1 00:00:00,240 --> 00:00:07,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:09,480 --> 00:00:11,800 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:11,840 --> 00:00:14,040 Speaker 2: the top stories in the coming week from our day 4 00:00:14,040 --> 00:00:16,360 Speaker 2: Break anchors all around the world, and straight ahead on 5 00:00:16,400 --> 00:00:18,880 Speaker 2: the program, a look ahead to this week's Federal Reserve 6 00:00:19,000 --> 00:00:22,599 Speaker 2: policy meeting Now it may impact monetary policy moving forward. 7 00:00:22,680 --> 00:00:25,400 Speaker 2: Plus a look at earnings from the media and entertainment 8 00:00:25,400 --> 00:00:28,920 Speaker 2: giant Walt Disney. I'm Tom Busby in New York. I'm 9 00:00:28,920 --> 00:00:30,000 Speaker 2: Stephen Carolin London. 10 00:00:30,040 --> 00:00:33,000 Speaker 3: But we're looking at the many challenges facing Germany's new 11 00:00:33,080 --> 00:00:36,080 Speaker 3: Chancellor as Fredrick Martz prepares to take up the job. 12 00:00:36,280 --> 00:00:39,200 Speaker 4: I'm Doug Krisner, exploring what's at stake in the US 13 00:00:39,320 --> 00:00:42,559 Speaker 4: China trade standoff ahead of some key eco data in 14 00:00:42,600 --> 00:00:43,360 Speaker 4: the week ahead. 15 00:00:45,520 --> 00:00:49,560 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 16 00:00:49,560 --> 00:00:53,280 Speaker 1: eleven three zero, New York, Bloomberg ninety nine to one, Washington, DC, 17 00:00:53,760 --> 00:00:58,920 Speaker 1: Bloomberg ninety two to nine, Boston, DAB, Digital Radio, London, Syrias, 18 00:00:59,040 --> 00:01:02,560 Speaker 1: XM one on and around the world on Bloomberg Radio 19 00:01:02,640 --> 00:01:04,839 Speaker 1: dot Com and the Bloomberg Business App. 20 00:01:08,760 --> 00:01:10,640 Speaker 2: Good day to you. I'm Tom Busby, and we begin 21 00:01:10,680 --> 00:01:13,840 Speaker 2: Today's program just ahead of the Federal Reserve's third policy 22 00:01:13,880 --> 00:01:16,080 Speaker 2: meeting of the year, which kicks off Tuesday, ends with 23 00:01:16,120 --> 00:01:19,440 Speaker 2: a decision on interest rates on Wednesday. Amid a lot 24 00:01:19,480 --> 00:01:22,520 Speaker 2: of economic uncertainty and the impact of President Trump's ever 25 00:01:22,680 --> 00:01:25,120 Speaker 2: changing tariffs, the Fed has a lot to consider. For 26 00:01:25,240 --> 00:01:28,840 Speaker 2: some perspective on what it all means. Stuart paul Us, 27 00:01:28,920 --> 00:01:33,120 Speaker 2: economist with Bloomberg Economics, what do you expect the FOMC 28 00:01:33,240 --> 00:01:34,280 Speaker 2: to do on Wednesday? 29 00:01:34,440 --> 00:01:37,880 Speaker 5: We're expecting a rate hold. We're expecting the Federal Reserve 30 00:01:37,959 --> 00:01:41,480 Speaker 5: to keep the target federal funds rate in the range 31 00:01:41,520 --> 00:01:43,479 Speaker 5: of four and a quarter to four and a half percent. 32 00:01:43,840 --> 00:01:46,880 Speaker 5: We're expecting very little news to come out of the FOMC. 33 00:01:47,120 --> 00:01:49,400 Speaker 5: We're expecting very little news to come in the way 34 00:01:49,600 --> 00:01:52,840 Speaker 5: of the Fed's balance sheet. All in all, it should 35 00:01:52,840 --> 00:01:55,720 Speaker 5: be one of the more boring FOMC decisions and press 36 00:01:55,720 --> 00:01:57,160 Speaker 5: conferences that we've had in a while. 37 00:01:57,840 --> 00:02:01,400 Speaker 2: So a boring press conference. However, a lot of turmoil 38 00:02:01,480 --> 00:02:03,280 Speaker 2: leading up to this, and there's a lot for the 39 00:02:03,320 --> 00:02:06,160 Speaker 2: Fed to consider. Let's start with some of the good news. 40 00:02:06,200 --> 00:02:08,440 Speaker 2: And there is good news about jobs, right, we just 41 00:02:08,520 --> 00:02:09,440 Speaker 2: led this past week. 42 00:02:09,560 --> 00:02:11,360 Speaker 5: That's right, in April, there were one hundred and seventy 43 00:02:11,360 --> 00:02:14,799 Speaker 5: seven thousand jobs added, a four point two percent unemployment rate. 44 00:02:15,080 --> 00:02:18,440 Speaker 5: From the Fed's perspective, it's not just thinking about employment 45 00:02:18,520 --> 00:02:22,560 Speaker 5: chugging along, it's thinking about inflation pressures. We saw relatively 46 00:02:22,639 --> 00:02:26,560 Speaker 5: modest zero point two percent wage growth and earnings growth 47 00:02:26,600 --> 00:02:30,520 Speaker 5: during the month. So as employment is becoming a little 48 00:02:30,520 --> 00:02:35,200 Speaker 5: bit broader as the workforce is expanding, inflation pressures stemming 49 00:02:35,280 --> 00:02:39,000 Speaker 5: from the workforce are rather dull. And as we're heading 50 00:02:39,000 --> 00:02:42,240 Speaker 5: into this FMC decision, the latest inflation data that the 51 00:02:42,240 --> 00:02:46,560 Speaker 5: FED has in hand are basically showing muted inflation pressures 52 00:02:46,600 --> 00:02:48,600 Speaker 5: so far. But the question is going to be on 53 00:02:48,639 --> 00:02:51,840 Speaker 5: the Fed's mind just how much can we expect inflation 54 00:02:51,919 --> 00:02:55,680 Speaker 5: pressures to ripple through from tariffs, And some of the 55 00:02:55,720 --> 00:02:58,360 Speaker 5: internal models that we that we know that the FED 56 00:02:58,440 --> 00:03:01,400 Speaker 5: operates with are likely showing that risk is skewed to 57 00:03:01,440 --> 00:03:04,360 Speaker 5: the upside that we could see let's say three and 58 00:03:04,360 --> 00:03:08,799 Speaker 5: a half four percent core PCEE inflation at year end. 59 00:03:09,120 --> 00:03:11,239 Speaker 5: That would be up from about two point six percent 60 00:03:11,360 --> 00:03:14,320 Speaker 5: right now. The FED is seeing a relatively hot jobs number, 61 00:03:14,520 --> 00:03:18,480 Speaker 5: it sees inflation low right now, but risks skewed to 62 00:03:18,520 --> 00:03:21,120 Speaker 5: the upside, so all the more reason to stay on 63 00:03:21,200 --> 00:03:23,320 Speaker 5: hold when the FMC meets next week. 64 00:03:24,040 --> 00:03:27,000 Speaker 2: Those risks, I mean, we're hearing because it's the first 65 00:03:27,040 --> 00:03:29,240 Speaker 2: quarter earning season. We're hearing from a lot of companies, 66 00:03:29,240 --> 00:03:32,320 Speaker 2: big companies, no more so than GM that said these 67 00:03:32,360 --> 00:03:35,600 Speaker 2: tariffs could be a five billion dollar hit to profits, 68 00:03:36,080 --> 00:03:38,200 Speaker 2: just as past week, Apple finally comes out and says 69 00:03:38,280 --> 00:03:42,480 Speaker 2: nine hundred million dollars hit. So company after company Amazon. 70 00:03:42,560 --> 00:03:44,880 Speaker 2: You know, a lot of uncertainty, a lot of people 71 00:03:44,920 --> 00:03:48,800 Speaker 2: fears of a recession. I mean, this is building and building. 72 00:03:49,000 --> 00:03:49,440 Speaker 6: That's right. 73 00:03:49,520 --> 00:03:51,840 Speaker 5: As much as I like to stay focused on the macro, 74 00:03:51,960 --> 00:03:53,960 Speaker 5: as much as I like to stay zoomed out at 75 00:03:53,960 --> 00:03:58,080 Speaker 5: thirty thousand feet thinking about capital investment in the workforce, 76 00:03:58,440 --> 00:04:00,640 Speaker 5: I think that the bigger thing next week is really 77 00:04:00,680 --> 00:04:02,600 Speaker 5: going to be earnings, because we're going to get to 78 00:04:02,600 --> 00:04:04,760 Speaker 5: hear from all these companies. We get to hear from FORD, 79 00:04:04,760 --> 00:04:06,640 Speaker 5: We're going to get to hear from AMD and some 80 00:04:06,680 --> 00:04:09,480 Speaker 5: of the tech companies that are thinking about exporting chips 81 00:04:09,520 --> 00:04:13,160 Speaker 5: and are thinking about regulation of AI and development and 82 00:04:13,240 --> 00:04:15,920 Speaker 5: other domestic investment. We're going to get to hear from 83 00:04:16,000 --> 00:04:19,239 Speaker 5: some of the more consumer oriented companies like door Dash, 84 00:04:19,320 --> 00:04:23,760 Speaker 5: for example, that are really leveraged to consumers discretionary spending power. 85 00:04:24,120 --> 00:04:27,120 Speaker 5: And so I do think that more than the Fed's decision, 86 00:04:27,480 --> 00:04:29,800 Speaker 5: more than the economic data, let's say on the trade 87 00:04:29,839 --> 00:04:32,440 Speaker 5: balance that we're going to get next week data from March. 88 00:04:32,680 --> 00:04:34,560 Speaker 5: But what's really going to matter is the guidance that 89 00:04:34,600 --> 00:04:37,160 Speaker 5: we are getting from companies. And what we hear when 90 00:04:37,160 --> 00:04:40,520 Speaker 5: we look at high frequency surveys, for example, is that 91 00:04:40,680 --> 00:04:46,320 Speaker 5: companies are experiencing input cost pressures, they are planning to 92 00:04:46,640 --> 00:04:48,480 Speaker 5: pass those along to consumers. 