Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is Bloomberg day Break Weekend, our global look at
Speaker 2: the top stories in the coming week from our Daybreak
Speaker 2: anchors all around the world, and straight ahead on the program,
Speaker 2: earning season rolls on. We'll take a look ahead to
Speaker 2: results from the chip maker at the center of the
Speaker 2: artificial intelligence Boom on Wall Street and Video, which just
Speaker 2: became the third most valuable company in the S and
Speaker 2: P five hundred.
Speaker 3: I'm Tom Buzber, New York. I'm Stephen Carolyn London. We're
Speaker 3: looking ahead to London.
Speaker 4: Milan and Paris fashion weeks as the luxury sector faces
Speaker 4: cooling demand for its products.
Speaker 5: I'm deg Prisoner previewing the next move from the Reserve
Speaker 5: Bank of Austria.
Speaker 6: That's all straight ahead on Bloomberg Daybreak Weekend, the business
Speaker 6: news you need to wrap up your week. Available on Apple, Spotify,
Speaker 6: the Bloomberg Business Appen everywhere you get your podcasts.
Speaker 3: Good day to you.
Speaker 2: I'm Tom Busby, and we begin today's program with earnings
Speaker 2: this Wednesday from Nvideo and for more on what to expect,
Speaker 2: we welcome Bloomberg Technology co host ed ludlow Ed and Video.
Speaker 2: This past week edging past the market value of Amazon
Speaker 2: dot Com then Alphabet worth one point eight trillion dollars.
Speaker 3: Is this unstoppable?
Speaker 7: This company, it seems unstop stoppable. It seems like a juggernaut,
Speaker 7: right And when you look at what Wall Street expects
Speaker 7: them to say when they post earnings next week, there
Speaker 7: are no signs that that will stop. You know that
Speaker 7: there's a lot of misconception and a lack of understanding
Speaker 7: about why in Nvidia has been on the tear that
Speaker 7: it has. And when we talk about in video in
Speaker 7: the AI context, what we're literally talking about is that
Speaker 7: the AI development, the building of large language models, it
Speaker 7: requires just one hundreds of square miles of data centers,
Speaker 7: just rat some racks of servers, and those servers are
Speaker 7: basically lots of big boxes that get stacked up on
Speaker 7: one another. And those boxes, you can think of them
Speaker 7: like supercomputers. So you know, the listener at home has
Speaker 7: maybe a desktop and it's a sort of rectangular shaped box.
Speaker 7: Think about something that's ten times the size of that,
Speaker 7: and then take that box and times it by one thousand.
Speaker 7: And in Video's role in that is that they provide
Speaker 7: the brains in that box, the GPU or AI accelerator
Speaker 7: and all of the money that's flowing into AI to
Speaker 7: build out that infrastructure. The reality is that you've only
Speaker 7: been able to build it within video products. Until very recently,
Speaker 7: there was no one else on the market doing that.
Speaker 7: So the numbers are that Wall Street sees revenue growth
Speaker 7: of three hundred and sixty nine percent year on year
Speaker 7: in the coming quarter. I'll repeat it, three hundred and
Speaker 7: sixty nine percent top line growth. And what's so astonishing
Speaker 7: is that last quarter they had two hundred and eighty
Speaker 7: percent tope and growth year on year, so it just
Speaker 7: doesn't seem to be tapering out yet.
Speaker 2: And the shares are up two hundred and thirty percent
Speaker 2: in the past twelve months.
Speaker 3: So it's it's yeah.
Speaker 2: Everything is just you know, coming up of roses for
Speaker 2: this company. But who are in Video's biggest customers and
Speaker 2: who are its top competitors?
Speaker 7: Yeah, I mean the question of who the biggest customers
Speaker 7: are goes right to the explanation I gave on how
Speaker 7: AI works in the real world, and the short answer
Speaker 7: is the hyperscalers, the cloud companies that own, operate and
Speaker 7: control the data centers. For the most part, that means
Speaker 7: Microsoft Azure and in video powering AWS, which is Amazon's
Speaker 7: cloud business. The other big player is Google and Google
Speaker 7: Cloud Platform. But remember Google's done a bit of work
Speaker 7: with its own custom silicon. But for the most part,
Speaker 7: even if you see the news headline like for example,
Speaker 7: and Thropic, which is a really big a company that
Speaker 7: makes a generative AI product is powered by Nvidia, we
Speaker 7: don't mean that that, you know, The CEO of and
Speaker 7: Propic knocks on the door of Nvidia in Santa Clara
Speaker 7: and says, hey, can I have a big bag of
Speaker 7: chips please, and throws it over his shoulder and off
Speaker 7: he goes to make AI. The reality is that you're
Speaker 7: still reliant on a hyperscaler and that Nvidia ships those
Speaker 7: h one hundreds. They're called to the cloud provider and
Speaker 7: the data center that they go into, and the AI
Speaker 7: company never has direct contact with with Nvidia. But it's
Speaker 7: kind of a triumvirate. You have Nvidia providing the hardware,
Speaker 7: the hyperscaler that runs, the data centers operating it, and
Speaker 7: the AI company basically pays for the compute, pays for
Speaker 7: use of that cloud capacity.
Speaker 3: And who competes at that kind of level within video?
