Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg day Break Weekend, our global look at
Speaker 2: the top stories in the coming week from our Daybreak
Speaker 2: anchors all around the world. Straight Ahead on the program,
Speaker 2: a look ahead to some key inflation data in the
Speaker 2: US how that may impact monetary policy for the FED.
Speaker 2: I'm Tom Busby in New York.
Speaker 3: I'm Caroline Hedge in London, where we're asking if the
Speaker 3: UK has what it takes to become a global tech superpower.
Speaker 4: I'm Doug Christner looking at what we may learn from
Speaker 4: next week's data on the Chinese economy.
Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 2: Good day to you. I'm Tom Busby. We begin today's
Speaker 2: program with some key inflation data here in the US.
Speaker 2: The consumer price index for May on Wednesday, the producer
Speaker 2: price index for that same month out on Thursday. For
Speaker 2: more on what to look for and how that data
Speaker 2: may impact the fed's next decision on rates. Were joined
Speaker 2: by Edward Harrison, senior editor at Bloomberg and author of
Speaker 2: Bloomberg's The Everything Risk newsletter. Edward, thank you so much
Speaker 2: for being here.
Speaker 5: Well, good to talk to you.
Speaker 4: Tom.
Speaker 2: A slightly better than forecast made jobs report this past
Speaker 2: week after a lot of incoming data not as upbeat.
Speaker 2: So what does this job's report tell you in regarding
Speaker 2: the Fed? And what are you expecting to see in
Speaker 2: these May CPI and PPI reports.
Speaker 5: Yeah, so, Tom, I think that the headline number tells
Speaker 5: the equity market that the jobs market is not falling apart,
Speaker 5: the economy is not falling apart. We got one hundred
Speaker 5: and thirty nine thousand added to nonfarm payrolls, which was
Speaker 5: ahead of expectations, and we had the unemployment rate staying
Speaker 5: solid at four point two percent. Those numbers just on
Speaker 5: the surface, it says that you know, the labor markets
Speaker 5: not falling apart, and that's what you actually would have
Speaker 5: needed to get to galvanize the Federal reserve to cut
Speaker 5: rates more quickly than anticipated. So, given that the Fed's
Speaker 5: going to be on hold and as a result of that,
Speaker 5: the CPI and the PPI are less important in terms
Speaker 5: of the Fed's thinking in terms of the rate decision
Speaker 5: going forward.
Speaker 2: Well, what are the big drivers for inflation right now,
Speaker 2: both for consumers and businesses? And you say it's a
Speaker 2: little less important, still key for them, still, you know,
Speaker 2: maybe not so much as the PCE, but they're still
Speaker 2: going to look at it very closely.
Speaker 5: Well, there are two things. One is that we still
Speaker 5: have services inflation, which is above where they would like
Speaker 5: it to be. That's still sticky. And then the second
Speaker 5: thing is that we're seeing a pass through of the
Speaker 5: goods inflation that comes from the tariffs into into the
Speaker 5: numbers the companies are talking about passing on the price increases.
Speaker 5: So these numbers that we're going to see are from May,
Speaker 5: and as a result, you can think of them as
Speaker 5: after the fact, after the the the tariffs were put on,
Speaker 5: But they're not. They're not consistent with the data, the
Speaker 5: incoming data that we're seeing, which is that you know,
Speaker 5: there is inflation in the pipeline, and so given that
Speaker 5: that means that the Fed is going to continue to
Speaker 5: be on the whole. The only reason that they would
Speaker 5: actually cut rates more aggressively. Is if we had numbers
Speaker 5: that came out last week from the jobs report that
Speaker 5: showed the economy stalling in a very precipitous way.
Speaker 2: Well, let's let's continue on with the tariffs, because in
Speaker 2: these reports that we're going to see this coming week,
Speaker 2: maybe just at least a hint, a little hint of
Speaker 2: the impact of the tariffs. But we have that ninety
Speaker 2: day reprieve on most tariffs expires in July. Is that
Speaker 2: when we're really going to see the impact.
Speaker 5: Well, you know, I think that actually the June CPI
Speaker 5: and PPI numbers will show you a little bit more
Speaker 5: of what's there. It is interesting that if you look
Speaker 5: at just the month on month numbers, the consensus is
Speaker 5: for zero point three percent CPI taking out food and energy,
Speaker 5: so you know, sort of the core CPI number, which
Speaker 5: is higher than it was in April. But you know,
Speaker 5: if that number is actually high, let's say zero point
Speaker 5: four percent, as you know, a miss to the upside,
Speaker 5: then you could say to yourself already in maybe we're
Speaker 5: seeing these numbers have impacted. We certainly will see them
Speaker 5: therefore impacted in June. That would make the Fed even
Speaker 5: more reticent about lowering interest rates, despite by the way,
Speaker 5: the fact that Donald Trump last week was saying that
Speaker 5: power should lower interest rates by one full percentage point.
Speaker 2: Now, a little more about the tariffs. We know there
Speaker 2: are talks slated to happen. They're supposed to happen with China,
Speaker 2: the European Union, they've been on and off, even Japan.
Speaker 2: But is there any clear read that you're seeing on
Speaker 2: what these negotiations are going to bring as far as
Speaker 2: you know, a tariff deal, a trade deal with these
Speaker 2: countries and the EU.
