1
00:00:00,240 --> 00:00:07,680
Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

2
00:00:10,400 --> 00:00:13,600
Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the

3
00:00:13,640 --> 00:00:16,120
Speaker 2: top stories in the coming week from our Daybreak anchors

4
00:00:16,239 --> 00:00:18,639
Speaker 2: all around the world. Straight Ahead on the program, we

5
00:00:18,680 --> 00:00:21,160
Speaker 2: look ahead to the July jobs report in the US

6
00:00:21,280 --> 00:00:23,960
Speaker 2: and what it may mean for fit policy moving forward.

7
00:00:24,000 --> 00:00:25,520
Speaker 2: I'm Nathan Hager in New York.

8
00:00:25,760 --> 00:00:27,800
Speaker 3: I'm Klin Hepgre in London. Where we're looking at you.

9
00:00:27,880 --> 00:00:29,760
Speaker 3: It was most important corporate bannings.

10
00:00:30,000 --> 00:00:32,559
Speaker 4: I'm Doug Prisner, looking ahead to the latest readings on

11
00:00:32,720 --> 00:00:37,080
Speaker 4: Vietnam's economy, including inflation and trade.

12
00:00:38,360 --> 00:00:42,400
Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg

13
00:00:42,400 --> 00:00:46,120
Speaker 1: eleven three YEO New York, Bloomberg ninety nine to one, Washington, DC,

14
00:00:46,600 --> 00:00:51,760
Speaker 1: Bloomberg ninety two nine Boston, DAB Digital Radio, London, Syrias

15
00:00:51,920 --> 00:00:55,440
Speaker 1: XM one twenty one, and around the world on Bloomberg Radio,

16
00:00:55,480 --> 00:00:57,640
Speaker 1: dot Com and the Bloomberg Business App.

17
00:01:02,800 --> 00:01:04,600
Speaker 5: Good day to you. I'm Nathan Hager.

18
00:01:04,720 --> 00:01:07,959
Speaker 2: We begin today's program with the July jobs report in

19
00:01:08,040 --> 00:01:11,479
Speaker 2: the US. Non farm payrolls come out this Friday at

20
00:01:11,520 --> 00:01:14,000
Speaker 2: eight thirty am. Wall Street Time For more on the

21
00:01:14,040 --> 00:01:16,360
Speaker 2: data than how they may affect Fed policy. We're joined

22
00:01:16,360 --> 00:01:20,200
Speaker 2: by Stuart paul Us, economist with Bloomberg Economics. Great to

23
00:01:20,200 --> 00:01:21,640
Speaker 2: have you with us on the program.

24
00:01:21,680 --> 00:01:22,000
Speaker 5: Stuart.

25
00:01:22,080 --> 00:01:25,800
Speaker 2: Of course, the Fed says it's still focused on inflation.

26
00:01:26,720 --> 00:01:29,400
Speaker 2: So how much of a difference could jobs make when

27
00:01:29,400 --> 00:01:31,400
Speaker 2: it comes to the policy outleg.

28
00:01:31,440 --> 00:01:34,640
Speaker 6: You know, it's actually pretty interesting. The Fed has been

29
00:01:34,720 --> 00:01:38,400
Speaker 6: laser focused on inflation, and that's been the case while

30
00:01:38,400 --> 00:01:41,520
Speaker 6: inflation has been well above the two percent target, so

31
00:01:41,560 --> 00:01:44,759
Speaker 6: it's now for several years. But each summer we've been

32
00:01:44,840 --> 00:01:48,520
Speaker 6: surprised with a series of week jobs reports that actually

33
00:01:48,640 --> 00:01:52,080
Speaker 6: ended up leading to a series of rate cuts. And

34
00:01:52,160 --> 00:01:55,160
Speaker 6: so while the consensus right now is expecting about eighty

35
00:01:55,200 --> 00:01:57,680
Speaker 6: twoe hundred thousand jobs added in the July jobs report,

36
00:01:57,880 --> 00:01:59,840
Speaker 6: we're actually a little bit more pessimistic for a host

37
00:01:59,840 --> 00:02:02,520
Speaker 6: of reasons that we can get into. And given the

38
00:02:02,520 --> 00:02:05,960
Speaker 6: fact that the Fed has been surprised by summer softening

39
00:02:05,960 --> 00:02:08,480
Speaker 6: in the labor market and it has made them reconsider

40
00:02:08,520 --> 00:02:11,359
Speaker 6: their policy stance. I don't think that they're going to

41
00:02:11,400 --> 00:02:14,760
Speaker 6: completely ignore the labor market. I do think that inflation

42
00:02:14,840 --> 00:02:17,320
Speaker 6: is still number one, But the Fed has its dual

43
00:02:17,360 --> 00:02:18,880
Speaker 6: mandate and labor still matters.

44
00:02:18,880 --> 00:02:21,120
Speaker 2: All right, Well, let's get into some of those reasons

45
00:02:21,120 --> 00:02:23,600
Speaker 2: why you are feeling more pessimistic. What are you seeing

46
00:02:23,600 --> 00:02:24,799
Speaker 2: in the labor market right now?

47
00:02:25,080 --> 00:02:28,600
Speaker 6: When we look at high frequency data, which admittedly has

48
00:02:28,639 --> 00:02:31,280
Speaker 6: been pretty noisy in the last couple months, we only

49
00:02:31,360 --> 00:02:34,840
Speaker 6: get to about fifty thousand jobs added, so we're running

50
00:02:34,960 --> 00:02:38,840
Speaker 6: almost nearly half the pace that the consensus is expecting.

51
00:02:39,440 --> 00:02:44,639
Speaker 6: And beyond that, we think that World Cup hiring pulled

52
00:02:44,800 --> 00:02:48,680
Speaker 6: forward labor demand earlier into the spring, sending the stage

53
00:02:48,680 --> 00:02:51,320
Speaker 6: for a July slowdown as the World Cup started to

54
00:02:51,320 --> 00:02:55,440
Speaker 6: wind down. Beyond that, again, is this problem of residual

55
00:02:55,520 --> 00:02:58,280
Speaker 6: seasonality in the data. Just it seems to be the

56
00:02:58,280 --> 00:03:01,239
Speaker 6: case that the Bureau of Labor Statistic has really struggled

57
00:03:01,280 --> 00:03:05,880
Speaker 6: with accounting for seasonality in hiring. For examples, for example,

58
00:03:05,960 --> 00:03:08,760
Speaker 6: teachers get effectively laid off during the summer and then

59
00:03:08,800 --> 00:03:12,079
Speaker 6: rehired in the fall. Accounting for that is a really

60
00:03:12,160 --> 00:03:14,960
Speaker 6: important part of the task here, and if the seasonal

61
00:03:14,960 --> 00:03:18,520
Speaker 6: adjustment process is imperfect, you end up seeing an uptick

62
00:03:18,600 --> 00:03:22,480
Speaker 6: in the unemployment rate a parent softening in the labor market,

63
00:03:22,680 --> 00:03:24,160
Speaker 6: and it's the sort of thing that we want to

64
00:03:24,200 --> 00:03:27,360
Speaker 6: be on guard for as we enter the summer and

65
00:03:27,440 --> 00:03:31,360
Speaker 6: as we start seeing again this July labor market, and

66
00:03:32,000 --> 00:03:34,840
Speaker 6: particularly the potential for softening that could catch folks off guard.

67
00:03:35,120 --> 00:03:35,320
Speaker 7: Well.

68
00:03:35,440 --> 00:03:40,800
Speaker 2: To the point about the pull forward potentially of seasonality.

69
00:03:40,840 --> 00:03:43,680
Speaker 2: We've been talking for so long about this low, higher,

70
00:03:43,800 --> 00:03:46,320
Speaker 2: low fire environment, I think we can say that we're

71
00:03:46,360 --> 00:03:48,720
Speaker 2: seeing that show up in some of the high frequency

72
00:03:48,800 --> 00:03:53,240
Speaker 2: data as well. What's been keeping this labor market at

73
00:03:53,240 --> 00:03:56,520
Speaker 2: this kind of low beyond just some of those factors

74
00:03:56,560 --> 00:03:57,840
Speaker 2: that you talked about.

75
00:03:57,600 --> 00:03:59,560
Speaker 6: I think there are a couple factors. The first, and

76
00:03:59,600 --> 00:04:03,760
Speaker 6: I think the most important, is a skill mismatch. We

77
00:04:03,960 --> 00:04:09,160
Speaker 6: have just a dearth of qualified healthcare workers, for example,

78
00:04:09,160 --> 00:04:12,200
Speaker 6: So once you can get a nurse on your payrolls,

79
00:04:12,240 --> 00:04:14,200
Speaker 6: you just keep them on your payrolls as long as

80
00:04:14,240 --> 00:04:19,960
Speaker 6: you can. We do see selective firing in certain industries

81
00:04:20,080 --> 00:04:23,039
Speaker 6: like information, where there had been an abundance of hiring,

82
00:04:23,160 --> 00:04:27,120
Speaker 6: particularly after the pandemic, and so there's just a reconsideration

83
00:04:27,240 --> 00:04:31,479
Speaker 6: of what specific skills firms need. But when they find

84
00:04:31,560 --> 00:04:35,280
Speaker 6: someone with those specific skills, they're really keeping them on

85
00:04:35,320 --> 00:04:37,960
Speaker 6: the payrolls. It's really that low fire element that you're

86
00:04:38,000 --> 00:04:41,720
Speaker 6: talking about. The Other factor though, is a reconsideration of

87
00:04:42,320 --> 00:04:46,360
Speaker 6: just how much labor any given firm needs as AI

88
00:04:46,520 --> 00:04:51,720
Speaker 6: gets implemented throughout the labor market throughout the economy as

89
00:04:51,760 --> 00:04:54,960
Speaker 6: a whole. So you have these different structural factors in

90
00:04:54,960 --> 00:04:59,080
Speaker 6: play again, that skill mismatch and the implementation of AI,

91
00:04:59,520 --> 00:05:02,560
Speaker 6: which is contributing to both that low fire and low

92
00:05:02,640 --> 00:05:03,400
Speaker 6: higher dynamic.

