1 00:00:02,120 --> 00:00:04,560 Speaker 1: This is Bloomberg day Break Weekend, our global look at 2 00:00:04,600 --> 00:00:06,760 Speaker 1: the top stories in the coming week from our Daybreak 3 00:00:06,800 --> 00:00:09,440 Speaker 1: anchors all around the world. Straight ahead on the program. 4 00:00:09,520 --> 00:00:11,640 Speaker 1: It's been quite a run for the bulls on Wall 5 00:00:11,640 --> 00:00:13,920 Speaker 1: Street as we enter the final stretch of the year. 6 00:00:14,080 --> 00:00:16,400 Speaker 1: I'm Tom Busby in New York. I'll have that store. 7 00:00:16,480 --> 00:00:19,400 Speaker 2: I'm pline Hege here in London, where we're watching upcoming 8 00:00:19,520 --> 00:00:22,439 Speaker 2: data for signs of the slow puncture in the UK's 9 00:00:22,440 --> 00:00:23,400 Speaker 2: housing markets. 10 00:00:23,520 --> 00:00:25,400 Speaker 3: I'm dek Krisner with a look at how the Bank 11 00:00:25,440 --> 00:00:29,040 Speaker 3: of Korea might respond to vibrancy in the South Korean economy. 12 00:00:29,080 --> 00:00:31,720 Speaker 4: I'm Kayleie Lyons in Washington, where Congress is set to 13 00:00:31,760 --> 00:00:35,120 Speaker 4: return from his holiday break with a long to do list. 14 00:00:35,479 --> 00:00:38,760 Speaker 5: That's all straight ahead on Bloomberg day Break Weekend, the 15 00:00:38,800 --> 00:00:41,360 Speaker 5: business news you need to wrap up your week in 16 00:00:41,560 --> 00:00:45,760 Speaker 5: just one fifteen minute podcast available on Apple, Spotify, The 17 00:00:45,760 --> 00:00:49,040 Speaker 5: Bloomberg Business Appen everywhere you get your podcasts. 18 00:00:50,560 --> 00:00:53,640 Speaker 1: Well, good day to you. I'm Tom Busby. We begin 19 00:00:53,680 --> 00:00:56,920 Speaker 1: today's program with a focus on the stock market as 20 00:00:56,960 --> 00:00:59,480 Speaker 1: we enter the last trading month of the year. After 21 00:00:59,520 --> 00:01:01,640 Speaker 1: a slump in twenty twenty two. This year has been 22 00:01:01,680 --> 00:01:05,680 Speaker 1: a good one for equity investors, particularly those in tech. 23 00:01:05,720 --> 00:01:08,039 Speaker 1: Now the Nasdaq has far outpaced both the S and 24 00:01:08,040 --> 00:01:10,800 Speaker 1: P five hundred and the Dow Jones Industrial Average. And 25 00:01:10,880 --> 00:01:14,319 Speaker 1: right now with inflation easing, a surprisingly strong corporate earning 26 00:01:14,360 --> 00:01:16,480 Speaker 1: season now wrapping up, and bets that the Fed is 27 00:01:16,520 --> 00:01:19,440 Speaker 1: done hiking rates, we've seen with just a few minor 28 00:01:19,520 --> 00:01:23,880 Speaker 1: hits a November rally, the big question can it continue well? 29 00:01:23,920 --> 00:01:26,920 Speaker 1: For that, we bring in Bloomberg Intelligence Chief Equity Strategist 30 00:01:27,000 --> 00:01:30,679 Speaker 1: Gina Martin Adams and her colleague Bloomberg Intelligence equity strategist 31 00:01:30,920 --> 00:01:33,240 Speaker 1: Michael Casper. Thank you both for being here. Gina, I'm 32 00:01:33,240 --> 00:01:35,240 Speaker 1: going to start with you, where do you see the 33 00:01:35,280 --> 00:01:37,880 Speaker 1: economy now and what do you anticipate we're going to 34 00:01:37,880 --> 00:01:39,639 Speaker 1: see in the markets in the weeks ahead. 35 00:01:39,840 --> 00:01:42,560 Speaker 6: Yeah. So, we actually have a really interesting model we 36 00:01:42,600 --> 00:01:45,400 Speaker 6: call our economic regime model, which gives us a sense 37 00:01:45,440 --> 00:01:50,560 Speaker 6: of where the economy is in real time. And unfortunately, 38 00:01:50,840 --> 00:01:55,040 Speaker 6: after the regime model was generally supportive of very strong 39 00:01:55,120 --> 00:01:58,040 Speaker 6: risk taking conditions in the broader equity markets throughout much 40 00:01:58,040 --> 00:02:02,040 Speaker 6: of twenty twenty three, it actually took another dip in October, 41 00:02:02,200 --> 00:02:04,560 Speaker 6: and if we take a step back, and we think 42 00:02:04,600 --> 00:02:07,600 Speaker 6: about what this regime model tells us. Back in twenty 43 00:02:07,680 --> 00:02:10,560 Speaker 6: twenty two, the regime model said that the economy was 44 00:02:10,800 --> 00:02:13,960 Speaker 6: very low probability still in recovery. In other words, the 45 00:02:14,000 --> 00:02:16,080 Speaker 6: economy may have already been in some form of a 46 00:02:16,120 --> 00:02:18,800 Speaker 6: recession in twenty twenty two, at least according to this model, 47 00:02:19,080 --> 00:02:22,640 Speaker 6: which of course coincided with terrible equity market returns. As 48 00:02:22,680 --> 00:02:24,960 Speaker 6: the economy was decelerating, we lost a lot of momentum 49 00:02:24,960 --> 00:02:27,359 Speaker 6: in the equity market as well. And then come into 50 00:02:27,440 --> 00:02:29,519 Speaker 6: twenty twenty three, and the model actually signaled that we 51 00:02:29,560 --> 00:02:32,880 Speaker 6: should get more optimistic. As of January of twenty twenty three, 52 00:02:33,120 --> 00:02:34,560 Speaker 6: it was saying, you know, it's not going to get 53 00:02:34,639 --> 00:02:36,640 Speaker 6: much worse here. Things are starting to get a little 54 00:02:36,639 --> 00:02:40,119 Speaker 6: bit better. Even though that getting better was somewhat short term. 55 00:02:40,120 --> 00:02:42,480 Speaker 6: In twenty twenty three, it did support the rally in stocks, 56 00:02:42,960 --> 00:02:45,720 Speaker 6: and now it's saying, hey, hold on a minute. Things 57 00:02:45,760 --> 00:02:48,639 Speaker 6: do appear to have slowed precipitously in the fourth quarter. 58 00:02:49,240 --> 00:02:52,320 Speaker 6: Even though the earnings recovery does appear to be underway, 59 00:02:52,440 --> 00:02:55,280 Speaker 6: there are certain segments of the earnings recovery that look 60 00:02:55,320 --> 00:02:58,680 Speaker 6: pretty vulnerable to a deceleration in the broader economy right now, 61 00:02:59,280 --> 00:03:01,520 Speaker 6: and that could be the risk going into twenty twenty 62 00:03:01,520 --> 00:03:04,800 Speaker 6: four is the groups that really did not correct in 63 00:03:04,840 --> 00:03:08,200 Speaker 6: that first dip in twenty twenty two may be set 64 00:03:08,200 --> 00:03:10,320 Speaker 6: to correct as we move into twenty twenty four. That 65 00:03:10,360 --> 00:03:13,639 Speaker 6: doesn't mean the whole market is necessarily vulnerable because we 66 00:03:13,720 --> 00:03:16,120 Speaker 6: went through twenty twenty two, but it does mean that 67 00:03:16,160 --> 00:03:18,320 Speaker 6: there are some vulnerabilities in the equity market and we 68 00:03:18,360 --> 00:03:20,560 Speaker 6: need to navigate those as we approach next year. 69 00:03:20,760 --> 00:03:23,320 Speaker 1: And are there specific segments you're referring to right now 70 00:03:23,400 --> 00:03:24,440 Speaker 1: about the Yeah. 71 00:03:24,200 --> 00:03:25,840 Speaker 6: I'll let Mike talk to that a lot because he 72 00:03:25,880 --> 00:03:29,320 Speaker 6: does run our sectors scorecard. But specifically the consumer sectors 73 00:03:29,320 --> 00:03:31,200 Speaker 6: look quite weak. If we think about what happened in 74 00:03:31,240 --> 00:03:33,520 Speaker 6: the fourth quarter earning season, sorry, the third quarter earning 75 00:03:33,560 --> 00:03:35,880 Speaker 6: season that just passed for the S and P five hundred, 76 00:03:36,600 --> 00:03:40,280 Speaker 6: really generally pretty strong earnings emerged X Energy the index 77 00:03:40,320 --> 00:03:43,160 Speaker 6: posted nearly ten percent earnings growth. When we look at 78 00:03:43,200 --> 00:03:45,000 Speaker 6: the whole S and P five hundred at large, it 79 00:03:45,040 --> 00:03:48,200 Speaker 6: looks like about four percent earnings growth. But we did 80 00:03:48,240 --> 00:03:50,920 Speaker 6: start to see some downward revision momentum. We started to 81 00:03:50,960 --> 00:03:54,880 Speaker 6: see some guidance in particular from those consumer companies and 82 00:03:55,160 --> 00:03:58,400 Speaker 6: consumer staples and discretionary do appear to be the worst sectors. 