1 00:00:00,280 --> 00:00:07,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:10,440 --> 00:00:13,440 Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the 3 00:00:13,440 --> 00:00:16,360 Speaker 2: top stories in the coming week from our Daybreak anchors 4 00:00:16,400 --> 00:00:19,080 Speaker 2: all around the world. Straight Ahead on the program, we'll 5 00:00:19,120 --> 00:00:21,160 Speaker 2: get you set for a couple of big earnings reports 6 00:00:21,160 --> 00:00:24,680 Speaker 2: from Tesla and Netflix. I'm Nathan Hager in Washington. 7 00:00:24,840 --> 00:00:27,400 Speaker 3: I'm Carolyn Headger in London, where we're looking ahead to 8 00:00:27,520 --> 00:00:30,480 Speaker 3: European bank earnings, including from Barkleys. 9 00:00:30,760 --> 00:00:33,479 Speaker 4: I'm Doug Prisner looking at how rare earths will be 10 00:00:33,520 --> 00:00:36,680 Speaker 4: a topic when Australia's Prime Minister visits the White House. 11 00:00:36,720 --> 00:00:37,559 Speaker 4: And the week ahead. 12 00:00:38,479 --> 00:00:42,520 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 13 00:00:42,560 --> 00:00:46,240 Speaker 1: eleven three yeh New York, Bloomberg ninety nine to one, Washington, DC, 14 00:00:46,760 --> 00:00:51,879 Speaker 1: Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Sirius 15 00:00:52,040 --> 00:00:55,560 Speaker 1: XM one twenty one, and around the world on Bloomberg Radio, 16 00:00:55,640 --> 00:00:57,840 Speaker 1: dot Com and the Bloomberg Business app. 17 00:01:02,800 --> 00:01:05,720 Speaker 2: Good day to you. I'm Nathan Hager. We begin today's 18 00:01:05,760 --> 00:01:09,839 Speaker 2: program with earnings. Ninety companies on the SMP five hundred 19 00:01:09,840 --> 00:01:12,640 Speaker 2: open their quarterly books this week. We want to focus 20 00:01:12,680 --> 00:01:16,759 Speaker 2: on two of the big ones, Tesla and Netflix. Here 21 00:01:16,800 --> 00:01:18,399 Speaker 2: to get a set for what to expect from the 22 00:01:18,440 --> 00:01:22,520 Speaker 2: EV giant this week is Steve Mann, senior autos analyst 23 00:01:22,600 --> 00:01:25,440 Speaker 2: for Bloomberg Intelligence. Great to have you with us on 24 00:01:25,480 --> 00:01:28,160 Speaker 2: the weekend program, Steve. I mean, this is the quarter 25 00:01:28,200 --> 00:01:30,960 Speaker 2: where we got that record delivery number, right, was it 26 00:01:30,959 --> 00:01:33,960 Speaker 2: close to half a million vehicles sold? What's that going 27 00:01:33,959 --> 00:01:35,959 Speaker 2: to mean for the numbers you're keeping an eye out on. 28 00:01:37,280 --> 00:01:40,840 Speaker 5: Thanks Nathan. Yeah, they did have a record shipment for 29 00:01:40,920 --> 00:01:43,640 Speaker 5: the quarter on EV's but they also had a record 30 00:01:43,680 --> 00:01:47,160 Speaker 5: shipment on their battery storage business too. I mean yeah, 31 00:01:47,560 --> 00:01:50,840 Speaker 5: I mean not of surprise because look, the seventy five 32 00:01:50,920 --> 00:01:54,840 Speaker 5: hundred tax credit EV tax credit it went away at 33 00:01:54,880 --> 00:01:57,600 Speaker 5: the end of September in the US, so there was 34 00:01:57,640 --> 00:02:00,240 Speaker 5: a lot of consumer coming into the market take an 35 00:02:00,240 --> 00:02:03,360 Speaker 5: advantage of that seventy five hundred dollars credit and bought 36 00:02:03,440 --> 00:02:06,800 Speaker 5: a lot of EV. So, you know, we saw record 37 00:02:07,120 --> 00:02:11,120 Speaker 5: EV sales for Tesla. They're not alone. GM also had 38 00:02:11,160 --> 00:02:15,519 Speaker 5: a record sale fort if it's not records almost record 39 00:02:15,520 --> 00:02:18,639 Speaker 5: sales as well, So the industry really got a boost. 40 00:02:19,240 --> 00:02:21,399 Speaker 5: But you know, I think the most important thing now 41 00:02:21,560 --> 00:02:25,639 Speaker 5: is what do we expect in the coming quarters, which 42 00:02:25,680 --> 00:02:27,240 Speaker 5: is you know, a slow down. 43 00:02:28,200 --> 00:02:31,440 Speaker 2: Yeah, So what do we expect given that these subsidies 44 00:02:31,440 --> 00:02:33,880 Speaker 2: are going away? I mean, it stands to reason that 45 00:02:33,880 --> 00:02:36,519 Speaker 2: we're probably not going to see these kind of blowout 46 00:02:36,560 --> 00:02:38,320 Speaker 2: delivery figures and quarters to. 47 00:02:38,280 --> 00:02:43,360 Speaker 5: Come right, Yeah, absolutely not. You know, to two ways 48 00:02:43,400 --> 00:02:45,839 Speaker 5: that we're looking at this first and in their term. 49 00:02:46,040 --> 00:02:50,839 Speaker 5: Definitely some challenges for Tesla as well as the rest 50 00:02:50,880 --> 00:02:54,720 Speaker 5: of the EV market. You know, Rivian and Lucid to 51 00:02:54,960 --> 00:02:58,040 Speaker 5: to name a couple. You know, there's been a lot 52 00:02:58,080 --> 00:03:03,560 Speaker 5: of pull forward demand into the third quarter, so you know, 53 00:03:03,919 --> 00:03:07,480 Speaker 5: expect kind of weak earnings, uh, you know, weaker cash 54 00:03:07,520 --> 00:03:11,800 Speaker 5: flow in the next couple of quarters for these EV makers. 55 00:03:13,080 --> 00:03:16,360 Speaker 5: But long term, it's going to be an interesting market 56 00:03:17,080 --> 00:03:20,639 Speaker 5: because without the semi five hundred, you're definitely going to 57 00:03:20,720 --> 00:03:24,040 Speaker 5: have less buyers. There will be buyers, but less buyers 58 00:03:24,320 --> 00:03:27,520 Speaker 5: in the marketplace. And there are a lot of products 59 00:03:27,520 --> 00:03:30,560 Speaker 5: out there. Like in the last two three years with 60 00:03:30,639 --> 00:03:33,760 Speaker 5: the Biden administration pumping a lot of money into the 61 00:03:33,800 --> 00:03:38,520 Speaker 5: EV market, every automaker you know, rolled out new products, 62 00:03:38,640 --> 00:03:42,760 Speaker 5: expanded capacity. So there's gonna be a lot of new 63 00:03:42,800 --> 00:03:46,800 Speaker 5: EV's out there. Uh. We actually expect price competition, right, 64 00:03:46,920 --> 00:03:49,840 Speaker 5: price competition, and wouldn't be surprised there's some consolidation in 65 00:03:49,880 --> 00:03:53,080 Speaker 5: the marketplace as well. We started to see that. Uh 66 00:03:53,280 --> 00:03:56,360 Speaker 5: GM just announced they' going to book one point six 67 00:03:56,400 --> 00:04:00,320 Speaker 5: billion dollars in write offs on evs. We expect they 68 00:04:00,480 --> 00:04:03,880 Speaker 5: probably going to have to right size their product portfolio 69 00:04:03,920 --> 00:04:04,320 Speaker 5: as well. 70 00:04:04,680 --> 00:04:08,040 Speaker 2: Yeah, so we saw the new products as well, specifically 71 00:04:08,160 --> 00:04:12,560 Speaker 2: on Tesla side, in those finally lower priced models of 72 00:04:12,840 --> 00:04:15,520 Speaker 2: the Model Y and the Model three. What could that 73 00:04:15,760 --> 00:04:19,400 Speaker 2: mean for Tesla's outlook and for their margins as well. 74 00:04:20,240 --> 00:04:24,000 Speaker 5: Yeah, it you know, if you think of the flip side, 75 00:04:24,120 --> 00:04:27,240 Speaker 5: it could be an opportunity, right for Tesla. They are 76 00:04:27,400 --> 00:04:33,159 Speaker 5: the largest EV maker in terms of sales globally and 77 00:04:33,279 --> 00:04:37,080 Speaker 5: in the US, one of the biggest definitely biggest in 78 00:04:37,120 --> 00:04:40,280 Speaker 5: the US, so it's also an opportunity for them potentially 79 00:04:40,320 --> 00:04:43,520 Speaker 5: gain market share. You know, they are the you know, 80 00:04:43,560 --> 00:04:48,200 Speaker 5: one of the very few profitable EV makers in the world. 81 00:04:48,720 --> 00:04:54,160 Speaker 5: So launching those products for broaduct appeal makes sense if 82 00:04:54,200 --> 00:04:58,480 Speaker 5: you look at social media, because actually now talks about them, 83 00:04:58,680 --> 00:05:03,240 Speaker 5: you know, revisiting the earlier plans of rolling out the 84 00:05:03,320 --> 00:05:06,800 Speaker 5: Model too, which is even a cheaper vehicle, So if 85 00:05:06,839 --> 00:05:09,040 Speaker 5: they can do that, they may be able to gain 86 00:05:09,080 --> 00:05:09,600 Speaker 5: market share. 87 00:05:10,160 --> 00:05:13,960 Speaker 2: You mentioned the record for a battery storage in Tesla's 88 00:05:14,040 --> 00:05:16,640 Speaker 2: latest quarter as well. Of course, there's a lot of 89 00:05:16,680 --> 00:05:20,320 Speaker 2: ambition in this company, not just from evs but from 90 00:05:20,640 --> 00:05:25,599 Speaker 2: the autonomous vehicle side robotaxis. Where should the focus be 91 00:05:25,800 --> 00:05:28,240 Speaker 2: for investors as we get ready for this quarter to 92 00:05:29,040 --> 00:05:29,760 Speaker 2: be explained? 