WEBVTT - Daybreak Weekend: Fed Decision, Germany Chancellor, China Eco 0:00:00.240 --> 0:00:07.720 Bloomberg Audio Studios, Podcasts, radio News. 0:00:09.480 --> 0:00:11.800 This is Bloomberg day Break Weekend, our global look at 0:00:11.840 --> 0:00:14.040 the top stories in the coming week from our day 0:00:14.040 --> 0:00:16.360 Break anchors all around the world, and straight ahead on 0:00:16.400 --> 0:00:18.880 the program, a look ahead to this week's Federal Reserve 0:00:19.000 --> 0:00:22.599 policy meeting Now it may impact monetary policy moving forward. 0:00:22.680 --> 0:00:25.400 Plus a look at earnings from the media and entertainment 0:00:25.400 --> 0:00:28.920 giant Walt Disney. I'm Tom Busby in New York. I'm 0:00:28.920 --> 0:00:30.000 Stephen Carolin London. 0:00:30.040 --> 0:00:33.000 But we're looking at the many challenges facing Germany's new 0:00:33.080 --> 0:00:36.080 Chancellor as Fredrick Martz prepares to take up the job. 0:00:36.280 --> 0:00:39.200 I'm Doug Krisner, exploring what's at stake in the US 0:00:39.320 --> 0:00:42.559 China trade standoff ahead of some key eco data in 0:00:42.600 --> 0:00:43.360 the week ahead. 0:00:45.520 --> 0:00:49.560 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:49.560 --> 0:00:53.280 eleven three zero, New York, Bloomberg ninety nine to one, Washington, DC, 0:00:53.760 --> 0:00:58.920 Bloomberg ninety two to nine, Boston, DAB, Digital Radio, London, Syrias, 0:00:59.040 --> 0:01:02.560 XM one on and around the world on Bloomberg Radio 0:01:02.640 --> 0:01:04.839 dot Com and the Bloomberg Business App. 0:01:08.760 --> 0:01:10.640 Good day to you. I'm Tom Busby, and we begin 0:01:10.680 --> 0:01:13.840 Today's program just ahead of the Federal Reserve's third policy 0:01:13.880 --> 0:01:16.080 meeting of the year, which kicks off Tuesday, ends with 0:01:16.120 --> 0:01:19.440 a decision on interest rates on Wednesday. Amid a lot 0:01:19.480 --> 0:01:22.520 of economic uncertainty and the impact of President Trump's ever 0:01:22.680 --> 0:01:25.120 changing tariffs, the Fed has a lot to consider. For 0:01:25.240 --> 0:01:28.840 some perspective on what it all means. Stuart paul Us, 0:01:28.920 --> 0:01:33.120 economist with Bloomberg Economics, what do you expect the FOMC 0:01:33.240 --> 0:01:34.280 to do on Wednesday? 0:01:34.440 --> 0:01:37.880 We're expecting a rate hold. We're expecting the Federal Reserve 0:01:37.959 --> 0:01:41.480 to keep the target federal funds rate in the range 0:01:41.520 --> 0:01:43.479 of four and a quarter to four and a half percent. 0:01:43.840 --> 0:01:46.880 We're expecting very little news to come out of the FOMC. 0:01:47.120 --> 0:01:49.400 We're expecting very little news to come in the way 0:01:49.600 --> 0:01:52.840 of the Fed's balance sheet. All in all, it should 0:01:52.840 --> 0:01:55.720 be one of the more boring FOMC decisions and press 0:01:55.720 --> 0:01:57.160 conferences that we've had in a while. 0:01:57.840 --> 0:02:01.400 So a boring press conference. However, a lot of turmoil 0:02:01.480 --> 0:02:03.280 leading up to this, and there's a lot for the 0:02:03.320 --> 0:02:06.160 Fed to consider. Let's start with some of the good news. 0:02:06.200 --> 0:02:08.440 And there is good news about jobs, right, we just 0:02:08.520 --> 0:02:09.440 led this past week. 0:02:09.560 --> 0:02:11.360 That's right, in April, there were one hundred and seventy 0:02:11.360 --> 0:02:14.799 seven thousand jobs added, a four point two percent unemployment rate. 0:02:15.080 --> 0:02:18.440 From the Fed's perspective, it's not just thinking about employment 0:02:18.520 --> 0:02:22.560 chugging along, it's thinking about inflation pressures. We saw relatively 0:02:22.639 --> 0:02:26.560 modest zero point two percent wage growth and earnings growth 0:02:26.600 --> 0:02:30.520 during the month. So as employment is becoming a little 0:02:30.520 --> 0:02:35.200 bit broader as the workforce is expanding, inflation pressures stemming 0:02:35.280 --> 0:02:39.000 from the workforce are rather dull. And as we're heading 0:02:39.000 --> 0:02:42.240 