83 00:03:58,840 --> 00:04:01,320 Speaker 6: That said, there are some strong sectors, and I'll let 84 00:04:01,320 --> 00:04:04,280 Speaker 6: Mike speak to those, because there are opportunities in this environment. 85 00:04:04,320 --> 00:04:06,360 Speaker 1: What's a strength from you, Mike, let's hear it. Let's 86 00:04:06,360 --> 00:04:06,880 Speaker 1: hear it. 87 00:04:06,920 --> 00:04:09,840 Speaker 7: Certainly, Communications is the one at the top of the list, 88 00:04:09,880 --> 00:04:12,920 Speaker 7: right so, earnings have been strong in twenty twenty three, 89 00:04:12,960 --> 00:04:14,920 Speaker 7: They're expected to be strong in twenty twenty. 90 00:04:14,640 --> 00:04:15,280 Speaker 1: Four as well. 91 00:04:16,400 --> 00:04:18,520 Speaker 7: Tech is up there as well. We run a five 92 00:04:18,560 --> 00:04:21,440 Speaker 7: factor sector scorecard and those two are at the top 93 00:04:21,480 --> 00:04:24,400 Speaker 7: of the scorecard right now. It's joined by financials, which 94 00:04:24,400 --> 00:04:28,440 Speaker 7: is quite an interesting case if you believe consensus rate 95 00:04:28,480 --> 00:04:31,279 Speaker 7: expectations for twenty twenty four. There for a little bit 96 00:04:31,279 --> 00:04:34,040 Speaker 7: of yield curve steepening, which should be a good fundamental 97 00:04:34,080 --> 00:04:38,040 Speaker 7: driver for especially the banks within financials, and our model's 98 00:04:38,080 --> 00:04:41,440 Speaker 7: flaging financials as one of the top plays in the 99 00:04:41,520 --> 00:04:43,520 Speaker 7: S and P five hundred at least. Right now. On 100 00:04:43,560 --> 00:04:46,400 Speaker 7: the flip side, I'll talk about some of the weakness. Definitely, 101 00:04:46,440 --> 00:04:50,800 Speaker 7: the defensives. Utilities, real estate staples have been consistently towards 102 00:04:50,839 --> 00:04:52,280 Speaker 7: the bottom of our model in the s and P 103 00:04:52,400 --> 00:04:55,560 Speaker 7: five hundred, and they're staying there at least right now. 104 00:04:56,240 --> 00:04:59,120 Speaker 1: So let's go back to the weaknesses. Now, we discussed 105 00:04:59,400 --> 00:05:04,360 Speaker 1: the consumer, discretionary, consumer staples. So we're getting some mixed 106 00:05:04,480 --> 00:05:08,320 Speaker 1: signals on the consumer. They're pulling back, they're not pulling back. 107 00:05:08,320 --> 00:05:10,559 Speaker 1: They're spending well, gas is cheaper, so people are spending 108 00:05:10,600 --> 00:05:13,200 Speaker 1: money elsewhere. Where do you see the consumer right now? 109 00:05:13,200 --> 00:05:16,120 Speaker 1: And we are going, I mean Thanksgivings over, we are 110 00:05:16,120 --> 00:05:19,039 Speaker 1: in the heart of the shopping season. Now where do 111 00:05:19,080 --> 00:05:19,960 Speaker 1: you see the consumer? 112 00:05:20,279 --> 00:05:20,640 Speaker 8: Yeah? 113 00:05:20,720 --> 00:05:24,160 Speaker 6: So, unfortunately, I think sentiment tells you a lot about 114 00:05:24,160 --> 00:05:26,039 Speaker 6: what you need to know about the US consumer. And 115 00:05:26,120 --> 00:05:29,719 Speaker 6: sentiment has been deteriorating very rapidly over the last couple 116 00:05:29,720 --> 00:05:33,080 Speaker 6: of months after it recovered a little bit in early 117 00:05:33,120 --> 00:05:35,960 Speaker 6: twenty twenty three. And the biggest conundrum with respect to 118 00:05:36,040 --> 00:05:40,440 Speaker 6: sentiment is this occurred without an increasing gas prices. Normally, 119 00:05:40,480 --> 00:05:44,120 Speaker 6: the consumer is pretty predictable. When they see gas prices accelerating, 120 00:05:44,120 --> 00:05:45,720 Speaker 6: they get a little bit, you know, they get a 121 00:05:45,720 --> 00:05:47,919 Speaker 6: little bit bummed out. They don't feel great, They have 122 00:05:47,960 --> 00:05:50,440 Speaker 6: to spend more at the pump, and so they spend 123 00:05:50,520 --> 00:05:54,040 Speaker 6: less elsewhere, and that definitely happened in parts of twenty 124 00:05:54,080 --> 00:05:57,760 Speaker 6: twenty two. But we've seen gas prices actually correcting for 125 00:05:57,800 --> 00:06:00,480 Speaker 6: the last several weeks. Gas prices moving lower has not 126 00:06:00,640 --> 00:06:03,000 Speaker 6: enabled to bump in consumer sentiments. So the consumer's a 127 00:06:03,000 --> 00:06:03,880 Speaker 6: little bit bummed out. 128 00:06:04,360 --> 00:06:04,680 Speaker 4: I think. 129 00:06:04,720 --> 00:06:07,919 Speaker 6: At the same time, we are seeing some minor job 130 00:06:07,960 --> 00:06:11,400 Speaker 6: losses emerge or some weaknesses emerge in the broader job market, 131 00:06:11,800 --> 00:06:14,760 Speaker 6: and that is filtering through to consumer confidence. Consumers are 132 00:06:14,760 --> 00:06:16,760 Speaker 6: feeling just a little bit less confident than they have 133 00:06:16,839 --> 00:06:19,920 Speaker 6: been in the last couple of years. It doesn't necessarily 134 00:06:19,960 --> 00:06:22,080 Speaker 6: mean the consumer has to crash And I think that 135 00:06:22,120 --> 00:06:24,479 Speaker 6: this is one thing that's really important to consider is 136 00:06:25,320 --> 00:06:28,320 Speaker 6: we all think of two thousand and nine as the 137 00:06:28,360 --> 00:06:31,160 Speaker 6: representative example, or two thousand and eight as the representative 138 00:06:31,200 --> 00:06:34,400 Speaker 6: example of what to expect from the consumer, and that 139 00:06:34,680 --> 00:06:37,360 Speaker 6: was one of the single worst recessions for the US 140 00:06:37,400 --> 00:06:41,200 Speaker 6: consumer in US history. So that's not necessarily the outlook. 141 00:06:41,240 --> 00:06:43,480 Speaker 6: Just because the consumer is feeling bummed out doesn't mean 142 00:06:43,920 --> 00:06:45,960 Speaker 6: that their spending has to go through the floor and 143 00:06:46,000 --> 00:06:48,320 Speaker 6: they crash out and they don't spend a dime. 144 00:06:48,440 --> 00:06:50,240 Speaker 1: Yeah, that's a tough comparison, it's. 145 00:06:50,120 --> 00:06:53,920 Speaker 6: A really tough comparison. Instead, they may just incrementally pull 146 00:06:54,080 --> 00:06:55,839 Speaker 6: back a little bit as they get a little bit 147 00:06:55,920 --> 00:07:00,240 Speaker 6: more cautious with respect to their outlays. Nonetheless, that can 148 00:07:00,320 --> 00:07:05,159 Speaker 6: have material impacts on sectors where earnings are somewhat sensitive 149 00:07:05,200 --> 00:07:07,279 Speaker 6: to what's happening with that overall growth out look. 150 00:07:07,440 --> 00:07:10,760 Speaker 1: Yeah, the job market has consistently good, but we have 151 00:07:10,880 --> 00:07:14,640 Speaker 1: seen some cracks. We've seen continuing claims rise. That means 152 00:07:14,760 --> 00:07:17,320 Speaker 1: long term unemployed are having a little trouble right now. 153 00:07:17,400 --> 00:07:21,720 Speaker 1: And I think that is where we're seeing the consumer 154 00:07:21,760 --> 00:07:23,880 Speaker 1: pull back, the people who say, hey, I don't know 155 00:07:23,880 --> 00:07:25,520 Speaker 1: what's going to happen in a month or a year. 156 00:07:25,640 --> 00:07:25,920 Speaker 2: Yeah. 157 00:07:25,960 --> 00:07:28,520 Speaker 6: And if you think about how that though impacts profits, 158 00:07:28,560 --> 00:07:30,160 Speaker 6: and this is something that MI can I do a 159 00:07:30,200 --> 00:07:33,280 Speaker 6: lot is really just analyze what's happening and inside the 160 00:07:33,320 --> 00:07:35,240 Speaker 6: profit stream for the S and P five hundred as 161 00:07:35,240 --> 00:07:37,760 Speaker 6: well as the Rustle two thousand, because profits are what 162 00:07:37,840 --> 00:07:40,760 Speaker 6: drives stock prices. The economy doesn't necessarily drive stock prices, 163 00:07:40,800 --> 00:07:43,800 Speaker 6: it's profits that do. Right, And if the consumer is 164 00:07:43,840 --> 00:07:47,560 Speaker 6: reacting because many businesses are pulling back on their investment 165 00:07:47,600 --> 00:07:51,320 Speaker 6: in employment, that actually impacts the earning stream in different 166 00:07:51,360 --> 00:07:54,120 Speaker 6: ways than I think many people think, because if we're 167 00:07:54,120 --> 00:07:58,160 Speaker 6: seeing job losses emerge, which we did and in little 168 00:07:58,200 --> 00:08:00,000 Speaker 6: bits and pieces over the course of the last day 169 00:08:00,040 --> 00:08:02,600 Speaker 6: teen months, but nonetheless we did see job losses emerge. 