Speaker 5: No, and there's no clear deal that's there. I think
Speaker 5: there are three countries Japan, the EU, and China that
Speaker 5: are outstanding which are definitely going to impact inflation and
Speaker 5: therefore the economy. There was actually a report from Bloomberg
Speaker 5: that the trade negotiators for the United States were fighting
Speaker 5: amongst each other in front of the Japanese delegation, and
Speaker 5: that certainly doesn't lead to any sort of positive outcome. Moreover,
Speaker 5: this whole old taco trade that people talk about, the
Speaker 5: fact that Trump eventually backs down only leads to the
Speaker 5: negotiators from the other side thinking, you know, we have
Speaker 5: some leverage here if we played chicken because eventually he'll
Speaker 5: cave on or you know, he'll back out in some regard.
Speaker 5: So I think that, you know, there's a lot of
Speaker 5: risk associated with that. And just going back to the
Speaker 5: jobs numbers for a second, really, even though the equity
Speaker 5: market thinks of this in a positive way and it's
Speaker 5: not going to galvanize the FED, the internals of the
Speaker 5: numbers were actually not as good as you might think.
Speaker 5: That the household survey showed labor participation going down. There
Speaker 5: were a negative ninety five two month payroll net revision,
Speaker 5: so that means that really we only saw forty four
Speaker 5: thousand net jobs if you take revisions into account. So
Speaker 5: the labor market is slowing, it's just not slowing enough
Speaker 5: to galvanize the FED to start to cut rates. And
Speaker 5: then you have the backdrop of these negotiations which aren't
Speaker 5: really going anywhere at this point, and that sort of
Speaker 5: downside risk for equities in particular.
Speaker 2: Well, a lot of variables for the FED to consider,
Speaker 2: including the may CPI out on Wednesday, the may PPI
Speaker 2: on Thursday. Our thanks to Edward Harrison, senior editor at
Speaker 2: Bloomberg and author of Bloomberg's The Everything Risk newsletter. We
Speaker 2: turn now to the ev maker Tesla, which is scheduled
Speaker 2: to launch its long delayed robo taxi service this week
Speaker 2: in Austin, Texas. For more on that expected launch, we're
Speaker 2: joined by Craig Trudell, Bloomberg's Global Autos editor. Well, Craig,
Speaker 2: thanks so much for joining us. Let's start with what
Speaker 2: is Tesla expected to do this Thursday in Austin, And
Speaker 2: after all the delays and setbacks, will it be ready?
Speaker 6: You know, that's the big question. But there are so
Speaker 6: many questions about Tesla's plans for this upcoming week that
Speaker 6: are still very much unanswered. I mean, even starting with
Speaker 6: that timing right where Bloomberg was first to report that
Speaker 6: the company was aiming for June twelve, we haven't heard
Speaker 6: anything to the contrary, at least to the point where
Speaker 6: you and I are speaking. But that number still has
Speaker 6: not been confirmed by the company. And you know, what
Speaker 6: we do know is is Elon Musk has talked about
Speaker 6: you know, sort of starting slows, starting with a small
Speaker 6: number of Model Y vehicles that they'll run around Austin.
Speaker 6: We don't know sort of you know, specifics about what
Speaker 6: areas of the city that they expect to run these
Speaker 6: these driver lists, you know, rides, we don't know what
Speaker 6: time of day, and some of these details are important
Speaker 6: because it can make real differences as to you know,
Speaker 6: how many other cars are out on the road, how
Speaker 6: challenging is it for these cars to sort of navigate
Speaker 6: those situations. And so you know, there's a lot of
Speaker 6: specifics that the company has yet to address that will
Speaker 6: be really important to sort of suss out, you know
Speaker 6: in the days toccomme.
Speaker 2: Yeah, not even how many cars they're going to put
Speaker 2: on the road this week.
Speaker 6: Yeah, what we've heard Musks say is something on the
Speaker 6: order of ten or twenty, So we're talking really small.
Speaker 6: This is you know, I guess what you would call
Speaker 6: in the tech business a soft launch. And you know,
Speaker 6: Musk has talked about, you know, scaling up quickly, but
Speaker 6: I think we have to kind of take that with
Speaker 6: a grain of salt because he's talked about, you know,
Speaker 6: putting driverless cars on the road you know, anytime now,
Speaker 6: year after year, and you know, we will see, we
Speaker 6: will see if twenty twenty five is his year.
Speaker 2: Well, we know that Tesla has for years been doing
Speaker 2: a lot of work. It's been testing these autonomous cars
Speaker 2: out on closed roads. It's been gathering data for years
Speaker 2: working on machine learning, and it has of course that
Speaker 2: controversial some would say misnamed full self driving mode, which
Speaker 2: I know you reported on just last week, involved in
Speaker 2: a recent string of sometimes deadly crashes. So with all that,
Speaker 2: can it still compete against Waimo and GM's Cruise, which
Speaker 2: packed it in after ten years because it was just
Speaker 2: too expensive.