into this FMC decision, the latest inflation data that the 0:02:42.240 --> 0:02:46.560 FED has in hand are basically showing muted inflation pressures 0:02:46.600 --> 0:02:48.600 so far. But the question is going to be on 0:02:48.639 --> 0:02:51.840 the Fed's mind just how much can we expect inflation 0:02:51.919 --> 0:02:55.680 pressures to ripple through from tariffs, And some of the 0:02:55.720 --> 0:02:58.360 internal models that we that we know that the FED 0:02:58.440 --> 0:03:01.400 operates with are likely showing that risk is skewed to 0:03:01.440 --> 0:03:04.360 the upside that we could see let's say three and 0:03:04.360 --> 0:03:08.799 a half four percent core PCEE inflation at year end. 0:03:09.120 --> 0:03:11.239 That would be up from about two point six percent 0:03:11.360 --> 0:03:14.320 right now. The FED is seeing a relatively hot jobs number, 0:03:14.520 --> 0:03:18.480 it sees inflation low right now, but risks skewed to 0:03:18.520 --> 0:03:21.120 the upside, so all the more reason to stay on 0:03:21.200 --> 0:03:23.320 hold when the FMC meets next week. 0:03:24.040 --> 0:03:27.000 Those risks, I mean, we're hearing because it's the first 0:03:27.040 --> 0:03:29.240 quarter earning season. We're hearing from a lot of companies, 0:03:29.240 --> 0:03:32.320 big companies, no more so than GM that said these 0:03:32.360 --> 0:03:35.600 tariffs could be a five billion dollar hit to profits, 0:03:36.080 --> 0:03:38.200 just as past week, Apple finally comes out and says 0:03:38.280 --> 0:03:42.480 nine hundred million dollars hit. So company after company Amazon. 0:03:42.560 --> 0:03:44.880 You know, a lot of uncertainty, a lot of people 0:03:44.920 --> 0:03:48.800 fears of a recession. I mean, this is building and building. 0:03:49.000 --> 0:03:49.440 That's right. 0:03:49.520 --> 0:03:51.840 As much as I like to stay focused on the macro, 0:03:51.960 --> 0:03:53.960 as much as I like to stay zoomed out at 0:03:53.960 --> 0:03:58.080 thirty thousand feet thinking about capital investment in the workforce, 0:03:58.440 --> 0:04:00.640 I think that the bigger thing next week is really 0:04:00.680 --> 0:04:02.600 going to be earnings, because we're going to get to 0:04:02.600 --> 0:04:04.760 hear from all these companies. We get to hear from FORD, 0:04:04.760 --> 0:04:06.640 We're going to get to hear from AMD and some 0:04:06.680 --> 0:04:09.480 of the tech companies that are thinking about exporting chips 0:04:09.520 --> 0:04:13.160 and are thinking about regulation of AI and development and 0:04:13.240 --> 0:04:15.920 other domestic investment. We're going to get to hear from 0:04:16.000 --> 0:04:19.239 some of the more consumer oriented companies like door Dash, 0:04:19.320 --> 0:04:23.760 for example, that are really leveraged to consumers discretionary spending power. 0:04:24.120 --> 0:04:27.120 And so I do think that more than the Fed's decision, 0:04:27.480 --> 0:04:29.800 more than the economic data, let's say on the trade 0:04:29.839 --> 0:04:32.440 balance that we're going to get next week data from March. 0:04:32.680 --> 0:04:34.560 But what's really going to matter is the guidance that 0:04:34.600 --> 0:04:37.160 we are getting from companies. And what we hear when 0:04:37.160 --> 0:04:40.520 we look at high frequency surveys, for example, is that 0:04:40.680 --> 0:04:46.320 companies are experiencing input cost pressures, they are planning to 0:04:46.640 --> 0:04:48.480 pass those along to consumers. 0:04:48.920 --> 0:04:49.520 But what we. 0:04:49.520 --> 0:04:52.080 Ultimately think is that with the saving rates so low, 0:04:52.680 --> 0:04:55.960 with consumers stretched and relying on credit as much as 0:04:55.960 --> 0:04:59.080 they are, when firms try to pass along those higher 0:04:59.120 --> 0:05:02.960 prices are ultimately going to face retrenching demand from consumers. 0:05:03.320 --> 0:05:06.240 We know sentiment from the University of Michigan polls at 0:05:06.240 --> 0:05:08.560 a five year low. I mean, people are really worried, 0:05:08.800 --> 0:05:09.240 that's right. 