1 00:00:02,960 --> 00:00:08,320 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,119 --> 00:00:13,720 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:13,760 --> 00:00:15,840 Speaker 2: the top stories in the coming week from our Daybreak 4 00:00:15,840 --> 00:00:18,480 Speaker 2: anchors all around the world. Straight Ahead on the program, 5 00:00:18,520 --> 00:00:21,360 Speaker 2: corporate earnings and Focus. We'll look ahead to results from 6 00:00:21,400 --> 00:00:25,400 Speaker 2: the jetmaker Boeing and shipping giant ups. I'm Tom Busby 7 00:00:25,440 --> 00:00:26,000 Speaker 2: in New York. 8 00:00:26,120 --> 00:00:28,440 Speaker 3: Him Carolyn Hetge here in London, where we're charting the 9 00:00:28,520 --> 00:00:33,200 Speaker 3: potential rise of British banking ahead of some key earnings reports. 10 00:00:33,440 --> 00:00:36,200 Speaker 1: I'm dek Prisner, looking ahead to next week's Brick Summit 11 00:00:36,320 --> 00:00:38,720 Speaker 1: hosted by Russian President Vladimir Putin. 12 00:00:43,920 --> 00:00:47,440 Speaker 4: Let's all e struly head on Bloomberg Daybreak Weekend on 13 00:00:47,560 --> 00:00:52,040 Speaker 4: Bloomberg eleven, TREEO, New York, Bloomberg ninety nine to one, Washington, DC, 14 00:00:52,479 --> 00:00:57,320 Speaker 4: Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Sirius 15 00:00:57,480 --> 00:01:00,880 Speaker 4: XM one twenty one, and around the world Bloomberg Radio, 16 00:01:00,920 --> 00:01:02,840 Speaker 4: dot Com and the Bloomberg Business. 17 00:01:02,880 --> 00:01:10,160 Speaker 2: A good day to you. I'm Tom Busby. We begin 18 00:01:10,200 --> 00:01:14,000 Speaker 2: today's program with the troubled aerospace giant Boeing, the company 19 00:01:14,000 --> 00:01:16,920 Speaker 2: making headlines for all the wrong reasons of late a 20 00:01:17,000 --> 00:01:21,360 Speaker 2: crippling month long strike, mounting losses, layoffs, investigation since the 21 00:01:21,440 --> 00:01:23,720 Speaker 2: safety of its aircraft and more. And amid all that, 22 00:01:24,560 --> 00:01:28,840 Speaker 2: Boeing officially reporting its third quarter earnings this Wednesday, although 23 00:01:29,120 --> 00:01:32,479 Speaker 2: some of those numbers were released last week. For more 24 00:01:32,560 --> 00:01:34,880 Speaker 2: and what we can expect, we're joined by George Ferguson, 25 00:01:34,920 --> 00:01:39,880 Speaker 2: Bloomberg Intelligence Senior Aerospace, Defense and Airlines analyst. George, thanks 26 00:01:39,920 --> 00:01:42,520 Speaker 2: for joining us well before we talk about what's wrong 27 00:01:42,600 --> 00:01:45,040 Speaker 2: at Boeing and maybe how to fix it, what do 28 00:01:45,080 --> 00:01:48,120 Speaker 2: you expect to see from the Q three earnings this Wednesday? 29 00:01:48,960 --> 00:01:51,280 Speaker 5: Yeah, I think we've already seen I think the most 30 00:01:51,280 --> 00:01:54,240 Speaker 5: important part of Q three earnings, and that was when 31 00:01:54,280 --> 00:01:59,120 Speaker 5: Boeing disclosed their cash balances and they and cash use 32 00:01:59,280 --> 00:02:02,800 Speaker 5: for the quarter. Right, So during the quarter we saw 33 00:02:02,840 --> 00:02:08,000 Speaker 5: a use of it's about a billion three So that 34 00:02:08,080 --> 00:02:11,320 Speaker 5: was from operations I think a little bit better than 35 00:02:11,320 --> 00:02:15,880 Speaker 5: what we had expected for usage. There's going to be 36 00:02:15,919 --> 00:02:18,119 Speaker 5: some capex that piles on top of that, which will 37 00:02:18,840 --> 00:02:21,440 Speaker 5: you know, give us our free cash flow for the 38 00:02:21,520 --> 00:02:25,160 Speaker 5: quarter again, probably something close to two billion ish in use. 39 00:02:25,639 --> 00:02:28,120 Speaker 5: They were down to about ten billion dollars in balances. 40 00:02:28,320 --> 00:02:31,480 Speaker 5: I think ten and a half, and so this is 41 00:02:31,520 --> 00:02:34,640 Speaker 5: a company that needs about ten billion dollars around the business. 42 00:02:35,440 --> 00:02:38,240 Speaker 5: So the big indicator here was that, you know, they're 43 00:02:38,280 --> 00:02:40,600 Speaker 5: they're at the point where they need to raise some money. 44 00:02:41,120 --> 00:02:43,720 Speaker 2: Speaking of raising money now, they're now working on raising 45 00:02:43,760 --> 00:02:47,160 Speaker 2: upwards of twenty five billion with new shares convertible bonds. 46 00:02:47,400 --> 00:02:49,520 Speaker 2: I mean, is this going to go ahead? It's credit 47 00:02:49,600 --> 00:02:53,000 Speaker 2: rating just above junk status? Is this what's next for Boeing? 48 00:02:54,080 --> 00:02:57,320 Speaker 5: Yeah, So I think you know, the company's calculus here 49 00:02:57,440 --> 00:02:59,560 Speaker 5: is that if they're right up against the edge of 50 00:02:59,600 --> 00:03:02,000 Speaker 5: what they need to run the company and they've got 51 00:03:02,040 --> 00:03:05,680 Speaker 5: a strike going on, you know, obviously there's going to 52 00:03:05,680 --> 00:03:10,640 Speaker 5: be well probably cast usage during the fourth quarter, so 53 00:03:10,680 --> 00:03:12,520 Speaker 5: they need to go into the markets and shore up 54 00:03:12,560 --> 00:03:16,160 Speaker 5: that liquidity position just to give them more leverage with 55 00:03:16,200 --> 00:03:19,680 Speaker 5: the union. And so I do think it's going to occur. 56 00:03:19,840 --> 00:03:23,040 Speaker 5: Right We've heard rumblings of them coming to the equity 57 00:03:23,080 --> 00:03:26,440 Speaker 5: market for up to twenty five billion. They filed the 58 00:03:26,480 --> 00:03:29,079 Speaker 5: shelf offering for twenty five billion. I don't think they 59 00:03:29,080 --> 00:03:31,519 Speaker 5: want to use all twenty five billion right now. I 60 00:03:31,560 --> 00:03:34,040 Speaker 5: don't think they want to be I don't think they 61 00:03:34,080 --> 00:03:36,960 Speaker 5: want to skimp either on what they get from the marketplace, right. 62 00:03:37,000 --> 00:03:40,160 Speaker 5: I think they want a couple quarters worth of liquidity 63 00:03:40,560 --> 00:03:42,320 Speaker 5: so they can get the union back to the table 64 00:03:42,320 --> 00:03:44,320 Speaker 5: and say, look, we've got a lot of staying power here, 65 00:03:44,720 --> 00:03:47,520 Speaker 5: so you better be ready to go, you know, a 66 00:03:47,600 --> 00:03:51,440 Speaker 5: quarter or more, you know, on this strike, which I 67 00:03:51,440 --> 00:03:53,120 Speaker 5: think is going to be very hard right for the 68 00:03:53,120 --> 00:03:57,280 Speaker 5: typical union rank and file. So you know, we kind 69 00:03:57,280 --> 00:04:00,680 Speaker 5: of see ten to fifteen billion worth of cash raise 70 00:04:01,600 --> 00:04:04,160 Speaker 5: again equity. The challenge will be that there'll be a 71 00:04:04,200 --> 00:04:09,080 Speaker 5: fair amount of dilution for current shareholders. There's about ninety 72 00:04:09,080 --> 00:04:11,280 Speaker 5: billion dollars in market cap right now in the company. 73 00:04:11,680 --> 00:04:15,480 Speaker 5: Ten billion dollar raise is something like eleven percent dilution, 74 00:04:15,560 --> 00:04:17,240 Speaker 5: so it's pretty significant. And that's why I think they 75 00:04:17,240 --> 00:04:19,440 Speaker 5: don't want to go all the way to the twenty 76 00:04:19,480 --> 00:04:23,200 Speaker 5: five billion dollar mark. I think equity sort of protects 77 00:04:23,279 --> 00:04:26,280 Speaker 5: their credit rating or helps them, you know, with their 78 00:04:26,320 --> 00:04:31,240 Speaker 5: credit rating, doesn't doesn't deteriorate their credit metrics. I'm sure 79 00:04:31,240 --> 00:04:33,720 Speaker 5: the agencies are also concerned about the strike, so I'm 80 00:04:33,760 --> 00:04:36,240 Speaker 5: not sure it gets them totally out of the woods 81 00:04:36,279 --> 00:04:39,800 Speaker 5: on pressure for their credit rating, but it's definitely a 82 00:04:39,800 --> 00:04:42,039 Speaker 5: lot better than them raising debt where I think the 83 00:04:42,080 --> 00:04:44,400 Speaker 5: credit rating agencies we just have to downgrade them as 84 00:04:44,440 --> 00:04:45,159 Speaker 5: soon as they did that. 85 00:04:45,600 --> 00:04:47,920 Speaker 2: Yeah, yeah, but and it could happen right. 86 00:04:48,200 --> 00:04:51,920 Speaker 5: Good again, I think there's still under pressure for credit ratings. 87 00:04:52,320 --> 00:04:55,520 Speaker 5: The agencies have clearly been looking past current problems, right 88 00:04:55,560 --> 00:04:59,040 Speaker 5: because you couldn't do a net debt to EBITDA analysis 89 00:04:59,080 --> 00:05:01,480 Speaker 5: on them right now right, ebitdas quite low and their 90 00:05:01,760 --> 00:05:04,679 Speaker 5: debts quite high. So the metrics are way out of whack. 91 00:05:04,760 --> 00:05:07,359 Speaker 5: And you know, the credit acies are looking through this period. 92 00:05:07,560 --> 00:05:09,839 Speaker 5: But the longer it goes on, the more they have 93 00:05:09,880 --> 00:05:12,840 Speaker 5: to worry about the financial challenges of Boeing. And I 94 00:05:12,920 --> 00:05:14,520 Speaker 5: think the less they can look through the period and 95 00:05:14,880 --> 00:05:15,960 Speaker 5: have to take some action. 