Speaker 1: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 1: top stories in the coming week from our day Break
Speaker 1: anchors all around the world, and straight ahead on the program,
Speaker 1: the job market and what it means.
Speaker 2: For all of us. I'm Top Busby in New York.
Speaker 3: I'm Stephen Carolyn London, where we're looking ahead to a
Speaker 3: meeting of some of Europe's top economists and business people
Speaker 3: in France at a time when yours own growth is stuttering.
Speaker 4: I'm Doug Prisner the challenges of developing artificial intelligence in China.
Speaker 5: I'm Joe Matthew in Washington. Next week we get a
Speaker 5: fly on the wall view of the last FED meeting.
Speaker 6: Coming up, we'll look ahead to the release of FED minutes.
Speaker 6: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 7: You.
Speaker 1: I'm Tom Busby, and we begin today's program with the
Speaker 1: June jobs report coming out this coming Friday. Joining me
Speaker 1: to talk about what's expected and what it all means.
Speaker 1: Bloomberg's Global Economics and Policy editor Michael McKee. Now, before
Speaker 1: we talk about June, let's start by looking back at
Speaker 1: May's data. There was three hundred and thirty nine thousand
Speaker 1: jobs added, way more than forecast, a sign of a
Speaker 1: pretty healthy labor market. Gains some professional business services, government, healthcare,
Speaker 1: and very important to the Fed, we saw wage growth
Speaker 1: slow the same time inflation started to pull back.
Speaker 7: It was a confusing report because the establishment survey, the
Speaker 7: three hundred and thirty nine thousand, was so strong, but
Speaker 7: on the household side, we lost jobs. The household survey
Speaker 7: produces the unemployment rate, and it jumped from three point
Speaker 7: four percent to three point seven percent. So the Fed's
Speaker 7: going to really be watching this coming month to see
Speaker 7: if that same dynamic plays out. Right now, the forecast
Speaker 7: for unemployment is unchanged at three point seven percent, but
Speaker 7: we'll have to see when we get to next Friday
Speaker 7: what the final number is and how it compares with
Speaker 7: job creation.
Speaker 1: And what kind of raw number were you looking at
Speaker 1: in ads.
Speaker 7: Well, here's the funny part. We've had a lot of
Speaker 7: strong economic data over the last week, and people have
Speaker 7: been talking about how the economy is in better shape
Speaker 7: than thought, but you kind of have been marking down
Speaker 7: their forecast for job growth. We're at one ninety five now.
Speaker 7: Earlier in the last week we were at about two twenty.
Speaker 7: So I'm not sure why the pessimism, but people are
Speaker 7: thinking that maybe the trend is finally breaking and then
Speaker 7: we will get lower job creation, although that's still very strong,
Speaker 7: lower job creation and slightly higher unemployment, even if we're
Speaker 7: seeing strength in other areas of the economy.
Speaker 1: But that's something right in the fed's playbook, right, that's
Speaker 1: what they're hoping to see.
Speaker 2: That's what they're hoping to see.
Speaker 7: The Fed's been hoping that we would a slow down
Speaker 7: in consumer spending, a slowdown in therefore business investment, and
Speaker 7: then a slow down in hiring, and the fewer people
Speaker 7: that get jobs, that's less money that goes into spending
Speaker 7: in the overall economy, cools. It's the standard playbook for
Speaker 7: central banks and it just hadn't worked yet.
Speaker 2: Well.
Speaker 1: Speaking of the FED, just this past week we saw
Speaker 1: Chairman Powell was in Madrid at an ECB event, and
Speaker 1: he said some things that really rattled investors.
Speaker 8: A strong majority of committee participants expect that it will
Speaker 8: be appropriate to raise interest rates two or more times
Speaker 8: by the end of this year. Inflation pressures continue to
Speaker 8: run high, in the process of getting inflation back down
Speaker 8: to two percent has a long way to go.
Speaker 2: That is a mouthful.
Speaker 7: Well, the FED had forecast at their last meeting that
Speaker 7: we would see the possibility of two more rate increases,
Speaker 7: and he seems to be underlining that the market had
Speaker 7: only priced in one, so he seems to be interested
Speaker 7: in pushing them to add to that. And we did
Speaker 7: see the swaps market react and at least start to
Speaker 7: price in the idea of two. But remember the FED
Speaker 7: has been saying all along it's very data dependent, and
Speaker 7: we haven't got a lot of employment or inflation data yet.
Speaker 7: We will be getting that, and so for the FED,
Speaker 7: it's a question of do they really have to carry
Speaker 7: through with two rate increases or will the data give
Speaker 7: them an out maybe only do one. And the market
Speaker 7: is kind of thinking the same way.
Speaker 1: And we've still got four weeks before the next meeting
Speaker 1: that they have, and then six weeks after that.
Speaker 2: Right in September.
