Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is Bloomberg day Break Weekend, our global look at
Speaker 2: the top stories in the coming week from our day
Speaker 2: Break anchors all around the world. And ahead on the program,
Speaker 2: we looked at the EV market and second quarter earnings
Speaker 2: from Tesla. I'm Tom Busby in New York.
Speaker 1: I'm Karlin Hepger here in London, where we're looking ahead
Speaker 1: to the Paris Olympics, that costs from the spectacle.
Speaker 3: I'm Brian Curtis in Hong Kong. We look ahead to
Speaker 3: the way Asian countries might be gaming, our differences in
Speaker 3: policy between President Biden and former President Donald Trump.
Speaker 4: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 2: Good day to you. I'm Tom Busby. We begin today's
Speaker 2: program with some highly anticipated economic data here in the US.
Speaker 2: Out this week, an initial look at second quarter GDP
Speaker 2: on Thursday and PC core inflation data on Friday. How
Speaker 2: might those numbers impact the feds monetary and interest rate
Speaker 2: policies moving forward?
Speaker 5: Well.
Speaker 2: For more, we turned to Stuart paul, Us, economist with
Speaker 2: Bloomberg Economics. Now, Stuart, let's start with that economic growth
Speaker 2: number for the spring's second quarter, A pretty mild GDP
Speaker 2: number one point three percent in the first quarter. What
Speaker 2: are you expecting in the spring.
Speaker 6: We're expecting a very modest uptick. Our base cases for
Speaker 6: headline GDP growth to register a one point eight percent
Speaker 6: annualized pace of growth. So we're slightly above the consensus,
Speaker 6: which is at one point seven percent. And so there's
Speaker 6: a very modest uptick in headline growth in the second quarter.
Speaker 6: And the real question is what's behind that acceleration and growth,
Speaker 6: Because it's not personal spending. We expect personal spending growth
Speaker 6: to essentially be constant at one and a half percent.
Speaker 6: What's really driving that headline growth number in the second
Speaker 6: quarter is an accumulation of inventories. And inventories can rise
Speaker 6: for two different reasons. Producers can be really optimistic about
Speaker 6: the growth outlooks, so they start stocking shelves and anticipation
Speaker 6: of future demand, or they could just misjudge growth accidentally
Speaker 6: overproduce goods and they find themselves carrying this inventory that
Speaker 6: they didn't intend to actually produce in the first place.
Speaker 6: And we think that it's more of the second. We
Speaker 6: think that it's more a misjudging of the durability of
Speaker 6: the American consumer in the present. So we think that
Speaker 6: one of the key fundamental drivers of growth in the
Speaker 6: second quarter is the sort of accidental accumulation of inventories.
Speaker 6: And so we're really thinking about growth in the first
Speaker 6: half of twenty twenty four relative to growth in the
Speaker 6: second half of twenty twenty three, and the pace of
Speaker 6: growth when you look second half of twenty twenty three
Speaker 6: and into the first half of twenty twenty four has
Speaker 6: basically been cut in half. And a big part of
Speaker 6: that is the cooling labor market. Consumers are becoming a
Speaker 6: little bit more prudent, and as a consequence, firms find
Speaker 6: themselves a little bit over stuffed with inventory. So as
Speaker 6: we head into the second half of the year, we
Speaker 6: expect production rolls to slow and we expect growth to
Speaker 6: cool in the second half as well.
Speaker 2: Okay, so we see a labor market cooling a little bit.
Speaker 2: We do see inflation cooling a little bit. But the
Speaker 2: several months in a row of solid manufacturing data that
Speaker 2: we have, the factory orders, durable goods orders, that's a
Speaker 2: false flag.
Speaker 6: You're saying some of it is because of a backlog
Speaker 6: in autos, right, the fleet is older, there's still a
Speaker 6: turnover that needs to take place. There is real underproduction
Speaker 6: of autos when there was a semiconductor shortage, so there's
Speaker 6: still a little bit of a catch up there. Auto
Speaker 6: sales in June will effect a little bit by a
Speaker 6: cyber attack, so there's still going to be some chunkiness
Speaker 6: to some of the data. There are still orders of
Speaker 6: some other transportation goods like aircraft, so there is some
Speaker 6: larger explanatory variables. They are separate apart from what we
Speaker 6: would think of as typically affected by monetary policy, typically
Speaker 6: affected by the business cycle. There are some of these
Speaker 6: lagging consequences of COVID that are still showing up in
Speaker 6: the data and making the data a little bit chunky.
Speaker 2: Oh boy, so will these build ups of inventories, whether
Speaker 2: it's cars, whether it's clothing, whether it's housing, appliances. Is
Speaker 2: that a good thing for consumers in the months ahead,
Speaker 2: I mean they're going to have to clear out these
Speaker 2: storerooms and warehouses.
