Speaker 1: This is Bloomberg day Break Weekend, our global look at
Speaker 1: the top stories in the coming week from our day
Speaker 1: Break anchors all around the world. Straight ahead on the program,
Speaker 1: the nation's biggest retailers battle it out for your summer
Speaker 1: spending dollars, and what earnings from Delta Airlines will tell
Speaker 1: us about travel demand Right now, I'm Tom Busby in
Speaker 1: New York.
Speaker 2: I'm Caroline Hetka in London as JP Morgan's Jmie Daman
Speaker 2: visits Ireland ahead of the US tariff deadline.
Speaker 3: For Europe, I'm Doug Prisner looking ahead to next week
Speaker 3: CPI and PPI reports for China.
Speaker 4: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 4: Bloomberg Radio, dot Com and the Bloomberg Business App.
Speaker 1: Good day to you. I'm Tom Busby. We begin today's
Speaker 1: program with what's become a Black Friday sales bonanza in
Speaker 1: the middle of summer. Amazon's annual Prime Day July sales
Speaker 1: event kicks off with Target, Walmart and others joining in.
Speaker 1: How much money is at stake? Are Americans expected to
Speaker 1: spend like we did before? And what role could the
Speaker 1: Trump tariffs play in sales? For more, we bring in
Speaker 1: Poonham Goyle, Senior US e Commerce and retail analysts at
Speaker 1: Bloomberg Intelligence. Poonham, thank you so much for joining us
Speaker 1: this holiday weekend. Millions of Americans gearing up to spend, spend,
Speaker 1: spend at the nation's biggest retailers, and this year is
Speaker 1: a little different. I think we have a couple of
Speaker 1: competing forces. A pullback in consumer spending, no doubt some
Speaker 1: people are spending less, and then fears about these Trump
Speaker 1: tariffs that are scheduled to kick in this coming Wednesday,
Speaker 1: July ninth. What do you see coming up on these
Speaker 1: big sales events?
Speaker 5: You know, you said it exactly right. They're really consumers
Speaker 5: are pulling back, and consumers are looking for deals. So
Speaker 5: what better way to find deals than on Amazon's Prime
Speaker 5: Day sales, which now is a four day event versus
Speaker 5: a two day event. Historically, deals matter, and hopefully these
Speaker 5: deals draw consumers to Amazon to buy what they want.
Speaker 1: Now, this is a lot of money last year in
Speaker 1: twenty four American This is, according to eMarketer, fourteen point
Speaker 1: two billion dollars. And as you said, this was only
Speaker 1: Amazon had a two day sales event. This year, they've
Speaker 1: stretched it to four. Do you think we're going to
Speaker 1: see that kind of spending.
Speaker 5: I think spending will be up double digits, including on
Speaker 5: this Prime Day. Now, the fact that it's four days
Speaker 5: and two days, does that mean that you double what
Speaker 5: you're expected to get? Probably not double, because there is
Speaker 5: spending that still occurs right on the Amazon platform after
Speaker 5: Prime Day. But I think what this helps do is
Speaker 5: if you think about what's happened since Amazon has introduced
Speaker 5: Prime Day, is that other retailers, as you have followed suit.
Speaker 5: So Walmart has its deals, Target has its steals, Best
Speaker 5: by Wayfair, you name it. But these deals aren't just
Speaker 5: two days, they're longer. So by Amazon going from two
Speaker 5: days to four days, they're now in play along with
Speaker 5: the rest of them for a longer duration. I think
Speaker 5: that's really what helps here.
Speaker 1: And Target is seven days, Walmart is a six day event.
Speaker 1: I mean, they are real. They're really stretching things here,
Speaker 1: aren't they.
Speaker 5: Yeah? Exactly, So you know, Amazon being just two days.
Speaker 5: I think it's smart of them to go to four days,
Speaker 5: and I do think it'll help them draw higher sales
Speaker 5: because it is a longer event.
Speaker 1: Now, Amazon did something I think really smart this year.
Speaker 1: They moved up the dates. Last year, i'll say there
Speaker 1: was a two day event. It started July sixteenth. This
Speaker 1: year it's starting July ninth, and that's an important day
Speaker 1: because that's the day that the across the board Trump
Speaker 1: tariffs are supposed to kick in, and we know anything
Speaker 1: could change before then. But I think it's a savvy
Speaker 1: move to move this up because people are afraid. People
Speaker 1: are worried. There's a lot of uncertainty about those tariffs,
Speaker 1: how much it's going to change, you know, prices on things,
Speaker 1: inflation rising, and it looks like everybody else has followed suit.
Speaker 5: Yeah, you're absolutely right. Look, that day is clearly going
Speaker 5: to be an important day and we'll find out what
Speaker 5: happens with tariffs. But as tariffs are top of mind
Speaker 5: on that day, consumers are also at the tip of
Speaker 5: their seats looking for deals because if things do change
Speaker 5: and if things get more expensive for the consumer, they're
Speaker 5: going to want to buy it now. And the Prime
Speaker 5: day sale happens to be just that day and for
Speaker 5: the next four days.
Speaker 1: Now, this started kind of the dog days of summer.
Speaker 1: People were not spending a lot of money. It started
Speaker 1: in twenty fifteen with Amazon, and they've grown into maybe
Speaker 1: stretching out not only back to school sales, they've early
Speaker 1: those up. I mean, this has really become an annual
Speaker 1: event along the lines of Black Friday, hasn't it all
Speaker 1: these retailers and consumers.
