1 00:00:00,240 --> 00:00:07,680 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:10,240 --> 00:00:13,160 Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the 3 00:00:13,160 --> 00:00:15,720 Speaker 2: top stories in the coming week from our Daybreak anchors 4 00:00:15,760 --> 00:00:18,400 Speaker 2: all around the world. Straight Ahead on the program, we'll 5 00:00:18,400 --> 00:00:21,040 Speaker 2: look to the next policy decision from the FET. I'm 6 00:00:21,120 --> 00:00:22,640 Speaker 2: Nathan Hager in Washington. 7 00:00:22,840 --> 00:00:26,040 Speaker 3: I'm Caroline Hepkeit in London, where we're asking what's next 8 00:00:26,040 --> 00:00:28,319 Speaker 3: for the UK as it sits on the precipice of 9 00:00:28,360 --> 00:00:31,200 Speaker 3: two big economic and political decisions. 10 00:00:31,480 --> 00:00:34,480 Speaker 4: I'm Doug Christner looking ahead at what's expected to be 11 00:00:34,800 --> 00:00:37,200 Speaker 4: a rate hike next week from the Bank of Japan. 12 00:00:38,159 --> 00:00:42,200 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 13 00:00:42,240 --> 00:00:45,920 Speaker 1: eleven three YEO New York, Bloomberg ninety nine to one, Washington, DC, 14 00:00:46,440 --> 00:00:51,559 Speaker 1: Bloomberg ninety two nine Boston, DAB Digital Radio, London, Syrias, 15 00:00:51,720 --> 00:00:55,240 Speaker 1: XM one twenty one, and around the world on Bloomberg Radio, 16 00:00:55,280 --> 00:00:57,520 Speaker 1: dot Com and the Bloomberg Business App. 17 00:01:02,360 --> 00:01:05,360 Speaker 2: Good day to you. I'm Nathan Hager. We begin today's 18 00:01:05,360 --> 00:01:08,520 Speaker 2: program with the Federal Reserve. All eyes will be on 19 00:01:08,560 --> 00:01:11,160 Speaker 2: the world's most important central bank when it begins its 20 00:01:11,240 --> 00:01:15,399 Speaker 2: June policy meeting on Tuesday and issues its decision Wednesday, 21 00:01:15,560 --> 00:01:18,759 Speaker 2: the first decision and news conference for new FED chair 22 00:01:19,000 --> 00:01:22,000 Speaker 2: Kevin worsh For more and what to expect, we are 23 00:01:22,080 --> 00:01:23,720 Speaker 2: joined by the man who will be in the room 24 00:01:23,760 --> 00:01:27,679 Speaker 2: when the decision comes down, Michael McKee, International economics and 25 00:01:27,720 --> 00:01:32,559 Speaker 2: policy correspondent for Bloomberg Radio and Television. No pressure, right, Mike, 26 00:01:33,840 --> 00:01:36,959 Speaker 2: I mean how much pressure is Warsh facing? Is he 27 00:01:37,080 --> 00:01:38,360 Speaker 2: under pressure right now? 28 00:01:39,360 --> 00:01:43,120 Speaker 5: Yes, he's under pressure, maybe a little bit different than 29 00:01:43,120 --> 00:01:47,880 Speaker 5: people anticipated. When the President was first nominating him, there 30 00:01:47,920 --> 00:01:50,160 Speaker 5: was a feeling that, of course Trump would be on 31 00:01:50,320 --> 00:01:54,440 Speaker 5: his case immediately to start lowering interest rates. The President 32 00:01:54,480 --> 00:01:56,600 Speaker 5: said at one point, I'm not going to pick anybody 33 00:01:56,600 --> 00:01:59,320 Speaker 5: who won't cut interest rates. But since then we've seen 34 00:01:59,360 --> 00:02:02,800 Speaker 5: inflation flow up quite a bit because of the war 35 00:02:02,920 --> 00:02:06,080 Speaker 5: that Donald Trump started. So Trump seems to be willing 36 00:02:06,120 --> 00:02:08,080 Speaker 5: to give him the benefit of the doubt still as 37 00:02:08,120 --> 00:02:12,240 Speaker 5: a cloud hanging over Warsh and his nomination and his 38 00:02:12,360 --> 00:02:16,280 Speaker 5: ascension to the chair, and so people will be watching 39 00:02:16,320 --> 00:02:19,880 Speaker 5: to see what he does to try to demonstrate his independence. 40 00:02:19,960 --> 00:02:21,880 Speaker 5: He doesn't have to make a decision, he doesn't have 41 00:02:21,919 --> 00:02:24,640 Speaker 5: to cut rates, he doesn't have to raise rates. They 42 00:02:24,639 --> 00:02:26,919 Speaker 5: can just leave them where they are. But does he 43 00:02:27,040 --> 00:02:30,440 Speaker 5: say the right things that the market wants to hear 44 00:02:30,560 --> 00:02:34,000 Speaker 5: about the FED caring about inflation and making sure that 45 00:02:34,080 --> 00:02:36,000 Speaker 5: they will do the right thing as opposed to just 46 00:02:36,040 --> 00:02:37,880 Speaker 5: automatically wanting to cut rates. 47 00:02:38,120 --> 00:02:40,959 Speaker 2: Well, let's talk about what the market is looking for 48 00:02:41,160 --> 00:02:44,760 Speaker 2: in terms of how the Fed could react to the data. 49 00:02:44,960 --> 00:02:49,880 Speaker 2: We are still seeing elevated price pressures, a little bit 50 00:02:49,960 --> 00:02:52,880 Speaker 2: of shakiness, I think you could say in the labor 51 00:02:52,919 --> 00:02:55,440 Speaker 2: market right now. How does the FED react to that 52 00:02:55,520 --> 00:02:56,440 Speaker 2: in this meaning. 53 00:02:56,639 --> 00:03:01,560 Speaker 5: Well, the interesting question and probably not going to be 54 00:03:01,800 --> 00:03:05,760 Speaker 5: too controversial, is whether they drop the guidance that they've 55 00:03:05,800 --> 00:03:09,600 Speaker 5: had in there by saying that, you know, in considering 56 00:03:09,680 --> 00:03:13,760 Speaker 5: any further rate moves, which everybody reads as a sign 57 00:03:13,800 --> 00:03:18,200 Speaker 5: of in considering further rate cuts. That was the phrase 58 00:03:18,280 --> 00:03:23,640 Speaker 5: that led to the three descents last time. And so 59 00:03:23,680 --> 00:03:26,520 Speaker 5: they'll probably take that out and leave the statement fairly 60 00:03:26,560 --> 00:03:29,480 Speaker 5: and and I and leave it open as neutral as 61 00:03:29,760 --> 00:03:34,320 Speaker 5: they can be, which will then lead us into the 62 00:03:34,360 --> 00:03:37,680 Speaker 5: summary of economic projections and the dot plot. Do they 63 00:03:37,840 --> 00:03:40,760 Speaker 5: still foresee rate cuts in the dot plot either this 64 00:03:40,840 --> 00:03:43,640 Speaker 5: year or next, or do we start seeing people think 65 00:03:43,720 --> 00:03:45,960 Speaker 5: that they need to move rates up? Are there going 66 00:03:46,000 --> 00:03:49,120 Speaker 5: to be any higher dots? And then we get Kevin 67 00:03:49,160 --> 00:03:51,880 Speaker 5: Warsh and we'll see what he says about all of that. 68 00:03:52,440 --> 00:03:56,000 Speaker 2: And we'll see what he says about the dot plot itself. Right, 69 00:03:56,040 --> 00:03:58,840 Speaker 2: I mean, even before he became chair, he has been 70 00:03:58,960 --> 00:04:02,680 Speaker 2: critical of a lot of the communication that the FED 71 00:04:03,120 --> 00:04:06,920 Speaker 2: puts out there. Do you expect him to say anything 72 00:04:07,000 --> 00:04:09,720 Speaker 2: more about FED communication? 73 00:04:10,800 --> 00:04:12,600 Speaker 5: Well, I'm sure he's going to be asked. I don't 74 00:04:12,640 --> 00:04:15,760 Speaker 5: know if he's ready yet to say exactly what he 75 00:04:15,800 --> 00:04:17,240 Speaker 5: wants to do, but he has made it clear he 76 00:04:17,279 --> 00:04:21,560 Speaker 5: thinks a that federal Federal Reserve officials talk too much, 77 00:04:21,960 --> 00:04:24,719 Speaker 5: that it becomes a cacaphany and it doesn't help the markets. 78 00:04:25,000 --> 00:04:27,520 Speaker 5: And he's also been an opponent of the dot plot, 79 00:04:27,560 --> 00:04:31,840 Speaker 5: feeling it locks members into their positions longer than they 80 00:04:31,839 --> 00:04:36,360 Speaker 5: should be if the circumstances change. It's very early. He's 81 00:04:36,400 --> 00:04:38,680 Speaker 5: only been in the job for about two weeks, given 82 00:04:38,720 --> 00:04:41,160 Speaker 5: the length of time it took to get him confirmed. 