Speaker 7: Yes, so we will see one more CPI report before
Speaker 7: the FED meeting, and of course next Friday is the
Speaker 7: Jobs report, and those will give us a pretty good
Speaker 7: idea of where we are at the moment. The question
Speaker 7: is what's the long run view, And since we only
Speaker 7: get one report, it's going to be harder for the
Speaker 7: Fed to make a forecast that works for the month
Speaker 7: of August, taking the month of August off and then
Speaker 7: not until September. Having another meeting, we will have j
Speaker 7: Powell and Jackson Hall, so if he has something to say,
Speaker 7: we'll hear it. But the Fed itself won't be voting again.
Speaker 7: So you're right, it's going to be an interesting vacuum
Speaker 7: for the market to fill.
Speaker 1: But so far, what the Fed has done took a while,
Speaker 1: but it appears to be bearing fruit.
Speaker 7: Well, they have brought down the inflation rate and it's
Speaker 7: about halved, but it's considered the low hanging fruit. I mean,
Speaker 7: we saw energy prices in particular falloff, and gasoline prices.
Speaker 7: Now the question is is they're embedded inflation in the
Speaker 7: core rate of inflation. That's going to be hard to eradicate.
Speaker 7: Our companies raising prices because they still have to pay
Speaker 7: more for their inputs. Are they raising prices because they can?
Speaker 7: People are used to it? Is labor still an issue
Speaker 7: in terms of having to make up the cost of
Speaker 7: additional wages for people. So we're not out of the woods.
Speaker 7: And the FED thinks that it's going to be much
Speaker 7: harder to get that last two percent wrung out of
Speaker 7: inflation than the first six percent.
Speaker 1: Yeah, and Chairman Pal said, it's not this year, it's
Speaker 1: not next year. It looks like it's going to be
Speaker 1: twenty twenty five hopefully.
Speaker 7: Yeah, that's a they're being conservative because they have been
Speaker 7: fooled and it's been much stickier than they thought. The
Speaker 7: Fed is thinking twenty twenty five, we are going to
Speaker 7: see inflation come down because the whole rent question, we've
Speaker 7: talked about a lot that it takes a long time
Speaker 7: for housing costs to get into and out of the
Speaker 7: inflation data. They're going to that's finally going to hit
Speaker 7: and we're going to see some drops in inflation. But
Speaker 7: then does that continue And that's something they don't know
Speaker 7: because we've started to see some home price and rent
Speaker 7: increases and now may take another six months or a
Speaker 7: year to go into the data, but it's going to
Speaker 7: be out there and it'll keep them farther away from
Speaker 7: two percent if that indeed happens.
Speaker 1: Well, Mike, I want to shift gears a little bit
Speaker 1: here and talk about the kinds of jobs that are
Speaker 1: going away, the kind of jobs that are we're seeing
Speaker 1: gains in the last couple of months, we've seen, or
Speaker 1: so far this year, hundreds of thousands of tech jobs
Speaker 1: that have been some of the big techies. Now we
Speaker 1: all know that they overhire during the pandemic when things
Speaker 1: nobody knew which way we're going to go. But as
Speaker 1: you have said before, every company is a tech company,
Speaker 1: so a lot of those people are finding work, you know,
Speaker 1: with AI. It looks like things are shifting that in
Speaker 1: that marketplace for those jobs.
Speaker 2: Tech jobs.
Speaker 7: Yeah, I'm not smart enough to know how easily you
Speaker 7: can transition to an AI job from another kind of
Speaker 7: tech job. And of course when we talk about tech,
Speaker 7: it's a very large category, everything from hardware to software
Speaker 7: and all different kinds of software. But it does look
Speaker 7: like that category has stabilized because people can find more jobs.
Speaker 7: The thing that was slow was temporary hiring because usually
Speaker 7: when you're seeing an economic ramp up. Companies add people
Speaker 7: on a temporary basis because they're worried about whether or
Speaker 7: not they'll have the businesses to sustain hiring them, and
Speaker 7: that turned around last month we saw some gains in
Speaker 7: temporary hiring. Healthcare has always been a last couple of years,
Speaker 7: has been a very strong category, and that saw gains.
Speaker 7: As we get older, we need more healthcare, and so
Speaker 7: we're looking to see where the weakness is going to come.
Speaker 7: It has been in manufacturing. Manufacturing was losing jobs for
Speaker 7: a bit, but now it seems to have added not
Speaker 7: at a huge pace, but we're starting to see more
Speaker 7: production and more hiring there. And construction. I know you've
Speaker 7: been following this. Construction jobs have really surprised. So it's
Speaker 7: the housing market. But builders have been putting up houses
Speaker 7: as fast as they can and they need construction workers.
Speaker 7: And now we're seeing the impact of some of the
Speaker 7: measures Congress passed in the last year, the Chips Act
Speaker 7: and the Inflation Reduction Act that incentivize constructing, especially for
Speaker 7: green energy new facilities, and we're seeing a huge amount
Speaker 7: of construction spending on business facilities, which means they need
Speaker 7: more people as well. So construction, which is normally very
Speaker 7: affected by interest rates is not confounded and that's another surprise.
