Speaker 1: Bloomberg Radio on demand and in your podcast feed.
Speaker 2: This is Bloomberg day Break Weekend, our global look at
Speaker 2: the top stories in the coming week from our Daybreak
Speaker 2: anchors all around the world. I'm Tom Busby in New York.
Speaker 2: We begin today's program with a look ahead to the
Speaker 2: latest inflation data in the wake of that September jobs
Speaker 2: report out last week. For more, we're joined by Bloomberg
Speaker 2: International Economic and Policy correspondent Michael McKee. Michael, thanks for
Speaker 2: being here again, Always.
Speaker 3: Happy to be here.
Speaker 2: Well, let's talk first about this past Friday September jobs report.
Speaker 2: Would you I've described as quote the mother of all
Speaker 2: upside surprises.
Speaker 3: Not bad, you know, we had a kind of unusually
Speaker 3: high jobs report with for the month three hundred and
Speaker 3: thirty six thousand jobs being created. Were also one hundred
Speaker 3: and nineteen thousand added for July and August, so you're
Speaker 3: well over four hundred thousand. The labor market has not
Speaker 3: gone away, at least not through September. Now, there's a
Speaker 3: lot of caveat to this, but it just tells you
Speaker 3: that the economy still remained strong or remained strong through September.
Speaker 3: And so the question is now, is that inflationary. See,
Speaker 3: I'm setting you up for.
Speaker 2: Your next question. For the next question, well, well we
Speaker 2: did see wages rose again. That is inflationary, you know,
Speaker 2: So that is the question. This is a good news
Speaker 2: bad news situation.
Speaker 3: But well, let's talk about the wages. They rose two
Speaker 3: tenths of a percent. The forecast was for a three
Speaker 3: tenths rise, and some economists had forecast a four tenths rise.
Speaker 3: Because this all relates to the survey week, the week
Speaker 3: that includes the twelfth and then the day. The months
Speaker 3: and weeks between the two surveys, and there was a
Speaker 3: longer time between the surveys, so people thought maybe we
Speaker 3: would see higher wages this time. Instead, we saw a
Speaker 3: lower than expected wage gain and that pushed the year
Speaker 3: a year number down to four point two percent. That
Speaker 3: is still higher than the feds three to three and
Speaker 3: a half percent they'd like to see, but it is progress.
Speaker 3: So it's hard to argue that the three hundred and
Speaker 3: thirty six thousand jobs created was a inflationary event in
Speaker 3: and of itself.
Speaker 2: But it was a surprise, and we also saw a
Speaker 2: revision one hundred and nineteen thousand jobs added July. In August,
Speaker 2: ADP predicted just eighty nine thousand private sector jobs. Boy
Speaker 2: were they wrong.
Speaker 3: Yeah, they were quite different. They would argue they're not
Speaker 3: wrong because they they're not predicting, but the economists were
Speaker 3: wrong too, in the sense that the change in private
Speaker 3: payrolls forecast was one hundred and sixty thousand and we
Speaker 3: got two hundred and sixty three thousand. So nobody has
Speaker 3: covered in glory with the forecast this time.
Speaker 2: Yeah, real surprise. Now you brought up inflation this week.
Speaker 2: We'll be looking at inflation PPI for some Tember out
Speaker 2: on Wednesday, CPI for the same month out on Thursday.
Speaker 3: What do you expect to see, Well, the forecasts are
Speaker 3: we're going to see a real slowing in inflation. With
Speaker 3: the PPI for final demand that's kind of the main
Speaker 3: figure that people look at up just three tenths that's
Speaker 3: less than half of what it was the prior month
Speaker 3: because we saw energy prices sort of flatten out. Oil
Speaker 3: prices didn't start to go down until October. But we're
Speaker 3: not going to get the same upward pressure that we did.
Speaker 3: If you look at the core PPI just up two
Speaker 3: tenths of eight percent, which is also lower than the
Speaker 3: previous month, so it would suggest that progress is still
Speaker 3: being made in the pipeline. CPI is also expected to
Speaker 3: be good news. The headline up only three tenths. It
Speaker 3: was up six tenths in August and that was largely
Speaker 3: because of energy, so hopefully the drop in energy is
Speaker 3: going to be good news. The core rate up is
Speaker 3: expected to be up three tenths, which is unchanged from
Speaker 3: the prior but both the year over year CPI and
Speaker 3: the CPI core will go down and they keep moving
Speaker 3: towards two percent, not at an enormously fast pace, but
Speaker 3: fast enough that it suggests we are still seeing progress.
Speaker 2: And we could see more. As you said, in October,
Speaker 2: just the first week, oil down ten percent West Texas.
Speaker 3: And gasoline prices never really went up when oil went up,
Speaker 3: and they're going down still, so that will really register
Speaker 3: in the October CPI if that trend continues.
