1 00:00:00,240 --> 00:00:07,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:10,440 --> 00:00:13,119 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:13,200 --> 00:00:15,360 Speaker 2: the top stories of the coming week from our Daybreak 4 00:00:15,360 --> 00:00:18,360 Speaker 2: anchors all around the world. Straight Ahead on the program, 5 00:00:18,360 --> 00:00:21,440 Speaker 2: I'll look ahead to some key inflation data in the US. 6 00:00:21,800 --> 00:00:23,319 Speaker 2: I'm John Tucker, I in New York. 7 00:00:23,400 --> 00:00:26,040 Speaker 3: I'm Caline Hepca in London, where we discussed in European 8 00:00:26,079 --> 00:00:30,280 Speaker 3: Central Bank as it grapples with an uncertain inflation landscape. 9 00:00:30,360 --> 00:00:34,160 Speaker 4: I'm Doug Christner looking ahead to Constitution Day in South 10 00:00:34,240 --> 00:00:37,760 Speaker 4: Korea and what it means for military hardware makers. 11 00:00:38,360 --> 00:00:42,400 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 12 00:00:42,400 --> 00:00:46,120 Speaker 1: eleven three YEO New York, Bloomberg ninety nine to one, Washington, DC, 13 00:00:46,640 --> 00:00:51,760 Speaker 1: Bloomberg ninety two nine Boston, DAB Digital Radio, London, Syrias 14 00:00:51,920 --> 00:00:55,440 Speaker 1: XM one twenty one, and around the world on Bloomberg Radio, 15 00:00:55,480 --> 00:00:57,640 Speaker 1: dot Com and the Bloomberg Business App. 16 00:01:02,600 --> 00:01:05,480 Speaker 2: Hi, everybody, I'm John Tucker, and let's start today's program 17 00:01:05,520 --> 00:01:08,959 Speaker 2: with some key inflation data in the US. We're to 18 00:01:09,000 --> 00:01:12,640 Speaker 2: get to consumer price index information for the month of 19 00:01:12,800 --> 00:01:17,080 Speaker 2: June on Tuesday, and also producer prices that comes on 20 00:01:17,200 --> 00:01:19,920 Speaker 2: Wednesday and for more I have this data may impact 21 00:01:19,959 --> 00:01:23,000 Speaker 2: FED policy. We're joined by Stuart Paul, the US economist 22 00:01:23,120 --> 00:01:27,360 Speaker 2: with Bloomberg Economics. Thanks first, I by today appreciate it. 23 00:01:28,200 --> 00:01:32,800 Speaker 2: Should I be more concerned about inflation or the job markets? 24 00:01:32,840 --> 00:01:36,360 Speaker 2: The two mandates for the Federal Reserve. 25 00:01:36,560 --> 00:01:39,399 Speaker 5: Well, the FED is going to be more concerned about inflation. 26 00:01:39,520 --> 00:01:42,200 Speaker 5: But fortunately for the Fed, we're going to have a 27 00:01:42,319 --> 00:01:46,039 Speaker 5: decline in the monthly headline CPI reading when we get 28 00:01:46,040 --> 00:01:49,760 Speaker 5: the June CPI requires that, well, gasoline prices fell about 29 00:01:49,840 --> 00:01:51,880 Speaker 5: nine percent during the month of June, as. 30 00:01:52,080 --> 00:01:54,000 Speaker 2: You haven't been to my gas station. 31 00:01:54,680 --> 00:01:57,240 Speaker 5: Well already, Now that we're moving through the month of July, 32 00:01:57,360 --> 00:01:59,640 Speaker 5: now that we're seeing the end of the ceasfire and 33 00:01:59,680 --> 00:02:03,520 Speaker 5: some escalation in the Middle East, Yes, as we go forward, 34 00:02:03,760 --> 00:02:07,120 Speaker 5: we will see a little bit of additional headline inflation pressures. 35 00:02:07,120 --> 00:02:10,040 Speaker 5: But for this June CPI report, the headline is going 36 00:02:10,080 --> 00:02:12,720 Speaker 5: to tick down just a little bit. The core I 37 00:02:12,800 --> 00:02:15,200 Speaker 5: expect to be pretty core. 38 00:02:15,440 --> 00:02:18,040 Speaker 2: Is just to explain it for everybody again, core is 39 00:02:18,240 --> 00:02:21,160 Speaker 2: you know, you strip out the stuff that's volatile. 40 00:02:20,840 --> 00:02:24,160 Speaker 5: That's right, So the core inflation measure strips out food 41 00:02:24,200 --> 00:02:27,240 Speaker 5: and energy. Those are things that have prices that are 42 00:02:27,240 --> 00:02:29,600 Speaker 5: determined in global markets and that are subject to a 43 00:02:29,639 --> 00:02:31,720 Speaker 5: lot of factors that are far beyond the FEDS control, 44 00:02:31,840 --> 00:02:35,440 Speaker 5: including things like war, things like the weather, even weather 45 00:02:35,520 --> 00:02:39,399 Speaker 5: weighing on food prices or affecting food prices. So oftentimes 46 00:02:39,400 --> 00:02:41,120 Speaker 5: the FED will look to the core as more of 47 00:02:41,120 --> 00:02:44,160 Speaker 5: a sign of underlying price pressures. The core is going 48 00:02:44,200 --> 00:02:46,760 Speaker 5: to be a little bit more tame. It's still gonna 49 00:02:46,760 --> 00:02:49,560 Speaker 5: be positive. Unlike the headline. Headline is going to decline. 50 00:02:49,840 --> 00:02:51,799 Speaker 5: Core is going to be showing about zero point two 51 00:02:51,800 --> 00:02:55,880 Speaker 5: percent month on month, in part because of the World 52 00:02:55,880 --> 00:02:59,720 Speaker 5: Cup affecting prices for things like leisure and hospitality, food services, 53 00:02:59,760 --> 00:03:04,000 Speaker 5: and commodations. But we're also going to see some core 54 00:03:04,080 --> 00:03:09,000 Speaker 5: pressures coming from core goods, in particular those things that 55 00:03:09,000 --> 00:03:12,360 Speaker 5: are subject to the chip shortage, appliances and electronics for example. 56 00:03:13,000 --> 00:03:16,480 Speaker 2: Kevin Warsh, the new FED cheer, he's got a different 57 00:03:16,600 --> 00:03:22,120 Speaker 2: set of metrics that he goes by. He's also formed 58 00:03:22,120 --> 00:03:25,160 Speaker 2: a bunch of committees to give him some sort of 59 00:03:25,200 --> 00:03:28,520 Speaker 2: idea of how changes should be made within the FED. 60 00:03:28,840 --> 00:03:31,800 Speaker 2: How much is that going to impact Federal Reserve policy 61 00:03:32,000 --> 00:03:32,680 Speaker 2: going forward? 62 00:03:32,960 --> 00:03:36,280 Speaker 5: I think if anything, it's just going to lead to 63 00:03:36,320 --> 00:03:38,520 Speaker 5: a little bit of can kicking. The Fed is going 64 00:03:38,560 --> 00:03:41,720 Speaker 5: to be waiting on some of the output from these 65 00:03:41,840 --> 00:03:46,520 Speaker 5: five task forces that Kevin Walsh has convened. Yes, Kevin 66 00:03:46,560 --> 00:03:49,480 Speaker 5: Walsh does look at some of the official statistics with 67 00:03:49,520 --> 00:03:53,360 Speaker 5: a skeptical eye, and in part that's for good reason. 68 00:03:53,560 --> 00:03:57,440 Speaker 5: Shelter inflation is really lagging, So the disinflation we're seeing 69 00:03:57,480 --> 00:04:01,240 Speaker 5: in shelter isn't showing up as materially in the statistics 70 00:04:01,320 --> 00:04:03,440 Speaker 5: as it is in the real economy. And so I 71 00:04:03,440 --> 00:04:06,360 Speaker 5: could understand why he wants to convene these task forces 72 00:04:06,480 --> 00:04:08,320 Speaker 5: to look a little bit more critically about what's going 73 00:04:08,320 --> 00:04:13,080 Speaker 5: on in the real economy. But for policymakers it probably 74 00:04:13,120 --> 00:04:15,560 Speaker 5: just means that they're going to be waiting on some 75 00:04:15,600 --> 00:04:19,440 Speaker 5: additional ideas from these task forces and keeping any sort 76 00:04:19,480 --> 00:04:21,960 Speaker 5: of change in the policy rate on a hold, probably 77 00:04:22,200 --> 00:04:22,920 Speaker 5: through year end. 78 00:04:23,240 --> 00:04:25,840 Speaker 2: All right, So what's the betting right now from the 79 00:04:25,920 --> 00:04:28,800 Speaker 2: markets on what the Federal Reserve is going to do? 80 00:04:28,920 --> 00:04:33,040 Speaker 2: And maybe you can just parenthetically another question, how accurate 81 00:04:33,120 --> 00:04:33,800 Speaker 2: is that betting? 82 00:04:35,320 --> 00:04:35,520 Speaker 6: You know? 83 00:04:35,680 --> 00:04:36,280 Speaker 2: Historically? 