WEBVTT - Bloomberg Daybreak Weekend: Jobs, EU Stocks, Solar, IMF 0:00:03.320 --> 0:00:06.240 This is Bloomberg Daybreak Weekend or Global look ahead of 0:00:06.280 --> 0:00:08.240 the top stories of the coming week from our day 0:00:08.240 --> 0:00:11.160 brank angers all around the world. You're just to hand 0:00:11.200 --> 0:00:14.120 of the program. More inflation data coming our way, and 0:00:14.320 --> 0:00:17.279 what is the Fed thinking. I'm John Tucker in New York. 0:00:17.680 --> 0:00:20.720 I'm Carolin Hedge in London, where we're looking at European 0:00:20.840 --> 0:00:24.439 companies to watch this quarter. I'm Deck Prisoner with a 0:00:24.440 --> 0:00:27.720 look at the Chinese clean energy companies focused on coming 0:00:27.720 --> 0:00:30.960 to the US. I'm Joe Matthew in Washington. The IMF 0:00:31.000 --> 0:00:33.080 meets in the nation's capital. Get a take on what 0:00:33.159 --> 0:00:38.839 you expect. That's all straight ahead on Bloomberg Daybreak Weekend 0:00:39.080 --> 0:00:43.720 on Bloomberg eleven Free O New York, Bloomberg ninety nine one, Washington, DC, 0:00:44.040 --> 0:00:48.120 Bloomberg one O six one, Boston, Bloomberg nine sixty, San Francisco, 0:00:48.360 --> 0:00:52.600 DAB Digital Radio London, Sirius XM one nineteen and around 0:00:52.600 --> 0:00:55.240 the world on Bloomberg Radio dot com and via the 0:00:55.280 --> 0:01:01.160 Bloomberg Business Apphi, everybody, I'm on Tucker, and let's start 0:01:01.200 --> 0:01:05.080 today's program with the feder reserved and the economy. We're 0:01:05.080 --> 0:01:07.080 going to be getting a report on the consumer prices 0:01:07.360 --> 0:01:10.800 and also getting the minutes from the feds last FOEMC meeting. 0:01:11.480 --> 0:01:14.080 Joining me to raise the curtain on all this, Bloomberg 0:01:14.120 --> 0:01:18.600 Global Economic and Policy Editor Michael McKee. As always, Michael, 0:01:18.680 --> 0:01:21.440 thank you very much for being with us. What should 0:01:21.480 --> 0:01:24.640 we be looking for? You've told us we're all data dependent. 0:01:25.880 --> 0:01:28.240 It's going to be interesting to see if the data 0:01:28.840 --> 0:01:32.520 the consumer pricing decks actually moves the needle for anyone 0:01:32.520 --> 0:01:35.120 at the FED as far as their May third meeting, 0:01:35.360 --> 0:01:38.639 the next meeting that's coming up. At their last meeting, 0:01:38.680 --> 0:01:42.000 they put out a new summary of Economic Projections and 0:01:42.160 --> 0:01:45.639 dot Plott and basically said we still think that rates 0:01:45.720 --> 0:01:48.960 need to go above five percent. Five percent is the 0:01:49.000 --> 0:01:52.600 top of the range right now. So they seem pretty 0:01:52.640 --> 0:01:56.000 married to that idea. It would probably take a lot 0:01:56.760 --> 0:01:59.880 of change in the CPI for them to back away from, 0:02:01.240 --> 0:02:05.480 but we are expecting a bit of a decline on 0:02:05.520 --> 0:02:09.200 the headline rate that would take us well, actually it's 0:02:09.240 --> 0:02:11.120 more than a bit, because you go from six percent 0:02:11.160 --> 0:02:13.320 to five point two percent. A lot of that is 0:02:13.320 --> 0:02:15.600 base effects, but it's it's going to be a major 0:02:15.720 --> 0:02:19.320 headline number. Okay, remind everybody what they're aiming for a 0:02:19.440 --> 0:02:22.280 rate of inflation of two percent, and then we're still 0:02:22.320 --> 0:02:26.080 a long way. Yeah. Can they at some point just say, okay, 0:02:26.080 --> 0:02:30.760 maybe it's three percent? Uh No. And the reason they 0:02:30.800 --> 0:02:33.240 don't want to do that is because then nobody will 0:02:33.280 --> 0:02:35.440 believe them that it's three percent. They'll think, well, oh, 0:02:35.480 --> 0:02:39.800 they'll have a credibility. You could change it to four percent. 