93
00:05:03,720 --> 00:05:07,400
Speaker 2: Now, we did see the market reaction after the Federal

94
00:05:07,440 --> 00:05:11,360
Speaker 2: Reserve this past week decided to keep interest rates on hold. Again,

95
00:05:11,760 --> 00:05:16,000
Speaker 2: if we do continue to see movement in the treasury

96
00:05:16,080 --> 00:05:19,719
Speaker 2: market yields to the upside, does that have an impact

97
00:05:19,880 --> 00:05:22,359
Speaker 2: on the labor market on a longer term basis?

98
00:05:22,839 --> 00:05:25,200
Speaker 6: On a longer term basis, certainly, I think that it

99
00:05:25,240 --> 00:05:27,839
Speaker 6: will have more of an effect on the Fed's decision

100
00:05:27,880 --> 00:05:30,120
Speaker 6: making process. In the near term. I think that we

101
00:05:30,279 --> 00:05:33,520
Speaker 6: heard from Chairman Warsh that he is taking a very

102
00:05:33,560 --> 00:05:37,360
Speaker 6: serious signal from the bond market right now, and when

103
00:05:37,480 --> 00:05:40,039
Speaker 6: hikes start to get priced in, I think that he's

104
00:05:40,839 --> 00:05:44,119
Speaker 6: going to effectively follow the bond market. The policy path

105
00:05:44,240 --> 00:05:46,760
Speaker 6: is going to follow the interest rate path that's being

106
00:05:46,800 --> 00:05:49,840
Speaker 6: set in markets right now. When it comes to the

107
00:05:49,920 --> 00:05:52,320
Speaker 6: labor market over the long term, and the sensitivity of

108
00:05:52,360 --> 00:05:56,400
Speaker 6: the labor market to firm's expansion and hiring plans. What's

109
00:05:56,400 --> 00:05:58,320
Speaker 6: a little bit peculiar right now is that it seems

110
00:05:58,360 --> 00:06:01,760
Speaker 6: like a lot of AI and VAS is rather interest

111
00:06:01,839 --> 00:06:06,680
Speaker 6: rate insensitive. But that same AI investment in capex, that

112
00:06:06,800 --> 00:06:11,320
Speaker 6: same set of expansion plans are also not going to

113
00:06:11,360 --> 00:06:14,599
Speaker 6: be as big of a driver of labor as say,

114
00:06:15,200 --> 00:06:19,560
Speaker 6: manufacturing expansion plans were in the fifties sixty seventies. So

115
00:06:20,120 --> 00:06:23,400
Speaker 6: the sensitivity of the labor market to interest rate policy

116
00:06:23,480 --> 00:06:26,840
Speaker 6: and firms expansion plans is a little bit loosened right now.

117
00:06:27,080 --> 00:06:29,400
Speaker 2: Appreciate this, Stewart lots to think about as we get

118
00:06:29,400 --> 00:06:31,640
Speaker 2: set for that non farm payrolls report for the month

119
00:06:31,680 --> 00:06:34,640
Speaker 2: of July. Again do out this Friday, eight thirty am

120
00:06:34,760 --> 00:06:37,840
Speaker 2: Wall Street Time our thanks to Stuart paul Us, economist

121
00:06:38,040 --> 00:06:40,599
Speaker 2: at Bloomberg Economics. Let's take a look now at some

122
00:06:40,640 --> 00:06:43,200
Speaker 2: stocks making news in the week ahead. I'm Nathan Hager,

123
00:06:43,320 --> 00:06:47,479
Speaker 2: joined by Bloomberg Markets Live Managing editor Christine Aquino, getting

124
00:06:47,520 --> 00:06:51,000
Speaker 2: us ready for a really busy Tuesday when it comes

125
00:06:51,080 --> 00:06:51,719
Speaker 2: to earnings.

126
00:06:51,839 --> 00:06:53,520
Speaker 8: Christine, absolutely so.

127
00:06:53,800 --> 00:06:56,360
Speaker 9: We're going to start off at least this conversation with

128
00:06:56,720 --> 00:07:01,800
Speaker 9: McDonald's it seems like despite the less it's been okay

129
00:07:02,040 --> 00:07:04,080
Speaker 9: for fast food, has it or am I wrong?

130
00:07:04,240 --> 00:07:05,320
Speaker 5: Well, I mean.

131
00:07:05,200 --> 00:07:07,200
Speaker 10: It depends on what you're looking at. Because we do

132
00:07:07,320 --> 00:07:11,560
Speaker 10: have data on the Bloomberg terminal just tracking consumer transactions

133
00:07:11,560 --> 00:07:14,440
Speaker 10: and foot traffic, and that did show a bit of

134
00:07:14,440 --> 00:07:17,080
Speaker 10: a pullback from consumers for a lot of these fast

135
00:07:17,080 --> 00:07:20,480
Speaker 10: food restaurants, including McDonald's, And in fact, that data was

136
00:07:20,480 --> 00:07:24,600
Speaker 10: showing that McDonald saw the first signs of a consumer

137
00:07:24,640 --> 00:07:29,400
Speaker 10: pullback during the peak of the cyclospora outbreak and when

138
00:07:29,600 --> 00:07:33,920
Speaker 10: the customers were really you know, the awareness and the

139
00:07:33,960 --> 00:07:35,960
Speaker 10: fear over that outbreak.

140
00:07:35,560 --> 00:07:36,440
Speaker 8: Was at its peak.

141
00:07:36,520 --> 00:07:39,560
Speaker 10: But the good news is that McDonald's is also the

142
00:07:39,640 --> 00:07:43,200
Speaker 10: first of the fast food restaurants to start showing tentative

143
00:07:43,200 --> 00:07:46,360
Speaker 10: signs of stabilization. So that's definitely going to be a

144
00:07:46,400 --> 00:07:49,200
Speaker 10: focal point in the earnings. I think whether that's something

145
00:07:49,280 --> 00:07:53,040
Speaker 10: that would hurt maybe not as soon as this quarter,

146
00:07:53,040 --> 00:07:55,120
Speaker 10: which is going to be the second quarter earnings that

147
00:07:55,120 --> 00:07:58,040
Speaker 10: they're going to be reporting, but perhaps something that gives

148
00:07:58,080 --> 00:08:00,600
Speaker 10: them a little bit of a negative out look heading

149
00:08:00,600 --> 00:08:02,440
Speaker 10: into the next Quarterback.

150
00:08:02,080 --> 00:08:05,120
Speaker 2: Well to that point to an extent, I mean, even

151
00:08:05,280 --> 00:08:08,880
Speaker 2: before this reporting, I think the CEO of McDonald's had

152
00:08:08,920 --> 00:08:12,720
Speaker 2: said they were expecting meaningful deceleration in the quarter that's

153
00:08:12,760 --> 00:08:14,000
Speaker 2: about to be reported.

154
00:08:14,080 --> 00:08:15,560
Speaker 5: Where does that leave the bar.

155
00:08:15,440 --> 00:08:18,520
Speaker 2: For McDonald's when it comes to maybe showing some outperformance.

156
00:08:18,880 --> 00:08:21,880
Speaker 10: Yeah, I mean it certainly helps that perhaps that lowered

157
00:08:21,920 --> 00:08:25,400
Speaker 10: expectations heading into the earning season. But yeah, I think

158
00:08:25,520 --> 00:08:28,120
Speaker 10: we're going to hear a lot about the challenges that

159
00:08:28,200 --> 00:08:32,199
Speaker 10: the US consumer and consumers in general are facing at

160
00:08:32,240 --> 00:08:34,720
Speaker 10: the moment. I mean, don't forget that they are still

161
00:08:34,720 --> 00:08:38,400
Speaker 10: grappling with higher prices when it comes to goods and

162
00:08:38,440 --> 00:08:41,840
Speaker 10: services as a result of the oil price bikes that

163
00:08:41,840 --> 00:08:44,400
Speaker 10: we saw in first half of this year, and that

164
00:08:44,480 --> 00:08:47,400
Speaker 10: hasn't necessarily gone away. It's receded a little bit, but

165
00:08:48,080 --> 00:08:52,120
Speaker 10: definitely by no means disappearing from the radar, and so

166
00:08:52,440 --> 00:08:55,480
Speaker 10: something that really has affected just overall the appetite for

167
00:08:55,600 --> 00:09:00,160
Speaker 10: spending among consumers and something that is very clearly for

168
00:09:00,240 --> 00:09:04,000
Speaker 10: sitting in discretionary spanning, which you know, demand for McDonald's

169
00:09:04,040 --> 00:09:04,720
Speaker 10: is one of them.