84 00:04:37,120 --> 00:04:40,919 Speaker 5: Well, right now, right now, financial markets are pricing in 85 00:04:40,960 --> 00:04:45,200 Speaker 5: a hike well before the end of the year. That 86 00:04:45,320 --> 00:04:49,160 Speaker 5: pricing swings pretty drastically, So I'm hesitant to put too 87 00:04:49,240 --> 00:04:52,120 Speaker 5: much weight on market pricing. My job as an economist 88 00:04:52,160 --> 00:04:54,680 Speaker 5: is always to look for where the market might be wrong, 89 00:04:55,200 --> 00:04:57,600 Speaker 5: and I think that, if anything, the market is over 90 00:04:57,720 --> 00:05:01,440 Speaker 5: anticipating a hike before year end. Right now, we have 91 00:05:01,520 --> 00:05:05,160 Speaker 5: relatively a little labor market dynamism. We don't have any 92 00:05:05,200 --> 00:05:10,120 Speaker 5: sort of inflation pressures coming from the job market, from wages, 93 00:05:10,279 --> 00:05:13,720 Speaker 5: from income that's really what the FED would fear. Instead, 94 00:05:13,760 --> 00:05:15,880 Speaker 5: we sort of have these price pressures coming from somewhat 95 00:05:15,960 --> 00:05:20,440 Speaker 5: idiosyncratic factors like air fares, which we'll see in the PPI, 96 00:05:21,160 --> 00:05:24,839 Speaker 5: from financial services prices. We'll see that in the PPI 97 00:05:24,960 --> 00:05:28,360 Speaker 5: on Wednesday, from the chip shortage. Now, the Fed's a 98 00:05:28,360 --> 00:05:30,520 Speaker 5: little bit concerned about that one. We saw that in 99 00:05:30,560 --> 00:05:34,120 Speaker 5: the minutes just last week. And other than that, we're 100 00:05:34,160 --> 00:05:36,520 Speaker 5: seeing a little bit of inflation pressures in the core 101 00:05:36,680 --> 00:05:39,240 Speaker 5: for things that are affected by the World Cup. So 102 00:05:39,360 --> 00:05:41,960 Speaker 5: I think that markets are getting a little bit too 103 00:05:42,000 --> 00:05:44,280 Speaker 5: far ahead of themselves and expecting that hike before a 104 00:05:44,360 --> 00:05:47,040 Speaker 5: year end. I expect the FED to remain on hold 105 00:05:47,120 --> 00:05:47,960 Speaker 5: throughout the end of the year. 106 00:05:48,240 --> 00:05:50,680 Speaker 2: All right, thanks to Stuart Paul he as economist with 107 00:05:50,760 --> 00:05:53,880 Speaker 2: Bloomberg Economics, and let's take a look now at some 108 00:05:53,920 --> 00:05:56,160 Speaker 2: of the stocks making news in the week ahead. I'm 109 00:05:56,240 --> 00:05:59,479 Speaker 2: John Tucker and I'm joined by Matthew Griffin, the Bloomberg 110 00:05:59,560 --> 00:06:04,600 Speaker 2: equity supporter New earning season already Tuesday. We start with 111 00:06:05,279 --> 00:06:10,880 Speaker 2: Fortress Diamond. JP Morgan Chase is reporting earnings results, opening 112 00:06:10,880 --> 00:06:13,360 Speaker 2: their books to investors. What are you looking out for? 113 00:06:14,120 --> 00:06:17,400 Speaker 6: Well, the question for JP Morgan when they report, along 114 00:06:17,400 --> 00:06:21,080 Speaker 6: with several other banks, is going to be a microcosm 115 00:06:21,680 --> 00:06:26,960 Speaker 6: of the questions everyone has about the broader market. Analysts 116 00:06:26,960 --> 00:06:30,039 Speaker 6: expect strong earnings for the bank, but will that be 117 00:06:30,240 --> 00:06:34,560 Speaker 6: enough for investors. The average estimate is for trading revenue 118 00:06:34,640 --> 00:06:37,719 Speaker 6: of more than ten billion dollars. That's a little lower 119 00:06:37,760 --> 00:06:40,600 Speaker 6: than the record haul in the first quarter, but it's 120 00:06:40,640 --> 00:06:45,040 Speaker 6: about fifteen percent growth year over year. They expect adjusted 121 00:06:45,080 --> 00:06:49,120 Speaker 6: earnings per share to grow to more than five dollars 122 00:06:49,160 --> 00:06:54,200 Speaker 6: and sixty cents. A lot of tailwinds there. Geopolitical volatility 123 00:06:54,279 --> 00:06:58,039 Speaker 6: can be good for trading, the revival and IPOs is 124 00:06:58,120 --> 00:07:01,039 Speaker 6: good for investment banking. But if you look at what 125 00:07:01,200 --> 00:07:03,880 Speaker 6: Baird is saying about the banks group right now, they say, 126 00:07:03,960 --> 00:07:07,920 Speaker 6: we expect solid results, but the group is priced for it. 127 00:07:08,440 --> 00:07:10,920 Speaker 6: We don't want to chase this stock right now, and 128 00:07:10,920 --> 00:07:13,240 Speaker 6: there are likely to be a lot of companies in 129 00:07:13,280 --> 00:07:13,880 Speaker 6: this position. 130 00:07:14,480 --> 00:07:16,640 Speaker 2: So as you say, the things to look for trading 131 00:07:16,720 --> 00:07:20,280 Speaker 2: rabbitus should remain historically elevated, and also the investment banking 132 00:07:20,320 --> 00:07:24,520 Speaker 2: looks to stay resilient despite what we'll call market volatility. 133 00:07:24,880 --> 00:07:26,560 Speaker 2: Let's move on to the next one. You're taking a 134 00:07:26,640 --> 00:07:29,920 Speaker 2: look at United Airlines. They open their books to investors 135 00:07:30,000 --> 00:07:34,000 Speaker 2: on Wednesday. Remember that old joke how to become a 136 00:07:34,040 --> 00:07:37,840 Speaker 2: millionaire will first become a billionaire and then buy an airline. 137 00:07:38,440 --> 00:07:42,200 Speaker 6: Yes, said Airlines have had a beginning of the year 138 00:07:42,240 --> 00:07:45,160 Speaker 6: that might remind investors of that joke. Of course, this 139 00:07:45,280 --> 00:07:49,160 Speaker 6: stock plunged during the Iran War along with the rest 140 00:07:49,200 --> 00:07:54,080 Speaker 6: of the group, then when an explosive rally as tensions 141 00:07:54,080 --> 00:07:57,320 Speaker 6: de escalated, up more than fifty percent from late May 142 00:07:57,440 --> 00:08:01,320 Speaker 6: to the end of last month. The question now that 143 00:08:01,400 --> 00:08:04,760 Speaker 6: Wall Street is asking is Okay, crude prices have come down. 144 00:08:05,200 --> 00:08:08,240 Speaker 6: What's going to happen to ticket prices for these airlines? 145 00:08:08,280 --> 00:08:10,000 Speaker 6: Are they going to be able to hang on to 146 00:08:10,680 --> 00:08:14,680 Speaker 6: some of the increases, and so of course earnings for 147 00:08:14,720 --> 00:08:18,040 Speaker 6: the most recent quarter are going to be important. Analysts 148 00:08:18,080 --> 00:08:20,840 Speaker 6: are looking for a dollar eighty four cents a share 149 00:08:20,880 --> 00:08:25,640 Speaker 6: excluding some items, but especially any forecast for the third 150 00:08:25,760 --> 00:08:28,360 Speaker 6: quarter is going to be important. That's where these questions 151 00:08:28,360 --> 00:08:32,400 Speaker 6: about pricing might show up. And expectations there are a 152 00:08:32,480 --> 00:08:35,600 Speaker 6: lot higher. Wall Street looking for three dollars fifty nine 153 00:08:35,640 --> 00:08:39,640 Speaker 6: cents a share. Now City expects airlines to beat consensus 154 00:08:39,720 --> 00:08:42,199 Speaker 6: across the board, and they say United is one of 155 00:08:42,240 --> 00:08:45,640 Speaker 6: the ones that might get rewarded for this. They're talking 156 00:08:45,679 --> 00:08:49,959 Speaker 6: about that guidance there. They say, you know, these major 157 00:08:50,000 --> 00:08:52,439 Speaker 6: airlines in the US, they weathered the shock well from 158 00:08:52,480 --> 00:08:55,480 Speaker 6: the war, So that means investors are likely to want 159 00:08:55,480 --> 00:08:58,600 Speaker 6: to return to the stock if they get any upside. 160 00:08:58,760 --> 00:09:01,559 Speaker 2: And here's my big insight. Airlines use a lot of 161 00:09:01,600 --> 00:09:05,520 Speaker 2: fuel JEFF fuel, and that's been expensive. The increase in 162 00:09:05,720 --> 00:09:08,920 Speaker 2: fares that they had did that more than make up 163 00:09:09,000 --> 00:09:11,240 Speaker 2: for the rising cost of JEFT fuel. 164 00:09:12,200 --> 00:09:16,240 Speaker 6: It is likely that it hasn't entirely made up for 165 00:09:16,360 --> 00:09:22,120 Speaker 6: it yet. United said that they expected roughly half of 166 00:09:22,160 --> 00:09:25,720 Speaker 6: the increase in fuel costs to be accounted for by 167 00:09:25,800 --> 00:09:28,920 Speaker 6: higher fares in the most recent quarter. We'll see what 168 00:09:28,960 --> 00:09:32,480 Speaker 6: they say about that, however, and they were making these 169 00:09:32,480 --> 00:09:37,800 Speaker 6: comments when the Iran conflict was, you know, much closer 170 00:09:38,200 --> 00:09:41,800 Speaker 6: to the front of mind for investors. Even then they 171 00:09:41,800 --> 00:09:44,400 Speaker 6: were saying that by the third quarter they expected that 172 00:09:44,559 --> 00:09:48,280 Speaker 6: to climb closer to making up all of that gap. 173 00:09:48,520 --> 00:09:51,480 Speaker 6: So again, we haven't gotten an update from the company 174 00:09:51,520 --> 00:09:53,640 Speaker 6: in a couple of months on this, and that's something 175 00:09:53,679 --> 00:09:55,920 Speaker 6: investors are likely to be watching for. 176 00:09:56,320 --> 00:09:59,319 Speaker 2: And then a Netflix they're going to report on Thursday. 