1 00:00:02,920 --> 00:00:08,280 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,400 --> 00:00:13,880 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:13,920 --> 00:00:15,880 Speaker 2: the top stories in the coming week from our day 4 00:00:15,920 --> 00:00:18,800 Speaker 2: Break anchors all around the world. Straight ahead on the program, 5 00:00:18,920 --> 00:00:22,119 Speaker 2: Inflation and what it could mean for the Fed plus 6 00:00:22,120 --> 00:00:25,160 Speaker 2: earning season is right around the corner. We'll get a preview. 7 00:00:25,360 --> 00:00:28,600 Speaker 2: I'm Tom Busby in New York. I'm Stephen Carolyn London. 8 00:00:28,640 --> 00:00:32,200 Speaker 2: For We're looking ahead and beyond the upcoming European Central 9 00:00:32,240 --> 00:00:36,640 Speaker 2: Bank meeting, when and how fast interest rates may come down. 10 00:00:37,040 --> 00:00:40,159 Speaker 3: I'm Doug Krisner looking at whether China's economy is bottomed 11 00:00:40,240 --> 00:00:41,879 Speaker 3: and if it's beginning to inflate. 12 00:00:43,880 --> 00:00:47,840 Speaker 4: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 13 00:00:47,840 --> 00:00:50,360 Speaker 4: Ey look them free own New York, Bloomberg ninety nine 14 00:00:50,400 --> 00:00:53,760 Speaker 4: to one, Washington, DC, Bloomberg one O six one, Boston, 15 00:00:53,840 --> 00:00:58,680 Speaker 4: Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius 16 00:00:58,840 --> 00:01:02,040 Speaker 4: XM one nineteen and around the world on Bloomberg Radio 17 00:01:02,160 --> 00:01:04,400 Speaker 4: dot Com and via the Bloomberg Business App. 18 00:01:08,520 --> 00:01:10,560 Speaker 2: Good day to you. I'm Tom Busby, and we begin 19 00:01:10,640 --> 00:01:14,640 Speaker 2: today's program with inflation and the March consumer Price Index 20 00:01:14,760 --> 00:01:17,720 Speaker 2: coming out this Wednesday. With the fed's next policy meeting 21 00:01:17,800 --> 00:01:20,600 Speaker 2: kicking off later this month, what could that mean for 22 00:01:20,680 --> 00:01:23,399 Speaker 2: the central banks direction moving forward? And for more we're 23 00:01:23,440 --> 00:01:29,720 Speaker 2: joined by Edward Harrison, Bloomberg, team leader America's FX and Rates. Edward, 24 00:01:30,120 --> 00:01:33,000 Speaker 2: Thanks for being here. What are you expecting to see 25 00:01:33,040 --> 00:01:34,199 Speaker 2: in that CPI report? 26 00:01:34,480 --> 00:01:37,959 Speaker 5: Hey, great to talk to you, Tom. The question really 27 00:01:38,319 --> 00:01:40,640 Speaker 5: is wide open in terms of what we can see. 28 00:01:41,120 --> 00:01:42,400 Speaker 5: There are a lot of things, and I think that 29 00:01:42,560 --> 00:01:45,880 Speaker 5: the way to think about this is that we had 30 00:01:45,920 --> 00:01:49,120 Speaker 5: a very high level of inflation as we came out 31 00:01:49,320 --> 00:01:54,840 Speaker 5: of the pandemic, and that's come down considerably, but we've 32 00:01:54,920 --> 00:01:58,680 Speaker 5: stalled at a level that is above the Fed's target. 33 00:01:58,960 --> 00:02:02,480 Speaker 5: And recently what we've seen is prices moving up in 34 00:02:02,720 --> 00:02:07,560 Speaker 5: places that people are sensitive to, you know, things like cocoa, 35 00:02:07,840 --> 00:02:12,079 Speaker 5: you know, for chocolate, things like oil, which affects your 36 00:02:12,280 --> 00:02:15,440 Speaker 5: gasoline prices in the US. And so, as a result, 37 00:02:15,880 --> 00:02:19,800 Speaker 5: after two readings in a row that were relatively high 38 00:02:20,360 --> 00:02:24,040 Speaker 5: above expectations, there's a lot of anticipation about this number, 39 00:02:24,520 --> 00:02:29,359 Speaker 5: and really it could be higher than expected given some 40 00:02:29,520 --> 00:02:30,840 Speaker 5: of those recent trends. 