93 00:05:30,279 --> 00:05:33,680 Speaker 5: Yeah, I think you know, when they release earnings and 94 00:05:33,839 --> 00:05:37,159 Speaker 5: on the conference call, wouldn't be surprised that Elon Musk 95 00:05:37,200 --> 00:05:43,880 Speaker 5: will primarily focus on their AI initiatives. Right, Robotaxi is 96 00:05:44,000 --> 00:05:48,800 Speaker 5: probably the only business that we have better visibility on 97 00:05:49,720 --> 00:05:52,240 Speaker 5: driving the top line and the bottom line. We think 98 00:05:52,279 --> 00:05:54,520 Speaker 5: that's you know, that's kind of probably going to come 99 00:05:54,560 --> 00:05:58,560 Speaker 5: through in twenty twenty eight, not immediately. You know, they've 100 00:05:58,640 --> 00:06:02,239 Speaker 5: rolled out all you know, robotaxing in Texas and parts 101 00:06:02,240 --> 00:06:05,960 Speaker 5: of California. They're looking to roll it out in other states, 102 00:06:06,000 --> 00:06:09,240 Speaker 5: maybe at least two more before year end, but the 103 00:06:09,640 --> 00:06:12,000 Speaker 5: you know, you know, the financials don't really roll in 104 00:06:12,400 --> 00:06:15,320 Speaker 5: until then. But you know, Robotaxi is probably the earliest 105 00:06:15,880 --> 00:06:18,039 Speaker 5: uh uh uh, the business is going to have the 106 00:06:18,080 --> 00:06:22,800 Speaker 5: earliest impact on on their botbom Line Optimist robot. I 107 00:06:22,839 --> 00:06:25,280 Speaker 5: think it's going to be a while. There's some technical 108 00:06:25,320 --> 00:06:29,240 Speaker 5: issues behind Optimus robot. It's going to be hard to 109 00:06:29,279 --> 00:06:35,080 Speaker 5: convince uh not you know, other automakers to adopt humanoid robots. 110 00:06:35,120 --> 00:06:39,640 Speaker 5: So you know, any Optimist sales or or adoption will 111 00:06:39,640 --> 00:06:42,760 Speaker 5: probably be more of an internal uh you know, within 112 00:06:43,360 --> 00:06:44,640 Speaker 5: the confines of Tesla. 113 00:06:44,960 --> 00:06:46,600 Speaker 2: All right, well, thanks for this, Steve. As we look 114 00:06:46,640 --> 00:06:49,560 Speaker 2: ahead to Tesla earnings later on this week. That is 115 00:06:49,600 --> 00:06:53,640 Speaker 2: Steve Mann, senior autos analyst for Bloomberg Intelligence. Now let's 116 00:06:53,640 --> 00:06:55,840 Speaker 2: turn to the other big earning story we've got our 117 00:06:55,839 --> 00:06:59,560 Speaker 2: eye on this week. That would be Netflix. The streaming 118 00:06:59,600 --> 00:07:03,520 Speaker 2: giant opens its third quarter books on Tuesday, and for more, 119 00:07:03,600 --> 00:07:07,279 Speaker 2: we're joined by Geta Ranganathan, senior US media analysts for 120 00:07:07,440 --> 00:07:10,880 Speaker 2: Bloomberg Intelligence's great to speak with you, Githa. And I 121 00:07:10,920 --> 00:07:14,520 Speaker 2: guess Netflix is expecting another great quarter. I mean they've 122 00:07:14,520 --> 00:07:17,640 Speaker 2: been guiding for something like double digit revenue growth. 123 00:07:17,400 --> 00:07:20,960 Speaker 6: Right absolutely, yes. So, you know, as we kind of 124 00:07:21,040 --> 00:07:25,200 Speaker 6: look forward to netflix third quarter earnings, one of the 125 00:07:25,240 --> 00:07:28,080 Speaker 6: things that we want to highlight because Netflix no longer 126 00:07:28,560 --> 00:07:31,720 Speaker 6: discloses subscriber numbers, but the two numbers that you know 127 00:07:31,760 --> 00:07:34,679 Speaker 6: everybody's looking for, especially on the street. One is revenue 128 00:07:34,720 --> 00:07:37,200 Speaker 6: growth numbers, and as you just pointed out, yes, double 129 00:07:37,240 --> 00:07:40,360 Speaker 6: digit growth, that's what we're looking for. The magic number 130 00:07:40,440 --> 00:07:44,080 Speaker 6: for this quarter is going to be seventeen percent, and 131 00:07:44,160 --> 00:07:46,880 Speaker 6: of course again we're going to look for guidance for 132 00:07:47,000 --> 00:07:51,240 Speaker 6: fourth quarter. Consensus right now expects about sixteen percent, so 133 00:07:51,720 --> 00:07:54,880 Speaker 6: you know, double digits, high double digits, high teens. That's 134 00:07:54,960 --> 00:07:58,240 Speaker 6: kind of what we're looking for. But really the headline 135 00:07:58,400 --> 00:08:01,120 Speaker 6: for you know, the third quarter, as well as with 136 00:08:01,200 --> 00:08:03,720 Speaker 6: the second half, I think as a whole, is just 137 00:08:03,760 --> 00:08:08,200 Speaker 6: the content slate. So Netflix management themselves have kind of 138 00:08:08,240 --> 00:08:11,400 Speaker 6: referred to the content slate this year, especially in the 139 00:08:11,400 --> 00:08:14,920 Speaker 6: second half, being somewhat of an embarrassment of riches. They've 140 00:08:14,960 --> 00:08:17,840 Speaker 6: had some of their biggest titles debut on the service, 141 00:08:17,840 --> 00:08:21,960 Speaker 6: So we're talking Wednesday, we're talking Stranger Things, we're talking 142 00:08:22,000 --> 00:08:25,680 Speaker 6: Squid Game, all of their biggest hits coming aboard on 143 00:08:25,720 --> 00:08:29,200 Speaker 6: the platform this year. But what's really turned out to 144 00:08:29,280 --> 00:08:33,040 Speaker 6: kind of be an absolute sleeper hit in the third 145 00:08:33,120 --> 00:08:37,040 Speaker 6: quarter is K Pop Demon Hunters. Nobody saw this coming. 146 00:08:37,800 --> 00:08:42,080 Speaker 6: This was absolutely monstrous, huge, So we just saw five 147 00:08:42,120 --> 00:08:45,400 Speaker 6: hundred million viewing hours just in the third quarter alone. 148 00:08:45,400 --> 00:08:46,840 Speaker 6: I think by the end of this year, we're probably 149 00:08:46,880 --> 00:08:50,240 Speaker 6: going to see about a billion hours. This is their 150 00:08:50,280 --> 00:08:54,160 Speaker 6: biggest movie of all time on their service, So just 151 00:08:54,200 --> 00:08:59,320 Speaker 6: to breakout film that has really driven engagement meaningfully, and 152 00:08:59,360 --> 00:09:01,280 Speaker 6: I think we're going to see that reflection in the numbers. 153 00:09:01,520 --> 00:09:06,200 Speaker 2: So, just given how bonkers K Pop Demon Hunters was 154 00:09:06,720 --> 00:09:09,839 Speaker 2: for Netflix, is the bar really high for them? If 155 00:09:09,840 --> 00:09:13,040 Speaker 2: they don't meet the expectations that they've put out there, 156 00:09:13,360 --> 00:09:14,839 Speaker 2: is that going to put a herd on the stock? 157 00:09:15,480 --> 00:09:17,000 Speaker 6: So the one thing I think that we're going to 158 00:09:17,040 --> 00:09:19,280 Speaker 6: watch for I think three Q is definitely going to 159 00:09:19,360 --> 00:09:25,000 Speaker 6: be strong. The one number that can probably cause some 160 00:09:26,080 --> 00:09:29,720 Speaker 6: nervousness is going to be if they actually release guidance 161 00:09:29,760 --> 00:09:32,720 Speaker 6: for twenty twenty six. So last year, the first time 162 00:09:32,760 --> 00:09:35,760 Speaker 6: that they issued guidance for twenty twenty five was when 163 00:09:35,800 --> 00:09:38,840 Speaker 6: they reported third quarter twenty twenty four earnings. So the 164 00:09:38,920 --> 00:09:41,320 Speaker 6: expectation on the street is, okay, they're probably going to 165 00:09:41,360 --> 00:09:45,319 Speaker 6: give us a twenty twenty six guidance number. Again, remember 166 00:09:45,440 --> 00:09:48,320 Speaker 6: revenue for this year, the revenue growth number for the 167 00:09:48,320 --> 00:09:51,640 Speaker 6: full year. Again, that the magic word there, double digit 168 00:09:51,720 --> 00:09:56,000 Speaker 6: revenue growth, it's actually fifteen percent. Can they keep that up? 169 00:09:56,040 --> 00:09:58,240 Speaker 6: So if it comes in much lower, if it comes 170 00:09:58,240 --> 00:10:01,440 Speaker 6: in lower than I would say thirteen four teen percent, yes, 171 00:10:01,559 --> 00:10:04,480 Speaker 6: that is going to probably cause some nervousness. So yes, 172 00:10:04,760 --> 00:10:08,000 Speaker 6: talking about that high bar, all of this engagement metrics 173 00:10:08,080 --> 00:10:11,120 Speaker 6: kind of really playing into that. And then the other 174 00:10:11,200 --> 00:10:13,720 Speaker 6: metric that we're kind of looking for with Netflix apart 175 00:10:13,760 --> 00:10:16,559 Speaker 6: from revenue is margin. So this year, I think their 176 00:10:16,600 --> 00:10:19,000 Speaker 6: margin growth is going to be really strong. I think 177 00:10:19,320 --> 00:10:21,960 Speaker 6: they've already guided to thirty percent. It's probably going to 178 00:10:21,960 --> 00:10:23,640 Speaker 6: be a little bit ahead of that. They're probably going 179 00:10:23,679 --> 00:10:26,360 Speaker 6: to raise guidance. So again next year, if they're a 180 00:10:26,360 --> 00:10:30,680 Speaker 6: little bit softer on that number, again, maybe that causes 181 00:10:30,720 --> 00:10:32,720 Speaker 6: a little bit of a pullback in the stock. 182 00:10:33,000 --> 00:10:36,120 Speaker 2: What's going to be driving the margins for Netflix in 183 00:10:36,280 --> 00:10:40,240 Speaker 2: quarters going forward? Is it going to be growth in subscribers? 184 00:10:40,440 --> 00:10:42,920 Speaker 2: Is it going to be revenue from advertising? 