177 00:09:59,720 --> 00:10:03,240 Speaker 2: Stop is down what's something like sixteen percent since the 178 00:10:03,280 --> 00:10:05,760 Speaker 2: start of the year. I got to wonder if this 179 00:10:05,840 --> 00:10:08,520 Speaker 2: company is losing some of its mojo. 180 00:10:10,200 --> 00:10:13,720 Speaker 6: Well, yes, this is a stock that really hasn't worked 181 00:10:13,840 --> 00:10:17,679 Speaker 6: and one that is dogged by a lot of questions 182 00:10:17,760 --> 00:10:21,520 Speaker 6: right now about its own financials and also about disruption 183 00:10:21,640 --> 00:10:24,280 Speaker 6: from AI. That's something that our colleagues over at Bloomberg 184 00:10:24,280 --> 00:10:29,199 Speaker 6: Intelligence have focused on. Will people watch AI generated entertainment 185 00:10:29,760 --> 00:10:31,240 Speaker 6: instead of you know, Netflix. 186 00:10:31,800 --> 00:10:33,600 Speaker 2: I can just imagine what that's going to be like 187 00:10:33,880 --> 00:10:35,880 Speaker 2: AI generated and entertainment. 188 00:10:36,280 --> 00:10:39,559 Speaker 6: Yes, I'm sure it'll be real high quality stuff, but 189 00:10:39,600 --> 00:10:42,200 Speaker 6: you know, people love short form video, you know, open 190 00:10:42,240 --> 00:10:46,120 Speaker 6: AI Sora didn't catch on, but we'll see what happens. 191 00:10:46,160 --> 00:10:49,400 Speaker 6: So this is maybe an underrated AI loser. We talk 192 00:10:49,440 --> 00:10:52,520 Speaker 6: a lot about these software names for Netflix though. In 193 00:10:52,559 --> 00:10:55,560 Speaker 6: this quarter, investors are going to be looking for anything 194 00:10:55,600 --> 00:10:59,240 Speaker 6: that could spark a turnaround. Analysts expect results about in 195 00:10:59,400 --> 00:11:03,360 Speaker 6: line with their guidance. So that's revenue of twelve point 196 00:11:03,400 --> 00:11:06,840 Speaker 6: five seven billion dollars and earnings per share of seventy 197 00:11:06,880 --> 00:11:10,280 Speaker 6: eight cents. That was a guide that disappointed investors when 198 00:11:10,280 --> 00:11:12,160 Speaker 6: the company gave it. So what they'll want to know 199 00:11:12,280 --> 00:11:16,000 Speaker 6: now is whether Netflix was being conservative. There is their 200 00:11:16,120 --> 00:11:22,320 Speaker 6: potential upside that being said, when the questions are big 201 00:11:23,080 --> 00:11:26,800 Speaker 6: like this AI disruption, whether the World Cup is going 202 00:11:26,840 --> 00:11:27,920 Speaker 6: to affect viewers. 203 00:11:27,679 --> 00:11:30,040 Speaker 2: Question, So I didn't even think about that FIFA drew 204 00:11:30,040 --> 00:11:31,839 Speaker 2: away viewers from Netflix. 205 00:11:32,440 --> 00:11:36,400 Speaker 6: We don't know yet. That's something that again Bloomberg Intelligence though, 206 00:11:36,400 --> 00:11:41,400 Speaker 6: has raised as a potential issue for investors, and of 207 00:11:41,400 --> 00:11:45,040 Speaker 6: course World Cup underway now, so maybe the company will 208 00:11:45,200 --> 00:11:47,920 Speaker 6: speak to that. So the stock here has gone in 209 00:11:48,000 --> 00:11:50,920 Speaker 6: the opposite direction of a lot of the market. But 210 00:11:50,960 --> 00:11:53,600 Speaker 6: the question is kind of the same. Even if Netflix 211 00:11:53,679 --> 00:11:56,200 Speaker 6: beats expectations, is that going to be enough here? 212 00:11:56,400 --> 00:11:59,840 Speaker 2: How much pricing power do they still enjoy at Netflix. 213 00:12:00,520 --> 00:12:06,280 Speaker 6: Well, they have raised prices recently while also introducing some 214 00:12:06,360 --> 00:12:09,720 Speaker 6: of these lower price options such as ads supported tiers, 215 00:12:09,760 --> 00:12:13,640 Speaker 6: So it seems like their strategy has been to exercise 216 00:12:13,679 --> 00:12:17,160 Speaker 6: pricing power with consumers who are willing to pay, while 217 00:12:17,200 --> 00:12:23,520 Speaker 6: also trying to keep everyone else on board. However, consumers 218 00:12:23,559 --> 00:12:26,280 Speaker 6: have a lot of other options now, so investors' minds 219 00:12:26,320 --> 00:12:30,800 Speaker 6: are constantly on whether each individual price increase is going 220 00:12:30,800 --> 00:12:31,560 Speaker 6: to be the final. 221 00:12:31,360 --> 00:12:34,800 Speaker 2: Straw make my own AI content to compete with Netflix. 222 00:12:35,400 --> 00:12:38,479 Speaker 2: Matt thanks a lot, our thanks to Matthew Griffin, Bloomberg 223 00:12:38,559 --> 00:12:41,840 Speaker 2: Equities reporter with is Today and just hand on Bloomberg 224 00:12:41,880 --> 00:12:44,920 Speaker 2: Daybreak Weekend. We're going to talk about the European Central 225 00:12:44,920 --> 00:12:49,760 Speaker 2: Bank as it grapples with an uncertain inflation landscape. I'm 226 00:12:49,840 --> 00:13:04,720 Speaker 2: John Tucker, and this is Bloomberg. This is Bloomberg Daybreak Weekend, 227 00:13:04,760 --> 00:13:07,479 Speaker 2: our global look ahead of the top stories for investors 228 00:13:07,480 --> 00:13:09,920 Speaker 2: in the coming week. I'm John Tucker in New York. 229 00:13:10,240 --> 00:13:12,760 Speaker 2: Up later in the program, we looked to South Korea, 230 00:13:13,160 --> 00:13:16,960 Speaker 2: where Constitution Day will be celebrated in the week ahead. 231 00:13:17,520 --> 00:13:19,480 Speaker 2: But first in the coming days, we're going to get 232 00:13:19,480 --> 00:13:22,720 Speaker 2: the latest set of data for the European Central Bank 233 00:13:22,760 --> 00:13:25,880 Speaker 2: before it gears up for its July meeting. With inflation 234 00:13:25,960 --> 00:13:29,240 Speaker 2: fears on the rise again and as conflict returns the 235 00:13:29,280 --> 00:13:33,280 Speaker 2: Middle East, how will policy makers navigate the situation formorrow? 236 00:13:33,360 --> 00:13:36,080 Speaker 2: Let's go to London and bring in Bloomberg Daybreak, Europe 237 00:13:36,080 --> 00:13:38,839 Speaker 2: Anchor Caroline Hepger John. 238 00:13:38,760 --> 00:13:42,600 Speaker 3: ECB policy makers were unanimous in backing last month's twenty 239 00:13:42,640 --> 00:13:46,000 Speaker 3: five basis point hike as they saw surging oil prices 240 00:13:46,040 --> 00:13:49,560 Speaker 3: spreading throughout the economy. But then the event peace deal 241 00:13:49,600 --> 00:13:53,840 Speaker 3: and surprisingly sharp slow down in inflation sowed division over 242 00:13:53,880 --> 00:13:56,520 Speaker 3: what to do next. Fast forward to now. In fresh 243 00:13:56,520 --> 00:14:00,560 Speaker 3: comments when President Trump have renewed concerns that fighting could 244 00:14:00,559 --> 00:14:04,000 Speaker 3: again raise oil prices and drive inflation up. At the 245 00:14:04,040 --> 00:14:07,240 Speaker 3: recent NATO summit, the President said that he thought the 246 00:14:07,280 --> 00:14:09,960 Speaker 3: ceasefar with Iran was over and a waste of time. 247 00:14:10,559 --> 00:14:13,240 Speaker 3: The US launched fresh strikes on the country and revoked 248 00:14:13,280 --> 00:14:16,720 Speaker 3: a waiver that allowed the sale of Iranian oil. Any 249 00:14:17,000 --> 00:14:21,040 Speaker 3: rebound though in energy prices, will reinforce the expectations that 250 00:14:21,080 --> 00:14:24,200 Speaker 3: the US Federal Reserve may keep interest rates higher for longer. 251 00:14:24,480 --> 00:14:27,680 Speaker 3: The recent FED minutes revealed that to say, few officials 252 00:14:27,880 --> 00:14:30,960 Speaker 3: saw a case for a rate hike in June. Speaking 253 00:14:30,960 --> 00:14:34,440 Speaker 3: to Blomberg recently at the Excellent Province Economic Conference, the 254 00:14:34,440 --> 00:14:38,680 Speaker 3: ECB Governing Council member Emmanuel Mulla reference data showing that 255 00:14:38,720 --> 00:14:42,840 Speaker 3: inflation had eased with the slump in oil prices, but 256 00:14:43,080 --> 00:14:48,440 Speaker 3: that uncertain backdrop means a complicated picture for ECB officials. 