Speaker 1: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 1: top stories in the coming week from our Daybreak anchors
Speaker 1: all around the world, and straight ahead on the program.
Speaker 1: A big week coming for US retailers. I'm Tom Busby
Speaker 1: in New York.
Speaker 2: I'm Stephen Carolyn London, where a major business conference could
Speaker 2: see tough questions asked of the Bank of England, governor,
Speaker 2: the government and the man who wants to be the
Speaker 2: UK's next Prime Minister.
Speaker 3: I'm Brian Curtis in Hong Kong. The Chinese economic data
Speaker 3: have been all over the map. Are we recovering there
Speaker 3: or falling back?
Speaker 4: I'm Kaylee Lyons in Washington, where we have not one
Speaker 4: but two bank failure hearings on death in the Senate.
Speaker 5: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
Speaker 5: Eleve Them free own New York, bloombergon ninety nine to one, Washington,
Speaker 5: d C Bloomberg one oh six one, Boston, Bloomberg nine sixty,
Speaker 5: San Francisco, DAB Digital Radio London, Sirius XM one nineteen
Speaker 5: and around the world on Bloomberg Radio dot com and
Speaker 5: via the Bloomberg Business App.
Speaker 1: Well, Good day to you. I'm Tom Bus. We begin
Speaker 1: today's program with the state of the US retail industry,
Speaker 1: with earnings this week from some of the sector's biggest names.
Speaker 1: Two thirds of the economy is consumer spending, and a
Speaker 1: big chunk of that is spent at retailers. But because
Speaker 1: of stubbornly high inflation, consumers are now paying the highest
Speaker 1: prices ever, as retailers pass along higher costs, also borrowing costs,
Speaker 1: including credit card rates the highest in sixteen years. And
Speaker 1: joining us now for how that is affecting those chains.
Speaker 1: Bloomberg retail reporter Brendan Case. Brendan, thank you so much
Speaker 1: for being.
Speaker 6: Here, Thanks for having me all right now, before.
Speaker 1: We look ahead at what you expect to see from
Speaker 1: those individual retailers, let's talk about the industry as a whole,
Speaker 1: its challenges, as well as what's going pretty well. You know,
Speaker 1: retail sales. They fell for a second month in a
Speaker 1: row in March. Is that an indication that those high
Speaker 1: prices and higher interest rates have really slowed spending.
Speaker 6: Yes, it is, and that's pretty much in line with
Speaker 6: what the big retailers have been expecting. Both Target and
Speaker 6: Walmart issued profit forecasts and their outlooks for comparable sales
Speaker 6: this year back in February, and both companies came in
Speaker 6: pretty well below wall streets expectations for a lot of
Speaker 6: those key metrics. And if you look at what they're
Speaker 6: expecting in terms of comparable sales and in terms of revenue,
Speaker 6: what you're seeing is a pretty muted outlook with you know,
Speaker 6: consumer spending at least as they see it, poised to
Speaker 6: sort of have trouble keeping up with inflation, and so
Speaker 6: in real terms kind of looking for flat to maybe
Speaker 6: even slightly down, and so you know, both companies are
Speaker 6: kind of setting expectations in a pretty cautious way for
Speaker 6: this year, and I do think that that reflects some
Speaker 6: weakness and consumer spending.
Speaker 1: And speaking of which a parrel sales, they fell for
Speaker 1: the first couple of weeks of April versus March five
Speaker 1: point seven percent versus six point nine percent as easter
Speaker 1: warmer weather early in the month, just not enough to
Speaker 1: boost people into the malls and into stores. Transactions down
Speaker 1: more than five percent average amount slipped. This is all
Speaker 1: five served point of sales data. But not looking good,
Speaker 1: is it?
Speaker 6: Yeah, that's exactly right. And this gets us into one
Speaker 6: of the big stories from last year that is certainly
Speaker 6: going to carry over to this year. And obviously, looking
Speaker 6: at apparel sales, you know, across the board, we're going
Speaker 6: to see varying results from the apparel specialists, depending on
Speaker 6: each particular company. But if you look at the big
Speaker 6: mass market retailers like Walmart and Target, last year, apparel
Speaker 6: was a real source spot in terms of the goods
Speaker 6: that they couldn't move and they had to discount pretty heavily.
Speaker 6: And if you just sort of take a step back,
Speaker 6: what happened last year is that both of those companies
Speaker 6: and many others misjudged a shift in demand pretty dramatically,
Speaker 6: and the shift was away from perchase of discretionary goods,
Speaker 6: including apparel, but also electronics, patio furniture, kitchen appliances. People
Speaker 6: started spending a lot less on that than before, and
Speaker 6: they started spending more on groceries, which partly reflected price increases.
Speaker 6: They were forced to spend more on the essentials, and
Speaker 6: it also partly reflected greater spending on services with restaurants
Speaker 6: and travel kind of coming back as the pandemic was abating,
Speaker 6: and so looking at apparel, that is going to be
Speaker 6: another area this year where probably a lot of consumers
Speaker 6: are going to say, you know, maybe I can wait
Speaker 6: another few months before buying that pair of genes or
Speaker 6: buying that blouse. Apparel is going to be a weak spot,
Speaker 6: and probably so will electronics and all those other kind
Speaker 6: of home goods that people spent so heavily on in
Speaker 6: the early stages of the pandemic and now they either
Speaker 6: don't need those goods as much or they're kind of
Speaker 6: willing to wait a while before before buying them.