0:05:09.360 --> 0:05:13.479 Sentiment is poor. Business investment plans are being put on 0:05:13.560 --> 0:05:16.760 a hold. A big part of it just gets synthesized 0:05:16.800 --> 0:05:22.479 in one measure, economic policy uncertainty. Our policy uncertainty index 0:05:22.560 --> 0:05:25.880 is spiking through the roof no reason why it's because 0:05:26.200 --> 0:05:30.200 policymakers are coming off as rather mercurial in changing trade 0:05:30.279 --> 0:05:33.279 policy week to week. We just heard from Stephen Moran 0:05:33.400 --> 0:05:36.440 from the Council of Economic Advisors, one of the President's 0:05:36.520 --> 0:05:40.360 chief economic advisors, that we could expect to see a 0:05:40.400 --> 0:05:43.599 trade deal with China perhaps in the coming weeks. Now 0:05:43.640 --> 0:05:46.680 he's not one of the trade advisors, but everybody is 0:05:46.760 --> 0:05:50.320 chirping up on what we can expect from trade policy. 0:05:50.720 --> 0:05:52.960 Just when we thought we had an escalation with China, 0:05:53.000 --> 0:05:55.520 we're now seeing perhaps there's going to be a de escalation. 0:05:55.839 --> 0:05:58.919 There's no wonder. Uncertainty is through the roof, and sentiment 0:05:59.000 --> 0:06:00.320 is down well. 0:06:00.320 --> 0:06:02.360 A lot to watch out for. The Federal Open Market 0:06:02.400 --> 0:06:05.440 Committee's two day policy meeting, wrapping up this Wednesday, a 0:06:05.520 --> 0:06:08.800 decision on rates and a press conference from Chairman Jerome Powell. 0:06:08.839 --> 0:06:12.719 Our thanks to Stuart paul, Us economist with Bloomberg Economics, 0:06:13.000 --> 0:06:15.520 we turned out of the current earning season a number 0:06:15.560 --> 0:06:18.640 of companies so far surprising to the upside. This week, 0:06:18.680 --> 0:06:21.240 we hear from the media and entertainment giant, the Walt 0:06:21.320 --> 0:06:23.920 Disney Company that's out on Wednesday in the House of Mouse, 0:06:24.320 --> 0:06:26.800 facing a lot of challenges right now, including a pullback 0:06:26.800 --> 0:06:30.839 in consumer spending, a slowing economy, fewer tours coming into 0:06:30.880 --> 0:06:32.839 the US and to its parks, and a lot of 0:06:32.880 --> 0:06:36.720 competition for its streaming TV offerings. For more, we turned 0:06:36.720 --> 0:06:41.120 to Geetha. Raganathan, Bloomberg Intelligence analysts on US media. Well, Geither, 0:06:41.240 --> 0:06:44.320 the last time we heard from Disney was before President 0:06:44.360 --> 0:06:47.080 Trump announced his tariffs, the trade wars with China, Europe 0:06:47.120 --> 0:06:50.640 and other countries. How has all that impacted the company 0:06:50.640 --> 0:06:52.440 and what do you expect to see from Disney in 0:06:52.520 --> 0:06:54.000 its second quarter results? 0:06:55.279 --> 0:06:58.400 Yeah? Absolutely, Thank you so much, tom So. Disney is really, 0:06:58.400 --> 0:07:01.600 I think one of the most complex stories in the 0:07:01.640 --> 0:07:04.400 media world. There are so many parts. There's so many 0:07:04.440 --> 0:07:07.160 moving parts really as you think of the parks business, 0:07:07.160 --> 0:07:10.600 the theme parks business, streaming, you know, you have a 0:07:10.640 --> 0:07:13.640 presence in linear TV sports with ESPN, and then of 0:07:13.680 --> 0:07:18.360 course the theatrical business and in box office. There's always 0:07:18.560 --> 0:07:22.400 something to be concerned about here. So you're absolutely right. 0:07:22.800 --> 0:07:25.840 In terms of parks, there is obviously, it is very 0:07:25.920 --> 0:07:28.880 very sensitive to the overall health of the economy. And 0:07:29.040 --> 0:07:31.240 why we are concerned about parks when it comes to 0:07:31.240 --> 0:07:35.120 Disney is because this makes up about fifty to fifty 0:07:35.200 --> 0:07:39.560 five percent of their profit, so this is really, you know, 0:07:39.680 --> 0:07:43.320 the largest contributor of operating income. And while they had 0:07:43.400 --> 0:07:47.560 initially guided to healthy summer bookings, you know, we've kind 0:07:47.560 --> 0:07:50.080 of seen this