257 00:14:48,720 --> 00:14:51,880 Speaker 3: Peter Kinsella is head of Investment Services for the UK 258 00:14:52,000 --> 00:14:55,960 Speaker 3: at Union Bank Preve and he discussed the outlook that 259 00:14:56,080 --> 00:14:57,800 Speaker 3: now looks in flux. 260 00:14:58,000 --> 00:15:00,200 Speaker 7: The big shift redio I think that we've seen in 261 00:15:00,280 --> 00:15:03,840 Speaker 7: the I would say, basically in the fom CEE voting, 262 00:15:03,960 --> 00:15:07,440 Speaker 7: you know, nine members not voting but bringing their red 263 00:15:07,440 --> 00:15:09,720 Speaker 7: expectation on the dot plot for a twenty five bit 264 00:15:09,800 --> 00:15:12,520 Speaker 7: rate hike this year. It basically suggests that I would 265 00:15:12,520 --> 00:15:15,360 Speaker 7: say the overall momentum on the FMC is veering towards 266 00:15:15,360 --> 00:15:17,800 Speaker 7: a rate hike this year, which was a big shift 267 00:15:17,960 --> 00:15:21,240 Speaker 7: in January, I think, and clearly you've seen the marketing interpretation. 268 00:15:21,600 --> 00:15:23,680 Speaker 7: I think that also reflects what we've seen overnight and 269 00:15:23,720 --> 00:15:25,960 Speaker 7: in previous days with the old price and the latest 270 00:15:26,000 --> 00:15:29,040 Speaker 7: just ha gon Iran and really I suppose the market 271 00:15:29,120 --> 00:15:31,880 Speaker 7: is now saying, okay, that it's really veering towards really, 272 00:15:31,920 --> 00:15:33,400 Speaker 7: really meaningfully pricing and a rate. 273 00:15:33,400 --> 00:15:35,280 Speaker 8: Hike this year, okay, And we were talking with Trevor 274 00:15:35,280 --> 00:15:37,840 Speaker 8: Greatham in the last part of the program about whether 275 00:15:37,880 --> 00:15:40,600 Speaker 8: that is the thing that will be needed to burst 276 00:15:40,600 --> 00:15:43,640 Speaker 8: any bubble if you identify bubbles as being present in 277 00:15:43,680 --> 00:15:45,560 Speaker 8: these markets at the moment, Peter, I mean, is that 278 00:15:45,600 --> 00:15:48,560 Speaker 8: the way we're thinking about FED rate hikes right now, 279 00:15:49,200 --> 00:15:51,000 Speaker 8: not that not that that will be the driver, but 280 00:15:51,040 --> 00:15:53,120 Speaker 8: that that would be the thing that would stop I. 281 00:15:53,120 --> 00:15:56,040 Speaker 7: Would say no, I from Frank depends where whether you 282 00:15:56,080 --> 00:15:57,640 Speaker 7: believe we're in a bubble or not, which is a 283 00:15:57,640 --> 00:16:00,640 Speaker 7: different discussion. But I think given that market is only 284 00:16:00,680 --> 00:16:02,760 Speaker 7: priced in one rate hike, if you look further out 285 00:16:02,800 --> 00:16:04,640 Speaker 7: the curve, we've not really priced in an awful lot. 286 00:16:04,720 --> 00:16:06,840 Speaker 7: So the market's kind of saying right, one and done. 287 00:16:07,480 --> 00:16:09,520 Speaker 7: I think in order to cause real pain for the 288 00:16:09,520 --> 00:16:11,960 Speaker 7: equity market, you will have to price in a series 289 00:16:12,000 --> 00:16:14,520 Speaker 7: of further rate hikes, which at present doesn't seem. 290 00:16:14,320 --> 00:16:14,840 Speaker 6: To be the case. 291 00:16:15,240 --> 00:16:17,840 Speaker 3: That was Peter Kinsell, a head of investment services for 292 00:16:17,920 --> 00:16:21,200 Speaker 3: the UK at ingnon banker privet, speaking there to Bloomberg's 293 00:16:21,320 --> 00:16:24,640 Speaker 3: Vonnie Quinn. Join me now for more on the challenge 294 00:16:24,640 --> 00:16:27,880 Speaker 3: facing the ECB is Bloomberg's economics reporter William Harribin and 295 00:16:27,960 --> 00:16:31,360 Speaker 3: our senior reporter covering the ECB, Yanna Randau. Welcome to 296 00:16:31,400 --> 00:16:36,200 Speaker 3: both of you. The ECB's next decision on boring costs 297 00:16:36,320 --> 00:16:38,720 Speaker 3: is on the twenty third of July. We have a 298 00:16:38,720 --> 00:16:42,040 Speaker 3: few more days. What do you think is the mood though, 299 00:16:42,120 --> 00:16:47,400 Speaker 3: given this uncertain backdrop among ECB officials, now, oh, they. 300 00:16:47,320 --> 00:16:50,920 Speaker 9: Are definitely more concerned than they were maybe a week ago. 301 00:16:51,280 --> 00:16:53,720 Speaker 9: That essentially all has to do with Trump, and it 302 00:16:53,760 --> 00:16:57,520 Speaker 9: all has to do with oil prices because they decided 303 00:16:57,680 --> 00:17:00,640 Speaker 9: to hike grates in June. Everything was in a way 304 00:17:00,760 --> 00:17:06,280 Speaker 9: on track. Then the ceasefire happened, Peace negotiations seem to progress, 305 00:17:06,440 --> 00:17:10,679 Speaker 9: and you know, with that backdrop, they had maybe eased 306 00:17:10,720 --> 00:17:14,480 Speaker 9: a little bit off the real you know, panic levels 307 00:17:14,520 --> 00:17:17,359 Speaker 9: if you want, and we're a bit more confident that 308 00:17:17,440 --> 00:17:20,480 Speaker 9: the worst of the Iran shock may have already been over. 309 00:17:20,720 --> 00:17:24,879 Speaker 9: But now really it's all back on. They are worried 310 00:17:24,880 --> 00:17:28,680 Speaker 9: that inflation will stick above two percent for longer. They 311 00:17:28,680 --> 00:17:32,240 Speaker 9: are concerned about second round effects and you know, additional 312 00:17:32,400 --> 00:17:34,920 Speaker 9: rate hikes are very much on the agenda. 313 00:17:35,440 --> 00:17:38,080 Speaker 3: William, where do you think that leaves us in the 314 00:17:38,160 --> 00:17:40,439 Speaker 3: run up to the all important July meeting. 315 00:17:41,440 --> 00:17:44,560 Speaker 10: Just going back to what Jana said about how quickly 316 00:17:44,640 --> 00:17:47,399 Speaker 10: things are changing for these central bankers, it's a you know, 317 00:17:47,400 --> 00:17:49,680 Speaker 10: a few days is a long time in montrepolicy these 318 00:17:49,760 --> 00:17:55,760 Speaker 10: days in excellent Provence in France last week there was 319 00:17:56,720 --> 00:17:59,520 Speaker 10: this sort of sort of a Davos in the sunshine 320 00:18:00,160 --> 00:18:02,800 Speaker 10: in France, and it's usually a very hot and stressful 321 00:18:02,800 --> 00:18:05,400 Speaker 10: place to be, but everyone was actually very relaxed, including 322 00:18:05,880 --> 00:18:10,680 Speaker 10: fid in central bankers. I remember novel was even making 323 00:18:10,760 --> 00:18:15,040 Speaker 10: jokes about football rather than speaking about policy, and the 324 00:18:15,040 --> 00:18:17,800 Speaker 10: French central banker has said that, you know, we were 325 00:18:18,160 --> 00:18:20,480 Speaker 10: the ECB was now in a good position because things 326 00:18:20,560 --> 00:18:24,159 Speaker 10: were so much calmer on the in Iran, and as 327 00:18:24,240 --> 00:18:29,080 Speaker 10: Janna says, that's changed dramatically once again this week, and 328 00:18:29,440 --> 00:18:33,639 Speaker 10: so it sort of towards the July meeting. Though you asked, 329 00:18:34,600 --> 00:18:38,920 Speaker 10: it probably won't change that much because they're very data dependent. 330 00:18:39,680 --> 00:18:42,440 Speaker 10: I think they prefer to take decisions when they have 331 00:18:42,760 --> 00:18:44,800 Speaker 10: more forecasts and more information. 332 00:18:45,720 --> 00:18:48,400 Speaker 3: Yeah, absolutely, I mean, William, what do you think about 333 00:18:48,440 --> 00:18:51,560 Speaker 3: September then, and I think it's sort of an important 334 00:18:51,600 --> 00:18:54,280 Speaker 3: moment to take the temperature for central bankers, as you say, 335 00:18:54,320 --> 00:18:57,320 Speaker 3: and for the ECB in particular, because there has been 336 00:18:57,400 --> 00:18:59,639 Speaker 3: quite a bit of movement in recent days around the 337 00:18:59,680 --> 00:19:03,520 Speaker 3: ex spectations for rate hikes in Europe because of these 338 00:19:03,560 --> 00:19:06,680 Speaker 3: moves in the Middle East, the moves on oil prices 339 00:19:06,800 --> 00:19:10,240 Speaker 3: and what that means for inflation. So what's the thinking 340 00:19:10,320 --> 00:19:11,480 Speaker 3: now about September. 