Shanghais is a sign
Speaker 12: that they're really kind of doubling down on their investment.
Speaker 3: We did see some political pressure coming from Mike Gallagher,
Speaker 3: the congressman, on Tesla and its commitment to China. You
Speaker 3: mentioned that commitment earlier with this megapack factory. Is that
Speaker 3: something that investors will be paying close attention to or
Speaker 3: not so much?
Speaker 12: Yeah, I mean the Gallagher's comment was that he was concerned.
Speaker 12: I don't know how much pressure that really, you know, holds.
Speaker 12: But China has always been a big part of Tesla's
Speaker 12: business model, and they just announced that Tom Ju, who
Speaker 12: kind of led operations in China, is now an executive officer.
Speaker 3: Dan, we mentioned the pollution curbs coming from the Biden administration.
Speaker 3: What can you tell us on that front?
Speaker 12: It's great for Tesla. I mean, you have a Biden
Speaker 12: administration that is trying to accelerate EV adoption. Then you
Speaker 12: have Tesla, which is like the pure player EV carmaker.
Speaker 12: There's a sort of only there's only upside from policies
Speaker 12: kind of designed to accelerate this.
Speaker 11: Danna, thanks for helping us look at Tesla as we
Speaker 11: prepare for the earnings in the coming week. Dana Hall
Speaker 11: is senior reporter in San Francisco covering Tesla and Elon Musk.
Speaker 11: I'm Doug Prisoner along with Brian Curtis. He's in Hong
Speaker 11: Kong and you can catch us weekdays here for Bloomberg
Speaker 11: day Break Asia beginning at six am in Hong Kong
Speaker 11: six pm on Wall Street.
Speaker 1: Tom, thank you, Brian and Doug. And that does it
Speaker 1: for this edition of Bloomberg day Break Weekend. Join us
Speaker 1: again Monday morning at five am Wall Street time for
Speaker 1: the latest on markets overseas and the news you need
Speaker 1: to start your day. I'm Tom Buzzby. Stay with us
Speaker 1: top stories and global business headlines coming up right now.