Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 2: top stories in the coming week from our Daybreak anchors
Speaker 2: all around the world. Straight Ahead on the program, we'll
Speaker 2: look to the next policy decision from the FET. I'm
Speaker 2: Nathan Hager in Washington.
Speaker 3: I'm Caroline Hepkeit in London, where we're asking what's next
Speaker 3: for the UK as it sits on the precipice of
Speaker 3: two big economic and political decisions.
Speaker 4: I'm Doug Christner looking ahead at what's expected to be
Speaker 4: a rate hike next week from the Bank of Japan.
Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 2: Good day to you. I'm Nathan Hager. We begin today's
Speaker 2: program with the Federal Reserve. All eyes will be on
Speaker 2: the world's most important central bank when it begins its
Speaker 2: June policy meeting on Tuesday and issues its decision Wednesday,
Speaker 2: the first decision and news conference for new FED chair
Speaker 2: Kevin worsh For more and what to expect, we are
Speaker 2: joined by the man who will be in the room
Speaker 2: when the decision comes down, Michael McKee, International economics and
Speaker 2: policy correspondent for Bloomberg Radio and Television. No pressure, right, Mike,
Speaker 2: I mean how much pressure is Warsh facing? Is he
Speaker 2: under pressure right now?
Speaker 5: Yes, he's under pressure, maybe a little bit different than
Speaker 5: people anticipated. When the President was first nominating him, there
Speaker 5: was a feeling that, of course Trump would be on
Speaker 5: his case immediately to start lowering interest rates. The President
Speaker 5: said at one point, I'm not going to pick anybody
Speaker 5: who won't cut interest rates. But since then we've seen
Speaker 5: inflation flow up quite a bit because of the war
Speaker 5: that Donald Trump started. So Trump seems to be willing
Speaker 5: to give him the benefit of the doubt still as
Speaker 5: a cloud hanging over Warsh and his nomination and his
Speaker 5: ascension to the chair, and so people will be watching
Speaker 5: to see what he does to try to demonstrate his independence.
Speaker 5: He doesn't have to make a decision, he doesn't have
Speaker 5: to cut rates, he doesn't have to raise rates. They
Speaker 5: can just leave them where they are. But does he
Speaker 5: say the right things that the market wants to hear
Speaker 5: about the FED caring about inflation and making sure that
Speaker 5: they will do the right thing as opposed to just
Speaker 5: automatically wanting to cut rates.
Speaker 2: Well, let's talk about what the market is looking for
Speaker 2: in terms of how the Fed could react to the data.
Speaker 2: We are still seeing elevated price pressures, a little bit
Speaker 2: of shakiness, I think you could say in the labor
Speaker 2: market right now. How does the FED react to that
Speaker 2: in this meaning.
Speaker 5: Well, the interesting question and probably not going to be
Speaker 5: too controversial, is whether they drop the guidance that they've
Speaker 5: had in there by saying that, you know, in considering
Speaker 5: any further rate moves, which everybody reads as a sign
Speaker 5: of in considering further rate cuts. That was the phrase
Speaker 5: that led to the three descents last time. And so
Speaker 5: they'll probably take that out and leave the statement fairly
Speaker 5: and and I and leave it open as neutral as
Speaker 5: they can be, which will then lead us into the
Speaker 5: summary of economic projections and the dot plot. Do they
Speaker 5: still foresee rate cuts in the dot plot either this
Speaker 5: year or next, or do we start seeing people think
Speaker 5: that they need to move rates up? Are there going
Speaker 5: to be any higher dots? And then we get Kevin
Speaker 5: Warsh and we'll see what he says about all of that.
Speaker 2: And we'll see what he says about the dot plot itself. Right,
Speaker 2: I mean, even before he became chair, he has been
Speaker 2: critical of a lot of the communication that the FED
Speaker 2: puts out there. Do you expect him to say anything
Speaker 2: more about FED communication?
Speaker 5: Well, I'm sure he's going to be asked. I don't
Speaker 5: know if he's ready yet to say exactly what he
Speaker 5: wants to do, but he has made it clear he
Speaker 5: thinks a that federal Federal Reserve officials talk too much,
Speaker 5: that it becomes a cacaphany and it doesn't help the markets.
Speaker 5: And he's also been an opponent of the dot plot,
Speaker 5: feeling it locks members into their positions longer than they
Speaker 5: should be if the circumstances change. It's very early. He's
Speaker 5: only been in the job for about two weeks, given
Speaker 5: the length of time it took to get him confirmed.
Speaker 5: So he may just let the process go forward this month,
Speaker 5: but he'll be asked about it, and so it'll be
Speaker 5: interesting to see whether he says, I want to get
Speaker 5: rid of it or I'm going to talk to my
Speaker 5: colleagues about it, or I haven't thought about it yet.
Speaker 2: I don't know if we could call this an elephant
Speaker 2: in the room, Mike, but we do know that a
Speaker 2: former chair is going to be in the room in
Speaker 2: Jay Powell. Does Powell fade away in this meeting or
Speaker 2: what's it going to mean for the Central Bank to
Speaker 2: have two chairs at the same meeting.