deteriorating macro sentiment. So I think investors 0:07:50.080 --> 0:07:53.080 are definitely going to be focused on that. Apart from 0:07:53.120 --> 0:07:56.200 the general health of the economy. You know, as far 0:07:56.240 --> 0:07:58.800 as you know theme parks are concerned. The one thing 0:07:58.840 --> 0:08:01.720 that Disney investors are going to be super focused on 0:08:01.760 --> 0:08:05.360 as any commentary that management can provide in terms of 0:08:05.400 --> 0:08:09.680 competition from Epic Universe, which is a whole brand new 0:08:09.720 --> 0:08:13.840 theme park that is coming out of Universal and will 0:08:13.840 --> 0:08:17.200 be in Florida and is expected to be a very, 0:08:17.280 --> 0:08:19.720 very big competitor because some of the initial reviews have 0:08:19.760 --> 0:08:21.320 been absolutely amazing. 0:08:21.040 --> 0:08:23.240 And just open this week right or this month? 0:08:23.320 --> 0:08:26.120 Yeah it is, Yeah, it is going to open on 0:08:26.200 --> 0:08:29.800 May twenty second. Yes, So you know, near term, I 0:08:29.800 --> 0:08:32.400 think there's going to be a lot of wait and 0:08:32.440 --> 0:08:35.520 watch with the theme park business. But I think medium 0:08:35.520 --> 0:08:38.800 to longer term the business is definitely stabilizing, especially on 0:08:38.840 --> 0:08:42.880 the streaming front. So we're definitely seeing a big improvement 0:08:42.960 --> 0:08:46.400 in terms of streaming profits, with the company expecting a 0:08:46.440 --> 0:08:50.160 billion dollars in operating income this year, compared that to 0:08:50.200 --> 0:08:53.840 about four billion dollars in losses just a few years ago. 0:08:54.080 --> 0:08:57.080 Wow. Wow, Well, let's go back to parks, because another 0:08:57.600 --> 0:09:00.760 part of that is its cruise division, and as I understand, 0:09:01.360 --> 0:09:04.440 it's just unbelievable the demand for these Disney cruises. 0:09:05.880 --> 0:09:09.560 Yes, they have really made a huge push into the 0:09:09.640 --> 0:09:13.360 cruise ship business. And this quarter is going to be 0:09:13.679 --> 0:09:15.920 our fiscal second quarter when they report, is going to 0:09:15.920 --> 0:09:18.680 be particularly interesting because you're going to have a full 0:09:18.760 --> 0:09:23.160 quarter contribution from a new cruise ship, which is called 0:09:23.200 --> 0:09:25.760 Disney Treasure, and which is expected to have been profitable 0:09:25.760 --> 0:09:28.760 in its first full quarter. So it's going to be interesting. 0:09:28.800 --> 0:09:30.920 We think that, you know, the cruise ship business is 0:09:30.960 --> 0:09:32.959 going to go from you know, about two to three 0:09:33.000 --> 0:09:35.679 billion dollars in revenue to as much as four to 0:09:35.800 --> 0:09:38.520 five billion dollars in just a few years time. So 0:09:38.840 --> 0:09:41.480 this is going to become a major part of their 0:09:41.559 --> 0:09:43.840 parks business. And the one thing that we've seen with 0:09:43.920 --> 0:09:47.640 cruises as opposed to parks is you know, the demand, 0:09:47.880 --> 0:09:50.880 as you just pointed out, is very very strong and 0:09:50.920 --> 0:09:54.640 will be a stabilizing force for the entire experiences segment. 0:09:54.679 --> 0:09:55.280 For Disney. 0:09:56.200 --> 0:09:58.240 Now, I want to talk about its streaming TV unit. 0:09:58.320 --> 0:10:01.720 We have Disney Plus and Hulu and ESPN. Has there 0:10:01.760 --> 0:10:03.840 been any let up, any signs of a letup in 0:10:03.960 --> 0:10:06.960 advertising revenue where they really make a lot of money 0:10:07.000 --> 0:10:09.360 from all these networks and their linear networks. 0:10:10.000 --> 0:10:14.160 I think the general commentary tom on advertising is obviously 0:10:14.200 --> 0:10:17.720 a very cautious kind of wait and see approach, because 0:10:17.760 --> 0:10:20.800 when you head into an economic environment where you have 0:10:20.880 --> 0:10:24.160 so much of volatility, the first sector that kind of 0:10:24.200 --> 0:10:27.880 sees that pullback is of course advertising. Now there's both 0:10:27.880 --> 0:10:30.960 good and bad with respect to Disney. So if you 0:10:31.040 --> 0:10:34.760 just look at it from an overall company perspective, only 0:10:34.800 --> 0:10:39.000 about fourteen to fifteen percent of Disney's revenue actually comes 0:10:39.000 --> 0:10:43.160 from advertising, so exposure itself is not very very heavy. 