Speaker 6: We think that it can lead to some discounting of
Speaker 6: consumer durable goods, and consumer durable goods are typically dragging
Speaker 6: on inflation. We do see just through time, this was
Speaker 6: true pre COVID as well, that consumer durable goods really
Speaker 6: dragged on headline inflation. And for the inflation outlook, the
Speaker 6: thing that's going to matter most is really inflation in
Speaker 6: some select services categories, things like homeowner's insurance and auto insurance,
Speaker 6: where the price of autos rose a lot, so the
Speaker 6: replacement cost of autos rose a lot, and so what
Speaker 6: you should be paying in insurance premiums is now rising
Speaker 6: a lot. So there's a little bit of this catch
Speaker 6: up inflation that's taking place. That's booying inflation separate and
Speaker 6: apart from the dynamic that's taking place in goods, where
Speaker 6: we do expect to see some discounting because of that
Speaker 6: accidental build up in inventories.
Speaker 2: Well that would be nice to see. Well, let's stay
Speaker 2: on inflation, because we're going to turn to that PCE
Speaker 2: price index for June the FEDS preferred measure of inflation.
Speaker 2: Are we going to continue to see evidence that inflation
Speaker 2: is cooling? I mean, we're not getting worse, that's right.
Speaker 6: So CPI inflation and PPI inflation are both pretty good
Speaker 6: for June. And when we map CPI and producer prices
Speaker 6: PPI in to that core PCE space so that we
Speaker 6: can get a good feel of the Fed's preferred measure,
Speaker 6: we estimate that annual core PCEE inflation is going to
Speaker 6: register two and a half percent in June. That's down
Speaker 6: from two point six percent in May. And if we
Speaker 6: look on a monthly basis, we're expecting to see core
Speaker 6: inflation of just zero point one percent. Now, that'll give
Speaker 6: us the third month in a row where the monthly
Speaker 6: pace of inflation is pretty consistent with the fed's two
Speaker 6: percent inflation target, and that should give the FED some
Speaker 6: confidence to cut rates this year. We think starting in
Speaker 6: September and.
Speaker 2: Three months in a row is exactly the kind of
Speaker 2: consistency they were looking for. So we do have a
Speaker 2: FED meeting later this month at the very end of July.
Speaker 2: It's the September one that is the focus for everybody,
Speaker 2: right that By then we will have data on jobs
Speaker 2: and data of inflation for July and for August. Is
Speaker 2: that the one where we may really see the holy
Speaker 2: grail everyone's been waiting for.
Speaker 6: I think that's right. I think that September is going
Speaker 6: to be the month where we finally get a cut.
Speaker 6: I think that the July meeting that's coming up is
Speaker 6: actually going to be pretty the uneventful. We could get
Speaker 6: some communications from the FED Chairman at the post meeting
Speaker 6: press conference that sort of sets this stage for cuts
Speaker 6: this year. Then all the FED officials go to Jackson
Speaker 6: Hole for their annual symposium where they discuss a lot
Speaker 6: of academic papers, and there is typically a pretty well
Speaker 6: attended speech by the FED Chairman that always serves as
Speaker 6: an opportunity for communications to set the stage for that
Speaker 6: September cut that will then follow. And then we get
Speaker 6: the September meeting, and I think that could be the one.
Speaker 3: Wow.
Speaker 2: A lot to look forward to. Second quarter GDP out
Speaker 2: this Thursday. The PCE price Index for June on Friday
Speaker 2: are thanks to Stuart paul Us, economist with Bloomberg Economics. Well,
Speaker 2: next we move to the auto space and ev Giant Tesla.
Speaker 2: The world's most valuable automaker report second quarter earnings on Tuesday,
Speaker 2: and for more. We're joined by Steve Mann, Bloomberg Intelligence,
Speaker 2: Global Autos and Industrials research analysts. So, Steve, it's been
Speaker 2: kind of a challenging time for most ev makers, sales
Speaker 2: still growing a lot more slowly, but Tesla, at least
Speaker 2: on Wall Street, is on our role. What are you
Speaker 2: expecting to see in Tesla's second quarter earnings on Tuesday.
Speaker 7: Yeah, their stock has been doing really, really well. You know,
Speaker 7: a lot of it is related to the robo taxi
Speaker 7: that they have planning to announced in October. They were
Speaker 7: originally saying August, now it's in October. But if you
Speaker 7: look at the underlying business, the auto business, it's still challenging.
Speaker 7: You know, second quarter sales are down year every year.
Speaker 7: But we still think their earnings can actually beat consensus
Speaker 7: by like twenty to twenty five cents, mainly on you know,
Speaker 7: lower raw material costs on the battery side, as well
Speaker 7: as you know, cyber truck production is ramping up. They
Speaker 7: you know, produce eleven thousand in the second quarter, up
Speaker 7: from thirty five hundred in the first quarter. So overall
Speaker 7: earnings in the first quarter should be better than what
Speaker 7: people expect.
Speaker 2: So Tesla's delivery numbers rising from I would say a
Speaker 2: pretty tough first quarter when GM and FOD they're not
Speaker 2: seeing the same kind of dem I mean, can you
Speaker 2: compare the products or is Tesla that much more desirable
Speaker 2: the demand for those products so much better?