170
00:09:04,960 --> 00:09:07,319
Speaker 2: And not to be outdone, we're going to hear as

171
00:09:07,360 --> 00:09:11,920
Speaker 2: well from Caterpillar. Totally different category, but maybe a similar

172
00:09:11,960 --> 00:09:14,600
Speaker 2: issue when it comes to the overhang from what's happening

173
00:09:14,600 --> 00:09:15,240
Speaker 2: in the Middle East.

174
00:09:15,280 --> 00:09:17,280
Speaker 5: Potentially, Yeah, potentially, Nathan.

175
00:09:17,320 --> 00:09:19,920
Speaker 10: I mean, it's certainly something that they're grappling with as

176
00:09:19,920 --> 00:09:24,040
Speaker 10: a company, would be higher costs for materials, building construction,

177
00:09:24,160 --> 00:09:27,200
Speaker 10: things like that. Right, very big space for Caterpillar. But actually,

178
00:09:27,360 --> 00:09:31,760
Speaker 10: very interestingly, one thing that investors are probably putting more

179
00:09:31,800 --> 00:09:35,200
Speaker 10: focus on is their role in the AI driven demand,

180
00:09:35,280 --> 00:09:39,160
Speaker 10: particularly the data center build out, because we did recently

181
00:09:39,840 --> 00:09:43,840
Speaker 10: see the Caterpillar shares seeing the worst performance on a

182
00:09:43,920 --> 00:09:46,600
Speaker 10: day to day basis since April twenty twenty five, and

183
00:09:46,640 --> 00:09:48,240
Speaker 10: that's because you know, there was a little bit of

184
00:09:48,280 --> 00:09:51,920
Speaker 10: a pullback in the AI sector when it comes to

185
00:09:52,080 --> 00:09:56,920
Speaker 10: chip makers, but just generally anxiety over demand for data

186
00:09:56,960 --> 00:10:00,280
Speaker 10: center how sustainable that is. And also we got a

187
00:10:00,320 --> 00:10:04,760
Speaker 10: downgrade from Baird for Caterpillar stock. They cut their rating

188
00:10:04,800 --> 00:10:07,080
Speaker 10: on a stock to neutral from outperform, and a prior

189
00:10:07,080 --> 00:10:09,959
Speaker 10: starter was also lowered by twenty five percent. And analysts

190
00:10:10,000 --> 00:10:13,679
Speaker 10: we're citing specifically the state of data centers and how

191
00:10:13,720 --> 00:10:16,920
Speaker 10: that's starting to see some regulatory pushback and so if

192
00:10:16,960 --> 00:10:19,360
Speaker 10: we do see more and more local governments kind of

193
00:10:19,360 --> 00:10:21,920
Speaker 10: pushing back against the expansion of data centers. That's something

194
00:10:21,960 --> 00:10:23,760
Speaker 10: that will hurt Caterpillars order.

195
00:10:24,040 --> 00:10:27,280
Speaker 2: Yeah, obviously there's a lot of attention there on Caterpillars

196
00:10:27,360 --> 00:10:29,480
Speaker 2: role in the AI data center build up. But I mean,

197
00:10:29,520 --> 00:10:32,200
Speaker 2: I think about when it comes to Caterpillar, you know,

198
00:10:32,280 --> 00:10:36,199
Speaker 2: the farm equipment, the construction equipment for houses, are those

199
00:10:36,880 --> 00:10:40,560
Speaker 2: aspects of the business something that could potentially outweigh any

200
00:10:40,600 --> 00:10:42,240
Speaker 2: of the downgrades that you mentioned from Baird.

201
00:10:42,440 --> 00:10:46,800
Speaker 10: I look, I think that's something that could help offset

202
00:10:46,800 --> 00:10:50,280
Speaker 10: if we do see some surprises on that front. But

203
00:10:50,679 --> 00:10:53,439
Speaker 10: you know, more and more, a lot of companies, including Caterpillar,

204
00:10:53,520 --> 00:10:58,040
Speaker 10: have really kind of leaned into this AI driven demand

205
00:10:58,040 --> 00:11:00,880
Speaker 10: and all aspects related to that, right, And so it

206
00:11:01,200 --> 00:11:04,560
Speaker 10: seems these days for any companies reporting that are in

207
00:11:04,640 --> 00:11:08,760
Speaker 10: any way related or connected to that story, if there's

208
00:11:08,840 --> 00:11:12,079
Speaker 10: any kind of hint of negativity on that front, that

209
00:11:12,120 --> 00:11:15,960
Speaker 10: tends to outweigh any positive sentiment that comes from other

210
00:11:16,040 --> 00:11:19,000
Speaker 10: aspects of the earnings. And one thing to do look

211
00:11:19,040 --> 00:11:22,200
Speaker 10: out for is probably its power and Energy unit that

212
00:11:22,320 --> 00:11:25,600
Speaker 10: is still expected to post twenty three percent organic sales growth,

213
00:11:26,400 --> 00:11:29,160
Speaker 10: and that's something that could be a silver lining if

214
00:11:29,200 --> 00:11:31,120
Speaker 10: we do get a little bit more of a subdued

215
00:11:31,120 --> 00:11:33,640
Speaker 10: outlook when it comes to data center related demand.

216
00:11:33,679 --> 00:11:35,720
Speaker 2: Well, another one of those companies that I think you

217
00:11:35,720 --> 00:11:38,720
Speaker 2: could say is really directly related to the AI trade

218
00:11:38,800 --> 00:11:41,880
Speaker 2: is also reporting on Tuesday. What are we expecting from

219
00:11:42,360 --> 00:11:43,720
Speaker 2: advanced micro devices?

220
00:11:43,800 --> 00:11:46,040
Speaker 5: The chip maker? That's right maker.

221
00:11:46,080 --> 00:11:48,160
Speaker 10: I mean, yeah, that is very much front and center

222
00:11:48,240 --> 00:11:52,320
Speaker 10: when it comes to the AI trade narrative here. Look,

223
00:11:52,320 --> 00:11:54,360
Speaker 10: I think the expectation is still very much for a

224
00:11:54,400 --> 00:11:58,880
Speaker 10: solid parter. There's been robust demand for its server CPUs

225
00:11:59,040 --> 00:12:02,320
Speaker 10: and that give the company a lot of pricing power

226
00:12:02,400 --> 00:12:06,280
Speaker 10: really because we have seen prices for related equipment in

227
00:12:06,360 --> 00:12:09,440
Speaker 10: that space a ramping higher just because there's so much

228
00:12:09,480 --> 00:12:11,840
Speaker 10: demand in the space, and so you know, is that

229
00:12:11,920 --> 00:12:14,360
Speaker 10: going to be sustainable? That something that investors are going

230
00:12:14,400 --> 00:12:17,400
Speaker 10: to be looking forward to. We did also see a

231
00:12:17,559 --> 00:12:20,400
Speaker 10: md unveil new products, right They have a new generation

232
00:12:20,480 --> 00:12:24,200
Speaker 10: of microprocessors, a new server rack, and so that's something

233
00:12:24,200 --> 00:12:26,439
Speaker 10: that investors will be watching for. They're going to one

234
00:12:26,520 --> 00:12:30,280
Speaker 10: see some evidence that the company is going to be

235
00:12:30,280 --> 00:12:32,360
Speaker 10: on track for a successful ramp up in the second

236
00:12:32,400 --> 00:12:32,960
Speaker 10: half of the year.

237
00:12:33,240 --> 00:12:35,480
Speaker 2: Such a busy Tuesday coming up.

238
00:12:36,040 --> 00:12:37,280
Speaker 5: Thank you for this, Christine.

239
00:12:37,280 --> 00:12:41,240
Speaker 2: That's Bloomberg Markets Lives Managing editor Christine the Quina, and

240
00:12:41,320 --> 00:12:44,120
Speaker 2: coming up on Bloomberg Daybreak weekend, we look ahead to

241
00:12:44,160 --> 00:12:46,480
Speaker 2: some of the most consequential earnings releases of the.

242
00:12:46,480 --> 00:12:50,400
Speaker 5: Year in Europe. On Nathan Hager and this is Bloomberg.

243
00:13:01,160 --> 00:13:03,760
Speaker 2: This is Bloomberg day Break weekend, our global look ahead

244
00:13:03,760 --> 00:13:05,920
Speaker 2: at the top stories for investors in the coming week.

245
00:13:05,920 --> 00:13:08,679
Speaker 2: I'm Nathan Hager in New York. Later in the program

246
00:13:08,720 --> 00:13:11,479
Speaker 2: we'll look ahead to some key economic data in Vietnam.

247
00:13:11,720 --> 00:13:13,800
Speaker 2: But first, in the coming days, we hear from some

248
00:13:13,840 --> 00:13:17,640
Speaker 2: of the world's biggest companies as earning season continues. But

249
00:13:17,760 --> 00:13:21,320
Speaker 2: how have European firms adapted to an uncertain market context?