83 00:04:41,560 --> 00:04:45,159 Speaker 5: So he may just let the process go forward this month, 84 00:04:45,200 --> 00:04:47,479 Speaker 5: but he'll be asked about it, and so it'll be 85 00:04:47,520 --> 00:04:49,520 Speaker 5: interesting to see whether he says, I want to get 86 00:04:49,600 --> 00:04:51,440 Speaker 5: rid of it or I'm going to talk to my 87 00:04:51,560 --> 00:04:55,160 Speaker 5: colleagues about it, or I haven't thought about it yet. 88 00:04:55,600 --> 00:04:57,360 Speaker 2: I don't know if we could call this an elephant 89 00:04:57,360 --> 00:04:59,480 Speaker 2: in the room, Mike, but we do know that a 90 00:04:59,520 --> 00:05:02,920 Speaker 2: former chair is going to be in the room in 91 00:05:03,040 --> 00:05:07,039 Speaker 2: Jay Powell. Does Powell fade away in this meeting or 92 00:05:07,480 --> 00:05:10,159 Speaker 2: what's it going to mean for the Central Bank to 93 00:05:10,240 --> 00:05:13,320 Speaker 2: have two chairs at the same meeting. 94 00:05:14,200 --> 00:05:18,200 Speaker 5: I suspect that Jay powellill do his best to fade away, 95 00:05:18,680 --> 00:05:21,960 Speaker 5: to fade into the background. It would probably be some 96 00:05:22,000 --> 00:05:28,040 Speaker 5: sort of really strange decision that would lead him to dissent, 97 00:05:28,120 --> 00:05:29,920 Speaker 5: and that would be the only news he would make 98 00:05:29,960 --> 00:05:32,719 Speaker 5: out of it. He's not going to be talking to us. 99 00:05:33,480 --> 00:05:38,040 Speaker 5: We won't know from the transcripts what he said, what 100 00:05:38,120 --> 00:05:40,480 Speaker 5: positions he took, and I don't think we're going to 101 00:05:40,560 --> 00:05:43,279 Speaker 5: hear from him a lot Outside of all of this. 102 00:05:43,440 --> 00:05:47,000 Speaker 5: He's remaining on the Fed, obviously for the reasons that 103 00:05:47,040 --> 00:05:49,560 Speaker 5: we all know about with his dispute with the administration, 104 00:05:50,080 --> 00:05:51,880 Speaker 5: but he has made it clear he doesn't want to 105 00:05:51,920 --> 00:05:55,120 Speaker 5: be the shadow FED chair. He doesn't want to interrupt 106 00:05:55,200 --> 00:05:58,960 Speaker 5: or interfere with what Kevin Warsh is doing. So while 107 00:05:58,960 --> 00:06:01,760 Speaker 5: he will play a role. He'll get his speaking moments 108 00:06:01,880 --> 00:06:04,920 Speaker 5: during the meeting. We won't know about it, and that'll 109 00:06:04,960 --> 00:06:05,880 Speaker 5: be the way he likes it. 110 00:06:06,120 --> 00:06:08,520 Speaker 2: Thanks for this, Mike, really looking forward to your coverage 111 00:06:08,520 --> 00:06:11,760 Speaker 2: this week. That is Michael McKee, international economics and Policy 112 00:06:11,800 --> 00:06:16,039 Speaker 2: correspondent for Bloomberg Radio and Television. Ahead of Kevin Warsh's 113 00:06:16,040 --> 00:06:19,240 Speaker 2: first policy decision this Wednesday, we will of course have 114 00:06:19,400 --> 00:06:23,520 Speaker 2: full coverage for you right here on Bloomberg Radio. Let's 115 00:06:23,520 --> 00:06:25,520 Speaker 2: take a look now at some stocks making news in 116 00:06:25,560 --> 00:06:29,039 Speaker 2: the week ahead. I'm Nathan Hager, joined by Bloomberg's Judy LaGrue, 117 00:06:29,240 --> 00:06:32,279 Speaker 2: and we're looking forward to some more earnings this week. 118 00:06:32,279 --> 00:06:35,640 Speaker 2: We're going to hear from Kroger Thursday. Look at what 119 00:06:35,680 --> 00:06:39,679 Speaker 2: Bloomberg Intelligence has to say about the grocery chain. Expectations 120 00:06:39,680 --> 00:06:42,120 Speaker 2: here don't look too great, Judy. 121 00:06:42,279 --> 00:06:45,640 Speaker 6: That's right. Bloomberg Intelligence analysts are seeing that Kroger is 122 00:06:45,680 --> 00:06:49,200 Speaker 6: set for its weakest sales and profit growth of the year. 123 00:06:50,040 --> 00:06:53,000 Speaker 6: So I think for them it's really like the focus 124 00:06:53,000 --> 00:06:56,440 Speaker 6: on that is the seam source sales growth, which is 125 00:06:56,520 --> 00:06:59,440 Speaker 6: expected to be the lowest since August twenty twenty four. 126 00:06:59,480 --> 00:07:02,520 Speaker 6: But Nathan, I have a question for you. Yeah, talk 127 00:07:02,520 --> 00:07:04,920 Speaker 6: to me a little bit about how you think about 128 00:07:04,960 --> 00:07:08,080 Speaker 6: grocery shopping. Do you prefer to go in person? Do 129 00:07:08,120 --> 00:07:10,520 Speaker 6: you prefer to go through an app to get your 130 00:07:10,560 --> 00:07:11,360 Speaker 6: groceries delivery? 131 00:07:11,440 --> 00:07:14,120 Speaker 2: I go to the grocery store almost every day just 132 00:07:14,160 --> 00:07:16,120 Speaker 2: to fill up on like the one recipe that I 133 00:07:16,160 --> 00:07:18,560 Speaker 2: have to do every day. So yeah, I'm an in 134 00:07:18,600 --> 00:07:19,080 Speaker 2: store person. 135 00:07:19,120 --> 00:07:21,960 Speaker 6: Kind of okay, interesting, you know, I am here in 136 00:07:21,960 --> 00:07:24,720 Speaker 6: Manhattan and I miss going to the grocery store in person. 137 00:07:24,760 --> 00:07:27,320 Speaker 6: I am a transplant, and so I've had to adjust 138 00:07:27,320 --> 00:07:31,680 Speaker 6: to you getting delivery over going into the grocery store. 139 00:07:31,720 --> 00:07:34,280 Speaker 6: But it is an experience and I do like and 140 00:07:34,520 --> 00:07:35,960 Speaker 6: miss that experience greatly. 141 00:07:36,480 --> 00:07:36,680 Speaker 7: Yeah. 142 00:07:36,720 --> 00:07:40,360 Speaker 2: Well, I mean these grocery stores they still get the business, 143 00:07:40,480 --> 00:07:43,960 Speaker 2: you know, whether whether they're getting it delivered or not. Right, 144 00:07:44,040 --> 00:07:46,640 Speaker 2: But I mean, is it just same store sales alone 145 00:07:46,760 --> 00:07:51,080 Speaker 2: that are potentially going to be dragging Kroger's results down? 146 00:07:51,280 --> 00:07:53,920 Speaker 6: I mean, truly, for Kroger, it's a story of trying 147 00:07:53,920 --> 00:07:57,240 Speaker 6: to catch up to where the business is. And so 148 00:07:57,520 --> 00:08:01,240 Speaker 6: Kroger primarily is trying to spur growth than their grocery 149 00:08:01,280 --> 00:08:05,520 Speaker 6: business through their e commerce fulfillment. So that's through partnerships 150 00:08:05,560 --> 00:08:09,200 Speaker 6: with Instacart, with door Dash, with Uber Eats, and right 151 00:08:09,240 --> 00:08:12,360 Speaker 6: now they're really seeing that basically a lot of their 152 00:08:12,400 --> 00:08:15,760 Speaker 6: business is coming from people who are ordering delivery on 153 00:08:15,800 --> 00:08:19,720 Speaker 6: an increasing basis, and so in tandem with that, there 154 00:08:19,840 --> 00:08:23,280 Speaker 6: is for Kroger a lot of thought into price cuts 155 00:08:23,840 --> 00:08:26,240 Speaker 6: and what that looks like for them as they compete 156 00:08:26,280 --> 00:08:31,800 Speaker 6: with other grocery store providers who deliver like Amazon, like Walmart. 157 00:08:32,360 --> 00:08:35,600 Speaker 6: And so one thing I was looking at was City 158 00:08:35,840 --> 00:08:40,560 Speaker 6: researchers really noting how vocal the CEO, Greg Foreman, what 159 00:08:40,679 --> 00:08:44,319 Speaker 6: foreign was in the press about price cuts on the 160 00:08:44,440 --> 00:08:48,520 Speaker 6: day that Walmart reported their earnings, and City analy is 161 00:08:48,559 --> 00:08:53,320 Speaker 6: called that quote strange timing and not coincidental, which I liked, 162 00:08:53,480 --> 00:08:55,240 Speaker 6: you know, I thought that was really interesting and good 163 00:08:55,320 --> 00:08:59,120 Speaker 6: language to use. But they certainly perceived the talk about 164 00:08:59,200 --> 00:09:01,400 Speaker 6: price cuts as quote poking the bear. 165 00:09:01,960 --> 00:09:06,440 Speaker 2: Seriously, when you think about, you know, just how expensive 166 00:09:06,640 --> 00:09:11,800 Speaker 2: everything is right now, it's very top of mind for anybody, 167 00:09:11,800 --> 00:09:15,599 Speaker 2: whether they're going into the store or getting it by delivery. 