170 00:08:03,120 --> 00:08:05,320 Speaker 6: If we see those job losses emerge, that means companies 171 00:08:05,320 --> 00:08:08,560 Speaker 6: are spending less, which means their margins can improve, which 172 00:08:08,560 --> 00:08:11,920 Speaker 6: means they actually can have earnings growth. This is what 173 00:08:12,000 --> 00:08:14,640 Speaker 6: took a lot of folks by surprise throughout twenty twenty three, 174 00:08:14,720 --> 00:08:17,680 Speaker 6: is the earnings environment actually improved quite materially. Even though 175 00:08:17,680 --> 00:08:21,480 Speaker 6: the economy was generally decelerating for much of this year, 176 00:08:22,080 --> 00:08:25,880 Speaker 6: we did see profit growth emerge in the second half 177 00:08:25,920 --> 00:08:28,840 Speaker 6: of this year. That's not because revenue growth got stronger. 178 00:08:29,000 --> 00:08:31,040 Speaker 6: It's because companies were cutting costs. 179 00:08:31,640 --> 00:08:34,560 Speaker 1: And we've seen that in information technology, Mike, You've seen 180 00:08:34,600 --> 00:08:37,559 Speaker 1: some saying, well, maybe not going to you know, buy 181 00:08:37,600 --> 00:08:40,600 Speaker 1: a whole new system of computers and mainframes. Have you 182 00:08:40,640 --> 00:08:42,040 Speaker 1: seen Yeah, certainly. 183 00:08:42,320 --> 00:08:45,240 Speaker 7: I think tech companies margin has been a driver for 184 00:08:45,520 --> 00:08:48,920 Speaker 7: long term tech gains, especially last cycle, and I think 185 00:08:48,920 --> 00:08:51,319 Speaker 7: that's really where they're focused. They can't really control what's 186 00:08:51,360 --> 00:08:54,440 Speaker 7: going on in revenues. That's more economically sensitive, so everybody's 187 00:08:54,480 --> 00:08:56,200 Speaker 7: going to focus on the margin line and how they 188 00:08:56,200 --> 00:08:58,680 Speaker 7: can improve their business. And I'll just add that the 189 00:08:58,720 --> 00:09:02,120 Speaker 7: trends that Genus pointing out are also evident in small caps, right, 190 00:09:02,200 --> 00:09:06,280 Speaker 7: So small cap net income margins are actually starting to improve. 191 00:09:06,320 --> 00:09:09,000 Speaker 7: They hit a bottom a few quarters ago and they're 192 00:09:09,000 --> 00:09:12,240 Speaker 7: starting to move upward, and that's causing some earnings growth 193 00:09:12,280 --> 00:09:14,800 Speaker 7: in the Russell two thousand when it's been pretty much 194 00:09:14,800 --> 00:09:18,120 Speaker 7: a dearth for over a year. So an interesting trend 195 00:09:18,160 --> 00:09:18,800 Speaker 7: of merging there. 196 00:09:19,559 --> 00:09:22,120 Speaker 1: Well, as we start to wrap up, we talked about 197 00:09:22,120 --> 00:09:25,040 Speaker 1: some sectors that have been in real trouble. Let's go 198 00:09:25,080 --> 00:09:27,640 Speaker 1: back to the ones that are doing really well. AI 199 00:09:27,640 --> 00:09:31,240 Speaker 1: fueled information technology sector is doing really well. You spoke 200 00:09:31,280 --> 00:09:34,520 Speaker 1: of a few others. What can investors look forward to 201 00:09:34,960 --> 00:09:36,040 Speaker 1: in the final month of the year. 202 00:09:36,320 --> 00:09:38,280 Speaker 7: Yeah, so the final month of the year. I want 203 00:09:38,280 --> 00:09:40,920 Speaker 7: to point out though, the valuations on tech. We keep 204 00:09:41,040 --> 00:09:44,920 Speaker 7: talking about tech. Tech valuations are the only it's the 205 00:09:44,920 --> 00:09:47,439 Speaker 7: only sector trading above its pre pandemic norm pretty much 206 00:09:47,720 --> 00:09:49,560 Speaker 7: by a wide margin. If you look at everything else 207 00:09:49,559 --> 00:09:51,640 Speaker 7: in the S and P five hundred, it's cheap to 208 00:09:51,679 --> 00:09:54,200 Speaker 7: that pre pandemic five year average. So there's a bit 209 00:09:54,240 --> 00:09:57,079 Speaker 7: of a dichotomy there in the S and P five hundred, 210 00:09:57,080 --> 00:09:59,040 Speaker 7: and I'm really watching that going into the end of 211 00:09:59,080 --> 00:10:01,679 Speaker 7: the year. I mentioned the communitycation stocks before having strong 212 00:10:01,679 --> 00:10:05,080 Speaker 7: earnings growth. Communications actually is the cheapest sector in the 213 00:10:05,160 --> 00:10:06,880 Speaker 7: S and P five hundred right now if you look 214 00:10:06,920 --> 00:10:11,679 Speaker 7: at their megacaps, Alphabet, Matta, Disney, Netflix, all cheap to 215 00:10:11,720 --> 00:10:14,080 Speaker 7: their pre pandemic five year averages, which is in stark 216 00:10:14,120 --> 00:10:16,760 Speaker 7: contrast to everything else that's going on in tech, with Apple, 217 00:10:16,880 --> 00:10:21,280 Speaker 7: Microsoft and Nvidia trading well above those averages. So that's 218 00:10:21,320 --> 00:10:22,360 Speaker 7: what I'm watching the end of the year. 219 00:10:22,400 --> 00:10:24,160 Speaker 1: Well, it's a lot to look forward to. And our 220 00:10:24,160 --> 00:10:28,040 Speaker 1: thanks to Bloomberg Intelligence Chief Equity Strategist Gina Martin Adams 221 00:10:28,360 --> 00:10:31,920 Speaker 1: and our colleague Bloomberg Intelligence Equity strategist Michael Casper. Thank 222 00:10:31,960 --> 00:10:32,840 Speaker 1: you both for being here. 223 00:10:32,920 --> 00:10:34,240 Speaker 6: Thank you very much for having us. 224 00:10:34,280 --> 00:10:34,600 Speaker 9: Thank you. 225 00:10:34,760 --> 00:10:37,360 Speaker 1: Coming up on Bloomberg day Break Weekend will take you 226 00:10:37,400 --> 00:10:39,959 Speaker 1: to Europe to see how the mortgage and real estate 227 00:10:40,000 --> 00:10:43,240 Speaker 1: markets in Britain are holding up. I'm Tom Busby and 228 00:10:43,320 --> 00:10:56,480 Speaker 1: this is Bloomberg. This is Bloomberg day Break Weekend, our 229 00:10:56,520 --> 00:10:59,080 Speaker 1: global look ahead at the top stories for investors in 230 00:10:59,120 --> 00:11:01,800 Speaker 1: the coming week. I'm Tom Busby in New York. Up 231 00:11:01,840 --> 00:11:05,079 Speaker 1: later in our program, as Congress returns from their holiday break, 232 00:11:05,120 --> 00:11:08,000 Speaker 1: we preview the upcoming budget battles for the house in 233 00:11:08,080 --> 00:11:11,960 Speaker 1: the new year. But first, in the UK, inflation is slowing, 234 00:11:12,040 --> 00:11:14,920 Speaker 1: but the Bank of England is warning against any expectations 235 00:11:15,120 --> 00:11:18,800 Speaker 1: of an interest rate cut. Cold comfort for suffering homeowners 236 00:11:19,000 --> 00:11:23,040 Speaker 1: following fourteen rate hikes by the Central Bank. There. Fresh 237 00:11:23,120 --> 00:11:24,640 Speaker 1: data in the coming days will tell us how the 238 00:11:24,679 --> 00:11:26,960 Speaker 1: mortgage and real estate markets in Britain are holding up. 239 00:11:26,960 --> 00:11:29,319 Speaker 1: And for more, let's go to London and bring in 240 00:11:29,360 --> 00:11:32,560 Speaker 1: Bloomberg Daybreak europe Banker Caroline Hepgar Tom. 241 00:11:32,640 --> 00:11:35,199 Speaker 2: Economists say that the UK housing market is in the 242 00:11:35,240 --> 00:11:38,160 Speaker 2: middle of a slow puncture, so we're watching the upcoming 243 00:11:38,280 --> 00:11:42,600 Speaker 2: data on mortgage lending and house prices carefully. Figures last 244 00:11:42,640 --> 00:11:46,840 Speaker 2: month from Halifax and nationwide showed a slight uptick in prices, 245 00:11:46,920 --> 00:11:50,040 Speaker 2: but also a major slow down in the number of sales. Economists, 246 00:11:50,080 --> 00:11:53,440 Speaker 2: including our own nirvaj Sha, warned that prices still have 247 00:11:53,640 --> 00:11:56,320 Speaker 2: further to fall. Joining me now to discuss is our 248 00:11:56,400 --> 00:11:59,880 Speaker 2: economics report Lucy White and our European real Estate reported 249 00:12:00,080 --> 00:12:02,600 Speaker 2: Damien Shepherd, you can tell us all about how the 250 00:12:02,640 --> 00:12:05,599 Speaker 2: housing market is actually holding up. Damien, can you just 251 00:12:05,679 --> 00:12:08,760 Speaker 2: talk us through where the UK housing market is at 252 00:12:08,800 --> 00:12:12,480 Speaker 2: the moment. It's sort of quite difficult to discern that sometimes. 