93 00:04:48,920 --> 00:04:49,520 Speaker 2: But what we. 94 00:04:49,520 --> 00:04:52,080 Speaker 5: Ultimately think is that with the saving rates so low, 95 00:04:52,680 --> 00:04:55,960 Speaker 5: with consumers stretched and relying on credit as much as 96 00:04:55,960 --> 00:04:59,080 Speaker 5: they are, when firms try to pass along those higher 97 00:04:59,120 --> 00:05:02,960 Speaker 5: prices are ultimately going to face retrenching demand from consumers. 98 00:05:03,320 --> 00:05:06,240 Speaker 2: We know sentiment from the University of Michigan polls at 99 00:05:06,240 --> 00:05:08,560 Speaker 2: a five year low. I mean, people are really worried, 100 00:05:08,800 --> 00:05:09,240 Speaker 2: that's right. 101 00:05:09,360 --> 00:05:13,479 Speaker 5: Sentiment is poor. Business investment plans are being put on 102 00:05:13,560 --> 00:05:16,760 Speaker 5: a hold. A big part of it just gets synthesized 103 00:05:16,800 --> 00:05:22,479 Speaker 5: in one measure, economic policy uncertainty. Our policy uncertainty index 104 00:05:22,560 --> 00:05:25,880 Speaker 5: is spiking through the roof no reason why it's because 105 00:05:26,200 --> 00:05:30,200 Speaker 5: policymakers are coming off as rather mercurial in changing trade 106 00:05:30,279 --> 00:05:33,279 Speaker 5: policy week to week. We just heard from Stephen Moran 107 00:05:33,400 --> 00:05:36,440 Speaker 5: from the Council of Economic Advisors, one of the President's 108 00:05:36,520 --> 00:05:40,360 Speaker 5: chief economic advisors, that we could expect to see a 109 00:05:40,400 --> 00:05:43,599 Speaker 5: trade deal with China perhaps in the coming weeks. Now 110 00:05:43,640 --> 00:05:46,680 Speaker 5: he's not one of the trade advisors, but everybody is 111 00:05:46,760 --> 00:05:50,320 Speaker 5: chirping up on what we can expect from trade policy. 112 00:05:50,720 --> 00:05:52,960 Speaker 5: Just when we thought we had an escalation with China, 113 00:05:53,000 --> 00:05:55,520 Speaker 5: we're now seeing perhaps there's going to be a de escalation. 114 00:05:55,839 --> 00:05:58,919 Speaker 5: There's no wonder. Uncertainty is through the roof, and sentiment 115 00:05:59,000 --> 00:06:00,320 Speaker 5: is down well. 116 00:06:00,320 --> 00:06:02,360 Speaker 2: A lot to watch out for. The Federal Open Market 117 00:06:02,400 --> 00:06:05,440 Speaker 2: Committee's two day policy meeting, wrapping up this Wednesday, a 118 00:06:05,520 --> 00:06:08,800 Speaker 2: decision on rates and a press conference from Chairman Jerome Powell. 119 00:06:08,839 --> 00:06:12,719 Speaker 2: Our thanks to Stuart paul, Us economist with Bloomberg Economics, 120 00:06:13,000 --> 00:06:15,520 Speaker 2: we turned out of the current earning season a number 121 00:06:15,560 --> 00:06:18,640 Speaker 2: of companies so far surprising to the upside. This week, 122 00:06:18,680 --> 00:06:21,240 Speaker 2: we hear from the media and entertainment giant, the Walt 123 00:06:21,320 --> 00:06:23,920 Speaker 2: Disney Company that's out on Wednesday in the House of Mouse, 124 00:06:24,320 --> 00:06:26,800 Speaker 2: facing a lot of challenges right now, including a pullback 125 00:06:26,800 --> 00:06:30,839 Speaker 2: in consumer spending, a slowing economy, fewer tours coming into 126 00:06:30,880 --> 00:06:32,839 Speaker 2: the US and to its parks, and a lot of 127 00:06:32,880 --> 00:06:36,720 Speaker 2: competition for its streaming TV offerings. For more, we turned 128 00:06:36,720 --> 00:06:41,120 Speaker 2: to Geetha. Raganathan, Bloomberg Intelligence analysts on US media. Well, Geither, 129 00:06:41,240 --> 00:06:44,320 Speaker 2: the last time we heard from Disney was before President 130 00:06:44,360 --> 00:06:47,080 Speaker 2: Trump announced his tariffs, the trade wars with China, Europe 131 00:06:47,120 --> 00:06:50,640 Speaker 2: and other countries. How has all that impacted the company 132 00:06:50,640 --> 00:06:52,440 Speaker 2: and what do you expect to see from Disney in 133 00:06:52,520 --> 00:06:54,000 Speaker 2: its second quarter results? 134 00:06:55,279 --> 00:06:58,400 Speaker 7: Yeah? Absolutely, Thank you so much, tom So. Disney is really, 135 00:06:58,400 --> 00:07:01,600 Speaker 7: I think one of the most complex stories in the 136 00:07:01,640 --> 00:07:04,400 Speaker 7: media world. There are so many parts. There's so many 137 00:07:04,440 --> 00:07:07,160 Speaker 7: moving parts really as you think of the parks business, 138 00:07:07,160 --> 00:07:10,600 Speaker 7: the theme parks business, streaming, you know, you have a 139 00:07:10,640 --> 00:07:13,640 Speaker 7: presence in linear TV sports with ESPN, and then of 140 00:07:13,680 --> 00:07:18,360 Speaker 7: course the theatrical business and in box office. There's always 141 00:07:18,560 --> 00:07:22,400 Speaker 7: something to be concerned about here. So you're absolutely right. 142 00:07:22,800 --> 00:07:25,840 Speaker 7: In terms of parks, there is obviously, it is very 143 00:07:25,920 --> 00:07:28,880 Speaker 7: very sensitive to the overall health of the economy. And 144 00:07:29,040 --> 00:07:31,240 Speaker 7: why we are concerned about parks when it comes to 145 00:07:31,240 --> 00:07:35,120 Speaker 7: Disney is because this makes up about fifty to fifty 146 00:07:35,200 --> 00:07:39,560 Speaker 7: five percent of their profit, so this is really, you know, 147 00:07:39,680 --> 00:07:43,320 Speaker 7: the largest contributor of operating income. And while they had 148 00:07:43,400 --> 00:07:47,560 Speaker 7: initially guided to healthy summer bookings, you know, we've kind 149 00:07:47,560 --> 00:07:50,080 Speaker 7: of seen this deteriorating macro sentiment. So I think investors 150 00:07:50,080 --> 00:07:53,080 Speaker 7: are definitely going to be focused on that. Apart from 151 00:07:53,120 --> 00:07:56,200 Speaker 7: the general health of the economy. You know, as far 152 00:07:56,240 --> 00:07:58,800 Speaker 7: as you know theme parks are concerned. The one thing 153 00:07:58,840 --> 00:08:01,720 Speaker 7: that Disney investors are going to be super focused on 154 00:08:01,760 --> 00:08:05,360 Speaker 7: as any commentary that management can provide in terms of 155 00:08:05,400 --> 00:08:09,680 Speaker 7: competition from Epic Universe, which is a whole brand new 156 00:08:09,720 --> 00:08:13,840 Speaker 7: theme park that is coming out of Universal and will 157 00:08:13,840 --> 00:08:17,200 Speaker 7: be in Florida and is expected to be a very, 158 00:08:17,280 --> 00:08:19,720 Speaker 7: very big competitor because some of the initial reviews have 159 00:08:19,760 --> 00:08:21,320 Speaker 7: been absolutely amazing. 160 00:08:21,040 --> 00:08:23,240 Speaker 2: And just open this week right or this month? 161 00:08:23,320 --> 00:08:26,120 Speaker 7: Yeah it is, Yeah, it is going to open on 162 00:08:26,200 --> 00:08:29,800 Speaker 7: May twenty second. Yes, So you know, near term, I 163 00:08:29,800 --> 00:08:32,400 Speaker 7: think there's going to be a lot of wait and 164 00:08:32,440 --> 00:08:35,520 Speaker 7: watch with the theme park business. But I think medium 165 00:08:35,520 --> 00:08:38,800 Speaker 7: to longer term the business is definitely stabilizing, especially on 166 00:08:38,840 --> 00:08:42,880 Speaker 7: the streaming front. So we're definitely seeing a big improvement 167 00:08:42,960 --> 00:08:46,400 Speaker 7: in terms of streaming profits, with the company expecting a 168 00:08:46,440 --> 00:08:50,160 Speaker 7: billion dollars in operating income this year, compared that to 169 00:08:50,200 --> 00:08:53,840 Speaker 7: about four billion dollars in losses just a few years ago. 170 00:08:54,080 --> 00:08:57,080 Speaker 2: Wow. Wow, Well, let's go back to parks, because another 171 00:08:57,600 --> 00:09:00,760 Speaker 2: part of that is its cruise division, and as I understand, 172 00:09:01,360 --> 00:09:04,440 Speaker 2: it's just unbelievable the demand for these Disney cruises. 173 00:09:05,880 --> 00:09:09,560 Speaker 7: Yes, they have really made a huge push into the 174 00:09:09,640 --> 00:09:13,360 Speaker 7: cruise ship business. And this quarter is going to be 175 00:09:13,679 --> 00:09:15,920 Speaker 7: our fiscal second quarter when they report, is going to 176 00:09:15,920 --> 00:09:18,680 Speaker 7: be particularly interesting because you're going to have a full 177 00:09:18,760 --> 00:09:23,160 Speaker 7: quarter contribution from a new cruise ship, which is called 178 00:09:23,200 --> 00:09:25,760 Speaker 7: Disney Treasure, and which is expected to have been profitable 179 00:09:25,760 --> 00:09:28,760 Speaker 7: in its first full quarter. So it's going to be interesting. 