Speaker 5: Absolutely, the Prime Day sale is a big event. It's
Speaker 5: not as big as Black Friday, but still a very
Speaker 5: big event, and it comes at a key shopping point
Speaker 5: in time, right it's right ahead of back to school,
Speaker 5: So consumers have the intent to shop, they have the
Speaker 5: urgency to shop, they have the need to shop, and
Speaker 5: this year especially, they want the deals right. They're looking
Speaker 5: to spend less and get more and the only way
Speaker 5: to do that is to go shop on Dal Days.
Speaker 5: And this is one of Amazon's biggest deal days outside
Speaker 5: of Black Friday.
Speaker 1: Now, Amazon now has two hundred and twenty million subscribers,
Speaker 1: and really to get the full benefits of these Prime Days,
Speaker 1: you have to be a subscriber. What kind of deals
Speaker 1: are we talking about and are there ones that stick
Speaker 1: out to you that you've seen that could really really
Speaker 1: have a big impact on sales.
Speaker 5: So we'll see the deals this week when you know.
Speaker 5: Amazon starts launching them this year. They're doing it a
Speaker 5: little differently. They're dropping new deals every day on different categories.
Speaker 5: So they're being very targeted in how they get consumers
Speaker 5: to keep coming back. Right, you don't want to go
Speaker 5: shop the first day and then not come back the
Speaker 5: second day. So they're being targeted for their deals. In
Speaker 5: terms of what the deals will be, I think you're
Speaker 5: going to see the same as you've seen before. You're
Speaker 5: going to see deals on electronics. You're going to see
Speaker 5: deals on Amazon gadgets, whether it's a Kindle or any
Speaker 5: of their other devices. You're going to see them use
Speaker 5: their Rufus and Alexa AI assistance to help consumers find deals.
Speaker 5: So that's the real new thing here is that Amazon
Speaker 5: is going to try to have consumers lean into these
Speaker 5: AI tools not only just to compare products on their website,
Speaker 5: but also to learn about them, get smarter, and really
Speaker 5: see the value in them to help them hit Dappa
Speaker 5: and buy now.
Speaker 1: Our thanks to Punamgoyle, Senior US e Commerce and retail
Speaker 1: analysts at Bloomberg Intelligence. We turn out to the airline
Speaker 1: industry with the latest earnings from Delta Airlines, out on Thursday,
Speaker 1: just as the summer travel season is in full swing
Speaker 1: or is it for more. We're joined by George ferguson Airlines,
Speaker 1: Aerospace and Defense, senior analyst with Bloomberg Intelligence. Well, George,
Speaker 1: thank you for being here. I want to start with
Speaker 1: what you expect to see from Delta second quarter earnings
Speaker 1: this week, which comes after blowout earnings for Q one
Speaker 1: three months ago. But since then, I think we both
Speaker 1: agree a lot has changed in the industry.
Speaker 6: It has, and thanks for having me on. Delta is
Speaker 6: always the first airline to report and usually one of
Speaker 6: the stronger airlines in the US industry, and we'd expect
Speaker 6: the same this time. I think you know, the big
Speaker 6: things that we're going to watch is first US domestic travel.
Speaker 6: We think US domestic travel is probably cooling. It's the
Speaker 6: biggest driver of revenues profits for the airlines, and so
Speaker 6: to give us a good sense for how much that
Speaker 6: is cooling right now, it's hard for these airlines to
Speaker 6: continue to push to higher profitability if that market isn't working.
Speaker 6: And we're expecting across the board that the US airlines
Speaker 6: are going to have lower profitability than last year. In
Speaker 6: the same quarter, we'll also get a first look at
Speaker 6: Europe during the summer vacation season that's been super strong
Speaker 6: for the big US full service carriers United, Delta, and American.
Speaker 6: You know, we suspect that this market's going to cool
Speaker 6: as well, although this is probably because of a slowing economy,
Speaker 6: the US dollar weakening a bit. We don't think it's
Speaker 6: going to fall off a cliff, but we just can't
Speaker 6: see it remaining as super strong as it has been.
Speaker 6: Kind of suspect that a lot of these travelers book
Speaker 6: pretty far in advance. I have sort of a joke
Speaker 6: that on Christmas Morning, everybody wakes up, opens their presence
Speaker 6: and then decides where they're going to travel to Europe
Speaker 6: that summer in the well heeled families of America, And
Speaker 6: so we suspect that two q' is probably going to
Speaker 6: hang in there pretty well. But we'll be listening closely
Speaker 6: for trends for three Q and into four Q because
Speaker 6: again we think there's a bit of a lag that
Speaker 6: occurs in bookings into Europe. We still think two Q
Speaker 6: may provide some insight into some potential softening in that market.
Speaker 6: And I think one of the challenges we'll also have
Speaker 6: as we look at Delta, like I said, is you know,
Speaker 6: we're expecting that domestic market to soften, and we'll see
Speaker 6: some of that in Delta's earnings, but it won't be
Speaker 6: a good indicator as good an indicator, but we expect
Speaker 6: that at the low cost carriers, because the low cost
Speaker 6: carriers really catering to a different clientele, we would expect
Speaker 6: that anything Delta reports on the domestic industry is going
Speaker 6: to be even softer when we get to some of
Speaker 6: the low costs like Jet Blue, Southwest Frontier, those kind
Speaker 6: of companies.
Speaker 1: Well back to Delta now, they telegraph this softening back
Speaker 1: in April their last earnings report, right where they withdrew
Speaker 1: a full year guidance because of softer demand. And since then,
Speaker 1: I mean, we've seen more unrest in the Middle East,
Speaker 1: these White House, you know, policies on migrants, travel bands,
Speaker 1: the Trump tariffs, I mean, have things even gotten a
Speaker 1: little worse than even you suspected?