Speaker 5: I suspect that Jay powellill do his best to fade away,
Speaker 5: to fade into the background. It would probably be some
Speaker 5: sort of really strange decision that would lead him to dissent,
Speaker 5: and that would be the only news he would make
Speaker 5: out of it. He's not going to be talking to us.
Speaker 5: We won't know from the transcripts what he said, what
Speaker 5: positions he took, and I don't think we're going to
Speaker 5: hear from him a lot Outside of all of this.
Speaker 5: He's remaining on the Fed, obviously for the reasons that
Speaker 5: we all know about with his dispute with the administration,
Speaker 5: but he has made it clear he doesn't want to
Speaker 5: be the shadow FED chair. He doesn't want to interrupt
Speaker 5: or interfere with what Kevin Warsh is doing. So while
Speaker 5: he will play a role. He'll get his speaking moments
Speaker 5: during the meeting. We won't know about it, and that'll
Speaker 5: be the way he likes it.
Speaker 2: Thanks for this, Mike, really looking forward to your coverage
Speaker 2: this week. That is Michael McKee, international economics and Policy
Speaker 2: correspondent for Bloomberg Radio and Television. Ahead of Kevin Warsh's
Speaker 2: first policy decision this Wednesday, we will of course have
Speaker 2: full coverage for you right here on Bloomberg Radio. Let's
Speaker 2: take a look now at some stocks making news in
Speaker 2: the week ahead. I'm Nathan Hager, joined by Bloomberg's Judy LaGrue,
Speaker 2: and we're looking forward to some more earnings this week.
Speaker 2: We're going to hear from Kroger Thursday. Look at what
Speaker 2: Bloomberg Intelligence has to say about the grocery chain. Expectations
Speaker 2: here don't look too great, Judy.
Speaker 6: That's right. Bloomberg Intelligence analysts are seeing that Kroger is
Speaker 6: set for its weakest sales and profit growth of the year.
Speaker 6: So I think for them it's really like the focus
Speaker 6: on that is the seam source sales growth, which is
Speaker 6: expected to be the lowest since August twenty twenty four.
Speaker 6: But Nathan, I have a question for you. Yeah, talk
Speaker 6: to me a little bit about how you think about
Speaker 6: grocery shopping. Do you prefer to go in person? Do
Speaker 6: you prefer to go through an app to get your
Speaker 6: groceries delivery?
Speaker 2: I go to the grocery store almost every day just
Speaker 2: to fill up on like the one recipe that I
Speaker 2: have to do every day. So yeah, I'm an in
Speaker 2: store person.
Speaker 6: Kind of okay, interesting, you know, I am here in
Speaker 6: Manhattan and I miss going to the grocery store in person.
Speaker 6: I am a transplant, and so I've had to adjust
Speaker 6: to you getting delivery over going into the grocery store.
Speaker 6: But it is an experience and I do like and
Speaker 6: miss that experience greatly.
Speaker 7: Yeah.
Speaker 2: Well, I mean these grocery stores they still get the business,
Speaker 2: you know, whether whether they're getting it delivered or not. Right,
Speaker 2: But I mean, is it just same store sales alone
Speaker 2: that are potentially going to be dragging Kroger's results down?
Speaker 6: I mean, truly, for Kroger, it's a story of trying
Speaker 6: to catch up to where the business is. And so
Speaker 6: Kroger primarily is trying to spur growth than their grocery
Speaker 6: business through their e commerce fulfillment. So that's through partnerships
Speaker 6: with Instacart, with door Dash, with Uber Eats, and right
Speaker 6: now they're really seeing that basically a lot of their
Speaker 6: business is coming from people who are ordering delivery on
Speaker 6: an increasing basis, and so in tandem with that, there
Speaker 6: is for Kroger a lot of thought into price cuts
Speaker 6: and what that looks like for them as they compete
Speaker 6: with other grocery store providers who deliver like Amazon, like Walmart.
Speaker 6: And so one thing I was looking at was City
Speaker 6: researchers really noting how vocal the CEO, Greg Foreman, what
Speaker 6: foreign was in the press about price cuts on the
Speaker 6: day that Walmart reported their earnings, and City analy is
Speaker 6: called that quote strange timing and not coincidental, which I liked,
Speaker 6: you know, I thought that was really interesting and good
Speaker 6: language to use. But they certainly perceived the talk about
Speaker 6: price cuts as quote poking the bear.
Speaker 2: Seriously, when you think about, you know, just how expensive
Speaker 2: everything is right now, it's very top of mind for anybody,
Speaker 2: whether they're going into the store or getting it by delivery.
Speaker 2: But before we hear from Kroger on Thursday, we're going
Speaker 2: to get some more earnings from Carmas on Wednesday. How's
Speaker 2: the car market looking right?