Speaker 7: So none of this is working out as the previous
Speaker 7: models would have suggested.
Speaker 1: Another thing you talked about manufacturing, and this is timely
Speaker 1: because the UAW this month in July is talking to
Speaker 1: all of Detroit's Big three about a new contract. And
Speaker 1: boy has that industry changed over the last three or
Speaker 1: four years dramatically Because they know the UAW. Electric cars
Speaker 1: do not have the components that gas engine cars have
Speaker 1: and therefore do not need the same amount of workers
Speaker 1: putting it together to assemble those cars. So they've got
Speaker 1: their work cut out from the UAW.
Speaker 7: It is going to be a very interesting negotiation. Labor
Speaker 7: relations in the auto industry have gotten better, so hopefully
Speaker 7: they will be able to avoid strike. And many years
Speaker 7: ago now doesn't seem like it to us old guys,
Speaker 7: but they went to two tier wages with younger people
Speaker 7: coming in at lower wage levels, and so that has
Speaker 7: helped the automakers a lot. Now, how they handle a
Speaker 7: technological change rather than an age change is going to
Speaker 7: be very interesting. And what kinds of people do you need?
Speaker 7: What kinds of jobs are you going.
Speaker 2: To have to fill?
Speaker 1: Well, Michael, thank you so much for being here. That
Speaker 1: was Michael McKee, our Global Economics and Policy editor, and
Speaker 1: coming up on.
Speaker 2: Bloomberg Daybreak weekend.
Speaker 1: How about a trip to France the Summer Economic Conference
Speaker 1: coming to ex Au Provence. I'm Tom Busby and this
Speaker 1: is Bloomberg. This is Bloomberg day Break weekend, our global
Speaker 1: look ahead at the top stories for investors in.
Speaker 2: The coming week. I'm Tom Busby in New York.
Speaker 1: Up later in our program big global gathering on artificial intelligence.
Speaker 1: It's in the works for next week, but first, After
Speaker 1: scraping through a difficult winter, Europe's major economies are stagnating
Speaker 1: as the impact of higher interest rates now kicking in.
Speaker 1: It's an interesting time for some of the continent's stop economists,
Speaker 1: policymakers and business people to be gathering in the south
Speaker 1: of France for the annual Economic Conference in the city
Speaker 1: of ex A, Provence.
Speaker 2: For more, let's head to London.
Speaker 1: And bring in Bloomberg Daybreak Europe banker Stephen Carroll Tom.
Speaker 3: It's a staple of the European economists calendar. This conference
Speaker 3: organized by the French group Sec de seconist or the
Speaker 3: Circle of Economists. The theme this year is Renewing Hope
Speaker 3: and features politicians, CEOs and some ECP policymakers joining the
Speaker 3: discussions as well. Bloomberg's Power supporter Carolyn Connan will be
Speaker 3: there and she joins us now for more on this Carolyn,
Speaker 3: many of our listeners may not be familiar with excellent Provence.
Speaker 3: Can you tell us a bit about first of all,
Speaker 3: where this event is taking place.
Speaker 9: Even I think you have to close your eyes and
Speaker 9: imagine the village atmosphere of Provence. So it's in southeast
Speaker 9: of France, less than one hour north of Marseille. You
Speaker 9: can hear the sound of the cicadas because it's the
Speaker 9: beginning of summer, and you have some concerts, some opera
Speaker 9: at night. That's where the conference is taking place. Probably
Speaker 9: one of my favorite events of the year, even though
Speaker 9: sometimes the weather might get very hard to occasionally close
Speaker 9: to the forty degrees celsius. So most important, most importantly,
Speaker 9: I would say it's one of the best events to
Speaker 9: mingle with French executives and ministers because they are relaxed,
Speaker 9: they're very open to conversations and sometimes they actually share
Speaker 9: some news with you. Really enjoyed the conference because it's
Speaker 9: also the same weekend as the Opera Festival in Excellent Province,
Speaker 9: and it comes at a quiet period before the first
Speaker 9: half earning season, so not too much pressure. It's kind
Speaker 9: of like DeVos in France. That's why we call it
Speaker 9: here the French divors.
Speaker 3: Ah, well, you're making us all very jealous the prospect
Speaker 3: of that setting. Anyway, for the organization, talk to us
Speaker 3: about the key topics they're going to be up for discussion.
Speaker 9: As you mentioned this year, the mental topic is renewing hope,
Speaker 9: which couldn't be of course more appropriate given the geopolitical uncertainties,
Speaker 9: the war in Ukraine, the rebellion of Wagner and Russia,
Speaker 9: and the concerns also on the economic front about a
Speaker 9: credit crunch and the danger of possible recession. So we'll
Speaker 9: get some general comments about all that, but the outlook
Speaker 9: for the economy, but also some of the other issues
Speaker 9: supply chain innovation, labor shortages for example. But X, as
Speaker 9: you know, also lacks expanding the topics for discussions. So
Speaker 9: for example, well the ECB president Kittin Lagard is doing
Speaker 9: a panel about gender equality. You've also got the former
Speaker 9: prime minister and presidential hopeful Edward Philip who will talk
Speaker 9: about choices for the future of society. So there will
Speaker 9: be also a lot of discussions about ecological awareness, healthcare, work,
Speaker 9: life balance. There is a one panel for example, which
Speaker 9: is called working to live or living to work. That's
Speaker 9: a interesting choice, and of course education. The younger generations
Speaker 9: will also be discussing. On the other side of the spectrum,
Speaker 9: the retirement because we're just a few months after President
Speaker 9: Macon pass is very controversial pension reform.