168 00:09:15,679 --> 00:09:18,520 Speaker 2: But before we hear from Kroger on Thursday, we're going 169 00:09:18,559 --> 00:09:23,400 Speaker 2: to get some more earnings from Carmas on Wednesday. How's 170 00:09:23,520 --> 00:09:25,400 Speaker 2: the car market looking right? 171 00:09:25,440 --> 00:09:28,000 Speaker 6: Now, Judy, I mean, look, I think that there's a 172 00:09:28,040 --> 00:09:31,679 Speaker 6: lot going on and the car market is a reflection 173 00:09:32,040 --> 00:09:34,920 Speaker 6: of what we're seeing in the economy. I think, really 174 00:09:34,960 --> 00:09:40,120 Speaker 6: Carmas is an interesting company stock earning result to watch 175 00:09:40,200 --> 00:09:43,160 Speaker 6: because used car sales are certainly on top of mind 176 00:09:43,200 --> 00:09:45,280 Speaker 6: for a lot of us in terms of it's read 177 00:09:45,320 --> 00:09:48,640 Speaker 6: on the consumer, it's read on affordability for used cars, 178 00:09:48,920 --> 00:09:52,960 Speaker 6: auto credit, whether the retail turnaround is actually working. I mean, 179 00:09:53,000 --> 00:09:56,719 Speaker 6: there's so many roads that lead to use car purchasing. 180 00:09:56,840 --> 00:10:00,760 Speaker 6: So at least for Carmas, what we're looking at in 181 00:10:00,840 --> 00:10:03,760 Speaker 6: terms of the street and analysts, they're looking at and 182 00:10:03,840 --> 00:10:06,559 Speaker 6: adjusted earnings per share of about ninety seven cents, which 183 00:10:06,600 --> 00:10:09,880 Speaker 6: is down thirty percent from this time last year, and 184 00:10:10,040 --> 00:10:13,720 Speaker 6: revenue was also expected to be slightly lower year over year. 185 00:10:13,760 --> 00:10:16,199 Speaker 6: And so I think that is really sort of reflective 186 00:10:16,200 --> 00:10:19,160 Speaker 6: of where we're seeing used car sales just as an economy, 187 00:10:19,200 --> 00:10:22,800 Speaker 6: as a country, there's just strain there. And so as 188 00:10:22,840 --> 00:10:26,320 Speaker 6: a result, investors aren't really looking for a blowout growth 189 00:10:26,440 --> 00:10:30,240 Speaker 6: story here. They're looking for evidence that the worst of 190 00:10:30,320 --> 00:10:34,960 Speaker 6: this storm, in terms of really wavering and dropping used 191 00:10:35,000 --> 00:10:39,240 Speaker 6: car interest in sales, is starting to stabilize and sort 192 00:10:39,240 --> 00:10:43,000 Speaker 6: of steady out as far as CarMax. 193 00:10:42,840 --> 00:10:44,520 Speaker 2: And what more stock we're going to watch maybe for 194 00:10:44,520 --> 00:10:46,640 Speaker 2: the next few weeks here with the World Cup on 195 00:10:46,960 --> 00:10:49,600 Speaker 2: is Draft Kings do you think we're going to see 196 00:10:49,600 --> 00:10:52,040 Speaker 2: investors get a payoff from the tournament? 197 00:10:52,080 --> 00:10:54,320 Speaker 6: Judy, Oh goodness, this is a really this is the 198 00:10:54,320 --> 00:10:57,400 Speaker 6: crux of the question here. I think it depends on 199 00:10:57,400 --> 00:11:00,240 Speaker 6: a number of things. It depends on whether the World 200 00:11:00,280 --> 00:11:04,439 Speaker 6: Cup will bring in more betters, more dollars waged, or 201 00:11:04,559 --> 00:11:09,840 Speaker 6: more repeat customers, and that is something that in my view, 202 00:11:09,880 --> 00:11:12,680 Speaker 6: remains to be seen. I think we'll have to sort 203 00:11:12,679 --> 00:11:16,400 Speaker 6: of understand what the handle or the total amount bet 204 00:11:16,480 --> 00:11:21,559 Speaker 6: looks like as the World Cup gets underway, and whether 205 00:11:21,640 --> 00:11:26,040 Speaker 6: or not Draft Kings can turn this big event into 206 00:11:26,120 --> 00:11:29,400 Speaker 6: new users without spending too much on promotions, which I 207 00:11:29,440 --> 00:11:33,680 Speaker 6: think is really they're set up for that. Analyst Ian 208 00:11:33,800 --> 00:11:39,480 Speaker 6: Moore at Bernstein really pointed out Draft Kings as being 209 00:11:39,559 --> 00:11:43,480 Speaker 6: the clearest prediction market sports betting winner of the World Cup, 210 00:11:43,520 --> 00:11:47,200 Speaker 6: and I think those are really really strong words, and 211 00:11:47,600 --> 00:11:50,480 Speaker 6: for that, I think it's certainly something to watch from 212 00:11:50,480 --> 00:11:53,440 Speaker 6: a perspective of stock movement as it pertains to the 213 00:11:53,480 --> 00:11:55,959 Speaker 6: perception of the amount of betters who are jumping in 214 00:11:56,160 --> 00:11:58,520 Speaker 6: or even increasing their wagers as a result of the 215 00:11:58,520 --> 00:11:59,000 Speaker 6: World Cup. 216 00:11:59,200 --> 00:12:01,160 Speaker 2: Yeah, we'll be keeping an eye on it as the 217 00:12:01,240 --> 00:12:04,120 Speaker 2: tournament goes on. Thanks for this, Judy, great having you 218 00:12:04,160 --> 00:12:04,560 Speaker 2: on with us. 219 00:12:04,760 --> 00:12:05,200 Speaker 8: Thanks guy. 220 00:12:05,760 --> 00:12:10,000 Speaker 2: That's Judy LaGrue, reporter for Bloomberg News and coming up 221 00:12:10,040 --> 00:12:12,400 Speaker 2: on Bloomberg day Break weekend, we'll look at what's next 222 00:12:12,400 --> 00:12:15,440 Speaker 2: for the UK as it's on the precipice of two 223 00:12:15,480 --> 00:12:19,760 Speaker 2: big economic and political decisions. I'm Nathan Hager and this 224 00:12:20,160 --> 00:12:34,679 Speaker 2: is Bloomberg. This is Bloomberg Daybreak Weekend, our global look 225 00:12:34,679 --> 00:12:37,160 Speaker 2: ahead at the top stories for investors in the coming week. 226 00:12:37,240 --> 00:12:40,120 Speaker 2: I'm Nathan Hager in Washington. Up later in the program, 227 00:12:40,120 --> 00:12:42,480 Speaker 2: we'll look to a monetary policy decision from the Bank 228 00:12:42,520 --> 00:12:45,440 Speaker 2: of Japan. But in the coming days, a high stakes 229 00:12:45,480 --> 00:12:48,360 Speaker 2: election takes place in the UK on the same day 230 00:12:48,400 --> 00:12:51,280 Speaker 2: as the Bank of England's Monetary Policy Committee meets to 231 00:12:51,280 --> 00:12:54,640 Speaker 2: make its latest interest rate decision. With both economics and 232 00:12:54,760 --> 00:12:58,160 Speaker 2: politics at a crucial juncture, how will the two interact 233 00:12:58,320 --> 00:13:01,080 Speaker 2: in the UK? For more, Let's go to London and 234 00:13:01,080 --> 00:13:04,679 Speaker 2: bring in Bloomberg day Break. You're a banker, Caroline Hepger Nathan. 235 00:13:04,679 --> 00:13:08,040 Speaker 3: The by election in Makerfield in the coming days will 236 00:13:08,080 --> 00:13:12,240 Speaker 3: take place in a constituency of former mining towns, some 237 00:13:12,440 --> 00:13:18,520 Speaker 3: leafy villages and commuter suburbs between Liverpool and Manchester in 238 00:13:18,559 --> 00:13:22,760 Speaker 3: the north of England. It could have very significant consequences 239 00:13:22,800 --> 00:13:26,559 Speaker 3: for the future of Britain. Just about seventy seven thousand 240 00:13:26,679 --> 00:13:30,760 Speaker 3: voters will potentially decide the next UK leader, who will 241 00:13:30,760 --> 00:13:35,400 Speaker 3: govern over a population of some seventy million. Its Member 242 00:13:35,480 --> 00:13:39,200 Speaker 3: of Parliament, Josh Simmons, resigned to give former Greater Manchester 243 00:13:39,280 --> 00:13:43,400 Speaker 3: mayor Andy Burnham a route back into Parliament, a prerequisite 244 00:13:43,760 --> 00:13:47,880 Speaker 3: for an expected leadership challenge against Prime Minister Kirs Starmer, 245 00:13:48,520 --> 00:13:52,319 Speaker 3: but the competition is far from a foregone conclusion. Once 246 00:13:52,520 --> 00:13:55,920 Speaker 3: a safe Labour seat due to the area's historic ties 247 00:13:55,960 --> 00:13:59,800 Speaker 3: to mining and trade unions, is yet another place where 248 00:13:59,840 --> 00:14:03,320 Speaker 3: the governing party has sheared support to the populist and 249 00:14:03,480 --> 00:14:08,200 Speaker 3: anti immigrant Reform UK Party led by Nigel Farage. The 250 00:14:08,320 --> 00:14:12,160 Speaker 3: constituency is a deliberate choice though for Burnham, say his 251 00:14:12,280 --> 00:14:15,360 Speaker 3: backers to fight a tight contest where there is a 252 00:14:15,440 --> 00:14:18,520 Speaker 3: direct threat from Reform so he can show how he 253 00:14:18,559 --> 00:14:21,840 Speaker 3: would beat them in the next general election, which must 254 00:14:21,920 --> 00:14:26,040 Speaker 3: be called before August twenty twenty nine. Burnham is not 255 00:14:26,080 --> 00:14:29,240 Speaker 3: the only would be challenger, though to Starmer, former Health Sexuary, 256 00:14:29,240 --> 00:14:31,840 Speaker 3: where Streeting is also expected to mount a bid for 257 00:14:31,960 --> 00:14:35,440 Speaker 3: the Labor leadership should a contest take place now. He 258 00:14:35,520 --> 00:14:37,720 Speaker 3: recently spoke to Bloomberg's Francin in Laqua. 