Speaker 7: Yeah, so for quite a long time now, and when
Speaker 7: I say that, it actually is not a long time,
Speaker 7: it's basically two years. Because all of this has happened
Speaker 7: in two years. Nvidia has been the only name where
Speaker 7: they're actually building its scale these GPUs graphics processing units,
Speaker 7: and in very simple terms, a GPU can make lots
Speaker 7: of mathematical calculations in parallel at once. That's why they're
Speaker 7: good for training large language models or building AI. AMD
Speaker 7: has recently come to the market with a similar products
Speaker 7: called the mi I three hundred series. But you don't
Speaker 7: just sort of start building these in huge volumes. It
Speaker 7: takes a really long time to ramp, and as you know,
Speaker 7: there's been a chip supply crunch in the post pandemic
Speaker 7: era which has impacted that. So AMD is slowly ramping.
Speaker 7: The principal difference between the two of them is that
Speaker 7: AMD realizes in video has got a real hold on
Speaker 7: this market for training large language models. But once you've
Speaker 7: trained the model and you want to start actually running
Speaker 7: the technology in the real world, you have consumers using
Speaker 7: generative AI tools like chat, GPT, or start integrating AI
Speaker 7: tools into your own software. Move to what's called inference.
Speaker 7: In other words, getting a response from the model you ask,
Speaker 7: it's something, it gives your response, and AMD is basically
Speaker 7: saying ours is going to be better because what they
Speaker 7: all have in common is is incredibly expensive to do
Speaker 7: both of those functions. And so there's a battle that's
Speaker 7: brewing now as the market shifts from training models to
Speaker 7: actually using them in the inference stage. And it'll be
Speaker 7: interesting to see if AMD starts to take some market share.
Speaker 3: So what's next for Nvidia? How do they pivot now?
Speaker 7: Well, I think they just keep going. I mean, you
Speaker 7: guys may have seen that I did an interview with
Speaker 7: Nvidia's CEO Jensen Huang last week or the end of
Speaker 7: a couple of weeks ago. And the next big market
Speaker 7: is what Jensen's calling sovereign AI. So right now, all
Speaker 7: of the financing and activity behind AI is being done
Speaker 7: by the private sector, big tech companies. But there is
Speaker 7: an academic school of thought that, because of how impactful
Speaker 7: artificial intelligence will be on society, governments should have their
Speaker 7: own operations. Right, government should have supercomputers and data centers
Speaker 7: that they control, that is, training large language models, that is,
Speaker 7: giving some kind of national level AI competence. And Jensen's
Speaker 7: been flying around the world to every region, speaking to
Speaker 7: you the leaders of those nations, and doing deals, you know,
Speaker 7: saying let's collaborate, we can do something where we sell
Speaker 7: directly to you that doesn't really show up in the
Speaker 7: financials yet.
Speaker 2: Wow, a lot to look forward to. Well, our thanks
Speaker 2: to Bloomberg Technology co host ed Ludlow, thanks for being here.
Speaker 7: Ed, Thank you very much.
Speaker 2: Hapy weekend, And now we turn to the Fed and
Speaker 2: minutes from the January meeting of the FOMC will be
Speaker 2: released this coming Wednesday, and policymakers voted to keep benchmark
Speaker 2: lending rates unchanged at that meeting for the fourth time
Speaker 2: in a row. So what will they reveal and how
Speaker 2: soon will the Fed pivot to cutting rates? For some insight,
Speaker 2: we welcome Bloomberg International Economic and Policy correspondent Michael McKee. So, Michael,
Speaker 2: what are you expecting to see in these minutes?
Speaker 8: You didn't need me, You just answered the question. That's
Speaker 8: what people want on Wall Street to find out is
Speaker 8: when and under what conditions will the FED start lowering
Speaker 8: interest rates? And I'm not sure they're going to get
Speaker 8: a complete answer. We have heard from a lot of
Speaker 8: Fed officials since the meeting that they thought the news
Speaker 8: was good on the economy and things were progressing towards
Speaker 8: the two percent target, but they're not there yet, and
Speaker 8: so they want to see more good news, which just
Speaker 8: basically means they need more months of data. How many months, Well,
Speaker 8: they're not sure of that either. They have to wait
Speaker 8: and see how the data comes in and whether it
Speaker 8: is in any way confusing. So when you're looking at
Speaker 8: the minutes, you'll probably see something along the lines of
Speaker 8: most members agreed that progress had been made, but there's
Speaker 8: not going to be anybody who says it's time to
Speaker 8: cut Well.
Speaker 2: Boy, well, let's talk about some of the data we
Speaker 2: have seen, and we've seen a pretty robust labor market,
Speaker 2: although seen a lot of especially in the tech sector,
Speaker 2: job cuts nowadays. Consumer demand has been good, spending, you know,
Speaker 2: not as strong sustained economic growth, the soft landing, I mean,
Speaker 2: all of that is pretty good.