0:10:43.200 --> 0:10:45.360 You compare that to some of the other companies like 0:10:45.360 --> 0:10:48.000 a Fox or a Warner Brothers Discovery, where you know 0:10:48.080 --> 0:10:50.839 almost thirty five to forty percent of revenues are coming 0:10:50.880 --> 0:10:55.400 from advertising. So I think overall the exposure is fairly limited. 0:10:56.120 --> 0:10:59.640 That said, if things go bad, they can go really 0:10:59.679 --> 0:11:03.040 really bad. So if you're looking at a linear TV business, 0:11:03.320 --> 0:11:06.880 and Disney has considerable exposure here, you know, whether it's ESPN, 0:11:06.960 --> 0:11:10.079 whether it's the ABC network, we can see ads drop 0:11:10.160 --> 0:11:13.360 almost ten to fifteen percent, and that is really not 0:11:13.480 --> 0:11:15.240 good for the business. They do have a little bit 0:11:15.240 --> 0:11:18.880 of a hedge because streaming ads or digital ads in 0:11:19.000 --> 0:11:22.480 general have held up better than the linear TV side 0:11:22.520 --> 0:11:25.960 of the business. But overall, it is definitely going to 0:11:25.960 --> 0:11:29.200 be a very very cautious tone on the advertising business. 0:11:29.360 --> 0:11:31.800 And let's turn to its film studio, because we've seen 0:11:31.840 --> 0:11:35.800 some wild success as Captain America, Mufasa movie, some not 0:11:35.920 --> 0:11:39.720 so great Snow White Mawana too, but still I suspect 0:11:39.760 --> 0:11:40.800 they're all going to make money. 0:11:41.280 --> 0:11:43.920 They absolutely are, and we've seen you know, just if 0:11:43.960 --> 0:11:46.520 you just think a few quarters ago, Tom, I mean, 0:11:46.600 --> 0:11:50.080 this business was really really struggling. The content business as 0:11:50.080 --> 0:11:54.080 a whole was in desperate need of a rejigger, and 0:11:54.120 --> 0:11:57.000 we really had that with you know, inside out kind 0:11:57.040 --> 0:12:02.480 of really you know, start this whole resurgence in the 0:12:02.520 --> 0:12:06.000 box office unit last year and ever since then, it's 0:12:06.040 --> 0:12:08.880 been great. You pointed out Mufasa that's done really well, 0:12:08.920 --> 0:12:11.480 Moana did really well, and then of course you had 0:12:11.520 --> 0:12:14.360 Captain America, and then we have the summer season for 0:12:15.320 --> 0:12:18.600 Disney kicking off the summer box office season kicking off 0:12:18.600 --> 0:12:22.000 with Thunderbolts, which is tracking to a very very strong 0:12:22.720 --> 0:12:26.480 opening and should have a fantastic run just like Captain America. 0:12:26.520 --> 0:12:28.160 You know, this is the next phase of the Marble 0:12:28.240 --> 0:12:31.839 cinematic universe. Should do really really well for Disney, and 0:12:31.920 --> 0:12:35.480 they have a fantastic content pipeline coming out over the 0:12:35.520 --> 0:12:36.680 next eight to ten months. 0:12:37.240 --> 0:12:40.520 Disney second quarter earning's coming out after Wall Street's closing 0:12:40.520 --> 0:12:43.960 belt This Wednesday, our thanks to Getha raganoffin Bloomberg Intelligence 0:12:44.000 --> 0:12:47.680 Analysts on US media, coming up on Bloomberg day Break weekend, 0:12:47.720 --> 0:12:51.199 looking at the many challenges facing Germany's new chancellor as 0:12:51.240 --> 0:12:53.920 he prepares to take up the job. I'm Tom Busby, 0:12:53.960 --> 0:13:01.720 and this is Bloomberg. Is Bloomberg Daybreak Weekend, our global 0:13:01.760 --> 0:13:03.760 look ahead at the top stories for investors in the 0:13:03.760 --> 0:13:07.040 coming week. I'm Tom Busby in New York. Up later 0:13:07.080 --> 0:13:08.959 in our program and look at what the Trump tariffs 0:13:08.960 --> 0:13:13.160 could mean for China's economy. But first, Germany's next Chancellor, 0:13:13.200 --> 0:13:16.319 Friedrich Mertz, will be officially confirmed in his role leading 0:13:16.320 --> 0:13:19.839 Europe's largest economy. This week, it's been a rocky road 0:13:19.880 --> 0:13:22.400 to the top of the conservative who will preside over 0:13:22.600 --> 0:13:26.000 uncertain times? What does this path ahead look like for 0:13:26.080 --> 0:13:28.559 the country's new leader. For more, let's go to London 0:13:28.559 --> 0:13:31.720 and bring in Bloomberg Daybreak europe Banker Stephen Carroll. 