Speaker 7: Yeah, well, Tesla does have a cachet in the EV space,
Speaker 7: but look, I think you know they're going to face challenges.
Speaker 7: GM and other companies like Stilentis. They're not waiting, they're
Speaker 7: not holding back. Even though EV sales are slow in
Speaker 7: the recent quarters, they're still investing a lot of money
Speaker 7: in introducing new products. You know. For example, GM introduced
Speaker 7: the new Blazer not too long ago, and then another one,
Speaker 7: a more affordable one, the Chevrolet Equinox. And you're seeing
Speaker 7: that across the board. A lot of the automakers are
Speaker 7: introducing more affordable evs. And that's what I think the
Speaker 7: industry needs to do, is to cater to the bigger masses,
Speaker 7: the bigger audience in the auto market by introducing a lower,
Speaker 7: more affordable EV.
Speaker 2: Well, nowhere is that more then in China and the
Speaker 2: EV maker byd on track to overtake Tesla and sales
Speaker 2: in that country this year, and it's just one of
Speaker 2: many competitors. Some of their cars going for about thirteen
Speaker 2: thousand US dollars over there. How is Tesla competing against that?
Speaker 7: That market is just crazy. I mean, the price war
Speaker 7: is not only impacting the EV markets, impacting everyone including
Speaker 7: internal combustion engine vehicle makers like BMW. It's a crazy
Speaker 7: market over there. Tesla is actually doing fairly well over there.
Speaker 7: They've actually held back on any price cuts, but they
Speaker 7: are providing some better financing terms for some consumers. Sales
Speaker 7: have actually, you know, fallen off a little bit, but
Speaker 7: overall they're still producing a lot in their factories, shipping
Speaker 7: them overseas in Europe. But overall, you know, Tesla, I
Speaker 7: think it will bounce back, you know, once this price
Speaker 7: for kind of subsides.
Speaker 2: Now, let me circle back with you on the ROBOTAXI.
Speaker 2: I mean, we have been hearing about this autonomous cab
Speaker 2: for six seven years, A delay, delay, delay. We are
Speaker 2: going to expect to see it August eighth, Now it's October.
Speaker 2: What do you think? What is the real reason or
Speaker 2: as Kathy Woods of our management said, he wants to
Speaker 2: wow us, and it's going to be even better than
Speaker 2: we expected.
Speaker 7: Yeah. I mean, if you look at their stock price,
Speaker 7: we did some of the back of the anvelope calculation.
Speaker 7: Most of the stock price is valuing Robotaxi and AI.
Speaker 7: You know, Elon must have talked about robotaxi for a
Speaker 7: long time, and I think this is an event that's
Speaker 7: going to be mostly watched to see how they're going
Speaker 7: to move AI, you know, into the cars. They're going
Speaker 7: to probably announce or give some updates on the Optimus
Speaker 7: humanoid robots. It's going to be a huge event for us.
Speaker 7: You know, Robotaxi is only I think. I think one
Speaker 7: component of what Elon Musk is trying to do. Rye
Speaker 7: hailing is probably going to be a small part of
Speaker 7: that business for them. There's a lot of opportunities for
Speaker 7: robo taxi. You know, his mantra is really about driving sustainability,
Speaker 7: lower consumption or lower greenhouse gases. These Tesla vehicles, you know,
Speaker 7: if you think about it, they're actually battery on wheels,
Speaker 7: so other than taking the passenger from zero point A
Speaker 7: to point B on the rye hailing business, you know,
Speaker 7: I think what Kathy Wood and others are thinking about.
Speaker 7: Is these cars could be used for distributed power, offsetting
Speaker 7: peak power in one region to the next.
Speaker 4: Wow.
Speaker 2: Well a lot to look forward to Tesla's second quarter
Speaker 2: earnings after Wall Street's closing bell on Tuesday, Our thanks
Speaker 2: to Steve Man Bloomberg Intelligence, Global Autos and Industrials research analysts,
Speaker 2: coming up Bloomberg day Break Weekend. Can France win an
Speaker 2: Olympic gold in profitability? We look ahead to the twenty
Speaker 2: twenty four Summer Olympic Games in Paris. I'm Tom Busby
Speaker 2: and this is Bloomberg. This is Bloomberg day Break Weekend,
Speaker 2: our global look ahead at the top stories for investors
Speaker 2: in the coming week. I'm Tom Busby in New York.
Speaker 2: Up later in our program we'll look at how the
Speaker 2: US presidential election in November may shape US China relations
Speaker 2: going forward. But first, the French capital prepares to host
Speaker 2: the greatest show on Earth. But will it be worth it?
Speaker 2: The Olympic Games famously expensive, very rarely profitable. Will Paris
Speaker 2: be able to convert athletic prowess to economic gain? And
Speaker 2: for more, Let's go to London and bring in Bloomberg
Speaker 2: Daybreak Europe anchor Caroline hepgar Tom.
Speaker 1: Much like an Olympic marathon, the road to Paris twenty
Speaker 1: twenty five four has already been filled with ups and downs.