0:02:40.280 --> 0:02:44.079 But the headline that will grab people's attention is obviously 0:02:44.080 --> 0:02:47.160 a big drop in the year over year number if 0:02:47.160 --> 0:02:49.840 it goes to five point two percent. But according to 0:02:49.960 --> 0:02:53.320 economists surveyed by Bloomberg, we're going to see core inflation 0:02:53.600 --> 0:02:57.000 rise to five point six percent from five point five. 0:02:57.120 --> 0:03:00.200 So core inflation that you've got to remind everybody it's 0:03:00.240 --> 0:03:03.600 the weekend and you know we're preparing to eat food 0:03:03.639 --> 0:03:06.880 and stuff like that. Core inflation is inflation that really 0:03:06.919 --> 0:03:11.400 matters because the other stuff like gasoline and fuel energy 0:03:11.440 --> 0:03:13.600 qualits that goes up and down, all goes up and down. 0:03:13.639 --> 0:03:16.160 And obviously we saw in the last week big movements 0:03:16.160 --> 0:03:20.839 in oil prices after OPEC announced a production cut, and 0:03:21.680 --> 0:03:24.080 you know, FED officials tend to look through those things 0:03:24.120 --> 0:03:26.639 because they do go up and down. But the average 0:03:26.680 --> 0:03:29.520 American does not because they have to fill their tank. 0:03:29.840 --> 0:03:32.680 So if we do see gasoline prices going up, I mean, 0:03:32.720 --> 0:03:34.640 that's that's going to be a worry for the FED 0:03:34.680 --> 0:03:37.240 because they can't do anything about it. You can raise 0:03:37.280 --> 0:03:39.000 interest rates all you want, it isn't going to produce 0:03:39.080 --> 0:03:41.880 more and gasoline. So they do look at the core, 0:03:42.280 --> 0:03:47.320 and they're looking at core services without housing. They do 0:03:47.680 --> 0:03:51.400 x housing because we know that housing has taken a 0:03:51.440 --> 0:03:57.400 long time to incorporate the idea of lower rents. Rent 0:03:58.080 --> 0:04:01.000 increases have been fading, but takes about a year to 0:04:01.040 --> 0:04:03.520 get into the data. So that's going to start hitting. 0:04:03.760 --> 0:04:07.320 And they're they're looking at services because services is the 0:04:07.400 --> 0:04:10.800 biggest part of the economy and it includes things like 0:04:10.920 --> 0:04:13.280 you know, going out the restaurant, the waiter or the 0:04:13.320 --> 0:04:17.600 wais bars, stuff, and a lot of people in you know, 0:04:17.680 --> 0:04:24.159 accounting or radio. Things like that would be service industry jobs, 0:04:24.520 --> 0:04:27.839 um and for many of those categories it's still been 0:04:27.880 --> 0:04:31.040 hard to find workers. We've seen strong hiring and labor 0:04:31.040 --> 0:04:34.640 costs are the biggest part of a service industry budgets Okay, 0:04:34.640 --> 0:04:36.719 So if they can't find people, they've got to attract 0:04:36.800 --> 0:04:40.200 people by paying more and that's and that's inflation concern. 0:04:40.320 --> 0:04:42.560 So the FED is going to be looking at that. 0:04:42.640 --> 0:04:44.919 They'll be looking at all this data for signs of 0:04:44.960 --> 0:04:48.840 a slowdown. They want to see that they're making incremental progress. Okay, 0:04:48.839 --> 0:04:51.359 they're going to be looking for signs of a slowdown there. 0:04:51.400 --> 0:04:57.920 But I'm told that's stickier inflation. Whether they're they're two 0:04:58.040 --> 0:05:02.160 kinds of inflation, well, many kinds, but one that would 0:05:02.160 --> 0:05:08.159 one responds to FED tightening. Like we know that people 0:05:08.200 --> 0:05:13.000 buy fewer cars when infrastrates go up, and housing prices 0:05:13.680 --> 0:05:18.480 generally start to flatten out, if not go down, when 0:05:18.720 --> 0:05:21.800 mortgage rates go up. But there are other things that 0:05:21.960 --> 0:05:26.279 are called sticky prices that take longer to adjust. And 0:05:26.600 --> 0:05:31.320 anything to do with labor takes longer to adjust because 0:05:31.560 --> 0:05:36.640 it's you don't basically go into your office and say, well, 0:05:36.640 --> 0:05:38.320 we need to save money, so we're going to cut 0:05:38.320 --> 0:05:40.279 your salary. I mean you're either going to be laying 0:05:40.320 --> 0:05:43.320 off workers, which we haven't really seen any huge numbers yet, 0:05:43.640 --> 0:05:46.360 or you know you're going to have to find other 0:05:46.440 --> 0:05:49.560 places to get those savings from. Yeah, we do see 0:05:49.600 --> 0:05:52.920 those headlines crossing almost on a daily basis. This big 0:05:52.960 --> 0:05:56.359 company or that big company that you've heard of cutting 