259 00:14:38,280 --> 00:14:40,520 Speaker 9: I think Andy will win and make a field when 260 00:14:40,520 --> 00:14:42,840 Speaker 9: none of us and the included taking it for granted. 261 00:14:43,800 --> 00:14:46,000 Speaker 9: It comes back to this fundamental point, though, which is 262 00:14:46,760 --> 00:14:50,720 Speaker 9: I can see Andy's strengths. I think he needs to 263 00:14:50,720 --> 00:14:53,680 Speaker 9: be tested. I think his ideas need to be tested, 264 00:14:53,720 --> 00:14:57,320 Speaker 9: and so do mine. And I'm probably a rare thing 265 00:14:57,320 --> 00:15:01,080 Speaker 9: in the Labor Party. I'm a monarchist, but this is 266 00:15:01,120 --> 00:15:05,880 Speaker 9: one coronation that I I'm not enthusiastic about. I think 267 00:15:05,920 --> 00:15:07,880 Speaker 9: you need a debate. I think you need a battle 268 00:15:07,880 --> 00:15:09,920 Speaker 9: of ideas. He needs to set out his store, I 269 00:15:09,960 --> 00:15:10,760 Speaker 9: need to set out mine. 270 00:15:11,280 --> 00:15:14,720 Speaker 3: That was Labor politician West Treating, speaking to Bloomberg's Farcy 271 00:15:14,760 --> 00:15:18,840 Speaker 3: and Lacqua at the London south By Southwest Festival. The 272 00:15:18,960 --> 00:15:22,960 Speaker 3: UK stands at the precipice in no small part due 273 00:15:23,000 --> 00:15:27,000 Speaker 3: to the state of the economy and voters who don't 274 00:15:27,080 --> 00:15:30,520 Speaker 3: usually turn out in enormous numbers for by elections. We'll 275 00:15:30,560 --> 00:15:32,920 Speaker 3: be going to the polls on the very same day 276 00:15:32,960 --> 00:15:35,800 Speaker 3: as the Bank of England's Monetary Policy Committee makes its 277 00:15:35,840 --> 00:15:39,840 Speaker 3: decision on interest rates as it assesses the extent to 278 00:15:39,880 --> 00:15:44,320 Speaker 3: which higher energy costs are affecting domestic prices. We're going 279 00:15:44,360 --> 00:15:47,800 Speaker 3: to dig into both topics now with Bloomberg's Politics reported, 280 00:15:47,880 --> 00:15:51,120 Speaker 3: Jacob Reid and our economists covering the UK and the 281 00:15:51,160 --> 00:15:55,080 Speaker 3: euro Area, Ana Andrede. Welcome to both of you. So 282 00:15:55,480 --> 00:15:59,800 Speaker 3: i'll call it the two Andy's Andy Burnham and Andrew Bailey. 283 00:16:00,200 --> 00:16:02,520 Speaker 3: Lots of candidates of course running in the by election, 284 00:16:02,960 --> 00:16:05,640 Speaker 3: and lots of policymakers at Bank of England too. But 285 00:16:05,680 --> 00:16:10,520 Speaker 3: that's just my shorthand for really thinking about next Thursday. Jacob, 286 00:16:10,520 --> 00:16:13,040 Speaker 3: why do you think, though, that the vote in make 287 00:16:13,080 --> 00:16:14,640 Speaker 3: a Field is so important? 288 00:16:14,800 --> 00:16:18,720 Speaker 10: Oh my goodness. I mean it's completely bizarrest by election 289 00:16:18,920 --> 00:16:21,280 Speaker 10: in a you know, we're going to be seventy thousand 290 00:16:21,360 --> 00:16:25,600 Speaker 10: voters or something like that, and it could reshape British politics. 291 00:16:25,640 --> 00:16:29,360 Speaker 10: We've got a Prime Minister, Keir Starmer, who's historically unpopular. 292 00:16:29,800 --> 00:16:32,960 Speaker 10: The Labor Party is seeing those polls we're very worried. 293 00:16:33,360 --> 00:16:36,880 Speaker 10: And Andy Burnham, the Mayor of Manchester of Greater Manchester, 294 00:16:37,280 --> 00:16:40,680 Speaker 10: is the most popular politician in the country. The issue 295 00:16:40,800 --> 00:16:44,560 Speaker 10: is he can't become Labor Leader and Prime Minister without 296 00:16:44,640 --> 00:16:47,560 Speaker 10: being in Parliament. So one of the Labor MPs stood 297 00:16:47,600 --> 00:16:50,040 Speaker 10: down and said, go on, Andy, running this by election 298 00:16:50,560 --> 00:16:52,560 Speaker 10: and if you win, you'll be able to challenge for 299 00:16:52,560 --> 00:16:55,120 Speaker 10: the leadership. And it's a big if. It's a big if, 300 00:16:55,160 --> 00:16:56,080 Speaker 10: it's not a done deal. 301 00:16:56,360 --> 00:16:59,240 Speaker 3: No, So what does the polling look like? What have 302 00:16:59,360 --> 00:17:04,800 Speaker 3: candidates actually been campaigning on in quite an unusual contest obviously. 303 00:17:04,840 --> 00:17:08,400 Speaker 10: Yeah, so there have been two poles. They both put 304 00:17:08,440 --> 00:17:12,000 Speaker 10: Andy Burnham ahead by different amounts. For most recent one 305 00:17:12,119 --> 00:17:14,800 Speaker 10: was ten percentage points ahead, which you would say is 306 00:17:15,320 --> 00:17:19,680 Speaker 10: relatively comfortable. But it's notoriously difficult to do accurate polling 307 00:17:20,200 --> 00:17:24,960 Speaker 10: in small constituencies to get an accurate sample. So while 308 00:17:25,000 --> 00:17:28,040 Speaker 10: people probably do think Andy Burnham will win, there's a 309 00:17:28,080 --> 00:17:32,800 Speaker 10: strong challenge from Robert Kenyan, who's the Reform UK candidate, 310 00:17:32,880 --> 00:17:37,000 Speaker 10: and he's basically saying that Andy Burnham is using this 311 00:17:37,359 --> 00:17:41,400 Speaker 10: constituency as a stepping stone for his personal ambition and 312 00:17:41,480 --> 00:17:44,520 Speaker 10: that you know he's still labor, and Labour's very unpopular. 313 00:17:45,840 --> 00:17:48,040 Speaker 3: Is there anyone in the North of England who doesn't 314 00:17:48,080 --> 00:17:50,959 Speaker 3: know the name Andy Burnham? I doubt it. He's certainly 315 00:17:50,960 --> 00:17:55,000 Speaker 3: playing on home turf in terms of that record. And 316 00:17:55,040 --> 00:17:58,240 Speaker 3: I know you've spent lots of time in the constituency 317 00:17:58,480 --> 00:18:01,760 Speaker 3: and in the North of England thinking about that. So 318 00:18:02,359 --> 00:18:05,400 Speaker 3: what do you kind of extract from his record? 319 00:18:06,040 --> 00:18:08,560 Speaker 10: The big thing is buses. I mean to go to 320 00:18:08,640 --> 00:18:11,159 Speaker 10: make Afield ashually in Makeerfield, the town center and you 321 00:18:11,200 --> 00:18:14,760 Speaker 10: see these big yellow buses going past you. And his 322 00:18:14,800 --> 00:18:18,080 Speaker 10: big policy has been taken them back under public control, 323 00:18:18,520 --> 00:18:21,919 Speaker 10: capping the fairs to two pounds, making sure they do 324 00:18:22,080 --> 00:18:24,360 Speaker 10: roots for the kind of in the middle of nowhere, 325 00:18:24,400 --> 00:18:28,240 Speaker 10: but a bit of a lifeline for those people. That's 326 00:18:28,280 --> 00:18:31,479 Speaker 10: his big thing. And also Greater Manchester is just an 327 00:18:31,520 --> 00:18:34,080 Speaker 10: area of it's doing really well. The UK economy is 328 00:18:34,160 --> 00:18:37,600 Speaker 10: quite gloomy, and this is a city, a city region. 