Speaker 6: Now, Judy, I mean, look, I think that there's a
Speaker 6: lot going on and the car market is a reflection
Speaker 6: of what we're seeing in the economy. I think, really
Speaker 6: Carmas is an interesting company stock earning result to watch
Speaker 6: because used car sales are certainly on top of mind
Speaker 6: for a lot of us in terms of it's read
Speaker 6: on the consumer, it's read on affordability for used cars,
Speaker 6: auto credit, whether the retail turnaround is actually working. I mean,
Speaker 6: there's so many roads that lead to use car purchasing.
Speaker 6: So at least for Carmas, what we're looking at in
Speaker 6: terms of the street and analysts, they're looking at and
Speaker 6: adjusted earnings per share of about ninety seven cents, which
Speaker 6: is down thirty percent from this time last year, and
Speaker 6: revenue was also expected to be slightly lower year over year.
Speaker 6: And so I think that is really sort of reflective
Speaker 6: of where we're seeing used car sales just as an economy,
Speaker 6: as a country, there's just strain there. And so as
Speaker 6: a result, investors aren't really looking for a blowout growth
Speaker 6: story here. They're looking for evidence that the worst of
Speaker 6: this storm, in terms of really wavering and dropping used
Speaker 6: car interest in sales, is starting to stabilize and sort
Speaker 6: of steady out as far as CarMax.
Speaker 2: And what more stock we're going to watch maybe for
Speaker 2: the next few weeks here with the World Cup on
Speaker 2: is Draft Kings do you think we're going to see
Speaker 2: investors get a payoff from the tournament?
Speaker 6: Judy, Oh goodness, this is a really this is the
Speaker 6: crux of the question here. I think it depends on
Speaker 6: a number of things. It depends on whether the World
Speaker 6: Cup will bring in more betters, more dollars waged, or
Speaker 6: more repeat customers, and that is something that in my view,
Speaker 6: remains to be seen. I think we'll have to sort
Speaker 6: of understand what the handle or the total amount bet
Speaker 6: looks like as the World Cup gets underway, and whether
Speaker 6: or not Draft Kings can turn this big event into
Speaker 6: new users without spending too much on promotions, which I
Speaker 6: think is really they're set up for that. Analyst Ian
Speaker 6: Moore at Bernstein really pointed out Draft Kings as being
Speaker 6: the clearest prediction market sports betting winner of the World Cup,
Speaker 6: and I think those are really really strong words, and
Speaker 6: for that, I think it's certainly something to watch from
Speaker 6: a perspective of stock movement as it pertains to the
Speaker 6: perception of the amount of betters who are jumping in
Speaker 6: or even increasing their wagers as a result of the
Speaker 6: World Cup.
Speaker 2: Yeah, we'll be keeping an eye on it as the
Speaker 2: tournament goes on. Thanks for this, Judy, great having you
Speaker 2: on with us.
Speaker 8: Thanks guy.
Speaker 2: That's Judy LaGrue, reporter for Bloomberg News and coming up
Speaker 2: on Bloomberg day Break weekend, we'll look at what's next
Speaker 2: for the UK as it's on the precipice of two
Speaker 2: big economic and political decisions. I'm Nathan Hager and this
Speaker 2: is Bloomberg. This is Bloomberg Daybreak Weekend, our global look
Speaker 2: ahead at the top stories for investors in the coming week.
Speaker 2: I'm Nathan Hager in Washington. Up later in the program,
Speaker 2: we'll look to a monetary policy decision from the Bank
Speaker 2: of Japan. But in the coming days, a high stakes
Speaker 2: election takes place in the UK on the same day
Speaker 2: as the Bank of England's Monetary Policy Committee meets to
Speaker 2: make its latest interest rate decision. With both economics and
Speaker 2: politics at a crucial juncture, how will the two interact
Speaker 2: in the UK? For more, Let's go to London and
Speaker 2: bring in Bloomberg day Break. You're a banker, Caroline Hepger Nathan.
Speaker 3: The by election in Makerfield in the coming days will
Speaker 3: take place in a constituency of former mining towns, some
Speaker 3: leafy villages and commuter suburbs between Liverpool and Manchester in
Speaker 3: the north of England. It could have very significant consequences
Speaker 3: for the future of Britain. Just about seventy seven thousand
Speaker 3: voters will potentially decide the next UK leader, who will
Speaker 3: govern over a population of some seventy million. Its Member
Speaker 3: of Parliament, Josh Simmons, resigned to give former Greater Manchester
Speaker 3: mayor Andy Burnham a route back into Parliament, a prerequisite
Speaker 3: for an expected leadership challenge against Prime Minister Kirs Starmer,
Speaker 3: but the competition is far from a foregone conclusion. Once
Speaker 3: a safe Labour seat due to the area's historic ties
Speaker 3: to mining and trade unions, is yet another place where
Speaker 3: the governing party has sheared support to the populist and
Speaker 3: anti immigrant Reform UK Party led by Nigel Farage. The
Speaker 3: constituency is a deliberate choice though for Burnham, say his
Speaker 3: backers to fight a tight contest where there is a
Speaker 3: direct threat from Reform so he can show how he
Speaker 3: would beat them in the next general election, which must
Speaker 3: be called before August twenty twenty nine. Burnham is not
Speaker 3: the only would be challenger, though to Starmer, former Health Sexuary,
Speaker 3: where Streeting is also expected to mount a bid for
Speaker 3: the Labor leadership should a contest take place now. He
Speaker 3: recently spoke to Bloomberg's Francin in Laqua.