Speaker 2: Now, also on Wednesday, we get minutes from the fed's
Speaker 2: latest meeting, and obviously this is leading into the next
Speaker 2: meeting October thirty first, November first, so let's talk about
Speaker 2: the minutes, what we should expect, what we should look for,
Speaker 2: what the FED was thinking, because I'm sure they're all
Speaker 2: as surprised as anybody else about that September jobs report.
Speaker 3: Well, most of the fedspeak that we've had since their
Speaker 3: last meeting has been on the order of, we could
Speaker 3: do one more if we need to. So how do
Speaker 3: you define if we need to? And that's what people
Speaker 3: are going to be looking to in the minutes is
Speaker 3: what kind of economy would cause them to raise rates
Speaker 3: another time? Is it the three hundred and thirty six
Speaker 3: thousand jobs created in September or does the average hourly
Speaker 3: earnings take some of the edge off of that. Is
Speaker 3: it something to do with retail sales or the outlook
Speaker 3: for GDP growth which in the third quarter is very
Speaker 3: very strong, somewhere between three and five percent. So that's
Speaker 3: I think what people in the bond market especially, and
Speaker 3: in the stock market are going to want to look
Speaker 3: at is what would be the trigger for the Fed.
Speaker 2: And we still have a couple of weeks before the
Speaker 2: Fed had to make this decision. But what is it
Speaker 2: looking like all these You know, as far as I
Speaker 2: can remember that past year, we've been calling for a recession.
Speaker 2: Before now we've been calling for There were economists saying
Speaker 2: this will be the last good Jobs report before things,
Speaker 2: you know, take a nose dive.
Speaker 3: I think what we're likely to see in terms of
Speaker 3: the recession forecasts is keep the forecast, just push the
Speaker 3: date out. Because the feeling is, with rates where they
Speaker 3: are and the economy as hot as it is, that
Speaker 3: this can't continue. They call that Stein's law after Herbstein,
Speaker 3: is that which cannot continue will stop. And there's a
Speaker 3: feeling and maybe that has to happen, but a growing
Speaker 3: feeling that maybe not. This is not what you would
Speaker 3: call a sustainable level of hiring that we saw this
Speaker 3: past week. But if we can continue to see job
Speaker 3: growth that will continue to power consumer spending, if prices
Speaker 3: are coming down, then the G word comes into play goldilocks,
Speaker 3: and so we'll see. And you saw in the reaction
Speaker 3: to this the jobs report on Friday, we saw the
Speaker 3: Fed Funds futures only price in a thirty two percent
Speaker 3: chance of a rate increase on November first. Now that's
Speaker 3: up from twenty two percent, but it's still only you know,
Speaker 3: a one third chance that the Fed will raise rates again.
Speaker 3: So the markets are waiting for additional data as well.
Speaker 3: Everybody's data dependent.
Speaker 2: Yeah, yeah, Now, speaking of data, let's talk more about
Speaker 2: the rates, because in housing now we have a seven
Speaker 2: point five percent rate, and even that is not affecting
Speaker 2: housing like it should. It's more that there are not
Speaker 2: enough houses for sale. So you're right, the consumer is
Speaker 2: still strong, Consumers still spending. People still have this demand.
Speaker 2: We saw autos and we know those auto loan rates
Speaker 2: have gone up Toyota and GM fifteen percent increase in
Speaker 2: the last three years in auto sales leading up to
Speaker 2: last month. So you're right. The consumer keeps spending, keep
Speaker 2: making more money. Who knows when it could end?
Speaker 3: Well, you know, the old saying is it doesn't have to.
Speaker 3: And the expansions don't die of natural causes. The FED
Speaker 3: kills them. And so that's kind of the playbook people
Speaker 3: are working from that. If the FED gets rates up
Speaker 3: too high, it will kill the economy. But we don't
Speaker 3: see signs of that happening necessarily right now. The neutral rate,
Speaker 3: the rate the Fed funds rate would be at that
Speaker 3: doesn't stimulate or hold back the economy is obviously higher
Speaker 3: than the Fed or anybody thought at this point. For
Speaker 3: a year, I think, yeah, if you're looking at housing,
Speaker 3: they are having an impact because there's no houses for
Speaker 3: sale because people don't want to trade in their three
Speaker 3: percent mortgages for seven percent mortgages, and that's going to
Speaker 3: be a problem down the road. It is going to
Speaker 3: be an issue.
Speaker 2: And how's the.
Speaker 3: FED get out of that? Because if they don't bring
Speaker 3: mortgage rates down significantly, people won't go back into the market.