Speaker 8: Well, we've had a week where the data sort of
Speaker 8: contradicted each other when you're thinking about it. In terms
Speaker 8: of the FED, they had a strong CPI number, which
Speaker 8: took a lot of people by surprise and of course
Speaker 8: raised questions about whether inflation is going to be coming
Speaker 8: back or not. Inflation could be driven by a strong economy,
Speaker 8: which we had been seeing, and then we got the
Speaker 8: retail sales numbers that showed a lot of weakness. Some
Speaker 8: of that may have been weather related and it may
Speaker 8: reverse in the next month, which would be another argument
Speaker 8: for waiting on the Fed side. But if the economy
Speaker 8: is weakening, then you would assume there would be less
Speaker 8: inflation and we'd be more on the path that the
Speaker 8: FED wants to see. The jobless claim numbers came in
Speaker 8: down this week, which is a bit surprising given what
Speaker 8: we have seen and heard in the layoff announcements, but
Speaker 8: it does suggest that the labor market is still strong,
Speaker 8: and as long as the labor markets strong, people will
Speaker 8: be spending. It's only a question of how much.
Speaker 2: Yeah, and the and the high inflation that we're seeing,
Speaker 2: I mean, that's affecting certainly housing business, you know, borrowing
Speaker 2: and infrastructure spending.
Speaker 3: So what else is it affecting negatively?
Speaker 8: Well, this last month's numbers were kind of distorted by
Speaker 8: the weather, so we know there's some issues in there.
Speaker 8: But inflation is making a difference in housing definitely, because
Speaker 8: we've been expecting housing prices to come down in the
Speaker 8: CPI and the PCE, and they haven't really done that.
Speaker 8: They actually rose in the CPI numbers, and so FAN
Speaker 8: officials are a little confused about that, as is everybody.
Speaker 8: Why we see rent prices falling and that doesn't translate
Speaker 8: into lower housing numbers because they use the rent numbers
Speaker 8: to calculate those. If that were to finally take off
Speaker 8: and go down, then the FED would feel a whole
Speaker 8: lot better about the inflation picture right now. But the
Speaker 8: good news is inflation has come down a lot, to
Speaker 8: the point where now for the last six or eight months,
Speaker 8: Americans average hourly earnings have outpaced inflation. That looks like
Speaker 8: the American people haven't noticed yet, but they're finally ahead
Speaker 8: of the game and maybe they'll start to notice that soon.
Speaker 2: Yeah, someone should tell them that it's looking good. Hey, everybody, Well,
Speaker 2: our next FMC meeting March nineteenth and twentieth. So what
Speaker 2: are we going to get between now and then, or
Speaker 2: what is the FED going to get to come to
Speaker 2: their decision.
Speaker 8: We'll get another CPI reading and we will also get
Speaker 8: the jobs numbers for the month, and we should get
Speaker 8: retail sales before that, so they'll have another month's picture.
Speaker 8: They'll have the February picture before they have to make
Speaker 8: a decision. We won't have the PCE index, which is
Speaker 8: the inflation number that they follow, and there's been a
Speaker 8: wedge between the CPI and the PCE that is partly
Speaker 8: based on the waiting of the things in the various categories.
Speaker 8: PC's been running a lot slower and it's much closer
Speaker 8: to the two percent goal that the Fed has and
Speaker 8: they won't.
Speaker 3: Have that data.
Speaker 8: So expect March to be an on hold meeting. They've
Speaker 8: kind of signaled that at this point. By the time
Speaker 8: we get to the meeting after that in May, there
Speaker 8: should be enough data that they can make a decision.
Speaker 8: But if it comes in contradictory as it has this
Speaker 8: past month, they may not be ready then either.
Speaker 3: Well, it's a lot to look forward to. Well.
Speaker 2: Our thanks to Bloomberg International Economic and Policy correspondent Michael McKee,
Speaker 2: and coming up on Bloomberg day Break weekend, we're looking
Speaker 2: ahead to London, Milan and Paris for fashion as the
Speaker 2: luxury sector faces cooling demand for its products. I'm Tom
Speaker 2: Busby and this is Bloomberg. This is Bloomberg Daybreak Weekend.
Speaker 2: Our global look ahead at the top stories for investors
Speaker 2: in the coming week. I'm Tom Busby in New York.
Speaker 2: The biggest fashion brands will be showcasing their designs across
Speaker 2: Europe in the coming days at the London, Milan and
Speaker 2: Paris fashion Weeks. These glitzy events are happening at a
Speaker 2: challenging time for many luxury names. So how are the
Speaker 2: world's most illustrious fashion houses protecting their profits while also
Speaker 2: prioritizing style well for more, Let's go to London and
Speaker 2: bring in Bloomberg Daybreak europe banker Stephen Carroll.
Speaker 4: Tom it's a tricky time to be in fashion. Cooling
Speaker 4: demand for luxury products after the pandemic, along with slowing
Speaker 4: sales in China and higher inflation, have squeezed some key
Speaker 4: drivers of growth. This season of European Fashion Weeks are
Speaker 4: expected to be as glamorous as ever, with the fashion
Speaker 4: elite descending on London, then Milan, and then Paris. While
Speaker 4: luxury giants LVMH and Armez had good stories to tell
Speaker 4: in their most recent results with strong sales and key brands,
Speaker 4: there was less good news and the likes of Burbery,
Speaker 4: which issued a profit warning, wiping the equivalent of almost
Speaker 4: one hundred and thirty million dollars off its outlook. I've
Speaker 4: been discussing all of this with Bloomberg opinion columnist Andrea
Speaker 4: Felsted and our European luxury reporter Angelina Rascouette. I started
Speaker 4: by asking Angelina how important Fashion Week events are to
Speaker 4: these big brands.