Speaker 9: I think Andy will win and make a field when
Speaker 9: none of us and the included taking it for granted.
Speaker 9: It comes back to this fundamental point, though, which is
Speaker 9: I can see Andy's strengths. I think he needs to
Speaker 9: be tested. I think his ideas need to be tested,
Speaker 9: and so do mine. And I'm probably a rare thing
Speaker 9: in the Labor Party. I'm a monarchist, but this is
Speaker 9: one coronation that I I'm not enthusiastic about. I think
Speaker 9: you need a debate. I think you need a battle
Speaker 9: of ideas. He needs to set out his store, I
Speaker 9: need to set out mine.
Speaker 3: That was Labor politician West Treating, speaking to Bloomberg's Farcy
Speaker 3: and Lacqua at the London south By Southwest Festival. The
Speaker 3: UK stands at the precipice in no small part due
Speaker 3: to the state of the economy and voters who don't
Speaker 3: usually turn out in enormous numbers for by elections. We'll
Speaker 3: be going to the polls on the very same day
Speaker 3: as the Bank of England's Monetary Policy Committee makes its
Speaker 3: decision on interest rates as it assesses the extent to
Speaker 3: which higher energy costs are affecting domestic prices. We're going
Speaker 3: to dig into both topics now with Bloomberg's Politics reported,
Speaker 3: Jacob Reid and our economists covering the UK and the
Speaker 3: euro Area, Ana Andrede. Welcome to both of you. So
Speaker 3: i'll call it the two Andy's Andy Burnham and Andrew Bailey.
Speaker 3: Lots of candidates of course running in the by election,
Speaker 3: and lots of policymakers at Bank of England too. But
Speaker 3: that's just my shorthand for really thinking about next Thursday. Jacob,
Speaker 3: why do you think, though, that the vote in make
Speaker 3: a Field is so important?
Speaker 10: Oh my goodness. I mean it's completely bizarrest by election
Speaker 10: in a you know, we're going to be seventy thousand
Speaker 10: voters or something like that, and it could reshape British politics.
Speaker 10: We've got a Prime Minister, Keir Starmer, who's historically unpopular.
Speaker 10: The Labor Party is seeing those polls we're very worried.
Speaker 10: And Andy Burnham, the Mayor of Manchester of Greater Manchester,
Speaker 10: is the most popular politician in the country. The issue
Speaker 10: is he can't become Labor Leader and Prime Minister without
Speaker 10: being in Parliament. So one of the Labor MPs stood
Speaker 10: down and said, go on, Andy, running this by election
Speaker 10: and if you win, you'll be able to challenge for
Speaker 10: the leadership. And it's a big if. It's a big if,
Speaker 10: it's not a done deal.
Speaker 3: No, So what does the polling look like? What have
Speaker 3: candidates actually been campaigning on in quite an unusual contest obviously.
Speaker 10: Yeah, so there have been two poles. They both put
Speaker 10: Andy Burnham ahead by different amounts. For most recent one
Speaker 10: was ten percentage points ahead, which you would say is
Speaker 10: relatively comfortable. But it's notoriously difficult to do accurate polling
Speaker 10: in small constituencies to get an accurate sample. So while
Speaker 10: people probably do think Andy Burnham will win, there's a
Speaker 10: strong challenge from Robert Kenyan, who's the Reform UK candidate,
Speaker 10: and he's basically saying that Andy Burnham is using this
Speaker 10: constituency as a stepping stone for his personal ambition and
Speaker 10: that you know he's still labor, and Labour's very unpopular.
Speaker 3: Is there anyone in the North of England who doesn't
Speaker 3: know the name Andy Burnham? I doubt it. He's certainly
Speaker 3: playing on home turf in terms of that record. And
Speaker 3: I know you've spent lots of time in the constituency
Speaker 3: and in the North of England thinking about that. So
Speaker 3: what do you kind of extract from his record?
Speaker 10: The big thing is buses. I mean to go to
Speaker 10: make Afield ashually in Makeerfield, the town center and you
Speaker 10: see these big yellow buses going past you. And his
Speaker 10: big policy has been taken them back under public control,
Speaker 10: capping the fairs to two pounds, making sure they do
Speaker 10: roots for the kind of in the middle of nowhere,
Speaker 10: but a bit of a lifeline for those people. That's
Speaker 10: his big thing. And also Greater Manchester is just an
Speaker 10: area of it's doing really well. The UK economy is
Speaker 10: quite gloomy, and this is a city, a city region.
Speaker 10: It's really been outpacing a lot of a lot of
Speaker 10: the country. It feels like things are happening. Buildings are
Speaker 10: going up. So he's kind of trying to capitalize on
Speaker 10: that good vibe.