180 00:09:28,800 --> 00:09:30,920 Speaker 7: We think that, you know, the cruise ship business is 181 00:09:30,960 --> 00:09:32,959 Speaker 7: going to go from you know, about two to three 182 00:09:33,000 --> 00:09:35,679 Speaker 7: billion dollars in revenue to as much as four to 183 00:09:35,800 --> 00:09:38,520 Speaker 7: five billion dollars in just a few years time. So 184 00:09:38,840 --> 00:09:41,480 Speaker 7: this is going to become a major part of their 185 00:09:41,559 --> 00:09:43,840 Speaker 7: parks business. And the one thing that we've seen with 186 00:09:43,920 --> 00:09:47,640 Speaker 7: cruises as opposed to parks is you know, the demand, 187 00:09:47,880 --> 00:09:50,880 Speaker 7: as you just pointed out, is very very strong and 188 00:09:50,920 --> 00:09:54,640 Speaker 7: will be a stabilizing force for the entire experiences segment. 189 00:09:54,679 --> 00:09:55,280 Speaker 7: For Disney. 190 00:09:56,200 --> 00:09:58,240 Speaker 2: Now, I want to talk about its streaming TV unit. 191 00:09:58,320 --> 00:10:01,720 Speaker 2: We have Disney Plus and Hulu and ESPN. Has there 192 00:10:01,760 --> 00:10:03,840 Speaker 2: been any let up, any signs of a letup in 193 00:10:03,960 --> 00:10:06,960 Speaker 2: advertising revenue where they really make a lot of money 194 00:10:07,000 --> 00:10:09,360 Speaker 2: from all these networks and their linear networks. 195 00:10:10,000 --> 00:10:14,160 Speaker 7: I think the general commentary tom on advertising is obviously 196 00:10:14,200 --> 00:10:17,720 Speaker 7: a very cautious kind of wait and see approach, because 197 00:10:17,760 --> 00:10:20,800 Speaker 7: when you head into an economic environment where you have 198 00:10:20,880 --> 00:10:24,160 Speaker 7: so much of volatility, the first sector that kind of 199 00:10:24,200 --> 00:10:27,880 Speaker 7: sees that pullback is of course advertising. Now there's both 200 00:10:27,880 --> 00:10:30,960 Speaker 7: good and bad with respect to Disney. So if you 201 00:10:31,040 --> 00:10:34,760 Speaker 7: just look at it from an overall company perspective, only 202 00:10:34,800 --> 00:10:39,000 Speaker 7: about fourteen to fifteen percent of Disney's revenue actually comes 203 00:10:39,000 --> 00:10:43,160 Speaker 7: from advertising, so exposure itself is not very very heavy. 204 00:10:43,200 --> 00:10:45,360 Speaker 7: You compare that to some of the other companies like 205 00:10:45,360 --> 00:10:48,000 Speaker 7: a Fox or a Warner Brothers Discovery, where you know 206 00:10:48,080 --> 00:10:50,839 Speaker 7: almost thirty five to forty percent of revenues are coming 207 00:10:50,880 --> 00:10:55,400 Speaker 7: from advertising. So I think overall the exposure is fairly limited. 208 00:10:56,120 --> 00:10:59,640 Speaker 7: That said, if things go bad, they can go really 209 00:10:59,679 --> 00:11:03,040 Speaker 7: really bad. So if you're looking at a linear TV business, 210 00:11:03,320 --> 00:11:06,880 Speaker 7: and Disney has considerable exposure here, you know, whether it's ESPN, 211 00:11:06,960 --> 00:11:10,079 Speaker 7: whether it's the ABC network, we can see ads drop 212 00:11:10,160 --> 00:11:13,360 Speaker 7: almost ten to fifteen percent, and that is really not 213 00:11:13,480 --> 00:11:15,240 Speaker 7: good for the business. They do have a little bit 214 00:11:15,240 --> 00:11:18,880 Speaker 7: of a hedge because streaming ads or digital ads in 215 00:11:19,000 --> 00:11:22,480 Speaker 7: general have held up better than the linear TV side 216 00:11:22,520 --> 00:11:25,960 Speaker 7: of the business. But overall, it is definitely going to 217 00:11:25,960 --> 00:11:29,200 Speaker 7: be a very very cautious tone on the advertising business. 218 00:11:29,360 --> 00:11:31,800 Speaker 2: And let's turn to its film studio, because we've seen 219 00:11:31,840 --> 00:11:35,800 Speaker 2: some wild success as Captain America, Mufasa movie, some not 220 00:11:35,920 --> 00:11:39,720 Speaker 2: so great Snow White Mawana too, but still I suspect 221 00:11:39,760 --> 00:11:40,800 Speaker 2: they're all going to make money. 222 00:11:41,280 --> 00:11:43,920 Speaker 7: They absolutely are, and we've seen you know, just if 223 00:11:43,960 --> 00:11:46,520 Speaker 7: you just think a few quarters ago, Tom, I mean, 224 00:11:46,600 --> 00:11:50,080 Speaker 7: this business was really really struggling. The content business as 225 00:11:50,080 --> 00:11:54,080 Speaker 7: a whole was in desperate need of a rejigger, and 226 00:11:54,120 --> 00:11:57,000 Speaker 7: we really had that with you know, inside out kind 227 00:11:57,040 --> 00:12:02,480 Speaker 7: of really you know, start this whole resurgence in the 228 00:12:02,520 --> 00:12:06,000 Speaker 7: box office unit last year and ever since then, it's 229 00:12:06,040 --> 00:12:08,880 Speaker 7: been great. You pointed out Mufasa that's done really well, 230 00:12:08,920 --> 00:12:11,480 Speaker 7: Moana did really well, and then of course you had 231 00:12:11,520 --> 00:12:14,360 Speaker 7: Captain America, and then we have the summer season for 232 00:12:15,320 --> 00:12:18,600 Speaker 7: Disney kicking off the summer box office season kicking off 233 00:12:18,600 --> 00:12:22,000 Speaker 7: with Thunderbolts, which is tracking to a very very strong 234 00:12:22,720 --> 00:12:26,480 Speaker 7: opening and should have a fantastic run just like Captain America. 235 00:12:26,520 --> 00:12:28,160 Speaker 7: You know, this is the next phase of the Marble 236 00:12:28,240 --> 00:12:31,839 Speaker 7: cinematic universe. Should do really really well for Disney, and 237 00:12:31,920 --> 00:12:35,480 Speaker 7: they have a fantastic content pipeline coming out over the 238 00:12:35,520 --> 00:12:36,680 Speaker 7: next eight to ten months. 239 00:12:37,240 --> 00:12:40,520 Speaker 2: Disney second quarter earning's coming out after Wall Street's closing 240 00:12:40,520 --> 00:12:43,960 Speaker 2: belt This Wednesday, our thanks to Getha raganoffin Bloomberg Intelligence 241 00:12:44,000 --> 00:12:47,680 Speaker 2: Analysts on US media, coming up on Bloomberg day Break weekend, 242 00:12:47,720 --> 00:12:51,199 Speaker 2: looking at the many challenges facing Germany's new chancellor as 243 00:12:51,240 --> 00:12:53,920 Speaker 2: he prepares to take up the job. I'm Tom Busby, 244 00:12:53,960 --> 00:13:01,720 Speaker 2: and this is Bloomberg. Is Bloomberg Daybreak Weekend, our global 245 00:13:01,760 --> 00:13:03,760 Speaker 2: look ahead at the top stories for investors in the 246 00:13:03,760 --> 00:13:07,040 Speaker 2: coming week. I'm Tom Busby in New York. Up later 247 00:13:07,080 --> 00:13:08,959 Speaker 2: in our program and look at what the Trump tariffs 248 00:13:08,960 --> 00:13:13,160 Speaker 2: could mean for China's economy. But first, Germany's next Chancellor, 249 00:13:13,200 --> 00:13:16,319 Speaker 2: Friedrich Mertz, will be officially confirmed in his role leading 250 00:13:16,320 --> 00:13:19,839 Speaker 2: Europe's largest economy. This week, it's been a rocky road 251 00:13:19,880 --> 00:13:22,400 Speaker 2: to the top of the conservative who will preside over 252 00:13:22,600 --> 00:13:26,000 Speaker 2: uncertain times? What does this path ahead look like for 253 00:13:26,080 --> 00:13:28,559 Speaker 2: the country's new leader. For more, let's go to London 254 00:13:28,559 --> 00:13:31,720 Speaker 2: and bring in Bloomberg Daybreak europe Banker Stephen Carroll. 255 00:13:31,800 --> 00:13:35,000 Speaker 3: Tom It's been more than two months since Germany's federal election, 256 00:13:35,160 --> 00:13:38,560 Speaker 3: and now finally the country will have a new chancellor. 257 00:13:38,679 --> 00:13:41,840 Speaker 3: The Social Democrats who led the outgoing government have voted 258 00:13:41,840 --> 00:13:45,600 Speaker 3: in favor of a coalition deal with Friedrich Martz's Conservative alliance, 259 00:13:45,840 --> 00:13:48,160 Speaker 3: clearing the way for the Christian Democratic leader to be 260 00:13:48,240 --> 00:13:52,200 Speaker 3: confirmed as the country's next chancellor. The agreement, backed by 261 00:13:52,280 --> 00:13:56,120 Speaker 3: around eighty five percent of SPT members in an online ballot, 262 00:13:56,280 --> 00:13:59,720 Speaker 3: brings to a close a complex set of negotiations. The 263 00:13:59,760 --> 00:14:03,040 Speaker 3: deal also keeps the far right AfD out of power 264 00:14:03,160 --> 00:14:06,160 Speaker 3: after they won a historic twenty point eight percent of 265 00:14:06,200 --> 00:14:09,120 Speaker 3: the vote in February. As Chancellor, Frederick Martz will have 266 00:14:09,160 --> 00:14:12,320 Speaker 3: to deal with a delicate economic outlook. Germany saw just 267 00:14:12,400 --> 00:14:15,439 Speaker 3: meager growth than the first quarter, and its key industries 268 00:14:15,480 --> 00:14:18,800 Speaker 3: face the impact of US tariffs. He's already passed a 269 00:14:18,800 --> 00:14:21,920 Speaker 3: plan to ramp up defense and infrastructure spending in Germany, 270 00:14:22,080 --> 00:14:24,520 Speaker 3: and that's something the CFO of Deutsche Bank, James von 271 00:14:24,560 --> 00:14:26,840 Speaker 3: Moltke says is already having an impact. 