0:13:31.800 --> 0:13:35.000 Tom It's been more than two months since Germany's federal election, 0:13:35.160 --> 0:13:38.560 and now finally the country will have a new chancellor. 0:13:38.679 --> 0:13:41.840 The Social Democrats who led the outgoing government have voted 0:13:41.840 --> 0:13:45.600 in favor of a coalition deal with Friedrich Martz's Conservative alliance, 0:13:45.840 --> 0:13:48.160 clearing the way for the Christian Democratic leader to be 0:13:48.240 --> 0:13:52.200 confirmed as the country's next chancellor. The agreement, backed by 0:13:52.280 --> 0:13:56.120 around eighty five percent of SPT members in an online ballot, 0:13:56.280 --> 0:13:59.720 brings to a close a complex set of negotiations. The 0:13:59.760 --> 0:14:03.040 deal also keeps the far right AfD out of power 0:14:03.160 --> 0:14:06.160 after they won a historic twenty point eight percent of 0:14:06.200 --> 0:14:09.120 the vote in February. As Chancellor, Frederick Martz will have 0:14:09.160 --> 0:14:12.320 to deal with a delicate economic outlook. Germany saw just 0:14:12.400 --> 0:14:15.439 meager growth than the first quarter, and its key industries 0:14:15.480 --> 0:14:18.800 face the impact of US tariffs. He's already passed a 0:14:18.800 --> 0:14:21.920 plan to ramp up defense and infrastructure spending in Germany, 0:14:22.080 --> 0:14:24.520 and that's something the CFO of Deutsche Bank, James von 0:14:24.560 --> 0:14:26.840 Moltke says is already having an impact. 0:14:27.280 --> 0:14:29.640 Well, there are two things going on that German economy 0:14:29.680 --> 0:14:32.800 is obviously an export driven economy, so there's a significant 0:14:32.800 --> 0:14:36.040 impact of tariffs, whatever the outcome will be in and 0:14:36.080 --> 0:14:39.320 so there are scenarios around that as to what the impact. 0:14:39.480 --> 0:14:42.320 But at the same time, you have this offsetting impact 0:14:42.480 --> 0:14:46.560 of the fiscal reform in Germany and now several years 0:14:46.640 --> 0:14:51.480 on infrastructure, defense spending. Obviously the sustainable and digital transitions 0:14:51.480 --> 0:14:54.440 that are underway, so a significant investment volume, and so 0:14:54.720 --> 0:14:57.040 corporates in Germany are sort of gearing themselves up to 0:14:57.760 --> 0:14:58.320 manage that. 0:14:59.200 --> 0:15:02.480 And in terms of of payouts and dividends and sort 0:15:02.480 --> 0:15:05.520 of and buybacks and these sorts of things, is this 0:15:05.560 --> 0:15:07.840 a moment to sort of preserve cash? How are you 0:15:07.840 --> 0:15:09.320 thinking about that going into this way. 0:15:09.360 --> 0:15:14.080 We're executing on the on the distribution strategy and policies 0:15:14.080 --> 0:15:16.440 that we've laid out. So we've announced so far this 0:15:16.560 --> 0:15:20.080 year two point one billion of distributions through dividends and buybacks. 0:15:20.280 --> 0:15:22.800 We're executing on that. And to your question, all or 0:15:22.880 --> 0:15:26.200 will will will reassess as time goes by, we see 0:15:26.240 --> 0:15:28.760 the performance in the first and second quarters in the environment, 0:15:29.280 --> 0:15:31.960 you know, let's say ninety days from now, we'll have 0:15:32.000 --> 0:15:34.400 an opportunity to reassess distributions later in the year. 0:15:34.440 --> 0:15:35.680 And then I'd like to also just take a step 0:15:35.680 --> 0:15:37.760 back and look at the sort of market architecture and 0:15:37.800 --> 0:15:39.320 what we've seen over the last couple of weeks. And 0:15:39.320 --> 0:15:41.600 I'll begin by sort of quoting some of your own 0:15:41.640 --> 0:15:43.920 research back to you that the preconditions are now in 0:15:43.920 --> 0:15:46.680 place for the beginning of a major dollar down trend, 0:15:46.720 --> 0:15:50.600 expecting one thirty euro versus the dollar by twenty twenty seven. 