Speaker 3: Really yeah, absolutely well, Anna, let's bring you in at
Speaker 3: this point, then we know that the UK is facing
Speaker 3: obviously political turmoil with all of this, just walk us
Speaker 3: through then the economic picture right now for.
Speaker 11: The U, Yeah, definitely. So obviously we've had a very
Speaker 11: strong start to the year. We've seen real GDP gaining
Speaker 11: zero point six percent quarter on quarter. That's very unusual.
Speaker 11: There's all these question marks about whether that reflects strong
Speaker 11: momentum in underlying activity or actually it's just a problem
Speaker 11: that the OS is not fully capturing a shift in
Speaker 11: the pattern of economic activity. Regardless, we expect and our
Speaker 11: outlook for the next coming quarters is actually quite gloomy.
Speaker 11: And that's obviously on the Iran war. So as a
Speaker 11: net importer of energy, they run more to rising energy costs,
Speaker 11: means that there'll be a taxflationary shock to the economy.
Speaker 11: We're going to see headline inflation increasing faster than we
Speaker 11: were expecting. We've actually revised our forecast compared to the
Speaker 11: pre war We see it higher by one point five
Speaker 11: percentage points by the start of next year. That's obviously
Speaker 11: a squeeze, real income squeeze for households, and and on
Speaker 11: top of that you had tightening and funding conditions because
Speaker 11: markets are no longer pricing in rate cuts from the BOE.
Speaker 11: So our outlook even before sort of all of this
Speaker 11: political thermol was for extreme weak growth over the next
Speaker 11: coming quarters.
Speaker 8: Yeah.
Speaker 3: Absolutely, And you know we don't have a resolution to
Speaker 3: the war in Iran and that is certainly a big,
Speaker 3: big challenge. And I suppose going back to the kind
Speaker 3: of politics, that's one of the big questions, isn't it
Speaker 3: how somebody like Andy Burnham would translate his policies nationally,
Speaker 3: what his bigger economic plans might be when the backdrop
Speaker 3: we know has been massively challenging for Kistoma, the currently leader,
Speaker 3: and even leaders.
Speaker 10: Before that, exactly, it would be difficult for anyone coming in.
Speaker 10: Broadly speaking, Burnham has said he wants to take more
Speaker 10: control of essential industries, so the bus is a key example,
Speaker 10: or some energy water. He stopped short of saying he
Speaker 10: would want to nationalize. It might be more regulation. He's
Speaker 10: also talked a bit about a new way of doing politics,
Speaker 10: devolving more tax and spend powers to local areas and
Speaker 10: maybe even changing the electoral system. And historically he's been
Speaker 10: in favor of rejoining the EU, but he knows he's
Speaker 10: competing in a constituency that voted to leave, so he's
Speaker 10: kind of walked back from those comments. I think basically
Speaker 10: there are two different school of thoughts. One is that
Speaker 10: he's more left wing than Keir Starmer. He's a bit
Speaker 10: more radical. He's talked about MC government shouldn't be in
Speaker 10: hot to the bond markets. That was interpreted by some
Speaker 10: as you know crikee, he's going to borrow more. He
Speaker 10: said that he meant that we need a long term
Speaker 10: plan and not to just follow sort of guilt girations.
Speaker 10: The other school of thought is that he's basically a
Speaker 10: bit more of a charming Kio Starmer. He would have
Speaker 10: similar policies. He's said he's in favor of a lot
Speaker 10: of pretty tough restrictions the government has done on immigration.
Speaker 10: He just sell them a bit better. He's a bit
Speaker 10: more charismatic and it's not clear which Andy Vernon we
Speaker 10: might get.
Speaker 3: So then what do we think that the Bank of
Speaker 3: England amidst all of this is going to do.
Speaker 11: I mean, I think right now the focus is still
Speaker 11: pretty much on the Iran war and the impact that
Speaker 11: it can have on the economy. I think the political
Speaker 11: uncertainty and obviously the question mark of what will happen
Speaker 11: to fiscal policy will be a crucial thing for the
Speaker 11: bo's policy outlook, but it's just not We just know
Speaker 11: very little of what's going to happen there. BOE policy
Speaker 11: makers take policy announcements as given, so there's little they
Speaker 11: can do now regarding the upcoming meeting, I mean, I'm
Speaker 11: not expecting much. I think the most notable shift is
Speaker 11: probably going to be in the vote split. So in
Speaker 11: April we had hu Peel favoring a great hike. He's
Speaker 11: probably going to be joined by one or two maybe
Speaker 11: extra NPC members Meghan Green, Katherine Mann possibly, But in
Speaker 11: the rest of the committee there's really not a lot
Speaker 11: of appetite for a rate hike right now, so we
Speaker 11: expect rates to be unchanged. I think the interesting thing
Speaker 11: to watch is how the BIW is going to manage
Speaker 11: its communications, because it has said that it has essentially
Speaker 11: talked tough. It said that it was going to do
Speaker 11: whatever was necessary to prevent the inflation from deviating from
Speaker 11: the two percent target. But we just don't know what
Speaker 11: will be the trigger for further action. If it's waiting
Speaker 11: for second round effects to show up in the data,
Speaker 11: that's wage data. It's a late cycle indicator, so it
Speaker 11: will be late by defaults. So I think personally it
Speaker 11: already has a lot of the information on the table
Speaker 11: to deliver or not that hike. We expect a move
Speaker 11: maybe in July, but I think if the buy continues
Speaker 11: to act tough, to talk tough, sorry, but not act
Speaker 11: tough and not follow up on that, then there's a
Speaker 11: big risk to its credibility.