Speaker 6: Yeah, you know, I think with Cruise the sort of
Speaker 6: you know, thing that we took away from. One of
Speaker 6: the things to take away from that was, you know,
Speaker 6: it can come down to a single crash, a single
Speaker 6: crash that in Crusi's case, actually didn't result in a fatality,
Speaker 6: but it was a gruesome one and unfortunate one. Nonetheless,
Speaker 6: the company's handling of that and sort of running a
Speaker 6: foul of you know, the local regulators that was working
Speaker 6: with in San Francisco, you know, really ultimately led to
Speaker 6: GM deciding, you know what, we're going to pull the
Speaker 6: plug on this company. And I go back to you know,
Speaker 6: twenty eighteen, there was a similar incident in the case
Speaker 6: of Uber right where they had a self driving test
Speaker 6: vehicle that was involved in a fatal crash, and that
Speaker 6: ultimately led Uber to decide to get out of this space.
Speaker 6: So part of the reason why this is such a
Speaker 6: big story in terms of, you know, having a closer
Speaker 6: look at one of the fatal crashes that has resulted
Speaker 6: from people using full self driving is we the public
Speaker 6: are much less tolerant of crashes in which a robot
Speaker 6: or sort of you know, something other and a human
Speaker 6: is involved in running the car. And you know, in
Speaker 6: this case, it was a crash that you know, sort
Speaker 6: of avoided the headlines. Initially, it took the US safety regulator,
Speaker 6: the National Highway Traffic Safety Administration, investigating full self driving
Speaker 6: on the basis of this and a few other crashes
Speaker 6: for it to really come to light and get our
Speaker 6: attention and lead to us seeking out some public records
Speaker 6: to learn more about what happened.
Speaker 2: And these aren't isolated incidents with with Tesla and it's
Speaker 2: full self driving. I mean, there is there is a
Speaker 2: paper trail on this, right, a number of incidents.
Speaker 6: That's right, full self driving has not been around as
Speaker 6: long as autopilot, but that's the other sort of branding
Speaker 6: that that Tesla has used for sort of lower level
Speaker 6: capability of you know, driver ass as features and I
Speaker 6: would say, you know, when you look at this, you
Speaker 6: know long track record of autopilot and full self driving,
Speaker 6: there have been a string of investigations into whether these
Speaker 6: are defective, and one of those investigations involving autopilot actually
Speaker 6: got to the point where Nitsa said to Tesla, look,
Speaker 6: we think that there's a safety risk here that you
Speaker 6: need to address for the recall. It led to Tesla
Speaker 6: recalling two million cars, and you know, in a matter
Speaker 6: of a few months, Nitsa came back to Tesla and said,
Speaker 6: you know what, we're not sure that the remedy that
Speaker 6: you offered to address you know, what we were raising
Speaker 6: was sufficient. And so not only is Tesla under investigation
Speaker 6: with respect to full self driving, it's also you know,
Speaker 6: under a pending investigation a query as to whether that
Speaker 6: recall that it did to sort of, you know, make
Speaker 6: autopilots safer to use, whether or not that went far enough.
Speaker 2: Well, Thursday, June twelfth, the expected launch date for the
Speaker 2: Tesla robotaxi in Austin, Texas. Our thanks to Bloomberg's Global
Speaker 2: autos editor Craig Drudell, coming up on Bloomberg Day Break weekend, Well,
Speaker 2: look at whether the UK has what it takes to
Speaker 2: become a global tech superpower. I'm Tom Busby and this
Speaker 2: this is Bloomberg. This is Bloomberg day Break weekend, our
Speaker 2: global look ahead at the top stories for investors in
Speaker 2: the coming week. I'm Tom Busby and New York Up.
Speaker 2: Later in our program we'll look ahead to some key
Speaker 2: economic data coming out in China. But first, tech leaders
Speaker 2: from around the world will gather in the UK capital
Speaker 2: for the London Tech Summit, with speakers ranging from the
Speaker 2: inventor of the World Wide Web to renowned professors, even
Speaker 2: some tech CEOs. Forty thousand tech enthusiasts set to flock
Speaker 2: to Olympia for a week of panel discussions. But with
Speaker 2: stiff competition from innovators around the world, can the UK
Speaker 2: keep up with the global tech revolution for more, Let's
Speaker 2: get to London and bring in Bloomberg Daybreak Europe anchor
Speaker 2: Caroline Hepgar Tom.
Speaker 3: The Great Tech Race has been a permanent feature of
Speaker 3: the corporate world for much of twenty twenty five. The
Speaker 3: rise of the Chinese artificial intelligence startup Deep Seek has
Speaker 3: only added attention to the issue. In February, the company
Speaker 3: released an open source model that it said rivaled software
Speaker 3: from the top American AI developers, and it claimed to
Speaker 3: have done so for a fraction of the development cost
Speaker 3: using less powerful hardware. And now global businesses including Meta,
Speaker 3: are busy buying several hundreds of acres in a bid
Speaker 3: to build data centers capable of fueling their AI focused dreams.
Speaker 3: Primig Intelligence is senior tech industry analyst says the world's
Speaker 3: biggest tech firms are all in when it comes to
Speaker 3: leveling up their artificial intelligence capabilities.