Speaker 1: The journey has been punctuated by obstacles, from funding challenges
Speaker 1: to more recent political uncertainty and local dissatisfaction at the
Speaker 1: perceived inconveniences that the Games could bring. Central two discussions
Speaker 1: has been the question about whether Paris's iconic river Senn
Speaker 1: will be clean enough in time to welcome Olympic swimmers
Speaker 1: onto its banks. Recently, the Paris mayor and Idalago took
Speaker 1: a dip in the river herself plus some journalists in
Speaker 1: a bid to prove its cleanliness. France has earmarked one
Speaker 1: point four billion euros that's about one and a half
Speaker 1: billion US dollars for improving the water quality of the river,
Speaker 1: amid lingering concerns that the overflows from the city's sewage
Speaker 1: system bring waste water and bacteria into the Seine, making
Speaker 1: it unswimmable. President Immanue and macar is even committed to
Speaker 1: a swim in the river at SCE some point, although
Speaker 1: given the country's current political situation, he may find it
Speaker 1: difficult to find the time cleaning up the river and
Speaker 1: reversing a centuries old ban on swimming in It has
Speaker 1: been a long and complicated project for French authorities, the
Speaker 1: peculiarities of which I've been discussing with Bloomberg's investigations Reporter
Speaker 1: gasper seabag.
Speaker 8: Well, the issue here is that when it rains a lot,
Speaker 8: the sewage system in Paris overflows and that brings wastewater
Speaker 8: and bacteria into the Seine, which obviously isn't what you want.
Speaker 1: No indeed, and the weather has been particularly rainy across Europe,
Speaker 1: how has it been in Paris lately?
Speaker 9: It's not being fantastic. I mean, June was pretty horrendous
Speaker 9: and that obviously translated into the quality of the water
Speaker 9: not being adequate. For basically most of the days of June.
Speaker 9: July has been much more positive and we've seen several
Speaker 9: days in a row being at the right quality standards,
Speaker 9: and in fact, the Sports Minister Amelie Udia Castella took
Speaker 9: a dive into the seine to show that it was
Speaker 9: it was okay for athletes.
Speaker 7: To go in.
Speaker 2: So how have they done us.
Speaker 8: Well?
Speaker 9: There's a huge variety of efforts that have been deployed
Speaker 9: in Paris. It's it's taken several years. There's some which
Speaker 9: really got the spotlight, like creating a huge water bisin
Speaker 9: in the depth of Paris, which was you know, they
Speaker 9: they excavated and they created this huge capacity to increase
Speaker 9: the possibility to store those overflows from the sewage when
Speaker 9: it rains. That I was talking about. But there were
Speaker 9: a lot of smaller tasks, some quite For example, they
Speaker 9: had to go knocking on doors to make sure that
Speaker 9: households were connected to the sewage system because the reality,
Speaker 9: the grim reality of all of this is that some
Speaker 9: were just pumping their toilets directly into the sein. Again
Speaker 9: not at all what you want to achieve. The result
Speaker 9: of having athletes a jump into the sin and feeling
Speaker 9: comfortable about it.
Speaker 1: So that was Gaspar Sibag speaking to me. But murky
Speaker 1: rivers aren't the only problem facing the Paris Olympics. Organizers
Speaker 1: also faced the challenge of extracting lasting value from these games,
Speaker 1: economic gain being perhaps the most sought after prize ever
Speaker 1: since the first Olympics was held over a century ago.
Speaker 1: The Games have been known for dazzling sporting feats, but
Speaker 1: also dizzying expense, particularly for opening ceremonies. Recently, the ballooning
Speaker 1: cost of hosting the Games led residents in Austin, in
Speaker 1: Rome and in Oslo to reject efforts to bring the
Speaker 1: Olympics to their cities. As a result, the International Olympic
Speaker 1: Committee is hoping to reign in costs, starting with Paris.
Speaker 1: Well joining me for a discussion around this and how
Speaker 1: Paris is trying to do things differently and keep the
Speaker 1: costs of the Games down is Bloomberg's Hugo Miller.
Speaker 5: Well. I sat down with Sebco for the Big Take
Speaker 5: that we wrote on this topic recently, and what he
Speaker 5: told me was something fascinating was that the architect of
Speaker 5: the modern Games in Los Angeles in nineteen eighty four
Speaker 5: said to him the most important thing you do, as
Speaker 5: he was preparing to run the twenty twelve London Games,
Speaker 5: was learned to say no. And the trouble is that
Speaker 5: the Olympics for too long have not been able to
Speaker 5: say no. In other words, when in doubt, they've added
Speaker 5: another ceremony, another event, just to kind of make the
Speaker 5: whole spectacle that much more spectacular, and over the years
Speaker 5: the Games have got bigger and more bloated. For the
Speaker 5: better part of three decade.
Speaker 1: Well, and only one of the games is actually ever
Speaker 1: managed to be profitable, and that was Los Angeles in
Speaker 1: nineteen eighty four. How did they manage to do it,
Speaker 1: even though of course it's quite a long time ago.