Speaker 3: Much to come in terms of politics and economics here
Speaker 3: in the UK in the coming days and months. Thank
Speaker 3: you so much for being with me. That is that
Speaker 3: Bloomberg's Jacob Reed and Anna Andrade really appreciate your input.
Speaker 3: We will of course have full coverage of that all
Speaker 3: important make Afield by election in England and the upcoming
Speaker 3: Bank of England interest rate decision on Bloomberg platforms. I'm
Speaker 3: Caroline Hepkee here in London. You can catch us every
Speaker 3: weekday morning for Bloomberg Daybreak. You're at the beginning at
Speaker 3: six am in London. That's one am on Wall Street, Nathan.
Speaker 2: Thanks Caroline, and coming up on Bloomberg day Break weekend,
Speaker 2: we'll look ahead to the rate decision coming up from
Speaker 2: the Bank of Japan. I'm Nathan Hager, and this is Bloomberg.
Speaker 2: This is Bloomberg day Break weekend, our global look ahead
Speaker 2: at the top stories for investors in the coming week.
Speaker 2: I'm Nathan Hager in Washington. This week I think of
Speaker 2: Japan's got a great decision on the way. For more,
Speaker 2: let's get to Doug Krisner, host of the Bloomberg Daybreak
Speaker 2: Asia podcast.
Speaker 4: Thanks Nathan. The market is bracing for the outcome of
Speaker 4: this meeting, not so much because it fears an interest
Speaker 4: rate hike, but because anything less than a decisive move
Speaker 4: could create doubt about the boj's commitment to contain inflation.
Speaker 4: For a closer look, let's bring in Bloomberg's Molly Smith.
Speaker 4: Molly is a member of the Japan Korea Economy and
Speaker 4: Government team. Today she joins us from Hong Kong. Thank
Speaker 4: you for being here. Can we begin with the fact
Speaker 4: that BOJ Governor Uwaita has been hospitalized for treatment of
Speaker 4: a liver cyst infection, and the BOJ has said that
Speaker 4: Uwaita's medical treatment means he will miss this two day meeting,
Speaker 4: and I'm curious to get your take on what his
Speaker 4: absence will do to shift the dynamic of this meeting
Speaker 4: if at all.
Speaker 8: Yeah, it's interesting. I think that the boj was maybe
Speaker 8: doing just like a bit of level setting by saying
Speaker 8: off the bat and what Otherwise, it was a fairly
Speaker 8: short statement about this, but to say that he's expected
Speaker 8: to be in the hospital for two weeks, so like,
Speaker 8: you know, not like this is going to be some
Speaker 8: swift thing and like leave any question as to if
Speaker 8: he could make the meeting next week very clear that
Speaker 8: he will not be there, but has a very competent
Speaker 8: deputy in Yumino who will be taking the reins as
Speaker 8: well as Uchietah, so that I don't think there's any concern,
Speaker 8: and you know, the expertise of those two very experienced
Speaker 8: central bankers in their own right, So I don't think
Speaker 8: it doesn't change anything as far as like the the decision,
Speaker 8: I think that's more or less made at this point.
Speaker 8: It's I think, you know, what everyone's really just been
Speaker 8: curious about is going to be how hawkish the press
Speaker 8: conference would be, because at this point it's almost like
Speaker 8: we're kind of looking for next week is a done
Speaker 8: deal more or less, but like, are you going to
Speaker 8: telegraph the possibility of another hike? By the end of
Speaker 8: the year, because that's really I think where all of
Speaker 8: the ex dictations to our turning to at this point,
Speaker 8: and for the sake of the end I think will
Speaker 8: also be quite important as we're still right very much
Speaker 8: in intervention territory.
Speaker 4: Definitely stuck at around one sixty against the greenbeck. I
Speaker 4: think we heard from Uweita in the early part of
Speaker 4: June and he was talking about the spillover effects of
Speaker 4: higher oil prices leading to an upward deviation in underlying inflation.
Speaker 4: Is oil still the big problem here in terms of
Speaker 4: becoming a driver of higher inflation in Japan or there
Speaker 4: are some other things that we need to consider.
Speaker 8: It's definitely still a problem. I think that this is
Speaker 8: where Takeichi and her administration comes in, and this is
Speaker 8: really the focal point of where the extra budget is at.