Speaker 9: These events are very important because obviously you're unveiling and
Speaker 9: you're you're going to be showing your consumer's WATA will
Speaker 9: be the trend. And obviously, in the age of social media,
Speaker 9: you know, you have influencers, celebrities who's got millions of followers.
Speaker 9: So actually the impact of these fashion shows are huge.
Speaker 9: And you know, but it's not just fashion shows obviously.
Speaker 9: I and if you think just about Miley Cyrus, like
Speaker 9: recently she was at the Grammars and she was wearing
Speaker 9: a Gucci you know, at some point she was wearing
Speaker 9: a Gucci gown with a bag, and that's very important
Speaker 9: for the brand. You know, you think about Gucci, I'm
Speaker 9: going to be going to the show and in Milan
Speaker 9: next week. It's a brand that is in turnaround and
Speaker 9: he needs all the attention and the visibility can get.
Speaker 9: They have a new recently new designer. I mean this
Speaker 9: is going to be his third show, so indeed it's
Speaker 9: going to be you know, very important. But remember there's
Speaker 9: always a lag also between the unveiling of a collection.
Speaker 9: So his first collection, Sabato at Gucci, was in September
Speaker 9: and it's now only hitting the stores right now, so
Speaker 9: there's always a lag of course, So the financial impact
Speaker 9: cannot be assessed obviously right away. Right away, what you
Speaker 9: can assess is you know, the bus you know, if
Speaker 9: a video goes viral, that's pretty much what you can assess.
Speaker 4: Andrea, that brings us very neatly something you've been writing
Speaker 4: about recently when it comes to Gucci as well. Just
Speaker 4: the headline from your piece Gucci can be revived, but
Speaker 4: it won't go viral. Tell us more about how you're
Speaker 4: thinking about the series of fashion weeks.
Speaker 1: Yes, obviously Gucci, as Angelina mentioned, it's it's moving from
Speaker 1: its bold maximalism that it had before to this new
Speaker 1: much sleeker esthetic in line with quiet luxury. This this
Speaker 1: trends that emerged around a year ago at the at
Speaker 1: the shows early last year, which sort of set the
Speaker 1: direction of fashion.
Speaker 9: Now.
Speaker 1: The worry is that We're having a bit of quiet
Speaker 1: luxury fatigue, so this could be potentially awkward for Gucci.
Speaker 1: I'm not sure that the that the new Gucci is
Speaker 1: really is distinctive enough to stand out in the way
Speaker 1: that the past designer Alessandro and Mikayley did. It's also
Speaker 1: going to take a while, as Angelina said, to come through,
Speaker 1: So yes, this will we really want to.
Speaker 4: Watch Miley cyrus not enough to revive an entire brand.
Speaker 4: Andre I wanted to ask you though about Burbery as well,
Speaker 4: because they made us bash in the last season of
Speaker 4: Fashion Weeks in September with their takeover of Barn Street Station,
Speaker 4: for example, but the company still saw a profit warning
Speaker 4: its recent earnings report. Is this going to be a
Speaker 4: difficult showcase for Burbery? Do they need to turn around
Speaker 4: the vibes?
Speaker 1: I think it's going to be just as sort of
Speaker 1: confident and exciting as September was, because what Birbury needs
Speaker 1: to do is, as Angela Andlina mentioned, it's all about
Speaker 1: creating a buzz, creating a halo effect, and Burbury really
Speaker 1: needs to do that. So it's got some quite nice
Speaker 1: products some coming through. It's got a lot of nice bags,
Speaker 1: you know, Daniel Lee is really pumping out the products.
Speaker 1: There's a new trench bag which is canvas, very much
Speaker 1: in line with the nylon bag trend we've seen. There's
Speaker 1: been a lot of narrative that Burber has been putting
Speaker 1: the prices up and that's putting people off. That's missing
Speaker 1: the point. You know, what you need is brand desirability.
Speaker 1: It's starting to happen. Burbery is starting to move there's
Speaker 1: a list index of the most in demand brands that
Speaker 1: people are searching for and buying started to move up gradually.
Speaker 1: I'm seeing some young people with the Burbery check bags,
Speaker 1: Barberary check scarves, often vintage, so that's really good size.
Speaker 1: What it needs to do is it really needs to
Speaker 1: pump up that desirability. It needs to get those bags
Speaker 1: out to influencers so that we can follow and see
Speaker 1: them in you know, Instagram, pos, TikTok videos, Pinterest boards.
Speaker 1: And I think when that happens that that could be
Speaker 1: good for Birbary because I feel that a lot of
Speaker 1: the turnaround stories a lot of the brands are kind
Speaker 1: of they've been around for a while. I mean, Gucci
Speaker 1: was exploding around eight years ago. The Mew Mew turnaround
Speaker 1: is and the product turnaround are pretty well established now.
Speaker 1: I feel that there is room for something new and
Speaker 1: exciting and if Barberie can get it right, that can
Speaker 1: be Actually can tell I'm the lone Barbary.
Speaker 4: Ball Anthony, I wonder do you have a contrarian view
Speaker 4: on on on Birbary From what Andrea was talking about,
Speaker 4: is that the big highlight from London Fashion Week that
Speaker 4: you'll be looking at.