253 00:12:12,160 --> 00:12:12,760 Speaker 1: Yeah, exactly. 254 00:12:12,840 --> 00:12:15,160 Speaker 9: I think the main two things that people have their 255 00:12:15,200 --> 00:12:17,440 Speaker 9: iron at the moment is where a house price is 256 00:12:17,440 --> 00:12:20,160 Speaker 9: at and where a mortgage rate's at. In terms of 257 00:12:20,200 --> 00:12:24,520 Speaker 9: the latter, mortgage rates are extremely high but steadily declining, 258 00:12:24,640 --> 00:12:27,240 Speaker 9: And in terms of house prices, again we're seeing some 259 00:12:27,280 --> 00:12:30,880 Speaker 9: steady declines, but not necessarily the doomsday predictions that we 260 00:12:30,960 --> 00:12:33,560 Speaker 9: had at the back end of twenty twenty two. So 261 00:12:33,559 --> 00:12:36,160 Speaker 9: there's some housing data coming out next week which should 262 00:12:36,160 --> 00:12:38,360 Speaker 9: point us perhaps more in the direction as to where 263 00:12:38,360 --> 00:12:41,640 Speaker 9: we're going. But we're in a period where buyers are 264 00:12:42,360 --> 00:12:45,320 Speaker 9: looking at the market and thinking I'm priced out a 265 00:12:45,320 --> 00:12:47,400 Speaker 9: lot of them are anyway, And at the same time, 266 00:12:47,480 --> 00:12:50,320 Speaker 9: sellers will have a lot of nerves about where the 267 00:12:50,400 --> 00:12:52,360 Speaker 9: value of their properties going. So in a bit of 268 00:12:52,400 --> 00:12:55,360 Speaker 9: a strange period as we enter the winter, do. 269 00:12:55,280 --> 00:12:58,679 Speaker 2: You expect the house prices to continue falling then? And 270 00:12:58,720 --> 00:13:02,120 Speaker 2: sort of how severe? Because who's as I mentioned Niral 271 00:13:02,200 --> 00:13:04,480 Speaker 2: Shah saying is actually a slow puncture. A lot of 272 00:13:04,480 --> 00:13:08,520 Speaker 2: people had really thought, had not you know, completely discounted 273 00:13:08,520 --> 00:13:10,320 Speaker 2: the idea for crash, But we don't seem to be 274 00:13:10,360 --> 00:13:13,840 Speaker 2: in that position now. How far how fast do you 275 00:13:13,840 --> 00:13:15,280 Speaker 2: think prices are falling? 276 00:13:15,840 --> 00:13:18,360 Speaker 9: I think slow puncture is a really great definition for 277 00:13:18,400 --> 00:13:23,000 Speaker 9: what's happening. I think we're in a period where the 278 00:13:23,040 --> 00:13:25,439 Speaker 9: buyers are looking at the headlines and thinking I should 279 00:13:25,440 --> 00:13:27,640 Speaker 9: be getting a discount if I'm buying a property now, 280 00:13:27,880 --> 00:13:30,520 Speaker 9: And at the same time, you've got sellers who you know, 281 00:13:30,640 --> 00:13:33,800 Speaker 9: aren't willing to come to terms with the fact that 282 00:13:33,880 --> 00:13:36,760 Speaker 9: their house price is probably not worth what it was, 283 00:13:37,640 --> 00:13:41,120 Speaker 9: you know, eighteen months ago. So I think once those 284 00:13:41,480 --> 00:13:45,280 Speaker 9: you know, two things come together and buyers and sellers 285 00:13:45,320 --> 00:13:48,360 Speaker 9: start to see more eye to eye, then we'll start 286 00:13:48,400 --> 00:13:50,240 Speaker 9: to see those house prices accelerate more. 287 00:13:51,080 --> 00:13:53,320 Speaker 2: Lucy White want to bring you in on this point. 288 00:13:53,400 --> 00:13:57,000 Speaker 2: Then the relationship between the housing data that we get 289 00:13:57,000 --> 00:14:01,160 Speaker 2: and the UK's overall economic position, I mean, the housing 290 00:14:01,280 --> 00:14:04,160 Speaker 2: market is is a fundamental bedrock of the economy. 291 00:14:04,679 --> 00:14:07,400 Speaker 10: Absolutely. I think this is one of the tensions that's 292 00:14:07,440 --> 00:14:10,440 Speaker 10: really holding back any further force in prices at the 293 00:14:10,440 --> 00:14:12,600 Speaker 10: moment is that actually, you know, we've had a lot 294 00:14:12,640 --> 00:14:14,840 Speaker 10: of talk about a recession, but we haven't necessarily seen 295 00:14:14,880 --> 00:14:18,080 Speaker 10: that yet, and in some ways the economy has held 296 00:14:18,160 --> 00:14:20,360 Speaker 10: up a lot better than we might have expected in 297 00:14:20,400 --> 00:14:24,200 Speaker 10: the aftermath of the pandemic. So what's actually holding back 298 00:14:24,240 --> 00:14:26,080 Speaker 10: any further declines at the moment is the fact that 299 00:14:26,080 --> 00:14:29,320 Speaker 10: we're not really seeing huge losses in the labor market. 300 00:14:29,320 --> 00:14:33,440 Speaker 10: You know, we're not seeing huge rises in unemployment. And 301 00:14:33,560 --> 00:14:36,520 Speaker 10: while there's no force selling, there's a real constraint on 302 00:14:36,600 --> 00:14:39,000 Speaker 10: supply at the moment, so you know, people aren't being 303 00:14:39,040 --> 00:14:41,400 Speaker 10: forced to sell their homes, so you know, there's nothing 304 00:14:41,440 --> 00:14:44,800 Speaker 10: really pushing the house prices down. At the same time, 305 00:14:44,920 --> 00:14:47,400 Speaker 10: you know, we've got buyers, as you say, constrained by 306 00:14:47,960 --> 00:14:52,080 Speaker 10: you know, very high mortgage prices. So I think, you know, 307 00:14:52,160 --> 00:14:55,480 Speaker 10: as long as the Bank of England base rate remains 308 00:14:55,520 --> 00:14:57,240 Speaker 10: where it is at the moment, you know, we're not 309 00:14:57,280 --> 00:15:01,240 Speaker 10: going to see mortgage rates hugely come down. A lot 310 00:15:01,280 --> 00:15:03,160 Speaker 10: of economists I'm just talking to you are saying that 311 00:15:03,200 --> 00:15:05,720 Speaker 10: we're not going to really see any any huge change 312 00:15:05,720 --> 00:15:08,040 Speaker 10: in the mortgage rates until the Bank of England starts 313 00:15:08,280 --> 00:15:10,520 Speaker 10: cutting its rate. Whether that is you know, as the 314 00:15:10,560 --> 00:15:13,120 Speaker 10: market's expecting sometime next year or you know, the Bank 315 00:15:13,120 --> 00:15:14,760 Speaker 10: of England is pushing back on that a little bit 316 00:15:14,800 --> 00:15:16,760 Speaker 10: and saying, you know, it's going to be later and 317 00:15:16,800 --> 00:15:17,560 Speaker 10: remains to be seen. 318 00:15:18,040 --> 00:15:22,480 Speaker 2: And also of course the impact that people remortgaging has 319 00:15:22,520 --> 00:15:24,920 Speaker 2: on consumer spending. I mean, you've got something like one 320 00:15:24,960 --> 00:15:28,800 Speaker 2: point six million people who are still about to face 321 00:15:28,840 --> 00:15:31,000 Speaker 2: a kind of a repricing in their mortgage, will have 322 00:15:31,040 --> 00:15:33,440 Speaker 2: to re mortgage their homes. That could be a very 323 00:15:33,480 --> 00:15:36,920 Speaker 2: significant effect that has yet to hit the economy. 324 00:15:36,520 --> 00:15:39,200 Speaker 10: Absolutely, yeah. And whether we see you know, kind of 325 00:15:39,200 --> 00:15:43,240 Speaker 10: people deciding to downgrade into smaller properties as that happens, 326 00:15:43,840 --> 00:15:45,640 Speaker 10: it's still kind of up in the air at the moment. 