341 00:19:12,400 --> 00:19:14,640 Speaker 10: What's been interesting in the last few days is that 342 00:19:14,800 --> 00:19:17,040 Speaker 10: the oil price has bounced back up a bit, but 343 00:19:17,119 --> 00:19:20,720 Speaker 10: not the sort of dramatically as we had earlier, but 344 00:19:21,280 --> 00:19:25,680 Speaker 10: pricing for market expectations for a move in September have 345 00:19:26,119 --> 00:19:29,399 Speaker 10: shifted back up, and looking about eighty percent now chants 346 00:19:29,480 --> 00:19:34,159 Speaker 10: that none ECB will hike again in September. But you know, 347 00:19:34,800 --> 00:19:36,879 Speaker 10: I think we have to be very cautious about that 348 00:19:36,960 --> 00:19:42,480 Speaker 10: because the situation is so volatile. The markets are moving 349 00:19:43,720 --> 00:19:46,800 Speaker 10: almost you know, from hour to hour, depending what Trump says, 350 00:19:47,960 --> 00:19:52,000 Speaker 10: and so I expect that, you know, the central bankers 351 00:19:52,000 --> 00:19:56,360 Speaker 10: will remain cautious and keep saying that they are though 352 00:19:56,440 --> 00:20:00,679 Speaker 10: very much data dependent, even as everyone else starts to 353 00:20:00,960 --> 00:20:05,879 Speaker 10: think that September is probably more of a live meeting, Yana. 354 00:20:05,640 --> 00:20:09,080 Speaker 3: What do you think about September then, And also, as 355 00:20:09,200 --> 00:20:13,879 Speaker 3: you say William, that Trump can change the trajectory quite quickly. 356 00:20:13,920 --> 00:20:16,600 Speaker 3: I mean, we saw Brent crew jump more than six 357 00:20:16,640 --> 00:20:21,840 Speaker 3: percent higher over just two days just after President Chump's 358 00:20:21,960 --> 00:20:25,639 Speaker 3: NATO comments and those further strikes. Yano, what do you 359 00:20:25,680 --> 00:20:29,960 Speaker 3: think about the path for raids? And perhaps it is 360 00:20:30,000 --> 00:20:32,320 Speaker 3: September that markets will be most focused on. 361 00:20:33,040 --> 00:20:35,520 Speaker 9: It looks very likely that the ECB will raise rates 362 00:20:35,520 --> 00:20:39,880 Speaker 9: again after the summer in September, and that essentially has 363 00:20:39,880 --> 00:20:42,760 Speaker 9: to deal with the fact that as long as the 364 00:20:42,840 --> 00:20:48,000 Speaker 9: conflict keeps going on, that means all prices will remain elevated. 365 00:20:48,280 --> 00:20:51,240 Speaker 9: That means trade will be disrupted because we don't know 366 00:20:51,720 --> 00:20:54,560 Speaker 9: how shipping through the strait of Hormos is going to 367 00:20:54,800 --> 00:20:58,439 Speaker 9: play out, and all that translates into inflation risks for 368 00:20:58,480 --> 00:21:02,280 Speaker 9: the Eurozone and you know, higher for longer. On the 369 00:21:02,280 --> 00:21:07,320 Speaker 9: inflation side, it translates into uncertainty and potentially consumers and 370 00:21:07,720 --> 00:21:11,359 Speaker 9: businesses raising inflation expectations as well. So the longer this 371 00:21:11,440 --> 00:21:15,000 Speaker 9: conflict lasts, the more likely we will see also second 372 00:21:15,080 --> 00:21:19,159 Speaker 9: round effects. When you know, for example, workers ask for 373 00:21:19,280 --> 00:21:23,320 Speaker 9: more pay because prices are higher, and that has the 374 00:21:23,359 --> 00:21:26,320 Speaker 9: easy be concerned, and that would all speak in favor 375 00:21:26,359 --> 00:21:27,520 Speaker 9: of another red hike. 376 00:21:27,920 --> 00:21:30,280 Speaker 3: William, what do you think the ECB is looking at 377 00:21:30,320 --> 00:21:30,879 Speaker 3: most closely? 378 00:21:30,920 --> 00:21:31,040 Speaker 6: Then? 379 00:21:31,080 --> 00:21:34,400 Speaker 3: If we say data dependent, what are we thinking about 380 00:21:34,440 --> 00:21:39,800 Speaker 3: as policymakers are trying to navigate, you know, quite difficult circumstances. 381 00:21:39,840 --> 00:21:43,160 Speaker 10: Now, the key risk that they're looking for is second 382 00:21:43,240 --> 00:21:46,320 Speaker 10: round effects, so whether this starts turning up in whether 383 00:21:46,400 --> 00:21:50,399 Speaker 10: the increased price pressures start turning up in wage demands. 384 00:21:51,400 --> 00:21:56,400 Speaker 10: They're also very watching very closely for core inflation, so 385 00:21:57,000 --> 00:22:00,720 Speaker 10: services in particular, to see if the end direct effects 386 00:22:00,960 --> 00:22:04,119 Speaker 10: are spreading more than more than they might have anticipated. 387 00:22:05,359 --> 00:22:08,760 Speaker 10: And even within you know, some economists say even within 388 00:22:08,880 --> 00:22:12,920 Speaker 10: like services inflation, they should be looking at the kind 389 00:22:12,920 --> 00:22:15,880 Speaker 10: of services that are just adjacent to energy and might 390 00:22:16,000 --> 00:22:19,240 Speaker 10: move up very quickly like I don't know, airline tickets, 391 00:22:19,240 --> 00:22:21,640 Speaker 10: but could also come down very quickly. But then other 392 00:22:21,720 --> 00:22:25,800 Speaker 10: services like business services that would be stickier. So they 393 00:22:25,840 --> 00:22:29,480 Speaker 10: really have to pick through the data very very carefully. 394 00:22:29,880 --> 00:22:34,919 Speaker 10: Here in France, the central Bank does a survey of 395 00:22:35,480 --> 00:22:39,119 Speaker 10: business pricing, so they'll be looking at small sort of 396 00:22:39,280 --> 00:22:42,080 Speaker 10: like bits of data like that, but so far, you know, 397 00:22:42,160 --> 00:22:46,720 Speaker 10: that indicates sure businesses are raising prices, but not as 398 00:22:46,840 --> 00:22:48,959 Speaker 10: much as they did in twenty twenty two. 399 00:22:49,320 --> 00:22:51,560 Speaker 3: Yeah, that's the Bank of France data is acme, isn't 400 00:22:51,600 --> 00:22:54,400 Speaker 3: it In the next few days, well, William, I think 401 00:22:54,400 --> 00:22:57,360 Speaker 3: it's also at moments like this, there's quite a lot 402 00:22:57,400 --> 00:23:00,359 Speaker 3: of chatter about whether central banks will end u making 403 00:23:00,400 --> 00:23:02,879 Speaker 3: policy errors, and there's a bit of focus on that. 404 00:23:02,960 --> 00:23:06,080 Speaker 3: I mean, the ECB was the first of the group 405 00:23:06,119 --> 00:23:10,080 Speaker 3: of seven central banks to raise rates at the start 406 00:23:10,160 --> 00:23:12,240 Speaker 3: of the Iran war, so I'm sure there'll be lots 407 00:23:12,240 --> 00:23:15,560 Speaker 3: of focus also on making sure that each step is 408 00:23:15,920 --> 00:23:18,720 Speaker 3: the right one, and the worry about policy error. 409 00:23:19,200 --> 00:23:22,119 Speaker 10: To avoid sort of accusations of policy error. What the 410 00:23:22,400 --> 00:23:25,840 Speaker 10: ECB probably wants to do is avoid giving any forward 411 00:23:25,880 --> 00:23:30,520 Speaker 10: guidance because the more they give guidance, the more markets ads, 412 00:23:30,680 --> 00:23:34,280 Speaker 10: and then if something happens quickly, then they're sort of 413 00:23:34,320 --> 00:23:36,919 Speaker 10: locked into something that they didn't that. You know, when 414 00:23:36,920 --> 00:23:40,880 Speaker 10: the circumstances change, it's harder to avoid making a policy 415 00:23:40,960 --> 00:23:43,800 Speaker 10: error if you've already guided in one direction. Yeah. 416 00:23:43,840 --> 00:23:46,800 Speaker 3: It also comes, of course, when in the next few 417 00:23:46,840 --> 00:23:50,880 Speaker 3: days the new still fairly new Federal Reserve cheir Kevin 418 00:23:50,920 --> 00:23:54,320 Speaker 3: Walsh is scheduled to give his first semi annual Marsh 419 00:23:54,440 --> 00:23:59,800 Speaker 3: policy testimony before Congress. In terms of any reader cross 420 00:23:59,800 --> 00:24:03,320 Speaker 3: you out of the FED and into maybe this new 421 00:24:03,359 --> 00:24:05,960 Speaker 3: world of central banking where we get slightly less forward 422 00:24:06,000 --> 00:24:09,520 Speaker 3: guidance and less information from the Federal Reserve, is there 423 00:24:09,560 --> 00:24:13,080 Speaker 3: a reader cross into the ECB, or at least ECB 424 00:24:13,200 --> 00:24:15,920 Speaker 3: policy makers thinking about that and watching it. 425 00:24:16,880 --> 00:24:20,240 Speaker 9: I mean, where they agree is certainly on not offering 426 00:24:20,280 --> 00:24:22,920 Speaker 9: any forward guidance because Will Will was right to point 427 00:24:22,960 --> 00:24:25,919 Speaker 9: out they burned their fingers in the past, you know, 428 00:24:26,000 --> 00:24:30,400 Speaker 9: twenty twenty two jumps to mind, and really, you know, 429 00:24:30,560 --> 00:24:33,720 Speaker 9: what should they be guiding toward when they don't know 430 00:24:33,760 --> 00:24:38,160 Speaker 9: what's happening themselves. But where things may be slightly different 431 00:24:38,320 --> 00:24:42,000 Speaker 9: is that Kevin Warsh believes in, you know, letting the 432 00:24:42,040 --> 00:24:46,200 Speaker 9: market do its thing in a way and then cross 433 00:24:46,320 --> 00:24:49,560 Speaker 9: checking by the end of the policy meeting whether policy 434 00:24:49,560 --> 00:24:53,879 Speaker 9: makers and the market degree. So he seems to at 435 00:24:53,960 --> 00:24:57,080 Speaker 9: least to me, to build a little bit of you know, 436 00:24:57,280 --> 00:25:02,560 Speaker 9: movement volatility into the whole operation. Whereas the ECB very 437 00:25:02,600 --> 00:25:06,200 Speaker 9: clear at explaining how it will take decisions on which 438 00:25:06,240 --> 00:25:10,840 Speaker 9: basis it will take decisions. The president, Christine Laguard, she 439 00:25:11,280 --> 00:25:15,080 Speaker 9: described that at the SYNTHIDAC conference not too long ago 440 00:25:15,440 --> 00:25:19,439 Speaker 9: as framework guidance, and that's essentially explaining the reaction function. 