0:05:56.360 --> 0:06:00.480 workers that you're telling me hasn't filtered through or really 0:06:00.520 --> 0:06:03.080 is enough to make a difference. A lot of people 0:06:03.120 --> 0:06:07.000 who are being laid off are either in jobs that 0:06:07.080 --> 0:06:09.719 are in demand. You get laid off at one tech company, 0:06:09.720 --> 0:06:14.080 you might get hired at another reasonably quickly. Or people 0:06:14.120 --> 0:06:17.760 are getting severance, and when you get severance, basically you're 0:06:17.800 --> 0:06:21.720 not eligible for jobless benefits until your severance runs out. 0:06:22.000 --> 0:06:27.240 And so you're seeing people who may move into the 0:06:27.320 --> 0:06:31.720 doubless claims area and show up as unemployed still off 0:06:31.760 --> 0:06:34.560 those books. So it's been hard to tell the impact 0:06:34.600 --> 0:06:39.880 of all these layoff announcements. Also the layoff announcements, if 0:06:39.920 --> 0:06:42.640 you're laying off a lot of people, there's a law 0:06:42.680 --> 0:06:44.640 that says you have to give them sixty days notice, 0:06:45.120 --> 0:06:48.640 and also it may take you longer than that to 0:06:49.600 --> 0:06:53.920 do your layoffs. So the general view of economists is 0:06:53.920 --> 0:06:56.040 we're going to see the impact of all this later 0:06:56.400 --> 0:07:00.600 in the year. Okay, I'll remind everybody that the to Reserve, 0:07:00.800 --> 0:07:03.599 the Central Bank of the United States, has a couple 0:07:03.600 --> 0:07:07.800 of mandates. One is price stability, keeping the rate of 0:07:07.880 --> 0:07:11.840 inflation at you know, something reasonable like you said two 0:07:11.880 --> 0:07:16.880 percent and also full employment, but those two things are 0:07:17.040 --> 0:07:20.280 kind of contradictory. It sounds like you just told me, Well, 0:07:20.560 --> 0:07:24.960 there are times when they're in opposition in the sense 0:07:25.040 --> 0:07:28.440 that to bring inflation down, the FED has to slow 0:07:28.440 --> 0:07:31.760 the economy, and to slow the economy, the FED has 0:07:31.840 --> 0:07:34.640 to basically put up with the idea that you're going 0:07:34.680 --> 0:07:37.800 to see people laid off and unemployment is going to rise. Now, 0:07:37.880 --> 0:07:41.840 their thought at the moment is that right now, because 0:07:42.080 --> 0:07:44.960 labor is so tight, that we are below what the 0:07:45.280 --> 0:07:48.640 normal level of unemployment is because there are always people 0:07:48.640 --> 0:07:52.080 switching jobs in between jobs, and there are people that 0:07:52.200 --> 0:07:54.360 come out of college and they haven't found a job yet, 0:07:55.040 --> 0:07:58.400 and they think that number is around to four and 0:07:58.400 --> 0:08:01.040 a half percent, and we're at three point six percent. 0:08:01.160 --> 0:08:04.440 So at this point they're thinking they have some room 0:08:04.520 --> 0:08:10.560 that won't bring the economy down if that unemployment rate rises. 0:08:10.640 --> 0:08:15.560 So are things different this time because we had the pandemic. 0:08:15.960 --> 0:08:18.800 Everything's different this time in the sense that we're not 0:08:18.840 --> 0:08:23.800 sure how everybody's going to react, and all of the 0:08:23.920 --> 0:08:27.720 dynamics that normally come into play in a recessionary time 0:08:27.800 --> 0:08:31.840 haven't this time. We don't have an inventory overhang or 0:08:31.880 --> 0:08:36.319 something like that. What we have is is consumers who 0:08:36.320 --> 0:08:38.160 are still spending because they got a lot of money 0:08:38.200 --> 0:08:42.840 from the government during the pandemic, and there was nothing 0:08:43.520 --> 0:08:48.240 basically wrong with the economy going into the pandemic. So 0:08:48.760 --> 0:08:51.000 it's hard to know exactly what the cure is going 0:08:51.040 --> 0:08:52.880 to be for all this. And the FED is doing 0:08:52.880 --> 0:08:55.680 its best to try to bring inflation down, but as 0:08:55.720 --> 0:09:00.720 long as people and the economy feels good, it's harder 0:09:00.760 --> 0:09:03.960 to do and the models don't work because we've not 0:09:04.080 --> 0:09:06.960 had a pandemic like this since nineteen