Speaker 3: The new homes are selling like hotcakes because you don't
Speaker 3: have anybody in them, so you don't have to worry
Speaker 3: about selling it, and a lot of the all builders
Speaker 3: are offering credits or financing that brings that mortgage rate
Speaker 3: down some. So we're still seeing strong growth in that,
Speaker 3: which actually has They both have a big Existing homes
Speaker 3: and new home sales have a big impact on the
Speaker 3: economy in different ways. The new home sales a lot
Speaker 3: of construction materials obviously, and new appliances things like that,
Speaker 3: whereas the new homes the existing homes, people tend to
Speaker 3: replace the carpets and buy furniture, and that's our thing.
Speaker 3: So we lose one, we gain the other.
Speaker 2: And you build it, someone will buy it no matter
Speaker 2: where it is, where you put it, how big, how small,
Speaker 2: someone's going to buy that house. Bloomberg's International Economic and
Speaker 2: Policy correspondent Michael McKee. Coming up on Bloomberg day Break weekend,
Speaker 2: we head across the Pond and look at Ireland's upcoming
Speaker 2: budget with the country's Financial Services Minister. I'm Tom Busby,
Speaker 2: and this is Bloomberg. This is Bloomberg Daybreak weekend, our
Speaker 2: global look ahead at the top stories for investors in
Speaker 2: the coming week. I'm Tom Busby in New York. Up
Speaker 2: later in our program, the race for House speakers heating up.
Speaker 2: But first, while many countries in Europe are struggling with
Speaker 2: large budget deficits, Ireland is forecasting a run of big surpluses.
Speaker 2: That's thanks to buoyant corporate tax revenues. The Irish government
Speaker 2: unveiling its budget for next year in the coming days
Speaker 2: and for more, let's go to London and bring in
Speaker 2: Bloomberg Daybreak Europe Banker Stephen Carroll, Tom.
Speaker 4: It's an enviable position for any government to be and
Speaker 4: to have a surplus of income to spend on tax
Speaker 4: cuts or increased public spending. Across Europe, It's a pretty
Speaker 4: unusual occurrence. In Ireland. It's sparked massive political debate about
Speaker 4: how the money should be spent, especially as the country
Speaker 4: faces issues including an acute shortage of housing. The Finance
Speaker 4: Ministry in Dublin is expected to see a surplus of
Speaker 4: billions of euros this year and as much as sixty
Speaker 4: five billion by twenty twenty seven. The government, though, is
Speaker 4: conscious that the boom in corporate tax receipts, a big
Speaker 4: driver of that extra income, won't last. In fact, figures
Speaker 4: released in recent days showed the tax take from companies
Speaker 4: was twenty three percent lower in the first nine months
Speaker 4: of this year compared to last year. Add to that
Speaker 4: a warning from the ESRI think tank that the Irish
Speaker 4: economy will contract for the first time this year since
Speaker 4: twenty twelve. Now, while the domestic economy is growing, Ireland's
Speaker 4: headline GDP figures are distorted by the outsized nature of
Speaker 4: major international companies that operate there.
Speaker 5: Now.
Speaker 4: I've been discussing all of these issues with Ireland's Financial
Speaker 4: Services Minister Jennifer Carroll McNeil. We started by talking about
Speaker 4: the much debated choices the government is making in its
Speaker 4: upcoming budget.
Speaker 5: We're very curful about managing the projections there. We're very
Speaker 5: careful about how we may use that. We've obviously a
Speaker 5: commitment to put quite a bit of that aside for
Speaker 5: a pension reserve fund, for sovereign Wealth fund, different types
Speaker 5: of longer term investment in infrastructure, which is a really
Speaker 5: important piece for Ireland. At the same time, recognizing that
Speaker 5: our construction unemployment is two percent, our unemployment generally is
Speaker 5: four percent, we're absolutely at full employment. We've never had
Speaker 5: more people working in Ireland. So we have this very
Speaker 5: strong domestic economy from which a lot of our tax
Speaker 5: receipts are being generated, also corporation tax. But we're mindful
Speaker 5: that you look, Ireland has been through the mill in
Speaker 5: fifteen years. We've been up and we've been down, and
Speaker 5: we've worked very very hard to recover our economy make
Speaker 5: it resilient and strong. Yes, we're benefiting from significant surpluses
Speaker 5: at the moment, but I think we take a very
Speaker 5: curful view about how we may invest that we don't
Speaker 5: want to do anything that's inflationary, and we're very careful
Speaker 5: about protecting ourselves for the future. So we feel that
Speaker 5: it's the product of a lot of hard work, but
Speaker 5: we're very careful to try to manage that for the future.
Speaker 4: So when the conversations running up to the budget, then
Speaker 4: how much of the surplus is going to go to
Speaker 4: those sort of precautionary measures, or how much we'll go
Speaker 4: to other measures like tax cuts.