441 00:25:19,920 --> 00:25:23,400 Speaker 9: So you know, the market, the policy makers, they're looking 442 00:25:23,440 --> 00:25:26,560 Speaker 9: at the same set of information, the same data, the 443 00:25:26,600 --> 00:25:32,200 Speaker 9: same input, and the market knows extremely well how policymakers 444 00:25:32,240 --> 00:25:34,479 Speaker 9: will interpret those data. 445 00:25:34,920 --> 00:25:39,159 Speaker 3: Yeah, absolutely, Joanna, thank you. That was Bloomberg's senior reporter 446 00:25:39,280 --> 00:25:43,840 Speaker 3: covering the ECB Jana Randall, and Bloomberg's economics reporter William Horribin. 447 00:25:43,920 --> 00:25:46,840 Speaker 3: Thank you to both of you. I'm Caroline Hepga here London. 448 00:25:46,880 --> 00:25:49,639 Speaker 3: You can catch us every weekday morning here for Blomberg Daybreak. 449 00:25:49,680 --> 00:25:51,920 Speaker 3: You are beginning at six am in London. That's one 450 00:25:51,960 --> 00:25:52,959 Speaker 3: am almoll Street. 451 00:25:53,119 --> 00:25:53,439 Speaker 7: John. 452 00:25:54,000 --> 00:25:57,520 Speaker 2: Thanks Caroline, and coming up on Bloomberg Daybreak weekend, I'll 453 00:25:57,560 --> 00:26:01,280 Speaker 2: looking ahe at the Constitution day in South Korea. I'm 454 00:26:01,359 --> 00:26:16,520 Speaker 2: John Tucker and this is Bloomberg. This is Bloomberg Daybreak weekend, 455 00:26:16,560 --> 00:26:19,000 Speaker 2: our global look ahead of the top stories for investors 456 00:26:19,000 --> 00:26:21,320 Speaker 2: in the coming week. I'm John Tucker in New York. 457 00:26:21,760 --> 00:26:25,240 Speaker 2: We go to South Korea next where Constitution Day will 458 00:26:25,280 --> 00:26:28,200 Speaker 2: be celebrated in the week ahead, and for a closer 459 00:26:28,240 --> 00:26:32,400 Speaker 2: look with this national holiday represents, let's turn to Doug Krisner, 460 00:26:32,520 --> 00:26:35,280 Speaker 2: host of the Bloomberg Daybreak Asia podcast. 461 00:26:35,920 --> 00:26:40,080 Speaker 4: Thanks John. Constitution Day commemorates the legal framework for the 462 00:26:40,119 --> 00:26:44,240 Speaker 4: Republic of Korea. It was proclaimed on July seventeenth, nineteen 463 00:26:44,320 --> 00:26:47,399 Speaker 4: forty eight, in a moment that set the stage for 464 00:26:47,600 --> 00:26:51,640 Speaker 4: South Korea's governance and its national security during the Cold War. 465 00:26:52,359 --> 00:26:55,159 Speaker 4: After the Second World War, the Republic of Korea was 466 00:26:55,240 --> 00:27:00,280 Speaker 4: liberated from Japanese colonial rule and the Korean Peninsula was 467 00:27:00,280 --> 00:27:04,760 Speaker 4: divided along the thirty eighth Parallel into Soviet and American 468 00:27:04,840 --> 00:27:09,320 Speaker 4: occupation zones. Now these days, South Korea's national security is 469 00:27:09,440 --> 00:27:13,240 Speaker 4: rooted in the strong defense alliance with the US, primarily 470 00:27:13,640 --> 00:27:16,960 Speaker 4: as a deterrence against North Korea. And at the same time, 471 00:27:17,320 --> 00:27:21,200 Speaker 4: South Korea has expanded its security partnership with NATO as 472 00:27:21,240 --> 00:27:25,240 Speaker 4: a major non member ally, and these dynamics have contributed 473 00:27:25,280 --> 00:27:30,000 Speaker 4: to a still growing defense industry in South Korea. For 474 00:27:30,080 --> 00:27:32,560 Speaker 4: a closer look at what's happening on the ground, let's 475 00:27:32,600 --> 00:27:36,119 Speaker 4: bring in Bloomberg's Cat Barton. She is our bureau chief 476 00:27:36,320 --> 00:27:38,639 Speaker 4: in Seoul. Thank you so much for being here. I 477 00:27:38,680 --> 00:27:42,240 Speaker 4: want to begin by kind of going back to a 478 00:27:42,280 --> 00:27:46,480 Speaker 4: recent ceremony in Seoul highlighting the importance of the defense 479 00:27:46,560 --> 00:27:50,040 Speaker 4: industry and at the same time honoring some of the 480 00:27:50,160 --> 00:27:54,600 Speaker 4: workers for their contributions. Maybe it's a good way to 481 00:27:54,640 --> 00:27:57,320 Speaker 4: help us get into the sense of size of the 482 00:27:57,359 --> 00:28:00,439 Speaker 4: overall defense industry in South Korea and the US areas 483 00:28:00,480 --> 00:28:01,920 Speaker 4: in which it operates. 484 00:28:02,320 --> 00:28:05,520 Speaker 11: It's an increasingly important part of the economy. I mean, 485 00:28:05,520 --> 00:28:07,680 Speaker 11: if you've looked at the Cosby over the last couple 486 00:28:07,720 --> 00:28:11,040 Speaker 11: of years, you've seen some absolutely exponential growth there, and 487 00:28:11,119 --> 00:28:13,920 Speaker 11: most of that is due to Skehiniz and Samsung. It's 488 00:28:13,920 --> 00:28:16,800 Speaker 11: all an AI play. But the other bright spot is 489 00:28:16,880 --> 00:28:19,840 Speaker 11: defense and that's been kind of supercharged this year actually, 490 00:28:19,960 --> 00:28:23,879 Speaker 11: especially since obviously the Iran War. South Korea's government is 491 00:28:24,000 --> 00:28:27,760 Speaker 11: super keen on growing the industry. They've targeted a number 492 00:28:27,800 --> 00:28:31,479 Speaker 11: four position globally, and it's an industry that kind of 493 00:28:31,600 --> 00:28:35,080 Speaker 11: really complements a lot of what is going on unfortunately 494 00:28:35,119 --> 00:28:38,400 Speaker 11: conflict wise globally at the moment, because they're very good 495 00:28:38,600 --> 00:28:42,440 Speaker 11: in areas that have come into play, for example with Ukraine. 496 00:28:42,480 --> 00:28:46,600 Speaker 11: In Europe, they've sold a lot of tanks to Poland 497 00:28:46,680 --> 00:28:51,040 Speaker 11: for example, recently they're howitzers are increasingly in demand. And 498 00:28:51,080 --> 00:28:54,760 Speaker 11: then also this year we've seen huge growth in demand 499 00:28:54,800 --> 00:28:58,360 Speaker 11: in the Middle East for interceptors. So South Korea makes 500 00:28:58,360 --> 00:29:01,760 Speaker 11: something that's very akin to a US Patriot missile, but 501 00:29:01,880 --> 00:29:04,160 Speaker 11: is a lot cheaper and they can produce them a 502 00:29:04,160 --> 00:29:06,880 Speaker 11: lot quicker, So that has been something that they've seen 503 00:29:06,920 --> 00:29:10,080 Speaker 11: a lot of interest from Middle Eastern governments. 504 00:29:10,160 --> 00:29:12,080 Speaker 4: So I'm glad you brought up the issue of the 505 00:29:12,120 --> 00:29:15,160 Speaker 4: memory chip makers because we have seen recently how the 506 00:29:15,200 --> 00:29:19,360 Speaker 4: government and Soul has become involved increasingly involved in helping 507 00:29:19,760 --> 00:29:23,400 Speaker 4: names like s K, Heinix and Samsung add capacity to 508 00:29:23,520 --> 00:29:27,000 Speaker 4: their production of memory chips. How is the government disposed 509 00:29:27,040 --> 00:29:30,000 Speaker 4: when it comes to adding capacity in the defense industries, 510 00:29:31,360 --> 00:29:33,040 Speaker 4: They are proactive. 