272 00:14:27,280 --> 00:14:29,640 Speaker 8: Well, there are two things going on that German economy 273 00:14:29,680 --> 00:14:32,800 Speaker 8: is obviously an export driven economy, so there's a significant 274 00:14:32,800 --> 00:14:36,040 Speaker 8: impact of tariffs, whatever the outcome will be in and 275 00:14:36,080 --> 00:14:39,320 Speaker 8: so there are scenarios around that as to what the impact. 276 00:14:39,480 --> 00:14:42,320 Speaker 8: But at the same time, you have this offsetting impact 277 00:14:42,480 --> 00:14:46,560 Speaker 8: of the fiscal reform in Germany and now several years 278 00:14:46,640 --> 00:14:51,480 Speaker 8: on infrastructure, defense spending. Obviously the sustainable and digital transitions 279 00:14:51,480 --> 00:14:54,440 Speaker 8: that are underway, so a significant investment volume, and so 280 00:14:54,720 --> 00:14:57,040 Speaker 8: corporates in Germany are sort of gearing themselves up to 281 00:14:57,760 --> 00:14:58,320 Speaker 8: manage that. 282 00:14:59,200 --> 00:15:02,480 Speaker 9: And in terms of of payouts and dividends and sort 283 00:15:02,480 --> 00:15:05,520 Speaker 9: of and buybacks and these sorts of things, is this 284 00:15:05,560 --> 00:15:07,840 Speaker 9: a moment to sort of preserve cash? How are you 285 00:15:07,840 --> 00:15:09,320 Speaker 9: thinking about that going into this way. 286 00:15:09,360 --> 00:15:14,080 Speaker 8: We're executing on the on the distribution strategy and policies 287 00:15:14,080 --> 00:15:16,440 Speaker 8: that we've laid out. So we've announced so far this 288 00:15:16,560 --> 00:15:20,080 Speaker 8: year two point one billion of distributions through dividends and buybacks. 289 00:15:20,280 --> 00:15:22,800 Speaker 8: We're executing on that. And to your question, all or 290 00:15:22,880 --> 00:15:26,200 Speaker 8: will will will reassess as time goes by, we see 291 00:15:26,240 --> 00:15:28,760 Speaker 8: the performance in the first and second quarters in the environment, 292 00:15:29,280 --> 00:15:31,960 Speaker 8: you know, let's say ninety days from now, we'll have 293 00:15:32,000 --> 00:15:34,400 Speaker 8: an opportunity to reassess distributions later in the year. 294 00:15:34,440 --> 00:15:35,680 Speaker 9: And then I'd like to also just take a step 295 00:15:35,680 --> 00:15:37,760 Speaker 9: back and look at the sort of market architecture and 296 00:15:37,800 --> 00:15:39,320 Speaker 9: what we've seen over the last couple of weeks. And 297 00:15:39,320 --> 00:15:41,600 Speaker 9: I'll begin by sort of quoting some of your own 298 00:15:41,640 --> 00:15:43,920 Speaker 9: research back to you that the preconditions are now in 299 00:15:43,920 --> 00:15:46,680 Speaker 9: place for the beginning of a major dollar down trend, 300 00:15:46,720 --> 00:15:50,600 Speaker 9: expecting one thirty euro versus the dollar by twenty twenty seven. 301 00:15:50,960 --> 00:15:53,120 Speaker 9: How much of this damage do you think is permanent? 302 00:15:53,960 --> 00:15:58,160 Speaker 8: Well, look, that's our analysts are calling for relatively significant 303 00:15:58,200 --> 00:15:59,160 Speaker 8: structural change. 304 00:15:59,360 --> 00:16:00,760 Speaker 6: I do think that will take time. 305 00:16:01,200 --> 00:16:04,400 Speaker 8: There's been a what i'll call a break if you like. 306 00:16:04,400 --> 00:16:07,280 Speaker 6: In sentiment, but that sentiment I think. 307 00:16:07,400 --> 00:16:11,560 Speaker 8: Will make itself felt gradually over time. It's had a 308 00:16:11,560 --> 00:16:14,640 Speaker 8: pretty dramatic impact on the euro dollar exchange rate already, 309 00:16:15,120 --> 00:16:18,440 Speaker 8: and a further drift you know, up from here, would 310 00:16:18,480 --> 00:16:22,520 Speaker 8: be impactful overall. I think the difference you're seeing is 311 00:16:22,560 --> 00:16:27,200 Speaker 8: that the policy changes are making the rest of the 312 00:16:27,200 --> 00:16:33,000 Speaker 8: world interesting to investors and changing the relative position a 313 00:16:33,000 --> 00:16:34,960 Speaker 8: little bit of the United States and Europe, but other 314 00:16:35,040 --> 00:16:36,120 Speaker 8: destinations as well. 315 00:16:36,600 --> 00:16:37,720 Speaker 6: In a sense, that's good. 316 00:16:37,800 --> 00:16:39,920 Speaker 8: I think it's been a wake up call for Europe, 317 00:16:40,760 --> 00:16:43,360 Speaker 8: whether that's the policy side of Europe or as we 318 00:16:43,400 --> 00:16:47,080 Speaker 8: talked about, the corporate side, and so there's an opportunity 319 00:16:47,120 --> 00:16:49,440 Speaker 8: to rebalance a little bit. But it'll have impact on 320 00:16:49,480 --> 00:16:50,840 Speaker 8: a number of markets, including currents. 321 00:16:50,880 --> 00:16:52,520 Speaker 9: And when you think about sort of the remaking of 322 00:16:52,520 --> 00:16:55,560 Speaker 9: that sort of global market architecture, does that mean that 323 00:16:55,720 --> 00:16:58,680 Speaker 9: European markets, that German bonds, that the year of plays 324 00:16:58,720 --> 00:17:01,960 Speaker 9: a larger role going forward, if not completely eclipsing the 325 00:17:02,040 --> 00:17:03,840 Speaker 9: United States, but certainly changes. 326 00:17:04,080 --> 00:17:04,560 Speaker 6: I don't think. 327 00:17:04,600 --> 00:17:07,720 Speaker 8: Again there's I don't necessarily think this is a zero 328 00:17:07,760 --> 00:17:08,520 Speaker 8: sum competition. 329 00:17:08,560 --> 00:17:09,200 Speaker 6: I really don't. 330 00:17:09,280 --> 00:17:12,720 Speaker 8: But the Bund is an anchor sort of investment and 331 00:17:12,800 --> 00:17:17,160 Speaker 8: anchor source of stability in the world, and that's really good. 332 00:17:17,240 --> 00:17:20,359 Speaker 8: In fairness, and one thing another thing our analyst said, 333 00:17:20,359 --> 00:17:23,520 Speaker 8: and this is true for the German government to have 334 00:17:23,520 --> 00:17:26,560 Speaker 8: announced as big a fiscal expansion as has taken place, 335 00:17:27,080 --> 00:17:29,520 Speaker 8: and for the long bond in Germany, the bond not 336 00:17:29,600 --> 00:17:32,840 Speaker 8: to have moved substantially in that time is a real 337 00:17:32,960 --> 00:17:34,720 Speaker 8: sign of confidence in Germany. 338 00:17:35,000 --> 00:17:36,960 Speaker 6: We actually think that the. 339 00:17:36,480 --> 00:17:39,919 Speaker 8: Economic health of the country and also its fiscal strength 340 00:17:40,320 --> 00:17:43,600 Speaker 8: in many respects, can be improved through this spending and 341 00:17:43,920 --> 00:17:46,960 Speaker 8: if you like, a rebalancing of the economy, more consumption, 342 00:17:47,080 --> 00:17:48,200 Speaker 8: more investment at home. 343 00:17:48,240 --> 00:17:49,360 Speaker 9: And I want to get into that, but I also 344 00:17:49,400 --> 00:17:51,760 Speaker 9: want to talk quickly also just about the foreign exchange market, 345 00:17:51,880 --> 00:17:53,960 Speaker 9: not just within the markets, but also your clients as 346 00:17:54,000 --> 00:17:56,720 Speaker 9: obviously companies that look at the outside world. You've seen 347 00:17:56,800 --> 00:17:59,240 Speaker 9: some wild moves on the exchange rate. How are your 348 00:17:59,280 --> 00:18:01,479 Speaker 9: clients dealing with how are you sort of also in 349 00:18:01,480 --> 00:18:03,560 Speaker 9: intermedia and helping them sort of hedge some of that risk. 350 00:18:03,640 --> 00:18:06,600 Speaker 8: But we had we had tremendous volumes in those days 351 00:18:06,640 --> 00:18:09,800 Speaker 8: of early early April, so obviously we were managing our risk, 352 00:18:09,920 --> 00:18:12,960 Speaker 8: but we were also helping clients to manage theirs and 353 00:18:13,600 --> 00:18:16,879 Speaker 8: a there is a theme by the way of more 354 00:18:16,920 --> 00:18:20,480 Speaker 8: business coming to us because of clients seeking to work 355 00:18:20,480 --> 00:18:22,960 Speaker 8: with a European bank, and that that's also encouraging for 356 00:18:22,960 --> 00:18:25,760 Speaker 8: the business model. Again, rebalance is a little bit the 357 00:18:25,800 --> 00:18:28,880 Speaker 8: imbalance that has been strategically the case in the industry. 358 00:18:29,359 --> 00:18:33,439 Speaker 8: The clients were in those days reacting strongly to this 359 00:18:33,560 --> 00:18:35,720 Speaker 8: idea that that the dollar. 360 00:18:35,440 --> 00:18:37,960 Speaker 6: In the US long bond was no longer. 361 00:18:37,680 --> 00:18:40,840 Speaker 8: The risk off trade and where's that resulted in a 362 00:18:40,840 --> 00:18:43,320 Speaker 8: lot of movement and uncertainty with clients. 363 00:18:43,359 --> 00:18:46,240 Speaker 6: But all around the world is the honest truth. 364 00:18:46,560 --> 00:18:48,320 Speaker 9: And so trying to figure out the sort of German 365 00:18:48,800 --> 00:18:51,800 Speaker 9: fiscal expansion kind of conversation here there's so much bad 366 00:18:51,880 --> 00:18:53,560 Speaker 9: news price then, whether it's what's coming out of the 367 00:18:53,640 --> 00:18:56,479 Speaker 9: United States, the sort of years of contraction within Germany. 