Speaker 5: It has been very significant already. We've put four billion
Speaker 5: across into one fund. We may very well put it
Speaker 5: put a great deal more. We've identified a billion for
Speaker 5: tax cuts, and I think at a time of full
Speaker 5: employment that's particularly important. I think in Ireland we hit
Speaker 5: the higher rate of tax too soon and I think
Speaker 5: we're a bit of an outlier on that. And when
Speaker 5: you're looking at marginal decisions in relation to going back
Speaker 5: to work or perhaps working more in a very tight
Speaker 5: labor market, those sorts of decisions around tax policies, they
Speaker 5: become quite important. And so we are trying to make
Speaker 5: sure that our very very skilled workforce is able to
Speaker 5: work as much as it can, as much as it
Speaker 5: wants to. You might recognize that there's a lot of
Speaker 5: people taking a step back from work for a period,
Speaker 5: potentially with childcare costs, and so we're trying to adopt
Speaker 5: an approach of putting money back in people's pockets through
Speaker 5: tax cuts, but reducing a lot of structural costs in Ireland,
Speaker 5: So reducing the cost of childcare by twenty five percent
Speaker 5: last year and hopefully more this year. Reducing the cost
Speaker 5: of a child going to college, reducing upfront structural costs
Speaker 5: and health and making it easier to access services more
Speaker 5: cheaply transport costs. What can you do at a time
Speaker 5: of inflation. You can cut the costs that you can control,
Speaker 5: and you can give people back money back to a
Speaker 5: point with at being inflationary, and so we're trying to
Speaker 5: approach it from those perspectives. We also have a very
Speaker 5: significant capital and you know, investment project. We have a
Speaker 5: lot of infrastructure that needs upgrading. But we do face constraints,
Speaker 5: employment constraints, particularly in the construction sector, which I think
Speaker 5: are reflected right across Western Europe. But are you know
Speaker 5: they are as acute in Ireland as anywhere else.
Speaker 4: What is the concern about what the drop off and
Speaker 4: the tax receipts could be given that so much of
Speaker 4: that corporate tax money comes from a very limited number
Speaker 4: of companies in Ireland.
Speaker 5: Well, look, I think it's fair to say that any
Speaker 5: sort of sexual specific challenge could have a very significant yeah,
Speaker 5: tech or even an individual company. And of course you
Speaker 5: know there are different intellectual property issues. You know about
Speaker 5: about derogations running out and so on, and so we
Speaker 5: are very fortunate to have this position, but we are
Speaker 5: very careful to manage it. Obviously, Ireland is part of
Speaker 5: the OECD, the new tax framework. Ate please to be
Speaker 5: part of that looking forward to that, and we have
Speaker 5: to manage that transition now over the next period. But
Speaker 5: you know, I'm looking at my tax tax receipts just
Speaker 5: this year. You know, income taxes up, the at receipts
Speaker 5: are up all of your domestic you know, all of
Speaker 5: the indicators of a really strong domestic economy. So we're
Speaker 5: generating very significant receipts from that as well. It's not
Speaker 5: just corporation tax, it's income tax, it's that it's activity
Speaker 5: in the employment sector. We have never had more people
Speaker 5: at work in Ireland and we have a very highly
Speaker 5: skilled labor force. So it's a good time for us
Speaker 5: considering where we were ten years ago. We're very excited
Speaker 5: to be here, but we take a careful pause in
Speaker 5: our approach to it. You know, we recognize that we
Speaker 5: want to be in as resilient a position ten years
Speaker 5: from now, and of course there's going to be ups
Speaker 5: and downs. Of course, there's going to be retrenchments in
Speaker 5: different sectors. Earlier this year, for example, there was a
Speaker 5: slight retrenchment in tech in employment. We have a very
Speaker 5: strong financial services sector, as you're aware, and we found
Speaker 5: that a lot of that skill was absorbed immediately by
Speaker 5: financial services in fintech, in sure tech. Great innovation that's
Speaker 5: coming out of Ireland because we have this juxtaposition of
Speaker 5: tech and financial services right beside each other. We're doing
Speaker 5: a lot of very interesting, exciting things there. So I
Speaker 5: think it's a good moment. But I think in Ireland
Speaker 5: we will always adopt a sort of curfl pause. We've
Speaker 5: come back from a really disastrous financial crash to a
Speaker 5: balanced budget to an interesting surplus.
Speaker 4: Some of the changes that we've seen post Brexit in
Speaker 4: the UK has been to move away from some of
Speaker 4: the mifit to regulations, particularly around funding for research. Is
Speaker 4: that giving the UK a competitive edge when it comes
Speaker 4: to attracting financial services companies versus Ireland.