96 00:05:16,200 --> 00:05:18,200 Speaker 2: Well, let's talk a little bit more about that strike. 97 00:05:18,520 --> 00:05:21,400 Speaker 2: And I just want to be clear, this is just 98 00:05:21,440 --> 00:05:25,640 Speaker 2: their Pacific Northwest manufacturing, right. There is manufacturing going on elsewhere. 99 00:05:25,839 --> 00:05:28,040 Speaker 5: Yeah, So this is the machinist out of the Pacific 100 00:05:28,080 --> 00:05:33,760 Speaker 5: Northwest they're responsible for. They build most of the commercial 101 00:05:33,800 --> 00:05:36,720 Speaker 5: programs for Boeing, Right, so they would build the seven 102 00:05:36,800 --> 00:05:39,640 Speaker 5: sixty seven, they'd build the Triple seven, they'd build the 103 00:05:39,680 --> 00:05:43,000 Speaker 5: seven thirty seven of those airplanes, the seven thirty seven 104 00:05:43,120 --> 00:05:46,320 Speaker 5: is the most important airplane to Boeing commercial that's the 105 00:05:46,400 --> 00:05:49,200 Speaker 5: highest volume. It's where they generate their cash, make their 106 00:05:49,240 --> 00:05:52,200 Speaker 5: profits out of. So that's why this strike is so 107 00:05:52,360 --> 00:05:56,839 Speaker 5: debilitating to the company. They do manufacture seven eight sevens, 108 00:05:57,000 --> 00:06:00,760 Speaker 5: I think their second most important commercial platform. They make 109 00:06:00,839 --> 00:06:04,880 Speaker 5: them in the Carrollton in South Carolina near Charleston. That's 110 00:06:04,880 --> 00:06:08,600 Speaker 5: a non union plant, so it's not affected there is 111 00:06:09,120 --> 00:06:12,279 Speaker 5: you know what I've heard in the marketplaces, some of 112 00:06:12,320 --> 00:06:15,240 Speaker 5: those seven eight sevens come back up to Everett, Washington 113 00:06:15,760 --> 00:06:18,240 Speaker 5: and get worked a bit before they go to customers. 114 00:06:18,800 --> 00:06:21,240 Speaker 5: So we're not going to say that they're not impacted 115 00:06:21,279 --> 00:06:23,400 Speaker 5: at all by the strike, but I think they have 116 00:06:23,480 --> 00:06:26,960 Speaker 5: the capability to continue to deliver in decent numbers close 117 00:06:27,000 --> 00:06:30,040 Speaker 5: to their targets. That's seven eighty seven during the strike, 118 00:06:30,279 --> 00:06:33,479 Speaker 5: and then the defense network really isn't affected except for 119 00:06:34,040 --> 00:06:37,240 Speaker 5: KC forty six tanker. KC forty six tanker is the 120 00:06:37,360 --> 00:06:40,680 Speaker 5: US aerial tanker program, another program Boeing has had a 121 00:06:40,720 --> 00:06:42,520 Speaker 5: lot of problems on. Taking a lot of charges on 122 00:06:43,240 --> 00:06:47,120 Speaker 5: the airframe goes down a line in the Northwest in 123 00:06:47,200 --> 00:06:50,920 Speaker 5: the Seattle area up in Everett, and I think that's 124 00:06:51,040 --> 00:06:55,040 Speaker 5: largely machinist in union labor, and so that's probably impacted 125 00:06:55,080 --> 00:06:57,320 Speaker 5: as well by the strike, but a large portion of 126 00:06:57,360 --> 00:06:59,679 Speaker 5: defense is not affected by the strike. 127 00:07:00,000 --> 00:07:03,440 Speaker 2: Affected. Wow, well Boeing's latest earnings this Wednesday ahead of 128 00:07:03,480 --> 00:07:06,760 Speaker 2: Wall Street's opening bell our Thanks to George Ferguson, Bloomberg 129 00:07:06,800 --> 00:07:11,440 Speaker 2: Intelligence Senior Aerospace, Defense and Airlines analyst. We move next 130 00:07:11,440 --> 00:07:14,920 Speaker 2: to the shipping and logistics company United Parcel Service UPS, 131 00:07:15,040 --> 00:07:18,240 Speaker 2: reporting its third quarter earnings on Thursday. Now, UPS coming 132 00:07:18,280 --> 00:07:21,080 Speaker 2: off a pretty rough second quarter after a drop in volume, 133 00:07:21,160 --> 00:07:23,160 Speaker 2: will the third quarter be any different? 134 00:07:23,360 --> 00:07:23,720 Speaker 6: For more? 135 00:07:23,760 --> 00:07:28,040 Speaker 2: We're joined by Lee Clasgal, Bloomberg Intelligence Senior Transport, Logistics 136 00:07:28,040 --> 00:07:31,000 Speaker 2: and Shipping Analysts. So, Lee, thank you for being here. 137 00:07:31,080 --> 00:07:33,520 Speaker 2: What do you expect to see in UPS's third quarter 138 00:07:33,560 --> 00:07:34,360 Speaker 2: earnings this week? 139 00:07:34,520 --> 00:07:36,560 Speaker 7: Well, I think this print's going to be a much 140 00:07:36,560 --> 00:07:39,120 Speaker 7: better print that we've seen in the first half. 141 00:07:38,880 --> 00:07:39,360 Speaker 8: Of the year. 142 00:07:39,920 --> 00:07:42,120 Speaker 7: In the third quarter, revenues are supposed to be up 143 00:07:42,200 --> 00:07:45,760 Speaker 7: about mid single digits, same with earnings per share. That's 144 00:07:45,800 --> 00:07:49,239 Speaker 7: good news, you know, because we're seeing earnings growth again 145 00:07:49,520 --> 00:07:52,040 Speaker 7: and we expect that to really accelerate into twenty twenty 146 00:07:52,040 --> 00:07:53,600 Speaker 7: five and a lot of that has to do with 147 00:07:53,640 --> 00:07:56,240 Speaker 7: what the company has been doing through its pricing initiatives. 148 00:07:56,800 --> 00:07:59,520 Speaker 7: The company has set a number of different search charges. 149 00:08:00,320 --> 00:08:04,240 Speaker 7: It's a volume specific surcharge, whether it's you know, charging 150 00:08:04,720 --> 00:08:10,000 Speaker 7: more for weird shape or heavy freight that's not really conveyable, 151 00:08:10,040 --> 00:08:13,880 Speaker 7: so it adds costs for UPS. And then they're also 152 00:08:14,040 --> 00:08:16,320 Speaker 7: you know, they're constantly doing you know, not constantly, but 153 00:08:16,400 --> 00:08:18,360 Speaker 7: once a year they do a general rate increase or 154 00:08:18,400 --> 00:08:22,200 Speaker 7: a GRI and there's one on December twenty third, that's 155 00:08:22,240 --> 00:08:26,760 Speaker 7: around five point nine percent. And we expect Historically UPS 156 00:08:26,800 --> 00:08:31,240 Speaker 7: FedEx DHL, you know, they tend to heavily discount their 157 00:08:31,320 --> 00:08:34,480 Speaker 7: GRIS and we expect those discounts to be a lot 158 00:08:34,600 --> 00:08:38,920 Speaker 7: less this time around, just given all the labor inflation, 159 00:08:39,160 --> 00:08:44,199 Speaker 7: equipment inflation that they need to mitigate through pricing initiatives. 160 00:08:44,320 --> 00:08:47,200 Speaker 2: Now that labor inflation you spoke about, they had settled 161 00:08:47,240 --> 00:08:50,560 Speaker 2: avoided to strike, yes, and but it really cost them, 162 00:08:50,559 --> 00:08:51,200 Speaker 2: didn't it. 163 00:08:51,200 --> 00:08:53,679 Speaker 7: It did, and you know it was front loaded, and 164 00:08:53,679 --> 00:08:56,000 Speaker 7: that's something else that will benefit and in the second half, 165 00:08:56,559 --> 00:09:00,760 Speaker 7: the comparables will become a lot easier for them. On 166 00:09:00,800 --> 00:09:04,240 Speaker 7: that longer term contract with the team serves, So that 167 00:09:04,400 --> 00:09:06,400 Speaker 7: is good news, and you know, now they know kind 168 00:09:06,400 --> 00:09:09,240 Speaker 7: of what their costs are going to be as it 169 00:09:09,240 --> 00:09:11,920 Speaker 7: relates to labor and they can work through that. And 170 00:09:11,960 --> 00:09:14,079 Speaker 7: the company has been doing a lot of different things 171 00:09:14,120 --> 00:09:17,800 Speaker 7: in terms of increasing the overall productivity. They've also focusing 172 00:09:17,880 --> 00:09:19,839 Speaker 7: more on some of what they would i esteem their 173 00:09:19,880 --> 00:09:24,040 Speaker 7: core business. They recently sold their freight brokerage business, which 174 00:09:24,120 --> 00:09:28,840 Speaker 7: is called Coyote. They sold that to RXO and that 175 00:09:28,880 --> 00:09:31,880 Speaker 7: should be a huge win for RXO because they can 176 00:09:32,240 --> 00:09:35,800 Speaker 7: really take that business maybe a lot further than YOUWPS 177 00:09:35,840 --> 00:09:39,000 Speaker 7: did because it really wasn't a focus for UPS management 178 00:09:39,040 --> 00:09:41,680 Speaker 7: over the years. It was more of a complimentary business 179 00:09:42,000 --> 00:09:45,679 Speaker 7: that probably works better outside of the UPS. 180 00:09:46,240 --> 00:09:46,320 Speaker 6: Well. 181 00:09:46,360 --> 00:09:48,640 Speaker 2: They also made some acquisitions correct Mexico. 