Speaker 5: Indeed, that was the culmination of a bad decade for
Speaker 5: the Olympic movement. You had in nineteen seventy two, the
Speaker 5: tragedy of the murder the terrorists murder of eleven Israeli
Speaker 5: athletes in seventy two, and in Montreal in seventy six,
Speaker 5: you had a massive cost overruns, which led taxpayers in
Speaker 5: Montreal to still be paying for the Olympics four decades later.
Speaker 5: And things got so bad that the citizens of Denver
Speaker 5: actually said, after being awarded the Games, no thanks, we
Speaker 5: don't want them. So basically, by the time you got
Speaker 5: to nineteen eighty you had just two cities bidding for
Speaker 5: the games, Los Angeles and Tehran. And as we know,
Speaker 5: the history books tell us, Iran was rapidly overtaken by revolution.
Speaker 5: So you've had la alone. And what that allowed Peter Uberov,
Speaker 5: this businessman who was fronting the games, to do is
Speaker 5: to tell the IOC, you know what I'm going to
Speaker 5: do these games the way I want to do them,
Speaker 5: and that means we're going to reuse student dorms for
Speaker 5: the athletes, We're going to reuse existing stadia like the
Speaker 5: Coliseum and the Rose Bowl, and we're not going to
Speaker 5: build for the sake of building. And he was the
Speaker 5: first and to date, as you say, the only person
Speaker 5: to deliver the games on profit, on time.
Speaker 1: Well, what about Paris? What is France doing to rain
Speaker 1: in the costs and try to bring it home profitably
Speaker 1: for them?
Speaker 5: Paris, even cynics would say, Paris so far looks like
Speaker 5: it's learned the lessons from the past and taking a
Speaker 5: queue from the IOC, is set to deliver a balanced
Speaker 5: budget for its games. It's done so by keeping the
Speaker 5: construction of new infrastructure to a minimum, primarily just to
Speaker 5: revitalize the northern neighborhood of San Denis in Paris, but
Speaker 5: really a focus on private sector involvement, to keep the
Speaker 5: operating budget down to four point seven billion dollars and
Speaker 5: then to keep the surrounding infrastructure spending to another four
Speaker 5: and a half billion, which, when you compare it to
Speaker 5: the boondoggle that was such a in twenty fourteen or Beijing.
Speaker 5: It's a fraction of those costs.
Speaker 1: So I feel so expensive. Why do cities? Why do
Speaker 1: countries keep on bidding or wanting to take part? What
Speaker 1: do they gain from it?
Speaker 5: When it comes to democracies, Many of these democracies simply
Speaker 5: say no, And we had taxpayer revolts in Stockholm, in Boston,
Speaker 5: in Rome, as we discussed. But I think there is
Speaker 5: just this irresistible urge, particularly in emerging markets and authoritarian
Speaker 5: countries that still seek kind of soft power to be
Speaker 5: gained from host the Games. So that's why you saw
Speaker 5: Puchin trying to kind of burnish Russia's legacy well after
Speaker 5: the Cold War is over with the such a Games,
Speaker 5: and the Chinese Communist Party looking to do it not
Speaker 5: once but twice with the Summer and Winter Games in Beijing.
Speaker 5: It seems like there's a certain sort of authoritarian swagger,
Speaker 5: as we put it, that they feel comes from hosting
Speaker 5: the Games that the Western democracies don't really feel anymore.
Speaker 1: Having said that, maybe there are some benefits. For example,
Speaker 1: if France manages to clean up I know that the
Speaker 1: main river the send in Paris, for example, I mean
Speaker 1: that's expensive, but perhaps could be seen as quite.
Speaker 10: Worthwhile indeed, and to listeners and readers, I have to
Speaker 10: give a shout out to my colleage Jenny Cha who
Speaker 10: did in deep job in the same as Paris Mayor
Speaker 10: and Hidalgo yesterday to experience the send for herself going
Speaker 10: to every.
Speaker 1: Length as a Bloomberg report.
Speaker 5: I like it she did, and I think that that
Speaker 5: is a sensible legacy that we should collectively sit dwellers
Speaker 5: aimed for is that London could regenerate part of the
Speaker 5: east end of the city twelve years ago, that Paris
Speaker 5: can turn the sin into a swimmable asset. And these
Speaker 5: are fantastic legacies, and these are what we should be
Speaker 5: aiming for. What the IOC doesn't want to see anymore,
Speaker 5: and what I don't think any taxpayer should want to
Speaker 5: see is instead where you see things like what happened
Speaker 5: in Rio de Geneiro, where they built all this infrastructure
Speaker 5: for sports that locals just didn't use and sat there
Speaker 5: like white elephants within months of the game's ending.
Speaker 1: Yeah, in London, interestingly, the eastern part of the city
Speaker 1: that was redeveloped is really being absorbed, has been absorbed
Speaker 1: into the cattle, which is interesting, which brings me to
Speaker 1: my last thought about long term economic and development gains.
Speaker 1: Do those emerge, where have they emerged? Most will they
Speaker 1: emerge from the Paris Games.