eighteen. All Right, 0:09:07.000 --> 0:09:09.760 you've been speaking to the people at the Central Bank 0:09:09.800 --> 0:09:12.920 who make all these decisions. What have the FED officials 0:09:13.600 --> 0:09:17.720 been telling you that could possibly move the needle. Well, 0:09:18.320 --> 0:09:20.880 the needle is an interesting question, because the needle right 0:09:20.920 --> 0:09:23.800 now points on Wall Street to four rate cuts or 0:09:23.840 --> 0:09:26.440 three to four rate cuts this year because they think 0:09:26.440 --> 0:09:29.480 that we're going to go into recession and inflation is 0:09:29.520 --> 0:09:30.719 going to fall fast and the FED is going to 0:09:30.800 --> 0:09:32.960 have to rescue the economy. Fed officials don't think that 0:09:33.040 --> 0:09:37.200 at all. They've been repeating the mantra to me all 0:09:37.280 --> 0:09:41.280 week that they need to keep interest rates high and 0:09:41.920 --> 0:09:47.280 we spoke with Susan Collins and of Boston, and Jim 0:09:47.280 --> 0:09:49.720 Bullard of Saint Louis and Lorettamester of Cleveland. They all 0:09:49.760 --> 0:09:51.920 make the case that we need to raise rates at 0:09:51.960 --> 0:09:55.559 least one more time and then leave them there for 0:09:55.840 --> 0:09:58.240 the rest of the year. So it's going to set 0:09:58.280 --> 0:10:01.200 up a clash between the markets and the Fed. We 0:10:01.240 --> 0:10:04.080 will probably see rates rise at their next meeting May third, 0:10:04.080 --> 0:10:05.960 and then if the Fed wants to go on hold, 0:10:06.800 --> 0:10:08.920 the market's going to be pushing them to start cutting. 0:10:08.960 --> 0:10:11.320 And we're going to be all watching the data for 0:10:11.400 --> 0:10:15.880 signs of who's right. Do they know something we don't? Well, 0:10:16.520 --> 0:10:20.199 I not know something, but they're probably focused on things 0:10:20.240 --> 0:10:23.400 a lot more than we are in terms of what 0:10:23.520 --> 0:10:27.280 are the possibilities for this economy, because, as I said, 0:10:27.280 --> 0:10:29.720 the models don't work, so they're trying to figure out 0:10:29.960 --> 0:10:32.880 what's the most likely path for the economy. They will 0:10:32.920 --> 0:10:35.280 tell you, and it makes no sense that they will 0:10:35.280 --> 0:10:39.640 react to whatever happens in the economy. But at the moment, 0:10:40.000 --> 0:10:42.680 from what they can see, they need to leave interest 0:10:42.760 --> 0:10:47.880 rates up high until they get a much clearer signal 0:10:47.880 --> 0:10:50.840 that inflation is going to continue falling. Mike, Thanks a lot. 0:10:50.880 --> 0:10:55.400 That's always a pleasure. Bloomberg's Global Economics and Policy editor 0:10:55.440 --> 0:11:00.280 Michael McKee just ahead on Bloomberg Daybreak weekend, which Europeans 0:11:00.400 --> 0:11:02.480 you should have your eye on this new quarter? And 0:11:02.640 --> 0:11:12.200 why John Tucker, This is Bob. This is Bloomberg Daybreak weekend, 0:11:12.200 --> 0:11:14.640 our global look at healthy time stories for investors in 0:11:14.679 --> 0:11:17.440 the coming week. I'm John Tucker in New York. Up 0:11:17.520 --> 0:11:20.760 later in the program, Why Chinese solar panel makers think 0:11:20.800 --> 0:11:24.800 the industry is about to shine the first European stocks 0:11:24.800 --> 0:11:27.920 had their worst March since twenty twenty. A lot of 0:11:27.960 --> 0:11:31.280 stocks and key valuations to watch in the second quarter 0:11:31.640 --> 0:11:33.880 for more, or lets into London and bring in Bloomberg 0:11:33.960 --> 0:11:38.400 Daybreak Europe anchor Caroline Hepger. John, defensive and growth stocks 0:11:38.400 --> 0:11:42.400 have benefited from my rotation in European equities. Recently, recession 0:11:42.440 --> 0:11:46.000 warriors have resurfaced. For more, I'm joined by Bloomberg Intelligence. 0:11:46.080 --> 0:11:49.040 Is Tim craighead. Tim, great to have you on the program. 0:11:49.120 --> 0:11:51.920 So you've picked out then for the quarter to come, 0:11:52.080 --> 0:11:55.760 ten stocks to watch, and a number are European companies, 0:11:55.760 --> 0:11:57.880 So this really piqued my interest. One is a bank, 0:11:57.960 --> 0:12:03.920 but that's a bit surprising BBVA. Yeah, so BBBA, you 0:12:03.960 --> 0:12:06.080 would think it's a little crazy picking a bank in 0:12:06.080 --> 0:12:09.000 the midst of a banking crisis or a perceived banking crisis. 