Speaker 1: All right, well, Brenda, let's talk about some of the
Speaker 1: individual companies that are reporting this week to kick things
Speaker 1: off in the sector. And up on Tuesday is Dow
Speaker 1: Component Home Depot. Now spring the busiest season of the
Speaker 1: year for the chain, are we expecting to hear that
Speaker 1: people are still spending on those home improvement projects, upgrading
Speaker 1: their lawns, doing the driveway? I mean, are we looking
Speaker 1: good at Home Depot?
Speaker 6: You know, it's going to be a really interesting test.
Speaker 6: There were some indications in the last report that home
Speaker 6: improvement spending was showing some weakness, and so the first
Speaker 6: thing we're going to be looking for is any evidence
Speaker 6: that that trend is continuing or worsening. Now, sales themselves
Speaker 6: have actually done okay thanks to higher prices, but the
Speaker 6: unit sales have been down, and so in other words,
Speaker 6: people are buying fewer things, but they're paying more for them.
Speaker 6: And then one of the big questions to watch with
Speaker 6: with Home Depot, especially in terms of the commentary of
Speaker 6: the executives, is kind of what they're seeing in the
Speaker 6: US housing market and how that's filtering through to their results. Traditionally,
Speaker 6: their sales, at least in the eyes of many analysts,
Speaker 6: have been tied to US home sales, which have been
Speaker 6: very choppy but you know, clearly showing some signs of weakness.
Speaker 6: At the same time, the company has been at pains
Speaker 6: to emphasize recently that it's home prices that can justify
Speaker 6: a lot of spending in terms of like do it
Speaker 6: yourself home improvement projects, and so what they say about that,
Speaker 6: what the latest trends are they're seeing in terms of
Speaker 6: their drivers of sales, especially related to the housing market.
Speaker 6: That'll be a big watch item for Wall Street and
Speaker 6: for the rest of.
Speaker 1: US Wednesday is target among I think among the most
Speaker 1: nimble of retailers, and what are we expecting there, and
Speaker 1: particularly I know, the emphasis on groceries. They've moved things
Speaker 1: around in the store near you know, to really put
Speaker 1: an emphasis on that part of their business.
Speaker 6: Yeah, very much so. And what they're trying to do
Speaker 6: there is to tap into the increased spending on just
Speaker 6: the basic goods, kind of put those, put those very
Speaker 6: much front of mind for consumers, and harvest as much
Speaker 6: of that spending on the basics as they can. You know,
Speaker 6: for Target, they get about twenty percent of their sales
Speaker 6: from food and beverage. If you define grocery a little more,
Speaker 6: a little more broadly to include you know, non consumable
Speaker 6: items that were you know, constantly buying paper products, you know,
Speaker 6: cleaning supplies. You get to a higher percentage of their sales,
Speaker 6: but it's still well below fifty percent, and so they're
Speaker 6: trying to reposition themselves to serve that demand and to
Speaker 6: sort of adjust to the fact that a lot of
Speaker 6: their signature goods or sort of their signature strength over
Speaker 6: the years has been in the more discretionary items. You know,
Speaker 6: they've got the reputation for the you know, the cheap
Speaker 6: chic kind of positioning in the market. They get a
Speaker 6: lot of people into the stores looking at clothes, looking
Speaker 6: at you know, bedlinens, you name it. That's where there
Speaker 6: was a lot of weakness in sales last year, and
Speaker 6: probably that weakness will continue, especially in the earlier part
Speaker 6: of this year. It gets a little cloudier as we
Speaker 6: get into the second half of the year. We'll just
Speaker 6: have to see. But Target will certainly be wanting to
Speaker 6: emphasize it's food and beverage and grocery sales, but it'll
Speaker 6: be a big question mark what their discretionary goods sales
Speaker 6: look like. And you know, last time we heard from
Speaker 6: them in February, the CFO just came right out and
Speaker 6: said that the biggest question mark for them is just
Speaker 6: the path of the US consumer.
Speaker 1: And we could say the same thing about the biggie
Speaker 1: Walmart earnings out on Thursday. Is it going to be
Speaker 1: the same as Target?
Speaker 3: You think?
Speaker 6: And then you get the big one, and I think
Speaker 6: the dynamics there are a little different. Look at the
Speaker 6: last two really three quarters for Walmart, they're comparable sales.
Speaker 6: They've just been hitting the cover off the ball, and
Speaker 6: a big part of the demand they've been getting has
Speaker 6: been coming from wealthier consumers, people with household incomes of
Speaker 6: more than one hundred thousand dollars. And what you're seeing
Speaker 6: there is you're seeing Walmart's strength in grocery, which accounts
Speaker 6: for you know, fifty five percent of their total sales.