Speaker 5: I think it remains to be seeing what the parish
Speaker 5: organizers say is four billion dollars depending on your perspective,
Speaker 5: as a lot or amount of money when you're talking
Speaker 5: about public spending on infrastructure. But the aim is to
Speaker 5: take a more depressed, or at least to put bluntly
Speaker 5: poorer part of the city that hasn't necessarily benefited from
Speaker 5: public spending and create things like swimming pool sports facilities
Speaker 5: for local residents in the northern part of the city.
Speaker 5: That hopefully will prove to be the case in the
Speaker 5: years to come. But as we've seen over and over
Speaker 5: and over again, there is a history of overrun and overspending.
Speaker 5: But hopeful in Paris is the exception to that unfortunate rule.
Speaker 1: So that was Hugo Miller and of course not long
Speaker 1: to go now. Paris begins its Olympics extravaganza with an
Speaker 1: opening ceremony along a six kilometer route taking in all
Speaker 1: of the Paris sites we expect, right along the River Sene.
Speaker 1: On the twenty sixth of July. I'm Caroline Hepger here
Speaker 1: in London. You can catch us every weekday morning for
Speaker 1: Bloomberg Daybreak Europe, beginning at six am in London, that's
Speaker 1: one am, Tom.
Speaker 2: Thank you, Caroline, And coming up on Bloomberg day Break
Speaker 2: weekend to look at how the US presidential election may
Speaker 2: shape relations between US and China. I'm Tom Busby on
Speaker 2: This is Bloomberg. I'm Tom Busby in New York with
Speaker 2: your global look ahead at the top stories for investors
Speaker 2: in the coming week. How will the US presidential election
Speaker 2: shape the relationship between the US and China? For more,
Speaker 2: Let's go to Bloomberg Daybreak Asia co host Brian Curtis
Speaker 2: in Hong Kong.
Speaker 3: Tom, the twenty twenty four US election will be critical
Speaker 3: in setting the chorus for relations with China and indeed
Speaker 3: all of Asia over the next four years. Broadly speaking,
Speaker 3: both President Joe Biden and former President Donald Trump want
Speaker 3: to be tough on China, and in fact both want
Speaker 3: to step up the pressure and enact even tougher policies,
Speaker 3: but they will take different paths. Biden will be more ideological,
Speaker 3: Trump more transactional. Now, President Biden says the US would
Speaker 3: force fully respond to a Chinese invasion of Taiwan, while
Speaker 3: former President Trump hinted to Bloomberg he'd want to see
Speaker 3: the US get paid for it. Earlier, Bloomberg's Rome var
Speaker 3: Geese weighed in on Trump's comments.
Speaker 11: It's never been a question the United States would protect
Speaker 11: Taiwan against Chinese aggression. But here he is saying what's
Speaker 11: in it for us? And I think that's the common
Speaker 11: thread throughout all of these policies and all of his statements.
Speaker 11: It's I'm not going to take anything for granted, and
Speaker 11: I'm going to see what's best for me and what's
Speaker 11: the best for the United States.
Speaker 3: That's Rome var Geese. We also heard from Bloomberg opinion
Speaker 3: columnists menschene Pai.
Speaker 12: We should not worry very much about what Trump says.
Speaker 12: He keeps saying one thing and then doing another, so
Speaker 12: he's totally unpredictable, and I think most people do not
Speaker 12: eve at the moment in what he says. So the
Speaker 12: market is reacting.
Speaker 3: Rationally well, particularly in an area like that. But I
Speaker 3: think we can believe that he would like to slap
Speaker 3: sixty percent tariffs on China.
Speaker 12: Oh yes, I think so. Trump has this of the
Speaker 12: double sided feature to his policy. On the one hand,
Speaker 12: he's very tough on China in terms of trade, he
Speaker 12: wants to cut China off from the US market. At
Speaker 12: the same time, he does not care that much about
Speaker 12: China's military might, especially where Taiwan is concerned. There are
Speaker 12: inconsistencies in there, because in his heart, Trump really does
Speaker 12: not want to see China strong and powerful, and if
Speaker 12: you see Taiwan to China, then China will become even
Speaker 12: more powerful than it is today. So at the end
Speaker 12: of the day, I think Trump will probably be tougher
Speaker 12: on China where Taiwan is concerned then what.
Speaker 3: He see Bloomberg opinion columnists mention pay for more on this,
Speaker 3: We turn now to Bill Ferries, Bloomberg Senior Editor. So, Bill,
Speaker 3: we wanted to talk a little bit about how countries
Speaker 3: in Asia, and probably more with China, how they might
Speaker 3: be preparing for different outcomes from the US election. We
Speaker 3: sometimes generalize in the differences between the two on policy,
Speaker 3: saying that President Trump really focuses more on trade policy
Speaker 3: and President Biden more on industrial policy. But when looking
Speaker 3: at the differences, how do you think China is seeing it? Well?