185 00:10:43,600 --> 00:10:45,559 Speaker 6: Yeah, I'm really glad that you brought it out, because 186 00:10:45,600 --> 00:10:48,200 Speaker 6: now that they don't disclose subscribers anymore, it's a little 187 00:10:48,200 --> 00:10:51,440 Speaker 6: bit hard to get transparency. And again, just for full disclosure, 188 00:10:51,480 --> 00:10:56,640 Speaker 6: they haven't actually disclosed any hard metrics around advertising either, 189 00:10:57,240 --> 00:11:00,800 Speaker 6: so we don't necessarily know exactly what the advertising revenue is. 190 00:11:01,040 --> 00:11:03,040 Speaker 6: Of course, there have been some guestimates that it was 191 00:11:03,080 --> 00:11:07,160 Speaker 6: probably around a billion dollars and change in twenty twenty four. 192 00:11:07,200 --> 00:11:09,679 Speaker 6: That's probably going to be upwards of two billion this year. 193 00:11:10,200 --> 00:11:14,199 Speaker 6: But then you're absolutely right, we're expecting a significant ramp 194 00:11:14,280 --> 00:11:17,080 Speaker 6: up going into twenty twenty six, and that is going 195 00:11:17,080 --> 00:11:19,200 Speaker 6: to be one of the major drivers for both the 196 00:11:19,240 --> 00:11:23,000 Speaker 6: top line growth as well as you know, operating margins. 197 00:11:23,000 --> 00:11:25,240 Speaker 6: Sof for operating margin, you need strong top line growth, 198 00:11:25,240 --> 00:11:29,000 Speaker 6: but you also need content cost rationalization, and that's really 199 00:11:29,000 --> 00:11:33,320 Speaker 6: what we've seen Netflix do extremely well. So they're you know, 200 00:11:33,360 --> 00:11:37,000 Speaker 6: we're seeing revenue grow, you know, mid teens levels, sometimes 201 00:11:37,000 --> 00:11:40,280 Speaker 6: even high teens, but content costs grow only about mid 202 00:11:40,320 --> 00:11:42,920 Speaker 6: to high single digits, and that's where we're seeing this 203 00:11:43,360 --> 00:11:46,320 Speaker 6: huge jump in operating margins year after year. 204 00:11:46,679 --> 00:11:51,240 Speaker 2: And when it comes to content cost management, where is 205 00:11:51,400 --> 00:11:54,800 Speaker 2: the focus going to be? Do you think for Netflix 206 00:11:54,840 --> 00:11:57,439 Speaker 2: is it going to be on that you know, original content, 207 00:11:57,520 --> 00:12:00,079 Speaker 2: the scripted stuff, or is it going to be more 208 00:12:00,120 --> 00:12:02,480 Speaker 2: reality shows, are even more live shows. 209 00:12:03,160 --> 00:12:05,559 Speaker 6: It's going to be all of the above. So we've 210 00:12:05,679 --> 00:12:08,520 Speaker 6: seen them really do a very good job. Originals, as 211 00:12:08,559 --> 00:12:12,760 Speaker 6: you pointed out, drives majority of the viewership on the 212 00:12:12,800 --> 00:12:15,599 Speaker 6: Netflix platform. We've seen that in all of the engagement 213 00:12:16,000 --> 00:12:19,120 Speaker 6: stats that they've disclosed from time to time. That makes 214 00:12:19,200 --> 00:12:22,520 Speaker 6: up about fifty to fifty five percent of their content budget. 215 00:12:23,040 --> 00:12:25,840 Speaker 6: But you're absolutely right, they have a really nice mix. 216 00:12:25,920 --> 00:12:29,760 Speaker 6: They also have a good amount of licensed content, the 217 00:12:29,920 --> 00:12:32,079 Speaker 6: content that they get from the Disney's and the Warner 218 00:12:32,120 --> 00:12:34,560 Speaker 6: Brothers and the paramounts of the world. So they're making 219 00:12:34,720 --> 00:12:37,079 Speaker 6: very concerted investments across the board. 220 00:12:37,440 --> 00:12:39,120 Speaker 2: All right, well, thank you for this, keith A. Really 221 00:12:39,120 --> 00:12:41,880 Speaker 2: great having you on with us. That is a Githa Ranganathan, 222 00:12:42,320 --> 00:12:46,320 Speaker 2: Senior analyst for US Media for Bloomberg Intelligence, and coming 223 00:12:46,400 --> 00:12:48,800 Speaker 2: up on Bloomberg day Break weekend, we'll look ahead to 224 00:12:49,040 --> 00:12:51,640 Speaker 2: bank earnings out of Europe, how they may have been 225 00:12:51,640 --> 00:12:55,800 Speaker 2: affected by rate cuts and geopolitical risk. I'm Nathan Hager, 226 00:12:55,960 --> 00:13:09,880 Speaker 2: and this is Bloomberg. This is Bloomberg Daybreak Weekend, our 227 00:13:09,920 --> 00:13:12,400 Speaker 2: global look ahead at the top stories for investors in 228 00:13:12,440 --> 00:13:15,600 Speaker 2: the coming week. I'm Nathan Hager in Washington. Up later 229 00:13:15,640 --> 00:13:17,800 Speaker 2: in our program will look ahead to a key meeting 230 00:13:17,840 --> 00:13:22,320 Speaker 2: between Australian Prime Minister Anthony Albanizi and President Donald Trump. 231 00:13:22,480 --> 00:13:26,200 Speaker 2: But first, European banks have seen a trillion euro surge 232 00:13:26,240 --> 00:13:29,319 Speaker 2: in value since late twenty twenty two as interst rates 233 00:13:29,320 --> 00:13:32,080 Speaker 2: have come down, but that may come under pressure from 234 00:13:32,120 --> 00:13:35,400 Speaker 2: growing fears over sovereign risks in France and threat of 235 00:13:35,400 --> 00:13:38,520 Speaker 2: a new bank tax in the UK, while rate cuts 236 00:13:38,600 --> 00:13:43,000 Speaker 2: and geopolitical risks are added burdens. With the UK's biggest 237 00:13:43,040 --> 00:13:46,120 Speaker 2: banks Barclays, Nott West and Lloyd's reporting earnings in the 238 00:13:46,120 --> 00:13:49,160 Speaker 2: next few days, we want to get more from Bloomberg Daybreak, 239 00:13:49,160 --> 00:13:51,920 Speaker 2: euro banker Caroline Hepger in London. 240 00:13:52,040 --> 00:13:56,120 Speaker 3: Nathan European banks are eyeing Ball Street after a bumper 241 00:13:56,160 --> 00:13:59,480 Speaker 3: set of earnings for the third quarter. JP Morgan, Goldin 242 00:13:59,520 --> 00:14:02,800 Speaker 3: Sachs as City Group all comfortably beat estimates with a 243 00:14:02,800 --> 00:14:06,400 Speaker 3: combined profit of more than twenty billion dollars, but the 244 00:14:06,440 --> 00:14:09,960 Speaker 3: CEOs of a number of US John's did sound alarm 245 00:14:10,040 --> 00:14:15,040 Speaker 3: bells that market optimism is perhaps overblown. JP Morgan's Jamie 246 00:14:15,120 --> 00:14:18,480 Speaker 3: Diamond pointed to a pair of recent bankruptcies in the 247 00:14:18,640 --> 00:14:19,920 Speaker 3: private credit space. 248 00:14:20,520 --> 00:14:23,120 Speaker 6: Nice pleasure and say this, but when you see one cockroach, 249 00:14:23,600 --> 00:14:27,040 Speaker 6: you're probably more you know, and so we should everyone 250 00:14:27,040 --> 00:14:28,840 Speaker 6: should be four more than this one. 251 00:14:29,240 --> 00:14:34,480 Speaker 3: So Diamond's comments came amid an increasingly complex macroeconomic picture. 252 00:14:34,720 --> 00:14:38,960 Speaker 3: You've got global trade wars, tariffs, and political turmoil for 253 00:14:39,000 --> 00:14:42,520 Speaker 3: the banks to think about. So against that backdrop, lenders 254 00:14:42,560 --> 00:14:45,240 Speaker 3: on the other side of the Atlantic are also looking 255 00:14:45,240 --> 00:14:49,960 Speaker 3: to balance risks and opportunities. So how have European banks 256 00:14:50,000 --> 00:14:53,040 Speaker 3: been faring? So joining us now is Bloomberg's finance reporter, 257 00:14:53,080 --> 00:14:57,360 Speaker 3: Will Shaw and Philip Richards Bloomberg Intelligence is senior banking analysts. 258 00:14:57,400 --> 00:14:59,960 Speaker 3: Welcome to both of you. Thank you for being with me, Phil, 259 00:15:00,000 --> 00:15:02,560 Speaker 3: But can I start with you on the third quarter earnings? 260 00:15:02,840 --> 00:15:07,200 Speaker 3: How are European banks expected to fare, specifically against those 261 00:15:07,240 --> 00:15:10,320 Speaker 3: War Street lenders who've reported just in the last few days. 262 00:15:10,600 --> 00:15:12,960 Speaker 7: Yeah, so we've had all the US bank supporting and 263 00:15:13,000 --> 00:15:15,320 Speaker 7: they've actually come across quite a lot stronger than the 264 00:15:15,320 --> 00:15:18,640 Speaker 7: market was expecting, particularly on the investment banking side, some 265 00:15:18,800 --> 00:15:22,520 Speaker 7: quite hefty beats coming through on fixed income equity trading, 266 00:15:22,840 --> 00:15:24,760 Speaker 7: also quite a big return in terms of M and 267 00:15:24,840 --> 00:15:27,560 Speaker 7: A and those are also quite a head of consensus 268 00:15:27,600 --> 00:15:29,880 Speaker 7: coming through as well. But also on the retail banking 269 00:15:29,920 --> 00:15:32,560 Speaker 7: side as well, lending growth has been higher than most 270 00:15:32,600 --> 00:15:36,080 Speaker 7: people expected. A couple of wabbles on the credit quality side, 271 00:15:36,080 --> 00:15:38,360 Speaker 7: but overall they've been very strong and so the question 272 00:15:38,480 --> 00:15:40,160 Speaker 7: is how much of that is going to follow through 273 00:15:40,160 --> 00:15:42,400 Speaker 7: to the European banks and the week coming ahead. I 274 00:15:42,400 --> 00:15:44,800 Speaker 7: think Boderlanders, I think that they should follow quite similar trends. 275 00:15:44,800 --> 00:15:46,320 Speaker 7: I mean, there are obviously a lot of overlap in 276 00:15:46,400 --> 00:15:50,000 Speaker 7: terms of the investment banking space where the banks are operating. 