Speaker 3: Yeah, I mean, look, it's a fascinating set of discussions.
Speaker 3: I do think it's very interesting, as you say that
Speaker 3: when we have this summer setting and the idea that
Speaker 3: you know, people are perhaps a little bit more relaxed,
Speaker 3: they'll take time to dig into the broader economic issues
Speaker 3: that perhaps you don't get to during the rest of
Speaker 3: the year. But having said that, we have got a
Speaker 3: couple of ECB names are going to be attending as
Speaker 3: well will be expecting to hear from them.
Speaker 9: There are no less than five central bankers attending, including
Speaker 9: four from the ECB President La Gard, also the French
Speaker 9: Villa Gualo, the Portuguese and the Spanish, and also separately
Speaker 9: you got the Bank of England Governor Andrew Bailey, who's
Speaker 9: going to be there on a Sunday. So very interesting
Speaker 9: and it's not usually a place where Christine Lagarde breaks
Speaker 9: a lot of news, but some of the others they
Speaker 9: like talking. They like to be a bit more open
Speaker 9: minded to talking on the sideline. So we'll check if
Speaker 9: they give any signals regarding the next ECB meeting in
Speaker 9: July and also of course the highly expected September meeting.
Speaker 9: What will be the policy after these sellin next meetings?
Speaker 9: How many more rate hikes are we going to see?
Speaker 9: That will be some of the key questions. And who knows,
Speaker 9: if you're lucky, I might actually have an exclusive sit
Speaker 9: down with one of those central bankers. And my good
Speaker 9: feeling this will actually happen.
Speaker 3: Oh, we're all wishing for that as well, Carolyne. Let's
Speaker 3: set ourselves up for that ECB conversation, though, and bring
Speaker 3: you some of the interview that we had with the
Speaker 3: ECB Vice president least again to us. In recent days
Speaker 3: he's been speaking to Bloomberg at the ECB forum in
Speaker 3: CenTra and Portugal and told our editor at large, Francine Laqua,
Speaker 3: that the September rate hike decision was open.
Speaker 10: We are not done. There is more ground to recovered,
Speaker 10: and you know, the key factory is going to be
Speaker 10: the blution of inflation. And so what we want to
Speaker 10: indicate is very clearly our determination to reduce inflation and
Speaker 10: to bring inflation down or definition of press ability.
Speaker 11: So what happens for future interest rate hikes? I know
Speaker 11: your data dependence. I know September is a question mark.
Speaker 11: But given the data points we have, now, are you
Speaker 11: just going to power ahead and hike Well.
Speaker 10: I think that July is afeta complete. It has been indicated,
Speaker 10: and you know, it's quite clear September. September will depend.
Speaker 10: You know, you know, what are the factors that are
Speaker 10: going to determine what happens in September will be our
Speaker 10: bank lending survey that I think that is very important
Speaker 10: because it's going to be an indication of how our
Speaker 10: monetary policies trust to the financial system and from the
Speaker 10: financial system to the rest of the economy. How you know,
Speaker 10: the title in the financing conditions fed through to the
Speaker 10: real economy. The second will be you know, our predictions
Speaker 10: in September we will have a new round projections. And finally,
Speaker 10: the lusion of core inflation underline inflation. That I think
Speaker 10: that is you know, very relevant in the person's scumstances.
Speaker 10: So these are the three elements that we will take
Speaker 10: into consideration. But well, I said that in July it
Speaker 10: was afterta complete or it is after the complete in September.
Speaker 10: I think that is open.
Speaker 11: Do you believe, Vice President, this is a matter of
Speaker 11: credibility for the Central Bank to get to two percent
Speaker 11: no matter what happens.
Speaker 10: Well, I think that is very important. It's our mandate.
Speaker 10: You know, it's not only well, credibility is very relevant,
Speaker 10: but as well you know, we have a definition of
Speaker 10: pressability and our mandate is to to to rich and
Speaker 10: to guarantee that presstability is so for us is key.
Speaker 3: That's the ECP's vice president least to gain us Speaking
Speaker 3: to Bloomberg last week, Carolyne Connor, what are the other
Speaker 3: names that you'll be watching out for an ax On
Speaker 3: province aside from the center bankers.