Speaker 13: I don't think From China's perspective, they see it as
Speaker 13: a tough election for them either way, regardless of who
Speaker 13: wins in November, there's not a lot of upside for them.
Speaker 13: I mean, as you suggested at the outset, being tough
Speaker 13: on China is one of the very few things that
Speaker 13: has bipartisan support in the United States at this point.
Speaker 13: So you know, China sees that as they'll have to
Speaker 13: take their poison, whether it's a round of new tariffs
Speaker 13: that a President Trump would or says he would enact,
Speaker 13: versus a lot of the trade restrictions. We're already seeing
Speaker 13: the Bided administration ramping up when it comes to high
Speaker 13: technology semiconductor chips and things like that, including support for Taiwan.
Speaker 13: So I think China knows there's still a lot that
Speaker 13: could happen in the next several months before the election,
Speaker 13: and that regardless of who wins, it's going to be
Speaker 13: a bumpy road for them for quite a while.
Speaker 3: Yeah, because if you think about what you highlighted there,
Speaker 3: President Biden using the foreign direct Product rule on chip
Speaker 3: makers doing business in China, that's something that really in
Speaker 3: a sense is almost like the higher tariffs that President
Speaker 3: Trump would put on right.
Speaker 13: You know, it's a real point of leverage that the
Speaker 13: US has with China. Listen, you know, we import a
Speaker 13: lot of goods from China. We found out during the
Speaker 13: pandemic that a lot of the just the basic medical
Speaker 13: goods that we products that we needed to deal with
Speaker 13: the COVID nineteen outbreak were coming in from China. There
Speaker 13: was a lot of reassessment of US vulnerabilities. The access
Speaker 13: to the highest technology gear to make the top line
Speaker 13: chips is something that the US has influence over. It's
Speaker 13: something that China has spent tens of billions of dollars
Speaker 13: trying to recreate and so far hasn't been able to.
Speaker 13: So I think the US, really, regardless of who wins,
Speaker 13: is going to continue to use that leverage over a
Speaker 13: Beijing because it's one real strength that the US has
Speaker 13: at this point.
Speaker 3: Let's talk a little bit about the different approach to
Speaker 3: policy on Taiwan. How do you see the differences there?
Speaker 13: You know, it's fascinating because if you remember back to
Speaker 13: twenty sixteen, when President Trump was first elected, he actually
Speaker 13: took a call from the then Taiwanese president and that
Speaker 13: was seen as a huge breach of diplomatic protocol. It
Speaker 13: never happened again. But you know, I think the latest
Speaker 13: comments we have from the former President Trump in his
Speaker 13: interview with Bloomberg suggests real questions about whether the US
Speaker 13: would come militarily to Taiwan's aid. I think President Trump
Speaker 13: always had a proclivity towards selling weapons to allies or anybody.
Speaker 13: He really talked about that a lot with countries like
Speaker 13: Saudi Arabia and Japan. I think he would be willing
Speaker 13: to continue and even ramp up weapons sales to Taiwan.
Speaker 13: But the idea of sending American troops into harm's way
Speaker 13: if China attacked, that's really been raised into question by
Speaker 13: his latest comments. President Biden, on the other hand, kind
Speaker 13: of broke with decades of a diplomatic protocol in his
Speaker 13: own way when he said that, yes, the US would
Speaker 13: have to come to Taiwan's aid if attacked. So there
Speaker 13: is a big difference there. But I don't think anyone
Speaker 13: really knows how strongly Trump would stick to those doubts
Speaker 13: if he is elected and there was an attack.
Speaker 3: So that really is a good example of the transactional
Speaker 3: versus the ideological differences. President Biden feels very strongly about
Speaker 3: protecting for reasons to go all the way back to
Speaker 3: the Second World War and perhaps even further whereas President
Speaker 3: Trump you know, wants to get paid in the sense
Speaker 3: of offering protections to Taiwan like an insurance policy, he
Speaker 3: believes that as she could pay. If you're a foreign
Speaker 3: leader in Asia, is it easier to deal with a
Speaker 3: transactional person or an ideological person?
Speaker 13: It depends on, like which issues I think you're trying
Speaker 13: to get into. I think the Chinese, you know, a
Speaker 13: lot of foreign leaders will remember Trump as being transactional.
Speaker 13: They will also remember him as being quite unpredictable, and
Speaker 13: so you can try to reach a deal. You can
Speaker 13: think you have a deal, and then a week later
Speaker 13: you can find out that that deal no longer stands.
Speaker 13: So that's something I think people will have memories for.
Speaker 13: On the other hand, if you're facing you know, someone
Speaker 13: like Joe Biden and he's if you don't like the policy,
Speaker 13: you're going to have a much harder time changing that
Speaker 13: policy because I think, you know, Biden has more of
Speaker 13: an ideological focus in terms of you know, when they
Speaker 13: make decisions, they're making them kind of long term, and
Speaker 13: they can be harder to undo.