182 00:09:49,080 --> 00:09:51,200 Speaker 7: They do a lot of tucket acquisitions, and a lot 183 00:09:51,240 --> 00:09:55,000 Speaker 7: of the acquisitions that they're doing they're trying to get 184 00:09:55,080 --> 00:09:57,839 Speaker 7: kind of longer into the supply chain, if you will, 185 00:09:58,800 --> 00:10:01,199 Speaker 7: So you know some of the acquisitions they've done a 186 00:10:01,240 --> 00:10:04,320 Speaker 7: lot in healthcare industry. Healthcare is a is a very 187 00:10:04,320 --> 00:10:09,280 Speaker 7: interesting industry from a logistics standpoint because it comes with 188 00:10:09,360 --> 00:10:11,600 Speaker 7: higher margins. There's a lot of specialties that go on 189 00:10:11,640 --> 00:10:14,000 Speaker 7: and I'm sure everyone remembers during the pandemic, you know, 190 00:10:14,080 --> 00:10:16,280 Speaker 7: when we had the vaccines distributed. They had to be 191 00:10:16,320 --> 00:10:20,319 Speaker 7: super super cold, and you know, those kind of services 192 00:10:20,360 --> 00:10:25,319 Speaker 7: cost a lot more money than sending an envelope overseas, 193 00:10:25,640 --> 00:10:28,199 Speaker 7: and therefore it usually comes with higher margins, so it's 194 00:10:28,240 --> 00:10:31,199 Speaker 7: usually it's a very good business. And UPS and FedEx 195 00:10:31,240 --> 00:10:34,440 Speaker 7: are also looking at, you know, a step down from 196 00:10:34,440 --> 00:10:37,440 Speaker 7: the enterprise market, so the small to medium sized shipper, 197 00:10:37,640 --> 00:10:41,240 Speaker 7: which tend to have better margins as well. So UPS, 198 00:10:41,280 --> 00:10:46,120 Speaker 7: while they're divesting some businesses, they're leaning into other businesses 199 00:10:46,840 --> 00:10:49,040 Speaker 7: through these bolt on acquisitions. 200 00:10:49,720 --> 00:10:51,200 Speaker 2: Now, I want to talk go back to something you 201 00:10:51,200 --> 00:10:55,720 Speaker 2: said about the search charges. Consumers are definitely pulling back 202 00:10:55,760 --> 00:11:00,000 Speaker 2: on their money. Fed X has said, UPS maybe had 203 00:11:00,080 --> 00:11:02,800 Speaker 2: said the same thing, that people are choosing a cheaper 204 00:11:02,840 --> 00:11:06,560 Speaker 2: option ground transportation instead of air freight to save money. 205 00:11:07,040 --> 00:11:10,240 Speaker 2: I mean, is that being offset by these higher search charges? 206 00:11:10,320 --> 00:11:13,080 Speaker 2: And what does that mean as we head into the 207 00:11:13,120 --> 00:11:16,000 Speaker 2: most important season for them, you know, the holiday season? 208 00:11:16,800 --> 00:11:19,040 Speaker 7: Yeah, so I mean we're definitely seeing a trade down 209 00:11:19,080 --> 00:11:22,440 Speaker 7: effect to your point, So it maybe instead of having 210 00:11:22,559 --> 00:11:25,400 Speaker 7: expedited freight or freight that or a package that has 211 00:11:25,440 --> 00:11:27,560 Speaker 7: to go overnight. Maybe people are willing to take three 212 00:11:27,679 --> 00:11:30,920 Speaker 7: or five days. I know personally anecdotally. You know, when 213 00:11:30,960 --> 00:11:33,319 Speaker 7: I when I'm doing online shopping, there's a lot more 214 00:11:33,360 --> 00:11:36,720 Speaker 7: options there, like of not having it overnight, and usually 215 00:11:36,720 --> 00:11:39,319 Speaker 7: when it's not overnight, then it's usually free, and I'm 216 00:11:39,320 --> 00:11:40,800 Speaker 7: always going to pick the free. 217 00:11:40,600 --> 00:11:43,400 Speaker 2: Option, always only always always. 218 00:11:43,400 --> 00:11:45,439 Speaker 7: I mean, I don't need a pair of pants that bad. 219 00:11:45,760 --> 00:11:47,760 Speaker 7: I can wait a week. And so you know, you 220 00:11:47,880 --> 00:11:51,120 Speaker 7: are seeing that, you're also seeing an interesting shift. So 221 00:11:51,160 --> 00:11:54,080 Speaker 7: you know, we talked earlier that volumes are expected to 222 00:11:54,200 --> 00:11:57,439 Speaker 7: increase mid single ditch for their domestic market and slightly 223 00:11:57,559 --> 00:12:00,800 Speaker 7: up for their international market. Some of the volume growth 224 00:12:00,840 --> 00:12:04,400 Speaker 7: is coming out of China with these relatively new e 225 00:12:04,440 --> 00:12:09,840 Speaker 7: commerce providers like Sheen and Timu, And that's interesting because 226 00:12:10,120 --> 00:12:13,880 Speaker 7: they're kind of going under the radar with some duties 227 00:12:14,240 --> 00:12:16,719 Speaker 7: where there's a deminimus rule. I know this again a 228 00:12:16,760 --> 00:12:20,320 Speaker 7: little wonky now, where if the value of the products 229 00:12:20,440 --> 00:12:24,480 Speaker 7: under eight hundred dollars, they don't face an extra duty. 230 00:12:24,840 --> 00:12:27,679 Speaker 7: And so a lot of freight is coming in from 231 00:12:27,800 --> 00:12:31,679 Speaker 7: China because you know, without a duty, and it's a 232 00:12:31,720 --> 00:12:34,640 Speaker 7: lot cheaper and kind of undercutting maybe things that people 233 00:12:34,679 --> 00:12:37,160 Speaker 7: could buy here in the United States. So the Biden 234 00:12:37,200 --> 00:12:39,760 Speaker 7: administration is looking at that and that that could change 235 00:12:39,840 --> 00:12:43,760 Speaker 7: some volumes on a negative aspect, because it's been a 236 00:12:43,800 --> 00:12:47,280 Speaker 7: good area of growth for the fedexes and eps's of 237 00:12:47,320 --> 00:12:47,720 Speaker 7: the world. 238 00:12:48,080 --> 00:12:51,120 Speaker 2: Well ups third quarter earnings out this Thursday. That's ahead 239 00:12:51,120 --> 00:12:53,679 Speaker 2: of Wall Street's opening bell are thanks to Lee Glasgow, 240 00:12:53,760 --> 00:12:58,920 Speaker 2: Bloomberg Intelligence Senior Transport, Logistics and Shipping analyst. Coming up 241 00:12:58,960 --> 00:13:01,520 Speaker 2: on Bloomberg day Break, we again we'll chart the potential 242 00:13:01,600 --> 00:13:05,400 Speaker 2: rise of British banking with some prominent UK banks reporting 243 00:13:05,400 --> 00:13:09,000 Speaker 2: their latest earnings. I'm Tom Busby and this is Bloomberg. 244 00:13:19,600 --> 00:13:22,040 Speaker 2: This is Bloomberg day Break weekend, our global look ahead 245 00:13:22,080 --> 00:13:24,160 Speaker 2: at the top stories for investors in the coming week. 246 00:13:24,400 --> 00:13:26,880 Speaker 2: I'm Tom Busby in New York. Up later in our 247 00:13:26,960 --> 00:13:29,840 Speaker 2: program we'll look ahead to the sixteenth annual Brick Summit 248 00:13:29,880 --> 00:13:32,880 Speaker 2: in Russia. But first, ahead of upcoming earnings from some 249 00:13:32,920 --> 00:13:36,680 Speaker 2: of the UK's largest banks like Lloyd's and Barclay's, analysts 250 00:13:36,720 --> 00:13:40,040 Speaker 2: are turning more positive on the sector. Jeffries, Ubs and 251 00:13:40,120 --> 00:13:43,720 Speaker 2: Goldman all bullish on British banking shares. Can the results 252 00:13:43,760 --> 00:13:46,320 Speaker 2: live up to the expectations for more. Let's go to 253 00:13:46,400 --> 00:13:50,160 Speaker 2: London and bring in Bloomberg Daybreak europe banker Caroline Hepger. 254 00:13:50,280 --> 00:13:53,720 Speaker 3: Tom the boost to British banking brought about by high 255 00:13:53,840 --> 00:13:57,480 Speaker 3: interest rates could linger longer than thought, and Lissa turning 256 00:13:57,520 --> 00:14:01,280 Speaker 3: positive on the likes of nat West and Lloyd's, citing 257 00:14:01,320 --> 00:14:04,920 Speaker 3: the rewards of what they call the structural hedge, hundreds 258 00:14:04,920 --> 00:14:08,120 Speaker 3: of billions of pounds invested in the swaps market to 259 00:14:08,240 --> 00:14:12,559 Speaker 3: reduce sensitivity to interest rate movements. There's also a new 260 00:14:12,600 --> 00:14:15,560 Speaker 3: government in town if you haven't noticed, one determined to 261 00:14:15,720 --> 00:14:19,640 Speaker 3: bolster growth and bring in investment. That's something that UK 262 00:14:19,800 --> 00:14:23,160 Speaker 3: banks should be poised to profit from. Blueberg has been 263 00:14:23,200 --> 00:14:27,680 Speaker 3: speaking to Lloyd's CEO Charlie Nunn at the UK Investments 264 00:14:27,680 --> 00:14:32,000 Speaker 3: Summit recently. None told Bloomberg's Farsi Laqua that he is 265 00:14:32,120 --> 00:14:34,280 Speaker 3: optimistic about Britain's future. 266 00:14:35,000 --> 00:14:35,640 Speaker 6: I think the really. 267 00:14:35,520 --> 00:14:37,640 Speaker 9: Important thing to get more investment in the UK is 268 00:14:37,680 --> 00:14:40,880 Speaker 9: first the clarity and a clear direction of the country. 269 00:14:40,920 --> 00:14:43,720 Speaker 9: And so the stability in the clarity this government's trying 270 00:14:43,720 --> 00:14:45,000 Speaker 9: to give, I think is really important. 271 00:14:45,240 --> 00:14:46,960 Speaker 6: Investors want to invest. 272 00:14:46,600 --> 00:14:47,040 Speaker 4: In the UK. 273 00:14:47,400 --> 00:14:49,520 Speaker 9: They're looking at the UK relative to Europe and the 274 00:14:49,600 --> 00:14:52,080 Speaker 9: US and Asia, and at the moment the UK looks 275 00:14:52,120 --> 00:14:54,920 Speaker 9: like a good destination. But the first thing is clarity instability. 276 00:14:55,280 --> 00:14:57,600 Speaker 9: The second thing is tell me where you're going to 277 00:14:57,640 --> 00:14:59,720 Speaker 9: invest alongside us, and do it in a way that 278 00:14:59,800 --> 00:15:02,960 Speaker 9: they us to bring private capital to work. We estimate 279 00:15:03,000 --> 00:15:06,040 Speaker 9: that there's about forty to fifty billion pounds worth of 280 00:15:06,080 --> 00:15:08,960 Speaker 9: investment per year for the next twenty years, so the 281 00:15:09,000 --> 00:15:11,280 Speaker 9: government can't afford that, but the private sector. 