Speaker 9: So in between you're going to have a multitude of
Speaker 9: French executives including carfour, Sanofi, LG mh Elberts, Total NGI
Speaker 9: and also all the banks BNP sociitation in Hall. And
Speaker 9: then you've got a lot of member of the French government,
Speaker 9: including the Finance minister Brinolomer, the European Minister Lawrences Boon,
Speaker 9: that we're going to talk to on Friday, and I
Speaker 9: was mentioning earlier the presidential hopefully war Philip. That will
Speaker 9: be also interesting to see him there.
Speaker 3: I'm gonna bringing those entews on Bloomberg Radio and television
Speaker 3: as well. Lawrence Spoon always a very interesting name to
Speaker 3: lest Night for of course she's former chief economist at
Speaker 3: the OECD as well, so somebody well known to the
Speaker 3: listeners and viewers at Bloomberg. Talk to us a bit
Speaker 3: about the economic context for this event, Caroline, because it's
Speaker 3: happening at a time in France where the recent economic
Speaker 3: data has been quite mixed.
Speaker 9: Yeah, well, you've got the economy context and the political context.
Speaker 9: Of course, inflation in France remains above five percent, so
Speaker 9: it's actually slightly lower than the average in the US
Speaker 9: on which is closer to six percent. But clearly the
Speaker 9: French growth is expected to remain subdued about plus zero
Speaker 9: point six percent this year after two point five percent
Speaker 9: last year, so that would be below the one percent
Speaker 9: growth target that Macron's government was counting on to cut
Speaker 9: the budget deficit, and that will be another key discussion
Speaker 9: in x is whether Emaniel Macon will be able to
Speaker 9: pass more reforms after the very controversial pension reform, whether
Speaker 9: he'll be able to cut this budget deficit and a
Speaker 9: very high French debt. We've also seen business and consumer
Speaker 9: confidence also deterior rating because of high rates, of course,
Speaker 9: but also because of high food inflation. And in spring,
Speaker 9: remember you had even a Feitch cutting Frances credit rating.
Speaker 9: So very interesting economic discussions ahead.
Speaker 3: Plenty to watch out for them. Thank you to Bloomberg's
Speaker 3: Carolyn Connor in Paris, and we will bring you coverage
Speaker 3: of the excellent Province Economic conference on Bloomberg Radio and
Speaker 3: television as well. I'm Stephen Carroll in London. You can
Speaker 3: catch us every weekday morning here for Bloomberg Daybreak here
Speaker 3: but getting at six am in London and one am
Speaker 3: on Wall Streets.
Speaker 1: Tom bel c Stephen and coming up on Bloomberg day
Speaker 1: Break weekend, here comes the World Artificial Intelligence Conference in Shanghai.
Speaker 2: I'm Tom Busby and this is.
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Speaker 6: studio in New York. Bloomberg Elemon three oh to Washington,
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Speaker 6: in Bloomberg 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: Investors tracking the coming World Artificial Intelligence Conference in Shanghai
Speaker 1: very closely. For more on the conference and what to expect,
Speaker 1: let's go to our Bloomberg Daybreak Asia host Doug Krisner.
Speaker 2: Tom.
Speaker 4: We know chatchipt and other generative AI applications have sparked
Speaker 4: intense interest in the promise of artificial intelligence, and for
Speaker 4: China it sparked a new obsession competing with US titans
Speaker 4: names like Alphabet and Microsoft in the race for revolutionary
Speaker 4: apps for both business and consumers. Joining me now is
Speaker 4: Alan Jan He is Bloomberg Senior editor and our Shenzen
Speaker 4: bureau chief, joining us from our studios in Shenzen. Alan,
Speaker 4: thanks for being with us. This is being branded as
Speaker 4: a world conference. Now, I know you're going to be
Speaker 4: there covering World AI. It's happening in China, obviously, and
Speaker 4: I'm wondering whether the story here is really about Chinese
Speaker 4: firms using this as a platform to showcase their potential
Speaker 4: and determination to compete with companies in the US. Do
Speaker 4: you think that's likely?
Speaker 12: Oh, for sure. I mean all the big names are
Speaker 12: going to be there since time, and those are the
Speaker 12: two main Chinese companies that rolled OUTQPT services. So we're
Speaker 12: going to see a lot more. I'll see a lot
Speaker 12: of stops to see what they're working on. This is
Speaker 12: grapportunity to see how far along China is in terms
Speaker 12: of catching up to US in terms of AI.
Speaker 4: Now, there are two important issues that I think we
Speaker 4: have to address. One is the government, which we can
Speaker 4: talk more about in a moment. The other is the
Speaker 4: semiconductor issue that AI is reliant upon. So we are
Speaker 4: told the Biden administration is planning to tighten export controls
Speaker 4: on sales of some artificial intelligence chips to China. That
Speaker 4: proposal is expected we are hearing in July, and it
Speaker 4: would revise current US export controls aimed at making it
Speaker 4: more difficult to sell some chips to China without a license.
Speaker 4: This move may be aimed in part at Nvidia's A
Speaker 4: eight hundred chip. Last week on Bloomberg Daybreak Asia, we
Speaker 4: spoke with Vlad Savov our tech at during Hong Kong
Speaker 4: and he offered some insight.