329 00:18:37,960 --> 00:18:40,840 Speaker 10: It's really been outpacing a lot of a lot of 330 00:18:40,840 --> 00:18:44,280 Speaker 10: the country. It feels like things are happening. Buildings are 331 00:18:44,320 --> 00:18:47,000 Speaker 10: going up. So he's kind of trying to capitalize on 332 00:18:47,080 --> 00:18:48,280 Speaker 10: that good vibe. 333 00:18:48,320 --> 00:18:51,439 Speaker 3: Really yeah, absolutely well, Anna, let's bring you in at 334 00:18:51,440 --> 00:18:54,479 Speaker 3: this point, then we know that the UK is facing 335 00:18:54,480 --> 00:18:57,280 Speaker 3: obviously political turmoil with all of this, just walk us 336 00:18:57,320 --> 00:18:59,840 Speaker 3: through then the economic picture right now for. 337 00:18:59,680 --> 00:19:04,200 Speaker 11: The U, Yeah, definitely. So obviously we've had a very 338 00:19:04,200 --> 00:19:07,800 Speaker 11: strong start to the year. We've seen real GDP gaining 339 00:19:08,000 --> 00:19:11,200 Speaker 11: zero point six percent quarter on quarter. That's very unusual. 340 00:19:12,160 --> 00:19:16,639 Speaker 11: There's all these question marks about whether that reflects strong 341 00:19:16,680 --> 00:19:20,600 Speaker 11: momentum in underlying activity or actually it's just a problem 342 00:19:20,680 --> 00:19:24,280 Speaker 11: that the OS is not fully capturing a shift in 343 00:19:24,320 --> 00:19:29,080 Speaker 11: the pattern of economic activity. Regardless, we expect and our 344 00:19:29,240 --> 00:19:32,080 Speaker 11: outlook for the next coming quarters is actually quite gloomy. 345 00:19:32,160 --> 00:19:35,600 Speaker 11: And that's obviously on the Iran war. So as a 346 00:19:35,640 --> 00:19:39,399 Speaker 11: net importer of energy, they run more to rising energy costs, 347 00:19:39,520 --> 00:19:42,800 Speaker 11: means that there'll be a taxflationary shock to the economy. 348 00:19:43,000 --> 00:19:46,720 Speaker 11: We're going to see headline inflation increasing faster than we 349 00:19:46,720 --> 00:19:50,000 Speaker 11: were expecting. We've actually revised our forecast compared to the 350 00:19:50,040 --> 00:19:52,760 Speaker 11: pre war We see it higher by one point five 351 00:19:52,800 --> 00:19:56,480 Speaker 11: percentage points by the start of next year. That's obviously 352 00:19:56,520 --> 00:20:00,199 Speaker 11: a squeeze, real income squeeze for households, and and on 353 00:20:00,240 --> 00:20:03,320 Speaker 11: top of that you had tightening and funding conditions because 354 00:20:03,400 --> 00:20:05,840 Speaker 11: markets are no longer pricing in rate cuts from the BOE. 355 00:20:06,840 --> 00:20:10,359 Speaker 11: So our outlook even before sort of all of this 356 00:20:10,480 --> 00:20:14,640 Speaker 11: political thermol was for extreme weak growth over the next 357 00:20:14,680 --> 00:20:15,480 Speaker 11: coming quarters. 358 00:20:15,800 --> 00:20:16,159 Speaker 8: Yeah. 359 00:20:16,200 --> 00:20:18,800 Speaker 3: Absolutely, And you know we don't have a resolution to 360 00:20:18,880 --> 00:20:22,920 Speaker 3: the war in Iran and that is certainly a big, 361 00:20:22,960 --> 00:20:26,440 Speaker 3: big challenge. And I suppose going back to the kind 362 00:20:26,440 --> 00:20:29,640 Speaker 3: of politics, that's one of the big questions, isn't it 363 00:20:30,359 --> 00:20:35,720 Speaker 3: how somebody like Andy Burnham would translate his policies nationally, 364 00:20:36,480 --> 00:20:41,639 Speaker 3: what his bigger economic plans might be when the backdrop 365 00:20:41,800 --> 00:20:45,640 Speaker 3: we know has been massively challenging for Kistoma, the currently leader, 366 00:20:45,680 --> 00:20:46,680 Speaker 3: and even leaders. 367 00:20:46,400 --> 00:20:50,560 Speaker 10: Before that, exactly, it would be difficult for anyone coming in. 368 00:20:50,760 --> 00:20:54,480 Speaker 10: Broadly speaking, Burnham has said he wants to take more 369 00:20:54,520 --> 00:20:59,359 Speaker 10: control of essential industries, so the bus is a key example, 370 00:21:00,200 --> 00:21:03,600 Speaker 10: or some energy water. He stopped short of saying he 371 00:21:03,600 --> 00:21:07,600 Speaker 10: would want to nationalize. It might be more regulation. He's 372 00:21:07,640 --> 00:21:10,800 Speaker 10: also talked a bit about a new way of doing politics, 373 00:21:10,840 --> 00:21:15,080 Speaker 10: devolving more tax and spend powers to local areas and 374 00:21:15,520 --> 00:21:19,840 Speaker 10: maybe even changing the electoral system. And historically he's been 375 00:21:19,840 --> 00:21:22,879 Speaker 10: in favor of rejoining the EU, but he knows he's 376 00:21:23,040 --> 00:21:26,760 Speaker 10: competing in a constituency that voted to leave, so he's 377 00:21:26,840 --> 00:21:29,680 Speaker 10: kind of walked back from those comments. I think basically 378 00:21:29,760 --> 00:21:32,600 Speaker 10: there are two different school of thoughts. One is that 379 00:21:33,160 --> 00:21:35,880 Speaker 10: he's more left wing than Keir Starmer. He's a bit 380 00:21:35,920 --> 00:21:39,240 Speaker 10: more radical. He's talked about MC government shouldn't be in 381 00:21:39,320 --> 00:21:42,639 Speaker 10: hot to the bond markets. That was interpreted by some 382 00:21:42,880 --> 00:21:46,080 Speaker 10: as you know crikee, he's going to borrow more. He 383 00:21:46,240 --> 00:21:48,720 Speaker 10: said that he meant that we need a long term 384 00:21:48,760 --> 00:21:51,920 Speaker 10: plan and not to just follow sort of guilt girations. 385 00:21:52,520 --> 00:21:55,159 Speaker 10: The other school of thought is that he's basically a 386 00:21:55,200 --> 00:21:57,800 Speaker 10: bit more of a charming Kio Starmer. He would have 387 00:21:57,840 --> 00:22:01,280 Speaker 10: similar policies. He's said he's in favor of a lot 388 00:22:01,320 --> 00:22:05,200 Speaker 10: of pretty tough restrictions the government has done on immigration. 389 00:22:05,720 --> 00:22:07,520 Speaker 10: He just sell them a bit better. He's a bit 390 00:22:07,560 --> 00:22:10,320 Speaker 10: more charismatic and it's not clear which Andy Vernon we 391 00:22:10,400 --> 00:22:10,959 Speaker 10: might get. 392 00:22:11,200 --> 00:22:13,520 Speaker 3: So then what do we think that the Bank of 393 00:22:13,600 --> 00:22:16,040 Speaker 3: England amidst all of this is going to do. 394 00:22:16,480 --> 00:22:19,240 Speaker 11: I mean, I think right now the focus is still 395 00:22:19,280 --> 00:22:21,679 Speaker 11: pretty much on the Iran war and the impact that 396 00:22:21,680 --> 00:22:24,800 Speaker 11: it can have on the economy. I think the political 397 00:22:24,840 --> 00:22:27,880 Speaker 11: uncertainty and obviously the question mark of what will happen 398 00:22:27,960 --> 00:22:30,439 Speaker 11: to fiscal policy will be a crucial thing for the 399 00:22:30,480 --> 00:22:33,639 Speaker 11: bo's policy outlook, but it's just not We just know 400 00:22:33,800 --> 00:22:36,679 Speaker 11: very little of what's going to happen there. BOE policy 401 00:22:36,720 --> 00:22:39,359 Speaker 11: makers take policy announcements as given, so there's little they 402 00:22:39,400 --> 00:22:43,440 Speaker 11: can do now regarding the upcoming meeting, I mean, I'm 403 00:22:43,440 --> 00:22:47,919 Speaker 11: not expecting much. I think the most notable shift is 404 00:22:47,960 --> 00:22:50,960 Speaker 11: probably going to be in the vote split. So in 405 00:22:51,000 --> 00:22:55,560 Speaker 11: April we had hu Peel favoring a great hike. He's 406 00:22:55,560 --> 00:22:58,040 Speaker 11: probably going to be joined by one or two maybe 407 00:22:58,160 --> 00:23:03,879 Speaker 11: extra NPC members Meghan Green, Katherine Mann possibly, But in 408 00:23:03,920 --> 00:23:06,120 Speaker 11: the rest of the committee there's really not a lot 409 00:23:06,119 --> 00:23:09,080 Speaker 11: of appetite for a rate hike right now, so we 410 00:23:09,160 --> 00:23:12,880 Speaker 11: expect rates to be unchanged. I think the interesting thing 411 00:23:13,080 --> 00:23:15,280 Speaker 11: to watch is how the BIW is going to manage 412 00:23:15,320 --> 00:23:20,200 Speaker 11: its communications, because