327 00:15:45,960 --> 00:15:48,440 Speaker 10: But you know, as we say, as you say, the 328 00:15:48,480 --> 00:15:52,200 Speaker 10: Bank of England is thinking that around half of its 329 00:15:52,240 --> 00:15:55,160 Speaker 10: monetary tightening, you know, those rate hikes that have happened 330 00:15:55,160 --> 00:15:58,040 Speaker 10: since December twenty twenty one, about half the effect of 331 00:15:58,080 --> 00:16:00,720 Speaker 10: that has been felt in the economy me so far. 332 00:16:01,520 --> 00:16:03,960 Speaker 10: And partly that is because you know, we've got a 333 00:16:03,960 --> 00:16:07,280 Speaker 10: lot more people now on fixed rate mortgages than we 334 00:16:07,360 --> 00:16:10,080 Speaker 10: did have in the past, and they're not really feeling 335 00:16:10,120 --> 00:16:13,840 Speaker 10: the effect of those base rate hikes until their fixed 336 00:16:13,920 --> 00:16:16,000 Speaker 10: term comes to an end, and as you say, several 337 00:16:16,000 --> 00:16:18,120 Speaker 10: of those are going to be next year, and that's 338 00:16:18,120 --> 00:16:20,360 Speaker 10: when a lot of people really might start feeling the pain. 339 00:16:20,880 --> 00:16:25,200 Speaker 2: Lucy, I wonder whether you were struck by you know, 340 00:16:25,240 --> 00:16:28,280 Speaker 2: you're talking about young people, Damien, that the recent surveys 341 00:16:28,320 --> 00:16:30,720 Speaker 2: around the number of young people you know who, especially 342 00:16:30,760 --> 00:16:33,080 Speaker 2: those who are renting, who are leaving London and the 343 00:16:33,120 --> 00:16:38,840 Speaker 2: Southeast because of affordability issues. I mean, the effect again 344 00:16:38,920 --> 00:16:44,240 Speaker 2: on the UK economy is very significant in terms of 345 00:16:44,440 --> 00:16:48,800 Speaker 2: you know, the property bonanza sort of helps fuel the 346 00:16:48,800 --> 00:16:51,360 Speaker 2: wealth of many millions of people, but it has been 347 00:16:51,720 --> 00:16:56,520 Speaker 2: really quite destructive to opportunities for others, especially perhaps younger people. 348 00:16:56,600 --> 00:16:58,640 Speaker 10: Absolutely, yeah, and you know, we're seeing a lot of 349 00:16:59,240 --> 00:17:01,560 Speaker 10: data at the moment saying that you know, if you 350 00:17:01,640 --> 00:17:04,840 Speaker 10: can afford to buy a house, it's better than renting. 351 00:17:04,880 --> 00:17:09,280 Speaker 10: You know, it's more cost effective than renting, and that's 352 00:17:09,320 --> 00:17:11,600 Speaker 10: just not really an option for so many young people, 353 00:17:11,600 --> 00:17:13,840 Speaker 10: as Damien was saying, because supply is so constrained in 354 00:17:13,880 --> 00:17:15,960 Speaker 10: those hot spots like London. And as you say, we 355 00:17:16,000 --> 00:17:18,040 Speaker 10: are seeing more and more evidence that younger people are 356 00:17:18,040 --> 00:17:21,440 Speaker 10: starting to move out of the capital to find opportunities elsewhere. Anecdotally, 357 00:17:21,480 --> 00:17:25,280 Speaker 10: I've been hearing from several businesses who are kind of saying, 358 00:17:25,280 --> 00:17:29,240 Speaker 10: we're really struggling to recruit some of those younger graduate 359 00:17:29,880 --> 00:17:33,639 Speaker 10: jobs because people just can't afford to live here anymore. 360 00:17:33,680 --> 00:17:36,000 Speaker 10: You know, they're going to Manchester or Birmingham or Liverpool, 361 00:17:36,560 --> 00:17:38,720 Speaker 10: and that's going to be a real problem, I think, 362 00:17:38,800 --> 00:17:43,199 Speaker 10: especially as businesses try and you know, find people at 363 00:17:43,200 --> 00:17:44,880 Speaker 10: that at that lower end of the scale. And it's 364 00:17:44,880 --> 00:17:46,280 Speaker 10: worth saying as well that this is going to be 365 00:17:46,520 --> 00:17:49,320 Speaker 10: a double edged sword for rishie Zunak ahead of an 366 00:17:49,359 --> 00:17:52,800 Speaker 10: election next year because on the one hand, you know, 367 00:17:52,920 --> 00:17:55,920 Speaker 10: his traditional voter base tend to be older people who 368 00:17:56,200 --> 00:17:58,200 Speaker 10: don't want to see a fall in house prices. You know, 369 00:17:58,240 --> 00:18:01,040 Speaker 10: they're sitting on properties that they've and they're very happy 370 00:18:01,080 --> 00:18:03,320 Speaker 10: with the way things are going. But at the same time, 371 00:18:03,760 --> 00:18:06,920 Speaker 10: the millennial generation is the first generation that isn't growing 372 00:18:06,960 --> 00:18:10,119 Speaker 10: more conservative as it gets older, possibly because of you know, 373 00:18:10,160 --> 00:18:13,439 Speaker 10: issues like house prices, and that's going to be a 374 00:18:13,480 --> 00:18:16,399 Speaker 10: real challenge for the Conservative Party as it needs to 375 00:18:16,800 --> 00:18:21,200 Speaker 10: you know, retain popularity among some of those age groups in. 376 00:18:21,240 --> 00:18:24,440 Speaker 2: Terms of higher for longer then There's another argument though, 377 00:18:24,480 --> 00:18:26,800 Speaker 2: in terms of the Bank of England keeping interest rates 378 00:18:26,800 --> 00:18:29,360 Speaker 2: you know, perhaps higher for longer, which is still the 379 00:18:29,359 --> 00:18:33,280 Speaker 2: theme that officials are talking about, that actually that can 380 00:18:33,359 --> 00:18:36,800 Speaker 2: be absorbed, that the period of time over which will happen, 381 00:18:37,000 --> 00:18:39,359 Speaker 2: that it's a normalization of interest rates, and that that 382 00:18:39,400 --> 00:18:43,439 Speaker 2: can be absorbed that sort of strategy. How do we 383 00:18:43,480 --> 00:18:45,720 Speaker 2: think about higher for longer From the Bank of England. 384 00:18:46,160 --> 00:18:48,320 Speaker 10: I think it's something that they're really pushing on at 385 00:18:48,320 --> 00:18:50,200 Speaker 10: the moment because they need to make sure that those 386 00:18:50,200 --> 00:18:54,760 Speaker 10: inflation expectations among you know, people in the economy are anchored. 387 00:18:54,800 --> 00:18:56,040 Speaker 10: You know, they don't want to end up in a 388 00:18:56,080 --> 00:18:59,480 Speaker 10: situation like we were getting towards, you know, earlier this year, 389 00:18:59,520 --> 00:19:02,560 Speaker 10: perhaps where people are thinking, oh, you know, inflation has 390 00:19:02,560 --> 00:19:05,800 Speaker 10: been so high for so long that I don't believe 391 00:19:05,840 --> 00:19:07,440 Speaker 10: it's going to come back down to two percent, which 392 00:19:07,480 --> 00:19:10,280 Speaker 10: is where it's supposed to be, and for that reason 393 00:19:10,320 --> 00:19:14,240 Speaker 10: they start bargaining up their wages again, inflation ends up 394 00:19:14,280 --> 00:19:17,600 Speaker 10: in a sort of self sustaining doom loop essentially, So 395 00:19:17,640 --> 00:19:19,359 Speaker 10: the Bank of England really is kind of trying to 396 00:19:19,400 --> 00:19:22,080 Speaker 10: hammer home that message that we will stay high for 397 00:19:22,119 --> 00:19:23,160 Speaker 10: as long as we need to. 398 00:19:23,480 --> 00:19:26,479 Speaker 2: Thank you to Bloomberg Economics reporter Lucy White and our 399 00:19:26,520 --> 00:19:29,200 Speaker 2: European real estate report at Damien Shepherd. Really great to 400 00:19:29,240 --> 00:19:31,680 Speaker 2: have you on Bloomberg Radio. I'm Caroline Hepgar here in London. 401 00:19:31,720 --> 00:19:34,520 Speaker 2: You can catch us every weekday morning for Bloomberg Daybreak. 402 00:19:34,560 --> 00:19:37,120 Speaker 2: You're at beginning at six am in London. That's one 403 00:19:37,119 --> 00:19:38,240 Speaker 2: am on Wall Street. 