511 00:29:33,160 --> 00:29:36,360 Speaker 11: The industry here is dominated by what we call chabele, 512 00:29:36,440 --> 00:29:40,520 Speaker 11: which are these family run companies, so they're huge conglomerates 513 00:29:40,560 --> 00:29:45,560 Speaker 11: that control most of the production line. So the government 514 00:29:45,600 --> 00:29:48,640 Speaker 11: has really been strongly backing them. Because you have to remember, 515 00:29:48,800 --> 00:29:53,040 Speaker 11: South Korea remains technically at war, right, so the conflict 516 00:29:53,040 --> 00:29:56,440 Speaker 11: with nuclear armed North Korea, which ended in the nineteen fifties, 517 00:29:56,440 --> 00:29:58,920 Speaker 11: it ended in an armistice, not a treaty, not a 518 00:29:58,920 --> 00:30:02,080 Speaker 11: peace treaty, so the government remains technically in a state 519 00:30:02,120 --> 00:30:04,840 Speaker 11: of war. So these huge defense companies are not only 520 00:30:05,200 --> 00:30:08,120 Speaker 11: part of a kind of growing export strategy, but they're 521 00:30:08,120 --> 00:30:11,200 Speaker 11: integral to South Korea's own defense. They have to be 522 00:30:11,240 --> 00:30:16,400 Speaker 11: making tanks, howitzer's ammunition, developing new fighter jets because they're 523 00:30:16,560 --> 00:30:19,600 Speaker 11: constantly locked in this state of conflict with Kim Jong 524 00:30:19,680 --> 00:30:22,720 Speaker 11: un in the North, who has you know, frequently threatened 525 00:30:22,760 --> 00:30:25,600 Speaker 11: to wipe out SOUL and reduce it to rubble. So 526 00:30:25,640 --> 00:30:29,000 Speaker 11: there's a lot of government backing, and the government obviously 527 00:30:29,040 --> 00:30:32,440 Speaker 11: recognizes that strategically, if they can keep the industry going, 528 00:30:32,920 --> 00:30:36,680 Speaker 11: it's also a huge asset export wise. They see opportunity 529 00:30:37,080 --> 00:30:39,600 Speaker 11: globally and they are really trying to help these Chibbel 530 00:30:39,680 --> 00:30:40,800 Speaker 11: firms capitalize on it. 531 00:30:40,920 --> 00:30:43,840 Speaker 4: So we know that North Korea CAT is a nuclear power. 532 00:30:43,960 --> 00:30:46,640 Speaker 4: SOUL doesn't operate in this space. It's been reliant on 533 00:30:46,720 --> 00:30:50,400 Speaker 4: the US security umbrella. But I'm wondering whether the mood 534 00:30:50,760 --> 00:30:53,200 Speaker 4: is changing a bit and whether SOUL might feel the 535 00:30:53,280 --> 00:30:57,360 Speaker 4: need to develop more within the nuclear space. Is that possible? 536 00:30:57,600 --> 00:31:01,080 Speaker 11: The US security umbrella is crucial to South Korean defense 537 00:31:01,320 --> 00:31:05,040 Speaker 11: and the government here has said repeatedly. The president has 538 00:31:05,040 --> 00:31:08,360 Speaker 11: said they do not want their own nuclear weapons. Lee 539 00:31:08,440 --> 00:31:10,760 Speaker 11: Ja Mung said it a couple of weeks ago. They 540 00:31:10,840 --> 00:31:13,520 Speaker 11: really have emphasized that they feel, you know, they're committed 541 00:31:13,560 --> 00:31:16,520 Speaker 11: to nuclear non proliferation. They don't want to become like 542 00:31:16,560 --> 00:31:19,160 Speaker 11: a rogue state, a kin to North Korea by developing 543 00:31:19,160 --> 00:31:23,760 Speaker 11: their own nuclear weapons. However, obviously there are growing voices 544 00:31:23,800 --> 00:31:25,960 Speaker 11: here that suggest they should at least look at this 545 00:31:26,000 --> 00:31:28,840 Speaker 11: option and what they have been doing, and they have 546 00:31:28,920 --> 00:31:32,320 Speaker 11: talked to US President Donald Trump about is developing their 547 00:31:32,360 --> 00:31:36,200 Speaker 11: own nuclear powered submarine. So that's not a nuclear armed submarine, 548 00:31:36,240 --> 00:31:39,760 Speaker 11: but they have the technology to build it. They're talking 549 00:31:39,760 --> 00:31:42,160 Speaker 11: to the US and that project is moving forward, and 550 00:31:42,240 --> 00:31:45,000 Speaker 11: that would be a huge step up for their naval 551 00:31:45,040 --> 00:31:47,200 Speaker 11: defenses because at the moment they have, you know, very 552 00:31:47,240 --> 00:31:50,480 Speaker 11: sophisticated diesel powered submarines, but not a nuclear powered one, 553 00:31:50,520 --> 00:31:51,560 Speaker 11: and that's their next goal. 554 00:31:51,680 --> 00:31:54,360 Speaker 4: I'm so glad you brought up the submarines because recently 555 00:31:54,440 --> 00:31:56,840 Speaker 4: South Korea missed out on a chance to build twelve 556 00:31:56,880 --> 00:32:01,200 Speaker 4: subs for the Canadian Navy. That contract went to Germany's 557 00:32:01,240 --> 00:32:04,240 Speaker 4: TISN Group Marine systems. But I'm wondering when you look 558 00:32:04,240 --> 00:32:08,480 Speaker 4: at areas like shipbuilding submarine building, whether that represents a 559 00:32:08,480 --> 00:32:11,600 Speaker 4: big opportunity for the global market, particularly Europe. 560 00:32:11,760 --> 00:32:14,320 Speaker 11: It definitely is, and it was a big blow to 561 00:32:14,400 --> 00:32:17,600 Speaker 11: the South Korean side to miss out on that Canadian contract. 562 00:32:17,760 --> 00:32:20,680 Speaker 11: I think obviously they went for the NATO partner, but 563 00:32:20,840 --> 00:32:23,960 Speaker 11: even when you know, the president and the companies came 564 00:32:24,000 --> 00:32:26,920 Speaker 11: out afterwards, they emphasized the whole bidding process had been 565 00:32:26,920 --> 00:32:29,560 Speaker 11: a huge learning experience, and it shows the fact that 566 00:32:29,600 --> 00:32:33,040 Speaker 11: they were even being considered. Neck connect with Germany shows 567 00:32:33,040 --> 00:32:36,040 Speaker 11: how far the industry has come right, It's made huge 568 00:32:36,040 --> 00:32:38,720 Speaker 11: strides in recent years that they are up there as 569 00:32:38,760 --> 00:32:41,520 Speaker 11: a top global partner. And there were analysts that we 570 00:32:41,600 --> 00:32:45,360 Speaker 11: spoke to afterwards saying, yes, obviously, you know, maybe security 571 00:32:45,480 --> 00:32:49,320 Speaker 11: partnership wise Germany makes sense, but realistically South Korea would 572 00:32:49,320 --> 00:32:50,840 Speaker 11: have been a better choice because they can do it 573 00:32:50,840 --> 00:32:53,600 Speaker 11: more quickly, they have more capacity, you know, they build 574 00:32:53,600 --> 00:32:56,400 Speaker 11: a really good product more cheaply and more reliably, and 575 00:32:56,440 --> 00:32:58,760 Speaker 11: I think that's certainly why you know, President Trump has 576 00:32:58,800 --> 00:33:02,480 Speaker 11: talked about, you know, huge cooperation in shipbuilding with South Korea. 577 00:33:02,840 --> 00:33:05,560 Speaker 11: It's a key part of the three hundred and fifty 578 00:33:05,560 --> 00:33:08,360 Speaker 11: billion dollar trade deal that they struck with the US 579 00:33:08,400 --> 00:33:11,840 Speaker 11: to avoid tarrets with shipbuilding, the idea of the South 580 00:33:11,920 --> 00:33:15,920 Speaker 11: Korean shipbuilding companies coming to help rebuild and regenerate kind 581 00:33:15,920 --> 00:33:18,400 Speaker 11: of you know, the Philadelphia shipyards and that kind of thing. 582 00:33:18,920 --> 00:33:21,720 Speaker 11: But I think in terms of defense, they missed out 583 00:33:21,720 --> 00:33:23,880 Speaker 11: on that recent contract. But for the South Korean side, 584 00:33:23,920 --> 00:33:25,640 Speaker 11: that's just you know, a blick in the road, and 585 00:33:25,640 --> 00:33:27,120 Speaker 11: it's not going to put them off. They're going for 586 00:33:27,200 --> 00:33:29,560 Speaker 11: more contracts and they very much see this as a 587 00:33:29,600 --> 00:33:30,600 Speaker 11: global opportunity. 588 00:33:30,760 --> 00:33:33,840 Speaker 4: So we've touched on let's call it the addressable market 589 00:33:33,920 --> 00:33:37,160 Speaker 4: for exports of defense hardware. But let's go back to 590 00:33:37,200 --> 00:33:40,680 Speaker 4: the threat from North Korea, whether we're talking nuclear missiles 591 00:33:40,920 --> 00:33:44,320 Speaker 4: or cyber as being kind of the primary driver for 592 00:33:44,400 --> 00:33:47,080 Speaker 4: a lot of what's happened in the defense industry in 593 00:33:47,120 --> 00:33:49,600 Speaker 4: the South. I'm trying to get a sense of the 594 00:33:49,880 --> 00:33:54,280 Speaker 4: appetite for more domestic military spending right now and how people, 595 00:33:54,360 --> 00:33:57,400 Speaker 4: how the citizens in South Korea would feel about that. 596 00:33:58,280 --> 00:34:03,400 Speaker 11: South Korea has military service. They also have a demographic crisis. 