Speaker 8: You know, this is all about cushioning the impact from
Speaker 8: the Middle East conflict, and that trying to continue these
Speaker 8: subsidies that have been in place for quite some time
Speaker 8: at capping the cost of gasoline or utility costs, especially
Speaker 8: as we're heading into the hot summer months in Japan.
Speaker 8: That that's really at the heart of where this extra
Speaker 8: budget comes in.
Speaker 4: Well, you mentioned the weakness and the currency. That's obviously
Speaker 4: a big problem for inflation. How is it showing up
Speaker 4: in daily life in Japan? You would know better than I.
Speaker 8: Well, I think this is where my bias is. Somebody
Speaker 8: who's still being paid in dollars comes in and that
Speaker 8: I'm perhaps maybe a little uh, you know, not not
Speaker 8: the best person to ask on that, But yeah, for
Speaker 8: local people, of course, it's still it's incredibly frustrating, and
Speaker 8: that you know, Japan is a place where it's basically
Speaker 8: impossible to get fired, But that doesn't necessarily mean that
Speaker 8: like your your job conditions and like you know, your
Speaker 8: pay is like exactly like you know, something to really
Speaker 8: smile and write home about that. It's still like quite
Speaker 8: I think with the wage gains that like been showing
Speaker 8: up now for the past few months, but there is
Speaker 8: a lot of concern now that as inflation is rearing
Speaker 8: back up again of that might be quite short lived.
Speaker 8: So I think there definitely is a sense of frustration
Speaker 8: at the week end for people who are obviously being
Speaker 8: paid in yen.
Speaker 4: So given the fact that the Japanese yen has been
Speaker 4: so weak, particularly against the dollar, I'm wondering whether we've
Speaker 4: seen a commensurate pullback in consumer activity, has consumer spending
Speaker 4: declined at all.
Speaker 8: I think that's where the concern is like starting to
Speaker 8: shift for sure of like when this like really will
Speaker 8: start to hit household spending that you've had like supportive
Speaker 8: wages for like the past couple of months. But sentiment
Speaker 8: is still quite poor and as like you know could
Speaker 8: tell you from covering the US economy for five years,
Speaker 8: that sentiment is hardly a perfect predictor of consumer's actual behavior,
Speaker 8: but it's definitely still worth keeping an eye on.
Speaker 4: So the other side of a weekend story is obviously
Speaker 4: it makes exports cheaper to offshore markets. Is that the
Speaker 4: case right now? Or is are things perhaps slow? And
Speaker 4: I'm thinking about the American market and the tariff story.
Speaker 4: I mean, what's the dynamic when you look at the
Speaker 4: export side.
Speaker 8: Of the story that's still quite positive? And I think
Speaker 8: this is you know, kind of similar in Korea too,
Speaker 8: where you still are kind of counting on like this
Speaker 8: AI story to really carry a lot of the growth
Speaker 8: picture right now. And that's like exactly where you get
Speaker 8: all of these talks about k shaped economies around the
Speaker 8: world that when if you are like a supplier of
Speaker 8: anything AI chips related that that's been a really great
Speaker 8: export story, I mean for Korea especially, But then you
Speaker 8: start to wonder, like how much is that wealth being distributed?
Speaker 8: Is it really like a sustainable growth story? Is it
Speaker 8: an equitable one? And seem to be that way.
Speaker 4: So MOLLI is you're reporting on the Japanese economy, what
Speaker 4: are some of the things that you wrestle with? What
Speaker 4: are some of the narratives that that you're trying to understand?
Speaker 8: I think it's again it's still like I think I
Speaker 8: might have said this when we spoke last time, Doug,
Speaker 8: but it's still like quite fascinating coming from the US
Speaker 8: perspective of like inflation that is still in the one
Speaker 8: percent handle neighborhood, that this is like such a cause
Speaker 8: of concern. I understand that a lot of this is
Speaker 8: still more I'm like pre like, you know, concern of
Speaker 8: where inflation is going, not just where it is right
Speaker 8: now or point two. I mean, that's like that's a
Speaker 8: scary number. Inflation is nowhere near that in Japan here.
Speaker 8: But you see like the response from you know, fiscal
Speaker 8: authorities more so than monetary at this point that like,
Speaker 8: I feel like it creates in my head. It makes
Speaker 8: you would think that situation is much more dire, and
Speaker 8: perhaps it is not necessarily downplaying it, but you just
Speaker 8: like wonder of, like what if there ever was inflation
Speaker 8: in Japan like it's been in the rest of the world,
Speaker 8: Like what kind of a response would that take.
Speaker 4: There's an entire generation in that country that has no
Speaker 4: idea that prices are capable of rising, right that they
Speaker 4: have lived with deflation or a kind of disinflation for
Speaker 4: such a long time. It's been generations. It's remarkable story. Molly,
Speaker 4: thank you so very much. It's always a pleasure. Save
Speaker 4: travels back to Tokyo. By the way, Bloomberg's Molly Smith
Speaker 4: joining from Hong Kong. Let's stay in Hong Kong because
Speaker 4: last week the Bloomberg invest Hong Kong Summit took place,
Speaker 4: and it was there the top investors, asset managers, and
Speaker 4: policymakers gathered to discuss Asia and global market trends. It
Speaker 4: was there we had a chance to speak with Susan Chan.