0:12:09.480 --> 0:12:13.320 But this is in line with a number of the 0:12:13.360 --> 0:12:16.000 ten ideas where the market seems to be focused on 0:12:16.040 --> 0:12:20.520 the wrong thing. And with BBBA, the focus is on Turkey, 0:12:21.760 --> 0:12:25.560 which you know it has had a big exposure to 0:12:26.000 --> 0:12:29.120 over time, but it's only down to seven percent or 0:12:29.120 --> 0:12:33.680 so of the business. We think that they're well funded 0:12:33.800 --> 0:12:37.160 on that front, and it's it's overblown. At the same time, 0:12:37.520 --> 0:12:40.080 they've got a big Mexican business where loan growth is 0:12:40.120 --> 0:12:45.400 quite robust. They've got clearly a big Spanish business that 0:12:45.880 --> 0:12:49.559 is benefiting from higher rates driving higher net interest margins 0:12:49.559 --> 0:12:52.800 and profitability. Bottom line is we think they're going to 0:12:52.880 --> 0:12:59.640 be positively surprising on earnings and in ongoing other fundamental metrics. Okay, 0:12:59.640 --> 0:13:03.360 so that on BBVA. Eupe is also really trying to 0:13:03.520 --> 0:13:08.439 balance out the huge US inflation reduction acts thinking about 0:13:08.480 --> 0:13:11.360 the energy transition of course, and so you pick vest 0:13:11.440 --> 0:13:16.840 us is that the reason indeed that is absolutely behind it. 0:13:17.080 --> 0:13:21.920 Both Europeans spending on energy transition as well as the 0:13:22.040 --> 0:13:24.880 US and you take those two combined and we think 0:13:25.800 --> 0:13:30.520 there is shall we say, a tailwind sorry, that that 0:13:31.520 --> 0:13:34.199 is behind vest Us. And yet if you look at 0:13:34.280 --> 0:13:40.520 consensus expectations, order growth and revenue growth aren't particularly robust. 0:13:41.040 --> 0:13:43.440 There's been a bit of a lull in the wind 0:13:44.720 --> 0:13:47.680 and we think it will pick up and there's positive 0:13:47.720 --> 0:13:52.320 surprises in top line and earnings growth going ahead. Okay. 0:13:52.640 --> 0:13:55.520 And then just lastly, out of these three European businesses 0:13:55.559 --> 0:13:59.599 that were focused on this, cap Gemini indeed, so I 0:13:59.760 --> 0:14:03.319 think again, similar to the BBBA, what's the market focused on. Well, 0:14:03.360 --> 0:14:07.880 in technology, it's there's a tech downturn. You know, there's 0:14:07.920 --> 0:14:12.400 been pressure on semiconductors, there's thoughts of cutbacks across a 0:14:12.520 --> 0:14:17.360 number of elements of technology. There's concerned about economic risk. 0:14:17.840 --> 0:14:24.480 But companies are strategically transforming into things like cloud computing 0:14:24.720 --> 0:14:29.920 and digitization. That's across all industries and it's strategic. It 0:14:30.000 --> 0:14:32.680 has to happen, and cap Gemini is one of those 0:14:32.720 --> 0:14:37.560 IT service companies that's very exposed to these strategic transformations, 0:14:37.600 --> 0:14:42.440 not so much the cyclical, more cyclical implementation of sort 0:14:42.480 --> 0:14:46.880 of basic technology. And we think again the market's underestimating 0:14:46.960 --> 0:14:49.760 the opportunity here for cap Gemini. Yeah, and I mean 0:14:49.800 --> 0:14:52.400 when you look at tech it's flipped from being losses 0:14:52.480 --> 0:14:54.800 lagot in Europe to actually being the kind of market 0:14:54.920 --> 0:14:56.960 leader in twenty twenty three. We don't think of there 0:14:57.160 --> 0:15:00.160 being many tech, big tech companies in the UK, but 0:15:00.200 --> 0:15:02.600 interesting that you put cap Gemini in that kind of basket. 