Speaker 6: Yeah, I mean I think that the backdrop is getting
Speaker 6: is definitely getting more difficult. I don't know that they
Speaker 6: totally telegraphed more difficult times ahead. You know, the sense
Speaker 6: I got was at earnings there was just so much,
Speaker 6: so many things changing in the US right tariffs were
Speaker 6: being announced. Everybody wasn't sure what it was going to
Speaker 6: do to GDP that I think that the company has
Speaker 6: just decided that it was most prudent, maybe easiest, just
Speaker 6: to pull guidance for the year. But as we went
Speaker 6: through the call, there was you know, a lot of
Speaker 6: discussion about how they hadn't seen the softening yet in
Speaker 6: many of these markets. But again I agree with you.
Speaker 6: I think since then the backdrop has gotten a little
Speaker 6: bit worse on all those fronts. You know, again, I
Speaker 6: think commentary on the back half of the year won't
Speaker 6: be as strong. We'll be listening very closely for that,
Speaker 6: but all this takes time to filter through, and so
Speaker 6: too Q.
Speaker 5: You know, we expect it.
Speaker 6: To be okay, not more profitable than last year, but okay.
Speaker 1: Now, chances are, if you're traveling this summer, you've already
Speaker 1: made your flight and hotel bookings. But if not, could
Speaker 1: that mean right now it's July there are solid deals
Speaker 1: out there for consumers.
Speaker 6: Again, I think that some of the shortest distance between
Speaker 6: booking and travel is typically the domestic market. I would
Speaker 6: suspect that there's probably some interesting deals out there right
Speaker 6: now for the domestic market, because that's the one I
Speaker 6: think we'll get softest sooner. And then I think, you know,
Speaker 6: you'll see the airlines discount that try to fill those airplanes.
Speaker 6: You know, the way we see sort of revenue management
Speaker 6: at the airlines nowadays, all these carriers traditionally have sort
Speaker 6: of eight plus percent capacity of every airplane that flies.
Speaker 6: You know, those revenue managers will get out there and
Speaker 6: try to fill those airplanes at the marginal cost of
Speaker 6: the seat, and so, like I said, that means you
Speaker 6: could get some pretty interesting opportunities. I suspect on some
Speaker 6: of the international travel long haul Latin America, Asia, pac
Speaker 6: and Europe, I suspect still a good amount of those
Speaker 6: seats have been filled and filled earlier in the year,
Speaker 6: and so I think you'll see maybe less great deals
Speaker 6: in the marketplace for those, but you'll probably see some well.
Speaker 1: Delta Airlines Q two earnings out this Thursday ahead of
Speaker 1: Wall Street's opening bell our Thanks to George Ferguson, Senior analyst,
Speaker 1: for airlines, aerospace, and defense with Bloomberg Intelligence and coming
Speaker 1: up on Bloomberg day Break Weekend, JP Morgan Chase's Jamie
Speaker 1: Diamond visits Ireland head of the US tariff deadline for Europe.
Speaker 1: I'm Tom Busby and this is Bloomberg. This is Bloomberg
Speaker 1: day Break Weekend, our global look ahead at the top
Speaker 1: stories for investors in the coming week. I'm Tom Busby
Speaker 1: in New York. Up later in our program, China firms
Speaker 1: locked in a race to the bottom when it comes
Speaker 1: to pricing artificial intelligence. But first, Jamie Diamond, Chairman and
Speaker 1: CEO of JP Morgan, visits Ireland this week, just ahead
Speaker 1: of this Wednesday's July ninth deadline for US tariffs, which,
Speaker 1: if they go ahead as planned, would add fifty percent
Speaker 1: duties to most European goods exported to the US. Ireland,
Speaker 1: a major beneficiary of global economic integration. That's, according to
Speaker 1: the Finance Minister, is aiming to maintain formidable growth while
Speaker 1: balancing European interest with its traditionally strong relationship with America.
Speaker 1: For more, we turn to Bloomberg Daybreak anchor Caroline Hepger
Speaker 1: in the midst.
Speaker 2: Of a boom in Europe's banking sector. JP Morgan, Chair
Speaker 2: and CEO Jamie Diamond, will head to Dublin for talks
Speaker 2: with the country's second in command on trade, tariffs and
Speaker 2: sustaining economic growth the Banking Store. We'll meet with Ireland's
Speaker 2: tournished in effect, the Deputy Prime Minister. Just as geopolitical
Speaker 2: uncertainty both drives interest in Ireland's goldilock business climate but
Speaker 2: also could pose threats to its tech and farmer industry. Well,
Speaker 2: joining me now to discuss is Olivia Fletcher, Boomberg's Dublin
Speaker 2: bureau reporter, and here in London Blueberg Senior finance reporter
Speaker 2: Laura Noonan. Welcome to both of you and thanks for
Speaker 2: being with me. Olivia. To you first. Jamie Diamond has
Speaker 2: raised the alarm on macroeconomic risk, on bond markets, on
Speaker 2: tariff uncertainty. What do you think he's going to be
Speaker 2: talking about and thinking about when he's in Ireland. How
Speaker 2: much is Ireland at a risk from all of these Well.
Speaker 7: Big question now is how Ireland could remain competitive. You know,
Speaker 7: its whole economic model has been based off attracting and
Speaker 7: knowing foreign direct investment internationally, got especially from a lot
Speaker 7: of US firms. There are a lot of multinational hubs here,
Speaker 7: Apple Visor, a lot of the investment banks here as well,
Speaker 7: And the key is going to be staying competitives because
Speaker 7: was basically the envy of Europe. You know, it's got
Speaker 7: this huge budgets. Last year reaped record thirty nine billion
Speaker 7: euros in corporate tax receipts. Albeit they are kind of volatile,
Speaker 7: but that's a huge, huge amount of money that has
Speaker 7: transformed it from one of europe'spores to one of its richest.