Speaker 9: For Yeah, so for sure, Burbery is definitely the most
Speaker 9: famous brand coming out of London Fashion Week. And uh
Speaker 9: and the tricky uh bit with Birberies that obviously being
Speaker 9: a publicly listed company and it's not a group, it's
Speaker 9: only one brand, right, so so so it has to
Speaker 9: report results on a quarterly basis and that's scrutiny. Sometimes
Speaker 9: it's very difficult for a brand that's in turnaround mode.
Speaker 9: I mean, you know Andreas right, you have to be
Speaker 9: confident and you know that about the designer. You know
Speaker 9: he wasn't named less than two years ago and it
Speaker 9: doesn't happen overnight. So so that's the tricky bit. And
Speaker 9: Burbery in comparison to all the other groups, you know
Speaker 9: that you know if so is part of one group.
Speaker 9: Loueve is part of a group, so so you don't
Speaker 9: get the granularity of their performance on a quarterly basis.
Speaker 9: And that's that's actually the challenge for for Burbery because
Speaker 9: of course LVMH another company that you cover, Andrelia is
Speaker 9: an absolute mammoth in this area and and kind of
Speaker 9: covers a lot of ground in terms of brands as well.
Speaker 4: Does that allow for more space for underperformance and of
Speaker 4: certain brands, yes, I.
Speaker 9: Mean, you know, and and and they're not. You know,
Speaker 9: they have some mega brands like Viviiton and Christian and
Speaker 9: some brands who who who started from a very small
Speaker 9: and you know, with very small sales numbers and now
Speaker 9: we know that they've actually grown a lot in the
Speaker 9: past five to ten years. You know, if you think
Speaker 9: about a brand like Louieve with the designer Jonathan Anderson,
Speaker 9: he's an Irish designer trained at the London College of
Speaker 9: Fashion and he's done Wonders at WAVIN. We don't get
Speaker 9: the numbers of Louve, but we know he's done Wonders
Speaker 9: and they're very happy with him. And it's the same
Speaker 9: thing with Celine with its slimann again, we don't get
Speaker 9: the numbers, but we know these brands have fair very well.
Speaker 9: And actually another brand that that was at some point problematic,
Speaker 9: I mean he said it in I think it was
Speaker 9: more than five or six years ago in results that
Speaker 9: you know, Mark Jacobs was struggling and they managed to
Speaker 9: turn it around and they're very happy with the turnaround
Speaker 9: that they managed to do so. But being part of
Speaker 9: this wider group where you only have numbers by unit,
Speaker 9: not by brands, that is very helpful. That gives breathing
Speaker 9: room for the brands and for the managers who are
Speaker 9: in charge and the designers as well.
Speaker 4: Andrea, can you give us since we're talking about London
Speaker 4: fashion making then you know the European tour that follows
Speaker 4: with Malan and with Paris. What's your feeling abound the
Speaker 4: British fashion industry post breaks?
Speaker 3: It has that.
Speaker 4: Post challenges to it. Is that something that's led to
Speaker 4: a shift?
Speaker 1: It really has. The loss of those tax breaks for
Speaker 1: overseas shoppers in London has really hurt the London fashion
Speaker 1: fashion demand, particularly Berbery. It's another headwind that Burbery has
Speaker 1: to deal with. But across the across the board, there
Speaker 1: are hopes that might be revived. It was difficult for
Speaker 1: the government to say we are giving luxury shopping a
Speaker 1: tax break when we had the cost of living crisis
Speaker 1: going on. Optically it didn't look very good. But now
Speaker 1: that seems to be subsiding. There are hopes that that
Speaker 1: can be reversed and that can breathe life back into
Speaker 1: London fashion sales.
Speaker 4: Ay, and I wonder when you think about the other
Speaker 4: shows that you'll be going to, in the other brands
Speaker 4: that you'll be monitoring, what are their highlights are you
Speaker 4: looking out for?
Speaker 9: I mean, obviously with Too is always a big it's
Speaker 9: a big moment because it's the biggest luxury fashion brand.
Speaker 9: And uh so last month in January it was the
Speaker 9: Men's Worst Show. So that was Pharrell Williams. Uh third
Speaker 9: show for the brand since it's been named, second show
Speaker 9: in Paris. So now, you know, it'll be interesting to
Speaker 9: see what Nicola offers for for for for ladies and
Speaker 9: you know they, you know, we you know, when Forarrell
Speaker 9: Williams was named, you know, people are saying, oh, maybe
Speaker 9: he's going to like take all the spotlight away from
Speaker 9: from from from Nicolajeska, but actually Nicola, you know, he's
Speaker 9: been at Veton for ten years and they just renewed
Speaker 9: his contract. So it's a vote of confidence for Nicolai
Speaker 9: and uh and so for sure, I'll be I'll be
Speaker 9: looking forward to that one. I'm still hoping to get
Speaker 9: my invite. But uh and then uh, and then hermess
Speaker 9: as well, I mean hermess is the you know, Andrew
Speaker 9: was sort of mentioning the quiet luxury armess is you
Speaker 9: could put it in that basket. I mean, it really
Speaker 9: caters to the most to the ultra high network individuals.