Speaker 5: It's not what I'm hearing. I think what I would
Speaker 5: reflect is that I think we're at a point where,
Speaker 5: you know, I became Minister for Financial Services in December
Speaker 5: when we hadn't the Windsor Framework agreed and we were
Speaker 5: in a very different place in terms of our conversations
Speaker 5: in our dialogue. It's now the beginning of October, and
Speaker 5: I'm so pleased that that has been agreed and that
Speaker 5: we can have really constructive conversations about what we do
Speaker 5: together in the future. And I don't think that we
Speaker 5: need to approach it in an overly competitive sort of way. Obviously,
Speaker 5: Ireland is at the center of Europe is going to
Speaker 5: continue to do everything it can to protect and develop
Speaker 5: the Single Market and the opportunities within that. But we're
Speaker 5: so very pleased to have this closural close relationship with
Speaker 5: London as financials are services. You know, Okay, find.
Speaker 4: There's some frantation competitors, friendly.
Speaker 5: Competitors, and do you know what, there's nothing wrong with that.
Speaker 5: It does both of us well. London has been and
Speaker 5: always will be a major financial center of for the world,
Speaker 5: and you know, we benefit very strongly by London doing
Speaker 5: well and we will do well from that. So I
Speaker 5: approach it in a very collaborative way.
Speaker 4: You mentioned the Windsor framework. Are you disappointed there hasn't
Speaker 4: been restoration of the executive since the winds Are Framework agreed?
Speaker 4: I should point out you also used to be a
Speaker 4: member of the Parliamentary committee that looked at the implementation
Speaker 4: of the Good Variety Agreement.
Speaker 5: I am really disappointed. I am really disappointed because, you know,
Speaker 5: for so many reasons, it's a major democratic gap to
Speaker 5: have political institutions that were voted in by the people,
Speaker 5: where you have free and fair elections, which is, you know,
Speaker 5: a privilege and a luxury that most people around the world,
Speaker 5: you know, do not. In fact, have you free and
Speaker 5: fair elections in the opportunity to represent your community and government,
Speaker 5: it's an extraordinary privilege and an extraordinary opportunity. And nowhere
Speaker 5: is that more important than trying to build a reconciled
Speaker 5: society in Northern Ireland. Northern Ireland has the most exceptional
Speaker 5: opportunity being both part of the UK and in many
Speaker 5: ways the access to the Single Market. Also, we want
Speaker 5: to see Northern Ireland doing well. We want to see
Speaker 5: the ministers in place making decisions. We want to see
Speaker 5: collaboration in the way that we can between Dublin and Belfast.
Speaker 5: We want nothing but good things for Northern Ireland. But
Speaker 5: you know, the political institutions have to run. And I
Speaker 5: would say that of the twenty five years of the
Speaker 5: Good Friday Agreement, Stormant hasn't been an operation for I
Speaker 5: think close to ten of those, if not slightly more,
Speaker 5: and that's a major gap and I think that that's
Speaker 5: going to require reflection over the next period.
Speaker 4: That was Ireland's Financial Services Minister Jennifer Carol McNeil speaking
Speaker 4: to me here on Bloomberg Radio ahead of the budget
Speaker 4: announcement coming in the coming days. Also very interesting to
Speaker 4: get her views on the political stalemate in Northern Ireland,
Speaker 4: where an executive hasn't functioned for well over a year
Speaker 4: and a half at this stage due to political disagreements
Speaker 4: over Northern Ireland's post Brexit trade rules, so good to
Speaker 4: get her perspective on those issues too. I'm Stephen Carroll
Speaker 4: in London. You can catch us every weekday morning here
Speaker 4: for Bloomberg Daybreak. You're beginning at six am in London
Speaker 4: and one am on Wall Streets.
Speaker 2: Tom, thank you, Steven. And coming up on Bloomberg day
Speaker 2: Break weekend, we head to the nation's capital and look
Speaker 2: at the race for Speaker of the House. I'm Tom Busby.
Speaker 2: This is Bloomberg Bloomberg Radio on demand and in your
Speaker 2: podcast feed. I'm Tom Busby in New York with your
Speaker 2: global look ahead at the top stories for investors in
Speaker 2: the coming week. One of the biggest political stories we're
Speaker 2: watching this week is the race for Speaker of the House.
Speaker 2: Republicans will host a candidate forum on Tuesday, and the
Speaker 2: closed party election will take place on Wednesday. There's no
Speaker 2: timeline for electing a speaker on the House floor. Now
Speaker 2: for more, let's head to our Bloomberg ninety nine one
Speaker 2: News from in Washington and Bloomberg Sound On co host
Speaker 2: Kaylee Lines.