it has said that it has essentially 413 00:23:21,000 --> 00:23:23,359 Speaker 11: talked tough. It said that it was going to do 414 00:23:23,400 --> 00:23:27,880 Speaker 11: whatever was necessary to prevent the inflation from deviating from 415 00:23:27,920 --> 00:23:30,840 Speaker 11: the two percent target. But we just don't know what 416 00:23:30,920 --> 00:23:34,840 Speaker 11: will be the trigger for further action. If it's waiting 417 00:23:34,840 --> 00:23:36,919 Speaker 11: for second round effects to show up in the data, 418 00:23:37,119 --> 00:23:40,560 Speaker 11: that's wage data. It's a late cycle indicator, so it 419 00:23:40,600 --> 00:23:44,639 Speaker 11: will be late by defaults. So I think personally it 420 00:23:44,680 --> 00:23:46,800 Speaker 11: already has a lot of the information on the table 421 00:23:47,080 --> 00:23:50,200 Speaker 11: to deliver or not that hike. We expect a move 422 00:23:50,400 --> 00:23:54,280 Speaker 11: maybe in July, but I think if the buy continues 423 00:23:54,320 --> 00:23:57,480 Speaker 11: to act tough, to talk tough, sorry, but not act 424 00:23:57,560 --> 00:23:59,679 Speaker 11: tough and not follow up on that, then there's a 425 00:23:59,680 --> 00:24:01,400 Speaker 11: big risk to its credibility. 426 00:24:02,119 --> 00:24:05,560 Speaker 3: Much to come in terms of politics and economics here 427 00:24:05,600 --> 00:24:08,560 Speaker 3: in the UK in the coming days and months. Thank 428 00:24:08,560 --> 00:24:10,159 Speaker 3: you so much for being with me. That is that 429 00:24:10,200 --> 00:24:14,320 Speaker 3: Bloomberg's Jacob Reed and Anna Andrade really appreciate your input. 430 00:24:14,359 --> 00:24:16,840 Speaker 3: We will of course have full coverage of that all 431 00:24:16,880 --> 00:24:20,360 Speaker 3: important make Afield by election in England and the upcoming 432 00:24:20,400 --> 00:24:23,600 Speaker 3: Bank of England interest rate decision on Bloomberg platforms. I'm 433 00:24:23,640 --> 00:24:25,720 Speaker 3: Caroline Hepkee here in London. You can catch us every 434 00:24:25,760 --> 00:24:28,359 Speaker 3: weekday morning for Bloomberg Daybreak. You're at the beginning at 435 00:24:28,400 --> 00:24:32,200 Speaker 3: six am in London. That's one am on Wall Street, Nathan. 436 00:24:32,359 --> 00:24:35,160 Speaker 2: Thanks Caroline, and coming up on Bloomberg day Break weekend, 437 00:24:35,200 --> 00:24:37,200 Speaker 2: we'll look ahead to the rate decision coming up from 438 00:24:37,200 --> 00:24:41,200 Speaker 2: the Bank of Japan. I'm Nathan Hager, and this is Bloomberg. 439 00:24:52,200 --> 00:24:54,879 Speaker 2: This is Bloomberg day Break weekend, our global look ahead 440 00:24:54,880 --> 00:24:57,400 Speaker 2: at the top stories for investors in the coming week. 441 00:24:57,440 --> 00:25:00,280 Speaker 2: I'm Nathan Hager in Washington. This week I think of 442 00:25:00,359 --> 00:25:03,160 Speaker 2: Japan's got a great decision on the way. For more, 443 00:25:03,280 --> 00:25:05,840 Speaker 2: let's get to Doug Krisner, host of the Bloomberg Daybreak 444 00:25:05,880 --> 00:25:06,960 Speaker 2: Asia podcast. 445 00:25:07,520 --> 00:25:10,600 Speaker 4: Thanks Nathan. The market is bracing for the outcome of 446 00:25:10,640 --> 00:25:13,080 Speaker 4: this meeting, not so much because it fears an interest 447 00:25:13,200 --> 00:25:16,840 Speaker 4: rate hike, but because anything less than a decisive move 448 00:25:17,160 --> 00:25:20,640 Speaker 4: could create doubt about the boj's commitment to contain inflation. 449 00:25:21,240 --> 00:25:23,760 Speaker 4: For a closer look, let's bring in Bloomberg's Molly Smith. 450 00:25:23,880 --> 00:25:26,760 Speaker 4: Molly is a member of the Japan Korea Economy and 451 00:25:26,840 --> 00:25:30,720 Speaker 4: Government team. Today she joins us from Hong Kong. Thank 452 00:25:30,760 --> 00:25:33,400 Speaker 4: you for being here. Can we begin with the fact 453 00:25:33,720 --> 00:25:37,679 Speaker 4: that BOJ Governor Uwaita has been hospitalized for treatment of 454 00:25:37,800 --> 00:25:41,479 Speaker 4: a liver cyst infection, and the BOJ has said that 455 00:25:41,600 --> 00:25:44,919 Speaker 4: Uwaita's medical treatment means he will miss this two day meeting, 456 00:25:45,080 --> 00:25:47,919 Speaker 4: and I'm curious to get your take on what his 457 00:25:48,160 --> 00:25:52,119 Speaker 4: absence will do to shift the dynamic of this meeting 458 00:25:52,160 --> 00:25:52,600 Speaker 4: if at all. 459 00:25:53,800 --> 00:25:57,000 Speaker 8: Yeah, it's interesting. I think that the boj was maybe 460 00:25:57,080 --> 00:25:59,480 Speaker 8: doing just like a bit of level setting by saying 461 00:26:00,119 --> 00:26:02,520 Speaker 8: off the bat and what Otherwise, it was a fairly 462 00:26:02,680 --> 00:26:05,280 Speaker 8: short statement about this, but to say that he's expected 463 00:26:05,320 --> 00:26:08,359 Speaker 8: to be in the hospital for two weeks, so like, 464 00:26:08,440 --> 00:26:09,800 Speaker 8: you know, not like this is going to be some 465 00:26:09,920 --> 00:26:12,480 Speaker 8: swift thing and like leave any question as to if 466 00:26:12,480 --> 00:26:15,000 Speaker 8: he could make the meeting next week very clear that 467 00:26:15,040 --> 00:26:17,960 Speaker 8: he will not be there, but has a very competent 468 00:26:18,200 --> 00:26:23,000 Speaker 8: deputy in Yumino who will be taking the reins as 469 00:26:23,000 --> 00:26:26,199 Speaker 8: well as Uchietah, so that I don't think there's any concern, 470 00:26:26,280 --> 00:26:29,080 Speaker 8: and you know, the expertise of those two very experienced 471 00:26:29,480 --> 00:26:32,680 Speaker 8: central bankers in their own right, So I don't think 472 00:26:32,680 --> 00:26:36,040 Speaker 8: it doesn't change anything as far as like the the decision, 473 00:26:36,080 --> 00:26:38,560 Speaker 8: I think that's more or less made at this point. 474 00:26:39,600 --> 00:26:42,240 Speaker 8: It's I think, you know, what everyone's really just been 475 00:26:42,359 --> 00:26:45,600 Speaker 8: curious about is going to be how hawkish the press 476 00:26:45,640 --> 00:26:49,200 Speaker 8: conference would be, because at this point it's almost like 477 00:26:49,240 --> 00:26:52,680 Speaker 8: we're kind of looking for next week is a done 478 00:26:52,760 --> 00:26:54,399 Speaker 8: deal more or less, but like, are you going to 479 00:26:54,440 --> 00:26:57,040 Speaker 8: telegraph the possibility of another hike? By the end of 480 00:26:57,080 --> 00:26:59,560 Speaker 8: the year, because that's really I think where all of 481 00:26:59,600 --> 00:27:02,320 Speaker 8: the ex dictations to our turning to at this point, 482 00:27:02,560 --> 00:27:04,200 Speaker 8: and for the sake of the end I think will 483 00:27:04,240 --> 00:27:07,800 Speaker 8: also be quite important as we're still right very much 484 00:27:07,800 --> 00:27:09,520 Speaker 8: in intervention territory. 485 00:27:09,160 --> 00:27:12,879 Speaker 4: Definitely stuck at around one sixty against the greenbeck. I 486 00:27:12,920 --> 00:27:15,520 Speaker 4: think we heard from Uweita in the early part of 487 00:27:15,600 --> 00:27:18,600 Speaker 4: June and he was talking about the spillover effects of 488 00:27:18,680 --> 00:27:24,400 Speaker 4: higher oil prices leading to an upward deviation in underlying inflation. 489 00:27:24,680 --> 00:27:28,440 Speaker 4: Is oil still the big problem here in terms of 490 00:27:28,800 --> 00:27:31,760 Speaker 4: becoming a driver of higher inflation in Japan or there 491 00:27:31,760 --> 00:27:33,920 Speaker 4: are some other things that we need to consider. 