Speaker 9: And uh. And you know, for many, many years we
Speaker 9: associated l Mess with the leatherboods, with handbags and with
Speaker 9: you know, but actually they've done tremendously well when it
Speaker 9: comes to ready to wear. And they have these two
Speaker 9: uh designers, uh you know, two ladies, Uh, one for
Speaker 9: men's wearing, one for for women's wear, and they've done wonders.
Speaker 5: Uh.
Speaker 9: So you know, but that but I'm one of of
Speaker 9: course it is you know, you it's it's it's less
Speaker 9: you know, on logos, it's less on bold maximalism that
Speaker 9: that Andrew was talking about. It's more on the the
Speaker 9: the quiet but uh, you know, the the think about
Speaker 9: you know clothes that you can you know their their
Speaker 9: viability will last for over a season. Let's put it
Speaker 9: this way, and then otherwise, uh, you know, is always
Speaker 9: an important one of course. Uh Maria gras acuity, she's
Speaker 9: been she's been with the brand for for many years
Speaker 9: and actually she's done Wonders as well for commercially.
Speaker 4: Andrea, final thought from you, it's the fortieth year of
Speaker 4: London Fashion Week, so it's a bit of a milestone
Speaker 4: as well. Have you have you kind of a particular
Speaker 4: view unwhere of about the next forty years might be
Speaker 4: taking London fashion.
Speaker 1: I'm London's always been very innovative in fashion. When we
Speaker 1: think about you know, many designers come through some Martins,
Speaker 1: for example. London can be quite edgy as well, so
Speaker 1: I think that it's important to keep that, you know, experimentation, edginess,
Speaker 1: to have a different point of view from some of
Speaker 1: the bigger capitals. And I think if Barbery can get
Speaker 1: it right, it can really reinforce that.
Speaker 4: That was Bloomberg Opinion columnist Andrea Felsted and our European
Speaker 4: luxury reporter Angelina Rascouette. I'm Stephen Carroll in London. You
Speaker 4: can catch US every weekday morning here for Bloomberg Daybreak Europe,
Speaker 4: beginning at six am in London and one am on
Speaker 4: Wall Street, Tom.
Speaker 2: Stephen and coming up on Bloomberg day Break weekend, the
Speaker 2: Reserve Bank of Australia releasing minutes from its latest policy meeting,
Speaker 2: and we'll get a preview. I'm Tom Busby and this
Speaker 2: is Bloomberg. I'm Tom Busby in New York with your
Speaker 2: global look ahead at the top stories for investors in
Speaker 2: the coming week. In the week ahead, the Reserve Bank
Speaker 2: of Australia releases minutes from its latest policy meeting. That's
Speaker 2: when the RBA left its benchmark rate on hold after
Speaker 2: lifting it thirteen times since twenty twenty two. Bloomberg's Doug
Speaker 2: Christner and Paul Allen from the Daybreak Asia team on
Speaker 2: what it all means.
Speaker 5: Tom. We know how rampant inflation was in many developed
Speaker 5: economies during the pandemic, and central bankers responded with aggressive
Speaker 5: rate hikes. In a last year, the stories seemed to
Speaker 5: shift to immaculate disinflation, but that's no longer a given,
Speaker 5: as the recent USCPI data show clients have stalled and
Speaker 5: it's forced an adjustment to expectations for the number of
Speaker 5: rate cuts from the FED and how aggressive the FED
Speaker 5: may be.
Speaker 10: Other central banks facing a similar dynamic, and this week
Speaker 10: we might get inside into how the RBA have used
Speaker 10: the inflation story. Minutes from the last meeting of the
Speaker 10: Reserve Bank of Australia schedule for release on Tuesday for
Speaker 10: a look ahead, we're joined by Swati Pandi, Bloomberg Australia
Speaker 10: Economy Government Reporter and Swati We've got a big piece
Speaker 10: of the puzzle with the January unemployment numbers ticking up
Speaker 10: to four point one percent. I believe that's the highest
Speaker 10: in two years, one hundred thousand full time jobs lost.
Speaker 10: A little bit more is that it can we say
Speaker 10: that tightening's now off the table for the RBA.
Speaker 11: It was a surprising piece of data and a very
Speaker 11: important one as well, because the RBA has been looking
Speaker 11: at the jobless rate and that was also one of
Speaker 11: the reasons why they have been hawkish. But the ABS
Speaker 11: has tried to play it down that report by saying
Speaker 11: there is a lot of c reasonality in December and January,
Speaker 11: January being a very popular month for people to go
Speaker 11: on holidays, and also there have been some people who
Speaker 11: were marked as unemployed, but they were actually in between jobs,
Speaker 11: so we could see a revision in the unemployment rate,
Speaker 11: maybe going back down in February. So I would say
Speaker 11: it's probably too early to say that we are in
Speaker 11: a market where the labor where the labor market is easing.
Speaker 11: There are tentative signs, but overall the RBA's assessment is
Speaker 11: that the labor market is still tight and demand is
Speaker 11: still exceeding supply.
Speaker 5: That said, the labor market data did get the market's attention.
Speaker 5: We spoke earlier in the week with Charlie Jamison, he
Speaker 5: is the CIO of Jamison Coot Bonds. Here's what he
Speaker 5: had to say.