Speaker 13: And Vidia had the restrictions in O sober from the
Speaker 13: US government, and it developed China specific chips which were
Speaker 13: less powerful. And now it seems like the government is
Speaker 13: going to increase its sanctions, get even further into it,
Speaker 13: and without those chips, like you say, it's very questionable
Speaker 13: that Chinese companies will be able to compete.
Speaker 4: That is Bloomberg's Glad savof Alan. It seems like without
Speaker 4: access to the type of computing power that's necessary these
Speaker 4: graphics processors that basically are being used by companies that
Speaker 4: are playing in AI, without access to that technology, it's
Speaker 4: a very very high hurdle to try to advance the
Speaker 4: technology going forward.
Speaker 2: Wouldn't you agree with that?
Speaker 12: I think it's a challenge for sure. But this has
Speaker 12: been going for a while, right, I mean, China has
Speaker 12: been pose all kinds of sanctions in preventing a lot
Speaker 12: of these US tech companies from exploiting to the US
Speaker 12: and the video of course is the I mean, they
Speaker 12: have to kill a chip so to speak, right, the
Speaker 12: accelerate chip that a lot of these open AI services
Speaker 12: rely on. But I always I would argue that China's
Speaker 12: gonna be able to find a work around. I mean
Speaker 12: they have so far in many different areas. I think
Speaker 12: they're gonna be able to try to outsource it from
Speaker 12: other you know, other countries. And I think that domestically,
Speaker 12: there are companies that are producing you know, similar chips.
Speaker 12: Maybe not as robust as the video, but but I
Speaker 12: think there's definitely a challenge. And then now you've also
Speaker 12: got a lot of venture capital invested, uh, you know
Speaker 12: in this area as well, I mean, to catch up
Speaker 12: to the US. So I think, you know, you've got
Speaker 12: that going on. You've got the government as well, the
Speaker 12: Big fund investing in developing similar type chips. Right, So
Speaker 12: I think that you have a lot of other vendors.
Speaker 12: I think I think the short term, yes, it's gonna
Speaker 12: be an obstacle, but I think that China will figure
Speaker 12: figure a way out.
Speaker 4: Let's talk about the role of the government. You just
Speaker 4: mentioned it there in one case, we know China is
Speaker 4: a vastly different landscape from what we're what we have
Speaker 4: here in the US, and obviously the American companies that
Speaker 4: have been playing in artificial intelligence in many respects are
Speaker 4: as much as three years ahead. And I'm wondering now
Speaker 4: because a lot of the AI in terms of these
Speaker 4: large language models that are required to train AI programs,
Speaker 4: we know the data situation in China is very very
Speaker 4: different visa viv the Internet than it is in the West,
Speaker 4: and I'm wondering whether this is going to make it
Speaker 4: increasingly difficult for China to play catch up as well.
Speaker 12: Oh for sure, I think you know you've got the
Speaker 12: data issue. There's two problems right. First is that you know,
Speaker 12: there's a lot of data regulation in China and Governor
Speaker 12: has already said that it would have to approve any
Speaker 12: kind of rollout of any kind of genitor AI services.
Speaker 12: That problem and then the problem of scraping the data. Right,
Speaker 12: a lot of the you know, data in China, you know,
Speaker 12: comes from the Chinese Internet, and it's censored, so it's
Speaker 12: not not gonna be as robust as what you said
Speaker 12: the WES. But that's said you know, in the US
Speaker 12: you have problems with you know a lot of you know,
Speaker 12: fake news and this information as well. In China, one
Speaker 12: issue I think is that you know, a lot of
Speaker 12: Chinese they get the information from the super app right,
Speaker 12: we chat right, So it's a bit different from the
Speaker 12: US where you have the Yeah, everyone used the Internet.
Speaker 12: I think that there are limitations to that, the fact
Speaker 12: that you know, you can't you know, scrape the the
Speaker 12: Chinese Internet for lots different reasons. They're also privacy issues
Speaker 12: as well. But it is it is a challenge. But
Speaker 12: I think that in some ways it creates opportunity for
Speaker 12: some of these companies like bay Do and Sense Sense Time,
Speaker 12: just because they know what the ground rules are.
Speaker 2: Uh.
Speaker 12: They know that, you know, certain things are going to
Speaker 12: be prohibited and it's gonna be up to the all
Speaker 12: these what do you call Internet platforms to the censor
Speaker 12: all this stuff. So there's a But it's not something
Speaker 12: that's new, is it. I mean, you've got China, You've
Speaker 12: got to Chinese intinet right people right use by doing
Speaker 12: all that, so it still works, you know, saying.
Speaker 4: Well you mentioned by Do and I saw a piece
Speaker 4: on the Bloomberg terminal over the past week, they were
Speaker 4: comparing the by do ernie bot to chat GPT and
Speaker 4: by a couple of measures, by Do at least is
Speaker 4: claiming that the early Bought now beats Chat GPT. So
Speaker 4: to your point, there are companies in China that are
Speaker 4: pushing the envelope, so to speak, and trying to develop
Speaker 4: certain types of AI technology more on the consumer side.