250
00:13:21,440 --> 00:13:23,640
Speaker 2: For more, let's go to London and bring in Bloomberg

251
00:13:23,720 --> 00:13:26,360
Speaker 2: Daybreak europe anker Caroline Hepger Nathan.

252
00:13:26,480 --> 00:13:29,560
Speaker 3: Investors are finding out whether second quarter earnings can live

253
00:13:29,640 --> 00:13:33,319
Speaker 3: up to their sky high expectations European companies who are

254
00:13:33,320 --> 00:13:36,480
Speaker 3: expected to deliver robust earnings growth not just for this

255
00:13:36,600 --> 00:13:40,080
Speaker 3: quarter but for twenty twenty six overall, and yet Europe

256
00:13:40,120 --> 00:13:44,440
Speaker 3: faces high energy costs, sticky inflation, the possibility of one

257
00:13:44,559 --> 00:13:48,000
Speaker 3: or maybe even two rate hikes from the ECB by

258
00:13:48,000 --> 00:13:51,240
Speaker 3: the end of the year, with European stocks also remaining

259
00:13:51,280 --> 00:13:55,080
Speaker 3: near all time record highs, one that was set only

260
00:13:55,080 --> 00:13:57,439
Speaker 3: on the sixth of July at six hundred and fifty

261
00:13:57,440 --> 00:14:01,960
Speaker 3: four points. The setup leaves little room for error, and

262
00:14:02,080 --> 00:14:04,600
Speaker 3: after months of conflict in the Middle East, companies have

263
00:14:04,679 --> 00:14:07,720
Speaker 3: had to contend with a very complicated back job.

264
00:14:08,080 --> 00:14:08,560
Speaker 8: Natalie A.

265
00:14:08,559 --> 00:14:13,080
Speaker 3: Lippikina, who is head of EMEA Equity Strategy JP Morgan

266
00:14:13,120 --> 00:14:16,280
Speaker 3: Private Bank, says that investors will be looking out for

267
00:14:16,440 --> 00:14:18,920
Speaker 3: signs of those effects.

268
00:14:19,160 --> 00:14:21,960
Speaker 7: This is something the market is definitely watching. I think

269
00:14:22,040 --> 00:14:25,040
Speaker 7: the reason why we didn't have such a strong negative

270
00:14:25,080 --> 00:14:28,200
Speaker 7: market reaction so far is because the market probably thinks

271
00:14:28,200 --> 00:14:31,200
Speaker 7: that oil prices will ultimately come down because we saw

272
00:14:31,440 --> 00:14:33,720
Speaker 7: this already earlier this year. And second one, if you

273
00:14:33,760 --> 00:14:36,640
Speaker 7: look into the latest inflation prints, they were actually okay

274
00:14:36,720 --> 00:14:39,560
Speaker 7: so far, so clearly something that the market is watching.

275
00:14:39,880 --> 00:14:42,400
Speaker 7: I think it will be important to see if, for example,

276
00:14:42,440 --> 00:14:44,920
Speaker 7: oil breaks through one hundred and ten hundred and twenty.

277
00:14:45,280 --> 00:14:47,720
Speaker 7: If that happens, yes, then the market will react because

278
00:14:47,760 --> 00:14:51,320
Speaker 7: that will impact potentially the margin, especially for European companies

279
00:14:51,320 --> 00:14:54,480
Speaker 7: because they are just more cyclical and exposed to oil prices.

280
00:14:54,560 --> 00:14:57,600
Speaker 3: But we don't think that we're there yet, so the

281
00:14:57,640 --> 00:15:01,760
Speaker 3: concerns around energy prices in U. That was Natalie Lepekina

282
00:15:01,800 --> 00:15:05,640
Speaker 3: from JP Morgan speaking to Bloomberg Radio. Gentlemen. Now for

283
00:15:05,640 --> 00:15:08,760
Speaker 3: more as Bloomberg senior strashus for Equity Market, it's Michael

284
00:15:08,800 --> 00:15:12,320
Speaker 3: Masika and our Markets Today editor Sam Onsted. Welcome to

285
00:15:12,400 --> 00:15:15,720
Speaker 3: both of you. It's been a very busy time in

286
00:15:15,760 --> 00:15:18,240
Speaker 3: the last few days, and it will continue that way,

287
00:15:18,280 --> 00:15:22,640
Speaker 3: won't it. Michael, we're underway with the earnings season in Europe.

288
00:15:22,640 --> 00:15:26,600
Speaker 3: How have investors reacted to European earnings so far?

289
00:15:27,680 --> 00:15:30,680
Speaker 11: So it's a it's a very stronger earning season and

290
00:15:31,560 --> 00:15:35,360
Speaker 11: the reaction has been I would say positive for the

291
00:15:35,360 --> 00:15:39,480
Speaker 11: overall market. It's you know, European stocks have been holding

292
00:15:39,560 --> 00:15:44,040
Speaker 11: up pretty well despite the recognition of like tensions in

293
00:15:44,080 --> 00:15:47,880
Speaker 11: the in the Middle East, despite bond yields going up,

294
00:15:49,000 --> 00:15:52,240
Speaker 11: so overall there was this support from earnings. Because the

295
00:15:52,320 --> 00:15:55,880
Speaker 11: earning season is really strong in terms of reaction to stocks,

296
00:15:56,280 --> 00:16:01,400
Speaker 11: we've seen that beats were kind of expected, so the

297
00:16:01,480 --> 00:16:07,280
Speaker 11: reactions is relatively not muted, but like not very strong.

298
00:16:07,480 --> 00:16:12,080
Speaker 11: When missus have been penalized a lot harder.

299
00:16:12,000 --> 00:16:14,280
Speaker 3: Yeah, more heavily in Lasia. So then one of the

300
00:16:14,280 --> 00:16:16,680
Speaker 3: big names to watch out for in the coming days.

301
00:16:16,920 --> 00:16:22,800
Speaker 11: And why so the season is well engaged, I would say,

302
00:16:22,880 --> 00:16:25,200
Speaker 11: so we had quite a lot of earnings.

303
00:16:26,040 --> 00:16:29,000
Speaker 8: There's still some very important one next week. I think.

304
00:16:29,080 --> 00:16:31,800
Speaker 11: For example, in the defense sector you have Ryan Mettal

305
00:16:31,840 --> 00:16:35,680
Speaker 11: and Rank, which are very important for this sector and

306
00:16:35,760 --> 00:16:39,880
Speaker 11: also for Defferense stocks having done very well lately, so

307
00:16:40,200 --> 00:16:43,960
Speaker 11: that would be something to watch. Cemens Cemen's Energy very

308
00:16:44,120 --> 00:16:49,400
Speaker 11: very big on everything that's powering the AI data center

309
00:16:49,800 --> 00:16:55,520
Speaker 11: in Europe, so those were big winners. From AI banks

310
00:16:55,560 --> 00:16:57,640
Speaker 11: as well, especially the ones involved in MNA. We have

311
00:16:57,760 --> 00:17:00,920
Speaker 11: quite a few of those like bpm BNP Yes Comments Bank,

312
00:17:01,880 --> 00:17:07,600
Speaker 11: so that's moatful. And in the semiconductor space we have

313
00:17:07,800 --> 00:17:11,920
Speaker 11: Infinion big one as well, and finally a defensive stock

314
00:17:12,040 --> 00:17:14,600
Speaker 11: which haven't done well at all because everyone's been piling

315
00:17:14,680 --> 00:17:16,359
Speaker 11: up on sickly calls lately.

316
00:17:17,240 --> 00:17:19,840
Speaker 8: We have novel nor disc Bayer.

317
00:17:19,640 --> 00:17:23,760
Speaker 11: In the farmer and Heineken India Gio in staples, so

318
00:17:23,800 --> 00:17:25,479
Speaker 11: all those are to be watched closely.

319
00:17:25,760 --> 00:17:29,720
Speaker 3: Okay, interesting, Sam, what are the most important FOOTSYA releases

320
00:17:29,880 --> 00:17:30,959
Speaker 3: in the next few days?

321
00:17:31,560 --> 00:17:33,720
Speaker 12: Well, I think, as Michael was saying, we're quite deep

322
00:17:33,720 --> 00:17:36,360
Speaker 12: into the earning season now, so a lot of these

323
00:17:36,359 --> 00:17:39,200
Speaker 12: companies now are coming up not just against their own expectations,

324
00:17:39,200 --> 00:17:42,760
Speaker 12: but the expectations have been moved around by by their

325
00:17:42,760 --> 00:17:45,960
Speaker 12: peers reporting. So BP is coming next week, you would

326
00:17:45,960 --> 00:17:47,639
Speaker 12: expect to see broadly the same kind of thing you

327
00:17:47,680 --> 00:17:49,680
Speaker 12: saw with Shell. You know, higher all prices, better of

328
00:17:49,760 --> 00:17:53,639
Speaker 12: finding margins. Whether BP does a buyback probably a lot

329
00:17:53,720 --> 00:17:55,720
Speaker 12: less likely than than for Shell, but that will be

330
00:17:55,760 --> 00:17:56,600
Speaker 12: watched very closely.

331
00:17:57,480 --> 00:17:57,639
Speaker 7: You know.