Speaker 7: Just look at how far they have come in terms
Speaker 7: of you know, infrastructure, Like a company like Google, Not
Speaker 7: only are they designing their own data centers and you know,
Speaker 7: creating their own chips, and now they are you know,
Speaker 7: procuring power do they extend that they want to make
Speaker 7: sure that these AI chips, which can have volatile power needs,
Speaker 7: are more optimize when it comes to the efficiency of
Speaker 7: their infrastructure. And that's why these hyperscaler companies really have
Speaker 7: got so many different aspects to their mode. So it's
Speaker 7: not just about the search algorithm or in the case
Speaker 7: of Meta, you know, their social media knowledge graph. It
Speaker 7: is about the entirety of how they run their infrastructure,
Speaker 7: and that is what is a long term mode because
Speaker 7: nobody else can operate at the scale at which these
Speaker 7: hyperscalers are operating right now.
Speaker 3: That was Bloomberg Intelligence's man Deep Singh speaking there. Well.
Speaker 3: The UK's role in the AI and wider technology arms
Speaker 3: race is something that I've been discussing with Bloomberg Daybreak
Speaker 3: Europe anchor Tom McKenzie. As London Tech Week approaches, this
Speaker 3: is always a really exciting week, isn't it. In London,
Speaker 3: CEOs and visionaries are going to be arguing surely that
Speaker 3: the UK can be one of the AI capitals of
Speaker 3: the world.
Speaker 8: Absolutely, and we're going to have government presence there at
Speaker 8: London Tech Week. You have London Tech Week and you
Speaker 8: have Founders Forum as well. In Paris, by the way,
Speaker 8: you have Vivtech which is also drawing a lot of
Speaker 8: these big names there. So there's the competition between Paris
Speaker 8: and London next week as well. But certainly the government's involved.
Speaker 8: Peter Carr will be there of course, the Secrety of
Speaker 8: State in terms of science and innovation and technology. You
Speaker 8: also have the likes of Matt Clifford, who is the
Speaker 8: Prime Minister's advisor on AI, and they will be making
Speaker 8: the case that London is the place to invest and
Speaker 8: to innovate, and there are some data that backs that up.
Speaker 8: In terms of fun flows, you have seen more money
Speaker 8: moving into the tech sector last year from venture capital
Speaker 8: into London into the UK than into France and Germany combined.
Speaker 8: And we have some big name startups now that are
Speaker 8: raising real capital and have an impact, companies like Wave
Speaker 8: in the mobility space, which is valued at a little
Speaker 8: over two billion US dollars. You have companies like Synthesia,
Speaker 8: eleven Labs, Polyai, Luminance, Revolute, which is huge in terms
Speaker 8: of fintech. So we do have examples of successful startups here.
Speaker 8: There is money flowing in, but there is a lot
Speaker 8: more to do, and in terms of positioning the UK
Speaker 8: when it comes to AI, that is going to be
Speaker 8: crucial in terms of the conversations I think going forward
Speaker 8: and the kind of traction that government ministers can get
Speaker 8: and that companies can get in terms of fundraising.
Speaker 3: Yeah, I mean the UK government website talking about London
Speaker 3: becoming the epicenter of global innovation.
Speaker 9: That's one side of things.
Speaker 3: On the other, in recent days we've seen why saying
Speaker 3: that it's going to move its listing primary listing to
Speaker 3: the US. So there are some concerns also, aren't there.
Speaker 8: And I'm glad you brought up wise because that really
Speaker 8: points to one of the key hurdles, one of the
Speaker 8: key headwinds for the UK. This, of course, the money
Speaker 8: transfer business listed in twenty twenty one to great fanfare.
Speaker 8: It's been one of the few tech companies listed in
Speaker 8: the UK now, as you say, making that decision to
Speaker 8: put its primal listing in the US, which tells a
Speaker 8: bigger story. It tells a story about the valuations these
Speaker 8: companies think they can get in the US market versus
Speaker 8: here in the UK. It tells a story about companies
Speaker 8: including for example, Delivery that was bought over and bought
Speaker 8: by door Dash, Dark Trace which is brought by private equity.
Speaker 8: The companies that are able to build here in terms
Speaker 8: of the tech sector, they often then go to the
Speaker 8: US to raise the bigger funds and to list. And
Speaker 8: that is not a trend that we have seen stopping
Speaker 8: despite changes that London Stock has changed have tried to
Speaker 8: make so capital access to capital and the capital markets
Speaker 8: is really key when it comes to the question of
Speaker 8: how you scale and how you grow these businesses.
Speaker 3: What about regulation when it comes to tech. I mean,
Speaker 3: obviously global companies have a huge market in Europe and
Speaker 3: the UK being sort of attached to that. What about
Speaker 3: the idea of deregulation or how we regulate artificial intelligence
Speaker 3: and other bits of the tech sphere.
Speaker 8: Keir Starmer's government is actually taking a more proactive approach
Speaker 8: in terms of looking at the opportunities versus the risk.
Speaker 8: So the emphasis has shifted. Some would say that's because
Speaker 8: the growth needs of this economy are so much more
Speaker 8: acute that if you're looking for one alexir of growth,
Speaker 8: AI could be that, So you have to reach for
Speaker 8: the opportunities. The UK is still trying to carve out
Speaker 8: what the regulatory framework is going to be. We have
Speaker 8: an AI strategy. The European Union does have its AI
Speaker 8: Safety Act that is being implemented gradually towards the end
Speaker 8: of this year and into twenty twenty six. There's a
Speaker 8: lot of pushback against that regulation still from the tech industry.