Speaker 6: You're seeing their lower income customers, middle income customers, you know,
Speaker 6: spending more on those goods simply because they have to
Speaker 6: prices rising, and then you're seeing some of the higher
Speaker 6: income households switching over to Walmart in search of bargains,
Speaker 6: search of lower prices. Despite that strength the last few quarters,
Speaker 6: Walmart came out with a pretty sober outlook for sales
Speaker 6: and co perable sales this year. There was some debate
Speaker 6: among analysts about, you know, are they really that worried
Speaker 6: about consumer spending after so much strength recently, you know,
Speaker 6: or could it be more a case where they just
Speaker 6: wanted to sort of err on the side of caution
Speaker 6: if you ask, If you ask the company, they kind
Speaker 6: of echo what Target said about uncertainty, And you know,
Speaker 6: they've they've said that it's really hard to predict right
Speaker 6: now and they want to be realistic with their assumptions.
Speaker 6: But what we're going to see next week will be
Speaker 6: a big update on that, and we'll also see whether
Speaker 6: their first quarter results are more in line with the
Speaker 6: strengths they've had the last few quarters, or if there's
Speaker 6: a noticeable shift and you know, you see a lot
Speaker 6: of a lot more weakness creeping in.
Speaker 1: Oh boy, a lot to look forward to. Brendan, thank
Speaker 1: you so much. That's Bloomberg Retail reporter Brendan Case. And
Speaker 1: coming up on Bloomberg day Break weekend, big annual gatherings
Speaker 1: of movers and shakers on the UK political and economic scenes.
Speaker 1: I'm Tom and this is Bloomberg. This is Bloomberg Daybreak Weekend,
Speaker 1: our global look ahead at the top stories for investors
Speaker 1: in the coming week. I'm Tom Busby in New York.
Speaker 1: And up later in our program hearings on what went
Speaker 1: wrong at US regional banks. But first, in the UK,
Speaker 1: political and business leaders will be gathering for the annual
Speaker 1: conference of the British Chambers of Commerce. They'll include the
Speaker 1: Governor of the Bank of England and the man who
Speaker 1: could be the next Prime Minister for more. Lets head
Speaker 1: to London and bring in Bloomberg Daybreak Europe banker Stephen Carroll.
Speaker 2: Tom. This event is happening at a time when the
Speaker 2: UK economy is facing all kinds of challenges. Inflation is
Speaker 2: still in double digits, growth as flatlined, and the possibility
Speaker 2: of a recession remains close. All the more reason that
Speaker 2: businesses will want to hear from the likes of Andrew
Speaker 2: Bailey from the Bank of England and the Opposition leader
Speaker 2: cair Starmer as well to discuss what we should expect
Speaker 2: from the British Chambers of Commerce event. Is our UK
Speaker 2: correspondent Lizzyburden, who'll be covering it for Bloomberg TV and Radio. Lizzie,
Speaker 2: this is an organization that represents tens of thousands of
Speaker 2: firms in Britain, all sorts of sizes. Set the scene
Speaker 2: for us about what the big issues are that they'll
Speaker 2: want to be discussing at this event.
Speaker 7: Well, Stephen, the consensus among business leaders that I speak
Speaker 7: to is that the one thing Liz trust got right
Speaker 7: is that the UK needs better growth. So part of
Speaker 7: that does come down to plugging the holes in the
Speaker 7: labor market. Of course, in the latest budget, the Chancellor
Speaker 7: announced the childcare reforms the pension reforms, both to try
Speaker 7: to entice people back into the labor market. The question
Speaker 7: is are they enough to reduce the tightness in the
Speaker 7: labor market and that to have an impact on inflation,
Speaker 7: which of course we know is still in double digits
Speaker 7: here in the UK. They may also businesses want the
Speaker 7: Chancellor to loosen immigration rules more.
Speaker 8: Of course, it's a.
Speaker 7: Toxic issue post Brexit, and at the CBI annual conference
Speaker 7: in the autumn last year, the Opposition leader Kir Starmer
Speaker 7: actually was talking tougher on immigration, so it'll be interesting
Speaker 7: to see see how the two parties frame that one.
Speaker 6: Now.
Speaker 7: The other question is how to make the UK more investible.
Speaker 7: Of course recently we've heard the Financial Conduct Authority looking
Speaker 7: at changing listing requirements for the UK. Really the question
Speaker 7: is how do you help businesses grow and then keep
Speaker 7: them here once they've reached a certain size, because it's
Speaker 7: been a real blow for the government to lose arm
Speaker 7: CRH and Flutter all to other bosses.
Speaker 2: You mentioned the CBI conference as also this question of
Speaker 2: the sort of beauty pageant that politicians have at events
Speaker 2: like this, where they want to show up and be
Speaker 2: popular and liked. And because we are in a very
Speaker 2: long countdown to a general election in the UK, that's
Speaker 2: a really important pitch for Keir Starmer, the Opposition leader,
Speaker 2: because he really wants to be able to confirm his
Speaker 2: pitch as being, you know, Labor being a party that's
Speaker 2: going to be a pro business.
Speaker 6: Yeah.
Speaker 7: We don't have a date for the next election at
Speaker 7: the moment, we're expecting it to be at the latest
Speaker 7: autumn twenty twenty four. Businesses want are specifics. They want
Speaker 7: things that are temporary to be made permanent so that
Speaker 7: they can make that investment. In particular, they want to
Speaker 7: know what's coming in terms of tax cuts. That's going
Speaker 7: to be a key battleground in the run up to
Speaker 7: the next election. Can the government afford to cut taxes?