492 00:27:35,359 --> 00:27:38,159 Speaker 8: It's definitely still a problem. I think that this is 493 00:27:38,200 --> 00:27:41,800 Speaker 8: where Takeichi and her administration comes in, and this is 494 00:27:41,840 --> 00:27:45,879 Speaker 8: really the focal point of where the extra budget is at. 495 00:27:46,200 --> 00:27:48,720 Speaker 8: You know, this is all about cushioning the impact from 496 00:27:49,080 --> 00:27:53,800 Speaker 8: the Middle East conflict, and that trying to continue these 497 00:27:53,840 --> 00:27:56,280 Speaker 8: subsidies that have been in place for quite some time 498 00:27:56,359 --> 00:28:01,639 Speaker 8: at capping the cost of gasoline or utility costs, especially 499 00:28:01,680 --> 00:28:04,520 Speaker 8: as we're heading into the hot summer months in Japan. 500 00:28:05,040 --> 00:28:08,160 Speaker 8: That that's really at the heart of where this extra 501 00:28:08,200 --> 00:28:08,960 Speaker 8: budget comes in. 502 00:28:09,680 --> 00:28:12,400 Speaker 4: Well, you mentioned the weakness and the currency. That's obviously 503 00:28:12,440 --> 00:28:15,800 Speaker 4: a big problem for inflation. How is it showing up 504 00:28:15,840 --> 00:28:18,800 Speaker 4: in daily life in Japan? You would know better than I. 505 00:28:20,920 --> 00:28:23,359 Speaker 8: Well, I think this is where my bias is. Somebody 506 00:28:23,400 --> 00:28:26,600 Speaker 8: who's still being paid in dollars comes in and that 507 00:28:26,720 --> 00:28:30,600 Speaker 8: I'm perhaps maybe a little uh, you know, not not 508 00:28:30,680 --> 00:28:33,840 Speaker 8: the best person to ask on that, But yeah, for 509 00:28:34,119 --> 00:28:38,280 Speaker 8: local people, of course, it's still it's incredibly frustrating, and 510 00:28:38,320 --> 00:28:43,080 Speaker 8: that you know, Japan is a place where it's basically 511 00:28:43,080 --> 00:28:46,720 Speaker 8: impossible to get fired, But that doesn't necessarily mean that 512 00:28:46,880 --> 00:28:50,120 Speaker 8: like your your job conditions and like you know, your 513 00:28:50,200 --> 00:28:53,360 Speaker 8: pay is like exactly like you know, something to really 514 00:28:53,600 --> 00:28:57,880 Speaker 8: smile and write home about that. It's still like quite 515 00:28:58,400 --> 00:29:01,080 Speaker 8: I think with the wage gains that like been showing 516 00:29:01,160 --> 00:29:02,800 Speaker 8: up now for the past few months, but there is 517 00:29:02,840 --> 00:29:06,040 Speaker 8: a lot of concern now that as inflation is rearing 518 00:29:06,040 --> 00:29:08,920 Speaker 8: back up again of that might be quite short lived. 519 00:29:09,000 --> 00:29:11,920 Speaker 8: So I think there definitely is a sense of frustration 520 00:29:12,880 --> 00:29:15,560 Speaker 8: at the week end for people who are obviously being 521 00:29:15,600 --> 00:29:16,200 Speaker 8: paid in yen. 522 00:29:16,960 --> 00:29:19,240 Speaker 4: So given the fact that the Japanese yen has been 523 00:29:19,320 --> 00:29:23,040 Speaker 4: so weak, particularly against the dollar, I'm wondering whether we've 524 00:29:23,040 --> 00:29:28,040 Speaker 4: seen a commensurate pullback in consumer activity, has consumer spending 525 00:29:28,080 --> 00:29:28,880 Speaker 4: declined at all. 526 00:29:30,120 --> 00:29:32,840 Speaker 8: I think that's where the concern is like starting to 527 00:29:32,880 --> 00:29:35,400 Speaker 8: shift for sure of like when this like really will 528 00:29:35,440 --> 00:29:39,080 Speaker 8: start to hit household spending that you've had like supportive 529 00:29:39,120 --> 00:29:44,080 Speaker 8: wages for like the past couple of months. But sentiment 530 00:29:44,200 --> 00:29:46,480 Speaker 8: is still quite poor and as like you know could 531 00:29:46,520 --> 00:29:49,000 Speaker 8: tell you from covering the US economy for five years, 532 00:29:49,000 --> 00:29:55,200 Speaker 8: that sentiment is hardly a perfect predictor of consumer's actual behavior, 533 00:29:55,400 --> 00:29:58,080 Speaker 8: but it's definitely still worth keeping an eye on. 534 00:29:58,880 --> 00:30:01,640 Speaker 4: So the other side of a weekend story is obviously 535 00:30:01,680 --> 00:30:06,840 Speaker 4: it makes exports cheaper to offshore markets. Is that the 536 00:30:06,880 --> 00:30:11,280 Speaker 4: case right now? Or is are things perhaps slow? And 537 00:30:11,360 --> 00:30:14,160 Speaker 4: I'm thinking about the American market and the tariff story. 538 00:30:14,240 --> 00:30:15,960 Speaker 4: I mean, what's the dynamic when you look at the 539 00:30:16,000 --> 00:30:16,880 Speaker 4: export side. 540 00:30:16,680 --> 00:30:20,320 Speaker 8: Of the story that's still quite positive? And I think 541 00:30:20,400 --> 00:30:23,520 Speaker 8: this is you know, kind of similar in Korea too, 542 00:30:23,680 --> 00:30:26,760 Speaker 8: where you still are kind of counting on like this 543 00:30:26,880 --> 00:30:30,600 Speaker 8: AI story to really carry a lot of the growth 544 00:30:30,800 --> 00:30:34,680 Speaker 8: picture right now. And that's like exactly where you get 545 00:30:34,720 --> 00:30:37,400 Speaker 8: all of these talks about k shaped economies around the 546 00:30:37,400 --> 00:30:41,320 Speaker 8: world that when if you are like a supplier of 547 00:30:41,760 --> 00:30:46,840 Speaker 8: anything AI chips related that that's been a really great 548 00:30:46,920 --> 00:30:50,640 Speaker 8: export story, I mean for Korea especially, But then you 549 00:30:50,680 --> 00:30:54,120 Speaker 8: start to wonder, like how much is that wealth being distributed? 550 00:30:55,040 --> 00:30:58,400 Speaker 8: Is it really like a sustainable growth story? Is it 551 00:30:58,560 --> 00:31:01,080 Speaker 8: an equitable one? And seem to be that way. 552 00:31:01,600 --> 00:31:04,320 Speaker 4: So MOLLI is you're reporting on the Japanese economy, what 553 00:31:04,360 --> 00:31:06,200 Speaker 4: are some of the things that you wrestle with? What 554 00:31:06,240 --> 00:31:09,280 Speaker 4: are some of the narratives that that you're trying to understand? 555 00:31:10,240 --> 00:31:13,800 Speaker 8: I think it's again it's still like I think I 556 00:31:13,880 --> 00:31:15,840 Speaker 8: might have said this when we spoke last time, Doug, 557 00:31:15,880 --> 00:31:19,240 Speaker 8: but it's still like quite fascinating coming from the US 558 00:31:19,400 --> 00:31:25,040 Speaker 8: perspective of like inflation that is still in the one 559 00:31:25,120 --> 00:31:29,960 Speaker 8: percent handle neighborhood, that this is like such a cause 560 00:31:30,000 --> 00:31:32,400 Speaker 8: of concern. I understand that a lot of this is 561 00:31:32,440 --> 00:31:35,640 Speaker 8: still more I'm like pre like, you know, concern of 562 00:31:35,680 --> 00:31:38,080 Speaker 8: where inflation is going, not just where it is right 563 00:31:38,120 --> 00:31:40,800 Speaker 8: now or point two. I mean, that's like that's a 564 00:31:40,840 --> 00:31:45,320 Speaker 8: scary number. Inflation is nowhere near that in Japan here. 565 00:31:45,360 --> 00:31:49,120 Speaker 8: But you see like the response from you know, fiscal 566 00:31:49,680 --> 00:31:52,080 Speaker 8: authorities more so than monetary at this point that like, 567 00:31:52,960 --> 00:31:55,360 Speaker 8: I feel like it creates in my head. It makes 568 00:31:56,200 --> 00:31:58,680 Speaker 8: you would think that situation is much more dire, and 569 00:31:59,040 --> 00:32:02,760 Speaker 8: perhaps it is not necessarily downplaying it, but you just 570 00:32:02,800 --> 00:32:05,720 Speaker 8: like wonder of, like what if there ever was inflation 571 00:32:05,840 --> 00:32:07,840 Speaker 8: in Japan like it's been in the rest of the world, 572 00:32:07,880 --> 00:32:09,640 Speaker 8: Like what kind of a response would that take. 573 00:32:09,880 --> 00:32:13,840 Speaker 4: There's an entire generation in that country that has no 574 00:32:14,080 --> 00:32:18,040 Speaker 4: idea that prices are capable of rising, right that they 575 00:32:18,080 --> 00:32:22,560 Speaker 4: have lived with deflation or a kind of disinflation for 576 00:32:22,600 --> 00:32:27,760 Speaker 4: such a long time. It's been generations. It's remarkable story. Molly, 577 00:32:27,840 --> 00:32:29,800 Speaker 4: thank you so very much. It's always a pleasure. Save 578 00:32:29,920 --> 00:32:33,200 Speaker 4: travels back to Tokyo. By the way, Bloomberg's Molly Smith 579 00:32:33,280 --> 00:32:36,560 Speaker 4: joining from Hong Kong. Let's stay in Hong Kong because 580 00:32:36,720 --> 00:32:40,360 Speaker 4: last week the Bloomberg invest Hong Kong Summit took place, 581 00:32:40,440 --> 00:32:43,360 Speaker 4: and it was there the top investors, asset managers, and 582 00:32:43,400 --> 00:32:48,760 Speaker 4: policymakers gathered to discuss Asia and global market trends. It 583 00:32:48,840 --> 00:32:51,240 Speaker 4: was there we had a chance to speak with Susan Chan. 584 00:32:51,480 --> 00:32:54,880 Speaker 4: Susan is head of Asia Pacific at Blackrock, and she 585 00:32:55,000 --> 00:32:56,840 Speaker 4: spoke with Bloomberg's Rebecca Sin. 586 00:32:57,080 --> 00:32:59,720 Speaker 12: You know crypto. You guys do have the largest bitcoenty 587 00:32:59,760 --> 00:33:01,960 Speaker 12: tip globally. Let's talk about crypt Hong Kong is trying 588 00:33:02,000 --> 00:33:04,240 Speaker 12: to be the crypto hub. We've done a lot in tokenization. 