0:15:03.000 --> 0:15:05.880 So is tech in Europe something to watch in the 0:15:05.880 --> 0:15:08.240 next quarter? Yeah, Well, I think there are a couple 0:15:08.240 --> 0:15:11.640 of parts to this UM and it's a very different story, 0:15:11.680 --> 0:15:14.600 I would say than say tech broadly if you think 0:15:14.600 --> 0:15:17.760 about it from a US perspective. You know, in Europe 0:15:17.960 --> 0:15:22.680 we've got essentially cap Gemini and SAP and software and services, 0:15:23.240 --> 0:15:27.360 and you've got some big semiconductor companies ASML and Finnian 0:15:27.640 --> 0:15:33.080 st Micro. The semi has a semi business has its 0:15:33.080 --> 0:15:38.000 own cyclicality to it in Finnian and st Micro are 0:15:38.120 --> 0:15:42.160 very well positioned into China UM thinking about what's going 0:15:42.240 --> 0:15:45.680 on with with you know, the tipification of autos and 0:15:46.000 --> 0:15:52.600 everything else ASNL is absolutely the core of next generation 0:15:52.720 --> 0:15:57.200 semiconductor manufacturing up you have to have it, and all 0:15:57.240 --> 0:16:01.680 of this we think has fed into this last year's 0:16:01.720 --> 0:16:06.320 story of higher interest rates, putting pressure on multiples. This year, 0:16:06.600 --> 0:16:11.400 there's now increasing talk about FED and ECB pivot at 0:16:11.440 --> 0:16:14.240 some point that brings the pressure off on multiples and 0:16:14.320 --> 0:16:17.880 these things can move back up. So that's an element 0:16:17.960 --> 0:16:21.440 of that exposure to Europe that's positive. In the US, 0:16:21.720 --> 0:16:26.120 it's far different. It's more Internet, very high multiple stocks, 0:16:26.840 --> 0:16:29.560 and yes, those two have had a reprieve on the 0:16:29.680 --> 0:16:35.520 multiple pressure because the change in FED thoughts. Frankly, we're 0:16:35.520 --> 0:16:37.760 a bit more suspect on how quickly the fed's going 0:16:37.800 --> 0:16:41.360 to pivot. And it's a different business from the standpoint 0:16:41.360 --> 0:16:45.880 of the Internet oriented businesses in the US, so more 0:16:45.920 --> 0:16:48.720 interested in Europe, maybe still a little less interested in 0:16:49.080 --> 0:16:51.680 the US. Well, I wanted to ask you that why 0:16:51.720 --> 0:16:54.760 do you think that sentiment has tilted more towards you 0:16:54.760 --> 0:16:56.720 if it does seem that way since the start of 0:16:56.720 --> 0:17:02.240 the year, that there's a bit more favorability versus for 0:17:02.280 --> 0:17:05.359 European shares and perhaps for the US. Is that because 0:17:05.680 --> 0:17:08.480 recession seems more imminent in the US, or how would 0:17:08.480 --> 0:17:11.439 you read it? It's it's it's it's an interesting question. 0:17:12.640 --> 0:17:16.320 Part of it is valuation, there's no doubt. Part of 0:17:16.359 --> 0:17:23.160 it is that the idea of where we are at 0:17:23.200 --> 0:17:27.560 from an economic cycle. Last year, there was a lot 0:17:27.600 --> 0:17:30.000 of concern about energy. There was a lot of concern 0:17:30.080 --> 0:17:34.280 about Russia impact on Ukraine right at our doorsteps here 0:17:34.320 --> 0:17:37.040 in Europe. And not that that's gone away yet, clearly 0:17:37.080 --> 0:17:42.520 it hasn't. But we suffered so much on energy last 0:17:42.560 --> 0:17:46.240 year that is now cycling through with lower energy prices, 0:17:46.280 --> 0:17:50.119 notwithstanding OPEC's recent announcement. But that I think that's a 0:17:50.119 --> 0:17:53.480 little bit of yesterday's story. In the US, I think 0:17:53.480 --> 0:17:56.280 there is still ongoing concern of how much do we 0:17:56.320 --> 0:18:01.879 see wages play through? Where is the economy going, and 0:18:03.560 --> 0:18:06.160 it creates a different cycle. Yeah, absolutely so just less 0:18:06.440 --> 0:18:09.440 maybe less bad news than we had for Europe last year. 0:18:10.480 --> 0:18:13.359 Having said that, stocks do look now in Europe actually 0:18:13.359 --> 0:18:16.080 pretty close to a lot of year end targets. So 0:18:16.119 --> 0:18:18.080 I guess my other question is do we just end 0:18:18.160 --> 0:18:20.679 up treading water in yet? I think we could be 0:18:20.800 --> 0:18:23.880 having this conversation in another three months and we could 0:18:23.880 --> 0:18:26.240 have gone up five to ten percent in down five 0:18:26.280 --> 0:18:29.840 to ten percent between now and then. Okay, our last 0:18:29.840 --> 0:18:32.520 word for luxury stocks, because they're so dominant in terms 0:18:32.520 --> 0:18:34.440 of the European market as well, I