Speaker 4: But I'm also curious is what's happening on the business side.
Speaker 4: Is there a conversation happening that has to do with
Speaker 4: how AI might be useful for manufacturing or even healthcare
Speaker 4: in China?
Speaker 12: Oh, for sure. I mean what they're planing and what
Speaker 12: to hear anyway, is they're planning to create these chatbots
Speaker 12: to help manufacturers, you know, analyze consumption trends. You know,
Speaker 12: there are a lot of business applications. I mean, for
Speaker 12: by do they plan to incorporate their erni body into
Speaker 12: everything that they're doing cloud computing, uh, in their evs.
Speaker 12: So I think that yeah, I mean they're they're actually
Speaker 12: large uh not just consumption but uh, you know business
Speaker 12: software type applications, uh that can really use this kind
Speaker 12: of AI technology. And that's that's the area where trying
Speaker 12: to lacks relative to US. Right in business software.
Speaker 4: We were mentioning the funding issue a moment ago, and
Speaker 4: I'm curious in terms of trying to find capital to
Speaker 4: support this type of growth in China. Where is it
Speaker 4: coming from? Where will it come from?
Speaker 12: Yeah, That's the thing about it is that if you
Speaker 12: look at what's been happening last couple of years, right,
Speaker 12: this has this big tech crackdown and a lot of
Speaker 12: you know, Vegria capital into Chinas sort of plunge. Right.
Speaker 12: But then over the last you know, several months, we're
Speaker 12: seeing the value of deals UH in this area surging,
Speaker 12: saying like from a lack of years half of US
Speaker 12: levels and now they're you know, the two thirds of
Speaker 12: where the US is. So a lot of money is
Speaker 12: coming from these venture capitalists and also from the government
Speaker 12: as well. I mean earlier this year, the government UH
Speaker 12: said that it was trying to get private capital to
Speaker 12: work with the government in order to uh, you know,
Speaker 12: sort of develop these technologies, especially high tech chips, UH,
Speaker 12: in order to compete with the WES. So you've seen
Speaker 12: a sea change in the way the government has approached
Speaker 12: big tech. And when I said big tech, I'm seeing
Speaker 12: I'm saying basically, in some ways outside of Alibaba ten
Speaker 12: sent the fact that now there're you know, a lot
Speaker 12: of money is going into any companies that are working
Speaker 12: on you know, like these kind of chips that are
Speaker 12: being used for AI.
Speaker 4: Alan, thank you so much. I look forward to your
Speaker 4: coverage in the week ahead from the World Ai Conference
Speaker 4: in Shanghai. Alan one is a Bloomberg senior editor, also
Speaker 4: our Shenzen bureau chief. I'm Doug Prisner. You can join
Speaker 4: Brian Curtison myself weekdays here for Bloomberg Daybreak Asia beginning
Speaker 4: at six am in Hong Kong six pm on Wall Street.
Speaker 2: Tom, thank you, Doug.
Speaker 1: And coming up here on Bloomberg day Break Weekend, We're
Speaker 1: about to get more insight from the Fed, because here
Speaker 1: come those Fed minutes, and they come at a very
Speaker 1: important time. I'm Tom Busby, and this is Bloomberg. This
Speaker 1: is Bloomberg day Break Weekend, our global look ahead at
Speaker 1: the top stories for investors in the coming week. I'm
Speaker 1: Tom Busby in New York. As we've been reporting, the
Speaker 1: FED is watching the jobs report heading our way this
Speaker 1: coming Friday. Also this coming week, we'll get to be
Speaker 1: a fly on the wall when the FED releases the
Speaker 1: minutes from its latest policy meeting, and for more on
Speaker 1: that part of the story, that's heed to our Bloomberg
Speaker 1: ninety nine to one newsroom in Washington and Bloomberg Sound
Speaker 1: On host Joe Matthew.
Speaker 2: Thanks.
Speaker 5: We're going to look ahead now to the release of
Speaker 5: FED minutes next week as investors try to get inside
Speaker 5: the minds of policymakers, not that Chair j. Powell has
Speaker 5: been vague on this lately.
Speaker 8: At our last meeting, the Federal Open Market Committee decided
Speaker 8: to maintain the target range for the Federal funds rate
Speaker 8: at five to five and a quarter percent, while continuing
Speaker 8: the process of significantly reducing our securities holdings. We made
Speaker 8: this decision in light of the distance we've come in
Speaker 8: tightening policy, the uncertain lags in monetary policy, and the
Speaker 8: potential headwinds from credit tightening. As noted in the fmc's
Speaker 8: Summary of Economic projections, a strong majority of Committee participants
Speaker 8: expect that it will be appropriate to raise interest rates
Speaker 8: two or more times by the end of this year.