282 00:15:10,960 --> 00:15:13,360 Speaker 6: Really can make a difference. And then the third thing 283 00:15:13,440 --> 00:15:15,160 Speaker 6: is really enable the financial. 284 00:15:14,800 --> 00:15:18,480 Speaker 9: Services sector to unlock its potential to support that investment. 285 00:15:18,680 --> 00:15:20,960 Speaker 10: But Charlie, so you're one of the key components actually 286 00:15:21,000 --> 00:15:23,640 Speaker 10: try and get this foreign direct investment into the country. 287 00:15:23,880 --> 00:15:24,840 Speaker 6: Where would you deploy it? 288 00:15:24,880 --> 00:15:26,040 Speaker 4: Where will it be deployed? 289 00:15:26,480 --> 00:15:27,720 Speaker 6: Well, I know the government's going to come out with 290 00:15:27,720 --> 00:15:28,800 Speaker 6: their kind of industrial plan. 291 00:15:28,920 --> 00:15:31,960 Speaker 9: They're talking about eight sectors. Two examples that I think 292 00:15:32,000 --> 00:15:35,360 Speaker 9: there's huge opportunity. One is around the energy transition, and 293 00:15:35,840 --> 00:15:39,320 Speaker 9: the UK's already a leader around offshore wind, but floating wind, 294 00:15:39,440 --> 00:15:42,280 Speaker 9: onshore wind, the growth in solar, and then some of 295 00:15:42,320 --> 00:15:46,120 Speaker 9: the new technologies like carbon capture and hydrogen. There's huge 296 00:15:46,120 --> 00:15:49,160 Speaker 9: opportunities to invest and that also needs a clear plan 297 00:15:49,320 --> 00:15:52,640 Speaker 9: for the national grid and the electrical infrastructure. That's one 298 00:15:52,640 --> 00:15:56,200 Speaker 9: example of a huge opportunity for investment. Another's housing. So 299 00:15:56,640 --> 00:15:58,480 Speaker 9: the government's made a commitment to build a one point 300 00:15:58,520 --> 00:16:01,760 Speaker 9: five million new homes. We need more social and affordable 301 00:16:01,760 --> 00:16:04,400 Speaker 9: homes specifically, that's something we have called for as Lloyd's 302 00:16:04,400 --> 00:16:07,240 Speaker 9: Banking Group, and we really need to get the money invested, 303 00:16:07,360 --> 00:16:10,560 Speaker 9: start going behind breaking down the planning laws and building 304 00:16:10,560 --> 00:16:13,359 Speaker 9: more homes and that'll be good for jobs and productivity 305 00:16:13,360 --> 00:16:15,640 Speaker 9: and create an environment that we can get the skills 306 00:16:15,720 --> 00:16:16,840 Speaker 9: for the investment in business. 307 00:16:17,680 --> 00:16:20,240 Speaker 10: Charlie, So, I guess a lot of people are concerned 308 00:16:20,400 --> 00:16:22,760 Speaker 10: by the fact that, of course this government needs banks, 309 00:16:23,000 --> 00:16:25,440 Speaker 10: as you say, to bring in private capital, to deploy 310 00:16:25,480 --> 00:16:27,840 Speaker 10: some of the money to help them actually also help 311 00:16:27,840 --> 00:16:29,880 Speaker 10: with the National Wealth Fund. At the same time they're 312 00:16:29,920 --> 00:16:31,440 Speaker 10: trying about taxing the banks. 313 00:16:31,520 --> 00:16:32,560 Speaker 6: So how do you square the two. 314 00:16:33,080 --> 00:16:36,400 Speaker 9: Well, see taxations a matter for the government to talk about, 315 00:16:36,800 --> 00:16:39,600 Speaker 9: but irrespective of whatever kind of political decision they take 316 00:16:39,640 --> 00:16:42,600 Speaker 9: on that. As Lloyd's Banking Group, as an example, we've 317 00:16:42,640 --> 00:16:44,680 Speaker 9: got a nine hundred billion pound balance sheet. 318 00:16:44,840 --> 00:16:47,000 Speaker 6: We do eighty to one hundred billion pounds worth of 319 00:16:47,080 --> 00:16:49,280 Speaker 6: lending per year. We have two hundred. 320 00:16:49,080 --> 00:16:51,600 Speaker 9: Billion pounds worth of pension assets we manage on behalf 321 00:16:51,640 --> 00:16:54,240 Speaker 9: of Britain pensioners. We need to put that money to 322 00:16:54,280 --> 00:16:56,240 Speaker 9: work and then we partner with some of the biggest 323 00:16:56,240 --> 00:16:59,120 Speaker 9: world's pension funds, private credit funds, and our job is 324 00:16:59,120 --> 00:17:01,600 Speaker 9: to bring our expertise to channel out into the UK. 325 00:17:01,840 --> 00:17:05,119 Speaker 9: So there's huge opportunity for us to continue to deploy 326 00:17:05,119 --> 00:17:08,960 Speaker 9: that capital in smarter ways that derives productivity, growth and 327 00:17:09,080 --> 00:17:12,520 Speaker 9: jobs to get the UK economy to being the fastest 328 00:17:12,560 --> 00:17:15,960 Speaker 9: growth economy in the G seven, which is a really 329 00:17:16,040 --> 00:17:16,800 Speaker 9: bold ambition. 330 00:17:17,320 --> 00:17:19,679 Speaker 10: A number of your competitors now Western Guard players have 331 00:17:19,800 --> 00:17:24,760 Speaker 10: done recent acquisitions showing basically that they really support this economy. 332 00:17:25,040 --> 00:17:26,920 Speaker 10: Are you looking to do something likely as well? 333 00:17:27,320 --> 00:17:29,359 Speaker 9: So you know, we are now three years into the 334 00:17:29,359 --> 00:17:32,119 Speaker 9: five year strategy I laid out and the great uses 335 00:17:32,160 --> 00:17:34,719 Speaker 9: it's very much a growth strategy and we're delivering well 336 00:17:34,760 --> 00:17:36,879 Speaker 9: against that. We're going to do an update in February 337 00:17:37,080 --> 00:17:40,040 Speaker 9: next year on the first checkpoint in that strategy and 338 00:17:40,080 --> 00:17:42,399 Speaker 9: I'm really pleased with the progress we've made. We've done 339 00:17:42,440 --> 00:17:45,119 Speaker 9: some Bolton acquisitions, but the core of our strategy is 340 00:17:45,119 --> 00:17:47,440 Speaker 9: an organic growth strategy and the great thing for Lloyd's 341 00:17:47,440 --> 00:17:50,520 Speaker 9: Banking Group is we are typically the number one or 342 00:17:50,600 --> 00:17:53,720 Speaker 9: number two player in every segment and product we participate in, 343 00:17:53,720 --> 00:17:56,199 Speaker 9: including in fact an investment in the UK project finance, 344 00:17:56,240 --> 00:18:00,480 Speaker 9: infrastructure finance, housing finance, where we lead in the UK. No, 345 00:18:00,600 --> 00:18:04,479 Speaker 9: we'll look at acquisitions opportunistically. Our core strategy is organic 346 00:18:04,560 --> 00:18:05,159 Speaker 9: and we're. 347 00:18:05,000 --> 00:18:06,080 Speaker 6: Feeling good about where we're going. 348 00:18:06,400 --> 00:18:07,560 Speaker 10: What do you want on pensions? 349 00:18:07,760 --> 00:18:08,160 Speaker 6: Pensions? 350 00:18:08,160 --> 00:18:09,920 Speaker 10: But also there's a lot of talk on actually risk 351 00:18:10,000 --> 00:18:14,000 Speaker 10: taking and this takes years not months that the government has. 352 00:18:14,040 --> 00:18:16,680 Speaker 9: Yeah, so pensions are such an important part of the puzzle. 353 00:18:16,720 --> 00:18:18,760 Speaker 9: As I said, we are a leading pensions provider in 354 00:18:18,800 --> 00:18:21,040 Speaker 9: the UK two hundred billion pounds worth of pension money 355 00:18:21,880 --> 00:18:23,840 Speaker 9: and I think there's a few things that really matter. 356 00:18:23,920 --> 00:18:26,520 Speaker 9: The first is we need to get more of our 357 00:18:26,560 --> 00:18:27,920 Speaker 9: customers money into pensions. 358 00:18:28,080 --> 00:18:29,480 Speaker 6: About forty percent. 359 00:18:29,200 --> 00:18:31,919 Speaker 9: Of the UK households aren't on track for even a 360 00:18:31,920 --> 00:18:35,119 Speaker 9: basic living standard, and obviously giving them financial resilience is 361 00:18:35,160 --> 00:18:37,880 Speaker 9: good for the economy, so we need to increase enrollment 362 00:18:37,960 --> 00:18:40,159 Speaker 9: around pensions. The second thing is how can we invest 363 00:18:40,200 --> 00:18:43,080 Speaker 9: it safely and appropriately for them in high risk assets? 364 00:18:43,440 --> 00:18:46,680 Speaker 9: And actually that's more about conduct risk and fiduciary risk 365 00:18:46,960 --> 00:18:50,639 Speaker 9: than it is around changing or asking the investment managers 366 00:18:50,640 --> 00:18:53,600 Speaker 9: to invest more in those kinds of projects. We need 367 00:18:53,640 --> 00:18:56,000 Speaker 9: to look at how do you support customers to make. 368 00:18:55,880 --> 00:18:57,080 Speaker 6: Those choices in this country. 369 00:18:57,359 --> 00:18:59,280 Speaker 9: And that's something we're talking closely with the government and 370 00:18:59,359 --> 00:18:59,960 Speaker 9: the regulators about. 371 00:19:00,680 --> 00:19:03,480 Speaker 10: You know, the new Investment Minister, how many questions do 372 00:19:03,480 --> 00:19:06,640 Speaker 10: you think she'll feel from international investors about the budget? 373 00:19:06,960 --> 00:19:09,320 Speaker 10: Is this investment summit a little bit too soon as 374 00:19:09,359 --> 00:19:11,399 Speaker 10: we don't really know what happens to non darms, what 375 00:19:11,440 --> 00:19:14,240 Speaker 10: happens aster carried interest and other questions? 