Speaker 8: Where the UK lands on this will be interesting, Will
Speaker 8: it align more with less a fair approach that we're
Speaker 8: starting seeing at least the federal level in the US
Speaker 8: when it comes to AI. Or will it start to
Speaker 8: take account of the risk factors and take lessons from
Speaker 8: what Europe's craft in terms of their regulations. It may
Speaker 8: find a middle spot.
Speaker 3: So do you think that artificial intelligence will dominate given
Speaker 3: the questions about tak up about disruption?
Speaker 9: How important is that going to be on the agenda
Speaker 9: artificial intelligence?
Speaker 8: There is one name that I have not mentioned yet,
Speaker 8: and that is Jensen Huang of Nvidia, of course, the
Speaker 8: CEO of that company that makes the AI accelerators that
Speaker 8: has become the litmus test of AI demand that underpins
Speaker 8: so much of this AI revolution that we're seeing. Jensen
Speaker 8: Huang will be a keynote speaker at London Tech Week.
Speaker 8: He will also be at Viva Tech, the event taking
Speaker 8: place in Paris. So watch for any announcements from the
Speaker 8: CEO of Nvidia. They are building and funding the build out,
Speaker 8: of course of data centers in the US. They've announced
Speaker 8: plans to invest in data centers in the UAE. What
Speaker 8: is the data center story in the UK? What is
Speaker 8: the data story data center story in Europe? How much
Speaker 8: is Nvidia going to be investing in the infrastructure that
Speaker 8: underpins the advancements and innovations that we're seeing in AI
Speaker 8: and how is the UK trying to get a piece
Speaker 8: of that. I think that's going to be something really
Speaker 8: worth watching next week what we hear from Gensen Wang.
Speaker 3: Yeah, although I have sort of heard this idea that
Speaker 3: maybe those data centers are going to become less energy
Speaker 3: hungry and so maybe, you know, as we get the
Speaker 3: leaps forward in tech, that might be something in the future.
Speaker 3: Going back to your point there about the UK and
Speaker 3: its non EU status, does that help or hinder when
Speaker 3: it comes to tech firms with regulation, with fundraising?
Speaker 9: How are we seeing things now?
Speaker 8: If you look just at the data in terms of
Speaker 8: fun flows, in terms of talent, in terms of the
Speaker 8: numbers of startups, then the UK again is ahead of
Speaker 8: a number of its European peers. I think on the
Speaker 8: regulatory question, the jury is probably still out. The screaming
Speaker 8: question when you're in Continental Europe maan izon An event
Speaker 8: a few weeks ago and the CEOs and the investors
Speaker 8: I spoke to there in Germany talking about regulation in Europe. Regulation, regulation, regulation,
Speaker 8: That's what they were banging on about in terms of
Speaker 8: one of the key headwinds that are holding back, that
Speaker 8: is holding back the build out of tech and the
Speaker 8: ability to invest and scale in that economy, whether it's
Speaker 8: ESG or DEI or AI regulations. One person at this
Speaker 8: event quoted this line saying, you need to invest in Asia,
Speaker 8: do business in the US, and holiday in Europe, and
Speaker 8: they want to get away from that. In the UK,
Speaker 8: it's slightly it is slightly different. We do not have
Speaker 8: the EUAI Act. We don't have the same ESG and
Speaker 8: DEI regulations that they have in Europe that those particular
Speaker 8: participants were complaining about. We're starting to I'm trying to
Speaker 8: find our footing in terms of what the AAR regulation
Speaker 8: is going to look like. Here in the UK, we
Speaker 8: have seen again the talent flow as well, some evidence
Speaker 8: that talent is being drawn to the UK from the
Speaker 8: US in small numbers, but some venture counselors I've spoken
Speaker 8: to have said that as a result of the politics
Speaker 8: of the US, we're seeing some of that talent move
Speaker 8: to the UK. So we're benefiting from that. But talent
Speaker 8: is another key piece of this because you can have
Speaker 8: investors and you can have founders, but then finding the people,
Speaker 8: the CFOs and the coos to actually implement that strategy
Speaker 8: that is proving a challenge that kind of talent. There's
Speaker 8: still a shortage there when it.
Speaker 3: Come k Yeah, and the UK doesn't often perform well
Speaker 3: when it comes to management in the UK if you
Speaker 3: look at the kind of indices and yeah, we've you know,
Speaker 3: the government here really wants Oxford and Cambridge in that
Speaker 3: arc there to be a kind of Silicon Valley esque,
Speaker 3: don't they. But look on again on this on the
Speaker 3: big picture, the UK and Europe have to compete with
Speaker 3: the US and China when it comes to kind of
Speaker 3: transformational technology, don't they.
Speaker 7: They do.
Speaker 8: They have to compete with real innovation in the Chinese market,
Speaker 8: not just from deep Sat, which of course created all
Speaker 8: those headlines, the large language model that is open source
Speaker 8: and that was much cheaper to build according to the
Speaker 8: team who run that. There's all sorts of innovations coming
Speaker 8: through from key tech players in China and it is
Speaker 8: a race right now between China and the US. That
Speaker 8: is where the race is at. Can Europe catch up?