404 00:19:38,280 --> 00:19:41,560 Speaker 1: Tom our thanks to Bloomberg day Break Europe Banker Caroline 405 00:19:41,600 --> 00:19:44,520 Speaker 1: Hepgar and coming up on Bloomberg day Break weekend. It's 406 00:19:44,560 --> 00:19:47,359 Speaker 1: a big week ahead in South Korea. We'll get a 407 00:19:47,359 --> 00:19:50,680 Speaker 1: preview of what we can expect. I'm Tom Busby and 408 00:19:50,760 --> 00:20:03,800 Speaker 1: this is Bloomberg. This is Bloomberg day Break Weekend, our 409 00:20:03,800 --> 00:20:06,159 Speaker 1: global look ahead at the top stories for investors in 410 00:20:06,200 --> 00:20:09,560 Speaker 1: the coming week. I'm Tom Busby in New York. Will 411 00:20:09,600 --> 00:20:12,680 Speaker 1: the Bank of Korea keep the door open for another 412 00:20:12,880 --> 00:20:16,000 Speaker 1: possible rate hike from the current three point five percent? 413 00:20:16,640 --> 00:20:18,879 Speaker 1: Or will it keep its restrictive policy in place for 414 00:20:19,000 --> 00:20:22,280 Speaker 1: longer after prices rose more than expected last month? For more, 415 00:20:22,720 --> 00:20:25,840 Speaker 1: let's get to Bloomberg Daybreak Asia co host Doug Krisner. 416 00:20:25,960 --> 00:20:29,679 Speaker 3: Tom, there are several positives for South Korea exports are recovering, 417 00:20:30,040 --> 00:20:32,680 Speaker 3: the labor market has been resilient, and the economy is 418 00:20:32,680 --> 00:20:37,280 Speaker 3: still expanding. Now the glaring negative. South Korea's household debt 419 00:20:37,440 --> 00:20:40,400 Speaker 3: increased last quarter to a record. We want to take 420 00:20:40,440 --> 00:20:43,240 Speaker 3: a closer look now with Bloomberg's Paul Jackson, who covers 421 00:20:43,320 --> 00:20:46,560 Speaker 3: the economies of South Korea and Japan. He joins us 422 00:20:46,560 --> 00:20:49,119 Speaker 3: from our studios in Tokyo. Paul, it's always a pleasure. 423 00:20:49,280 --> 00:20:52,399 Speaker 3: So South Korea has avoided recession. We know that the 424 00:20:52,440 --> 00:20:54,600 Speaker 3: Bank of Korea was one of the first global central 425 00:20:54,600 --> 00:20:56,920 Speaker 3: banks to hike rates. I think there was a total 426 00:20:56,960 --> 00:21:00,280 Speaker 3: of about three hundred basis points and tightening between August 427 00:21:00,280 --> 00:21:04,119 Speaker 3: twenty one and January twenty three. Now, since January, the 428 00:21:04,160 --> 00:21:07,320 Speaker 3: BOK has kept that key rate restrictive and it's done 429 00:21:07,320 --> 00:21:10,360 Speaker 3: so for five consecutive meetings. So we have a policy 430 00:21:10,400 --> 00:21:12,919 Speaker 3: meeting in the coming week. I mentioned the fact that 431 00:21:12,920 --> 00:21:17,320 Speaker 3: household dead is elevated. It seems like tighter credit conditions 432 00:21:17,440 --> 00:21:19,760 Speaker 3: are warranted. So what's next for the BOKA. 433 00:21:20,160 --> 00:21:23,639 Speaker 11: Well, I think they're going to keep with this hawkish 434 00:21:23,720 --> 00:21:26,480 Speaker 11: hold stance. It makes a lot of sense for them. 435 00:21:27,000 --> 00:21:30,639 Speaker 11: They kind of threaten to go higher. They talk about 436 00:21:30,720 --> 00:21:34,840 Speaker 11: taking rates higher if needed, but really I think we've 437 00:21:34,840 --> 00:21:39,040 Speaker 11: got into a situation where it's about keeping the rate 438 00:21:39,160 --> 00:21:42,240 Speaker 11: where it is at three point five percent, which is 439 00:21:42,520 --> 00:21:45,399 Speaker 11: the highest it's been since two thousand and eight. So 440 00:21:45,480 --> 00:21:48,760 Speaker 11: it is pretty restrictive, and it's a case of keeping 441 00:21:48,800 --> 00:21:53,600 Speaker 11: this in place for longer rather than going higher. And 442 00:21:53,760 --> 00:21:59,080 Speaker 11: we spoke to an ex board member just earlier this month, 443 00:21:59,119 --> 00:22:02,040 Speaker 11: and that was kind of a view that he adhered to, 444 00:22:02,200 --> 00:22:04,960 Speaker 11: that it's a case of sticking at this three point 445 00:22:05,000 --> 00:22:09,359 Speaker 11: five percent for longer rather than pushing it higher. Now, 446 00:22:09,600 --> 00:22:13,800 Speaker 11: we have seen some challenges to the central banks inflation 447 00:22:13,960 --> 00:22:18,160 Speaker 11: few and for economists too, because we're up to three 448 00:22:18,200 --> 00:22:21,760 Speaker 11: point eight percent again, and you know, we were down 449 00:22:21,800 --> 00:22:24,520 Speaker 11: in the two percent range earlier in the year, so 450 00:22:25,200 --> 00:22:28,160 Speaker 11: things have been heating up. This is not exactly what 451 00:22:28,200 --> 00:22:31,960 Speaker 11: you're wanting to see if you're an inflation fighting a bank. 452 00:22:32,200 --> 00:22:36,800 Speaker 11: But given these household debt concerns and so on, I 453 00:22:36,840 --> 00:22:38,840 Speaker 11: think they just want to keep it at the sweet 454 00:22:38,840 --> 00:22:40,359 Speaker 11: spot of three point five percent. 455 00:22:40,440 --> 00:22:43,919 Speaker 3: So is anyone concerned about stress in the overall financial 456 00:22:43,960 --> 00:22:46,280 Speaker 3: system as a result of household at being so high? 457 00:22:46,280 --> 00:22:48,159 Speaker 3: Has that been a concern at this point. 458 00:22:48,880 --> 00:22:52,240 Speaker 11: I think it has been a concern, and in terms 459 00:22:52,240 --> 00:22:57,640 Speaker 11: of dealing with that issue, I think the property market 460 00:22:57,680 --> 00:23:01,880 Speaker 11: is a key supplier of this household debt, the key 461 00:23:01,960 --> 00:23:04,720 Speaker 11: factor in this household debt. So it's been a case 462 00:23:04,760 --> 00:23:08,639 Speaker 11: of ensuring that the property market doesn't crash. Now in 463 00:23:08,680 --> 00:23:14,639 Speaker 11: actual fact, well there was a fall in prices. Everything's 464 00:23:14,920 --> 00:23:18,080 Speaker 11: on the rise again and that's been one of the 465 00:23:18,119 --> 00:23:22,359 Speaker 11: reasons why the household debt started to rise again. So 466 00:23:22,480 --> 00:23:24,879 Speaker 11: I think some of these measures that the government took 467 00:23:25,200 --> 00:23:29,400 Speaker 11: to ensure that the property market didn't crash maybe been 468 00:23:29,440 --> 00:23:32,760 Speaker 11: a bit too successful and now feeding into the debt. 469 00:23:32,840 --> 00:23:34,679 Speaker 11: So maybe it's a case of the government needing to 470 00:23:34,760 --> 00:23:37,480 Speaker 11: pair back some of its extra measures to support the 471 00:23:37,480 --> 00:23:40,399 Speaker 11: property market. That's the better way forward than getting the 472 00:23:40,440 --> 00:23:43,560 Speaker 11: Bank of Korea to change policy, which is more like 473 00:23:43,720 --> 00:23:47,440 Speaker 11: moving your super tanker in the ocean. It's not something 474 00:23:47,480 --> 00:23:48,720 Speaker 11: you want to do lightly. 475 00:23:48,600 --> 00:23:50,959 Speaker 3: So very quickly. What did the government do to support 476 00:23:51,040 --> 00:23:53,520 Speaker 3: the property market to keep things from crashing. 477 00:23:53,880 --> 00:23:56,600 Speaker 11: Well, I think it's just a case of enabling people 478 00:23:56,640 --> 00:24:01,760 Speaker 11: to take out loans to buy, and also to support 479 00:24:02,480 --> 00:24:07,280 Speaker 11: those owners looking to turn over their properties and put 480 00:24:07,320 --> 00:24:12,800 Speaker 11: more out into the market. Keeping the liquidity going in place. 