376 00:19:14,800 --> 00:19:16,280 Speaker 9: Well, no, And if the first thing to say is 377 00:19:16,280 --> 00:19:18,320 Speaker 9: you can hear the buzz in the room today, it's 378 00:19:18,359 --> 00:19:20,640 Speaker 9: great to see the excitement about investing in the UK 379 00:19:20,680 --> 00:19:23,680 Speaker 9: and have the international investors here. It's very very early 380 00:19:23,760 --> 00:19:26,199 Speaker 9: days for the new Investment ministrating four or five days in. 381 00:19:27,520 --> 00:19:30,680 Speaker 9: I know her ambition is to increase overseas investment into 382 00:19:30,680 --> 00:19:33,200 Speaker 9: the UK. And the kind of investors we're talking about 383 00:19:33,240 --> 00:19:36,520 Speaker 9: are the big international pension funds, the big international sovereign 384 00:19:36,560 --> 00:19:39,919 Speaker 9: wealth funds, the private credit funds, and they're going to 385 00:19:39,920 --> 00:19:42,639 Speaker 9: be looking for good projects with a good return with 386 00:19:42,800 --> 00:19:45,280 Speaker 9: a government and a country that's getting behind making those 387 00:19:45,400 --> 00:19:48,119 Speaker 9: investments successful, that's what will matter. It won't be some 388 00:19:48,160 --> 00:19:50,480 Speaker 9: of the things you're talking about, and so I hope 389 00:19:50,520 --> 00:19:53,640 Speaker 9: that she's really focused on engaging those kinds of organizations 390 00:19:54,000 --> 00:19:57,080 Speaker 9: and then working with our financial services sector which has 391 00:19:57,119 --> 00:19:59,480 Speaker 9: the expertise to put that money to work, and we're 392 00:20:00,040 --> 00:20:02,000 Speaker 9: d and financial service sector in the world. 393 00:20:02,080 --> 00:20:03,919 Speaker 6: Let me say that. 394 00:20:03,240 --> 00:20:07,080 Speaker 3: That was Lloyd's Bank CEO Charlie Nunn, perhaps Keir Starman 395 00:20:07,240 --> 00:20:11,080 Speaker 3: managing to calm the city's jitters with that investment summit 396 00:20:11,200 --> 00:20:15,919 Speaker 3: ahead of the autumn budget. So what is driving the 397 00:20:16,080 --> 00:20:19,880 Speaker 3: positive trajectory of the UK banking sector. It's something that 398 00:20:19,920 --> 00:20:24,280 Speaker 3: I've been talking to our finance reporter about, Harry Wilson. 399 00:20:24,680 --> 00:20:26,960 Speaker 11: I think there's a few things. Obviously, we're now heading 400 00:20:27,000 --> 00:20:30,320 Speaker 11: into a interest rate cutting cycle and people are looking 401 00:20:30,320 --> 00:20:32,760 Speaker 11: at what impact that's going to have on credit demand. 402 00:20:32,960 --> 00:20:35,680 Speaker 11: So obviously, on the one hand, falling interest rates aren't 403 00:20:35,720 --> 00:20:38,439 Speaker 11: that great for banks as they cut their margins. But 404 00:20:38,440 --> 00:20:40,399 Speaker 11: on the other hand, you could see a increase in 405 00:20:40,840 --> 00:20:44,040 Speaker 11: demand among customers for loans and that can be positive 406 00:20:44,400 --> 00:20:46,600 Speaker 11: in its own sense for the banks. So it's really 407 00:20:46,680 --> 00:20:49,480 Speaker 11: kind of a trade off there between those things. And 408 00:20:49,480 --> 00:20:52,239 Speaker 11: then I think we also obviously we're looking out at 409 00:20:52,240 --> 00:20:53,840 Speaker 11: what the new government is going to mean for the 410 00:20:53,840 --> 00:20:57,119 Speaker 11: banking sector. So far it's being broadly positive, but obviously 411 00:20:57,160 --> 00:20:59,840 Speaker 11: we're waiting for the budget in the coming weeks. 412 00:21:00,359 --> 00:21:00,679 Speaker 12: Yeah. 413 00:21:00,720 --> 00:21:04,760 Speaker 3: Absolutely, how's the sector performed to date? So we've just 414 00:21:04,880 --> 00:21:08,760 Speaker 3: come off Wall Street Bank earnings which have been very strong. 415 00:21:09,080 --> 00:21:11,240 Speaker 3: How is the sector in the UK performing well? 416 00:21:11,240 --> 00:21:13,080 Speaker 11: The share price has been very strong this year. So 417 00:21:13,320 --> 00:21:15,920 Speaker 11: among the number of the banks, we've got double digit increases, 418 00:21:15,960 --> 00:21:18,040 Speaker 11: you know, just to take one, but something like Bark 419 00:21:18,040 --> 00:21:20,520 Speaker 11: Pieces up around about fifty five percent at the moment, 420 00:21:21,080 --> 00:21:24,679 Speaker 11: Lloyd's up nearly thirty percent, that West over sixty percent. 421 00:21:24,960 --> 00:21:29,399 Speaker 11: One of the laggards relative laggards is HSBC that they're 422 00:21:30,200 --> 00:21:33,600 Speaker 11: less than about eight percent of the moment. But generally 423 00:21:33,680 --> 00:21:35,360 Speaker 11: the sector has been having a very good year. 424 00:21:35,880 --> 00:21:39,679 Speaker 3: And so then in terms of what we're expecting to 425 00:21:39,720 --> 00:21:43,199 Speaker 3: come obviously, rate sensitive stocks light banks are in focus 426 00:21:43,200 --> 00:21:45,800 Speaker 3: when it comes to interest rates. The Bank of England 427 00:21:46,400 --> 00:21:49,159 Speaker 3: has seen inflation four below the two percent target for 428 00:21:49,200 --> 00:21:52,119 Speaker 3: the first time since what twenty twenty one. April twenty 429 00:21:52,160 --> 00:21:56,240 Speaker 3: twenty one, how do you think that will affect banks, 430 00:21:56,359 --> 00:21:59,040 Speaker 3: the loosening of central bank policy, the Bank of England 431 00:21:59,080 --> 00:22:00,000 Speaker 3: cutting interest rates. 432 00:22:00,440 --> 00:22:01,760 Speaker 11: I think one of the things we'll probably have to 433 00:22:01,760 --> 00:22:04,160 Speaker 11: be looking out for is particularly what banks they're around 434 00:22:04,240 --> 00:22:08,119 Speaker 11: cost cuts. So as as I mentioned, the cuts to 435 00:22:08,200 --> 00:22:12,000 Speaker 11: interest rates are actually you know, not seen that positively 436 00:22:12,320 --> 00:22:14,960 Speaker 11: for banks, particularly because it cuts into their margins. So 437 00:22:15,000 --> 00:22:17,119 Speaker 11: what we'll be then looking for is how banks adapt 438 00:22:17,160 --> 00:22:19,520 Speaker 11: to that. So you know, take one example, but we've 439 00:22:19,520 --> 00:22:23,359 Speaker 11: certainly seen at HSBT a lot of talk and speculation 440 00:22:23,440 --> 00:22:26,760 Speaker 11: around potential cost cuts as the bank looks to you know, 441 00:22:26,800 --> 00:22:30,200 Speaker 11: they're coming off a period in which they've had outsize earnings. 442 00:22:30,200 --> 00:22:33,119 Speaker 11: You know, this year or sorry last year was a 443 00:22:33,240 --> 00:22:36,960 Speaker 11: record year for their annual profits and so now that 444 00:22:37,000 --> 00:22:40,000 Speaker 11: we're that's likely to dampen. I think the focus among 445 00:22:40,000 --> 00:22:41,920 Speaker 11: the banks is probably going to be on how do 446 00:22:42,000 --> 00:22:44,439 Speaker 11: we cut our expenses given that we're probably going to 447 00:22:44,440 --> 00:22:46,879 Speaker 11: be expecting some kind of margin compression now in the 448 00:22:46,920 --> 00:22:47,560 Speaker 11: coming years. 449 00:22:48,080 --> 00:22:50,520 Speaker 3: Also, as you say, ahead of the budget on the 450 00:22:50,520 --> 00:22:55,200 Speaker 3: thirtieth of October, we did hear from some British leading bankers, 451 00:22:55,240 --> 00:22:58,480 Speaker 3: including the CEO of Barclays. Are the UK Investments summited 452 00:22:59,520 --> 00:23:03,720 Speaker 3: only a few days ago. Has the new government done 453 00:23:04,200 --> 00:23:08,040 Speaker 3: something to bolster this sector? I mean, Barclay's was really 454 00:23:08,080 --> 00:23:11,560 Speaker 3: quite positive on the UK on investing in the UK. 455 00:23:11,680 --> 00:23:15,439 Speaker 3: What's the interplay between this new government and bankers in Britain. 456 00:23:15,760 --> 00:23:19,399 Speaker 11: It's very early days, so it's hard to say exactly 457 00:23:19,800 --> 00:23:21,960 Speaker 11: what we're going to guess. I mean, I think everything 458 00:23:22,200 --> 00:23:26,640 Speaker 11: kind of rests on the budget. Obviously, if there's some 459 00:23:26,720 --> 00:23:30,520 Speaker 11: particularly harsh tax writers for banks, and that could definitely 460 00:23:30,560 --> 00:23:33,119 Speaker 11: weigh under sector. I think at the moment, both sides 461 00:23:33,280 --> 00:23:36,760 Speaker 11: are feeling themselves out, basically trying to get a sense 462 00:23:36,800 --> 00:23:40,640 Speaker 11: of what the other's about. And I don't think as 463 00:23:40,720 --> 00:23:43,159 Speaker 11: yet that there's any particular sign that they was going 464 00:23:43,240 --> 00:23:45,080 Speaker 11: to be that's harsh in banks. But on the other hand, 465 00:23:45,200 --> 00:23:46,680 Speaker 11: you know, if we were to see some kind of 466 00:23:46,800 --> 00:23:50,280 Speaker 11: new bank tax in the budget, that could probably quite 467 00:23:50,359 --> 00:23:51,399 Speaker 11: rapidly change sentiment. 