Speaker 4: Susan is head of Asia Pacific at Blackrock, and she
Speaker 4: spoke with Bloomberg's Rebecca Sin.
Speaker 12: You know crypto. You guys do have the largest bitcoenty
Speaker 12: tip globally. Let's talk about crypt Hong Kong is trying
Speaker 12: to be the crypto hub. We've done a lot in tokenization.
Speaker 12: Now in Hong Kong you can buy an ETF and
Speaker 12: then switch it into gold and get gold jewelry or
Speaker 12: gold bars back. What's Blackrock doing in this space?
Speaker 7: So we have, as you mentioned, we have our crypto ETFs.
Speaker 7: We continue to see demand for that and that will continue.
Speaker 7: We are working across the region in many countries to
Speaker 7: see how we can bring that capacity into the countries.
Speaker 7: We've actually listed in Australia and we're looking at other
Speaker 7: areas that we can do more in, including Hong Kong.
Speaker 12: So, if we look at the investment opportunities across Asia Pacific,
Speaker 12: where does black Rock seed as the most compelling investment opportunities?
Speaker 7: So I think there are a few areas right. So
Speaker 7: if we look at countries because of AI, we're seeing
Speaker 7: structural shifts. Where are they taking place? Korea, for example,
Speaker 7: is one big shift. If we look at what's happening
Speaker 7: there with just the AI team playing out and taking
Speaker 7: companies like Samsung and High Necks to an incredible level.
Speaker 7: And even last week when we had the MSCI rebalance,
Speaker 7: the weight of Korea in the EM markets went from
Speaker 7: eight nine percent to now twenty two percent. These are
Speaker 7: fundamental shifts that are not gonna, you know, revert. So
Speaker 7: that's Korea, that's Taiwan. In addition, we see Japan as
Speaker 7: a destination now because of the end of deflation. Of
Speaker 7: course that's going to take some time to play out,
Speaker 7: but there is a lot of interest in Japan. In particular,
Speaker 7: in Japan, I would say it's in the private market space,
Speaker 7: in the private credit space, in the infrastructure space, So
Speaker 7: that's another area that we see a tremendous opportunity. And
Speaker 7: then in the Aussian countries, what we what are seeing
Speaker 7: is this need for diversification and this need to want
Speaker 7: to invest outside of home country. Part of it is
Speaker 7: driven because of the weaker currencies in the Asian countries.
Speaker 7: You know, they need to diversify to have dollar assets
Speaker 7: so that they can balance their portfolios over time, and
Speaker 7: broadly we're seeing clients wanting to further diversify. What I
Speaker 7: would say, Rebecca, is that the traditional sixty to forty
Speaker 7: type of portfolio allocation is really underperforming, and we're finding
Speaker 7: that the need to think about that portfolio on a
Speaker 7: holistic manner across both equity fixing come private public is
Speaker 7: really critical. Today. We're also seeing that you have to
Speaker 7: look very and be very deliberate about how you select
Speaker 7: what's in each of the categories. Is no longer that
Speaker 7: you can just go buy an active equity fund and
Speaker 7: expect to generate the returns inactive. And also there is
Speaker 7: the demographic challenges of every country in Asia and we
Speaker 7: are living longer, We have pension challenges across all and
Speaker 7: portfolios of the traditional sixty forty are not going to
Speaker 7: generate the outcomes that we're gonna need for the future.
Speaker 7: So this is why private markets is becoming such an
Speaker 7: incredibly powerful asset class within the longer term portfolios because
Speaker 7: you need it and it fits very nicely in so
Speaker 7: many ways. Right in terms of long term returns. You know,
Speaker 7: when you're saving for the future, you're less dependent on
Speaker 7: short term liquidity, but you need to be able to
Speaker 7: see those returns and also what you're investing in in
Speaker 7: private markets nowadays, we always look at how do we
Speaker 7: help the countries, So infrastructure, you invest in country, so
Speaker 7: it's a way for you to also, as an investor,
Speaker 7: have a part in the development of your country.
Speaker 4: That was Susan Chan, head of Asia Pacific at Blackrock,
Speaker 4: speaking with Bloomberg's Rebecca Sin. I'm Doug Prisner. You can
Speaker 4: catch us weekdays for the Daybreak Asia podcast. It's available
Speaker 4: wherever you get your podcast.
Speaker 2: Nathan, Thanks Doug, and that does it for this edition
Speaker 2: of Bloomberg Daybreak Weekend. Join us again Monday morning at
Speaker 2: five am Wall Street Time for the latest on markets
Speaker 2: overseas and the news you need to start your day.
Speaker 2: I'm Nathan Hager. Stay with us. Top stories and global
Speaker 2: business headlines are coming up right now.