589 00:33:04,360 --> 00:33:06,880 Speaker 12: Now in Hong Kong you can buy an ETF and 590 00:33:06,880 --> 00:33:09,360 Speaker 12: then switch it into gold and get gold jewelry or 591 00:33:09,400 --> 00:33:12,440 Speaker 12: gold bars back. What's Blackrock doing in this space? 592 00:33:12,920 --> 00:33:17,520 Speaker 7: So we have, as you mentioned, we have our crypto ETFs. 593 00:33:18,840 --> 00:33:23,640 Speaker 7: We continue to see demand for that and that will continue. 594 00:33:23,720 --> 00:33:27,440 Speaker 7: We are working across the region in many countries to 595 00:33:27,480 --> 00:33:32,080 Speaker 7: see how we can bring that capacity into the countries. 596 00:33:32,360 --> 00:33:36,560 Speaker 7: We've actually listed in Australia and we're looking at other 597 00:33:36,640 --> 00:33:40,080 Speaker 7: areas that we can do more in, including Hong Kong. 598 00:33:40,840 --> 00:33:44,640 Speaker 12: So, if we look at the investment opportunities across Asia Pacific, 599 00:33:44,640 --> 00:33:48,120 Speaker 12: where does black Rock seed as the most compelling investment opportunities? 600 00:33:49,000 --> 00:33:53,000 Speaker 7: So I think there are a few areas right. So 601 00:33:53,080 --> 00:33:56,920 Speaker 7: if we look at countries because of AI, we're seeing 602 00:33:56,960 --> 00:34:01,760 Speaker 7: structural shifts. Where are they taking place? Korea, for example, 603 00:34:01,920 --> 00:34:04,880 Speaker 7: is one big shift. If we look at what's happening 604 00:34:04,960 --> 00:34:09,000 Speaker 7: there with just the AI team playing out and taking 605 00:34:09,040 --> 00:34:13,160 Speaker 7: companies like Samsung and High Necks to an incredible level. 606 00:34:14,120 --> 00:34:17,400 Speaker 7: And even last week when we had the MSCI rebalance, 607 00:34:18,840 --> 00:34:22,040 Speaker 7: the weight of Korea in the EM markets went from 608 00:34:22,239 --> 00:34:25,399 Speaker 7: eight nine percent to now twenty two percent. These are 609 00:34:25,520 --> 00:34:30,319 Speaker 7: fundamental shifts that are not gonna, you know, revert. So 610 00:34:30,360 --> 00:34:35,959 Speaker 7: that's Korea, that's Taiwan. In addition, we see Japan as 611 00:34:36,000 --> 00:34:39,880 Speaker 7: a destination now because of the end of deflation. Of 612 00:34:39,920 --> 00:34:41,839 Speaker 7: course that's going to take some time to play out, 613 00:34:42,160 --> 00:34:46,240 Speaker 7: but there is a lot of interest in Japan. In particular, 614 00:34:46,400 --> 00:34:48,800 Speaker 7: in Japan, I would say it's in the private market space, 615 00:34:49,200 --> 00:34:52,480 Speaker 7: in the private credit space, in the infrastructure space, So 616 00:34:52,800 --> 00:34:57,040 Speaker 7: that's another area that we see a tremendous opportunity. And 617 00:34:57,080 --> 00:35:00,680 Speaker 7: then in the Aussian countries, what we what are seeing 618 00:35:00,920 --> 00:35:06,479 Speaker 7: is this need for diversification and this need to want 619 00:35:06,520 --> 00:35:10,640 Speaker 7: to invest outside of home country. Part of it is 620 00:35:10,719 --> 00:35:13,920 Speaker 7: driven because of the weaker currencies in the Asian countries. 621 00:35:14,719 --> 00:35:17,760 Speaker 7: You know, they need to diversify to have dollar assets 622 00:35:18,440 --> 00:35:22,960 Speaker 7: so that they can balance their portfolios over time, and 623 00:35:24,000 --> 00:35:28,239 Speaker 7: broadly we're seeing clients wanting to further diversify. What I 624 00:35:28,239 --> 00:35:31,920 Speaker 7: would say, Rebecca, is that the traditional sixty to forty 625 00:35:32,320 --> 00:35:38,280 Speaker 7: type of portfolio allocation is really underperforming, and we're finding 626 00:35:38,320 --> 00:35:41,960 Speaker 7: that the need to think about that portfolio on a 627 00:35:41,960 --> 00:35:47,920 Speaker 7: holistic manner across both equity fixing come private public is 628 00:35:48,040 --> 00:35:51,840 Speaker 7: really critical. Today. We're also seeing that you have to 629 00:35:51,960 --> 00:35:55,600 Speaker 7: look very and be very deliberate about how you select 630 00:35:55,920 --> 00:35:59,160 Speaker 7: what's in each of the categories. Is no longer that 631 00:35:59,200 --> 00:36:02,799 Speaker 7: you can just go buy an active equity fund and 632 00:36:02,960 --> 00:36:08,759 Speaker 7: expect to generate the returns inactive. And also there is 633 00:36:08,760 --> 00:36:14,040 Speaker 7: the demographic challenges of every country in Asia and we 634 00:36:14,120 --> 00:36:18,799 Speaker 7: are living longer, We have pension challenges across all and 635 00:36:19,000 --> 00:36:22,480 Speaker 7: portfolios of the traditional sixty forty are not going to 636 00:36:22,600 --> 00:36:25,920 Speaker 7: generate the outcomes that we're gonna need for the future. 637 00:36:26,280 --> 00:36:29,839 Speaker 7: So this is why private markets is becoming such an 638 00:36:29,960 --> 00:36:35,600 Speaker 7: incredibly powerful asset class within the longer term portfolios because 639 00:36:35,640 --> 00:36:38,640 Speaker 7: you need it and it fits very nicely in so 640 00:36:38,760 --> 00:36:43,320 Speaker 7: many ways. Right in terms of long term returns. You know, 641 00:36:43,440 --> 00:36:47,560 Speaker 7: when you're saving for the future, you're less dependent on 642 00:36:47,560 --> 00:36:51,120 Speaker 7: short term liquidity, but you need to be able to 643 00:36:51,160 --> 00:36:54,560 Speaker 7: see those returns and also what you're investing in in 644 00:36:54,640 --> 00:36:58,080 Speaker 7: private markets nowadays, we always look at how do we 645 00:36:58,160 --> 00:37:02,000 Speaker 7: help the countries, So infrastructure, you invest in country, so 646 00:37:02,040 --> 00:37:04,440 Speaker 7: it's a way for you to also, as an investor, 647 00:37:05,280 --> 00:37:07,960 Speaker 7: have a part in the development of your country. 648 00:37:08,080 --> 00:37:10,880 Speaker 4: That was Susan Chan, head of Asia Pacific at Blackrock, 649 00:37:10,920 --> 00:37:14,680 Speaker 4: speaking with Bloomberg's Rebecca Sin. I'm Doug Prisner. You can 650 00:37:14,719 --> 00:37:18,280 Speaker 4: catch us weekdays for the Daybreak Asia podcast. It's available 651 00:37:18,320 --> 00:37:19,880 Speaker 4: wherever you get your podcast. 652 00:37:20,280 --> 00:37:23,479 Speaker 2: Nathan, Thanks Doug, and that does it for this edition 653 00:37:23,560 --> 00:37:27,120 Speaker 2: of Bloomberg Daybreak Weekend. Join us again Monday morning at 654 00:37:27,120 --> 00:37:29,760 Speaker 2: five am Wall Street Time for the latest on markets 655 00:37:29,760 --> 00:37:32,160 Speaker 2: overseas and the news you need to start your day. 656 00:37:32,520 --> 00:37:35,800 Speaker 2: I'm Nathan Hager. Stay with us. Top stories and global 657 00:37:35,880 --> 00:37:46,800 Speaker 2: business headlines are coming up right now.