Speaker 6: Yeah, Tom, that's right. After an historic week in the
Speaker 6: House of Representatives that saw the ousting of Kevin McCarthy
Speaker 6: as speaker through a motion to brought by Republican Congressman
Speaker 6: from Florida Matt Gates, this coming week promises to bring
Speaker 6: drama all its own as the House attempts to decide
Speaker 6: on who the next speaker will be. Here with me
Speaker 6: for more is Megan's scully, who leads Bloomberg's Congress coverage
Speaker 6: here in Washington. So, Megan, this is promising to be
Speaker 6: kind of chaotic. Chaotics seems to be the status quo
Speaker 6: in the House of Representatives at the moment, and there's
Speaker 6: a lot of individuals to talk about, so I'd like
Speaker 6: to take them kind of just one by one, beginning
Speaker 6: with one individual who this past week got the endorsement
Speaker 6: of former President Trump, Congressman Jim Jordan from Ohio, the
Speaker 6: chair of the Judiciary Committee. What are his strengths and
Speaker 6: weaknesses as a speaker candidate?
Speaker 7: Sure, so, Jim Jordan is probably best known for being
Speaker 7: a bomb thrower within the caucus. He doesn't like to
Speaker 7: wear a jacket. He's very sort of anti establishment, and
Speaker 7: he is one of the lawmakers who's leading the impeachment
Speaker 7: inquiry against President Joe Biden. This all plays very well
Speaker 7: for as does Trump's endorsement for the hardliners in the party,
Speaker 7: many of the same who had issues with Kevin McCarthy
Speaker 7: and really worked against him during his very short term
Speaker 7: as Speaker and ultimately ousted him. So that's all good
Speaker 7: for Jim Jordan. The downside, though, are the moderates, particularly
Speaker 7: the eighteen House Republicans who are from districts that Joe
Speaker 7: Biden carried in twenty twenty. These are very very purple
Speaker 7: areas and they're not terribly supportive of the impeachment inquiry,
Speaker 7: and this makes Jim Jordan a very difficult and problematic
Speaker 7: speaker candidate for folks like Mike Lawler and Mark Malnaro
Speaker 7: from New York. There's several in southern California as well.
Speaker 6: Okay, So knowing that whoever ultimately is going to be
Speaker 6: speaker needs to get the majority of the caucus, be
Speaker 6: that two hundred and seventeen or maybe lower. If there's
Speaker 6: some people that don't show up, the math's going to
Speaker 6: get very hard, especially when also in the mix is
Speaker 6: someone like Steve Scalise, the majority leader, kind of maybe
Speaker 6: the continuity candidate. You could see in that way, he's
Speaker 6: likely to appeal more to some of those moderates, some
Speaker 6: of those more endangered individuals, right, Yes, Steve.
Speaker 7: Scalase is sort of the safer candidate for those individuals.
Speaker 7: He is very conservative, you know, he's definitely not a moderate,
Speaker 7: but he is not one to be particularly polarizing to
Speaker 7: the American public. He's definitely more of the same mold
Speaker 7: as Kevin McCarthy in his well known entity, someone that
Speaker 7: the moderates I think feel like they can trust. He
Speaker 7: is not as problematic as Jim Jordan, for sure, and
Speaker 7: I think you're going to see those folks really rally
Speaker 7: behind him, although it remains to be seen whether he
Speaker 7: can get the hard right who's going to support Jim Jordan?
Speaker 6: Again, it comes down to the math. The math is
Speaker 6: just really tough. And there's other people kind of floating
Speaker 6: out there as well, like Congressman Kevin Hearn from Oklahoma.
Speaker 6: What's his deal?
Speaker 7: So, you know, I'm very curious to see what happens
Speaker 7: with him and whether he emerges as a consensus candidate,
Speaker 7: somebody who the hardliners can begrudgingly get on board with
Speaker 7: and the moderates can sort of hold their nose and
Speaker 7: vote for. He is the chairman of the largest ideological
Speaker 7: group in the House, the Republican Study Committee, and they
Speaker 7: are a conservative group, although they tend to be less
Speaker 7: bombastic than the House Freedom Caucus. So while folks like
Speaker 7: Mike Lawler might not be on board with Kevin Hearn's policies,
Speaker 7: his approach and his strategy is something that they can
Speaker 7: tolerate much more so than a Jim Jordan.
Speaker 6: And of course, the other individual here who is technically
Speaker 6: the one who interim is Speaker Congressman Patrick mckenne of
Speaker 6: North Carolina. He is acting in a pro temporary position
Speaker 6: right now. It kind of our understanding is he doesn't
Speaker 6: really have that much power other than to preside over
Speaker 6: a speaker's vote. And on the idea of when this
Speaker 6: vote's actually going to happen. Are the Republicans going to
Speaker 6: try to sort them out, sort all this out themselves,
Speaker 6: understand that someone is going to get the requisite majority
Speaker 6: vote before they actually take it to the floor, remembering
Speaker 6: it took fifteen rounds over the course of four days
Speaker 6: to get McCarthy the speaker's gavel in the first place
Speaker 6: in January.