Speaker 3: Trump is sending a message essentially that you can pay
Speaker 3: to have policy changed. Now we know that there are
Speaker 3: obviously lots of nuances in that for countries that are
Speaker 3: looking at trade and for what might come from President
Speaker 3: Trump versus President Biden. Former President Trump has talked about
Speaker 3: using tariffs even against allies. Do allies in Asia fear that?
Speaker 13: Yeah, I think allies in Asia are concerned. I think
Speaker 13: allies in Europe are concerned, and they all saw some
Speaker 13: of that in the previous administration. Yeah, I think he's
Speaker 13: going to be looking for companies to grant concessions to
Speaker 13: the US. He's going to be looking for companies to
Speaker 13: build factories in the United States. That was something that
Speaker 13: happened in his term. I think it's something that's happened
Speaker 13: in Joe Biden's term as well. You know, you go
Speaker 13: back to twenty twenty one when Biden took office, there
Speaker 13: were a lot of expectations that he would ease some
Speaker 13: of these tariffs on China, and that never happened. He
Speaker 13: kept them in place and then move forward on other
Speaker 13: high technology restrictions. So I think regardless of the country,
Speaker 13: whether you're a close ally or arrival of the United States,
Speaker 13: a President Trump would be very much looking to you
Speaker 13: for transactional diplomacy, looking for deals that, in his mind,
Speaker 13: would help the American consumer.
Speaker 3: Let's talk about a couple of other areas. So if
Speaker 3: we think about President Trump, if he were to win
Speaker 3: with Vladimir Putin and Shijen Ping, who becomes the third wheel.
Speaker 3: I was thinking about it from the standpoint of would
Speaker 3: President Trump be a third wheel with those two because
Speaker 3: they've already declared this very strong relationship. But then I
Speaker 3: was thinking, it's more interesting if you throw the three
Speaker 3: in a hat and say, which are the two that
Speaker 3: get the closest.
Speaker 8: Yeah.
Speaker 13: I mean, you've heard former President Trump saying that if
Speaker 13: he is elected that he will help bring peace to
Speaker 13: the Ukraine conflict even before he takes office, and you've
Speaker 13: seen him draw a, you know, a very harsh line
Speaker 13: on China. You know, he I think he showed a
Speaker 13: lot of comfort in his first term and working with
Speaker 13: leaders like Putin, like she, like the Saudi Crown Prince.
Speaker 13: He does seem to have a proclivity to work with
Speaker 13: these very kind of strong man type leaders who are
Speaker 13: able to make decisions and you know, very quickly in
Speaker 13: their countries because they don't have to deal with some
Speaker 13: of the mess of democracy. He took a harder line
Speaker 13: in many cases against a lot of US allies. So
Speaker 13: you know, whether he would try to strike deals with
Speaker 13: Shi Jinping, I think is a very open question. I mean,
Speaker 13: he started off his administration really trying to work with
Speaker 13: Shi Jinping, but by the end, when the COVID outbreak happened,
Speaker 13: I think the tone changed very quickly. So between those three,
Speaker 13: He's certainly believes that he has influence with people like
Speaker 13: Putin and She, but to the degree he'll be able
Speaker 13: to exercise that would A lot needs to happen for
Speaker 13: that to take place.
Speaker 3: A quick question on the dollar, Former President Trump seems
Speaker 3: to be pining for a weaker dollar, whereas President Biden
Speaker 3: doesn't normally wade into those waters.
Speaker 13: Differences there, Yeah, I mean President Trump in his first
Speaker 13: term was really like someone who, for the first time
Speaker 13: in a generation, talked about the value of a weaker dollar.
Speaker 13: He really saw that as a boon to American exports
Speaker 13: and you know, a way to bolster the economy. Traditionally,
Speaker 13: of course, Treasury secretaries and White Houses have always pushed
Speaker 13: a strong dollar policy. So you know, when you talk
Speaker 13: to economists about the economic policies that President Trump would
Speaker 13: bring about, they see it as very inflationary. He talks about,
Speaker 13: you know, extending his tax cuts, perhaps apps adding more
Speaker 13: tax cuts, but not as much talk on cutting spending side.
Speaker 13: So economists are looking at that as something that would
Speaker 13: have the FED perhaps having to keep rates higher. For Logger,
Speaker 13: that is essentially a stronger dollar policy if the rates
Speaker 13: remain high and the rest of the world is looking
Speaker 13: for cuts. So how he's going to square that circle
Speaker 13: is going to be a difficult one.
Speaker 3: Bill, thanks very much for playing ball with us. Bill Ferries,
Speaker 3: Bloomberg Senior Editor. I'm Brian Curtis in Hong Kong along
Speaker 3: with Doug Krisner. You can catch us every weekday here
Speaker 3: for Bloomberg Daybreak Asia, beginning at eight am in Hong
Speaker 3: Kong and eight pm on Wall Street.
Speaker 2: Tom thank you, Brian, and that does it for this
Speaker 2: edition of Bloomberg day Break Weekend. Join us again Monday
Speaker 2: morning at five am Wall Street time for the latest
Speaker 2: on markets overseas and the news you need to start
Speaker 2: your day. I'm Tom Busby. Stay with us top stories
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