Speaker 7: But now it's kind of make an headvise, I guess
Speaker 7: for maybe the wrong reasons, because Arland is now directly
Speaker 7: in Trump's line of sight. It has one of the
Speaker 7: biggest trade imbalances with the US, and Howard Lutnick has
Speaker 7: repeatedly singled out Land for its huge SURFLUS. So big question,
Speaker 7: I guess is how does Ireland continue to attract and
Speaker 7: maintain the foreign direct investment that's kind of funded its coffers,
Speaker 7: just as Trump is trying to nawse so many of
Speaker 7: those US companies back to American shores.
Speaker 2: Laura A lot of uncertainty then around tariffs and trade
Speaker 2: and what that means for Ireland, there.
Speaker 8: Is certainly a lot of uncertainty. What I would say
Speaker 8: is Ireland has tried to tread very fine line around
Speaker 8: Turfs and around the current Trump administration. So Ireland's always
Speaker 8: been in a particular position. I think where it is
Speaker 8: economically and politically is also similar to where it is
Speaker 8: from a geographic perspective. It is midway between it itself
Speaker 8: has been between the EU and between the US, and
Speaker 8: there has always been close ties between Ireland and the US,
Speaker 8: some of which predate Ireland's EU membership. So I think
Speaker 8: Ireland is trying to play a very fine line here.
Speaker 8: They are very conscious of not wanting to alienate the
Speaker 8: US administration anymore than is definitionally necessary. Because Ireland does
Speaker 8: have a low corporate tax base, that low corporate tax
Speaker 8: base has attracted a lot of multinational activity, a lot
Speaker 8: of US activity, which the US administration believes should be
Speaker 8: in the US. So that is a definitional problem. But
Speaker 8: beyond that, Ireland is trying to position itself as a
Speaker 8: friend to the US while also being a good European
Speaker 8: So you won't see the Irish administration making the same
Speaker 8: kind of combative statements as what you have seen some
Speaker 8: of the other eunations doing. In terms of Jamie coming
Speaker 8: to Ireland and Jamie Diamond, JP Morgan, Chase CEO, Jamie
Speaker 8: loves Ireland. That's the first thing to say. There are
Speaker 8: sometimes it's several times, there are some Americans who love Ireland.
Speaker 8: Jamie is one of those. So he loves Ireland. I
Speaker 8: think he will be stressing the benefits our of the
Speaker 8: Irish economy. He'll be spress stressing all the great things
Speaker 8: that the Irish landscape has delivered for JP Morgan, They've
Speaker 8: already got a couple of thousand people there. One of
Speaker 8: the jokes about Jamie coming to Ireland is that Jamie
Speaker 8: will come to Ireland to promise a couple of thousand
Speaker 8: jobs and then it's up for everyone else to figure
Speaker 8: out how to make that happen, or like how to
Speaker 8: walk that back. Like he just loves the place. So
Speaker 8: I think he will be stressing the strengths of Ireland
Speaker 8: and also trying to encourage Ireland to stay the path.
Speaker 8: From a stability perspective, one of the other assets Arreold
Speaker 8: has had through the recent geopolitical ups and downs is
Speaker 8: that there have been a lot of big elections. There's
Speaker 8: been a lot of political shifts in a lot of
Speaker 8: big countries and the UK. So last year we had
Speaker 8: elections and a lot of major EU countries. We had
Speaker 8: elections in the US, there was a lot of public
Speaker 8: talk about that. Internationally, we also had Irish elections. Nobody
Speaker 8: cared because essentially they rearranged the chairs in a very
Speaker 8: similar order to the old chairs. And I think that
Speaker 8: stability as well has become an asset. So while it
Speaker 8: doesn't make Olivia's life uny easier in trying to excite
Speaker 8: people about the Irish elections, it does become a selling
Speaker 8: point when you think about companies like JP Morrigan, who
Speaker 8: in this world have a lot of uncertainty. I think
Speaker 8: people do look for stability, and I think Jamie will
Speaker 8: be stressing the stability they have found in Ireland and
Speaker 8: will be encouraging the country to continue on that route.
Speaker 2: And of course some of these points were reflected in
Speaker 2: some recent interviews that we've had, including my Daybreak Europe
Speaker 2: co host co Ankers Stephen Carroll, who sat down with
Speaker 2: the Irish Finance Minister Pascal Donacue when Bloomberg opened its
Speaker 2: brand new bureau in Dublin. So have a listen to
Speaker 2: what on a Hue had to say.
Speaker 9: We have a growth outlook for our economy even now
Speaker 9: of to maybe even more than two percent per year.
Speaker 9: The reason why these companies have part of their global
Speaker 9: supply chains here in Ireland is because we have the skill,
Speaker 9: the experience and the competitiveness built up to keep them
Speaker 9: in our country, and we will look down at how
Speaker 9: we can maintained us even if the trade environment around
Speaker 9: it does begin to change.
Speaker 2: So quite a rosy vision then for Ireland's economy, despite
Speaker 2: the trade worries from Donahue Olivia, in terms of you know,
Speaker 2: the reliance as you say, on corporate tax receipts from
Speaker 2: large multinational companies, and also what the government is going
Speaker 2: to do with the budget surplus that it's got in
Speaker 2: terms of setting up a sovereign wealth fund. What are
Speaker 2: the next steps for the Irish government?