Speaker 8: It remains a key question. We do have players large
Speaker 8: language model company called mistral over in France. Can the
Speaker 8: UK play Where is the value in this? Is the
Speaker 8: value in those larger language models or is it in
Speaker 8: the companies that are building the solutions on top of that,
Speaker 8: like eleven Labs, which does things like audio translation here
Speaker 8: in the UK. Is it in legal and finance? We're
Speaker 8: very strong of course in terms of financial services and
Speaker 8: legal services companies like Luminance AI, which does AI for
Speaker 8: the legal sector. Is that where our strength is rather
Speaker 8: than the foundation models? Where is the value? And that
Speaker 8: still remains a debate.
Speaker 3: This makes me laugh because months ago, Tommy, you were
Speaker 3: telling me about how important it was to understand how
Speaker 3: those apps work, Which kind of leads me to my
Speaker 3: last thought, which is that you're not just at London
Speaker 3: Tech Week, but you're also launching a brand new show
Speaker 3: covering all things tech. It's such an important time now
Speaker 3: more than ever. What are you going to hope to
Speaker 3: bring us.
Speaker 9: In that show?
Speaker 8: I don't think I can overstress what this moment is
Speaker 8: in terms of the significance. You look at the defense, space,
Speaker 8: you look at energy, you look at space technology. In
Speaker 8: all those areas the UK and Europe need to be
Speaker 8: stepping up. These changes are going to happen rapidly with
Speaker 8: all of those sectors. AI is going to be powering
Speaker 8: a lot of it, whether it is energy, defense or
Speaker 8: space tech, and what we hope to do with Bloomberg
Speaker 8: Tech Europe is to chart some of that invasion, talk
Speaker 8: about where they close the gap is and how we
Speaker 8: close that gap, and speak to some of the key leaders,
Speaker 8: whether it is Demsisabis, whether it is Arms CEO Rennie
Speaker 8: has who I'll be speaking to next week, and key funders,
Speaker 8: venture capitalists and key founders as well across Europe and
Speaker 8: the UK.
Speaker 3: I bet it's going to be a great show, and
Speaker 3: of course we'll have lots of those snippets of all
Speaker 3: of those great interviews on Bloomberg Radio.
Speaker 9: Thank you so much, Tom for being with me.
Speaker 3: Bloomberg's Tom McKenzie will have full coverage of all the
Speaker 3: key moments for you from London Tech Week across Bloomberg platforms.
Speaker 3: I'm Caline Hepge here in London. You can catch us
Speaker 3: every weekday morning for Bloomberg Daybreak you at the beginning
Speaker 3: at six am in London.
Speaker 9: That's one am on Wall Street.
Speaker 2: Tom, Thanks Caroline, And coming up on Bloomberg day Break weekend,
Speaker 2: we'll look ahead to some fresh economic data out of China.
Speaker 2: I'm Tom Busby and this is Bloomberg. This is Bloomberg
Speaker 2: day Break Weekend, our global look ahead at the top
Speaker 2: stories for investors in the coming week. I'm Tom Busby
Speaker 2: in New York. Last week we learned China's services activity
Speaker 2: expanded at a faster pace in May. It was a
Speaker 2: positive sign for the country as it looks to stabilize
Speaker 2: trade relations with the US following a call between Presidents
Speaker 2: Trump and She. This week, we'll get fresh data and
Speaker 2: a clearer view of the health of the world's second
Speaker 2: largest economy. For more, let's get to the host of
Speaker 2: the Daybreak Asia podcast, Doug Krisner.
Speaker 4: Tom. The trade truce between the US and China is
Speaker 4: a month old, and it appears to be on shaky ground.
Speaker 4: Distrust between Washington and Beijing is running deep, and the
Speaker 4: question is whether a talk between Presidents Trump and She
Speaker 4: will produce a positive outcome. So how well is the
Speaker 4: Chinese economy holding up under the weight of this trade conflict.
Speaker 4: We'll get some insight in the week ahead with readings
Speaker 4: on Chinese exports, as well as industrial production and retail sales,
Speaker 4: to name a few. Joining me now for a closer
Speaker 4: look at the broader Chinese economy is John lou. He
Speaker 4: is Bloomberg Executive editor for Greater China, John joins us
Speaker 4: from our studios in Beijing. Good of you to make
Speaker 4: time to chat with me. There's a lot to cover here,
Speaker 4: but can we just start with kind of a summary
Speaker 4: of how you see the macro in China right now.
Speaker 10: I would describe it as being relatively stable, but in
Speaker 10: a relatively weak state. So I think the data that
Speaker 10: we've gotten as it refers to manufacturing, as it refers
Speaker 10: to trade, has shown that the economy has taken a
Speaker 10: hit from the tariffs imposed by the United States. We
Speaker 10: saw a pretty sharp drop off in shipments to the
Speaker 10: United States, a twenty percent decline in exports in the
Speaker 10: month of April. As we understand it, after the the
Speaker 10: sort of detent that came together in Geneva, trade did
Speaker 10: pick up. So we are expecting to see better trade
Speaker 10: numbers for the month of May because American importers are
Speaker 10: trying to get their goods in while the getting was good,
Speaker 10: but still we're expecting inflation factory gate prices to remain
Speaker 10: weak in May. That speaks to domestic consumption, domestic demand
Speaker 10: still not picking up.