277 00:15:50,120 --> 00:15:52,520 Speaker 7: I'm there for I think they could be fairly beats 278 00:15:52,520 --> 00:15:52,960 Speaker 7: it there as. 279 00:15:52,840 --> 00:15:57,080 Speaker 3: Well, hefty beats expected. Okay, that's interesting. Will how have 280 00:15:57,200 --> 00:16:00,320 Speaker 3: the Wall Street banks done during the ending season the 281 00:16:00,400 --> 00:16:03,840 Speaker 3: expectations then in your view for the big UK lenders, 282 00:16:03,880 --> 00:16:06,080 Speaker 3: including of course Barkley's coming up. 283 00:16:06,200 --> 00:16:09,240 Speaker 8: Yes, so I think, like Phillips says, the Wall Street 284 00:16:09,240 --> 00:16:12,440 Speaker 8: banks have really smashed it. I suppose as a technical 285 00:16:12,480 --> 00:16:17,880 Speaker 8: financial term, Morgan Stanley's stock traders sawed past expectations. They 286 00:16:17,880 --> 00:16:21,400 Speaker 8: were beating rivals on a surge and trading activity around 287 00:16:21,600 --> 00:16:26,040 Speaker 8: turbulence from Donald Trump's policies. Golden Sacks also posted record 288 00:16:26,120 --> 00:16:29,560 Speaker 8: third quarter revenue down to like a resurgence in deal 289 00:16:29,640 --> 00:16:33,320 Speaker 8: making as M and A began to resume. People now 290 00:16:33,320 --> 00:16:37,600 Speaker 8: obviously looking ahead to Barclays. Now, Barklay's are the analysts 291 00:16:37,800 --> 00:16:41,040 Speaker 8: that we take note of. They expect Actus traders to 292 00:16:41,120 --> 00:16:44,240 Speaker 8: make about seven hundred and fifty million pounds. That would 293 00:16:44,280 --> 00:16:46,560 Speaker 8: be an increase of about eight percent on the same 294 00:16:46,640 --> 00:16:50,360 Speaker 8: period a year ago. They're macro traders the sort of 295 00:16:50,360 --> 00:16:52,720 Speaker 8: tip to make about one point two billion, that'd be 296 00:16:52,800 --> 00:16:56,960 Speaker 8: up about two percent. Deal Makers looking at perhaps making 297 00:16:57,000 --> 00:16:59,880 Speaker 8: around six hundred million pounds in banking fees and under 298 00:17:00,000 --> 00:17:02,880 Speaker 8: fighting revenue again, that would be an uplift of around 299 00:17:02,960 --> 00:17:03,640 Speaker 8: two percent. 300 00:17:04,119 --> 00:17:07,560 Speaker 3: So those are the numbers we're watching out for. Then, Philip, 301 00:17:07,680 --> 00:17:10,800 Speaker 3: it's obviously been you know, the context in Europe this 302 00:17:11,040 --> 00:17:16,000 Speaker 3: fantastic four years. Interest rates have fallen and therefore you know, 303 00:17:16,160 --> 00:17:19,760 Speaker 3: you've had a good kind of tailwind for European banks. 304 00:17:19,760 --> 00:17:23,639 Speaker 3: We've seen that in the share prices. But you've highlighted, 305 00:17:23,680 --> 00:17:26,199 Speaker 3: of course that there are more threats now into the 306 00:17:26,200 --> 00:17:28,800 Speaker 3: second half of this year. What are the big challenges 307 00:17:28,840 --> 00:17:30,000 Speaker 3: for the European banks? 308 00:17:30,080 --> 00:17:31,480 Speaker 7: Yeah, I think that's fair. I mean the second is 309 00:17:31,480 --> 00:17:33,199 Speaker 7: we're on a huge run. As he's flagged, thearing up 310 00:17:33,200 --> 00:17:35,920 Speaker 7: about one hundred and sixty percent over that period. That 311 00:17:36,040 --> 00:17:38,760 Speaker 7: compared to the wider market about forty percent higher, So 312 00:17:39,040 --> 00:17:41,159 Speaker 7: a big out performance from the European Bank. But what 313 00:17:41,200 --> 00:17:43,000 Speaker 7: I want to say is they were very at very 314 00:17:43,000 --> 00:17:45,280 Speaker 7: distressed levels at that time when they first start that 315 00:17:45,359 --> 00:17:48,080 Speaker 7: run started, and where we are today, yes, we're back 316 00:17:48,119 --> 00:17:51,639 Speaker 7: at basically the highest level since the Great Financial Crisis 317 00:17:51,680 --> 00:17:53,919 Speaker 7: over two thousand and seven, two thousand and eight. So 318 00:17:53,960 --> 00:17:56,360 Speaker 7: we've had this rally, but it has really been supported 319 00:17:56,359 --> 00:18:00,800 Speaker 7: by fundamental improvements. You know, obviously industrate hikes supported it. 320 00:18:01,400 --> 00:18:04,400 Speaker 7: The economies in the better position now, credit qualities all low, 321 00:18:04,520 --> 00:18:06,439 Speaker 7: so it's not just about is that a bubble in 322 00:18:06,480 --> 00:18:09,480 Speaker 7: terms of share price, Actually the underlying earning is much better. 323 00:18:10,080 --> 00:18:11,680 Speaker 7: And you talk about the risk going forward, I think 324 00:18:11,680 --> 00:18:13,840 Speaker 7: actually some of those risks already come through in terms 325 00:18:13,840 --> 00:18:16,080 Speaker 7: of indust rate cuts. We've seen that now in both 326 00:18:16,600 --> 00:18:19,680 Speaker 7: Europe and the UK, and actually from here maybe one 327 00:18:19,720 --> 00:18:22,640 Speaker 7: more cuts in each market, but probably quite minimal from here. 328 00:18:22,680 --> 00:18:24,960 Speaker 7: So a lot of that pain has happened already. And 329 00:18:25,040 --> 00:18:27,560 Speaker 7: actually if you look at economic growth, so conditions are 330 00:18:27,760 --> 00:18:31,240 Speaker 7: still slow, but they're getting better. And certainly eclomists have 331 00:18:31,280 --> 00:18:34,640 Speaker 7: been upgrading forecasts overall, and therefore know those things could 332 00:18:34,680 --> 00:18:35,280 Speaker 7: help with the banks. 333 00:18:36,320 --> 00:18:39,119 Speaker 3: We heard a little bit of JP Morgan CEO just 334 00:18:39,440 --> 00:18:43,560 Speaker 3: about the issue with risky loans. I mean, some people 335 00:18:43,880 --> 00:18:45,959 Speaker 3: you know are concerned about this, others are not. Are 336 00:18:45,960 --> 00:18:50,240 Speaker 3: there signs of exposure amongst European banks to riskier loans? 337 00:18:50,280 --> 00:18:51,880 Speaker 3: What's the concern there in your view? 338 00:18:52,000 --> 00:18:54,800 Speaker 7: Yeah, this follows through from two big problems in the 339 00:18:54,880 --> 00:18:58,560 Speaker 7: US for Tricolor and First Brands, And the comment from 340 00:18:58,600 --> 00:19:00,720 Speaker 7: DEPM Morgan was basically that you don't often get just 341 00:19:00,760 --> 00:19:03,360 Speaker 7: one or two hiccups. Normally they come together and as 342 00:19:03,400 --> 00:19:05,720 Speaker 7: a sign of stress in the market. And what I 343 00:19:05,720 --> 00:19:08,320 Speaker 7: would say actually in the UK or even across of Europe, 344 00:19:08,400 --> 00:19:10,600 Speaker 7: we haven't really seen that yet. There's not really been 345 00:19:10,640 --> 00:19:14,040 Speaker 7: many big cases coming through. Credit quality may actually very 346 00:19:14,040 --> 00:19:16,200 Speaker 7: strong a cost the sector, but what I would say, 347 00:19:16,200 --> 00:19:19,000 Speaker 7: these are well below normalized level the current chargeoffs, so 348 00:19:19,040 --> 00:19:21,600 Speaker 7: they will gradily rise and there will be some negatives, 349 00:19:21,760 --> 00:19:24,160 Speaker 7: but overall, if you look at on a longer term perspective, 350 00:19:24,200 --> 00:19:26,679 Speaker 7: actually credit quality means very strong for the banks. 351 00:19:26,800 --> 00:19:27,080 Speaker 5: Hmm. 352 00:19:27,800 --> 00:19:30,240 Speaker 3: Again, we'll want to bring you back in on the 353 00:19:30,400 --> 00:19:33,400 Speaker 3: UK banks and on Barkley's. I mean, you focus on 354 00:19:33,560 --> 00:19:36,760 Speaker 3: Barklay's and what they're doing in lots of detail. And 355 00:19:36,800 --> 00:19:40,520 Speaker 3: I did also think that the stories around Barkley's and 356 00:19:40,560 --> 00:19:43,040 Speaker 3: their expansion in the US is very interesting. I mean, 357 00:19:43,080 --> 00:19:47,000 Speaker 3: they're spending what a billion dollars on the refurb of. 358 00:19:47,000 --> 00:19:50,120 Speaker 8: The New York Trading It seems enormous, doesn't it. Yeah, 359 00:19:50,320 --> 00:19:52,639 Speaker 8: like you say, they're preparing to spend at least billion 360 00:19:52,720 --> 00:19:56,960 Speaker 8: renovating their skyscraper, which is in New York's Times Square. 361 00:19:57,720 --> 00:19:59,920 Speaker 8: They'll begin construction on that tower in the middle of 362 00:20:00,119 --> 00:20:03,679 Speaker 8: next year and it's currently in the design phase and 363 00:20:03,720 --> 00:20:06,840 Speaker 8: it's expected to wrap up in about twenty thirty. I 364 00:20:06,880 --> 00:20:09,640 Speaker 8: think a lot of people were surprised at the sheer 365 00:20:09,760 --> 00:20:16,000 Speaker 8: scope of the expenditure there. Barclays is obviously Britain's investment bank. 366 00:20:17,400 --> 00:20:18,000 Speaker 1: It's big. 367 00:20:18,040 --> 00:20:21,800 Speaker 8: It's big here. It's not always as visible in the 368 00:20:21,920 --> 00:20:24,760 Speaker 8: US as perhaps some of the other rivals over there, 369 00:20:24,840 --> 00:20:28,840 Speaker 8: the Big Five, Goldman's, City Group, Morgan Stanley, etc. And 370 00:20:28,880 --> 00:20:31,240 Speaker 8: I think it was really interesting to see them put 371 00:20:31,240 --> 00:20:33,760 Speaker 8: their money where their mouths are and show just how 372 00:20:33,800 --> 00:20:37,400 Speaker 8: committed they are to the US market with such an 373 00:20:37,520 --> 00:20:38,920 Speaker 8: enormous expenditure there. 