368 00:18:56,720 --> 00:18:58,440 Speaker 9: Do you think that there is actually quite a bit 369 00:18:58,480 --> 00:19:00,520 Speaker 9: of good news that is not yet then, and that 370 00:19:00,520 --> 00:19:03,199 Speaker 9: actually we can really see things take off materially in Germany. 371 00:19:03,280 --> 00:19:04,440 Speaker 6: I think so it'll take time. 372 00:19:04,480 --> 00:19:06,760 Speaker 8: I mean, as in the nature of a fiscal expansion, 373 00:19:07,280 --> 00:19:09,399 Speaker 8: the government needs to be put in place and the 374 00:19:09,720 --> 00:19:14,479 Speaker 8: spending plans not just enacted but actually hitting. And so 375 00:19:14,520 --> 00:19:16,840 Speaker 8: we see this as a real support to the German 376 00:19:16,880 --> 00:19:21,280 Speaker 8: economy and the European more broadly economies in the years 377 00:19:21,280 --> 00:19:22,680 Speaker 8: really starting in twenty six. 378 00:19:22,880 --> 00:19:26,000 Speaker 6: But it's a sustained improvement. Now. 379 00:19:26,000 --> 00:19:28,520 Speaker 8: One thing that's important is what it does to confidence today, 380 00:19:28,560 --> 00:19:31,720 Speaker 8: and so we do expect some help in twenty five 381 00:19:32,280 --> 00:19:36,040 Speaker 8: in terms of overall confidence in households and corporates. Obviously 382 00:19:36,080 --> 00:19:39,320 Speaker 8: that confidence requires a resolution of the tariff war and 383 00:19:39,600 --> 00:19:41,960 Speaker 8: some of the other things that are live at the moment, 384 00:19:42,240 --> 00:19:45,159 Speaker 8: potentially piece in Ukraine. So there's a lot set of 385 00:19:45,200 --> 00:19:48,360 Speaker 8: hanging in terms of confidence on the outcome of these events. 386 00:19:49,040 --> 00:19:51,800 Speaker 3: That was the Deutsche Banks CFO James von Maltkez speaking 387 00:19:51,800 --> 00:19:54,800 Speaker 3: there to Bloomberg's Oliver Krook. So what are the major 388 00:19:54,880 --> 00:19:58,240 Speaker 3: challenges awaiting Germany's next chancellor. I've been discussing this with 389 00:19:58,320 --> 00:20:00,960 Speaker 3: our Germany Bureau chief christ for our world. 390 00:20:01,040 --> 00:20:04,080 Speaker 10: Pushing through economic reforms will will definitely be on top 391 00:20:04,119 --> 00:20:07,159 Speaker 10: of his list, and also will be particularly in focus 392 00:20:07,280 --> 00:20:10,359 Speaker 10: in coming days will be his efforts to liaise with 393 00:20:10,480 --> 00:20:13,800 Speaker 10: other European leaders like French President Imanuel Macron or the 394 00:20:13,800 --> 00:20:18,200 Speaker 10: Polish president tous Joined has been notably passive under outgoing 395 00:20:18,280 --> 00:20:21,679 Speaker 10: chance all of shots, and Mattz really has pledged and 396 00:20:21,720 --> 00:20:24,159 Speaker 10: maybe it like one of his top priorities to change 397 00:20:24,160 --> 00:20:26,639 Speaker 10: that and play also like a more active role on 398 00:20:26,680 --> 00:20:27,560 Speaker 10: the European stage. 399 00:20:27,600 --> 00:20:30,399 Speaker 3: Again, how quickly will the new government be able to 400 00:20:30,480 --> 00:20:32,920 Speaker 3: draw up a budget? I imagine another key concern. 401 00:20:33,359 --> 00:20:37,280 Speaker 10: That is actually definitely one of the most pressing issues actually, 402 00:20:37,600 --> 00:20:41,160 Speaker 10: since when the outgoing government decided on a provisional budget 403 00:20:41,200 --> 00:20:43,679 Speaker 10: for this year for twenty twenty five, there was a 404 00:20:43,720 --> 00:20:47,359 Speaker 10: gap of roughly twelve billion euros, that's about or close 405 00:20:47,400 --> 00:20:51,159 Speaker 10: to fourteen billion dollars. And since since that provisional budget 406 00:20:51,200 --> 00:20:54,320 Speaker 10: was announced, like some additional funding needs have actually come up, 407 00:20:54,600 --> 00:20:57,159 Speaker 10: So the latest number that has been floating around in 408 00:20:57,200 --> 00:21:00,560 Speaker 10: Berlin was about eighteen billion euros and the new government, 409 00:21:00,600 --> 00:21:03,399 Speaker 10: undeficult wish Melts will definitely need to address this sooner 410 00:21:03,520 --> 00:21:06,200 Speaker 10: rather than later to to basically plug these funding gaps. 411 00:21:06,480 --> 00:21:09,400 Speaker 3: Of course, Germany in the crosshairs, as so many other 412 00:21:09,440 --> 00:21:12,879 Speaker 3: countries are too, of Donald Trump's trade tariffs too. Are 413 00:21:12,920 --> 00:21:15,840 Speaker 3: we likely to hear anything about trade policy from mer 414 00:21:15,880 --> 00:21:17,040 Speaker 3: It's in the coming days? 415 00:21:17,320 --> 00:21:21,000 Speaker 10: That does seem pretty likely. Melt has been quite outspoken 416 00:21:21,040 --> 00:21:23,920 Speaker 10: actually that the disruption from the from from the US 417 00:21:24,040 --> 00:21:28,159 Speaker 10: tariffs marked really like a significant shift for for for 418 00:21:28,200 --> 00:21:31,360 Speaker 10: Germany because the US is one of its key trading partners. 419 00:21:31,640 --> 00:21:32,240 Speaker 6: So we can. 420 00:21:32,119 --> 00:21:34,560 Speaker 10: Definitely expect them not just to meet with with Immanuel 421 00:21:34,640 --> 00:21:37,720 Speaker 10: McCrow in France and with other European leaders in the 422 00:21:37,840 --> 00:21:41,359 Speaker 10: individual like European Union member states, but also to show 423 00:21:41,440 --> 00:21:44,240 Speaker 10: up in Brussels to get involved in the European Union's 424 00:21:44,280 --> 00:21:47,040 Speaker 10: trade policy, because that that is actually like this, the 425 00:21:47,080 --> 00:21:50,159 Speaker 10: sort of like entity that discusses traits with with the US. 426 00:21:50,600 --> 00:21:54,199 Speaker 3: How solid does this coalition look. The SPD have voted 427 00:21:54,200 --> 00:21:56,280 Speaker 3: for it, it has you know, gone through the period 428 00:21:56,320 --> 00:21:59,680 Speaker 3: of negotiations. But where should we be looking for potential 429 00:21:59,760 --> 00:22:01,160 Speaker 3: data in this new alliance. 430 00:22:02,119 --> 00:22:05,680 Speaker 10: This will definitely be a focus since the last government's 431 00:22:05,880 --> 00:22:09,760 Speaker 10: sort of constant bickering over over months and years actually 432 00:22:09,920 --> 00:22:11,960 Speaker 10: was really like one of one of its major problems, 433 00:22:12,000 --> 00:22:16,160 Speaker 10: and that actually disgruntled many many voters in Germany. Overall, 434 00:22:16,400 --> 00:22:19,400 Speaker 10: the SPD, the Social Democrats and the conservative blog that's 435 00:22:19,440 --> 00:22:22,879 Speaker 10: led by British mouts that do seem very determined and 436 00:22:23,160 --> 00:22:26,480 Speaker 10: so to reassure voters that they will make this cooperation work. 437 00:22:26,760 --> 00:22:30,000 Speaker 10: But there are there are definitely some some potentially contentious 438 00:22:30,000 --> 00:22:32,840 Speaker 10: issues there that will have to be addressed, particularly when 439 00:22:32,880 --> 00:22:36,880 Speaker 10: it comes to immigration for example, or social welfare spending, 440 00:22:36,960 --> 00:22:39,760 Speaker 10: where British Melts has sort of floated the idea of 441 00:22:39,920 --> 00:22:43,199 Speaker 10: pretty painful cutbacks and that that will be something that 442 00:22:43,240 --> 00:22:46,080 Speaker 10: will for the social Democrats will probably be difficult to accept. 443 00:22:46,119 --> 00:22:48,080 Speaker 10: So yeah, it's going to be really interesting to see 444 00:22:48,280 --> 00:22:50,399 Speaker 10: if they are or if they will be able to 445 00:22:50,400 --> 00:22:52,480 Speaker 10: find really like a common common ground. They are a 446 00:22:52,480 --> 00:22:53,200 Speaker 10: common line. 447 00:22:53,800 --> 00:22:56,119 Speaker 3: The biggest opposition this new government is going to be 448 00:22:56,119 --> 00:22:59,280 Speaker 3: facing comes from the fireright AfD party. They came in 449 00:22:59,359 --> 00:23:03,160 Speaker 3: second in the actions in February. They're leading the opposition. Now, 450 00:23:03,480 --> 00:23:07,000 Speaker 3: how much are the AfD's policies and politicians going to 451 00:23:07,040 --> 00:23:08,720 Speaker 3: put pressure on this new government. 