Speaker 4: We had comments recently from Treasury Secretary Scott Bessant saying
Speaker 4: that China needs to shift to a more consumption led
Speaker 4: economy to help ease global imbalances. It seems to be
Speaker 4: stating the obvious right now, what is the government in
Speaker 4: Beijing doing to try to address the issue of stronger
Speaker 4: domestic demand?
Speaker 10: So at a very high three thousand foot level, Beijing
Speaker 10: and Washington are in agreement on that. Chinese officials back
Speaker 10: ten fifteen years been saying the Chinese economy is unbalanced.
Speaker 10: It needs more domestic consumption, it needs to depend less
Speaker 10: on exports and investment. The problem is how to do
Speaker 10: that restructuring reconfiguration of what is the world's second biggest
Speaker 10: economy well over ten trillion dollars. How to do that
Speaker 10: without causing some hiccup and growth that would be destabilizing
Speaker 10: for the country. That is the problem. And so what
Speaker 10: we have instead seeing is it's much easier when growth
Speaker 10: is slow, when it's weak, for the government here in
Speaker 10: Beijing to double down on what has worked, and that
Speaker 10: has been manufacturing, that has been investment, that has been exports.
Speaker 10: And we've seen that through the course of COVID and
Speaker 10: in this most recent set of trade tensions that we've.
Speaker 4: Had deflation continues to be a huge problem. Are authorities
Speaker 4: worried about it reaching a dangerous level? Do you think?
Speaker 10: I think there's a lot of concern about deflation. I
Speaker 10: don't think we are at a point yet where it
Speaker 10: is causing alarm amongst policymakers. Here in Beijing. The PPI,
Speaker 10: the factory gate prices for Chinese companies, has been declining
Speaker 10: for the better part of three years. It speaks to
Speaker 10: Chinese companies not having the ability, the pricing ability when
Speaker 10: they're trying to offload, to get to distribute, to sell
Speaker 10: their products. That speaks to excess capacity in the Chinese economy.
Speaker 10: That's the result of trade barriers on one hand, but
Speaker 10: also the real estate problems that have happened here and
Speaker 10: there being a weakness and domestic demand. So there is worry,
Speaker 10: but we are still not at a level where I
Speaker 10: think it's going to trigger the Chinese government to go
Speaker 10: into overdrive stimulus mode and start churning out new policies
Speaker 10: to try and address it.
Speaker 4: One of the things that I think Beijing would like
Speaker 4: to have happen as part of any negotiation in dealing
Speaker 4: with the trade war, if we can call it that
Speaker 4: certainly the situation with these very very drastic tariffs is
Speaker 4: some type of relaxation when it comes to X controls
Speaker 4: on high technology. How is the high tech sector and
Speaker 4: I use that term very broadly, John, how is it
Speaker 4: performing in China right now?
Speaker 10: So? I think we've seen some breakthroughs in twenty twenty five.
Speaker 10: Deep Seek is probably the best known of those. There
Speaker 10: have been some breakthroughs in terms of robotics here in China,
Speaker 10: and so I think the state of the Chinese Chinese
Speaker 10: technology at the moment is it is still able to
Speaker 10: be innovative and come up with new products. The problem,
Speaker 10: I think is scale. How quickly can China scale AI applications?
Speaker 10: How quickly can China scale robotics? And I think this
Speaker 10: is where the technology, the limitations that the United States
Speaker 10: has placed on Chinese access to technology, I think this
Speaker 10: is where that comes in and starts to hurt the
Speaker 10: Chinese economy. If China could get its hands on more
Speaker 10: Nvidia chips, for example, it could roll out AI at
Speaker 10: a much larger scale than what it's been able to
Speaker 10: do now. And so there is a eagerness and interest
Speaker 10: in Beijing to have some of these technology curves removed.
Speaker 10: But at the same time, I think you have also
Speaker 10: seen Beijing trying to use its leverage when it comes
Speaker 10: to rare earth, when it comes to critical minerals and
Speaker 10: how that affects technology companies and manufacturers in the United
Speaker 10: States as a way to try and bring that issue
Speaker 10: onto the table. And so I think it is ultimately
Speaker 10: going to be a negotiation between the two.
Speaker 4: Governments to put a finer point on some of the
Speaker 4: controls that the US has established. When you look at
Speaker 4: a company like Huawei, are they moving closer to being
Speaker 4: able to compete with a company like in Nvidia when
Speaker 4: it comes to those very sophisticated AI chips.
Speaker 10: So I think this is where the issue of scale
Speaker 10: comes into play. Huawei can design some of the world's
Speaker 10: most leading AI chips. They can produce a few of them,
Speaker 10: you know, at a time, small lots. The problem becomes
Speaker 10: they cannot produce large amounts at economically very viable prices
Speaker 10: because they don't have access to the latest chip manufacturing technology,
Speaker 10: the things that TSMC has, the things that Nvidia has
Speaker 10: access to, and that has been the real hurdle for
Speaker 10: Chinese technology, Chinese Semiconductor's Chinese AI and that is why
Speaker 10: Beijing really wants some relaxation in these curves that the
Speaker 10: United States has put in.
Speaker 4: So I mentioned a moment ago the monthly activity data
Speaker 4: industrial production, retail sales to critical data points. Talk to
Speaker 4: me a little bit about the health of the Chinese
Speaker 4: consumer right now and what we may see in that
Speaker 4: retail sales number.