374 00:20:39,119 --> 00:20:42,439 Speaker 3: Well, just thinking about that, if Barclays is the UK's 375 00:20:42,480 --> 00:20:46,320 Speaker 3: investment bank. The policy outlook I think is very interesting, Philip. 376 00:20:46,760 --> 00:20:49,800 Speaker 3: We've got the budget coming up in November and there's 377 00:20:49,840 --> 00:20:53,840 Speaker 3: been plenty of talk not just of deregulation and of 378 00:20:53,880 --> 00:20:56,800 Speaker 3: things like changing the ring fencing rules for banks in 379 00:20:56,840 --> 00:21:00,240 Speaker 3: the UK, but also the possibility of a bank win 380 00:21:00,320 --> 00:21:02,639 Speaker 3: full tax on the chance of rachel rees. What do 381 00:21:02,680 --> 00:21:03,280 Speaker 3: you think about that? 382 00:21:03,359 --> 00:21:05,040 Speaker 7: Yeah, it's a bit of a contrast, do isn't it. 383 00:21:05,200 --> 00:21:06,920 Speaker 7: I'm giving one hand and take away with the other. 384 00:21:07,119 --> 00:21:10,360 Speaker 7: So promises of deregulation to match the US which are 385 00:21:10,560 --> 00:21:12,240 Speaker 7: obviously the whole that's the main word in the US 386 00:21:12,240 --> 00:21:14,480 Speaker 7: at the moment. I'm as supportive, and as you say, 387 00:21:14,520 --> 00:21:16,480 Speaker 7: it was less in terms of the ring fencing that 388 00:21:16,520 --> 00:21:18,720 Speaker 7: could release capital for the banks, it could lead to 389 00:21:18,720 --> 00:21:22,160 Speaker 7: a reduction operating expenses, so they were positive. But then 390 00:21:22,200 --> 00:21:23,840 Speaker 7: on the flip side, you know these banks are now 391 00:21:24,280 --> 00:21:26,560 Speaker 7: obviously in a much more profitable position, you know, fifteen 392 00:21:26,600 --> 00:21:30,639 Speaker 7: percent plus profitability of return on equity for the largest 393 00:21:31,000 --> 00:21:33,560 Speaker 7: UK banks, and that's obviously quite attractive to a chancellor 394 00:21:33,560 --> 00:21:35,119 Speaker 7: who's struggling to raise cash. 395 00:21:35,720 --> 00:21:38,480 Speaker 3: I suppose. Yeah, shall I ask you what the odds 396 00:21:38,480 --> 00:21:41,080 Speaker 3: are do you think of her actually doing it or not. 397 00:21:41,240 --> 00:21:43,240 Speaker 3: Maybe this is impossible, it's important to say. 398 00:21:43,240 --> 00:21:45,560 Speaker 7: I mean it's been mentioned, has been widely talked about 399 00:21:45,600 --> 00:21:47,720 Speaker 7: in the market, but the chance is obviously keeping her 400 00:21:47,760 --> 00:21:50,320 Speaker 7: cards coach of chest as it were, and therefore she's 401 00:21:50,320 --> 00:21:52,200 Speaker 7: not a really ending yet. We have seen it across 402 00:21:52,200 --> 00:21:54,600 Speaker 7: a number of other European markets, so it wouldn't be 403 00:21:54,600 --> 00:21:56,480 Speaker 7: out of the blue. We've seen in Poland, we've seen 404 00:21:56,480 --> 00:21:59,640 Speaker 7: in Italy. So yes, it's possible, but who knows. 405 00:21:59,720 --> 00:22:02,280 Speaker 3: Oh yeah, so wind full taxes people might be thinking 406 00:22:02,280 --> 00:22:05,639 Speaker 3: about that in the industry. Well, well in terms of 407 00:22:05,880 --> 00:22:08,959 Speaker 3: other things then that are happening on the banking front 408 00:22:09,359 --> 00:22:12,720 Speaker 3: and trying to beef up trading. That's the other thing. 409 00:22:12,720 --> 00:22:14,560 Speaker 3: I mean that the US banks are so good at that, 410 00:22:14,880 --> 00:22:17,639 Speaker 3: and does the UK have something to rival that, You know, 411 00:22:18,040 --> 00:22:19,920 Speaker 3: if maybe there is a wind full tax coming, is 412 00:22:19,960 --> 00:22:21,560 Speaker 3: there going to be a big pot two tax? 413 00:22:21,640 --> 00:22:21,880 Speaker 5: Yeah. 414 00:22:21,880 --> 00:22:25,160 Speaker 8: So Adil Khan, who's global head of markets at Berkeley's, 415 00:22:25,200 --> 00:22:27,400 Speaker 8: you know, he's been making a bit of a concerted 416 00:22:27,440 --> 00:22:30,600 Speaker 8: push into macro trading this year. They've hired more than 417 00:22:30,640 --> 00:22:34,360 Speaker 8: a dozen senior macro traders as it looks to make 418 00:22:34,400 --> 00:22:36,440 Speaker 8: the most out of all the turbulence in the bomb 419 00:22:36,480 --> 00:22:40,280 Speaker 8: market stemming from the Trump administration. So they've been hiring 420 00:22:40,280 --> 00:22:44,560 Speaker 8: people from the likes of JP Morgan, Millennium, Nomora, Morgan Stanley. 421 00:22:44,960 --> 00:22:49,800 Speaker 8: They're all big names and it's essentially part of the CEO, 422 00:22:49,960 --> 00:22:54,680 Speaker 8: Venkat's three year plan to boost returns across the investment bank. 423 00:22:55,119 --> 00:22:59,600 Speaker 8: He's identified priority areas which include European rates as well 424 00:22:59,600 --> 00:23:02,840 Speaker 8: as derivatives and securitized product training. So yeah, they do 425 00:23:02,920 --> 00:23:05,399 Speaker 8: seem to be really flexing their muscle in this area 426 00:23:05,440 --> 00:23:06,000 Speaker 8: at the moment. 427 00:23:06,480 --> 00:23:10,159 Speaker 3: And I think no conversation on any topic Frankly and 428 00:23:10,600 --> 00:23:16,520 Speaker 3: finance or banking is without the AI factor. Artificial intelligence 429 00:23:16,560 --> 00:23:20,960 Speaker 3: and banking so interesting. You've also reported on Berkley shifting 430 00:23:21,040 --> 00:23:23,359 Speaker 3: some of its top executives to try to lead an 431 00:23:23,400 --> 00:23:26,840 Speaker 3: AI push. What did an AI push look like for Barkleys. 432 00:23:27,359 --> 00:23:30,480 Speaker 8: Well, I mean all banks obviously are thinking a lot 433 00:23:30,520 --> 00:23:33,200 Speaker 8: about AI at the moment, what it means for speeding up, 434 00:23:34,280 --> 00:23:37,440 Speaker 8: creating greater efficiencies, thinking perhaps about what it might mean 435 00:23:37,480 --> 00:23:41,520 Speaker 8: for headcount going forward. Evident AI, which is a company 436 00:23:41,560 --> 00:23:45,840 Speaker 8: which tracks performance in AI of different banks, it doesn't 437 00:23:45,880 --> 00:23:49,879 Speaker 8: Frankly rate Barklays particularly highly I would expect Barkleys to 438 00:23:49,920 --> 00:23:53,760 Speaker 8: be looking around slightly nervously at the other Wall Street 439 00:23:53,800 --> 00:23:56,240 Speaker 8: banks and seeing what they're doing. You know, are they 440 00:23:56,240 --> 00:23:59,720 Speaker 8: at risk of falling behind. They're thinking about areas such 441 00:23:59,720 --> 00:24:03,439 Speaker 8: as generative AI can be used in parts of the 442 00:24:03,480 --> 00:24:07,240 Speaker 8: trading floor to make things more efficient. They've also promoted 443 00:24:07,400 --> 00:24:11,000 Speaker 8: Antwoinette O'Neil to group Chief Information Officer in charge of 444 00:24:11,040 --> 00:24:16,240 Speaker 8: areas including AI strategy. So they are on this interesting. 445 00:24:16,880 --> 00:24:19,160 Speaker 3: I think we should also put it into context. And 446 00:24:19,640 --> 00:24:23,280 Speaker 3: listening to Karen Ward also of JP Morgan Asset Management, 447 00:24:23,320 --> 00:24:25,520 Speaker 3: of course she's their chief market stratus. He was speaking 448 00:24:25,520 --> 00:24:27,639 Speaker 3: to us in the last few days on Bloomberg Radio, 449 00:24:27,720 --> 00:24:30,119 Speaker 3: I just thought this was really a great nugget that 450 00:24:30,200 --> 00:24:32,640 Speaker 3: was so interesting about AI and whether or not it's 451 00:24:32,680 --> 00:24:35,119 Speaker 3: going to benefit the UK or not. This is what 452 00:24:35,160 --> 00:24:35,840 Speaker 3: she had to say. 453 00:24:36,320 --> 00:24:38,679 Speaker 9: The thing I will say with conviction is if AI 454 00:24:39,280 --> 00:24:43,840 Speaker 9: delivers productivity benefits, the UK will benefit. One of the 455 00:24:43,880 --> 00:24:46,320 Speaker 9: things in markets at the moment I find very hard 456 00:24:46,800 --> 00:24:49,640 Speaker 9: to make sense of is the idea that the tech 457 00:24:49,680 --> 00:24:53,560 Speaker 9: giants will grow their earnings at twenty percent forever more, 458 00:24:53,600 --> 00:24:55,920 Speaker 9: and that's why you pay thirty times earnings for them, 459 00:24:56,480 --> 00:25:01,000 Speaker 9: but yet corporate, Global Corporate is going to have earnings 460 00:25:01,000 --> 00:25:03,720 Speaker 9: growth of you know, low single digits. You know that 461 00:25:04,080 --> 00:25:04,920 Speaker 9: can't make sense. 