0:15:50.960 --> 0:15:53.120 How much of this damage do you think is permanent? 0:15:53.960 --> 0:15:58.160 Well, look, that's our analysts are calling for relatively significant 0:15:58.200 --> 0:15:59.160 structural change. 0:15:59.360 --> 0:16:00.760 I do think that will take time. 0:16:01.200 --> 0:16:04.400 There's been a what i'll call a break if you like. 0:16:04.400 --> 0:16:07.280 In sentiment, but that sentiment I think. 0:16:07.400 --> 0:16:11.560 Will make itself felt gradually over time. It's had a 0:16:11.560 --> 0:16:14.640 pretty dramatic impact on the euro dollar exchange rate already, 0:16:15.120 --> 0:16:18.440 and a further drift you know, up from here, would 0:16:18.480 --> 0:16:22.520 be impactful overall. I think the difference you're seeing is 0:16:22.560 --> 0:16:27.200 that the policy changes are making the rest of the 0:16:27.200 --> 0:16:33.000 world interesting to investors and changing the relative position a 0:16:33.000 --> 0:16:34.960 little bit of the United States and Europe, but other 0:16:35.040 --> 0:16:36.120 destinations as well. 0:16:36.600 --> 0:16:37.720 In a sense, that's good. 0:16:37.800 --> 0:16:39.920 I think it's been a wake up call for Europe, 0:16:40.760 --> 0:16:43.360 whether that's the policy side of Europe or as we 0:16:43.400 --> 0:16:47.080 talked about, the corporate side, and so there's an opportunity 0:16:47.120 --> 0:16:49.440 to rebalance a little bit. But it'll have impact on 0:16:49.480 --> 0:16:50.840 a number of markets, including currents. 0:16:50.880 --> 0:16:52.520 And when you think about sort of the remaking of 0:16:52.520 --> 0:16:55.560 that sort of global market architecture, does that mean that 0:16:55.720 --> 0:16:58.680 European markets, that German bonds, that the year of plays 0:16:58.720 --> 0:17:01.960 a larger role going forward, if not completely eclipsing the 0:17:02.040 --> 0:17:03.840 United States, but certainly changes. 0:17:04.080 --> 0:17:04.560 I don't think. 0:17:04.600 --> 0:17:07.720 Again there's I don't necessarily think this is a zero 0:17:07.760 --> 0:17:08.520 sum competition. 0:17:08.560 --> 0:17:09.200 I really don't. 0:17:09.280 --> 0:17:12.720 But the Bund is an anchor sort of investment and 0:17:12.800 --> 0:17:17.160 anchor source of stability in the world, and that's really good. 0:17:17.240 --> 0:17:20.359 In fairness, and one thing another thing our analyst said, 0:17:20.359 --> 0:17:23.520 and this is true for the German government to have 0:17:23.520 --> 0:17:26.560 announced as big a fiscal expansion as has taken place, 0:17:27.080 --> 0:17:29.520 and for the long bond in Germany, the bond not 0:17:29.600 --> 0:17:32.840 to have moved substantially in that time is a real 0:17:32.960 --> 0:17:34.720 sign of confidence in Germany. 0:17:35.000 --> 0:17:36.960 We actually think that the. 0:17:36.480 --> 0:17:39.919 Economic health of the country and also its fiscal strength 0:17:40.320 --> 0:17:43.600 in many respects, can be improved through this spending and 0:17:43.920 --> 0:17:46.960 if you like, a rebalancing of the economy, more consumption, 0:17:47.080 --> 0:17:48.200 more investment at home. 0:17:48.240 --> 0:17:49.360 And I want to get into that, but I also 0:17:49.400 --> 0:17:51.760 want to talk quickly also just about the foreign exchange market, 0:17:51.880 --> 0:17:53.960 not just within the markets, but also your clients as 0:17:54.000 --> 0:17:56.720 obviously companies that look at the outside world. You've seen 0:17:56.800 --> 0:17:59.240 some wild moves on the exchange rate. How are your 0:17:59.280 --> 0:18:01.479 clients dealing with how are you sort of also in 0:18:01.480 --> 0:18:03.560 intermedia and helping them sort of hedge some of that risk. 0:18:03.640 --> 0:18:06.600 