think you can't 0:18:34.440 --> 0:18:37.120 avoid talking about them. And also just because but how 0:18:37.240 --> 0:18:41.320 now has now joined this tiny handful of billionaires worth 0:18:41.440 --> 0:18:44.720 more than two hundred billion US dollars in the last 0:18:44.720 --> 0:18:49.359 few days. I mean, the luxury space in Europe still 0:18:49.480 --> 0:18:52.960 seems to be a big, big strength in look. I 0:18:52.960 --> 0:18:57.400 think this plays into China reopening. You know, go back 0:18:57.440 --> 0:18:59.960 to those ten ideas. Two of the Asian ideas where 0:19:00.040 --> 0:19:03.280 to want belabor here are China reopening stories and I 0:19:03.320 --> 0:19:08.119 think luxury goods here is as well. And you know, 0:19:08.200 --> 0:19:11.119 if you think about big themes of this year, you've 0:19:11.160 --> 0:19:14.280 got the interest rate cycle, You've got the economic cycle, 0:19:14.359 --> 0:19:19.359 you have geopolitics between Russia, Ukraine, now the US with 0:19:19.400 --> 0:19:23.639 their own internal politics China US tensions. But a big 0:19:23.680 --> 0:19:29.720 item that's just sort of unadulterated positive is China opening 0:19:29.760 --> 0:19:34.399 back up from an economic perspective. And part of that 0:19:34.560 --> 0:19:39.680 is unleashing consumer spending and the Chinese, whether it's domestically 0:19:39.880 --> 0:19:43.840 or when they travel by luxury and you know, the 0:19:44.400 --> 0:19:48.800 European luxury goods names are in the sweet spot of 0:19:48.880 --> 0:19:51.720 that cycle. Okay, so we end on a positive note 0:19:51.760 --> 0:19:55.280 then thinking about European stocks for this quarter. Thank you 0:19:55.320 --> 0:19:58.320 so much Tim for being with us Spinbag Intelligences Directive Research. 0:19:58.400 --> 0:20:02.439 Tim Craighead with a few of his ideas around the 0:20:02.520 --> 0:20:04.800 stocks to watch here in Europe over the next few 0:20:04.800 --> 0:20:07.560 weeks this quarter. I'm Caroline Heppgeher in London. You can 0:20:07.560 --> 0:20:10.160 catch us every weekday morning for Bloomberg Daybreak Europe. That's 0:20:10.200 --> 0:20:13.560 beginning six am in London, one am on Wall Street. John, 0:20:13.840 --> 0:20:17.240 Thanks Caroline. Just ahead on Bloomberg Daybreak weekend, so major 0:20:17.280 --> 0:20:20.719 activity of the Chinese solar panel industry. I'm John Tucker. 0:20:20.880 --> 0:20:31.760 This is Bloomberg broadcasting live from the Bloomberg Interactive Broker 0:20:31.880 --> 0:20:35.560 Studio in New York. Bloomberg eleven FREEO to Washington, DC, 0:20:35.720 --> 0:20:39.120 Bloomberg ninety nine one to Boston, Bloomberg one O six 0:20:39.240 --> 0:20:42.520 one to San Francisco, Bloomberg nine sixty to the country, 0:20:42.560 --> 0:20:46.840 Sirius XM Channel one nineteen to London DAB Digital Radio, 0:20:46.960 --> 0:20:50.080 and around the globe the Bloomberg Business app and Bloomberg 0:20:50.160 --> 0:21:00.639 Radio dot Com. This is Bloomberg Daybreak Weekend, John Tucker 0:21:00.680 --> 0:21:02.480 in New York with your globe look ahead of the 0:21:02.600 --> 0:21:05.200 top stories for investors in the coming week. Just a 0:21:05.280 --> 0:21:08.119 hit on Bloomberg Daybreak weekend a look at why the 0:21:08.200 --> 0:21:12.560 International Monetary Fund meeting is being so closely watched. But first, 0:21:12.720 --> 0:21:15.960 after the US passed a landmark climate bill that supports 0:21:16.040 --> 0:21:20.600 local clean energy manufacturing, some of China's top solar panel 0:21:20.640 --> 0:21:23.840 makers are rushing to tap into the industry. For more 0:21:23.880 --> 0:21:26.480 on what's happening, let's go to Bloomberg Daybreak Asia host 0:21:26.600 --> 0:21:30.560 Doug Krisner John. It's not just solar panel makers. Several 0:21:30.600 --> 0:21:33.760 of China's leading renewable firms are joining the rush to 0:21:33.840 --> 0:21:37.000 open factories in the US. As an example, the Chinese 0:21:37.000 --> 0:21:40.399 company that makes the world's largest wind turbine, Ming Young's 0:21:40.440 --> 0:21:44.399 Smart Energy Group, is exploring whether to establish production and 0:21:44.480 --> 0:21:47.760 research facilities here in the US. Now. The driver of 0:21:47.800 --> 0:21:51.879 this movement is last year's Inflation Reduction Act, championed by 0:21:51.920 --> 0:21:55.200 the Biden administration. It includes three hundred and seventy four 0:21:55.240 --> 0:21:59.000 billion dollars in new climate related spending, and it is drawn, 0:21:59.200 --> 0:22:03.639 needless to say, the attention of China's world leading renewables companies. 