Speaker 7: Where is it going to make tax cuts? Labor really
Speaker 7: needs to present itself, as you say, as the party
Speaker 7: of businesses. I do think as well that it's significant
Speaker 7: that Labor is sending its leader, Kir Starmer. The government
Speaker 7: so far we know, is only sending a Treasury minister.
Speaker 7: So in terms of signaling how important business is, it
Speaker 7: looks like Kiir Starmer's taking it a bit more seriously.
Speaker 1: Yeah.
Speaker 2: Interesting. Now industrial policy is something on the minds at
Speaker 2: least some of the businesses at this conference. On Bloomberg Radio,
Speaker 2: we've been discussing this with Ben Fletcher from make UK,
Speaker 2: which represents manufacturers here speaking to Caroline Hepger on Bloomberg Radio,
Speaker 2: and they're called for an independent inquiry into the British
Speaker 2: government's industrial policy.
Speaker 8: The things I think.
Speaker 9: That is really important is that we look around the
Speaker 9: world and see which countries do it better than us.
Speaker 8: And I think if you look at Germany, if you
Speaker 8: look at France, you've got a very very long term
Speaker 8: sustained plan.
Speaker 9: If you look at America, you look at a number
Speaker 9: of places in the Far East, they've all got really
Speaker 9: clear plans and they've all got a real investment in
Speaker 9: skills and a focus on what this is going to
Speaker 9: achieve over the next ten years.
Speaker 8: And if you compare that to where we are now.
Speaker 9: Jeremy Hunt made some really positive steps forward in the
Speaker 9: budget last autumn, some clearly defined areas that he wants
Speaker 9: to invest in, but we really need to scale up
Speaker 9: from that and we need a huge amount more flesh
Speaker 9: on the bone in terms of detail.
Speaker 10: What of the Labor Party, I mean, we have an
Speaker 10: election general election looming that not that long away, and
Speaker 10: that the polling is very positive for the Labor Party
Speaker 10: if they were to get in. Do you think this
Speaker 10: is something that would appeal to them.
Speaker 8: We certainly hope that both parties look at it seriously
Speaker 8: and take it seriously.
Speaker 9: To directly address your question, you know, we've had some
Speaker 9: positive signs coming up. The Sounac government and Hunt's budget
Speaker 9: set out that ambition, and we strongly welcome that. The
Speaker 9: opposition party's labor in particular has said that an industrial
Speaker 9: strategy is critical and they would want to.
Speaker 8: Produce one and deliver one in government.
Speaker 9: What we're trying to do, I think, is to be
Speaker 9: a bit of a catalyst for all of that thinking.
Speaker 8: It's really critical that we get this right.
Speaker 9: We've learned some lessons from COVID I think about the
Speaker 9: impact if we don't have a lot.
Speaker 8: Of domestic capability.
Speaker 9: We're seeing the focus on net zero, We're seeing the
Speaker 9: focus on industrial growth in our big competitors, and at
Speaker 9: the moment our plan isn't fully functional, isn't fully worked,
Speaker 9: and isn't fully resourced. So what we see is a
Speaker 9: receptive audience on both sides of the house. What really
Speaker 9: we want to do is to put a turbo charger
Speaker 9: underneath that thinking and get people to realize that this
Speaker 9: isn't something you can just talk about you really have
Speaker 9: to do.
Speaker 5: So.
Speaker 2: That was Ben Fletcher from Make UK speaking to Caroline
Speaker 2: Hepger on Bloomberg Radio. The labor market, Lizzie's also going
Speaker 2: to be in front in the coming days, we're going
Speaker 2: to get an update on wages and unemployment for the UK.
Speaker 2: What should we be watching out for.
Speaker 7: Tightness in the labor market has been driving up inflation,
Speaker 7: so that's why these numbers are so crucial for the
Speaker 7: Treasury as well as the Bank of England. In the
Speaker 7: last data it was tighter than expected. People were still
Speaker 7: demanding wage rises to try to keep up with inflation,
Speaker 7: but then inflation has been swallowing up wage rises in
Speaker 7: real terms. This data is for March and April. I
Speaker 7: would really keep an eye on the employment rate, the
Speaker 7: unemployment rate, I should say, wage growth, and the number
Speaker 7: of days that have been lost to strike action, because
Speaker 7: we know that in the latest GDP data, which of
Speaker 7: course you said, growth had flatlined. One of the big
Speaker 7: reasons was because strikes were weighing on services output. And finally,
Speaker 7: looking at economic inactivity because as I say, we've got
Speaker 7: this huge these holes in the labor market that need
Speaker 7: to be plugged.
Speaker 2: Yeah, the tightness in the labor market is helping those
Speaker 2: who are changing jobs in England, though they're securing pay
Speaker 2: rises of varient ten percent, according to data from the
Speaker 2: recruitment company Read analyzed by Bloomberg. Here's Read's CEO James
Speaker 2: Reid speaking to us on Bloomberg Radio.
Speaker 11: A lot of employers are struggling to find the people
Speaker 11: they need and so they're paying a premium. They're paying
Speaker 11: a premium to attract new applicants, so the wages have
Speaker 11: been going up. I suppose what's interesting about this data
Speaker 11: is it's a much more forensic analysis that we've done
Speaker 11: with Bloomberg than we've ever done before, over five years
Speaker 11: worth of pay data, and it's showing some very interesting
Speaker 11: variations and it does raise some interesting questions, doesn't it
Speaker 11: about the future of the labor market and what the
Speaker 11: Bank of England might do, et cetera. So I think
Speaker 11: this data is fascinating and I would urge people to
Speaker 11: have a look at it.