332
00:17:57,680 --> 00:18:01,120
Speaker 12: For the UK itself, Next is coming out next week,

333
00:18:01,440 --> 00:18:03,359
Speaker 12: often kind of held up as a bell weather for

334
00:18:03,440 --> 00:18:06,120
Speaker 12: the UK high street, although I think that's probably diminished

335
00:18:06,160 --> 00:18:08,360
Speaker 12: a little bit over the years, just because they very

336
00:18:08,359 --> 00:18:11,520
Speaker 12: continually use quite conservative guidance and then beat it almost

337
00:18:11,560 --> 00:18:13,240
Speaker 12: every time. So it's quite hard to kind of take

338
00:18:13,240 --> 00:18:16,320
Speaker 12: that and extrapolate it out to other high street names.

339
00:18:16,920 --> 00:18:19,520
Speaker 12: I'd keep an eye as well. They're on home builders.

340
00:18:19,560 --> 00:18:22,280
Speaker 12: We're going to get Persimmon next week, just coming after

341
00:18:22,440 --> 00:18:24,440
Speaker 12: the Bank of England meeting over the course of the

342
00:18:24,480 --> 00:18:27,440
Speaker 12: past week, and then Diagio I would keep an eye

343
00:18:27,480 --> 00:18:28,720
Speaker 12: on as well. You know, we've already had a couple

344
00:18:28,720 --> 00:18:32,040
Speaker 12: of drinks companies coming out and the reaction to a

345
00:18:32,080 --> 00:18:34,160
Speaker 12: lot of the consumers talks has been a little bit mixed.

346
00:18:34,200 --> 00:18:35,600
Speaker 12: So it be interesting to see how they do.

347
00:18:36,600 --> 00:18:39,840
Speaker 3: In terms of the major names that we've already heard from.

348
00:18:40,200 --> 00:18:42,480
Speaker 3: What do you take away from that when it comes

349
00:18:42,520 --> 00:18:43,360
Speaker 3: to the foot Sea.

350
00:18:43,600 --> 00:18:45,800
Speaker 12: Well, as Michael was again saying that, so a lot

351
00:18:45,800 --> 00:18:48,119
Speaker 12: of the pattern on the foot Sea has been very

352
00:18:48,119 --> 00:18:51,240
Speaker 12: similar to the rest of Europe, where companies that are

353
00:18:51,359 --> 00:18:53,600
Speaker 12: beating expectations for the most part are getting a fairly

354
00:18:53,720 --> 00:18:56,720
Speaker 12: muted response because it's kind of expected. So if you

355
00:18:56,760 --> 00:18:59,960
Speaker 12: look at Rolls Royce for example, they upgrade their guide

356
00:19:00,200 --> 00:19:03,159
Speaker 12: again because effectively every bit of Rolls Royce is just

357
00:19:03,240 --> 00:19:06,000
Speaker 12: experienced of fantastic trends at the moment. You know, the

358
00:19:06,040 --> 00:19:08,520
Speaker 12: airlight the aerospace industry is doing well for them, They're

359
00:19:08,520 --> 00:19:10,919
Speaker 12: getting defense orders in, they're getting data center orders in,

360
00:19:11,280 --> 00:19:13,280
Speaker 12: but their shares you know, only rows sort of two

361
00:19:13,320 --> 00:19:15,199
Speaker 12: or three percent. You know, you didn't get that kind

362
00:19:15,240 --> 00:19:18,320
Speaker 12: of reaction that you would maybe expect. However, way, you

363
00:19:18,400 --> 00:19:21,320
Speaker 12: are seeing a few surprises, particularly on the upside. The

364
00:19:21,320 --> 00:19:23,600
Speaker 12: one that surprised me the most this week was Unilever.

365
00:19:24,560 --> 00:19:27,359
Speaker 12: You know, they are you know, they're coming into it with,

366
00:19:27,440 --> 00:19:30,640
Speaker 12: you know, relatively lower expectations, thanks mostly to Nesle having

367
00:19:30,760 --> 00:19:32,639
Speaker 12: taken a bit of a hit the previous week. But

368
00:19:32,720 --> 00:19:36,080
Speaker 12: they blew past those expectations quite easily, and a lot

369
00:19:36,119 --> 00:19:38,840
Speaker 12: of the companies making these branded products are actually doing

370
00:19:39,000 --> 00:19:42,520
Speaker 12: relatively well, which for consumer demand is not a bad sign,

371
00:19:43,080 --> 00:19:45,840
Speaker 12: and their shares got a really big bounce. So I

372
00:19:45,840 --> 00:19:48,600
Speaker 12: think it is a very similar pattern. You know, anything

373
00:19:48,840 --> 00:19:51,440
Speaker 12: any kind of areas of weakness. You take Barkleays for example,

374
00:19:51,480 --> 00:19:53,960
Speaker 12: their results are actually generally pretty good, but there are

375
00:19:54,000 --> 00:19:56,360
Speaker 12: a couple of areas that weren't quite as good as expected,

376
00:19:56,680 --> 00:19:57,959
Speaker 12: and their shares got punished for it.

377
00:19:58,640 --> 00:20:02,760
Speaker 3: Michael, we see so much interest in terms of the

378
00:20:02,840 --> 00:20:06,200
Speaker 3: kapex spending, in terms of the AI and data center

379
00:20:06,359 --> 00:20:09,800
Speaker 3: build out, and one massive question is about whether Europe

380
00:20:09,800 --> 00:20:11,600
Speaker 3: can keep up. What do you think we've learned from

381
00:20:11,680 --> 00:20:13,080
Speaker 3: this earning season about that.

382
00:20:14,920 --> 00:20:18,520
Speaker 11: So Europe doesn't have a lot of tech stock. We

383
00:20:18,640 --> 00:20:22,159
Speaker 11: have a few, they're small, nothing compares with the with

384
00:20:22,280 --> 00:20:27,320
Speaker 11: the US. But Europe has a lot of adopters and

385
00:20:27,359 --> 00:20:31,440
Speaker 11: they have a lot of enablers as well. Abb for example,

386
00:20:31,560 --> 00:20:37,000
Speaker 11: in Switzerland, Schneider in France, a Prismonian in Italy. Those companies,

387
00:20:37,800 --> 00:20:40,920
Speaker 11: they are part of the AI ecosystem because they help

388
00:20:40,960 --> 00:20:46,360
Speaker 11: building data centers powering it and they are actually very important.

389
00:20:46,440 --> 00:20:50,360
Speaker 11: They have a know how which is almost unique. Prisonian

390
00:20:50,440 --> 00:20:52,680
Speaker 11: has a lot of contracts in the US, Schneider as well,

391
00:20:52,720 --> 00:20:57,600
Speaker 11: ABB as well, So it's the benefiting from this. So

392
00:20:57,640 --> 00:21:00,919
Speaker 11: we have a whole ecosystem of companies in Europe that

393
00:21:01,000 --> 00:21:06,200
Speaker 11: are really benefiting from the hyper scaler. Spending kept expending

394
00:21:06,640 --> 00:21:10,959
Speaker 11: and we've seen into the earnings and those stocks. They

395
00:21:11,000 --> 00:21:12,679
Speaker 11: haven't done well in the past few days because there

396
00:21:12,720 --> 00:21:16,560
Speaker 11: was a lot of unwind in the AI trade. But

397
00:21:16,600 --> 00:21:20,479
Speaker 11: we're seeing a rebound today and that's also typical because

398
00:21:20,840 --> 00:21:21,480
Speaker 11: of results.

399
00:21:21,480 --> 00:21:23,800
Speaker 8: Our bridgers are coming in and guidance is coming in

400
00:21:23,920 --> 00:21:25,320
Speaker 8: and it's very positive.

401
00:21:25,480 --> 00:21:28,720
Speaker 3: In terms of the expectations for European companies though, I mean,

402
00:21:29,000 --> 00:21:33,200
Speaker 3: we are expecting to see very strong profit growth this year.

403
00:21:33,800 --> 00:21:36,879
Speaker 3: How can companies deliver for the year overall as we

404
00:21:36,920 --> 00:21:39,000
Speaker 3: think about the second half of this year and what

405
00:21:39,080 --> 00:21:42,439
Speaker 3: we take from this earning season for that year overall.

406
00:21:43,359 --> 00:21:47,520
Speaker 8: So expectations are high and they're getting higher and higher.

407
00:21:48,720 --> 00:21:49,840
Speaker 8: On the second quarter.

408
00:21:50,400 --> 00:21:52,960
Speaker 11: We have like eleven and a half percent expected earnings

409
00:21:52,960 --> 00:21:55,960
Speaker 11: growth year and year, and this number is going to

410
00:21:56,040 --> 00:21:59,280
Speaker 11: keep growing over the next two quarters. And I think

411
00:21:59,400 --> 00:22:02,440
Speaker 11: the last quarter of the year there's like nearly thirty

412
00:22:02,440 --> 00:22:05,280
Speaker 11: percent year on your growth that is expected from europarent stocks.