Speaker 7: Well, like you say, the picture is perhaps not as
Speaker 7: rosy as it once. You know, his Finance Department and
Speaker 7: has revised an it's domestic economic outlook, and so has
Speaker 7: a central bank. You know, the kind of saying that
Speaker 7: while Arland will still see a star plus, the selflus
Speaker 7: might not be as high as you know, it was
Speaker 7: once anticipated to be. And so the next steps for
Speaker 7: the Irish administration are, like I say, to continue to
Speaker 7: keep that competitive edge, you know, the Finance Department and
Speaker 7: you know, and also Arland's for Indirect Investment Agency. The
Speaker 7: idea that keen to stress that while Land has in
Speaker 7: the parson have attracted these companies because they are a
Speaker 7: strategic tax space. You know, Arland also has a hugely
Speaker 7: skilled workforce, and like Law has said as well. Actually
Speaker 7: when I went to see the idea recently when the
Speaker 7: press conferences, their chair said that Arland stands out as
Speaker 7: an oasis of stability to investors. So I think the
Speaker 7: key thing for Arland is to you know, remain stable,
Speaker 7: which seems like that's something they'll be able to do,
Speaker 7: and to continue squirrel and away some of that money
Speaker 7: into the sovereign welfare because Island isn't just thinking about
Speaker 7: the next three four years. The problems potentially could come
Speaker 7: you know, ten years down the line, when you know,
Speaker 7: for example, a company might not pull out of Island
Speaker 7: right away, but they might just decide not to invest
Speaker 7: in a pharmaceutical plant in ten years time. So the
Speaker 7: issue isn't necessarily that all these companies are going to
Speaker 7: lead right away, it's that what might just not be
Speaker 7: there in future, which is harder to measure. So you know,
Speaker 7: Ireland is having to look at all kinds of other
Speaker 7: ways to continue to attract companies. Also invest more in
Speaker 7: research and development. That's quite another thing that's hyped up
Speaker 7: on their agenda, things like that.
Speaker 2: Lord to bring you the context also amidst all of
Speaker 2: this is that European banks have done incredibly well in
Speaker 2: the first half of this year, so there's also that
Speaker 2: context to kind of bring into to this that European
Speaker 2: banks are again sort of back in focus.
Speaker 8: Yeah, I mean Irish banks are a bit of a
Speaker 8: different sector to European banks in the sense that what's
Speaker 8: happening there priorly reflects a reprivatization the market. Ireland is
Speaker 8: a very particular banking market, so there are basically two
Speaker 8: very large banks AIB and Bank of Ireland who dominate
Speaker 8: the market one slightly smaller bank. AIB has just returned
Speaker 8: to fully private ownership. That has put a lot of
Speaker 8: win behind Ireland sales, So I think it's a bit
Speaker 8: of a different sector. The Riish banking sector has gone well,
Speaker 8: but they also had obviously a very problematic legacy, and
Speaker 8: these things do tend to go up in ups and down.
Speaker 8: So because they lost a lot of money, they then
Speaker 8: tighten their standards a ton. I mean, if you think
Speaker 8: about underwriting standard Ireland and probably has some of the toughest.
Speaker 8: We have very tough mortgage rules. All those things do
Speaker 8: mean that the sector should out performed. So I think
Speaker 8: the domestic bank sector is going very well. I did
Speaker 8: want to say a word on the foreign banking sector
Speaker 8: as well in terms of next steps and what Ireland
Speaker 8: is doing. So Ireland will shortly launch its next international
Speaker 8: finance strategy. They launched their last one in twenty twenty.
Speaker 8: This is basically their strategy to make Ireland they go
Speaker 8: to destination for international finance and that will see them
Speaker 8: tackle some of the structure or see them they've certainly
Speaker 8: been lobbied on some of the structural points. Those are
Speaker 8: things like infrastructure. Anyone who's been to Ireland will know
Speaker 8: that we do not have a metro from the airport,
Speaker 8: which has been a bone of contention. I first wrote
Speaker 8: about it in two thousand and four, so there has
Speaker 8: been a very there is that there is housing. There
Speaker 8: are some issues around tax, both in terms of funds taxation.
Speaker 8: We talk a lot about banks, but funds are big
Speaker 8: industry in Ireland. Issues around that, issues around the banking
Speaker 8: bonus tax. So there are policy issues for the international
Speaker 8: finance sector and the international sector more broadly, because we
Speaker 8: all care about housing and infrastructure, which I think Ireland
Speaker 8: is going to commit to tackling quite soon.
Speaker 2: Olivia a last thought. As with all the other European countries,
Speaker 2: Ireland is also under pressure to continue achieving strong economic growth.
Speaker 2: Can they continue to deliver that?
Speaker 7: So the forecast suggests, the forecasts from the Department of
Speaker 7: Finance and the Central Banks suggests that Ireland will continue
Speaker 7: to grow, but at a slower pace. So while Onland
Speaker 7: may continue to you know, like Laura said, there.
Speaker 2: Are a lot of roadblocks to that.
Speaker 7: That actually some of the biggest points that the multinationals raised,
Speaker 7: we're violand you know, things like fix and infrastructure, energy grid,
Speaker 7: increase in housing starts, water supply. So while Island is
Speaker 7: probably can of continue to grow, there are definitely roadlocks
Speaker 7: to that and that's probably Areland's biggest challenge right now.
Speaker 2: So in terms of the economic growth picture your view, Laura.
Speaker 8: Yeah, so I think without putting in too much about
Speaker 8: Green Jersey on is where saying Ireland had the half
Speaker 8: fastest growth rate of any country in the EU in
Speaker 8: the first quarter and is expected to have one of
Speaker 8: the highest growth rates economically, So while it will be
Speaker 8: lower than it has been, it will still be one
Speaker 8: of the highest in the EU. Yeah.