Speaker 2: That was James Reid, the CEO of the recruitment company
Speaker 2: Read on Bloomberg Radio. Lizzie. Another question that I wanted
Speaker 2: to circle back to in relation to the British Chambers
Speaker 2: of Commerce conference is this idea of who represents business
Speaker 2: in the UK when they're speaking to politicians. The biggest
Speaker 2: business lobby group in this country, the Confederation of British Industry,
Speaker 2: has paused operations because of allegations of sexual misconduct and
Speaker 2: harassment among staff. The CBI is effectively in limbo. Who
Speaker 2: is the government and other politicians speaking to when they
Speaker 2: want to speak to business.
Speaker 7: Well, I actually interviewed one of his Treasury ministers, the
Speaker 7: City Minister, Andrew Griffith, and I asked him this very
Speaker 7: question and he said that the Treasury is always talking
Speaker 7: to business. There's a plethora of lobby groups out there
Speaker 7: for that community. You've got the British Chambers of Commerce,
Speaker 7: who's hosting this conference. There's also the Federation of Small Business,
Speaker 7: the FSB, and the Institute of Directors the IOD. So
Speaker 7: all of them are trying to fill this void that's
Speaker 7: been left by the CBI when the government has said
Speaker 7: that it's so problematic that I think the Chancellor himself
Speaker 7: said there's no point engaging with the CBI when their
Speaker 7: own members have deserted them in droves.
Speaker 2: Okay, something to watch out for as we look ahead
Speaker 2: to the events of the coming week. Thank you to
Speaker 2: Bloomberg's UK correspondent Lizzie Burden. I'm Stephen Kroen in London.
Speaker 2: You can catch us every weekday morning here for Bloomberg
Speaker 2: Daybreak Europe, beginning at six am in London on one
Speaker 2: am on Wall Streets. Tom.
Speaker 1: Thank you, Stephen, and coming up on Bloomberg day Break weekend,
Speaker 1: some big hearings on what went wrong with US regional banks.
Speaker 1: I'm Tom Busby and this is.
Speaker 5: Bloomberg broadcasting live from the Bloomberg it aactive brokers studio
Speaker 5: in New York. Bloomberg elemon three oh to Washington d C,
Speaker 5: Bloomberg ninety nine one to Boston, Bloomberg one O six
Speaker 5: one to San Francisco, Bloomberg nine sixteen to the country,
Speaker 5: Sirius XM Channel one nineteen to London DAB Digital radio,
Speaker 5: and around the globe the Bloomberg Business app in Bloomberg
Speaker 5: Radio dot Com. This is Bloomberg Daybreak Weekend.
Speaker 1: I'm Tom Busby in New York with your global look
Speaker 1: ahead at the top stories for investors in the coming week.
Speaker 1: The regional bank turmoil still haunting us as we move
Speaker 1: into the new trading week, and for more, let's add
Speaker 1: to our Bloomberg ninety nine to one newsroom in Washington
Speaker 1: and Bloomberg Sound On co host Kaylee lines, Kaylee.
Speaker 4: That's right, Tom. It's still not fully clear if regional
Speaker 4: banks are completely out of the woods yet, after a
Speaker 4: series of failures this year. It of course began in March.
Speaker 4: Silvergate had to wind down, Then Silicon Valley Bank and
Speaker 4: Signature Bank collapsed and were put into receivership by the FDIC,
Speaker 4: and then First Republic followed earlier this month, and here
Speaker 4: in Washington, they're still trying to pick apart exactly what
Speaker 4: happened and what should be done so it doesn't happen again.
Speaker 4: This coming week, we have two big hearings before the
Speaker 4: Senate Banking Committee. The first is Tuesday, where Committee Chairman
Speaker 4: Senator Shared Brown is about to get this wish which
Speaker 4: he shared with me back in March, to come true.
Speaker 3: We could move more quickly if the bank CEOs got
Speaker 3: out of their ivory towers and actually came and talked
Speaker 3: to us.
Speaker 4: That's right. On Tuesday, more than two months after the
Speaker 4: failures of their respective banks, for executives from SVB and
Speaker 4: Signature will testify before the committee. Then on Thursday, it
Speaker 4: will be the bank regulators in the hot seat, with
Speaker 4: FED Vice Chriff Supervision Michael Barr and fdi C Chair
Speaker 4: Marity Grenberg set to testify once again, along with several
Speaker 4: other witnesses from regulatory bodies, and in an interview with
Speaker 4: Bloomberg this past week, the CEO of JP Morgan Jamie
Speaker 4: Diamond had this message for them, we.
Speaker 12: Need to finish the bank crisis. We've had uncertain policy
Speaker 12: on mergers as first Arizon deal. I think we have
Speaker 12: to assume they'll be a little bit more so, you know,
Speaker 12: whatever the FDIC, the OCC, the Fellow Reserve or whatever
Speaker 12: they need to do to make it better, they should
Speaker 12: do be thoughtful, be very forward looking. You'll not be
Speaker 12: surprised constantly because some of these things have been known
Speaker 12: about for quite a while.