Speaker 7: That is certainly the big question. My money is on
Speaker 7: them not being able to rally behind a candidate. That
Speaker 7: is what party leaders are going to be trying to
Speaker 7: do on Tuesday before this goes to the floor on Wednesday.
Speaker 7: They don't want a whole messy spectacle on the floor
Speaker 7: on Wednesday. But looking at how things went with McCarthy's ouster,
Speaker 7: which was the first in US history, I find it
Speaker 7: very difficult to believe that this is going to be
Speaker 7: clean and short and be a show of unity for
Speaker 7: the GOP. I suspect that when this goes to the floor,
Speaker 7: it is going to be a very divided Republican conference,
Speaker 7: and I think that Democrats, just like they did with
Speaker 7: the vote on McCarthy, are going to watch from the
Speaker 7: sidelines and cast their no votes against whoever it is
Speaker 7: and vote for Remember Jeffries. Actually, how came Jeffreys, the
Speaker 7: Democratic leader, had the most votes of any candidate going
Speaker 7: into that fifteenth round because Democrats really united behind him.
Speaker 7: So we're going to see that, and it's just it's
Speaker 7: going to continue you to be extremely messy. We thought
Speaker 7: that the fifteen rounds that McCarthy went through was long
Speaker 7: and drawn out. It was certainly extraordinary, if not a record,
Speaker 7: I suspect this could go much longer and be far
Speaker 7: more bruising.
Speaker 6: So buckle up everyone, exactly. That's what's going to come
Speaker 6: on the floor potentially this coming week. I also want
Speaker 6: to talk about a letter of that forty five Republican
Speaker 6: members of the House wrote about what happened this past week.
Speaker 6: This includes the likes of Mike Lawler, who you've mentioned
Speaker 6: a few times. He signed this letter along with forty
Speaker 6: four others. Part of what they wrote this is a
Speaker 6: quote ashamed and embarrassed by what happened on the floor
Speaker 6: this week. We refuse to allow the eight members who
Speaker 6: abandoned an undermined or conference to dictate every outcome in
Speaker 6: policy and personnel for the remainder of this Congress, including
Speaker 6: the upcoming selection of the Speaker of the House. They're
Speaker 6: talking about the motion to vacate, Megan, is it going
Speaker 6: to go away? How hard will that be?
Speaker 7: Extremely hard? This motion to vacate was something that Kevin
Speaker 7: McCarthy had to agree to to be elected speaker. And
Speaker 7: what that is essentially, and how we saw that play
Speaker 7: out was it only took one member to bring that
Speaker 7: to the floor and then it required only a simple
Speaker 7: maturity of the House law makers present and voting to
Speaker 7: oust the speaker. That meant that McCarthy threw out his
Speaker 7: again very short term nine months. I think it was
Speaker 7: the third shortest in US history. Throughout his term as speaker,
Speaker 7: essentially had this gun to his head where he was concerned,
Speaker 7: you know, with every twist and turn that he could
Speaker 7: be ousted.
Speaker 3: Getting the.
Speaker 7: Hardliners to relent on that will be extraordinary difficult. Extraordinarily
Speaker 7: difficult because that is what gives them their power. So
Speaker 7: why would they let that go.
Speaker 6: They want to hold on to the leverage absolutely so
Speaker 6: much to look forward to Yes, just more paradise here
Speaker 6: in Washington. Really looking forward to your coverage of this
Speaker 6: over the coming week. Megan Scully, the leader of Bloomberg's
Speaker 6: congressional team here in Washington, thank you very much in
Speaker 6: Tom buckle up.
Speaker 2: Thank you, Kaylee. That was Bloomberg's sound on co host
Speaker 2: Kaylee Lines reporting from our Bloomberg ninety nine to one
Speaker 2: newsroom in Washington. And you can hear sound on weekdays
Speaker 2: one to three pm on Bloomberg Radio and coming up
Speaker 2: here on Bloomberg day Break Weekend. After China's Golden Week,
Speaker 2: we look at the holiday's impact on the country's economy.
Speaker 2: I'm Tom Busby, and this is Bloomberg. This is Bloomberg
Speaker 2: day Break Weekend, our global look ahead at the top
Speaker 2: stories for investors in the coming week. I'm Tom Busby
Speaker 2: in New York. Will China's seven day Golden Week holiday
Speaker 2: be a hope for the country's economy to reset? Let's
Speaker 2: get to Brian Curtis, co host of Bloomberg's Daybreak Asia
Speaker 2: radio show, to find out more.
Speaker 1: Tom, China markets reopen in the coming week after the
Speaker 1: Golden Week holiday, what might we expect? We're joined by
Speaker 1: Rebecca Chong Wilkins, Bloomberg Asia Government and Economics correspondent. So
Speaker 1: I'm curious, Rebecca, what you're hearing from investors now because
Speaker 1: this has been a critical time and do they need
Speaker 1: a catalyst to come back in.