468 00:23:52,000 --> 00:23:54,480 Speaker 3: Yeah, indeed, what are you on the lookout for in 469 00:23:54,560 --> 00:23:56,960 Speaker 3: terms of which of the banks might be of most 470 00:23:57,240 --> 00:23:58,000 Speaker 3: interest to you? 471 00:23:58,840 --> 00:24:01,640 Speaker 11: HSBC is the obvious, I think the probably the most 472 00:24:01,720 --> 00:24:04,000 Speaker 11: interesting one. At the moment, we've got a new CEO. 473 00:24:04,160 --> 00:24:06,560 Speaker 11: This is going to be his first set of results. 474 00:24:07,040 --> 00:24:10,119 Speaker 11: And there's an expectation now of some kind of at 475 00:24:10,200 --> 00:24:14,760 Speaker 11: least minor restructuring of the business, probably some major divisions 476 00:24:14,800 --> 00:24:18,560 Speaker 11: being combined, but also what they say about expenses and 477 00:24:18,600 --> 00:24:21,440 Speaker 11: the future strategy of the bank. For me HSBC is 478 00:24:21,840 --> 00:24:24,760 Speaker 11: going to be the one to watch this quarter. That said, 479 00:24:24,800 --> 00:24:27,040 Speaker 11: I think Barkleys could be an interesting one. We've seen 480 00:24:27,359 --> 00:24:29,359 Speaker 11: in the last few days. We've seen some very strong 481 00:24:29,359 --> 00:24:31,720 Speaker 11: results out of Wall Street. We've seen some very strong 482 00:24:31,760 --> 00:24:35,360 Speaker 11: trading results. Barclays is the UK bank of the highest 483 00:24:35,400 --> 00:24:38,440 Speaker 11: exposure to Wall Street, so this is clearly going to 484 00:24:38,480 --> 00:24:41,560 Speaker 11: be good news for Barklays and you get the sense 485 00:24:41,600 --> 00:24:43,800 Speaker 11: that they could have quite a good set of numbers. 486 00:24:44,280 --> 00:24:47,800 Speaker 3: Co Q threes ces ben Kata Krishnan talked about the 487 00:24:47,880 --> 00:24:54,880 Speaker 3: US election posing risks globally, geopolitics posing risks globally. How 488 00:24:54,920 --> 00:24:58,040 Speaker 3: do you think banks are thinking about the election outcome 489 00:24:58,080 --> 00:24:59,880 Speaker 3: in the US? Is that a risk fact? 490 00:25:00,720 --> 00:25:05,359 Speaker 11: I think banks are relatively sanguine about it. You know, 491 00:25:05,480 --> 00:25:09,840 Speaker 11: they tend to take the views that whoever wins these elections, 492 00:25:09,920 --> 00:25:13,120 Speaker 11: that they'll adapt to whatever comes from it. Certainly, as 493 00:25:13,119 --> 00:25:15,960 Speaker 11: a sector, banks have proved pretty adaptable way over the years. 494 00:25:16,080 --> 00:25:18,800 Speaker 11: Whatever it's been thrown at them, whether it's market crashes 495 00:25:18,920 --> 00:25:23,560 Speaker 11: or whether it's changes in governments. I think they'll probably, 496 00:25:23,800 --> 00:25:26,120 Speaker 11: as they've always done, go with the flow. So it's 497 00:25:26,160 --> 00:25:29,560 Speaker 11: hard to say if one outcome is particularly negative for them. 498 00:25:29,680 --> 00:25:32,879 Speaker 11: I mean, you know, as a general rule, particularly if 499 00:25:32,880 --> 00:25:35,840 Speaker 11: you've got strong trading operations, a period of volatility actually 500 00:25:35,880 --> 00:25:39,199 Speaker 11: turns out to be pretty good for business. If a 501 00:25:39,240 --> 00:25:41,639 Speaker 11: Trump election led to a lot of market volatility, I 502 00:25:41,640 --> 00:25:44,000 Speaker 11: think that could be something that the banks would obviously 503 00:25:44,359 --> 00:25:45,560 Speaker 11: can well profit from. 504 00:25:45,680 --> 00:25:48,720 Speaker 3: Many thanks to my Bloomberg colleague Carrie Wilson there for 505 00:25:48,960 --> 00:25:52,479 Speaker 3: talking us through the outlook for the banking sector in 506 00:25:52,560 --> 00:25:55,399 Speaker 3: the UK. I'm Karine Hecger here in London, and you 507 00:25:55,440 --> 00:25:58,199 Speaker 3: can catch us every weekday morning for Bloomberg Daybreak you 508 00:25:58,200 --> 00:26:00,680 Speaker 3: at beginning at six am in London. That's one am 509 00:26:00,720 --> 00:26:01,359 Speaker 3: on Wall Street. 510 00:26:01,600 --> 00:26:05,080 Speaker 2: Tom, Thanks Caroline, and coming up on Bloomberg day Break weekend, 511 00:26:05,080 --> 00:26:08,200 Speaker 2: the Bricks Group of Nations hold their sixteenth annual summit 512 00:26:08,280 --> 00:26:11,320 Speaker 2: in Russia next week. We'll have more on what to expect. 513 00:26:11,680 --> 00:26:25,240 Speaker 2: I'm Tom Busby and this is Bloomberg. This is Bloomberg 514 00:26:25,320 --> 00:26:27,360 Speaker 2: day Break Weekend, our global look ahead at the top 515 00:26:27,359 --> 00:26:30,080 Speaker 2: stories for investors in the coming week. I'm Tom Busby 516 00:26:30,119 --> 00:26:32,800 Speaker 2: in New York. The Bricks Group of Nations will hold 517 00:26:32,800 --> 00:26:35,720 Speaker 2: their sixteenth annual summit in Russia next week. Let's turn 518 00:26:35,760 --> 00:26:38,840 Speaker 2: out a Bloomberg Daybreak Asia podcast host Doug Chrisner for 519 00:26:38,880 --> 00:26:40,240 Speaker 2: a closer look Tom. 520 00:26:40,280 --> 00:26:42,919 Speaker 1: In the coming week, Russian President Vladimir Putin will be 521 00:26:42,960 --> 00:26:46,600 Speaker 1: hosting the Bricks Summit. This year's summit is especially important 522 00:26:46,640 --> 00:26:50,359 Speaker 1: because new members will be added. The founders that would 523 00:26:50,400 --> 00:26:54,600 Speaker 1: be Brazil, Russia, India, China and South Africa will formally 524 00:26:54,680 --> 00:26:59,760 Speaker 1: welcome four new countries. They are Egypt, Ethiopia, Iran, and 525 00:26:59,800 --> 00:27:03,200 Speaker 1: the United Arab Emirates. Now Saudi Arabia has been invited 526 00:27:03,240 --> 00:27:06,320 Speaker 1: to join. It will be represented by its foreign minister. 527 00:27:06,680 --> 00:27:10,080 Speaker 1: It seems like Russia in particular is intent on expanding 528 00:27:10,080 --> 00:27:13,520 Speaker 1: this alliance to counter the influence of the West, both 529 00:27:13,560 --> 00:27:17,080 Speaker 1: economically and politically. So for a closer look, let's bring 530 00:27:17,119 --> 00:27:21,960 Speaker 1: in Bloomberg Salaia Mosen, senior Washington correspondent on the US 531 00:27:22,000 --> 00:27:25,440 Speaker 1: ECOGOV team, joining us from the nation's capital. So, Leah, 532 00:27:25,480 --> 00:27:27,919 Speaker 1: thank you for making time to chat with us. Can 533 00:27:28,000 --> 00:27:30,520 Speaker 1: we start by taking a step back and looking broadly 534 00:27:30,600 --> 00:27:33,800 Speaker 1: at bricks, is it helpful to look at this alliance 535 00:27:33,800 --> 00:27:36,639 Speaker 1: as basically a countervailing force to the G seven. 536 00:27:37,280 --> 00:27:40,719 Speaker 13: That is a really interesting way to look at it. Absolutely, 537 00:27:41,320 --> 00:27:45,240 Speaker 13: the G seven is knitted around Western countries. It is 538 00:27:45,440 --> 00:27:50,600 Speaker 13: US led and it's been a force of power for 539 00:27:50,840 --> 00:27:53,920 Speaker 13: quite a while. And these are countries that work together. 540 00:27:54,359 --> 00:27:58,520 Speaker 13: They work together through the global financial crisis, through COVID 541 00:27:59,280 --> 00:28:03,600 Speaker 13: and most recently through the Russia invasion on Ukraine and 542 00:28:03,920 --> 00:28:07,960 Speaker 13: falling in line with US led economic sanctions on Russia. 543 00:28:08,480 --> 00:28:12,439 Speaker 13: And that's the very thing that triggered a stronger bond 544 00:28:13,080 --> 00:28:16,960 Speaker 13: across the bricks and now bricks plus nations. And so 545 00:28:17,200 --> 00:28:20,080 Speaker 13: there is a reactive force there. It's the US led 546 00:28:20,119 --> 00:28:24,520 Speaker 13: coalition and the China led coalition. The relationship between the 547 00:28:24,560 --> 00:28:28,800 Speaker 13: bricks countries, though, is interesting because they don't always all 548 00:28:29,000 --> 00:28:32,600 Speaker 13: get along, but when it comes to finding a way 549 00:28:32,640 --> 00:28:35,159 Speaker 13: around the dollar, they found some common ground. 550 00:28:35,320 --> 00:28:37,160 Speaker 1: We can talk about the dollar in a moment. Let's 551 00:28:37,200 --> 00:28:40,640 Speaker 1: talk a little bit about the internal dynamics as we 552 00:28:40,760 --> 00:28:44,360 Speaker 1: know them, or as we understand them. You mentioned kind 553 00:28:44,360 --> 00:28:46,560 Speaker 1: of maybe not seeing eye to eye. On one hand, 554 00:28:46,560 --> 00:28:49,840 Speaker 1: we have Brazil and India democracies, I think we can 555 00:28:49,880 --> 00:28:53,760 Speaker 1: agree on that Russia China autocracies. I'm imagining that that 556 00:28:53,840 --> 00:28:56,840 Speaker 1: creates a bit of internal rivalry, does it not? 557 00:28:57,320 --> 00:29:02,320 Speaker 13: Absolutely? Russia and China are running their countries very differently. 