481 00:24:12,960 --> 00:24:15,760 Speaker 3: It's South Korea is such an important bell weather for 482 00:24:15,800 --> 00:24:18,720 Speaker 3: global trade. I think exports account for roughly forty percent 483 00:24:18,760 --> 00:24:23,080 Speaker 3: of GDP. We're talking about semiconductors, we're talking about automobiles, 484 00:24:23,200 --> 00:24:26,600 Speaker 3: even cargo ships. How is the export side of the 485 00:24:26,640 --> 00:24:30,119 Speaker 3: economy functioning? And given the fact that you know, China 486 00:24:30,280 --> 00:24:33,120 Speaker 3: is still weak, we've got weakness in Europe. I mean, 487 00:24:33,359 --> 00:24:34,720 Speaker 3: is that showing up in the data. 488 00:24:35,800 --> 00:24:38,520 Speaker 11: Yeah, I think we're you know, we are seeing that 489 00:24:38,560 --> 00:24:43,159 Speaker 11: the figures not just in South Korea but also in 490 00:24:43,240 --> 00:24:47,159 Speaker 11: Japan and around the region. Still fairly feeble for China, 491 00:24:47,240 --> 00:24:52,480 Speaker 11: but showing signs of improvement. I think the overall export 492 00:24:52,600 --> 00:24:56,240 Speaker 11: picture is starting to look rosier for South Korea. We 493 00:24:56,400 --> 00:24:59,800 Speaker 11: have had the first rise year on year last month, 494 00:25:00,040 --> 00:25:03,760 Speaker 11: and we've got preliminary data for November also pointing to 495 00:25:04,320 --> 00:25:08,880 Speaker 11: a further gain this month. And remember the exports did 496 00:25:08,920 --> 00:25:12,600 Speaker 11: help lift GDP in the last quarter. We're expecting a 497 00:25:12,760 --> 00:25:15,000 Speaker 11: year on year growth to be about two percent in 498 00:25:15,040 --> 00:25:18,760 Speaker 11: the last quarter. That's the economist's view. So that should 499 00:25:19,000 --> 00:25:22,440 Speaker 11: take us to about one point four percent for the year, 500 00:25:22,440 --> 00:25:25,640 Speaker 11: which is in line with the IMF forecast. A note 501 00:25:25,720 --> 00:25:29,280 Speaker 11: also The IMF released its report last week on South 502 00:25:29,359 --> 00:25:32,520 Speaker 11: Korea and says, hey, Bank of Career should really just 503 00:25:32,560 --> 00:25:37,120 Speaker 11: stay where it is, keep policy going, and exports should 504 00:25:37,160 --> 00:25:41,760 Speaker 11: help to lift the economy next year for growth over 505 00:25:41,840 --> 00:25:43,399 Speaker 11: two percent two point four percent. 506 00:25:43,480 --> 00:25:46,280 Speaker 3: Obviously, the currency is a big part of the trade story, 507 00:25:46,359 --> 00:25:49,360 Speaker 3: and the Korean one has been holding up reasonably well, 508 00:25:50,040 --> 00:25:54,600 Speaker 3: particularly against the dollar. If the FED now begins to 509 00:25:54,640 --> 00:25:57,679 Speaker 3: make a minor change in policy, Let's assume for the 510 00:25:57,680 --> 00:25:59,560 Speaker 3: moment that the FED is on hold and maybe in 511 00:25:59,600 --> 00:26:02,679 Speaker 3: fact we get raid cuts mid twenty twenty four. What 512 00:26:02,800 --> 00:26:05,560 Speaker 3: would be the outlook then for the Korean currency? Wouldn't 513 00:26:05,600 --> 00:26:08,200 Speaker 3: it strengthen? And might that not be a negative when 514 00:26:08,240 --> 00:26:09,840 Speaker 3: you consider the trade story. 515 00:26:10,280 --> 00:26:13,240 Speaker 11: Well, I think that the one has been at very 516 00:26:13,280 --> 00:26:16,320 Speaker 11: low levels. We're in a better position than we were 517 00:26:16,480 --> 00:26:18,480 Speaker 11: a year ago. I mean, in the fall of last 518 00:26:18,560 --> 00:26:23,119 Speaker 11: year it was pushing four hundred and fifty, which was 519 00:26:23,800 --> 00:26:26,520 Speaker 11: seen as very very weak for the one. We're in 520 00:26:26,560 --> 00:26:30,600 Speaker 11: a better place now would below oney three hundred, so hey, 521 00:26:30,920 --> 00:26:33,199 Speaker 11: a bit more strengthening. I don't think that's going to 522 00:26:33,200 --> 00:26:35,719 Speaker 11: be too bad, and I don't think policymakers are going 523 00:26:35,760 --> 00:26:38,159 Speaker 11: to be too concerned about that it's really been the 524 00:26:38,440 --> 00:26:42,040 Speaker 11: weakness that has been the concern up till now. 525 00:26:42,600 --> 00:26:44,879 Speaker 3: So we were talking about the importance of trade, and 526 00:26:44,960 --> 00:26:47,960 Speaker 3: I know that the South Korean president was recently in 527 00:26:48,000 --> 00:26:51,520 Speaker 3: the UK looking to establish a free trade agreement. What 528 00:26:51,560 --> 00:26:52,480 Speaker 3: do we know about that? 529 00:26:52,840 --> 00:26:57,040 Speaker 11: Yeah, so President Yun has been in the UK this week. 530 00:26:57,080 --> 00:27:01,159 Speaker 11: He met King Charles the Third and also Prime Minister 531 00:27:01,520 --> 00:27:06,480 Speaker 11: Rishi Sinak and they're essentially launched kind of officially the 532 00:27:06,520 --> 00:27:10,400 Speaker 11: trade negotiations between the two sides. Now, if you think 533 00:27:10,520 --> 00:27:15,080 Speaker 11: back to Brexit, when the UK left the EU, you 534 00:27:15,119 --> 00:27:19,199 Speaker 11: know they had to quickly renegotiate trade agreements with some 535 00:27:19,320 --> 00:27:22,200 Speaker 11: key countries and Career was one of them. But essentially 536 00:27:22,240 --> 00:27:24,440 Speaker 11: all the conditions in the agreement they've got in place 537 00:27:24,480 --> 00:27:27,280 Speaker 11: at the moment are just like copycat, you know, what 538 00:27:27,400 --> 00:27:33,320 Speaker 11: they had during the time of membership of the EU. 539 00:27:33,640 --> 00:27:38,359 Speaker 11: So now these latest round of negotiations should give you know, 540 00:27:38,480 --> 00:27:42,679 Speaker 11: more concrete signs of whether you know, there's an actual 541 00:27:42,800 --> 00:27:46,000 Speaker 11: change in the trade relations that's more favorable to both countries. 542 00:27:46,200 --> 00:27:48,760 Speaker 11: And let's face it, for the UK that's probably more 543 00:27:48,800 --> 00:27:52,640 Speaker 11: important to them because they've got to justify this move 544 00:27:53,000 --> 00:27:55,360 Speaker 11: out of the EU, which hasn't been a great success 545 00:27:55,400 --> 00:27:55,720 Speaker 11: so far. 546 00:27:55,880 --> 00:27:57,520 Speaker 3: Yeah, yeah, and I would imagine a lot of the 547 00:27:57,520 --> 00:28:00,159 Speaker 3: focus is going to be on critical technologies. I'm thinking 548 00:28:00,240 --> 00:28:06,080 Speaker 3: artificial intelligence, quantum computing, semiconductors obviously, do I have that right. 549 00:28:06,800 --> 00:28:08,639 Speaker 11: Yeah, that's right. The corporation is going to be a 550 00:28:08,680 --> 00:28:14,080 Speaker 11: lot of that. They have announced more research funding for 551 00:28:14,520 --> 00:28:17,760 Speaker 11: UK and South Korea to be looking into those areas 552 00:28:17,800 --> 00:28:22,600 Speaker 11: of artificial intelligence semiconductors, as you mentioned, So that's a 553 00:28:22,680 --> 00:28:25,280 Speaker 11: key point of the cooperation between the two sides. 554 00:28:25,359 --> 00:28:27,560 Speaker 3: Paul, it's always a pleasure. Thank you so much for 555 00:28:27,600 --> 00:28:30,360 Speaker 3: spending some time to chat with us. Bloomberg's Paul Jackson. 556 00:28:30,440 --> 00:28:33,200 Speaker 3: He covers the economies of South Korea and Japan for 557 00:28:33,359 --> 00:28:36,679 Speaker 3: us from our bureau in Tokyo. I'm Doug Krisner. You 558 00:28:36,680 --> 00:28:39,720 Speaker 3: can catch Brian Curtison myself weekdays here for Bloomberg day 559 00:28:39,720 --> 00:28:42,960 Speaker 3: Break Asia, beginning at seven am in Hong Kong six 560 00:28:43,040 --> 00:28:44,160 Speaker 3: pm on Wall Street. 561 00:28:44,320 --> 00:28:47,800 Speaker 1: Tom, Thank you, Doug, and coming up on Bloomberg Daybreak weekend, 562 00:28:47,880 --> 00:28:50,720 Speaker 1: the House getting ready to return from its Thanksgiving break 563 00:28:50,760 --> 00:28:53,680 Speaker 1: with a very long to do list for lawmakers as 564 00:28:53,680 --> 00:28:56,360 Speaker 1: they head back to the capital. I'm Tom Busby, and 565 00:28:56,480 --> 00:29:03,280 Speaker 1: this is Bloomberg. I'm Tom Busby in New York with 566 00:29:03,360 --> 00:29:05,720 Speaker 1: your global look ahead at the top stories for investors 567 00:29:05,720 --> 00:29:07,840 Speaker 1: in the coming week. And it's a busy week on 568 00:29:07,920 --> 00:29:12,000 Speaker 1: Capitol Hill as lawmakers return from their Thanksgiving break. For more, 569 00:29:12,120 --> 00:29:14,360 Speaker 1: Let's head to our Bloomberg ninety nine one newsroom in 570 00:29:14,440 --> 00:29:17,840 Speaker 1: Washington and Bloomberg's sound on co host Kaylee Lines. 