Speaker 4: So will we get progress toward making it better? What
Speaker 4: answers from regulators, congressional leaders, former bank executives are we
Speaker 4: likely to get this coming week? Joining us now hopefully
Speaker 4: to help answer those questions? Or Zacho And he's a
Speaker 4: congressional reporter for Bloomberg Government as well as Ben bay And,
Speaker 4: who heads up Bloomberg's financial regulation coverage here in Washington,
Speaker 4: Zach Ben, thank you both so very much for joining us.
Speaker 4: And Zach, I'd like to start with you first. On
Speaker 4: the first hearing on Tuesday, we've got Greg Becker, the
Speaker 4: former Silicon Valley Bank CEO, Scott Shay, the former chair
Speaker 4: and co founder of Signature Bank, and Eric Howe, the
Speaker 4: former president of Signature Bank. Are these three essentially just
Speaker 4: going to get scolded and reprimanded by senators for several
Speaker 4: hours or does the committee actually just want to glean
Speaker 4: some new information from this hearing or ultimately just get
Speaker 4: some clips for campaign ads.
Speaker 13: Probably a little bit of both. You know, these executives
Speaker 13: don't really have a lot of friends left in Washington,
Speaker 13: so and this is really the first time that they're
Speaker 13: going to be able to talk directly to these lawmakers,
Speaker 13: at least in a public setting. Previous hearings have all
Speaker 13: been with these regulators, like you mentioned with Michael Barr
Speaker 13: and Marty Grunberg, and so this will be the first
Speaker 13: time where lawmakers will be able to say, we've brought
Speaker 13: these executives in. These are the questions we have, These
Speaker 13: are the scoldings that we want to give to them,
Speaker 13: and then to move on and say, what did happen,
Speaker 13: what could have been done to prevent these failures, and
Speaker 13: what could be done to prevent further failures of these
Speaker 13: midsize banks. And so I expect you'll see a little
Speaker 13: bit of politics, a little bit of more substantive probing,
Speaker 13: depending on who on the panel is at the microphone.
Speaker 4: There's always politics act. But I do wonder if this
Speaker 4: might actually be really bipartisan. Are we likely to see
Speaker 4: a difference in tone between the Democratic and Republican members
Speaker 4: of the committee or are they mostly in line on
Speaker 4: this specific issue when it comes to bank executives.
Speaker 13: I think everybody that we've talked to and that they've said,
Speaker 13: you know, Chairman Sharon Brown, ranking Member Tim Scott, the
Speaker 13: top Republican have all said that the bank executives are
Speaker 13: at least partially to blame for these bank failures. And so, yeah,
Speaker 13: we do expect a bipartisan thrashing to a certain extent
Speaker 13: of these executives who are going to come in and
Speaker 13: try to defend what happened at these banks and the
Speaker 13: lead up to their failure.
Speaker 4: So it sounds like there's definitely going to be some
Speaker 4: fireworks on Tuesday, and Ben I wonder if there's also
Speaker 4: going to be some fireworks on Thursday when the regulators
Speaker 4: are the ones that are in the hot seat there,
Speaker 4: of course, Marty Grunberg, the FDIC, the FEDS, Michael Barr.
Speaker 4: They have already been before the committee on the issue
Speaker 4: bank failures. So what's going to be different this time around?
Speaker 4: What are we likely to hear that we haven't heard already?
Speaker 14: Well, I think we're you know, fast forward a couple
Speaker 14: of weeks from the last time they appeared, and the
Speaker 14: situation still hasn't been fully resolved, and we're going to
Speaker 14: hear from former Silicon Valley Bank and former Signature Bank
Speaker 14: CEOs and those banks have failed. But in the meanwhile,
Speaker 14: there's still several you know, mid sized regional banks that
Speaker 14: the market seems quite concerned about, and you know, there
Speaker 14: still is this angst out there about potentially other shoes
Speaker 14: to drop. So I think there's gonna be a lot
Speaker 14: of questioning about whether bigger fixes need to happen policy wise. Now,
Speaker 14: the fti C has come out with a recommendation a
Speaker 14: thought of, you know, kind of what they'd like to
Speaker 14: do in terms of the Deposit Insurance Fund, which was
Speaker 14: certainly in the spotlight because that was used to make
Speaker 14: really everyone whole who was who had money in those
Speaker 14: two failed banks. But they need Congress to step in.
Speaker 14: So it's kind of this, you know, interesting moment where
Speaker 14: the regulators saying, Hey, we actually need Congress to do
Speaker 14: something and write a new law here to be able
Speaker 14: to to kind of come in the way that we
Speaker 14: might want to. And you have a situation in Congress
Speaker 14: where we're really not much is passing in terms of legislation,
Speaker 14: legislation at all in this area or any other.
Speaker 4: Yeah, the pace of the congressional response clearly has been
Speaker 4: quite slow, at least in comparison to the speed with
Speaker 4: which the crisis has moved. But these regulators been do
Speaker 4: have a certain degree of discretion here in terms of
Speaker 4: what they would like to do with their existing authority. Right,
Speaker 4: how quickly could we see them actually tighten things on
Speaker 4: their own, I mean there's.