558 00:29:02,680 --> 00:29:05,959 Speaker 13: There's always question about what would happen when there is 559 00:29:06,000 --> 00:29:10,920 Speaker 13: an eventual power transfer at hand. Brazil and India, they 560 00:29:10,960 --> 00:29:14,880 Speaker 13: have very different interests at hand. And then the countries 561 00:29:14,880 --> 00:29:17,480 Speaker 13: that you name that are now joining include a lot 562 00:29:17,480 --> 00:29:22,120 Speaker 13: of oil producing nations, and so those stakes are different 563 00:29:22,280 --> 00:29:23,600 Speaker 13: than what the other countries have. 564 00:29:23,960 --> 00:29:26,760 Speaker 1: Yeah, both Saudi Arabia, although it's only been invited to 565 00:29:26,920 --> 00:29:30,800 Speaker 1: join the UAE, which has been given membership, and then Iran, 566 00:29:31,280 --> 00:29:34,280 Speaker 1: So you're absolutely right not to leave out Russia in 567 00:29:34,400 --> 00:29:38,800 Speaker 1: terms of oil producers. We've got two major military conflicts happening. 568 00:29:38,880 --> 00:29:42,840 Speaker 1: We've got Israel conducting war in Gaza and on the 569 00:29:42,880 --> 00:29:46,200 Speaker 1: northern border with Lebanon, Israel is fighting has be Lah. 570 00:29:46,480 --> 00:29:50,000 Speaker 1: How are these conflicts likely to enter the conversation. 571 00:29:49,720 --> 00:29:52,480 Speaker 13: The two sets of conflicts. On the one hand, it's 572 00:29:52,600 --> 00:29:56,960 Speaker 13: kinetic war, you know, bombs and blasts going on in 573 00:29:57,080 --> 00:29:59,560 Speaker 13: those two major conflicts. And then on the other hand, 574 00:29:59,600 --> 00:30:02,960 Speaker 13: between the China led coalition in the US coalition. It's 575 00:30:03,000 --> 00:30:10,080 Speaker 13: a proxy war through economic and diplomatic channels, and both 576 00:30:10,240 --> 00:30:15,680 Speaker 13: ways are damaging. Both types of wars are just proof 577 00:30:15,880 --> 00:30:23,040 Speaker 13: that the decades old global order established when World War 578 00:30:23,160 --> 00:30:26,160 Speaker 13: Two came to a close has started to come apart. 579 00:30:26,240 --> 00:30:29,880 Speaker 13: And so you'll hear a lot more about global or 580 00:30:29,920 --> 00:30:34,960 Speaker 13: geoeconomic fragmentation, which is coming against the backdrop of economic 581 00:30:35,040 --> 00:30:40,160 Speaker 13: populism and protectionism popping up in a lot of across 582 00:30:40,200 --> 00:30:44,040 Speaker 13: the globe, including the United States. We have two presidential candidates, 583 00:30:44,080 --> 00:30:48,960 Speaker 13: two parties, both of them have become protectionist parties, and 584 00:30:49,040 --> 00:30:54,640 Speaker 13: so we have overlapping and coinciding forces pulling apart of 585 00:30:54,680 --> 00:30:55,400 Speaker 13: the global order. 586 00:30:55,800 --> 00:30:58,400 Speaker 1: The other military conflict that we have to address is 587 00:30:58,440 --> 00:31:01,360 Speaker 1: the Russian occupation of your I mentioned at the top 588 00:31:01,360 --> 00:31:04,160 Speaker 1: of the conversation that the summit will be hosted by 589 00:31:04,440 --> 00:31:07,440 Speaker 1: Russian President Vladimir Putin. To what extent is he going 590 00:31:07,480 --> 00:31:10,800 Speaker 1: to try to gather more support for what is happening 591 00:31:11,360 --> 00:31:13,240 Speaker 1: Russia's intentions in Ukraine? 592 00:31:13,480 --> 00:31:17,840 Speaker 13: Oh yeah, I mean, I think having allies, particularly with Russia, 593 00:31:17,840 --> 00:31:21,560 Speaker 13: the Russia's relationship with India and China is important for 594 00:31:22,040 --> 00:31:25,160 Speaker 13: Vladimir Putin. Right now, China has come out a little 595 00:31:25,160 --> 00:31:28,320 Speaker 13: bit more strongly in support of Russia. India is still 596 00:31:28,400 --> 00:31:31,160 Speaker 13: trying to toe the line a little bit. But those 597 00:31:31,200 --> 00:31:35,200 Speaker 13: relationships have limits to them, right If you just take 598 00:31:35,240 --> 00:31:39,320 Speaker 13: one example, that is that Russia was able to sell 599 00:31:39,400 --> 00:31:43,320 Speaker 13: a lot of its oil to India when the US 600 00:31:43,560 --> 00:31:46,280 Speaker 13: led coalition put a lot of caps on the amount 601 00:31:46,360 --> 00:31:49,880 Speaker 13: of oil Russian oil that could reach markets, and Vladimir 602 00:31:49,880 --> 00:31:51,720 Speaker 13: Putin after that ended up with a lot of Indian 603 00:31:51,800 --> 00:31:54,080 Speaker 13: rupees and he did not know what to do with 604 00:31:54,160 --> 00:31:57,440 Speaker 13: them because he cannot take that and buy the things 605 00:31:57,440 --> 00:31:59,680 Speaker 13: he needs, and so it didn't have the same exchange 606 00:31:59,720 --> 00:32:04,040 Speaker 13: ability value. And we're seeing similar data come through on 607 00:32:04,080 --> 00:32:08,280 Speaker 13: the Russia China relationship. But that being said, that's the technical, 608 00:32:08,560 --> 00:32:12,680 Speaker 13: sort of weedy stuff. Diplomatically, it's been hugely beneficial for 609 00:32:12,760 --> 00:32:15,760 Speaker 13: Russia to have a block of nations that is supporting 610 00:32:15,760 --> 00:32:18,680 Speaker 13: it in various levels of strength across the spectrum. 611 00:32:18,720 --> 00:32:21,920 Speaker 1: Sole I'd like to pivot to how the dollar plays 612 00:32:21,960 --> 00:32:23,960 Speaker 1: into all of this. We've talked in the past, you 613 00:32:24,000 --> 00:32:27,520 Speaker 1: and I about de dollarization, Whether the dollar is really 614 00:32:27,800 --> 00:32:30,320 Speaker 1: under threat right now, is the world's reserve currency. We 615 00:32:30,360 --> 00:32:33,040 Speaker 1: can talk about the challenges that you may see in 616 00:32:33,080 --> 00:32:35,800 Speaker 1: a minute. First, I want to listen to a segment 617 00:32:35,960 --> 00:32:39,040 Speaker 1: of a recent Bloomberg News interview with former President Donald 618 00:32:39,080 --> 00:32:43,040 Speaker 1: Trump where the dollar was discussed. Here is Bloomberg editor 619 00:32:43,040 --> 00:32:44,480 Speaker 1: in chief John Micklethwaite. 620 00:32:44,680 --> 00:32:47,160 Speaker 12: Can I ask you a particular thing about the dollar? 621 00:32:47,320 --> 00:32:49,480 Speaker 12: You've actually you've talked about wars at the New York 622 00:32:49,520 --> 00:32:52,520 Speaker 12: Economic Club. You said that if you lost the dollar 623 00:32:52,520 --> 00:32:55,280 Speaker 12: as a reserve currency, it would be like America losing 624 00:32:55,280 --> 00:32:57,400 Speaker 12: a wall. Yeah, you look at what you're going to 625 00:32:57,480 --> 00:33:00,479 Speaker 12: do in terms of protectionism arrive country is to use 626 00:33:00,520 --> 00:33:03,440 Speaker 12: the other currencies and all that death is also going 627 00:33:03,480 --> 00:33:06,880 Speaker 12: to lessen the dollars status as of the world's reserve currency. 628 00:33:06,960 --> 00:33:09,680 Speaker 8: If you worry about the dollar is so secure, your 629 00:33:09,720 --> 00:33:13,360 Speaker 8: reserve currency is the strongest it'll ever be. The reserve 630 00:33:13,400 --> 00:33:18,040 Speaker 8: currency is under threat because you have Iran, you have Russia, 631 00:33:18,120 --> 00:33:20,200 Speaker 8: you have China. Once China is the one that you 632 00:33:20,200 --> 00:33:21,280 Speaker 8: have to worry about because. 633 00:33:21,040 --> 00:33:21,480 Speaker 13: They want it. 634 00:33:21,800 --> 00:33:25,720 Speaker 8: They want to have the wand be the thing of power. 635 00:33:26,280 --> 00:33:29,040 Speaker 8: So here's what I'm doing again. I hate to go 636 00:33:29,160 --> 00:33:32,040 Speaker 8: back to it. If somebody says, and I know countries 637 00:33:32,080 --> 00:33:34,320 Speaker 8: want to get out because they don't respect our leadership. 638 00:33:34,360 --> 00:33:35,840 Speaker 8: They look at this guy. They say, you've got to 639 00:33:35,840 --> 00:33:37,640 Speaker 8: be kidding. And she's worse than him, by the way 640 00:33:37,720 --> 00:33:40,400 Speaker 8: she's I never thought i'd say this. She is not 641 00:33:40,480 --> 00:33:42,560 Speaker 8: as smart as Biden. If you can believe, this is 642 00:33:42,600 --> 00:33:46,120 Speaker 8: not what we had four years of this, this lunacy, 643 00:33:46,240 --> 00:33:47,920 Speaker 8: and we can't have anymore. We're not going to have 644 00:33:47,920 --> 00:33:52,360 Speaker 8: a country left. Okay. Currency very important, yes, and if 645 00:33:52,360 --> 00:33:54,240 Speaker 8: you want to go to third world if you want 646 00:33:54,280 --> 00:33:57,440 Speaker 8: to go to third world status, lose your reserve currency. 647 00:33:57,960 --> 00:34:00,640 Speaker 8: We have to have that. We cannot lose it if 648 00:34:00,760 --> 00:34:03,600 Speaker 8: you'll go to third world status in this country, because 649 00:34:03,600 --> 00:34:05,320 Speaker 8: you take a look at the way things are running. 650 00:34:05,760 --> 00:34:09,560 Speaker 8: If a country tells me, Sarah, we like you very much, 651 00:34:09,560 --> 00:34:11,960 Speaker 8: but we're going to no longer adhere to being in 652 00:34:12,000 --> 00:34:16,840 Speaker 8: the reserve currency. We're not going to salute the dollar anymore, 653 00:34:17,280 --> 00:34:20,759 Speaker 8: I'll say that's okay. And you're going to pay a 654 00:34:20,760 --> 00:34:23,799 Speaker 8: one hundred percent tariff on everything you sell into the 655 00:34:23,880 --> 00:34:26,759 Speaker 8: United States. And we love your product. I help you 656 00:34:26,800 --> 00:34:28,680 Speaker 8: sell a lot of it into the United States, but 657 00:34:28,719 --> 00:34:32,120 Speaker 8: you're going to pay one hundred percent tariff. He will 658 00:34:32,160 --> 00:34:34,279 Speaker 8: then follow it up by saying, sir, it would be 659 00:34:34,360 --> 00:34:37,919 Speaker 8: an honor to stay with the reserve currency. I will 660 00:34:37,960 --> 00:34:40,680 Speaker 8: be that will be like just playing that's not even chess, 661 00:34:40,719 --> 00:34:41,400 Speaker 8: that's checkers. 