462 00:25:05,280 --> 00:25:07,560 Speaker 3: Yeah, absolutely, Thank you so much for both of you 463 00:25:07,600 --> 00:25:10,040 Speaker 3: for joining me. Really appreciate your views. That is a 464 00:25:10,080 --> 00:25:14,080 Speaker 3: Bloomberg's finance reporter, Will Shaw and Philip Richards Bloomberg Intelligence 465 00:25:14,119 --> 00:25:17,080 Speaker 3: is senior banking analyst. We will have full coverage and 466 00:25:17,160 --> 00:25:21,360 Speaker 3: analysis of the UK bank earnings and European bank earnings 467 00:25:21,400 --> 00:25:24,320 Speaker 3: in the days ahead, including Berkley's quarterly earnings you out 468 00:25:24,359 --> 00:25:28,320 Speaker 3: on the twenty second of October. Also, we'll have Nat 469 00:25:28,359 --> 00:25:31,240 Speaker 3: West and Lloyd's to bring you on Bloomberg Radio. I'm 470 00:25:31,240 --> 00:25:33,440 Speaker 3: Caroline Hepge here in London. You can catch us every 471 00:25:33,440 --> 00:25:36,440 Speaker 3: weekday morning here for Bloomberg Daybreak Europe, beginning at six 472 00:25:36,440 --> 00:25:39,119 Speaker 3: am in London. That's one am on Wall Street. 473 00:25:39,480 --> 00:25:43,840 Speaker 2: Nathan, Thanks Caroline. And coming up on Bloomberg Daybreak weekend, 474 00:25:43,960 --> 00:25:46,960 Speaker 2: Australia's Prime Minister is set to meet with President Trump. 475 00:25:47,119 --> 00:25:50,760 Speaker 2: What implications could that have for the Australian economy? More 476 00:25:50,800 --> 00:25:54,919 Speaker 2: on that next. I'm Nathan Hager and this is Bloomberg. 477 00:26:06,000 --> 00:26:08,919 Speaker 2: This is Bloomberg Daybreak Weekend. Our global look ahead at 478 00:26:08,960 --> 00:26:11,280 Speaker 2: the top stories for investors in the coming week. I'm 479 00:26:11,320 --> 00:26:15,440 Speaker 2: Nathan Hager in Washington. Australian Prime Minister Anthony Albanizi will 480 00:26:15,480 --> 00:26:17,560 Speaker 2: be in the nation's capital in the week ahead to 481 00:26:17,600 --> 00:26:20,520 Speaker 2: meet with President Trump. For a preview, let's get to 482 00:26:20,600 --> 00:26:24,160 Speaker 2: Doug Krisner, host of the Daybreak Asia podcast. 483 00:26:24,119 --> 00:26:28,639 Speaker 4: Nathan, several issues will dominate the conversation when Albanizi visits 484 00:26:28,680 --> 00:26:32,879 Speaker 4: the White House. Perhaps the most important topic critical minerals. 485 00:26:33,000 --> 00:26:35,480 Speaker 4: For a closer look, I'm joined now by Bloomberg's Paul 486 00:26:35,560 --> 00:26:39,080 Speaker 4: Allen in Sydney. Paul, thanks for helping me preview the meeting. 487 00:26:39,480 --> 00:26:42,200 Speaker 4: You and I have talked in the past about Australia's 488 00:26:42,600 --> 00:26:46,080 Speaker 4: vast reserves of rare earths. If you had to look 489 00:26:46,160 --> 00:26:50,000 Speaker 4: at a potential deal between the US and Australia where 490 00:26:50,080 --> 00:26:52,399 Speaker 4: rare earths are concerned, what might it look like. 491 00:26:52,800 --> 00:26:55,920 Speaker 10: Well, there's certainly a lot of speculation around the stog 492 00:26:56,200 --> 00:26:59,200 Speaker 10: the prospect of a deal, around critical minerals, because we've 493 00:26:59,240 --> 00:27:02,080 Speaker 10: heard President Trump talking in the past about ideas like 494 00:27:02,160 --> 00:27:04,840 Speaker 10: well where maybe we could take over Greenland, or involvement 495 00:27:04,880 --> 00:27:07,000 Speaker 10: in Ukraine, and at the core of a lot of 496 00:27:07,040 --> 00:27:11,320 Speaker 10: these statements is these countries critical mineral reserves. In Australia, 497 00:27:11,560 --> 00:27:14,399 Speaker 10: depending on how you slice and dice, it has either 498 00:27:14,480 --> 00:27:18,560 Speaker 10: the largest or the second largest critical minerals deposits in 499 00:27:18,600 --> 00:27:22,920 Speaker 10: the world. But the limitation here is the refining of 500 00:27:22,960 --> 00:27:26,840 Speaker 10: those deposits. Australia's got the minds. It certainly has the 501 00:27:26,880 --> 00:27:30,720 Speaker 10: scope for plenty more, but all of the processing happens offshore, 502 00:27:30,840 --> 00:27:34,240 Speaker 10: mostly in China. Some of it happens in Korea as well, 503 00:27:34,400 --> 00:27:38,159 Speaker 10: So any discussion around a potential deal likely to focus 504 00:27:38,200 --> 00:27:41,400 Speaker 10: in on how these minerals get processed. And there's been 505 00:27:41,400 --> 00:27:43,840 Speaker 10: some speculation in the media that there could be some 506 00:27:43,880 --> 00:27:46,040 Speaker 10: sort of deal with the US and the range of 507 00:27:46,080 --> 00:27:49,199 Speaker 10: seven to eight hundred million dollars, but beyond that we 508 00:27:49,280 --> 00:27:52,679 Speaker 10: don't know anything. The government's been very tight lipped about this, 509 00:27:52,840 --> 00:27:56,760 Speaker 10: which again leads to future speculation that we very well 510 00:27:56,800 --> 00:28:01,119 Speaker 10: could see something get announced when Anthony Albanesi meets President Trump. 511 00:28:01,200 --> 00:28:04,800 Speaker 4: So, Paul, what is preventing Canberra from building up refining 512 00:28:04,800 --> 00:28:08,480 Speaker 4: capacity in Australia when it comes to the processing of 513 00:28:08,560 --> 00:28:09,159 Speaker 4: rare earths. 514 00:28:09,640 --> 00:28:13,240 Speaker 10: Certainly the political will exists. I think the question is 515 00:28:13,280 --> 00:28:16,520 Speaker 10: more a commercial one. I can give you an example 516 00:28:16,560 --> 00:28:20,359 Speaker 10: of one company. It's a small company called Australian Strategic Minerals. 517 00:28:20,720 --> 00:28:23,359 Speaker 10: It's seen a very healthy run up in its stock 518 00:28:23,440 --> 00:28:25,800 Speaker 10: price on the ASX. So this is despite the fact 519 00:28:25,840 --> 00:28:29,239 Speaker 10: that it doesn't actually have a mine in Australia. For 520 00:28:29,280 --> 00:28:33,320 Speaker 10: as long as I can remember working for Bloomberg and Australia, 521 00:28:33,440 --> 00:28:36,080 Speaker 10: ASM has been talking about starting a mine near a 522 00:28:36,119 --> 00:28:39,880 Speaker 10: town called Dubbo in New South Wales. It's still about 523 00:28:39,920 --> 00:28:43,160 Speaker 10: to start its pre feasibility stage, so it's taking a 524 00:28:43,280 --> 00:28:47,320 Speaker 10: long long time. There's certainly a desire to get this done, 525 00:28:47,920 --> 00:28:53,320 Speaker 10: but critical minerals processing very energy intensive. It generates a 526 00:28:53,320 --> 00:28:56,800 Speaker 10: lot of toxic waste as well, so putting together these 527 00:28:56,800 --> 00:29:00,680 Speaker 10: things seems to be the major hiccup. The biggest critical 528 00:29:00,680 --> 00:29:03,760 Speaker 10: minerals mine are listed on the ASX as Linus, but 529 00:29:03,840 --> 00:29:06,360 Speaker 10: it does all the bits refining in Malaysia, but it 530 00:29:06,400 --> 00:29:08,960 Speaker 10: does have a mine here in Australia. So it does 531 00:29:09,000 --> 00:29:13,120 Speaker 10: speak to this broader problem of the cost, the pollution, 532 00:29:13,600 --> 00:29:17,440 Speaker 10: of the regulation of getting processing underway in Australia. 533 00:29:17,560 --> 00:29:20,160 Speaker 4: President Trump was saying earlier that the US is in 534 00:29:20,240 --> 00:29:22,400 Speaker 4: fact in the trade war with China. How is this 535 00:29:22,480 --> 00:29:26,680 Speaker 4: being viewed in Australia right now, the tension between Washington 536 00:29:26,720 --> 00:29:27,240 Speaker 4: and Beijing. 537 00:29:27,640 --> 00:29:31,200 Speaker 10: It has forever been a very very difficult type grope 538 00:29:31,280 --> 00:29:34,600 Speaker 10: for Australia to walk because on the one hand, China 539 00:29:34,680 --> 00:29:39,080 Speaker 10: is Australia's largest trade partner by some considerable distance, and 540 00:29:39,160 --> 00:29:42,240 Speaker 10: it was not that long ago when Scott Morrison was 541 00:29:42,240 --> 00:29:45,680 Speaker 10: Prime Minister that the country was reeling under trade strikes 542 00:29:45,720 --> 00:29:48,360 Speaker 10: from China for all sorts of things from coal to 543 00:29:48,440 --> 00:29:51,320 Speaker 10: wine to bali. And when the new government got elected 544 00:29:51,320 --> 00:29:55,360 Speaker 10: here four years ago, the Albanese government, that was seen 545 00:29:55,400 --> 00:29:57,440 Speaker 10: as something of a reset, and those trade strikes have 546 00:29:57,520 --> 00:30:00,840 Speaker 10: since been wound back and the relationships improved. But it's 547 00:30:01,120 --> 00:30:04,800 Speaker 10: well known that China is no fan of the Aucas 548 00:30:04,920 --> 00:30:08,960 Speaker 10: Agreement between the United States and the United Kingdom. The 549 00:30:09,080 --> 00:30:13,840 Speaker 10: United States is Australia's most important ally. The relationship there 550 00:30:13,960 --> 00:30:17,040 Speaker 10: is very very close as well on a diplomatic level. 