Speaker 5: Two or more times by the end of this year.
Speaker 5: That's Powell from recent testimony on Capitol Hills just a
Speaker 5: little over a week ago, and he's reiterated that line
Speaker 5: several times. Joining us here in Washington, Bloomberg's Kate Davidson
Speaker 5: and Eric Wasson with the view on the FED and
Speaker 5: on Congress as the FED also deals with a response
Speaker 5: to the bank failures earlier this year. Kate, let's start
Speaker 5: with you here in the release of minutes.
Speaker 14: What are you looking for already? It's crazy?
Speaker 5: Is that possible?
Speaker 14: I know? No, Well, just because we've bits been the
Speaker 14: NonStop Jay Powell Show, so we forgot. It's been almost
Speaker 14: three weeks since the meeting. Yeah, so I think, you know,
Speaker 14: we we kind of know a lot from the projections
Speaker 14: that we got. You know, normally we'd be looking for
Speaker 14: those minutes to just glean more insight from how big
Speaker 14: is the group of officials that want to go further
Speaker 14: and thinks the Fed keeps need to keeps, needs to
Speaker 14: keep raising rates. But we know from the dot plot
Speaker 14: that we just got that there are a lot of them.
Speaker 14: So I think that we'll, you know, we'll be looking
Speaker 14: to see how you know, is that likely to happen
Speaker 14: in July and September? Our officials thinking they want to
Speaker 14: shift to in every other meeting stands I mean, we
Speaker 14: heard a little bit from Powell talking about that idea, saying,
Speaker 14: you know, consecutive rate hikes aren't off the table, which
Speaker 14: is a little puzzling because he kind of framed this
Speaker 14: as well, it's a moderating the pace. We're gonna pop
Speaker 14: as a meeting and then go. But now he's saying
Speaker 14: they could go back to back again. So I think
Speaker 14: there that you know, anything we can learn about about
Speaker 14: that and the pace, But just it really, it really
Speaker 14: just seems like the group of hawks is surprisingly big
Speaker 14: right now, like all these worries about the banking crisis
Speaker 14: seem to really have faded.
Speaker 5: Eric, what does Congress think of the FED at this point?
Speaker 5: Does it really fall along party lines?
Speaker 15: I do see a real difference between the way Republicans
Speaker 15: are approaching Pal versus Michael Barr. You know, they seem
Speaker 15: to be very concerned about what Barr could be up to,
Speaker 15: could be proposing, you know, flagging the idea that this
Speaker 15: could actually have an impingement on bank risk taking in
Speaker 15: the economy versus I you know, when we asked a
Speaker 15: couple of weeks ago, it's pretty wide survey of members
Speaker 15: talking about Pal. There seems to be general praise is
Speaker 15: that he's humble, he acknowledges mistakes, so I think they're
Speaker 15: trying to to sort of play good cup back up
Speaker 15: there a little bit.
Speaker 5: Moving beyond transitory finally.
Speaker 15: Right, So I know, you know, they do feel that
Speaker 15: he does bear shoulder some of the blame for acting,
Speaker 15: you know, too late to strain of inflation. But they
Speaker 15: send to focus the fire on Biden, someone they can
Speaker 15: actually unsee.
Speaker 5: We're still looking for two more as the consensus.
Speaker 14: Yeah, I mean to at least two, right, And it's
Speaker 14: kind of interesting. That's how Powell has been wording it.
Speaker 14: It's not entirely different from what he's said, but he's
Speaker 14: you know, we've all taken note it's been two or more,
Speaker 14: which again he points to the dot plot. You look
Speaker 14: at the projections, and that is what it says. But
Speaker 14: he's not not trying to shy away from that. He's
Speaker 14: not playing that down. Two or more is the expectation.
Speaker 5: To be confounded by a market that's still betting on
Speaker 5: rate cuts.
Speaker 3: It is.
Speaker 14: It is pretty interesting, although I think every time he
Speaker 14: gets out there, you know, they inch up and inchub
Speaker 14: and you get data like you saw, it's all very
Speaker 14: strong still.
Speaker 5: Great conversation and many thanks to Bloomberg's Kate Davidson on
Speaker 5: the FED and Bloomberg's Eric Watson on Congress. I'm Joe
Speaker 5: Matthew in Washington. I hope you have a happy fourth
Speaker 5: Tom back to you in New York.
Speaker 2: Thank you, Joe.
Speaker 1: And that was Bloomberg's sound on co host Joe Matthew
Speaker 1: reporting from our Bloomberg ninety nine one newsroom in Washington.
Speaker 1: And you can hear sound on weekdays one to three
Speaker 1: pm on Bloomberg Radio. And that does it for this
Speaker 1: edition of Bloomberg Daybreak Weekend. Join us again Monday morning
Speaker 1: at five am Wall Street Time for the latest on
Speaker 1: markets overseas and the news you need to start your day.
Speaker 2: I'm Tom Busby. Stay with us.
Speaker 1: Top stories and global business headlines are coming up right now.