Speaker 2: Absolutely, Laura, thank you so much for being with us
Speaker 2: today here in the radio studio Blueberg Senior Finance Reporter
Speaker 2: Laura Noonan, And in Dublin our Dublin bureau reporter Olivia Fletcher.
Speaker 1: Thank you, thanks Caroline. And coming up on Bloomberg day
Speaker 1: Break weekend, how China's AI drag risk choking each other.
Speaker 10: Whenever a new craze emerges, there's always just so many
Speaker 10: rivals that sort of come out of the woodwork ready
Speaker 10: to pounce. And now these sort of same forces are
Speaker 10: really in full swing in the booming artificial intelligence industry,
Speaker 10: and these AI firms have really been focused on this
Speaker 10: sort of classic playbook, which is scaling up their user
Speaker 10: bases and racing for market share.
Speaker 1: I'm Tom Busby and this is Bloombery. This is Bloomberg
Speaker 1: day Break Weekend, our global look ahead. At the top
Speaker 1: stories for investors in the coming week. I'm Tom Busby
Speaker 1: in New York. Recent data out of China providing an
Speaker 1: ambiguous read on the health of the world's second largest economy.
Speaker 1: With that, investors will be closely watching the next round
Speaker 1: of inflation data out of Beijing, and for a preview,
Speaker 1: let's get to the host of the Daybreak Asia podcast,
Speaker 1: Doug Krisner.
Speaker 3: Tom. Many recent data points for the Chinese economy have
Speaker 3: been mixed in the last week that saisheen manufacturing PMI
Speaker 3: for June seem to improve into expansion. Bloomberg Economic says
Speaker 3: this is a reflection of the truth in the US
Speaker 3: China trade war. However, the latest flash reading from China
Speaker 3: beige Book International shows slowing in June. Most sectors, according
Speaker 3: to China Beige Book, weakened as the result of declining
Speaker 3: revenue and profits, as well as falling prices and fewer hirings.
Speaker 3: Now in the week ahead, we'll get fresh data on
Speaker 3: inflation in the form of both the consumer price and
Speaker 3: producer price indices for a closer look. Now, I'm joined
Speaker 3: by Shazad Kazi. He is the COO also Managing director
Speaker 3: at China beij Book International. When we talk about price
Speaker 3: activity in China, I'm tempted to use the term deflation,
Speaker 3: but maybe that's a bit overused. Can we still use
Speaker 3: that term to characterize what's going on on the mainland?
Speaker 11: If you look at the producer side of the equation,
Speaker 11: there's no question about the fact that there has been
Speaker 11: deflation in and it's tied into the whole concept of
Speaker 11: excess capacity and companies having to cut prices to sell
Speaker 11: and so forth. But if you look at their CPI measure,
Speaker 11: and especially if you look at core CPI, what you
Speaker 11: have got going on and the official data even is
Speaker 11: a lot of disinflation rather than outright deflation. But the
Speaker 11: problem is that there is a profitability challenge in China,
Speaker 11: and fundamentally there's a price war going on in so
Speaker 11: many sectors that that's what's driving depressing a lot of
Speaker 11: those indicators.
Speaker 3: So is this merely an issue of overcapacity or is
Speaker 3: there something else that we need to unpack here?
Speaker 11: A lot of it is certainly over capacity. Chinese industrial
Speaker 11: sector has produced so much, whether it's you're talking about steel, aluminum, copper,
Speaker 11: whether you're talking about cars or evs, now that every
Speaker 11: company feels a pressure to cut cut cut prices in
Speaker 11: order to sell domestically and even more importantly, to sell abroad,
Speaker 11: which is where Chinese overcapacity problem comes in. They cut
Speaker 11: prices to the point where every other countries companies tend
Speaker 11: to not be very competitive, and then that's they fled
Speaker 11: their goods. But ultimately comes back in the form of
Speaker 11: weak industrial profits and it comes back in the form
Speaker 11: of this disinflation or oftentimes deflation challenge that we're talking
Speaker 11: about in China.
Speaker 3: Is there an effective policy response Beijing should employ to
Speaker 3: kind of begin to turn things around or is it
Speaker 3: more a matter of things being in place right now?
Speaker 3: But global markets need to be a little bit more patient.
Speaker 11: So there's no question. You know, this week we got
Speaker 11: some policy statements out criticizing these price wars and saying
Speaker 11: we have to push back on them by authorities in China.
Speaker 11: But you know the reality is that there's no incentive
Speaker 11: structure there. As a matter of fact, the incentive structure
Speaker 11: is the quite opposite. There's no pressure ultimately on many companies,
Speaker 11: especially large state owned companies, to turn a profit. Ever,
Speaker 11: and so as long as you have access to cheap
Speaker 11: or free loans from banks or you know, that Beijing
Speaker 11: is going to bail you out. There's absolutely no desire
Speaker 11: to say we have to whether we cannot do these
Speaker 11: price cutting. As a matter of fact, the whole reason
Speaker 11: you've got this price cutting is because many sectors are
Speaker 11: overly subsidized in that country.
Speaker 3: When I think of problems with price activity, I think
Speaker 3: of the property market, where in many cases prices are
Speaker 3: continuing to decline. Is that still the case?
Speaker 11: That is, unfortunately the case where you had a brief
Speaker 11: period here where prices were beginning to rebound and even
Speaker 11: though year over year they were looking weak, you know,
Speaker 11: the weakness was certainly starting to dissipate. I would say
Speaker 11: that is going away, and you are getting reports at
Speaker 11: least directionally saying that prices are again starting to decline.