551 00:30:17,600 --> 00:30:20,920 Speaker 10: We heard from the Prime Deputy Prime Minister Richard Marles 552 00:30:21,160 --> 00:30:23,480 Speaker 10: saying that no country is closer to the US than 553 00:30:23,480 --> 00:30:26,240 Speaker 10: Australia in terms of how we engage in the level 554 00:30:26,240 --> 00:30:30,080 Speaker 10: of trust that is there. So navigating that tightrope, particularly 555 00:30:30,160 --> 00:30:33,120 Speaker 10: when your closest ally is calling saying it isn't a 556 00:30:33,160 --> 00:30:36,840 Speaker 10: trade war with your closest trading partner. It's a really 557 00:30:36,840 --> 00:30:39,320 Speaker 10: difficult foreign policy balancing act. 558 00:30:39,520 --> 00:30:42,760 Speaker 4: Paul, I'd like to pivot to another area of importance 559 00:30:42,800 --> 00:30:45,240 Speaker 4: for the alban Eze visit to the White House, and 560 00:30:45,320 --> 00:30:47,880 Speaker 4: that would be the Orcus Defense Pact. I know this 561 00:30:47,920 --> 00:30:49,800 Speaker 4: is an area where there has been a great deal 562 00:30:49,880 --> 00:30:53,000 Speaker 4: of tension and I think things are still simmering a bit. 563 00:30:53,040 --> 00:30:56,080 Speaker 4: Can you give me some context here and bring me 564 00:30:56,200 --> 00:30:58,640 Speaker 4: up to speed on where this conversation is currently. 565 00:30:59,160 --> 00:31:03,200 Speaker 10: Domestically, at least there is bipartisan support in Australia for 566 00:31:03,440 --> 00:31:07,000 Speaker 10: this defense Pact. It was initially announced by Scott Morrison, 567 00:31:07,200 --> 00:31:09,400 Speaker 10: Joe Biden and Boris Johnson, or it might have been 568 00:31:09,440 --> 00:31:11,440 Speaker 10: Rischi Sunak. It's hard to keep track of what's been 569 00:31:11,480 --> 00:31:14,280 Speaker 10: going on in the UK sometimes, but that was a 570 00:31:14,320 --> 00:31:17,680 Speaker 10: liberal government that announced that policy in Australia. Since then, 571 00:31:17,720 --> 00:31:19,760 Speaker 10: we've had a change of government to a labor government 572 00:31:20,040 --> 00:31:22,800 Speaker 10: and that Defense Pact is still in place, so politically 573 00:31:22,880 --> 00:31:26,880 Speaker 10: at least it's iron clad. Of course within the political parties, 574 00:31:26,920 --> 00:31:30,400 Speaker 10: there is some distaste for it within Australia also, as 575 00:31:30,400 --> 00:31:33,840 Speaker 10: you can imagine there are significant segments of the public 576 00:31:33,880 --> 00:31:36,560 Speaker 10: that aren't in favor. But for Australia's part, this is 577 00:31:36,600 --> 00:31:39,440 Speaker 10: going ahead. Billions of dollars have already been made in 578 00:31:39,520 --> 00:31:42,920 Speaker 10: down payments to the United States to improve or build 579 00:31:43,000 --> 00:31:47,600 Speaker 10: up its shipbuilding capability. But in terms of the relationship 580 00:31:47,640 --> 00:31:50,040 Speaker 10: between the three partners in this pact, I think that's 581 00:31:50,080 --> 00:31:52,680 Speaker 10: where the tension's really been coming in because, of course 582 00:31:53,000 --> 00:31:56,239 Speaker 10: the US, under the eye of Albridge Colby, has been 583 00:31:56,320 --> 00:31:59,440 Speaker 10: running a review into this, and it's understood certainly with 584 00:31:59,480 --> 00:32:03,280 Speaker 10: an Australia that mister Colby is somewhat of an orcust skeptic. 585 00:32:03,560 --> 00:32:06,040 Speaker 10: Now the British Prime Minister kir Starmer has been trying 586 00:32:06,080 --> 00:32:09,000 Speaker 10: to calm everybody down. He's a supporter of Orcus and 587 00:32:09,040 --> 00:32:11,120 Speaker 10: he says, look, when I came to power, we also 588 00:32:11,200 --> 00:32:13,480 Speaker 10: had a review. It's quite natural, you know, the Trump 589 00:32:13,520 --> 00:32:16,520 Speaker 10: administration's back in power in the US, of course they 590 00:32:16,520 --> 00:32:18,560 Speaker 10: want to have a review. Well, there wasn't a review 591 00:32:18,560 --> 00:32:21,360 Speaker 10: in Australia when the government changed, but that might be 592 00:32:21,480 --> 00:32:25,360 Speaker 10: illustrative of being a bipartisan policy. But there's certainly nervousness 593 00:32:25,360 --> 00:32:28,200 Speaker 10: now in Australia that Look, we've made these darm payments. 594 00:32:28,400 --> 00:32:32,760 Speaker 10: We're committed to this plan. We need submarines, please don't counsel. 595 00:32:33,320 --> 00:32:36,720 Speaker 4: So will the Albanezy visit bring a sense of closure 596 00:32:36,800 --> 00:32:40,800 Speaker 4: to this chapter or is the conversation likely to continue 597 00:32:40,840 --> 00:32:42,800 Speaker 4: before a final decision is made. 598 00:32:42,920 --> 00:32:45,200 Speaker 10: We would find out very soon, and there's a degree 599 00:32:45,240 --> 00:32:48,720 Speaker 10: of optimism on the Australian side. The Deputy Prime Minister, 600 00:32:48,800 --> 00:32:52,080 Speaker 10: Richard Miles was in the United States back in August 601 00:32:52,080 --> 00:32:54,960 Speaker 10: to really lay the foundation and the groundwork for this visit. 602 00:32:55,000 --> 00:32:57,560 Speaker 10: He met with JD. Vance, He met with Marco Rubio 603 00:32:57,600 --> 00:32:59,760 Speaker 10: and Pete Hegseth as well. There is a photo of 604 00:32:59,800 --> 00:33:03,440 Speaker 10: them altogether smiling, and Richard Mole says, look, the group 605 00:33:03,640 --> 00:33:08,760 Speaker 10: shared only positive words about ORCUS, so he's confident that 606 00:33:08,760 --> 00:33:11,480 Speaker 10: it is going to go ahead. Anthony Albaneze's actually on 607 00:33:11,520 --> 00:33:13,400 Speaker 10: holiday this week. He's having a week off for the 608 00:33:13,440 --> 00:33:17,520 Speaker 10: first time since he was one reelection, but has understood 609 00:33:17,520 --> 00:33:19,880 Speaker 10: that he's taken a lot of homework away with him 610 00:33:19,880 --> 00:33:22,960 Speaker 10: on holiday to read up on this and work very 611 00:33:22,960 --> 00:33:25,440 Speaker 10: hard diplomatically to make sure that this proceeds. 612 00:33:25,800 --> 00:33:28,040 Speaker 4: Paul, I'm going to change gears on you once again 613 00:33:28,160 --> 00:33:31,040 Speaker 4: because I know you spent several days last week at 614 00:33:31,040 --> 00:33:33,840 Speaker 4: the A and Z Investment Conference in Sydney and you 615 00:33:33,880 --> 00:33:37,160 Speaker 4: had quite a few conversations there, in particular the talk 616 00:33:37,200 --> 00:33:40,600 Speaker 4: you had with the Assistant Governor and Chief Economist at 617 00:33:40,600 --> 00:33:43,800 Speaker 4: the RBA, Sarah Hunter. I'd like to play a portion 618 00:33:43,960 --> 00:33:46,640 Speaker 4: of that interview and I was hoping that you might 619 00:33:46,720 --> 00:33:47,680 Speaker 4: help us set it up. 620 00:33:48,040 --> 00:33:51,760 Speaker 10: Absolutely. This was at the City Australia and New Zealand 621 00:33:51,840 --> 00:33:55,200 Speaker 10: conference that's organized by City and there is always a 622 00:33:55,320 --> 00:33:58,640 Speaker 10: range of fascinating speakers there and it was really great 623 00:33:58,640 --> 00:34:00,720 Speaker 10: to be able to talk to Assist Governor and Chief 624 00:34:00,760 --> 00:34:03,480 Speaker 10: Economist Sarah Hunter at the RBA because it's going to 625 00:34:03,520 --> 00:34:07,000 Speaker 10: be a very important couple of weeks for the Reserve Bank. 626 00:34:07,080 --> 00:34:09,759 Speaker 10: We're going to have third quarter consumer prices come out. 627 00:34:09,800 --> 00:34:13,200 Speaker 10: We only get consumer prices quarterly in Australia, and we've 628 00:34:13,200 --> 00:34:16,359 Speaker 10: got inflation back inside the RBA's two to three target band, 629 00:34:16,400 --> 00:34:19,960 Speaker 10: but the Central Bank is still taking this very slow 630 00:34:20,040 --> 00:34:23,719 Speaker 10: and cautious approach towards easing. It left rates unchanged this 631 00:34:23,880 --> 00:34:26,560 Speaker 10: last meeting and the next decision is coming up in 632 00:34:26,600 --> 00:34:29,640 Speaker 10: the first week of November. So Sarah Hunter, I was 633 00:34:29,680 --> 00:34:32,719 Speaker 10: asking her about inflation, and you know she was expressing 634 00:34:32,760 --> 00:34:37,080 Speaker 10: caution again that some pockets are remaining stubbornly sticky. 635 00:34:37,400 --> 00:34:41,000 Speaker 11: We've had now two months of the monthly indicator for 636 00:34:41,040 --> 00:34:43,239 Speaker 11: the three months of the September quarter, and there's just 637 00:34:43,280 --> 00:34:45,080 Speaker 11: a couple of categories a look like they've come through 638 00:34:45,120 --> 00:34:47,880 Speaker 11: a little bit stronger than we are anticipating. The first 639 00:34:47,920 --> 00:34:51,440 Speaker 11: of those is housing, so that's the amalgamation of rents 640 00:34:51,440 --> 00:34:54,880 Speaker 11: and then particular new dwelling construction costs. And the second 641 00:34:54,960 --> 00:34:58,479 Speaker 11: is market services, and those ones are particularly important because 642 00:34:58,480 --> 00:35:01,480 Speaker 11: they are core components of CPI. They will come through 643 00:35:01,480 --> 00:35:03,839 Speaker 11: in the trim mean and so we're just monitoring those two. 644 00:35:03,880 --> 00:35:06,239 Speaker 11: But given that they've as say, they've printed through a 645 00:35:06,239 --> 00:35:08,359 Speaker 11: touch stronger than we expected, we think that that will 646 00:35:08,360 --> 00:35:11,080 Speaker 11: then show up in that full quarterly print that we 647 00:35:11,120 --> 00:35:12,680 Speaker 11: get at the end of October. 