0:22:04.040 --> 0:22:07.000 Let's take it closer to look now with Bloomberg's Dan Murtaugh. 0:22:07.080 --> 0:22:10.520 He is a Bloomberg Asia Energy reporter. Dan joins from 0:22:10.520 --> 0:22:13.840 our studios in Beijing. There's a lot to talk about. 0:22:13.880 --> 0:22:15.960 It seems a little ironic right out of the gate 0:22:16.040 --> 0:22:19.439 that the Inflation Reduction Act really has a goal of 0:22:19.520 --> 0:22:22.480 cultivating a boom for US clean tech. But at this 0:22:22.560 --> 0:22:26.920 point China seems to be the world's number one supplier 0:22:26.960 --> 0:22:30.760 of clean technology. Let me begin by asking where Beijing 0:22:30.880 --> 0:22:34.199 may be in allowing these companies to develop some of 0:22:34.200 --> 0:22:37.760 their operations here in the US. It's a good question. 0:22:38.240 --> 0:22:41.560 There's obviously been a lot of tension between Beijing and 0:22:41.600 --> 0:22:45.440 Washington in recent years. But at the same time, Beijing 0:22:45.600 --> 0:22:51.040 once it's clean tech energy industries to grow, they see 0:22:51.080 --> 0:22:54.359 them as one of their proudest achievements, developing these massive 0:22:54.400 --> 0:22:58.600 supply chains that can produce power generation to sort of 0:22:58.640 --> 0:23:02.240 wean the world off of car. So at the same 0:23:02.240 --> 0:23:07.240 time that that Beijing is nervous about Washington's intentions, they 0:23:07.280 --> 0:23:09.880 want to see this industry grow and prosper, and so 0:23:10.320 --> 0:23:13.240 you know that they're in constant communications with the heads 0:23:13.240 --> 0:23:16.959 of these massive companies about you know, what opportunities are 0:23:17.000 --> 0:23:19.959 there to to go overseas, you know what technology they 0:23:19.960 --> 0:23:22.280 can bring with them, you know, to how to sort 0:23:22.320 --> 0:23:27.119 of maintain their China's role as a dominant supplier of 0:23:27.160 --> 0:23:30.520 this clean tech industry while also allowing the firms to 0:23:30.560 --> 0:23:33.800 sort of broaden and diversify their own supply chains. Yeah, 0:23:33.840 --> 0:23:36.359 talk about domination when it comes to solar panels. I 0:23:36.440 --> 0:23:39.360 think we can agree that China really dominates production globally, 0:23:39.440 --> 0:23:42.200 but there have been cases where that production has been 0:23:42.240 --> 0:23:45.480 stymied from shipping to the US because of a series 0:23:45.480 --> 0:23:48.560 of trade disputes. There have also been there have also 0:23:48.600 --> 0:23:53.439 been allegations of human rights abuses. Is it necessary that 0:23:53.480 --> 0:23:56.359 the US has to do business with China when it 0:23:56.400 --> 0:23:58.720 comes to solar panels? How long does it take to 0:23:58.760 --> 0:24:03.359 build out a man manufacturing process for these devices? If 0:24:03.359 --> 0:24:06.479 you were going to just on the technicalities of it, 0:24:06.480 --> 0:24:08.320 it would probably be about a year and a half 0:24:08.320 --> 0:24:10.919 to two years to build a full supply chain. You know, 0:24:10.960 --> 0:24:14.399 most of these factories Chinese companies get up and running 0:24:14.400 --> 0:24:18.360 when about nine months UM. The key sort of raw 0:24:18.400 --> 0:24:21.040 material for all of this an ultra refined form of 0:24:21.080 --> 0:24:24.560 silicon known as polysilicon. Those plants take about eighteen months. 0:24:24.760 --> 0:24:28.280 So if you know you had unlimited resources and were 0:24:28.280 --> 0:24:30.880 able to sort and you know, access to the best technology, 0:24:30.920 --> 0:24:34.800 you could put a supply chain together relatively quickly, but 0:24:34.880 --> 0:24:38.240 of course these are very complicated supply chains. There's there's 0:24:38.359 --> 0:24:41.359