Speaker 12: We need to be generating more employment in order to
Speaker 12: keep those numbers designable. There has been a lot of
Speaker 12: loss of momentum in the me as we said, and
Speaker 12: that's certainly, you know, different to what you guys are
Speaker 12: saying in the United States at the moment, where the
Speaker 12: economy seems to have accelerated a little bit in the
Speaker 12: in the first part of the looking at employment and
Speaker 12: inflation data.
Speaker 5: So it's brought forward now the notion of rate cuts
Speaker 5: from the RBA. SWATI, is it too soon to talk
Speaker 5: about rate cuts.
Speaker 11: It's actually not too soon. But if you ask Reserve
Speaker 11: Bank Governor Michelle Velock, she would say it is too
Speaker 11: soon because they are still not ruling out interest rate hikes.
Speaker 11: That was her commentary last week, So they are not
Speaker 11: ruling anything out for that matter. But she's still sounding hawkish.
Speaker 11: Since she's still talking hard on inflation, markets are now
Speaker 11: expecting some probability of an August rate cut. There are
Speaker 11: some economists who are expecting a June rate cut. A
Speaker 11: Bloomberg economist is also expecting a rate cut around May June.
Speaker 11: So yes, it's it's still three months down the track.
Speaker 11: I would say, wa'ts.
Speaker 10: The inflation story telling us right now.
Speaker 11: Inflation is still well above the RBA's target, still has
Speaker 11: a four handle to it. ARBs target is two to
Speaker 11: three percent. They are targeting the midpoint two point five percent.
Speaker 11: So it is still at a level where a Michelle
Speaker 11: Bullock is really uncomfortable, and that is one of the
Speaker 11: reasons her vague guidance, I would say, is for interest
Speaker 11: rates to remain elevated for longer. The RBA's forecast does
Speaker 11: not show inflation in the midpoint until twenty twenty six.
Speaker 5: I was reading comments earlier in the week from Maryan Coller,
Speaker 5: the head of Economic Analysis from the RBA, and one
Speaker 5: of the things she was cautioning is that inflation may
Speaker 5: be sticky. Paul, give me your perspective. You live in Sydney.
Speaker 5: What is it like, you know, the cost of living
Speaker 5: right now? What are common people kind of dealing with
Speaker 5: in in their everyday affairs.
Speaker 10: Yeah, this is an interesting one that you raised, because
Speaker 10: we have Michelle Bullock last week speaking to Parliament about
Speaker 10: this and questions about businesses using the cover of high
Speaker 10: inflation to start pushing up prices were raised. And look,
Speaker 10: certainly from an anecdotal point of view, and I'm sure
Speaker 10: Swaty will back me up here, is if you just
Speaker 10: go on your regular grocery shop, you're just out and
Speaker 10: about doing things. Inflation's running, it's, you know, something above
Speaker 10: the RBA's target window, but you're buying things that might
Speaker 10: be higher by fifty, sixty, even one hundred percent than
Speaker 10: what they were a year ago. Now, the two big
Speaker 10: supermarket chains in Australia, Coals and Woolworth, start coming under
Speaker 10: fire as well for this type of thing. They're defending
Speaker 10: themselves against this accusation of price guarding. But you know,
Speaker 10: it's a hot subject in Australia at the moment, isn't
Speaker 10: it smitty just how much consumers are paying for things
Speaker 10: and how that doesn't really square away with the official
Speaker 10: inflation rate.
Speaker 11: That's absolutely right. Haircuts have become very expensive and it's
Speaker 11: eating out. Restaurants have raised their prices. I still would
Speaker 11: say that when you're out and about in Sydney, if
Speaker 11: you go to a pub on Friday, it's still buzzing,
Speaker 11: still teaming with people. So we are not really seeing
Speaker 11: that impact on every day kind of lifestyle. Yet we've
Speaker 11: not had a big impact on people really cutting down
Speaker 11: drastically on their budget at an aggregate level. I'm sure
Speaker 11: there are people at either ends of the spectrum who
Speaker 11: are very deeply affected, but if you are going out
Speaker 11: and about, it just feels like a normal day. During
Speaker 11: Boxing Day. In fact, around Christmas, shopping malls were chocolate block.
Speaker 11: They were huge queues of cars waiting to park, and
Speaker 11: that was the time we were talking about a hard
Speaker 11: landing soft landing, so it just did not feel like
Speaker 11: a recession is coming for that matter.
Speaker 5: You know, it's interesting because I think we have just
Speaker 5: in listening to the conversation here, I think we have
Speaker 5: to discriminate between services inflation and goods inflation. And I
Speaker 5: recently saw that the IMF was recommending that the RBA
Speaker 5: needed to raise rates to tame inflation. Is the IMF
Speaker 5: looking more at the services side than the good side?
Speaker 11: I would say the IMF is looking at the services
Speaker 11: side because that is something that Michelle Bullock and earlier
Speaker 11: Marion Kohler mentioned as well, that that is that part
Speaker 11: of inflation is quite sticky, and their concern is that
Speaker 11: it will remain elevated for some time. And another concern
Speaker 11: that they have is inflation expectations. So if you allow
Speaker 11: inflation to remain higher or above the target band for
Speaker 11: a long time, it will unanchor or do more inflation
Speaker 11: expectations as well, which right now is at two point
Speaker 11: five mid point.