Speaker 14: Certainly things they can do. I mean they can you know,
Speaker 14: these banks that failed and other banks are highly regulated entities,
Speaker 14: so you know, they're constantly going back and forth with
Speaker 14: their regulators over and getting various levels of scrutiny depending
Speaker 14: on which business activity we're talking about. So there are
Speaker 14: there are certainly things that regulators can do to dial
Speaker 14: up that scrutiny, and there were you know, a hole
Speaker 14: shown in terms of what was actually being looked at
Speaker 14: in you know, there's regulars, there's regulators on a regular basis,
Speaker 14: they can they can on their own go ahead and
Speaker 14: make those tweaks, but for the big kind of holistic
Speaker 14: changes that they might want, you know, they're going to
Speaker 14: probably need lawmakers to do something that all said. The
Speaker 14: Federal Reserve has been doing a review of a lot
Speaker 14: of you know, kind of oversight of banks and some
Speaker 14: of the rules, and that's happened. That's in the backdrop
Speaker 14: that was that was occurring before you know, this crisis,
Speaker 14: and I'm certain, I'm certain that what has transpired over
Speaker 14: the past two months are certainly can inform you know,
Speaker 14: whatever new rule proposals they come out with. So there
Speaker 14: are things regulators can do, but you know, ultimately, like
Speaker 14: many things, you know in Washington, it's Congress kind of
Speaker 14: needs to step in to do the big, big things.
Speaker 4: Zach, Will Congress do the big things? Do you think
Speaker 4: is there actual momentum toward that, because as I said,
Speaker 4: I mean, these banks failed two months ago, and we're
Speaker 4: still holding hearings that are kind of backwards.
Speaker 13: Looking, right, And I think part of that might be
Speaker 13: maybe a lack of urgency. As you've heard from from
Speaker 13: Yellen and Diamond. I think there's some confidence that maybe
Speaker 13: the crisis is abating or at least, you know, not
Speaker 13: quite finished, but at least you know, this isn't a
Speaker 13: two thousand and eight really fast paced crisis, so to speak.
Speaker 13: You know, other than these you know, these small regional banks,
Speaker 13: and so there's a couple of things that they probably
Speaker 13: won't do. The twenty eighteen rollback of Dodd frank On,
Speaker 13: you know, that lowered the liquidity requirements for some of
Speaker 13: these mid sized banks. That's not going anywhere. There's really
Speaker 13: no interest in the Republican controlled House or among Senate
Speaker 13: Republicans to work with Democrats and something like that. There's
Speaker 13: by parties an interest in things like clawing back pay
Speaker 13: to some of these executives, maybe to recoup costs, or
Speaker 13: maybe increasing the cap on uninsured, increasing the cap on
Speaker 13: insured deposits. And so maybe we see something along those lines.
Speaker 13: But I think lawmaker's role here is not so much
Speaker 13: in legislating, but in pressuring regulators to enact the kind
Speaker 13: of more strict requirements that they've been looking for in
Speaker 13: the kind of oversight that maybe was missing during these failures.
Speaker 4: Yeah, and of course we're talking here about the failures
Speaker 4: we have seen. But Ben, I feel like there is,
Speaker 4: and you were alluding to this earlier, still some fear
Speaker 4: in the market that there could be more failures to come.
Speaker 4: Are we likely to see more banks collapse before anyone
Speaker 4: can get around to making real changes?
Speaker 11: Well, I don't.
Speaker 14: I don't think, you know, we quite know the answer
Speaker 14: to that. I mean, there are it's been it's been
Speaker 14: you know, kind of days of while trading some of
Speaker 14: the Some some days, you know, these these shares are
Speaker 14: getting getting pounded down, you know, in the double digits.
Speaker 14: Other days that you know they'll kind of come roaring back.
Speaker 14: It does seem like there is in some instances, a
Speaker 14: disconnect between, you know, what the market is doing and
Speaker 14: what maybe the bank is saying about its business.
Speaker 4: Ben Bain, regulatory team leader for Bloomberg News and Zach
Speaker 4: co And a congressional reporter for Bloomberg Government, Thank you
Speaker 4: both so much. Really looking forward to the coverage of
Speaker 4: both of these hearings next week and we'll send it
Speaker 4: back to you.
Speaker 3: Thank you, Kaylee.
Speaker 1: Kaylee Lines reporting from our Bloomberg ninety nine one newsroom
Speaker 1: in Washington, and you can hear Kaylee and co host
Speaker 1: Joe Matthew on sound on weekdays one to three pm
Speaker 1: right here on Bloomberg Radio. Coming up here on Bloomberg
Speaker 1: day Break weekend, looking ahead to some key Chinese economic
Speaker 1: data coming our way. I'm Tom Busby, and this is Bloomberg.
Speaker 1: This is Bloomberg day Break Weekend, our global look ahead
Speaker 1: at the top stories for investors in the coming week.
Speaker 1: I'm Tom Busby in New York. China's economy bouncing back
Speaker 1: now that COVID measures have eased, But just how big
Speaker 1: of a bounce? For more, Let's go to Hong Kong
Speaker 1: and Bloomberg Daybreak Asia host Brian Curtis and his colleague
Speaker 1: Doug Krisner.