Speaker 3: Based on the data that you have access to, what
Speaker 3: are your expectations for the CPI and PPI prints that
Speaker 3: we're going to be looking at in the week ahead.
Speaker 11: Look, if you were to base it strictly on what
Speaker 11: we're seeing here, where we're seeing outright, you know, slow
Speaker 11: downs in our in our sales prices and disease and
Speaker 11: our input costs and disease. That tells us that the
Speaker 11: CPI and PPI prints. We should get lower prints there,
Speaker 11: we should probably get you know, CPI falling and PPI
Speaker 11: probably contracting further.
Speaker 3: But this is nothing really that the cent Bank can address,
Speaker 3: or can the PBOC change policy in a way to
Speaker 3: kind of reverse this. It seems to be coming back
Speaker 3: time and again to the issue of sentiment. Whether you're
Speaker 3: talking about consumers or businesses, the sentiment levels have been
Speaker 3: just too weak.
Speaker 11: That's exactly right. The sentiment levels have been too weak.
Speaker 11: And the problem is that monetary policy in China for
Speaker 11: a while now has not been producing the kinds of
Speaker 11: results you would expect it to. And by that I
Speaker 11: mean that interest rates keep coming down. Yet companies generally
Speaker 11: speaking are not particularly inclined to borrow. So in May,
Speaker 11: for example, we saw this nice jump a multi high
Speaker 11: from a monthly standpoint in our borrowing data. It came
Speaker 11: back down to earth in June. So you don't have
Speaker 11: this sustained rise in corporate borrowing for several years over
Speaker 11: the last almost five years as a matter of fact, now,
Speaker 11: because the economy overall is quite weak. So if you're
Speaker 11: not investing a lot, if you're not hiring a lot,
Speaker 11: if that r and d isn't there. The desire to
Speaker 11: borrow is not going to be there. It makes no
Speaker 11: sense to leverage.
Speaker 3: In a moment or two, we're going to be talking
Speaker 3: about the AI story in China. When you look at
Speaker 3: the degree to which tech companies, particularly those that have
Speaker 3: been playing in the AI space, have been contributing to growth,
Speaker 3: is that moving the needle in any way, not in.
Speaker 11: Any kind of meaningful way where you would see it
Speaker 11: showing up I think in big macroeconomic data points. But
Speaker 11: the reality is on the ground, the environment is very exciting.
Speaker 11: China is doing what they've done with for example, EVS
Speaker 11: and other sectors. They are increasingly figuring out ways to
Speaker 11: subsidize the indigenization of chip production, AI, quantum, et cetera.
Speaker 11: So they're throwing a lot of money at it. You've
Speaker 11: got companies that are ipoing in these fields. So certainly
Speaker 11: in China, the tech space and the tech industries and
Speaker 11: is having an exciting moment.
Speaker 3: Shazad will leave it there, Thank you so much. Shazad
Speaker 3: Kazi also Managing director at China Basebook International. And as
Speaker 3: I promised, let's shift gears. China's crowded AI landscape is
Speaker 3: not only fueling rapid innovation, but fierce competition as well,
Speaker 3: and it's that competition that seems to be dragging down profits.
Speaker 3: Let's check in with Bloomberg opinion columnist Catherine Thorbek. She
Speaker 3: covers all things tech in Asia, and she joins us
Speaker 3: from our bureau in Tokyo. Catherine, thank you for making
Speaker 3: time to chat with me about this. Give me a
Speaker 3: sense of perspective on this. How recent has this kind
Speaker 3: of tension between innovation and competition been developing in Ai
Speaker 3: in China?
Speaker 10: This is really a story we've seen play out many
Speaker 10: times in the history of China's tech sector. You know,
Speaker 10: competition is notoriously fierce in the world's second largest economy,
Speaker 10: So whenever a new craze emerges, there's always just so
Speaker 10: many rivals that sort of come out of the woodwork
Speaker 10: ready to pounce. And for example, we saw this in
Speaker 10: the food delivery market. There's some food delivery wars that
Speaker 10: were going on, and it really became a race to
Speaker 10: the bottom when it comes to pricing. You know, we
Speaker 10: saw bubble tea being sold for less than twenty five
Speaker 10: cents last month, and we also saw it in the
Speaker 10: electric vehicle market, which is sort of left behind a
Speaker 10: trail of zombie cars. And now, oh, these sort of
Speaker 10: same forces are really in full swing in the booming
Speaker 10: artificial intelligence industry, and these AI firms have really been
Speaker 10: focused on this sort of classic playbook, which is scaling
Speaker 10: up their user bases and racing for market share, and
Speaker 10: the result has sort of been this rat race. You know,
Speaker 10: they're at each other's throats when it comes to pricing,
Speaker 10: and it's really become a race to the bottom. But
Speaker 10: I think a key difference here is that nobody has
Speaker 10: actually figured out has really cracked the key to getting
Speaker 10: consumers to pay for these services. So it makes the
Speaker 10: issue of monetization or a path to profitability seem a
Speaker 10: really long way off. And this is really unique to
Speaker 10: China's tech sector. You know, in the States, there's in
Speaker 10: Silicon Valley, there's sort of a smaller number of large
Speaker 10: players that really dominate the market and they really have
Speaker 10: control over pricing, whereas in China, you know, there's just
Speaker 10: so many smaller players and as well as the big
Speaker 10: tech companies, so competition has been really really fierce, and
Speaker 10: I'm just not sure how sustainable it is.
Speaker 3: I'm just wondering when you talk about big tech companies,
Speaker 3: I think of Ali Baba, and you would expect maybe
Speaker 3: that company or companies like Baba to have some sort
Speaker 3: of advantage.