597 00:34:03,480 --> 00:34:07,760 Speaker 11: They have very few babies globally, so they are looking 598 00:34:07,800 --> 00:34:10,040 Speaker 11: at a lot of options in terms of how they 599 00:34:10,080 --> 00:34:13,440 Speaker 11: protect themselves moving forward, All men under thirty have to 600 00:34:13,480 --> 00:34:16,440 Speaker 11: serve eighteen months in the military, and there is, you know, 601 00:34:16,920 --> 00:34:19,719 Speaker 11: widespread support for that. I think obviously everyone who lives 602 00:34:19,719 --> 00:34:22,320 Speaker 11: in Soul recognizes that you're sixty kilometers from the border 603 00:34:22,400 --> 00:34:25,560 Speaker 11: and that North Korea is not to be trusted. In 604 00:34:25,640 --> 00:34:28,480 Speaker 11: terms of defense spending, the government is looking at moving 605 00:34:28,520 --> 00:34:31,120 Speaker 11: into kind of newer areas. They've talked recently a lot 606 00:34:31,160 --> 00:34:35,160 Speaker 11: about robotics, whether they could could turn to robots to 607 00:34:35,320 --> 00:34:39,439 Speaker 11: start helping with this demographic decline, the anticipated fall off 608 00:34:39,440 --> 00:34:42,240 Speaker 11: in the number of enlistments in future, and they're also 609 00:34:42,280 --> 00:34:44,800 Speaker 11: looking very much at drones because you have to remember, 610 00:34:45,080 --> 00:34:48,080 Speaker 11: North Korea became the only third party in the world 611 00:34:48,120 --> 00:34:51,560 Speaker 11: to kind of intervene directly in the Ukraine conflict. It 612 00:34:51,760 --> 00:34:54,759 Speaker 11: sent troops to help Russia fight Ukraine, and it has 613 00:34:54,800 --> 00:34:58,959 Speaker 11: sent tens of thousands of container loads of weapons, mostly cheap, 614 00:34:59,000 --> 00:35:03,400 Speaker 11: low end ammunition to help the Russian military. By some estimates, 615 00:35:03,440 --> 00:35:06,839 Speaker 11: by Ukrainian estimates, they're providing kind of forty percent of 616 00:35:07,080 --> 00:35:09,759 Speaker 11: the ammunition that Russia is using, right, So those are 617 00:35:09,960 --> 00:35:14,080 Speaker 11: that's coming from Kim Jong UN's stockpiles. So I think 618 00:35:14,760 --> 00:35:18,040 Speaker 11: in terms of you know, South Korea's looking at this, 619 00:35:18,160 --> 00:35:20,200 Speaker 11: They're looking at what has North Korea learned from that 620 00:35:20,239 --> 00:35:23,560 Speaker 11: involvement in Ukraine. And obviously they now have some battle 621 00:35:23,560 --> 00:35:26,959 Speaker 11: hardened kPa troops, Korean People's Armied troops, and they also 622 00:35:27,000 --> 00:35:29,560 Speaker 11: have a lot of understanding of drone warfare, which is 623 00:35:29,560 --> 00:35:32,160 Speaker 11: not something that South Korea itself has ever experienced in 624 00:35:32,520 --> 00:35:35,759 Speaker 11: a combat situation. But the North Korean soldiers have been 625 00:35:35,800 --> 00:35:38,320 Speaker 11: there in Ukraine fighting or not in Ukraine, they're fighting 626 00:35:38,320 --> 00:35:42,520 Speaker 11: in Russian territory, but have been fighting alongside Russian soldiers 627 00:35:42,960 --> 00:35:45,000 Speaker 11: and seen this modern drone warfare. So I think the 628 00:35:45,000 --> 00:35:48,480 Speaker 11: South Korean military is looking at heavy investments in drones, 629 00:35:48,600 --> 00:35:52,760 Speaker 11: in unmanned uevs, and they're looking at, yeah, also robotics, 630 00:35:52,760 --> 00:35:55,279 Speaker 11: what they can do in that space to counter these 631 00:35:55,360 --> 00:35:58,359 Speaker 11: kind of huge strides that North Korea has taken as 632 00:35:58,360 --> 00:36:00,000 Speaker 11: a result of their military relationship with rus. 633 00:36:00,560 --> 00:36:03,759 Speaker 4: I'm wondering about the tension that still exists between South 634 00:36:03,840 --> 00:36:07,160 Speaker 4: Korea and Japan after the Second World War. Some of 635 00:36:07,200 --> 00:36:10,400 Speaker 4: those issues have yet to be resolved, and I'm wondering 636 00:36:10,440 --> 00:36:13,360 Speaker 4: about the level of cooperation when it comes to areas 637 00:36:13,360 --> 00:36:17,440 Speaker 4: within the defense industries between South Korea and Japan, and 638 00:36:17,480 --> 00:36:20,719 Speaker 4: whether Japan could be in some way a customer for 639 00:36:20,800 --> 00:36:23,760 Speaker 4: some of the hardware that South Korea produces. 640 00:36:24,200 --> 00:36:28,360 Speaker 11: There is obviously lingering tension. It was a quite lengthy 641 00:36:28,440 --> 00:36:32,000 Speaker 11: period of quite brutal colonial occupation for the Korean peninsula 642 00:36:32,239 --> 00:36:35,719 Speaker 11: under the Japanese, and there both sides, Tokyo and Soul, 643 00:36:35,800 --> 00:36:39,720 Speaker 11: have made huge strides recently to bury that historical hatchet. 644 00:36:40,000 --> 00:36:42,600 Speaker 11: Relations are very good. I think if you look at areas, 645 00:36:42,600 --> 00:36:46,840 Speaker 11: for example, like the monitoring of North Korean missile launches, 646 00:36:47,440 --> 00:36:52,000 Speaker 11: the US, South Korea and Japan have very integrated intelligence sharing. 647 00:36:52,280 --> 00:36:56,040 Speaker 11: They monitor missile launches in real time. They really coordinate 648 00:36:56,239 --> 00:36:59,400 Speaker 11: in that kind of sphere very well. I think there 649 00:36:59,440 --> 00:37:02,840 Speaker 11: are other areas where there's kind of lingering historical sensitivities. 650 00:37:02,840 --> 00:37:06,239 Speaker 11: For example, I know that Japanese participation in some of 651 00:37:06,280 --> 00:37:11,200 Speaker 11: the joint US South Korean military drills sometimes is a 652 00:37:11,200 --> 00:37:16,080 Speaker 11: bit tricky. For example, their military flies the Rising Sun flag, 653 00:37:16,120 --> 00:37:18,040 Speaker 11: which I think is very sensitive in South Korea. There 654 00:37:18,080 --> 00:37:20,600 Speaker 11: are people here who get a bit sensitive seeing that 655 00:37:20,880 --> 00:37:24,239 Speaker 11: flying because it's still associated with colonial period. But in 656 00:37:24,280 --> 00:37:26,279 Speaker 11: terms of them being a customer. I mean, I think 657 00:37:26,400 --> 00:37:30,359 Speaker 11: Japan is also looking to ramp up their own domestic industry, right, 658 00:37:30,400 --> 00:37:32,960 Speaker 11: but they're definitely behind South Korea just because of the 659 00:37:33,400 --> 00:37:35,920 Speaker 11: you know, the South Korean have this unique circumstance with 660 00:37:36,000 --> 00:37:38,359 Speaker 11: North Korea where they've had to just maintain themselves at 661 00:37:38,360 --> 00:37:41,640 Speaker 11: a certain level of readiness ahead of other regional countries. 662 00:37:41,840 --> 00:37:44,760 Speaker 11: So I certainly think with you know, with relations between 663 00:37:44,800 --> 00:37:48,960 Speaker 11: Soul and Tokyo being better, better than they've been in decades, 664 00:37:49,280 --> 00:37:51,840 Speaker 11: I don't see why the Japanese couldn't be turning to 665 00:37:52,239 --> 00:37:54,680 Speaker 11: South Korea potentially in future as a source of supply 666 00:37:54,840 --> 00:37:57,480 Speaker 11: on things that they can't themselves build as quickly as 667 00:37:57,480 --> 00:37:57,799 Speaker 11: they might. 668 00:37:57,920 --> 00:38:00,719 Speaker 4: Like God, we'll leave it there, Thank you so very much. 669 00:38:00,880 --> 00:38:05,360 Speaker 4: Bloomberg's Kat Barton, our bureau chief in Seoul. I'm Doug Christner. 670 00:38:05,440 --> 00:38:08,320 Speaker 4: You can catch us weekdays here for the Daybreak Asia podcast. 671 00:38:08,440 --> 00:38:11,600 Speaker 4: It's available wherever you get your podcast. John. 672 00:38:12,200 --> 00:38:14,319 Speaker 2: All right, thanks Doug, and that does it for this 673 00:38:14,480 --> 00:38:17,840 Speaker 2: edition of Bloomberg Daybreak Weekend. Join us again Monday morning 674 00:38:17,880 --> 00:38:20,759 Speaker 2: at five am Wall Street Time for the latest on 675 00:38:20,960 --> 00:38:24,439 Speaker 2: markets overseas and the news you need to start your day. 676 00:38:24,600 --> 00:38:27,200 Speaker 2: I'm John Tucker and stay with us. Top stories and 677 00:38:27,400 --> 00:38:30,640 Speaker 2: global business headlines are coming up right now.