648 00:35:12,880 --> 00:35:15,040 Speaker 10: So how much weight do you think the board is 649 00:35:15,080 --> 00:35:17,759 Speaker 10: going to be placing on there before deciding its next move? 650 00:35:18,080 --> 00:35:20,680 Speaker 11: I mean, all data, masses, all data is important. Obviously, 651 00:35:20,719 --> 00:35:23,839 Speaker 11: inflation data is very important because it's part as core 652 00:35:23,920 --> 00:35:26,200 Speaker 11: to the mandate of US keeping inflation in that two 653 00:35:26,239 --> 00:35:29,000 Speaker 11: to three percent target band on an ongoing basis. So 654 00:35:29,120 --> 00:35:31,520 Speaker 11: that definitely it's going to feature. Of course, we are 655 00:35:31,520 --> 00:35:34,800 Speaker 11: also as part of the November meeting, will be publishing 656 00:35:35,040 --> 00:35:37,000 Speaker 11: on the day of the meeting itself our updates and 657 00:35:37,040 --> 00:35:40,080 Speaker 11: forecasts in our November SMP, so they'll also get that 658 00:35:40,160 --> 00:35:42,880 Speaker 11: information as well. Obviously everyone else will too, and that 659 00:35:42,920 --> 00:35:44,560 Speaker 11: will give you a real sense of how we've read 660 00:35:44,600 --> 00:35:46,600 Speaker 11: the data, whatever it turns out to be, and what 661 00:35:46,640 --> 00:35:47,640 Speaker 11: it means for the outlook. 662 00:35:47,719 --> 00:35:49,719 Speaker 10: Yeah, I want to talk about a forecast a little later, 663 00:35:49,719 --> 00:35:51,680 Speaker 10: but just circling back to that point that you made 664 00:35:51,719 --> 00:35:54,520 Speaker 10: about house prices, and this is something we typically see 665 00:35:54,560 --> 00:35:56,600 Speaker 10: when we're in an easy cite all that house prices 666 00:35:56,680 --> 00:35:58,880 Speaker 10: tend to go up, often as an impact on rents 667 00:35:58,920 --> 00:36:02,799 Speaker 10: as well. So what are the recent pickup telling you 668 00:36:02,840 --> 00:36:04,800 Speaker 10: about getting inflation nect target? 669 00:36:05,200 --> 00:36:07,440 Speaker 11: Yeah, well, so how surprises specifically? Of course they're not 670 00:36:07,520 --> 00:36:10,920 Speaker 11: directly in the CPI, but they are one of the 671 00:36:11,200 --> 00:36:15,799 Speaker 11: first typically domestic transmission channels for monetary policy. So it's 672 00:36:15,840 --> 00:36:18,359 Speaker 11: not a surprise that since you know, we started cutting 673 00:36:18,400 --> 00:36:19,960 Speaker 11: rates in February, we've seen a little bit of a 674 00:36:20,440 --> 00:36:22,640 Speaker 11: lift in the momentum in the housing market and that's 675 00:36:22,680 --> 00:36:25,799 Speaker 11: come through in prices and then we'll expect to see 676 00:36:25,840 --> 00:36:30,520 Speaker 11: that transmit through into new dwelling construction activity, so you know, 677 00:36:30,960 --> 00:36:34,880 Speaker 11: the viability of projects improves and lifting demand for dwellings, 678 00:36:34,880 --> 00:36:37,040 Speaker 11: and that will come through into construction over the forecast, 679 00:36:37,360 --> 00:36:40,239 Speaker 11: and then also it'll flow through a little bit into 680 00:36:40,280 --> 00:36:43,120 Speaker 11: consumer spending as well. We're really monitoring that channel and 681 00:36:43,200 --> 00:36:45,560 Speaker 11: thinking about what that then means for inflation. We're not 682 00:36:45,640 --> 00:36:47,480 Speaker 11: surprised that we've seen the pickup because we've seen it 683 00:36:47,520 --> 00:36:50,439 Speaker 11: before in cutting cycles, so what we've seen isn't out 684 00:36:50,480 --> 00:36:53,960 Speaker 11: of line with previous periods, but obviously we're monitoring it 685 00:36:54,080 --> 00:36:56,600 Speaker 11: and it's really for the board. What they're really focused 686 00:36:56,640 --> 00:36:59,759 Speaker 11: on now is, you know, keeping inflation around about the 687 00:36:59,800 --> 00:37:03,000 Speaker 11: middle of the target band, particularly that underlying trim mean metric, 688 00:37:03,000 --> 00:37:05,640 Speaker 11: because that's our best lead for where headline inflation will 689 00:37:05,719 --> 00:37:07,279 Speaker 11: be over the medium term. 690 00:37:07,480 --> 00:37:09,920 Speaker 10: How much confidence did you do you have that inflation 691 00:37:10,040 --> 00:37:11,880 Speaker 10: will be in the midpoint of that target ban by 692 00:37:11,960 --> 00:37:12,759 Speaker 10: twenty twenty six. 693 00:37:13,080 --> 00:37:18,239 Speaker 11: Well, look, forecasts, you know, inevitably you get things a 694 00:37:18,239 --> 00:37:20,919 Speaker 11: little bit wrong at least sometimes you get them quite 695 00:37:20,920 --> 00:37:22,840 Speaker 11: a lot wrong. And so that's the job for me 696 00:37:22,920 --> 00:37:26,360 Speaker 11: and my team is really looking at what's happening, updating 697 00:37:26,440 --> 00:37:29,640 Speaker 11: our forecasts, taking on the new information, and taking on 698 00:37:29,760 --> 00:37:31,600 Speaker 11: what's happening around the world as well and what that 699 00:37:31,719 --> 00:37:34,160 Speaker 11: actually means for the outlook. But obviously that's very much 700 00:37:34,200 --> 00:37:36,160 Speaker 11: what we're trying to achieve. That's what we want to achieve. 701 00:37:36,280 --> 00:37:38,279 Speaker 11: We've got to a point now where obviously we had 702 00:37:38,600 --> 00:37:40,759 Speaker 11: that trim mean inflation was two point seven percent in 703 00:37:40,840 --> 00:37:43,840 Speaker 11: the Dune quarter, and you know, the labor market have 704 00:37:43,920 --> 00:37:46,000 Speaker 11: been we think relatively stable in recent months. 705 00:37:46,280 --> 00:37:48,520 Speaker 3: We really would like to keep it there, you. 706 00:37:48,560 --> 00:37:50,640 Speaker 11: Know, trim mean around the middle of the target band 707 00:37:50,719 --> 00:37:53,600 Speaker 11: headline eventually there too, and the labor market stable. But 708 00:37:53,680 --> 00:37:56,200 Speaker 11: we've got to respond to what the data tells us 709 00:37:56,760 --> 00:37:58,680 Speaker 11: and what else might be happening that we didn't foresee. 710 00:37:58,719 --> 00:38:01,520 Speaker 11: And you can always get surprise shop. So that's the job, 711 00:38:01,680 --> 00:38:04,680 Speaker 11: and you're forever looking forward and things are always changing. 712 00:38:04,800 --> 00:38:06,239 Speaker 11: But I hope that I can come back in a 713 00:38:06,320 --> 00:38:07,360 Speaker 11: year and that's what we've achieved. 714 00:38:07,400 --> 00:38:08,359 Speaker 8: But let's see, all right. 715 00:38:08,440 --> 00:38:11,839 Speaker 10: That was the IBA's chief economist and Assistant governor there, 716 00:38:11,960 --> 00:38:14,000 Speaker 10: Sarah Hunter. She was speaking with me at the City 717 00:38:14,040 --> 00:38:16,839 Speaker 10: Australia and New Zealand conference and it was interesting Doug, 718 00:38:16,880 --> 00:38:19,640 Speaker 10: because I was also speaking to the City Australia CEO 719 00:38:19,800 --> 00:38:22,800 Speaker 10: Mike Woodruff. For his part, he thanks the ABBA is 720 00:38:23,040 --> 00:38:26,200 Speaker 10: done with its easing cycle for now three point six percent. 721 00:38:26,440 --> 00:38:27,040 Speaker 10: That's the end of it. 722 00:38:27,200 --> 00:38:30,600 Speaker 4: Paul. I was noticing that Ted Securities was saying the 723 00:38:30,760 --> 00:38:33,799 Speaker 4: economic data that will be released over the next couple 724 00:38:33,880 --> 00:38:37,200 Speaker 4: of days for Australia may be stronger than expected. Paul, 725 00:38:37,280 --> 00:38:40,560 Speaker 4: thank you so very much. Bloomberg's Paul Allen joining from Sydney. 726 00:38:40,920 --> 00:38:43,400 Speaker 4: I'm Doug Prisoner. You can catch us weekdays for the 727 00:38:43,480 --> 00:38:47,400 Speaker 4: Daybreak Asia podcast. It's available wherever you get your podcast. 728 00:38:47,840 --> 00:38:50,800 Speaker 2: Nathan, Hi, Thanks Doug. And that does it for this 729 00:38:51,040 --> 00:38:54,360 Speaker 2: edition of Bloomberg Daybreak Weekend. Join us again Monday morning 730 00:38:54,440 --> 00:38:57,360 Speaker 2: at five am Wall Street Time for the latestun markets, 731 00:38:57,360 --> 00:38:59,960 Speaker 2: overseas and the news you need to start your day. 732 00:39:00,520 --> 00:39:01,360 Speaker 2: I'm Nathan Hager. 733 00:39:01,560 --> 00:39:02,160 Speaker 9: Stay with us. 734 00:39:02,320 --> 00:39:06,160 Speaker 2: Top stories and global business headlines are coming up right now.