413
00:22:06,640 --> 00:22:11,359
Speaker 11: So there's a few things here. First, Typically, expectations are

414
00:22:11,400 --> 00:22:13,320
Speaker 11: meant to come down before the season. It wasn't the

415
00:22:13,359 --> 00:22:16,840
Speaker 11: case this season because I think analysts were too pessimistic

416
00:22:16,920 --> 00:22:19,920
Speaker 11: because of the war and they had downgraded way too much,

417
00:22:20,080 --> 00:22:22,720
Speaker 11: way too quickly. And that has changed. So that's why

418
00:22:22,720 --> 00:22:25,399
Speaker 11: they keep upgrading earnings now. And we see it with

419
00:22:26,520 --> 00:22:30,119
Speaker 11: this earning season. Companies are beating estimates. There's it's a

420
00:22:30,280 --> 00:22:31,200
Speaker 11: broad beat.

421
00:22:32,600 --> 00:22:34,720
Speaker 8: The yearning growth is coming in like more than.

422
00:22:34,600 --> 00:22:38,040
Speaker 11: Twelve percent twelve six percent at the moment, so higher

423
00:22:38,080 --> 00:22:38,920
Speaker 11: than expectations.

424
00:22:39,600 --> 00:22:40,399
Speaker 8: Bits are coming in.

425
00:22:40,440 --> 00:22:43,679
Speaker 11: There's a lot of sectors that are surprising positively, like

426
00:22:44,600 --> 00:22:48,600
Speaker 11: some were saying, we're talking about Unilevers. You look at Staples,

427
00:22:49,119 --> 00:22:52,280
Speaker 11: Consumer Staples, they were expecting to have negative EPs growth

428
00:22:52,359 --> 00:22:56,240
Speaker 11: this quarter. They're coming in with a positive one. So

429
00:22:56,600 --> 00:22:59,719
Speaker 11: and there's a lot of good surprises like that. So

430
00:23:00,320 --> 00:23:04,359
Speaker 11: there's there's some optimism building. You have some stimulus coming

431
00:23:04,359 --> 00:23:08,280
Speaker 11: in from Germany that is really kicking in. Now you

432
00:23:08,359 --> 00:23:12,320
Speaker 11: have inflation that is lower, even if you know there's

433
00:23:12,320 --> 00:23:14,479
Speaker 11: a certainty because of the war and you're on. But

434
00:23:14,560 --> 00:23:21,040
Speaker 11: like generally, earning growth is also a reflection of the

435
00:23:21,640 --> 00:23:23,960
Speaker 11: GDP growth that we're going to have in Europe over

436
00:23:24,000 --> 00:23:26,360
Speaker 11: the next year or so. So even if it's slow

437
00:23:26,440 --> 00:23:27,879
Speaker 11: single digits.

438
00:23:27,760 --> 00:23:29,880
Speaker 8: That's enough to power earnings growth.

439
00:23:30,359 --> 00:23:32,000
Speaker 3: All right, Thank you so much for both of you

440
00:23:32,200 --> 00:23:35,359
Speaker 3: for thinking about this earning season. What is still to

441
00:23:35,400 --> 00:23:38,160
Speaker 3: come in the days ahead. My thanks to Michael Masika,

442
00:23:38,320 --> 00:23:42,200
Speaker 3: who is Bloomberg's senior strategist for Acting Markets and Tour Markets.

443
00:23:42,200 --> 00:23:45,280
Speaker 3: Today editor sam on step thank you both. I'm Caline

444
00:23:45,280 --> 00:23:47,880
Speaker 3: Hebkeer here in London. You can catch us every weekday

445
00:23:47,880 --> 00:23:50,440
Speaker 3: morning for Bloomberg Daybreak. You are beginning at six am

446
00:23:50,480 --> 00:23:52,760
Speaker 3: in London. That's one am on Wall Street.

447
00:23:52,960 --> 00:23:56,760
Speaker 2: Nathan, thanks Caroline, and coming up on Bloomberg Daybreak weekend,

448
00:23:56,840 --> 00:23:59,840
Speaker 2: we look ahead to inflation and trade data in Vietnam.

449
00:24:00,080 --> 00:24:14,000
Speaker 2: I'm Nathan Hager, and this is Bloomberg. This is Bloomberg

450
00:24:14,119 --> 00:24:16,560
Speaker 2: day Break Weekend, our global look ahead of the top

451
00:24:16,600 --> 00:24:18,400
Speaker 2: stories for investors in the coming week.

452
00:24:18,440 --> 00:24:21,600
Speaker 5: I'm Nathan Hagar in New York. This week we get key.

453
00:24:21,480 --> 00:24:26,159
Speaker 2: Economic data in Vietnam, including numbers on consumer prices and trade.

454
00:24:26,280 --> 00:24:28,600
Speaker 2: For more, let's get to Bloomberg's Doug Prisner, host of

455
00:24:28,640 --> 00:24:30,160
Speaker 2: the Daybreak Asia podcast.

456
00:24:30,680 --> 00:24:35,840
Speaker 4: Thanks Nathan. Overall economic activity in Vietnam has been very impressive.

457
00:24:36,119 --> 00:24:38,760
Speaker 4: In the first half of the year, GDP grew at

458
00:24:38,760 --> 00:24:42,400
Speaker 4: an annual rate of eight point one eight percent. Now,

459
00:24:42,440 --> 00:24:45,680
Speaker 4: with that growth, economist at the Asian Development Bank are saying,

460
00:24:45,840 --> 00:24:50,359
Speaker 4: inflationary pressures warrant close monitoring. For a closer look at

461
00:24:50,359 --> 00:24:52,760
Speaker 4: what's happening on the ground in Vietnam, I'm joined by

462
00:24:52,800 --> 00:24:57,480
Speaker 4: Bloomberg's Francesca Stevens. Francesc is our Vietnam bureau chief, and

463
00:24:57,520 --> 00:25:00,199
Speaker 4: she joins from Hanoi. Thank you for being here. Can

464
00:25:00,240 --> 00:25:03,920
Speaker 4: we start with the inflation story CPI and the core rate.

465
00:25:04,040 --> 00:25:06,520
Speaker 4: We're both above four percent in the first half of

466
00:25:06,520 --> 00:25:09,320
Speaker 4: the year, and we know for any central banker the

467
00:25:09,480 --> 00:25:13,240
Speaker 4: challenge is always balancing growth and inflation, right.

468
00:25:13,520 --> 00:25:16,120
Speaker 13: Yeah, that's so. As you say, the economy here is

469
00:25:16,359 --> 00:25:20,680
Speaker 13: ticking along, although the double digit growth target does still

470
00:25:20,720 --> 00:25:24,240
Speaker 13: seem quite ambitious for us this year. But with that

471
00:25:24,320 --> 00:25:28,800
Speaker 13: push for growth that's also putting pressure on prices. As

472
00:25:28,800 --> 00:25:32,920
Speaker 13: you mentioned, officially, inflation is close to the government's comfort

473
00:25:33,000 --> 00:25:36,840
Speaker 13: zone but still manageable. So the government target is around

474
00:25:36,880 --> 00:25:40,200
Speaker 13: four point five percent this year, and in June east

475
00:25:40,400 --> 00:25:44,240
Speaker 13: to just slightly higher than that four point sixty nine percent.

476
00:25:45,160 --> 00:25:49,200
Speaker 13: It had been higher in May, so we're watching out

477
00:25:49,320 --> 00:25:52,240
Speaker 13: very closely to see what that number comes in on

478
00:25:52,560 --> 00:25:56,680
Speaker 13: Monday when the data for July is released. But unofficially

479
00:25:56,720 --> 00:25:59,399
Speaker 13: you will hear a different story. One friend was telling

480
00:25:59,440 --> 00:26:02,360
Speaker 13: me how a year or two ago he would expect

481
00:26:02,359 --> 00:26:05,159
Speaker 13: to pay around ten thousand dong for a bar and

482
00:26:05,280 --> 00:26:11,720
Speaker 13: me the Vietnamese famous sandwich that's around thirty eight cents,

483
00:26:12,000 --> 00:26:14,520
Speaker 13: but now it costs more than twice that, and yet

484
00:26:14,560 --> 00:26:19,560
Speaker 13: his income remains the same. So that's one example of

485
00:26:20,280 --> 00:26:25,119
Speaker 13: how those prices are unofficially rising. Fuel is still a

486
00:26:25,119 --> 00:26:28,159
Speaker 13: little higher than it was before the Iran war, although

487
00:26:28,280 --> 00:26:31,879
Speaker 13: again that's come down from the peak reached during the crisis.

488
00:26:32,840 --> 00:26:36,919
Speaker 13: The Central Bank has said inflation control will remain a

489
00:26:37,000 --> 00:26:41,600
Speaker 13: priority even as it supports the double digit growth target,

490
00:26:42,680 --> 00:26:46,920
Speaker 13: so we'll be watching closely to see how much pressure

491
00:26:47,000 --> 00:26:52,640
Speaker 13: that number puts puts on the Central Bank. What might

492
00:26:52,640 --> 00:26:55,000
Speaker 13: be more telling in the data on Monday is actually

493
00:26:55,040 --> 00:26:59,879
Speaker 13: the trade figures. So Vietnam has seen exports to the

494
00:26:59,920 --> 00:27:03,720
Speaker 13: US continue to surge this year, and that's becoming an

495
00:27:03,720 --> 00:27:09,480
Speaker 13: increasingly bigger issue as it exacerbates tensions with the US.