Speaker 10: That's right. So Ali Baba and Byteedance and Tencent, these
Speaker 10: sort of big tech players, I think they really can
Speaker 10: play the long game and they can sort of sort
Speaker 10: of weather this storm a little bit better than these
Speaker 10: so called little dragons, which are these sort of startups
Speaker 10: that are really driving innovation in China's tech ecosystem. And
Speaker 10: so I think the big tech players are definitely in
Speaker 10: a better position. But I also think that's a little
Speaker 10: bit unfortunate because we really see sort of the biggest
Speaker 10: breakthroughs in AI come from these smaller startups, which I
Speaker 10: think are at higher risk.
Speaker 5: Here.
Speaker 3: Does the government have a view on what's happening?
Speaker 4: Do you think so?
Speaker 10: I think post deep Seek, there's just been a lot
Speaker 10: of exuberance. There's been a lot of top down support
Speaker 10: for the AI sector, and so it's sort of driving
Speaker 10: this And in some ways it's a double edged sword,
Speaker 10: you know, because there's so much excitement for AI and
Speaker 10: so much top down support, it has really been driving
Speaker 10: widespread adoption of AI services and AI tools throughout China,
Speaker 10: which the government wants, but I think it definitely puts
Speaker 10: these companies in a crunch when it comes to sort
Speaker 10: of figuring out how to make money.
Speaker 3: So when you talk about adoption, is it primarily on
Speaker 3: the part of consumers using more AI related devices or
Speaker 3: is it in industry as well?
Speaker 10: That's right, So I think consumers definitely demand for AI
Speaker 10: services and tools is red hot. You know, we see
Speaker 10: so many chatbots, so many people using deep seak across
Speaker 10: you know, local governments and across even hospitals. So I
Speaker 10: think the adoption has been widespread. And the way I
Speaker 10: kind of look at it when we talk about the
Speaker 10: sort of top down support was you know, I'm not
Speaker 10: going to remember which US president it was, but there
Speaker 10: was a president that put electricity in the White House
Speaker 10: to sort of signal that, you know, this technology is
Speaker 10: safe and we can you know, rapidly adopt it. And
Speaker 10: I think there have been a lot of top down
Speaker 10: signals coming from Beijing and coming from Hijinping about how
Speaker 10: AI is you know, the future and we shouldn't be
Speaker 10: afraid of it. And I think we've really seen that
Speaker 10: play out when it comes to consumers really sort of
Speaker 10: embracing this technology and not being afraid of it and
Speaker 10: sort of rushing to adopt it.
Speaker 3: One of the big questions in the States as it
Speaker 3: relates to the investments being made in artificial intelligence, is
Speaker 3: the ROI turn on those investments. Do we have any
Speaker 3: visibility into whether or not this is having kind of
Speaker 3: a similar conundrum in China right now?
Speaker 10: Right so, I really think that's sort of the biggest
Speaker 10: existential threat hanging over sort of the entire AI ecosystem
Speaker 10: in China is that there really is not a clear
Speaker 10: path to profitability, and there's not even a clear path
Speaker 10: to sort of monetization and making money off of consumers.
Speaker 10: You know, so many of these chatbots are being offered
Speaker 10: for free, and because you know, competitors are offering them
Speaker 10: for free, it basically peer pressures all of the companies
Speaker 10: to do the same. And I think there's one statistic
Speaker 10: that our Bloomberg Intelligence colleagues wrote which was that I
Speaker 10: think all of the top ten AI chat bots at
Speaker 10: China generated just one million dollars in revenue from Apple's
Speaker 10: iOS app store in twelve months, and during that same
Speaker 10: time period, open AI's chat GBT garnered six hundred and
Speaker 10: sixty nine million dollars in iOS revenue. So that's quite
Speaker 10: a big difference, and that's just one chatbot compared to
Speaker 10: ten of So what do.
Speaker 3: We know about the rate of failure here? I mean,
Speaker 3: do we have enough data to begin to kind of
Speaker 3: quantify that?
Speaker 10: So I think it's too soon to tell. Like I said,
Speaker 10: there's you know, this top down support, and there's just
Speaker 10: this insatiable hype, especially in the wake of Deep Seek,
Speaker 10: and I think for now that's been a really strong
Speaker 10: propellant of the AI sector. You know, a former government
Speaker 10: official in China last week said that the nation is
Speaker 10: on the cusp of generating more than one hundred Deep
Speaker 10: Seek like breakthroughs. But I think, you know, if you
Speaker 10: look at more than one hundred deep Seeks, you know,
Speaker 10: what does that actually mean. That means such fierce competition,
Speaker 10: And so I think in the long run, we may
Speaker 10: see at least one hundred you know, zombie AI tools
Speaker 10: or zombie AI agents. But I think, you know, that's
Speaker 10: still a long way off. And for now, you know,
Speaker 10: this hype is really driving a lot of exuberance, But
Speaker 10: we'll have to see how it plays out.
Speaker 3: Catherine, Thank you so very much. It's always a pleasure.
Speaker 3: That is Catherine Thorbeck, Bloomberg opinion columnist. She covers Asia
Speaker 3: tech for us here at Bloomberg, and I'm Doug Chrisner.
Speaker 3: You can catch us weekdays for the Daybreak Asia Pod.
Speaker 3: It's available wherever you get your podcast.
Speaker 1: Tom, Thank you, Doug. And that does it for this
Speaker 1: edition of Bloomberg day Break Weekend. Join us again Monday
Speaker 1: morning at five am Wall Street Time for the latest
Speaker 1: on markets overseas, in the news you need to start
Speaker 1: your day. I'm Tom Buzzby. Stay with us. Top stories
Speaker 1: and global business headlines are coming up right now.