452 00:23:10,119 --> 00:23:13,240 Speaker 10: Well, they are definitely the biggest opposition party in the 453 00:23:13,320 --> 00:23:17,399 Speaker 10: new German Parliament after they secured just over twenty percent 454 00:23:17,440 --> 00:23:21,560 Speaker 10: of the votes in the last federal election in late February, 455 00:23:21,960 --> 00:23:24,840 Speaker 10: but they don't have direct influence on policy making on 456 00:23:25,440 --> 00:23:27,639 Speaker 10: a federal level. What we're seeing at the moment is 457 00:23:27,680 --> 00:23:30,040 Speaker 10: that like some of the some of the regional governments, 458 00:23:30,280 --> 00:23:34,080 Speaker 10: is like some of the German states where the AfD 459 00:23:34,720 --> 00:23:38,760 Speaker 10: has like a stronger presence that there, we can definitely 460 00:23:38,800 --> 00:23:42,080 Speaker 10: see that they are trying to disrupt and influence decision 461 00:23:42,119 --> 00:23:45,639 Speaker 10: making by blocking certain decisions on federal level. We're not 462 00:23:45,680 --> 00:23:48,760 Speaker 10: seeing that. I'm a bit reluctant to make a focus there. 463 00:23:48,600 --> 00:23:52,159 Speaker 11: Off while how long that will that will remain in 464 00:23:52,200 --> 00:23:54,440 Speaker 11: place or if they actually will have some sort of influence, 465 00:23:54,480 --> 00:23:57,919 Speaker 11: but for now their sort of potential to disrupt decision 466 00:23:57,960 --> 00:24:00,320 Speaker 11: making on a federal level is close to zero. 467 00:24:00,400 --> 00:24:03,360 Speaker 3: Actually, talk us through some of the international challenges that 468 00:24:03,359 --> 00:24:06,440 Speaker 3: that Friedrich Martz will will also need to be addressing. 469 00:24:06,760 --> 00:24:10,280 Speaker 3: We know, before this new Bodista came into force, he 470 00:24:10,320 --> 00:24:12,399 Speaker 3: did manage to pass that bill which will ramp up 471 00:24:12,440 --> 00:24:15,560 Speaker 3: defense and infrastructure spending. That's going to be an interesting 472 00:24:15,600 --> 00:24:18,080 Speaker 3: one to watch for the domestic economy. But in terms 473 00:24:18,119 --> 00:24:21,399 Speaker 3: of Germany's place in the EU, how will Friedrich Martz 474 00:24:21,440 --> 00:24:24,840 Speaker 3: be playing that given the you know, obviously trade trade 475 00:24:24,880 --> 00:24:26,960 Speaker 3: tarff's being a big question there too. 476 00:24:27,560 --> 00:24:30,119 Speaker 10: Yeah, defense spending will will definitely bun on one of 477 00:24:30,160 --> 00:24:32,600 Speaker 10: the one of the key areas, and that's like linked 478 00:24:32,640 --> 00:24:34,680 Speaker 10: to some of the trade deals that have been sort 479 00:24:34,720 --> 00:24:38,360 Speaker 10: of discussed over the past weeks and months. Yeah, both 480 00:24:38,400 --> 00:24:41,080 Speaker 10: both on national level and on European level, or on 481 00:24:41,160 --> 00:24:44,600 Speaker 10: natal level, I should say so. The German army originally 482 00:24:44,680 --> 00:24:47,480 Speaker 10: needs to be modernized to fulfill its obligations within NATO 483 00:24:47,840 --> 00:24:50,640 Speaker 10: and actually also be able to defend the country and 484 00:24:50,680 --> 00:24:54,480 Speaker 10: like modernizing the Bundes for Polish males will be hugely complicated. 485 00:24:55,520 --> 00:24:59,560 Speaker 10: Defense purchasing is as we all know that that's that's 486 00:24:59,600 --> 00:25:03,040 Speaker 10: a that's a pretty convoluted sort of process, a lot 487 00:25:03,040 --> 00:25:05,920 Speaker 10: of capacity restraints in the industry, and that is something 488 00:25:05,960 --> 00:25:08,800 Speaker 10: that we'll have to be addressed with both within the 489 00:25:08,880 --> 00:25:12,280 Speaker 10: NATO member states with the US administration oversly, because the 490 00:25:12,359 --> 00:25:14,119 Speaker 10: US is also like and when it comes to defense, 491 00:25:14,200 --> 00:25:16,840 Speaker 10: like a big sort of producer of like weapon systems 492 00:25:16,880 --> 00:25:22,159 Speaker 10: and ammunition. So that's definitely probably will be one of 493 00:25:22,200 --> 00:25:25,560 Speaker 10: the most sort of like difficult and complex of challenges 494 00:25:25,640 --> 00:25:27,760 Speaker 10: that that Melts will have to address. 495 00:25:27,960 --> 00:25:30,680 Speaker 3: Thanks to our Germany Bureau chief Christopher rowold Well, the 496 00:25:30,760 --> 00:25:33,720 Speaker 3: full coverage of Friedrich Martz's first days is German Chancellor. 497 00:25:33,760 --> 00:25:37,119 Speaker 3: For you here on Bloomberg, I'm Stephen Carolyn London. You 498 00:25:37,160 --> 00:25:40,600 Speaker 3: can catch us every weekday morning for Bloomberg Daybreak Europe, 499 00:25:40,680 --> 00:25:43,320 Speaker 3: beginning at six am in London and one am on 500 00:25:43,440 --> 00:25:43,960 Speaker 3: Wall Street. 501 00:25:44,200 --> 00:25:46,920 Speaker 2: Tom, thank you, Steven. And coming up on Bloomberg day 502 00:25:46,920 --> 00:25:49,240 Speaker 2: Break weekend, we'll look at more economic data in Asia 503 00:25:49,280 --> 00:25:52,000 Speaker 2: that could offer fresh clues about the health of the 504 00:25:52,000 --> 00:25:56,159 Speaker 2: world's second largest economy. I'm Tom Busby and this is Bloomberg. 505 00:26:06,880 --> 00:26:09,320 Speaker 2: This is Bloomberg day Break weekend, our global look ahead 506 00:26:09,320 --> 00:26:11,480 Speaker 2: at the top stories for investors in the coming week. 507 00:26:11,680 --> 00:26:15,080 Speaker 2: I'm Tom Busby in New York. As US China tensions 508 00:26:15,119 --> 00:26:18,480 Speaker 2: flair under President Trump's tariff push, fresh data out this 509 00:26:18,560 --> 00:26:21,560 Speaker 2: week could offer clues about the health of China's economy. 510 00:26:22,000 --> 00:26:24,040 Speaker 2: For some analysis, Let's get to the host of the 511 00:26:24,160 --> 00:26:26,680 Speaker 2: Daybreak Asia podcast, Doug Krisner. 512 00:26:27,359 --> 00:26:30,879 Speaker 4: Tom. A trio of key Chinese economic indicators will land 513 00:26:30,880 --> 00:26:34,399 Speaker 4: in the coming week. We'll have the Taisheen Manufacturing PMI 514 00:26:34,680 --> 00:26:38,679 Speaker 4: will be getting the April inflation reports and new trade 515 00:26:38,680 --> 00:26:42,600 Speaker 4: activity data. Together they will provide a crucial read on 516 00:26:42,680 --> 00:26:46,719 Speaker 4: China's economic momentum or lack thereof, at a time when 517 00:26:46,800 --> 00:26:50,600 Speaker 4: global markets are watching nervously for a closer look. I'm 518 00:26:50,640 --> 00:26:54,080 Speaker 4: joined now by John lu he is Bloomberg's executive editor 519 00:26:54,119 --> 00:26:58,160 Speaker 4: for Greater China. John joins us from our studios in Beijing. John, 520 00:26:58,240 --> 00:27:01,280 Speaker 4: we can talk about the inflation story in a moment, 521 00:27:01,320 --> 00:27:04,439 Speaker 4: but I want to begin by trying to understand current conditions. 522 00:27:04,920 --> 00:27:07,000 Speaker 4: Some of the recent data, as you well know, is 523 00:27:07,040 --> 00:27:09,639 Speaker 4: indicated a fair amount of weakness, and I'm thinking of 524 00:27:09,720 --> 00:27:12,679 Speaker 4: the PMI data in particular, which we had at the 525 00:27:12,720 --> 00:27:15,880 Speaker 4: end of last week. Give me your sense of the 526 00:27:15,920 --> 00:27:16,920 Speaker 4: macro right now. 527 00:27:17,480 --> 00:27:19,359 Speaker 12: I think there's a lot of concern at the moment. 528 00:27:19,440 --> 00:27:22,080 Speaker 12: The PMI data that you mentioned there, Doug, that came 529 00:27:22,160 --> 00:27:26,400 Speaker 12: in a week, there was a contraction. It was the 530 00:27:26,480 --> 00:27:30,520 Speaker 12: longest or the biggest contraction in manufacturing that I think 531 00:27:30,560 --> 00:27:33,320 Speaker 12: we've seen in about two years time, and so that 532 00:27:33,680 --> 00:27:37,680 Speaker 12: speaks to the weakness as a result of the liberation 533 00:27:37,840 --> 00:27:42,359 Speaker 12: tariffs Liberation Day tariffs that President Trump announced. Because that 534 00:27:42,400 --> 00:27:44,919 Speaker 12: PMI data was for the month of April, so it 535 00:27:45,040 --> 00:27:48,120 Speaker 12: was the first reading that we've had of what kind 536 00:27:48,119 --> 00:27:51,760 Speaker 12: of impact there has been on China's economy. And I 537 00:27:51,800 --> 00:27:55,080 Speaker 12: think there's a broad expectation that there will be more 538 00:27:55,119 --> 00:27:56,359 Speaker 12: weakness because of trade. 