But we had we had tremendous volumes in those days 0:18:06.640 --> 0:18:09.800 of early early April, so obviously we were managing our risk, 0:18:09.920 --> 0:18:12.960 but we were also helping clients to manage theirs and 0:18:13.600 --> 0:18:16.879 a there is a theme by the way of more 0:18:16.920 --> 0:18:20.480 business coming to us because of clients seeking to work 0:18:20.480 --> 0:18:22.960 with a European bank, and that that's also encouraging for 0:18:22.960 --> 0:18:25.760 the business model. Again, rebalance is a little bit the 0:18:25.800 --> 0:18:28.880 imbalance that has been strategically the case in the industry. 0:18:29.359 --> 0:18:33.439 The clients were in those days reacting strongly to this 0:18:33.560 --> 0:18:35.720 idea that that the dollar. 0:18:35.440 --> 0:18:37.960 In the US long bond was no longer. 0:18:37.680 --> 0:18:40.840 The risk off trade and where's that resulted in a 0:18:40.840 --> 0:18:43.320 lot of movement and uncertainty with clients. 0:18:43.359 --> 0:18:46.240 But all around the world is the honest truth. 0:18:46.560 --> 0:18:48.320 And so trying to figure out the sort of German 0:18:48.800 --> 0:18:51.800 fiscal expansion kind of conversation here there's so much bad 0:18:51.880 --> 0:18:53.560 news price then, whether it's what's coming out of the 0:18:53.640 --> 0:18:56.479 United States, the sort of years of contraction within Germany. 0:18:56.720 --> 0:18:58.440 Do you think that there is actually quite a bit 0:18:58.480 --> 0:19:00.520 of good news that is not yet then, and that 0:19:00.520 --> 0:19:03.199 actually we can really see things take off materially in Germany. 0:19:03.280 --> 0:19:04.440 I think so it'll take time. 0:19:04.480 --> 0:19:06.760 I mean, as in the nature of a fiscal expansion, 0:19:07.280 --> 0:19:09.399 the government needs to be put in place and the 0:19:09.720 --> 0:19:14.479 spending plans not just enacted but actually hitting. And so 0:19:14.520 --> 0:19:16.840 we see this as a real support to the German 0:19:16.880 --> 0:19:21.280 economy and the European more broadly economies in the years 0:19:21.280 --> 0:19:22.680 really starting in twenty six. 0:19:22.880 --> 0:19:26.000 But it's a sustained improvement. Now. 0:19:26.000 --> 0:19:28.520 One thing that's important is what it does to confidence today, 0:19:28.560 --> 0:19:31.720 and so we do expect some help in twenty five 0:19:32.280 --> 0:19:36.040 in terms of overall confidence in households and corporates. Obviously 0:19:36.080 --> 0:19:39.320 that confidence requires a resolution of the tariff war and 0:19:39.600 --> 0:19:41.960 some of the other things that are live at the moment, 0:19:42.240 --> 0:19:45.159 potentially piece in Ukraine. So there's a lot set of 0:19:45.200 --> 0:19:48.360 hanging in terms of confidence on the outcome of these events. 0:19:49.040 --> 0:19:51.800 That was the Deutsche Banks CFO James von Maltkez speaking 0:19:51.800 --> 0:19:54.800 there to Bloomberg's Oliver Krook. So what are the major 0:19:54.880 --> 0:19:58.240 challenges awaiting Germany's next chancellor. I've been discussing this with 0:19:58.320 --> 0:20:00.960 our Germany Bureau chief christ for our world. 0:20:01.040 --> 0:20:04.080 Pushing through economic reforms will will definitely be on top 0:20:04.119 --> 0:20:07.159 of his list, and also will be particularly in focus 0:20:07.280 --> 0:20:10.359 in coming days will be his efforts to liaise with 0:20:10.480 --> 0:20:13.800 other European leaders like French President Imanuel Macron or the 0:20:13.800 --> 0:20:18.200 Polish president tous Joined has been notably passive under outgoing 0:20:18.280 --> 0:20:21.679 chance all of shots, and Mattz really has pledged and 0:20:21.720 --> 0:20:24.159 maybe it like one of his top priorities to change 0:20:24.160 --> 0:20:26.639 that and play also like a more active role on 0:20:26.680 --> 0:20:27.560 the European stage. 0:20:27.600 --> 0:20:30.399 Again, how quickly will the new government be able to 0:20:30.480 --> 0:20:32.920 draw up a budget? I imagine another key concern. 0:20:33.359 --> 0:20:37.280