571 00:29:18,080 --> 00:29:21,120 Speaker 4: Yeah, Tom. After enjoying the Thanksgiving holiday at home with 572 00:29:21,200 --> 00:29:25,760 Speaker 4: their families, lawmakers may find their thankfulness slowly morphing into 573 00:29:25,840 --> 00:29:28,800 Speaker 4: dread as they return to Washington to face a lot 574 00:29:28,800 --> 00:29:31,400 Speaker 4: of business that they have to deal with, and it 575 00:29:31,520 --> 00:29:34,680 Speaker 4: might not be easy. Joining us now for more on 576 00:29:34,720 --> 00:29:36,959 Speaker 4: the long to deal list Bloomberg's Billy House who covers 577 00:29:36,960 --> 00:29:40,960 Speaker 4: Congress for us. So, Billy first and foremost, let's talk 578 00:29:40,960 --> 00:29:43,760 Speaker 4: about funding, because, of course, before they left for Thanksgiving, 579 00:29:43,800 --> 00:29:47,160 Speaker 4: Congress passed a continuing resolution kicked the can down the 580 00:29:47,200 --> 00:29:51,400 Speaker 4: road to two different funding deadlines January nineteenth and February second. 581 00:29:52,000 --> 00:29:54,280 Speaker 4: It still might be far away enough that they aren't 582 00:29:54,280 --> 00:29:56,400 Speaker 4: going to face the real pressure to get it figured 583 00:29:56,440 --> 00:29:58,040 Speaker 4: out for a while. What's your sense? 584 00:29:59,120 --> 00:30:01,920 Speaker 8: That's absolutely correct. What they did was avoid what we've 585 00:30:01,920 --> 00:30:05,800 Speaker 8: seen in recent years jamming by one party or the 586 00:30:05,840 --> 00:30:09,440 Speaker 8: other of a bill right before Christmas. But what new 587 00:30:09,520 --> 00:30:12,400 Speaker 8: Speaker Mike Johnson did do in the Senate followed up 588 00:30:12,400 --> 00:30:15,760 Speaker 8: by approving it was past a CR or current funding levels, 589 00:30:16,680 --> 00:30:18,840 Speaker 8: a different approach, a two step approach. It would see 590 00:30:18,880 --> 00:30:24,600 Speaker 8: some agencies come up for expiration of that funding in 591 00:30:24,880 --> 00:30:27,360 Speaker 8: on January nineteenth and others on February twentieth. That's a 592 00:30:27,400 --> 00:30:30,360 Speaker 8: two step sort of now deadline that he faces. That 593 00:30:30,440 --> 00:30:32,480 Speaker 8: might have seemed like a good idea, but as the 594 00:30:32,560 --> 00:30:35,800 Speaker 8: days go by, we see more of his people upset 595 00:30:35,800 --> 00:30:39,280 Speaker 8: about that approach, saying it's very very much like his 596 00:30:39,400 --> 00:30:44,600 Speaker 8: predecessor Kevin McCarthy as Speaker and relied on Democratic votes 597 00:30:44,640 --> 00:30:47,440 Speaker 8: to get passed in the House. So there's been a 598 00:30:47,440 --> 00:30:49,360 Speaker 8: lot of upset over that, and that will play out 599 00:30:49,400 --> 00:30:50,240 Speaker 8: over the next week. 600 00:30:50,760 --> 00:30:53,959 Speaker 4: Yeah, exactly. It's very similar in that it was a 601 00:30:54,000 --> 00:30:57,280 Speaker 4: clean continuing resolution, no spending cuts included, and passed with 602 00:30:57,320 --> 00:31:00,000 Speaker 4: overwhelming Democratic support. And yet it seems like, at least 603 00:31:00,120 --> 00:31:03,840 Speaker 4: for the time being, Mike Johnson, the new Speaker, got 604 00:31:03,880 --> 00:31:06,440 Speaker 4: away with it. I just wonder how long realistically that 605 00:31:06,560 --> 00:31:09,560 Speaker 4: grace is going to last, how stable at footing his 606 00:31:09,680 --> 00:31:11,080 Speaker 4: speakership is on. 607 00:31:11,440 --> 00:31:15,920 Speaker 8: Well, it is the same mass that plagued or be 608 00:31:16,040 --> 00:31:21,640 Speaker 8: deviled McCarthy with the filling of a new swearing in 609 00:31:21,840 --> 00:31:28,720 Speaker 8: of a Republican this week after last week's election in Utah, 610 00:31:29,960 --> 00:31:34,440 Speaker 8: Johnson can only afford to lose now four Republican votes 611 00:31:34,440 --> 00:31:37,560 Speaker 8: on party line votes. That's the same math that led 612 00:31:37,680 --> 00:31:40,120 Speaker 8: McCarthy to have to make deals with Democrats on almost 613 00:31:40,160 --> 00:31:42,400 Speaker 8: every spending bill. That's not going to change for Johnson 614 00:31:42,440 --> 00:31:45,600 Speaker 8: early next year. And so the question is he has 615 00:31:45,600 --> 00:31:48,120 Speaker 8: said he's not going to do any more stopgapp spending 616 00:31:48,160 --> 00:31:51,560 Speaker 8: bills known as continuing resolutions, as he just did. But 617 00:31:51,960 --> 00:31:54,240 Speaker 8: how is he going to pass anything without Democrats? And 618 00:31:55,160 --> 00:31:58,000 Speaker 8: that's going to be the big deal when his conservative 619 00:31:58,120 --> 00:32:03,400 Speaker 8: far rank, far right rank flank wants deep spending cuts 620 00:32:03,400 --> 00:32:04,680 Speaker 8: and changes to policies. 621 00:32:04,920 --> 00:32:07,880 Speaker 4: And of course that's just on the appropriations side of 622 00:32:07,920 --> 00:32:10,440 Speaker 4: the equation. There's also the question of emergency funding for 623 00:32:10,560 --> 00:32:15,800 Speaker 4: Israel and Ukraine. Is that realistically something that could happen 624 00:32:15,840 --> 00:32:17,120 Speaker 4: before the end of this year. 625 00:32:17,480 --> 00:32:19,800 Speaker 8: That's the goal is to do it by mid December 626 00:32:19,880 --> 00:32:22,080 Speaker 8: or by the end of the year. But and Senate 627 00:32:22,120 --> 00:32:26,320 Speaker 8: supporters of the Ukraine aid anyway in both and backers 628 00:32:26,320 --> 00:32:31,280 Speaker 8: in both parties are negotiating on some way out of that. 629 00:32:31,920 --> 00:32:35,920 Speaker 8: The outlook in the House again is murkier because the 630 00:32:36,200 --> 00:32:41,920 Speaker 8: conservatives there that are demanding stark immigration changes as part 631 00:32:41,920 --> 00:32:45,480 Speaker 8: of that package, and the Senate Democrats who control that 632 00:32:45,600 --> 00:32:47,360 Speaker 8: chamber just aren't going to go along with some of 633 00:32:47,360 --> 00:32:50,400 Speaker 8: the things that are being floaded by the House Republicans. 634 00:32:50,680 --> 00:32:54,520 Speaker 8: So that's still murky. And then there's a course aid 635 00:32:54,600 --> 00:32:58,600 Speaker 8: to Israel. As time goes on and more and more 636 00:32:58,760 --> 00:33:04,400 Speaker 8: public opposition shin or the polls starts showing less support 637 00:33:04,520 --> 00:33:09,520 Speaker 8: for continuing levels of Israel funding, that's murk here too. 638 00:33:09,840 --> 00:33:12,240 Speaker 4: All Right, well, I guess we'll see. I would imagine 639 00:33:12,280 --> 00:33:16,440 Speaker 4: that George Santos wasn't feeling super thankfulness thanksgiving. Billy House, 640 00:33:16,440 --> 00:33:20,360 Speaker 4: Bloomberg Congressional reporter, thank you so much, and Tom again, 641 00:33:20,600 --> 00:33:22,200 Speaker 4: that to do list is long. 642 00:33:22,440 --> 00:33:24,760 Speaker 1: Thank you, Kaylee. That was Bloomberg sound On co host 643 00:33:24,840 --> 00:33:27,400 Speaker 1: Kaylee Lines reporting from our Bloomberg ninety nine to one 644 00:33:27,440 --> 00:33:31,120 Speaker 1: newsroom in Washington, and you can hear sound on weekdays 645 00:33:31,280 --> 00:33:34,200 Speaker 1: one to three pm Wall Street time on Bloomberg Radio. 646 00:33:34,480 --> 00:33:36,520 Speaker 1: And that does it for this edition. Of Bloomberg day 647 00:33:36,520 --> 00:33:39,160 Speaker 1: Break weekend. Join us again Monday morning at five am 648 00:33:39,200 --> 00:33:41,640 Speaker 1: Wall Street Time for the latest on the market's overseas 649 00:33:41,680 --> 00:33:44,360 Speaker 1: and the news you need to start your day. I'm 650 00:33:44,400 --> 00:33:47,400 Speaker 1: Tom Buzzbeak. Stay with us. Top stories and global business 651 00:33:47,440 --> 00:33:49,760 Speaker 1: headlines are coming up right now.