496
00:27:09,800 --> 00:27:12,200
Speaker 13: And another thing that we'll get as well on Monday

497
00:27:12,600 --> 00:27:14,800
Speaker 13: is the major commodities data.

498
00:27:15,000 --> 00:27:17,119
Speaker 4: I want to get to the commodities angle in a moment.

499
00:27:17,280 --> 00:27:20,399
Speaker 4: It's obviously a big part of the trade story, and

500
00:27:20,480 --> 00:27:23,280
Speaker 4: we know that Vietnam is very reliant on exports. A

501
00:27:23,320 --> 00:27:26,560
Speaker 4: moment ago, you mentioned the tensions with the US when

502
00:27:26,600 --> 00:27:30,000
Speaker 4: it comes to trade, and I know that intellectual property

503
00:27:30,160 --> 00:27:34,000
Speaker 4: has been a particularly sensitive issue where the US is concerned.

504
00:27:34,520 --> 00:27:37,720
Speaker 4: Talk to me about the steps being undertaken by the

505
00:27:37,800 --> 00:27:39,560
Speaker 4: Vietnamese government to address this.

506
00:27:41,440 --> 00:27:44,879
Speaker 13: Yeah, that's right. I mean the big pressure here at

507
00:27:44,920 --> 00:27:49,119
Speaker 13: the moment is the tariff environment and what the US

508
00:27:49,240 --> 00:27:52,720
Speaker 13: is going to do here, and Vietnam has been taking

509
00:27:53,080 --> 00:27:56,920
Speaker 13: a lot of steps to show that it's addressing US

510
00:27:57,000 --> 00:28:02,680
Speaker 13: concerns around trade practices. Vietn arm faces three US Section

511
00:28:02,720 --> 00:28:06,800
Speaker 13: three and one investigations at the moment and no trade

512
00:28:06,800 --> 00:28:11,600
Speaker 13: deal yet. So one of the big concerns is what

513
00:28:11,840 --> 00:28:17,080
Speaker 13: happens with the tariff outcomes from those three different investigations.

514
00:28:17,080 --> 00:28:20,520
Speaker 13: There's the forced labor which Vietnam has just received a

515
00:28:20,520 --> 00:28:25,000
Speaker 13: twelve point five percent tariff for. They're also facing alleged

516
00:28:25,080 --> 00:28:31,120
Speaker 13: manufacturing over capacity and intellectual property violations. We've been reporting

517
00:28:31,160 --> 00:28:34,399
Speaker 13: this week on the fact that US Customs officials have

518
00:28:34,480 --> 00:28:39,120
Speaker 13: been carrying out spot inspections on factories here across a

519
00:28:39,240 --> 00:28:43,040
Speaker 13: range of sectors. That's things like looking at their documents,

520
00:28:43,160 --> 00:28:47,360
Speaker 13: looking at the origin of raw materials, their production lines,

521
00:28:47,440 --> 00:28:50,040
Speaker 13: just to see how much is made in China versus

522
00:28:50,640 --> 00:28:54,320
Speaker 13: how much is made in Vietnam. We put that to

523
00:28:54,480 --> 00:28:57,520
Speaker 13: US Customs and Border Protection but didn't get a response back.

524
00:28:57,600 --> 00:29:01,600
Speaker 13: But the Vietnam side will say that they have been

525
00:29:01,680 --> 00:29:06,120
Speaker 13: cracking down on all of those things. We saw a

526
00:29:06,240 --> 00:29:12,920
Speaker 13: raide on a factory making fake, allegedly fake nikes last week.

527
00:29:13,760 --> 00:29:19,440
Speaker 13: We see them detaining officials in connection to probes related

528
00:29:19,600 --> 00:29:24,720
Speaker 13: to quality control on the export of goods. And we

529
00:29:24,800 --> 00:29:32,440
Speaker 13: see the shutting down of online IRC websites and really

530
00:29:32,560 --> 00:29:39,440
Speaker 13: going after other intellectual property offenders. So there is this

531
00:29:40,680 --> 00:29:43,160
Speaker 13: there is this huge pressure on Vietnam at the moment

532
00:29:43,240 --> 00:29:45,840
Speaker 13: to show that it is taking all of those things

533
00:29:45,840 --> 00:29:50,520
Speaker 13: seriously as it seeks to continue its talks with the

534
00:29:50,600 --> 00:29:52,680
Speaker 13: US on a trade deal.

535
00:29:52,880 --> 00:29:55,280
Speaker 4: So do you have a sense of how successful these

536
00:29:55,320 --> 00:29:57,800
Speaker 4: efforts have been in what the US may be feeling

537
00:29:58,520 --> 00:30:01,680
Speaker 4: in terms of the steps that officials in Vietnam have

538
00:30:01,800 --> 00:30:04,680
Speaker 4: taken to address these issues, and whether or not we're

539
00:30:04,960 --> 00:30:07,520
Speaker 4: moving any closer to a final trade deal.

540
00:30:10,040 --> 00:30:13,920
Speaker 13: So we've heard the we've heard the trade talks are

541
00:30:14,040 --> 00:30:19,160
Speaker 13: very tense and difficult, precisely because some of these issues

542
00:30:19,240 --> 00:30:24,520
Speaker 13: are so problematic for both sides, and particularly around the

543
00:30:24,920 --> 00:30:29,240
Speaker 13: alleged trendshipment issue. Vietnam is a it's in a really

544
00:30:29,240 --> 00:30:34,360
Speaker 13: tough position. It's manufacturing chains that so closely entwined in

545
00:30:34,560 --> 00:30:37,600
Speaker 13: what happens over the border in China. A lot of

546
00:30:37,600 --> 00:30:42,040
Speaker 13: companies moved operations over the border during the first Trump

547
00:30:42,240 --> 00:30:44,880
Speaker 13: trade war. And while it might have been true then

548
00:30:44,960 --> 00:30:47,920
Speaker 13: that things were largely being made in China and then

549
00:30:47,920 --> 00:30:50,400
Speaker 13: shipped through here, people that we speak to you, so

550
00:30:50,520 --> 00:30:52,400
Speaker 13: that's just not the case anymore. Why would you do

551
00:30:52,520 --> 00:30:55,560
Speaker 13: that when labor is cheaper here, energy is cheaper, and

552
00:30:55,600 --> 00:31:00,240
Speaker 13: the various machines and production components have already been brought

553
00:30:59,880 --> 00:31:04,360
Speaker 13: in to make it easier to produce goods here. Still,

554
00:31:04,800 --> 00:31:08,680
Speaker 13: if we heard from jameson Greer in the last few

555
00:31:08,720 --> 00:31:17,320
Speaker 13: weeks making more claims about the transhipment issue and goods

556
00:31:17,600 --> 00:31:21,640
Speaker 13: allegedly just having a made in Vietnam label slapped on them,

557
00:31:22,000 --> 00:31:24,800
Speaker 13: So it really does seem like that is one of

558
00:31:24,840 --> 00:31:27,400
Speaker 13: the key issues that they are struggling to make progress

559
00:31:27,440 --> 00:31:29,080
Speaker 13: on at the moment in those trade talks.

560
00:31:29,200 --> 00:31:31,200
Speaker 4: So now we can get to the commodities part of

561
00:31:31,240 --> 00:31:35,440
Speaker 4: the trade story. I'm thinking of agriculture in particular. Can

562
00:31:35,480 --> 00:31:38,520
Speaker 4: you drill down a bit into this area and describe

563
00:31:38,520 --> 00:31:39,480
Speaker 4: some of the challenges.

564
00:31:39,960 --> 00:31:42,120
Speaker 13: Yeah, I think that's going to be one of the

565
00:31:42,160 --> 00:31:45,320
Speaker 13: things that we watch very closely over the next few months.

566
00:31:45,880 --> 00:31:50,479
Speaker 13: Norma is a big exporter of coffee and rice. It's

567
00:31:50,520 --> 00:31:56,120
Speaker 13: the world's second largest producer of coffee after Brazil, and

568
00:31:57,120 --> 00:32:01,680
Speaker 13: we are expecting to see a severe El Nino hit

569
00:32:01,960 --> 00:32:05,000
Speaker 13: this year. We were down in the rice fields and

570
00:32:05,040 --> 00:32:09,360
Speaker 13: the Mekong Delta a few weeks ago talking to rice

571
00:32:09,440 --> 00:32:12,520
Speaker 13: farmers down there. Now they were already saying how tough

572
00:32:12,920 --> 00:32:17,320
Speaker 13: things have been because of higher fuel and fertilizer costs

573
00:32:17,440 --> 00:32:21,480
Speaker 13: because of the Iran war, and so the last thing

574
00:32:21,560 --> 00:32:25,560
Speaker 13: that they can handle at the moment is more bad

575
00:32:25,560 --> 00:32:30,280
Speaker 13: weather affecting their crop. Now, obviously, you know, we wait

576
00:32:30,360 --> 00:32:34,480
Speaker 13: to see exactly how bad the weather will be this year.

577
00:32:34,840 --> 00:32:37,400
Speaker 13: They have already had several months of drought in the

578
00:32:37,400 --> 00:32:40,480
Speaker 13: central region which has already devastated the rice crop there.