Speaker 10: So we've just come off of a holiday at the
Speaker 10: beginning of May, a three day weekend here for the
Speaker 10: Dragon Boat Festival, and that showed while overall consumer spending
Speaker 10: during the holiday was up, the spending per trip was down.
Speaker 10: And so I think it speaks to the fact that
Speaker 10: people are still going out there, are going to lunches
Speaker 10: and dinners, and they're going shopping, and they're going out to,
Speaker 10: you know, have a holiday, but they're doing it less.
Speaker 10: And when they're doing it, they're trying to spend a
Speaker 10: little less. They're holding onto their wallets a little tighter.
Speaker 10: And that is still I think, ultimately a reflection of
Speaker 10: the real estate crash that we've had here in China,
Speaker 10: the fact that so much of household wealth is tied
Speaker 10: up in the home and when people see the value
Speaker 10: of their homes go down, they feel poorer themselves, even
Speaker 10: if their financial situation hasn't actually changed.
Speaker 4: Are consumers caught up in a lot of the rhetoric
Speaker 4: around the trade ward do they have a point of
Speaker 4: view when it comes to what Donald Trump and the
Speaker 4: Trump administration is imposing on China.
Speaker 10: So I think this is a it goes two ways.
Speaker 10: On one hand, it is affecting consumer confidence. The average
Speaker 10: individual here in China understands that trade is an important
Speaker 10: part of the economy, and if China is not able
Speaker 10: to sell products into the United States, that's going to
Speaker 10: make the job market less stable. It's going to make
Speaker 10: it weaker. People are going to be a little bit
Speaker 10: more concerned about their future prospects, and so as a result,
Speaker 10: they may constrain some of their discretionary spending. But at
Speaker 10: the same time, one of the other effects has been
Speaker 10: people broadly see the tariffs as being American aggression, and
Speaker 10: that has resulted in a lot of on the ground
Speaker 10: support Foreshiugen Ping and for the government here to retaliate,
Speaker 10: to play hardball with us, and so it kind of
Speaker 10: creates a situation where people are feeling the effect and
Speaker 10: feeling the hit in terms of confidence, But at the
Speaker 10: same time, ready to continue going on, ready to continue
Speaker 10: fighting the strang ward to.
Speaker 4: What extent is the government working to try to create
Speaker 4: new markets right now to compensate for the fact that
Speaker 4: demand coming from the US may be much less.
Speaker 10: So I think April was a very interesting month as
Speaker 10: an ill of that. In April, Chinese exports to the
Speaker 10: US fell by twenty percent, but Chinese exports to India
Speaker 10: to Southeast Asia increase by twenty percent. And so there
Speaker 10: is an effort by the Chinese government, by Chinese companies
Speaker 10: to look for new markets where they can send their
Speaker 10: products if those products cannot go to the United States.
Speaker 10: That is one thing that they're doing now. The question
Speaker 10: is how long can that last? Because if companies are
Speaker 10: diverting all those products about half a trillion dollars worth
Speaker 10: of exports to the United States in twenty twenty four,
Speaker 10: if that's all or much of that is being diverted
Speaker 10: to other markets, much smaller markets in Southeast Asia and
Speaker 10: India relative to the United States, how long will those
Speaker 10: markets allow those products to come in freely without they
Speaker 10: themselves putting up trade barriers. And so this is a
Speaker 10: question of yes, this is working now, but how long
Speaker 10: will it work into the future.
Speaker 4: What about the trading partners that China already relies heavily on,
Speaker 4: and I'm thinking of South Korea, Japan to some extent,
Speaker 4: certainly Australia. How are those relationships.
Speaker 10: They are tense because part of what is happening in
Speaker 10: these negotiations between the United States and South Korea and
Speaker 10: Japan and Australia is this push to try and get
Speaker 10: those countries to cut off Chinese sort of Chinese manufacturers
Speaker 10: sending their goods to South Korea, for example, so that
Speaker 10: they can be on sent to the United States. We
Speaker 10: saw that when the US reached an agreement with the UK.
Speaker 10: We've seen that with the US pushing for Mexico to
Speaker 10: stop Chinese manufacturers from doing that. And so there is
Speaker 10: an effort to buy the United States to put pressure
Speaker 10: on these allies to cut themselves off from the Chinese
Speaker 10: supply chain. China, on its part, is putting pressure on
Speaker 10: those same countries to not do that, and so it's
Speaker 10: actually caused a lot of these countries to be put
Speaker 10: in a very difficult position and they're having to play
Speaker 10: a balance that none of them wants to be in.
Speaker 4: John, Thank you so much much for helping us set
Speaker 4: the stage as we look forward to the data in
Speaker 4: the coming week on exports along with industrial production and
Speaker 4: retail sales. He's John Lou Bloomberg, Executive Editor for Greater China,
Speaker 4: and I'm Doug Chrisner. You can catch us weekdays for
Speaker 4: the Daybreak Asia podcast. It's available wherever you get your podcast.
Speaker 2: Tom, Thank you Doug. And that does it for this
Speaker 2: edition of Bloomberg day Break Weekend. Join us again Monday
Speaker 2: morning at five am Wall Street Time for the latest
Speaker 2: on markets overseas and the news you need to start
Speaker 2: your day. I'm Tom Busby. Stay with us. Top stories
Speaker 2: and global business headlines are coming up right now.