Speaker 8: Well, I think the big story for them is watching
Speaker 8: whether or not the Chinese consumer has come back during
Speaker 8: the Golden Week holiday. So this is a long stretch
Speaker 8: eight days where typically we see Chinese people going out, traveling,
Speaker 8: spending and buying more. Obviously that has been severely dented
Speaker 8: by sort of waning confidence, the property crisis and so on,
Speaker 8: And so that's really where investors are focusing. Are we
Speaker 8: seeing an improvement in sort of services, in consumer spending
Speaker 8: and tourism, And then the other part of this is property. Now,
Speaker 8: I think the prevailing feeling is that for property there's
Speaker 8: still some of that pessimism there. Just looking at the
Speaker 8: first four days of the month in thirty major cities,
Speaker 8: the data looks really weak. We're seeing this big decline
Speaker 8: again year over year. We hardly are their way through
Speaker 8: the month, but you know, even when we compare to September,
Speaker 8: marginal improvement there month over month. But you know, more broadly,
Speaker 8: it doesn't look like we're seeing a bottoming out, so
Speaker 8: that pessimism is prevailing. But in the consumer sectors and
Speaker 8: in the services part, we are maybe seeing these pockets
Speaker 8: of positive signs and that might be enough to start
Speaker 8: bringing some traders back in.
Speaker 1: You cited some numbers from the Golden week holiday, and
Speaker 1: we know that Golden weekend has historically been a key
Speaker 1: test for the property sector. Is there any possible catalysts
Speaker 1: there that investors might seize upon, and if so, what
Speaker 1: would it look like. Would it be like dramatic sales
Speaker 1: in Shanghai or in Beijing, or would be in the
Speaker 1: outlying areas. What would they be feasting on.
Speaker 8: I think there are a couple of elements there. So
Speaker 8: the first is and just say we're not really expecting this,
Speaker 8: But the first would be to see a more comprehensive
Speaker 8: approach from the government to try and support the sector.
Speaker 8: What we've seen so far has been very piecemeal, very localized,
Speaker 8: and pretty focused on specific regions or specific cities. Now,
Speaker 8: if we saw some kind of bigger restructuring program or
Speaker 8: bigger supportive policy program that we saw, for example in
Speaker 8: twenty fifteen, the regeneration of the slums, anything that was
Speaker 8: more comprehensive from the central government. I think that certainly
Speaker 8: would be a sign of a different mo from Beijing
Speaker 8: that would be taken very positively. We haven't seen signs
Speaker 8: that that's coming, but of course it remains an option,
Speaker 8: depending on how long this sort of how much in
Speaker 8: economic pain that Beijing can be willing to endure.
Speaker 1: You had oversupply and you had property developers get in trouble,
Speaker 1: but then you also have a big fall off in demand.
Speaker 1: What is the main cause of the drop in demand.
Speaker 8: Well, it is the crack down that Beijing has rolled
Speaker 8: out into the property market, which is specifically focused on
Speaker 8: this idea of cracking down speculative buying of property market.
Speaker 8: That speculative bet is what has driven the production of oversupply,
Speaker 8: particularly in those smaller cities that you know that if
Speaker 8: you bought a second, third, maybe a fourth or a
Speaker 8: fifth property, it was a guaranteed way to increase your
Speaker 8: wealth because the value of those markets was just going
Speaker 8: up and up and up and up. Now that trend
Speaker 8: has stopped. Not only has it stopped, but the demand
Speaker 8: for buying, the demand for renting has fallen and prices
Speaker 8: have fallen off. This sort of scary part. I think
Speaker 8: for long time watches of the market and for you know,
Speaker 8: investors who are thinking about where they want to be
Speaker 8: in China long term. Two and its economic growth model
Speaker 8: is that some estimates say that we are only about
Speaker 8: seventeen percent of the way through fixing that oversupply product.
Speaker 1: All right, Rebecca, thanks so much for joining us. Great
Speaker 1: insights there, Rebecca Chong Wilkins wlohenbrig Asia Government Economics correspondent.
Speaker 1: I'm Brian Curtis along with Doug Chrisner. You can catch
Speaker 1: us every weekday here for Bloomberg Daybreak Asia, beginning at
Speaker 1: six am in Hong Kong and six pm on Wall Street. Tom.
Speaker 2: Thanks Brian, and that does it for this edition of
Speaker 2: Bloomberg day Break Weekend. Join us again Monday morning at
Speaker 2: five am Wall Street time for the latest on markets
Speaker 2: overseas and the news you need to start your day.
Speaker 2: I'm Tom Buzzby. Stay with us. Top stories and global
Speaker 2: business headlines are coming up right now.