539 00:27:56,520 --> 00:27:59,679 Speaker 4: What about more stimulus and how might the government go 540 00:27:59,720 --> 00:28:02,320 Speaker 4: about it. I mean, some of this weakness is showing 541 00:28:02,400 --> 00:28:05,520 Speaker 4: up on the export side, which in the past hasn't 542 00:28:05,560 --> 00:28:09,880 Speaker 4: really correlated very strongly with trying to get domestic demand 543 00:28:10,400 --> 00:28:13,800 Speaker 4: put into a higher gear. Is this a particularly tricky 544 00:28:13,920 --> 00:28:15,560 Speaker 4: situation for Beijing right now? 545 00:28:15,800 --> 00:28:18,719 Speaker 12: I think there's a general recognition in Beijing that the 546 00:28:18,760 --> 00:28:23,320 Speaker 12: way to offset the pain from the trade war is 547 00:28:23,440 --> 00:28:28,919 Speaker 12: to provide stimulus that will create domestic demand, so create 548 00:28:28,960 --> 00:28:31,439 Speaker 12: a market for these products that would have gone to 549 00:28:31,480 --> 00:28:36,200 Speaker 12: the US without these tariffs. But that potentially gives companies 550 00:28:36,200 --> 00:28:38,480 Speaker 12: here in China a chance to sell domestically to a 551 00:28:38,680 --> 00:28:43,440 Speaker 12: domestic consumer or a domestic company. And I think what 552 00:28:43,480 --> 00:28:45,600 Speaker 12: you will see is more and more stimulus in terms 553 00:28:45,640 --> 00:28:48,720 Speaker 12: of offering rebates for people who buy a car, or 554 00:28:48,720 --> 00:28:52,960 Speaker 12: buy a refrigerator, or buy some air conditioning, offering rebates 555 00:28:53,000 --> 00:28:56,120 Speaker 12: for companies that want to get new equipment, that want 556 00:28:56,160 --> 00:28:59,880 Speaker 12: to upgrade their production processes, things of that nature. But 557 00:29:00,160 --> 00:29:03,600 Speaker 12: as of now, we had this Pollit Bureau meeting in 558 00:29:03,680 --> 00:29:08,080 Speaker 12: April that really showed the government right now is sort 559 00:29:08,120 --> 00:29:10,400 Speaker 12: of in a wait and see attitude. The government said, 560 00:29:11,000 --> 00:29:14,320 Speaker 12: we are ready with an emergency plan when that is needed, 561 00:29:14,640 --> 00:29:17,120 Speaker 12: but they seem to be conveying an idea that so 562 00:29:17,240 --> 00:29:20,000 Speaker 12: far in the first quarter the economy is doing okay, 563 00:29:20,040 --> 00:29:23,240 Speaker 12: and they're waiting for more data and information before they 564 00:29:23,320 --> 00:29:25,800 Speaker 12: launched themselves into some dramatic stimulus. 565 00:29:26,040 --> 00:29:28,480 Speaker 4: In the last two week here in the US, President 566 00:29:28,480 --> 00:29:31,440 Speaker 4: Trump held a rally in Warren, Michigan, and it was 567 00:29:31,480 --> 00:29:33,600 Speaker 4: there that he said countries from around the world have 568 00:29:33,800 --> 00:29:37,479 Speaker 4: contracted his administration about trade deals. India may end up 569 00:29:37,480 --> 00:29:39,560 Speaker 4: being the first. We just don't know at this point. 570 00:29:40,080 --> 00:29:43,080 Speaker 4: But I'm curious what President chi chin Ping is trying 571 00:29:43,120 --> 00:29:46,120 Speaker 4: to do in the Asia Pacific and deals that he 572 00:29:46,200 --> 00:29:49,760 Speaker 4: may be looking to create with trading partners that China 573 00:29:49,800 --> 00:29:51,080 Speaker 4: already has in the region. 574 00:29:51,400 --> 00:29:54,160 Speaker 12: So I think the starting point of this discussion, I 575 00:29:54,160 --> 00:29:56,880 Speaker 12: think is the fact that China's does not seem to 576 00:29:56,920 --> 00:29:59,800 Speaker 12: be in a rush to get to the negotiating table 577 00:30:00,080 --> 00:30:03,600 Speaker 12: with President Trump. I think the trade war has done 578 00:30:03,680 --> 00:30:07,240 Speaker 12: something very pronounced here in China in that it's really 579 00:30:07,960 --> 00:30:14,120 Speaker 12: created this sense of patriotism. It's really rallied support around Xijingping. 580 00:30:14,160 --> 00:30:19,160 Speaker 12: And so whatever economic troubles there might be, whatever the 581 00:30:19,200 --> 00:30:23,000 Speaker 12: employment situation might be, going to the future, by and large, 582 00:30:23,000 --> 00:30:25,600 Speaker 12: people here in China are gonna blame the United States. 583 00:30:26,080 --> 00:30:29,160 Speaker 12: They're gonna blame President Trump. That is going to take 584 00:30:29,200 --> 00:30:31,920 Speaker 12: a lot of pressure off of President Xijingping, and it's 585 00:30:32,000 --> 00:30:35,360 Speaker 12: gonna make it easier for him to hold out for 586 00:30:35,480 --> 00:30:38,920 Speaker 12: a better deal. In the meantime, there is also a 587 00:30:38,920 --> 00:30:42,360 Speaker 12: lot of angst in countries around Asia, in Southeast Asia 588 00:30:42,400 --> 00:30:46,480 Speaker 12: and Japan and Korea about the tariffs that the Trump 589 00:30:46,520 --> 00:30:49,520 Speaker 12: administration has announced, and Beijing is trying to take advantage 590 00:30:49,520 --> 00:30:52,640 Speaker 12: of that by doing a charm offensive. Xiji Ping has 591 00:30:52,640 --> 00:30:59,280 Speaker 12: already visited Southeast Asia. Beijing has just allowed the first 592 00:30:59,480 --> 00:31:02,680 Speaker 12: K pop concert that's taken place in China in about 593 00:31:02,680 --> 00:31:05,800 Speaker 12: a decade, and so there is an effort to take 594 00:31:05,840 --> 00:31:12,000 Speaker 12: advantage of that situation by offering various types of inducements 595 00:31:12,040 --> 00:31:15,800 Speaker 12: for neighboring countries to increase their trade relationship with China. 596 00:31:15,880 --> 00:31:18,760 Speaker 4: I was reading a piece on the Bloomberg Terminal in 597 00:31:18,840 --> 00:31:22,120 Speaker 4: the last week. This is Wang Yi, China's foreign minister, 598 00:31:22,280 --> 00:31:26,320 Speaker 4: was saying that if nations choose to remain silent, compromise 599 00:31:26,480 --> 00:31:29,400 Speaker 4: and retreat, it will only lead to the bullies making 600 00:31:29,440 --> 00:31:32,719 Speaker 4: further advances. This seems to be very much an anti 601 00:31:32,880 --> 00:31:35,360 Speaker 4: US message. I get that, but I'm wondering whether or 602 00:31:35,440 --> 00:31:38,400 Speaker 4: not there's a big audience for that right now in 603 00:31:38,760 --> 00:31:39,320 Speaker 4: the region. 604 00:31:39,840 --> 00:31:44,040 Speaker 12: I think there is. That message that Foreign Minister Wangi 605 00:31:44,160 --> 00:31:48,880 Speaker 12: delivered was at the meeting of Bricks Nations they're foreign 606 00:31:48,960 --> 00:31:52,640 Speaker 12: ministers that was held at the end of April, and 607 00:31:52,680 --> 00:31:55,640 Speaker 12: so I think in that setting there is a built 608 00:31:55,680 --> 00:32:00,880 Speaker 12: in audience for that message. Many of those countries Iran 609 00:32:01,040 --> 00:32:06,560 Speaker 12: is in that group, South Africa, Russia, Brazil. These are 610 00:32:06,600 --> 00:32:12,600 Speaker 12: countries that have always had a suspicion about American intentions, 611 00:32:12,720 --> 00:32:18,760 Speaker 12: if not outright hostility towards American intentions, and so in 612 00:32:18,800 --> 00:32:20,840 Speaker 12: that setting, I think he was speaking to the right 613 00:32:20,880 --> 00:32:24,200 Speaker 12: audience with that message. More broadly, I think it's trickier 614 00:32:24,240 --> 00:32:27,720 Speaker 12: to say when it comes to Australia or Japan or 615 00:32:27,800 --> 00:32:32,840 Speaker 12: South Korea, traditional American allies, how well that message, what 616 00:32:33,040 --> 00:32:37,000 Speaker 12: kind of mood that message will strike, because yes, these 617 00:32:37,000 --> 00:32:39,479 Speaker 12: countries depend on China for their economic growth, but they 618 00:32:39,480 --> 00:32:42,800 Speaker 12: also depend on the United States a lot for their security. 619 00:32:43,080 --> 00:32:47,120 Speaker 12: And at the same time, those countries also are suspicious 620 00:32:47,160 --> 00:32:52,280 Speaker 12: of Chinese intentions. Japan, many Southeast Asian countries, the Philippines, 621 00:32:52,320 --> 00:32:56,360 Speaker 12: India have all had border disputes with China, territorial disputes, 622 00:32:56,400 --> 00:33:01,360 Speaker 12: and so that makes them less than enthusiastics about embracing Beijing. 623 00:33:01,960 --> 00:33:04,800 Speaker 4: So we've established the fact that the overall economy is 624 00:33:04,840 --> 00:33:08,520 Speaker 4: weak visa VI the PMI data, and we know that 625 00:33:08,800 --> 00:33:11,920 Speaker 4: the government has to do more to stimulate domestic demand 626 00:33:12,040 --> 00:33:14,280 Speaker 4: a lot more. Let's talk a little bit about the 627 00:33:14,320 --> 00:33:17,720 Speaker 4: inflation story now, is China still very much in a 628 00:33:18,160 --> 00:33:22,160 Speaker 4: deflationary trap right now, or there are green shoots emerging 629 00:33:22,600 --> 00:33:26,000 Speaker 4: that maybe prices are beginning to move higher. 630 00:33:26,560 --> 00:33:30,800 Speaker 12: I think we are still in a position where deflation 631 00:33:31,040 --> 00:33:34,800 Speaker 12: is the major concern. There may be some green shoots 632 00:33:34,840 --> 00:33:38,840 Speaker 12: in terms of services and in terms of retail spending 633 00:33:39,320 --> 00:33:43,640 Speaker 12: because the government has started to roll out more and 634 00:33:43,720 --> 00:33:48,480 Speaker 12: more stimulus. They've tried to roll out subsidies for people 635 00:33:48,560 --> 00:33:53,640 Speaker 12: who buy various products. They've started to invest in new projects. 