Speaker 10: Well, we mentioned that Michelle Bullock the ABBYA Kevin I
Speaker 10: was speaking with senators last week in Australia. She took
Speaker 10: questions on this. What was she saying about it?
Speaker 11: She actually said that the IMF is not particularly talking
Speaker 11: about Australia. She said this is something they are talking
Speaker 11: about in general for developed economies. Because inflation continues to
Speaker 11: remain a concern. But also as far as goods inflation
Speaker 11: is concerned, it's still too early to say that we
Speaker 11: have won that battle because we have conflicts going on
Speaker 11: in parts of the world. There are supply chain disruptions
Speaker 11: that have again happened with the attacks in Red Sea.
Speaker 11: So even as far as goods inflation is concerned, Michelle
Speaker 11: Bullock is not willing to say that we have won
Speaker 11: the battle there.
Speaker 5: So my understanding is that the RBA during its tightening
Speaker 5: cycle raised rates thirteen times for a total of four
Speaker 5: hundred and twenty basis points. The policy rate now is
Speaker 5: at four thirty five. Paul helped me understand how that
Speaker 5: connects to the mortgage market in Australia.
Speaker 10: The big four banks here often cop a lot of
Speaker 10: criticism for being incredibly quick to pass on increases to
Speaker 10: the cash rate to people who are borrowing money off them.
Speaker 10: And in a country like Australia where house buying auctions
Speaker 10: practically a national sport, the tax regime has also set
Speaker 10: up very generously for people who want to buy investment properties.
Speaker 10: These sorts of interest rate moves really get people talking.
Speaker 10: There is a fair bit of competition. But if you're
Speaker 10: taking out a mortgage in Australia, yes, you do pay
Speaker 10: a lot more than you were a couple of years
Speaker 10: ago during the depths of the pandemic, when interest rates
Speaker 10: were very very low and we saw property prices just
Speaker 10: absolutely taking off. Now a lot of people took out
Speaker 10: loans when rates were at those low levels. Those rates
Speaker 10: have since increased, but we haven't seen a huge amount
Speaker 10: of mortgage stress. There's been a very few for sales,
Speaker 10: and certainly none of what was predicted the time seems
Speaker 10: to have come to pass. Is that your observation, Swati?
Speaker 11: Yes, absolutely. I would also like to add there that
Speaker 11: Australians are among the most indebted household in the world,
Speaker 11: so we have a debt to income ratio of roughly
Speaker 11: one hundred and eighty five percent, and that is one
Speaker 11: of the reasons it was expected that households would be very,
Speaker 11: very deeply hit by these interest rate hikes. But we
Speaker 11: had earnings from Commonwealth Bank of Australia earlier this week
Speaker 11: and they had like five billion dollars in profits, So
Speaker 11: clearly we are not seeing that impact in defaults and
Speaker 11: non performing assets for banks at least.
Speaker 5: So Swati. I'm wondering whether or not when we get
Speaker 5: these minutes from the last RBA meeting on Tuesday, whether
Speaker 5: we're going to be able to learn anything here, whether
Speaker 5: it's going to be kind of a level of understanding
Speaker 5: that the market will have, or do we need to
Speaker 5: say that because of this very very disappointing employment report,
Speaker 5: that it's essentially all bets are off now, we're starting
Speaker 5: almost from a clean slate.
Speaker 11: So Doug, we will have monthly inflation report next week
Speaker 11: that is going to be critical for markets, and if
Speaker 11: that is showing a softer number, I think rate bets
Speaker 11: will will be brought forward more convincingly than now. As
Speaker 11: far as the minutes are concerned. The Reserve Bank Governor
Speaker 11: held her first press conference after the rate decision last
Speaker 11: week and that went on for almost an hour and
Speaker 11: a lot of the questions around her views on interest rates,
Speaker 11: inflation and economy were answered, and then she also appeared
Speaker 11: into parliamentary appearances. So I think as far as the
Speaker 11: RBA's thinking is concerned, we already have a lot of
Speaker 11: information from them. So not sure how much more the
Speaker 11: minutes are going to show, but definitely markets will be
Speaker 11: looking out for that monthly inflation number.
Speaker 10: And Doug, I'm not sure if you're aware we're actually
Speaker 10: in the presence of history here because that was the
Speaker 10: first ever press conference by an Ibya governor and Swatty
Speaker 10: got to ask the first ever question, so that caused
Speaker 10: a little bit of consternation among the media pack.
Speaker 5: Swatty, thank you so much for making time to chat
Speaker 5: with us. Swati Pondie Bloomberg Australia Economy and Government reporter,
Speaker 5: and of course Paul Allen in Sydney, who is a
Speaker 5: member of the Daybreak Asia team. Thanks to you both,
Speaker 5: I'm Doug Prisner. You can catch Brian Curtis and myself
Speaker 5: weekdays here for Bloomberg day Break Asia beginning at nine
Speaker 5: in the morning in Hong Kong eight pm on Wall Street.
Speaker 2: Tom our thanks to Doug and Paul. And that does
Speaker 2: it for this edition of Bloomberg day Break Weekend. Join
Speaker 2: us again Monday morning at five am Wall Street Time
Speaker 2: for the latest on markets overseas and the news you
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Speaker 3: I'm Tom Buzby. Stay with us.
Speaker 2: Top stories and global business headlines are coming up right now.