662 00:34:41,520 --> 00:34:44,800 Speaker 1: Former President Trump there in conversation with Bloomberg editor in 663 00:34:44,920 --> 00:34:49,080 Speaker 1: chief John Micklethwaite. Let's bring in Bloomberg Solea Mosen, who 664 00:34:49,080 --> 00:34:52,320 Speaker 1: has been talking with me about the upcoming Brick summit 665 00:34:52,600 --> 00:34:56,800 Speaker 1: in Russia. Sole, you've written a lot about dedollarization. Was 666 00:34:56,840 --> 00:34:59,560 Speaker 1: there anything in that conversation that you want to push 667 00:34:59,560 --> 00:35:00,000 Speaker 1: back again? 668 00:35:00,480 --> 00:35:03,839 Speaker 13: Well, one thing is that Trump is I mean, yeah, 669 00:35:03,840 --> 00:35:06,359 Speaker 13: he's right that countries are talking about moving away from 670 00:35:06,400 --> 00:35:09,719 Speaker 13: the dollar, but he's wrong that any country has actually 671 00:35:09,960 --> 00:35:13,520 Speaker 13: actively abandoned the dollar. No one has. If you just 672 00:35:13,719 --> 00:35:15,920 Speaker 13: I'll just give you two data points. Eighty eight percent 673 00:35:16,080 --> 00:35:19,240 Speaker 13: of the world's foreign exchange transactions take place in the dollar. 674 00:35:19,840 --> 00:35:23,920 Speaker 13: The biggest rival that people talk about is China, and 675 00:35:23,960 --> 00:35:27,440 Speaker 13: that's who Trump by name has said, is gunning to 676 00:35:27,960 --> 00:35:31,200 Speaker 13: drop the dollar and make its own yuan the reserve asset. 677 00:35:31,760 --> 00:35:35,120 Speaker 13: Their figure, their equivalent figure is seven percent of global 678 00:35:35,120 --> 00:35:38,520 Speaker 13: foreign exchange transactions. So it's a very big disparity. So 679 00:35:38,640 --> 00:35:41,480 Speaker 13: no one has abandoned the dollar, and it's actually hard 680 00:35:41,520 --> 00:35:44,520 Speaker 13: to abandon the dollar. There's no clear alternative. The US 681 00:35:44,719 --> 00:35:47,920 Speaker 13: is so large and so deeply entrenched in the global 682 00:35:47,960 --> 00:35:52,560 Speaker 13: system with its currency that dropping the dollar would be 683 00:35:53,000 --> 00:35:57,160 Speaker 13: like the lingua franca not no longer being English. English 684 00:35:57,200 --> 00:35:59,839 Speaker 13: is no longer the universal language. Dollar is no longer 685 00:35:59,880 --> 00:36:01,719 Speaker 13: the universal currency. 686 00:36:01,840 --> 00:36:02,000 Speaker 6: Right. 687 00:36:02,040 --> 00:36:03,359 Speaker 13: That's how difficult it is. 688 00:36:03,480 --> 00:36:06,200 Speaker 1: So maybe we can call it aspirational to replace the 689 00:36:06,239 --> 00:36:09,719 Speaker 1: dollar as the global reserve currency. That said, could the 690 00:36:09,800 --> 00:36:13,799 Speaker 1: dollars dominance be challenged, even in a small way that 691 00:36:13,880 --> 00:36:16,759 Speaker 1: could maybe provide a little bit of disruption. 692 00:36:16,640 --> 00:36:16,840 Speaker 6: You know. 693 00:36:17,000 --> 00:36:19,759 Speaker 13: One thing that's important to state is that the and 694 00:36:19,880 --> 00:36:23,440 Speaker 13: US officials should not be complacent, and Trump is assuring 695 00:36:23,480 --> 00:36:26,280 Speaker 13: that he would not be complacent with any discussion about 696 00:36:26,680 --> 00:36:29,160 Speaker 13: countries wanting to come together and move away from the dollar, 697 00:36:29,280 --> 00:36:33,520 Speaker 13: because it is such a privileged status for the US 698 00:36:33,680 --> 00:36:38,239 Speaker 13: and everyone who lives in the US. Every consumer benefits 699 00:36:38,280 --> 00:36:40,520 Speaker 13: from that status, and then companies and countries around the 700 00:36:40,560 --> 00:36:43,920 Speaker 13: world benefit from that too. The biggest threat to the 701 00:36:44,200 --> 00:36:48,440 Speaker 13: dollar's dominance is not externally that any other country could 702 00:36:48,560 --> 00:36:52,040 Speaker 13: take over or ditch the dollar. Really, the threats come 703 00:36:52,080 --> 00:36:57,440 Speaker 13: from internal problems are massive debt and deficits. Some of 704 00:36:57,480 --> 00:37:02,960 Speaker 13: the playing chicken with our public financing issues, making sure 705 00:37:03,000 --> 00:37:06,319 Speaker 13: that no one is abusing the privileged position that the 706 00:37:06,400 --> 00:37:09,960 Speaker 13: dollar gives us in the world, which is basically saying, 707 00:37:10,040 --> 00:37:12,879 Speaker 13: let's not overuse sanctions, let's not overuse the dollar as 708 00:37:12,920 --> 00:37:15,759 Speaker 13: a tool. Those are a couple of the key components 709 00:37:15,760 --> 00:37:16,359 Speaker 13: to remember there. 710 00:37:16,560 --> 00:37:19,719 Speaker 1: Now, Former President Trump, in the conversation with John Micklethwaite, 711 00:37:19,920 --> 00:37:24,000 Speaker 1: was mentioning the Chinese currency, the ywan. Right now, given 712 00:37:24,040 --> 00:37:26,719 Speaker 1: everything that's going on in China, the challenges that the 713 00:37:26,880 --> 00:37:30,920 Speaker 1: economy has been confronted with, that seems like a long shot, 714 00:37:31,040 --> 00:37:31,920 Speaker 1: doesn't it. 715 00:37:31,920 --> 00:37:34,560 Speaker 13: It is a long shot. China is, yes, the second 716 00:37:34,680 --> 00:37:37,759 Speaker 13: largest economy in the world, but it's number two by 717 00:37:37,840 --> 00:37:40,759 Speaker 13: a large, large gap. It would take numbers two, three, 718 00:37:40,800 --> 00:37:44,080 Speaker 13: and four, so China, Japan, and Germany to come together 719 00:37:44,239 --> 00:37:46,600 Speaker 13: and then you can be bigger than the US in 720 00:37:46,680 --> 00:37:50,399 Speaker 13: terms of economic size. The other piece to add there 721 00:37:50,480 --> 00:37:55,200 Speaker 13: is that China does not have the transparency and democratic 722 00:37:55,320 --> 00:37:58,920 Speaker 13: values that investors have been accustomed to for eighty years 723 00:37:58,960 --> 00:38:02,719 Speaker 13: now in the world reserve asset. The reason that investors 724 00:38:02,960 --> 00:38:06,480 Speaker 13: flee to the dollar and US assets in times of 725 00:38:06,520 --> 00:38:10,359 Speaker 13: trouble or turmoil is because they know that it is 726 00:38:11,040 --> 00:38:15,239 Speaker 13: underpinned by a strong democracy. We have independent institutions, green 727 00:38:15,239 --> 00:38:19,480 Speaker 13: and fair elections, rule of law. Unless and because investors 728 00:38:19,520 --> 00:38:22,759 Speaker 13: are not conditioned to expect this, it will take a 729 00:38:22,800 --> 00:38:25,279 Speaker 13: lot for investors to change that. And I don't see 730 00:38:25,280 --> 00:38:26,240 Speaker 13: that happening overnight. 731 00:38:26,440 --> 00:38:28,759 Speaker 1: And on top of that, the Chinese currency is not 732 00:38:28,840 --> 00:38:32,800 Speaker 1: free floating. It's managed, very managed by the PBOC exactly. 733 00:38:32,920 --> 00:38:36,600 Speaker 13: That comes down to the transparency angle. It's not market 734 00:38:36,640 --> 00:38:40,799 Speaker 13: forces that determine where the currency is at and what 735 00:38:40,960 --> 00:38:44,040 Speaker 13: is going on in the economy. It's also still largely 736 00:38:44,080 --> 00:38:45,120 Speaker 13: a managed economy. 737 00:38:45,640 --> 00:38:47,600 Speaker 1: So Leia, thank you so much for making time to 738 00:38:47,920 --> 00:38:50,160 Speaker 1: help us preview the Brick Summit. In the week Ahead, 739 00:38:50,160 --> 00:38:54,320 Speaker 1: Bloomberg Saliya Mosen, Senior Washington correspondent. She's also the author 740 00:38:54,400 --> 00:38:58,480 Speaker 1: of Paper Soldiers, How the weaponization of the Dollar change 741 00:38:58,480 --> 00:39:01,720 Speaker 1: the World Order. I'm Doug. You can join us weekdays 742 00:39:01,719 --> 00:39:04,719 Speaker 1: for the Bloomberg Daybreak Asia podcast, where we dive into 743 00:39:04,760 --> 00:39:08,240 Speaker 1: the stories moving markets in the APAC region. It's available 744 00:39:08,280 --> 00:39:09,680 Speaker 1: wherever you get your podcast. 745 00:39:09,960 --> 00:39:12,360 Speaker 2: Tom and that does it for this edition of Bloomberg 746 00:39:12,400 --> 00:39:14,920 Speaker 2: day Break Weekend. Join us again Monday morning at five 747 00:39:14,920 --> 00:39:17,600 Speaker 2: am Wall Street Time for the latest on markets overseas 748 00:39:17,600 --> 00:39:19,919 Speaker 2: and the news you need to start your day. I'm 749 00:39:19,960 --> 00:39:23,080 Speaker 2: Tom Buzby. Stay with US. Top stories and global business 750 00:39:23,080 --> 00:39:24,719 Speaker 2: headlines are coming up right now.