636 00:33:53,760 --> 00:33:57,080 Speaker 12: China just approved a number of new nuclear power stations, 637 00:33:57,560 --> 00:34:02,040 Speaker 12: and so that investment will start making its way through 638 00:34:02,080 --> 00:34:04,560 Speaker 12: the economy. So some green shoots, but still I think 639 00:34:04,560 --> 00:34:07,920 Speaker 12: there's a major problem when you have such a big 640 00:34:07,960 --> 00:34:11,440 Speaker 12: trade relationship between the United States and China being essentially 641 00:34:11,480 --> 00:34:14,120 Speaker 12: cut off by the level of tariffs that have been imposed, 642 00:34:14,840 --> 00:34:18,920 Speaker 12: really shutting off in demand for many many Chinese factories. 643 00:34:18,920 --> 00:34:22,200 Speaker 12: And where those products are going to end up is 644 00:34:23,000 --> 00:34:26,120 Speaker 12: a big question, and I think there's a high likelihood 645 00:34:26,120 --> 00:34:29,440 Speaker 12: that you will see companies and manufacturers and suppliers try 646 00:34:29,480 --> 00:34:32,440 Speaker 12: to find a place to sell those products into you 647 00:34:32,480 --> 00:34:33,560 Speaker 12: by cutting prices. 648 00:34:34,040 --> 00:34:37,000 Speaker 4: So does that necessarily mean I hate to use the 649 00:34:37,080 --> 00:34:39,960 Speaker 4: term dumping. But that's what I hear when you kind 650 00:34:39,960 --> 00:34:42,040 Speaker 4: of make that point, and whether or not that's going 651 00:34:42,080 --> 00:34:45,000 Speaker 4: to leave China open to a lot of criticism. 652 00:34:45,440 --> 00:34:50,160 Speaker 12: So a lot of countries are worried about where these 653 00:34:50,239 --> 00:34:52,520 Speaker 12: Chinese products will go if they don't go to the 654 00:34:52,640 --> 00:34:54,640 Speaker 12: United States. That is a real concern, And that is 655 00:34:54,640 --> 00:34:56,880 Speaker 12: a real concern because of just what we're talking about, 656 00:34:57,239 --> 00:35:02,120 Speaker 12: manufacturers being incentivized to cut prices to get their product 657 00:35:02,320 --> 00:35:05,560 Speaker 12: moving out of the warehouse. Whether or not that will 658 00:35:05,680 --> 00:35:08,919 Speaker 12: result in dumping, I think we have to wait and see, 659 00:35:08,920 --> 00:35:12,240 Speaker 12: because what we have seen is the Chinese government telling 660 00:35:12,320 --> 00:35:15,560 Speaker 12: various countries in Southeast Asia, for example, that China will 661 00:35:15,560 --> 00:35:18,719 Speaker 12: not engage in dumping. And so there is a mechanism 662 00:35:18,760 --> 00:35:22,120 Speaker 12: by which the Chinese government could stop that sort of thing, 663 00:35:22,520 --> 00:35:25,120 Speaker 12: and so they may choose to do that in order 664 00:35:25,160 --> 00:35:27,600 Speaker 12: to take advantage of that opportunity we talked about. 665 00:35:28,000 --> 00:35:31,600 Speaker 4: So we know during the first Trump administration that supply 666 00:35:31,760 --> 00:35:36,120 Speaker 4: chains in China were being reconfigured to kind of remove 667 00:35:36,160 --> 00:35:39,279 Speaker 4: the thread of tariffs. A lot of that was accelerated 668 00:35:39,360 --> 00:35:42,440 Speaker 4: during the pandemic. But I'm wondering now whether or not 669 00:35:42,480 --> 00:35:45,560 Speaker 4: that's really gathered even more steam during the trade war. 670 00:35:45,600 --> 00:35:48,400 Speaker 4: Are we seeing more and more companies kind of taking 671 00:35:48,440 --> 00:35:52,880 Speaker 4: their processes out of China and to countries like India, 672 00:35:53,000 --> 00:35:56,240 Speaker 4: for example, just to maybe find a way of getting 673 00:35:56,239 --> 00:35:58,879 Speaker 4: into the good graces of the United States. 674 00:36:00,000 --> 00:36:03,880 Speaker 12: What we see is American companies like Apple. Apple has 675 00:36:03,920 --> 00:36:06,279 Speaker 12: announced that they are going to move all of the 676 00:36:06,320 --> 00:36:09,400 Speaker 12: production of their iPhones that they sell in the US 677 00:36:09,520 --> 00:36:13,040 Speaker 12: from China to India. So for an American company doing 678 00:36:13,080 --> 00:36:17,240 Speaker 12: that makes sense. For a Chinese company, it makes less sense. 679 00:36:17,280 --> 00:36:21,400 Speaker 12: Because the Trump administration has made it a point in 680 00:36:21,440 --> 00:36:26,920 Speaker 12: their discussions with other countries, with Mexico, with India, other partners, 681 00:36:26,960 --> 00:36:31,160 Speaker 12: that they want to make sure that Chinese companies are 682 00:36:31,200 --> 00:36:34,520 Speaker 12: not re routing their products through a third country. And 683 00:36:34,600 --> 00:36:38,440 Speaker 12: so I think that has made it more difficult for 684 00:36:38,560 --> 00:36:43,600 Speaker 12: Chinese companies to make decisions about investing building big factories 685 00:36:43,640 --> 00:36:47,320 Speaker 12: in Brazil or Mexico or some other country. What instead, 686 00:36:47,320 --> 00:36:49,240 Speaker 12: I think you are seeing a lot of Chinese companies 687 00:36:49,239 --> 00:36:52,279 Speaker 12: think about, is can I sell product in Brazil? Can 688 00:36:52,320 --> 00:36:55,200 Speaker 12: I sell product in Vietnam? Can I sell product in 689 00:36:55,560 --> 00:36:58,479 Speaker 12: Eastern Europe? And if I can, then I will build 690 00:36:58,480 --> 00:36:59,799 Speaker 12: a factory there to do that. 691 00:37:00,080 --> 00:37:02,400 Speaker 4: We were talking a moment ago about how the trade 692 00:37:02,440 --> 00:37:06,880 Speaker 4: war has kind of incited a feeling of nationalism in China, 693 00:37:07,000 --> 00:37:11,400 Speaker 4: coming together to kind of coalesce around supporting the government's 694 00:37:11,440 --> 00:37:14,760 Speaker 4: effort to fight this trade war. And I'm wondering whether 695 00:37:14,840 --> 00:37:18,319 Speaker 4: or not there is this feeling that we're in it 696 00:37:18,360 --> 00:37:21,840 Speaker 4: for the long haul and that China can really manage 697 00:37:21,840 --> 00:37:24,360 Speaker 4: to endure a great deal of economic pain for the 698 00:37:24,400 --> 00:37:27,800 Speaker 4: foreseeable future, or whether or not there is a level 699 00:37:27,880 --> 00:37:31,279 Speaker 4: of vulnerability right now that's being masked and there's a 700 00:37:31,280 --> 00:37:34,680 Speaker 4: breaking point that could happen in the next few months 701 00:37:34,760 --> 00:37:38,000 Speaker 4: if there is no resolution to this tariff story. 702 00:37:38,760 --> 00:37:42,279 Speaker 12: Unfortunately, I think we are in the early stages, the 703 00:37:42,360 --> 00:37:47,640 Speaker 12: early innings of this trade war, and right now both 704 00:37:47,680 --> 00:37:52,080 Speaker 12: sides are filling in a relatively strong position, and I 705 00:37:52,120 --> 00:37:56,600 Speaker 12: think that is mostly because the actual pain that will 706 00:37:56,600 --> 00:38:00,560 Speaker 12: be caused by this conflict is not being it's not 707 00:38:00,719 --> 00:38:04,400 Speaker 12: going through the economy yet. In this current situation in China, 708 00:38:05,320 --> 00:38:10,440 Speaker 12: people are feeling more patriotic. They're feeling like they want 709 00:38:10,480 --> 00:38:13,040 Speaker 12: to support their government, they want to support their president, 710 00:38:13,120 --> 00:38:15,880 Speaker 12: they want to fight this thing. As time goes on 711 00:38:16,760 --> 00:38:19,680 Speaker 12: and the economic reality sets in, the pain sets in, 712 00:38:19,800 --> 00:38:25,200 Speaker 12: I think that attitude will start to change and evolve. 713 00:38:25,920 --> 00:38:30,120 Speaker 12: I think there will be a more openness to negotiation, 714 00:38:31,040 --> 00:38:34,920 Speaker 12: and indeed, I think we probably will not get negotiations 715 00:38:35,000 --> 00:38:37,160 Speaker 12: until both sides feel enough pain. 716 00:38:37,520 --> 00:38:39,919 Speaker 4: John, it's always a pleasure. Thank you so very much, 717 00:38:40,080 --> 00:38:43,640 Speaker 4: John Lou Bloomberg, Executive Editor for Greater China, and I'm 718 00:38:43,640 --> 00:38:46,320 Speaker 4: Doug Christner. You can catch us weekdays for the Daybreak 719 00:38:46,320 --> 00:38:50,560 Speaker 4: Asia podcast. It's available wherever you get your podcast. Tom. 720 00:38:51,000 --> 00:38:53,279 Speaker 2: Thank you Doug. And that does it for this edition 721 00:38:53,320 --> 00:38:55,879 Speaker 2: of Bloomberg day Break Weekend. Join us again Monday morning 722 00:38:55,920 --> 00:38:57,799 Speaker 2: at five am Wall Street Time for the latest on 723 00:38:57,920 --> 00:39:00,879 Speaker 2: markets overseas and the news UNI To start your day, 724 00:39:01,239 --> 00:39:04,160 Speaker 2: I'm Tom Buzzby. Stay with us. Top stories and global 725 00:39:04,200 --> 00:39:06,160 Speaker 2: business headlines are coming up right now