Speaker 3: Tom, It's a simple question, is the Chinese economy sputtering
Speaker 3: or recovering? But the answer may be much more complicated.
Speaker 3: We'll get a slew of data in the coming week
Speaker 3: that will no doubt shed some light on the issue.
Speaker 15: Now, in the past week, we had some shocking data
Speaker 15: for the month of April. Producer prices fell further into deflation.
Speaker 15: Consumer prices at the same time barely positive, and imports plummeted.
Speaker 3: That might change with the retail sales and industrial production
Speaker 3: in the coming week. There are significant cross currents in
Speaker 3: the economy and to try to sort through them, we
Speaker 3: asked James Meger, Bloomberg Economics editor for Greater China and Mongolia,
Speaker 3: to join us. So, James, thank you. We understand that
Speaker 3: the base effect from last year is distorting the picture.
Speaker 3: In the case of exports, for instance, it made the
Speaker 3: data perhaps look better than they what the reality is. However,
Speaker 3: in the case of imports, it's actually worse. I mean,
Speaker 3: if imports were worse this year, down seven point nine
Speaker 3: percent from last year when we were in lockdown, well
Speaker 3: that tells you they were pretty bad.
Speaker 16: I mean, obviously the base effects from last year in
Speaker 16: April of last year, Shanhaio, as you said, was in lockdown,
Speaker 16: your lockdowns across the country, and so that's seriously going
Speaker 16: to undercut the amount of that time. It's going to
Speaker 16: make a lot of the numbers look better. So, as
Speaker 16: you said, exports were a lot better than expected, we
Speaker 16: expect retail sales to jump by like twenty percent or
Speaker 16: something in this April. But I know if you try
Speaker 16: and remove those from what we're looking at, the economy
Speaker 16: does seem to be really struggling at this time. Obviously,
Speaker 16: imports are very weak. Commodity and that's not just a
Speaker 16: commodity price thing. You know, the use of coal in
Speaker 16: the economy is falling. Deal companies are cutting prices because
Speaker 16: of weak demand for steel. We saw the excavated companies
Speaker 16: that sell you know, excavators for construction sales are down
Speaker 16: forty forty one percent in April for them. If you're
Speaker 16: looking across the whole economy, the industrial sector seems to
Speaker 16: be very weak. Exports don't seem to be particularly strong.
Speaker 16: Construction isn't really rebounding. Even though the housing sector seems
Speaker 16: to be stabilizing, You're not seeing a rebound in construction.
Speaker 16: You're not seeing a rebound in new home sales. So
Speaker 16: on all these critical sectors, the Chinese economy looks very
Speaker 16: weak at this time.
Speaker 15: In the coming months, we're hearing that China is expected
Speaker 15: to roll out some policies to address this growth issue
Speaker 15: away from applying direct fiscal stimulus. When you think about
Speaker 15: things like protecting supply chains or boosting the birth rate.
Speaker 15: Is there something more the government can be doing away
Speaker 15: from applying more money.
Speaker 16: So there's been a there's a real effort right now
Speaker 16: to attract more foreign investment into the economy. You know,
Speaker 16: you just have officials from across China, like cities, provinces,
Speaker 16: even the central governments, spreading out countries in Asia and
Speaker 16: more more widely to the Middle East for example, to
Speaker 16: try and get foreign investment to return to China. And
Speaker 16: there was a real slump in foreign investment during the pandemic,
Speaker 16: especially last year, and the aim is for this money
Speaker 16: to help drive growth this year. You know, the question
Speaker 16: is whether that's going to happen or night. And so
Speaker 16: far there hasn't been any sign of like a really
Speaker 16: bullish return of foreign investors to the Chinese economy. That's
Speaker 16: whether that's in greenfield investment in sort of new factories
Speaker 16: and new production here, or whether that's in portfolio flows
Speaker 16: and people buying into the stock in the bond market.
Speaker 16: There hasn't been the sort of an inflow of money
Speaker 16: that would help boost the economy, and so the government's
Speaker 16: really left with things like fiscal spending. You know, if
Speaker 16: export demand is weak. If foreign investment is not coming in,
Speaker 16: all you really have is there the domestic leavers for
Speaker 16: driving growth, whether that's more subsidies for the electric vehicle market,
Speaker 16: or whether it's you know, things like more subsidies for
Speaker 16: people to encourage them to have more children.
Speaker 15: James, thanks for helping out and helping us understand what's
Speaker 15: going on in China's economy as we look ahead to
Speaker 15: the retail sales and industrial production data in the coming week.
Speaker 15: James Mager, who is a Bloomberg Economics editor for Greater
Speaker 15: China and Mongolia.
Speaker 3: James, thank you. I'm Brian Curtis, along with Doug Krisner.
Speaker 3: You can catch us every weekday here for Bloomberg Daybreak Asia,
Speaker 3: beginning at six am in Hong Kong and six pm
Speaker 3: on Wall Street. Tom.
Speaker 1: Thank you, Brian and Doug. And that does it for
Speaker 1: this edition of Bloomberg Daybreak Weekend. Join us again Monday
Speaker 1: morning at five am Wall Street time for the latest
Speaker 1: on markets overseas and the news you need to start
Speaker 1: your day. I'm Tom Buzzby. Stay with us. Top stories
Speaker 1: and global business headlines are coming up right now.