579
00:32:41,680 --> 00:32:45,200
Speaker 13: And what happens with the coffee and the rice markets

580
00:32:45,200 --> 00:32:48,520
Speaker 13: here really really does tend to move the markets. As

581
00:32:48,600 --> 00:32:51,920
Speaker 13: I said, especially with coffee. Vietnam. Not only is it

582
00:32:51,960 --> 00:32:55,280
Speaker 13: the world's second largest supplier of coffee, it's the world's

583
00:32:55,360 --> 00:33:02,920
Speaker 13: largest exporter of the robuster bean. So when we experience

584
00:33:03,440 --> 00:33:06,960
Speaker 13: weather issues with the crops here, you will start to

585
00:33:07,040 --> 00:33:09,760
Speaker 13: see a higher price trickle into the market.

586
00:33:10,280 --> 00:33:12,920
Speaker 4: Francesca will leave it there. Thanks for your insight on

587
00:33:13,000 --> 00:33:18,120
Speaker 4: Vietnam's economy. Francesca Stevens is Bloomberg's Vietnam bureau chief. We

588
00:33:18,160 --> 00:33:21,840
Speaker 4: moved to Australia next and the mining giant Rio Tento.

589
00:33:22,120 --> 00:33:25,640
Speaker 4: In the last week the company reported first half underlying

590
00:33:25,680 --> 00:33:29,120
Speaker 4: profit above the average analyst estimate, and we caught up

591
00:33:29,160 --> 00:33:32,720
Speaker 4: with Rio Tento CEO Simon Trott. He spoke with Bloomberg

592
00:33:32,800 --> 00:33:34,080
Speaker 4: TV host Paul Allen.

593
00:33:34,160 --> 00:33:36,120
Speaker 14: Now talk to us about your approach, because you said

594
00:33:36,160 --> 00:33:39,160
Speaker 14: from the outsets to slim down, streamline the company. Even

595
00:33:39,240 --> 00:33:42,320
Speaker 14: this morning, you're using words like relentless, significant when talking

596
00:33:42,360 --> 00:33:45,880
Speaker 14: about cost savings, looking for productivity gains. So can you

597
00:33:45,920 --> 00:33:48,000
Speaker 14: talk to us about your plan for the next st half,

598
00:33:48,240 --> 00:33:48,920
Speaker 14: what's next?

599
00:33:49,240 --> 00:33:52,479
Speaker 15: So we set out a plan last year, Stronger, sharper, simpler,

600
00:33:52,880 --> 00:33:55,960
Speaker 15: and we talked about building a stronger Rio Tinto, a

601
00:33:56,000 --> 00:34:00,240
Speaker 15: more agile Riotinto and really pleasing today to say that

602
00:34:00,360 --> 00:34:05,240
Speaker 15: coming through in results. So prop it up significantly, free

603
00:34:05,240 --> 00:34:07,960
Speaker 15: cash flow up seventy five percent, allowing us to pay

604
00:34:08,320 --> 00:34:13,520
Speaker 15: a significantly increased dividend over three billion dollars back to shareholders,

605
00:34:13,920 --> 00:34:17,480
Speaker 15: and all of that really due to strong markets and

606
00:34:17,560 --> 00:34:20,640
Speaker 15: due to the work that we've been doing internally to

607
00:34:20,719 --> 00:34:23,040
Speaker 15: really make sure we're building as strong a REO Tinto

608
00:34:23,600 --> 00:34:26,640
Speaker 15: as possible. I guess what I'm most excited about, though,

609
00:34:27,400 --> 00:34:29,600
Speaker 15: is how we positioned for the future. So we've slim

610
00:34:29,680 --> 00:34:34,160
Speaker 15: down the portfolio to focus on copper, aluminium and lithium

611
00:34:34,480 --> 00:34:37,760
Speaker 15: and ironre They're the commodities where we have the asset

612
00:34:37,840 --> 00:34:41,480
Speaker 15: base and we see the greatest growth potential, and you

613
00:34:41,560 --> 00:34:45,239
Speaker 15: look forward to the underlying demand particularly from those big

614
00:34:45,239 --> 00:34:50,080
Speaker 15: trends of our time, AI and digital, traditional demand, electrification.

615
00:34:50,840 --> 00:34:53,600
Speaker 15: Really well positioned to take advantage of that.

616
00:34:53,760 --> 00:34:56,520
Speaker 14: I think you promised mentioned this morning. It's about another

617
00:34:56,560 --> 00:34:59,120
Speaker 14: five billion dollars worth of divestments to come. Can you

618
00:34:59,200 --> 00:35:01,080
Speaker 14: talk to us about some of the non core assets

619
00:35:01,120 --> 00:35:03,319
Speaker 14: that you're looking at And I know you've got a

620
00:35:03,360 --> 00:35:06,120
Speaker 14: small Canadian iron or mine, for example, would that be

621
00:35:06,239 --> 00:35:07,400
Speaker 14: one that's on the chopping block.

622
00:35:07,520 --> 00:35:10,520
Speaker 15: So we talked about releasing five to ten billion dollars

623
00:35:11,000 --> 00:35:13,880
Speaker 15: from the balance sheet, and so that included some assets

624
00:35:13,880 --> 00:35:17,360
Speaker 15: that we'd put under a strategic review, but also just

625
00:35:17,400 --> 00:35:20,360
Speaker 15: looking across the portfolio to really make sure the balance

626
00:35:20,400 --> 00:35:24,720
Speaker 15: sheets working as strongly as we would like. We also

627
00:35:24,800 --> 00:35:29,040
Speaker 15: promised around six hundred and fifty million in productivity savings,

628
00:35:29,040 --> 00:35:31,720
Speaker 15: and we announced we'd already banked eight hundred and seventy

629
00:35:32,440 --> 00:35:34,759
Speaker 15: and almost tripling the run rates, so one point eight

630
00:35:34,800 --> 00:35:36,479
Speaker 15: billion by the end of this year.

631
00:35:37,360 --> 00:35:39,680
Speaker 14: Now, iron Or still so central to what you do,

632
00:35:40,120 --> 00:35:42,840
Speaker 14: generating the largest amount of your revenue. This is despite

633
00:35:43,000 --> 00:35:45,799
Speaker 14: Chinese demand reaching a plateau, we've still got prices holding

634
00:35:45,840 --> 00:35:49,080
Speaker 14: up pretty well. How's your negotiation going though with the

635
00:35:49,200 --> 00:35:51,440
Speaker 14: Chinese State back by, can you give us an update

636
00:35:51,480 --> 00:35:53,960
Speaker 14: on that, What are they asking for and is there

637
00:35:54,000 --> 00:35:55,960
Speaker 14: a risk that they could ask for similar things for

638
00:35:56,040 --> 00:35:56,799
Speaker 14: other commodities.

639
00:35:57,160 --> 00:36:00,000
Speaker 15: So I Ramin is a really strong market for us.

640
00:36:00,320 --> 00:36:04,080
Speaker 15: We've been talking for years about the maturation of China

641
00:36:04,120 --> 00:36:06,680
Speaker 15: growth and you're certainly seeing that come through. It's been

642
00:36:06,719 --> 00:36:11,040
Speaker 15: far more resilient than I think market pundits had expected

643
00:36:11,080 --> 00:36:14,680
Speaker 15: because of that underlying demand. And whilst construction in China

644
00:36:14,719 --> 00:36:18,120
Speaker 15: has slowed, you've seen a real pickup in export related

645
00:36:18,120 --> 00:36:22,400
Speaker 15: steel demand, so secondary interestry products, and that's led to

646
00:36:22,440 --> 00:36:26,640
Speaker 15: fairly robust and stable pricing outcomes in the market. We

647
00:36:26,760 --> 00:36:31,120
Speaker 15: continue to engage with all market participants, including CMRJ, and

648
00:36:31,160 --> 00:36:34,399
Speaker 15: so through the ordinary course of business we renew those

649
00:36:34,440 --> 00:36:36,320
Speaker 15: contracts and that's the phase we're Another moment.

650
00:36:36,440 --> 00:36:39,719
Speaker 4: That was Simon Trotz, CEO of Rio Tinto, speaking with

651
00:36:39,800 --> 00:36:43,120
Speaker 4: Bloomberg's Paul Allen. I'm Doug Prisner. You can catch us

652
00:36:43,120 --> 00:36:46,880
Speaker 4: weekdays for the Daybreak Asia podcast. It's available wherever you

653
00:36:46,920 --> 00:36:48,600
Speaker 4: get your podcast. Nathan.

654
00:36:49,239 --> 00:36:51,360
Speaker 2: Thanks Doug, and that does it for this edition of

655
00:36:51,360 --> 00:36:52,800
Speaker 2: Bloomberg Daybreak Weekend.

656
00:36:52,800 --> 00:36:55,000
Speaker 5: To join us again Monday morning at five am.

657
00:36:55,040 --> 00:36:57,640
Speaker 2: Wall Street time for the latest don market's overseas, and

658
00:36:57,680 --> 00:36:58,880
Speaker 2: the news you need.

659
00:36:58,640 --> 00:37:01,680
Speaker 5: To start your day. I'm Nathan Hager. Stay with US.

660
00:37:01,760 --> 00:37:05,120
Speaker 2: Top stories and global business headlines are coming up right

661
00:37:05,160 --> 00:37:05,799
Speaker 2: now