41 00:02:31,280 --> 00:02:33,560 Speaker 2: Still a long way to go, though, to the fed's 42 00:02:33,560 --> 00:02:35,919 Speaker 2: two percent target, but like you said, not the nine 43 00:02:35,960 --> 00:02:38,840 Speaker 2: point one percent we saw just two summers ago. But 44 00:02:39,320 --> 00:02:41,679 Speaker 2: we had been heading in the right direction. Is this 45 00:02:42,000 --> 00:02:45,400 Speaker 2: recent pickup just an aberration you think, or are we 46 00:02:45,520 --> 00:02:46,960 Speaker 2: onto something more troubling. 47 00:02:47,240 --> 00:02:49,760 Speaker 5: Well, you know, the FED really wants to get their 48 00:02:50,080 --> 00:02:53,679 Speaker 5: hands around that to figure out what's going on. And 49 00:02:53,919 --> 00:02:57,280 Speaker 5: that's why when you heard Jerome Powell talking last week, 50 00:02:57,720 --> 00:03:01,079 Speaker 5: he was talking about patients. And that's because of this 51 00:03:01,240 --> 00:03:05,720 Speaker 5: number in particular, and also the number that's embedded in 52 00:03:05,880 --> 00:03:09,520 Speaker 5: the Personal Consumption Expenditures Report, which is what the FED 53 00:03:09,680 --> 00:03:13,120 Speaker 5: looks at even more closely. When you look at this number, 54 00:03:13,880 --> 00:03:16,960 Speaker 5: you know, the last number without food and energy, which 55 00:03:17,000 --> 00:03:19,560 Speaker 5: are very viable. When you strip that out, you still 56 00:03:20,120 --> 00:03:23,640 Speaker 5: had three point eight percent. They're expecting three point seven percent, 57 00:03:23,960 --> 00:03:28,440 Speaker 5: which is almost double the fed's level now. Luckily, because 58 00:03:28,520 --> 00:03:33,040 Speaker 5: food and energy have been relatively benign of late. The 59 00:03:33,160 --> 00:03:36,080 Speaker 5: number was three point two percent last time, and we're 60 00:03:36,120 --> 00:03:40,800 Speaker 5: expecting three point five percent this time. So that gives 61 00:03:40,840 --> 00:03:43,560 Speaker 5: you an indication that there's a lot of work to 62 00:03:43,600 --> 00:03:46,440 Speaker 5: be done. And this is why j Powell last week 63 00:03:46,560 --> 00:03:47,600 Speaker 5: was talking about patients. 64 00:03:47,840 --> 00:03:49,960 Speaker 2: Well, let's talk about some of those big drivers here. 65 00:03:50,200 --> 00:03:53,680 Speaker 2: You mentioned oil right now hovering around a five month high, 66 00:03:54,120 --> 00:03:58,240 Speaker 2: always very volucile, but we are seeing expectations gas is 67 00:03:58,280 --> 00:04:00,720 Speaker 2: going to hit four bucks a gallon here in the US, 68 00:04:00,840 --> 00:04:03,680 Speaker 2: that's for regular by the summer. I mean, that is 69 00:04:03,880 --> 00:04:06,840 Speaker 2: a real wildcard. Oil and gas prices. 70 00:04:07,080 --> 00:04:09,080 Speaker 5: Without a doubt. And you know, as I was saying, 71 00:04:09,360 --> 00:04:11,920 Speaker 5: they had been positive in terms of the numbers food 72 00:04:11,920 --> 00:04:17,160 Speaker 5: and energy because the headline number is lower than the 73 00:04:17,320 --> 00:04:19,440 Speaker 5: number when you strip out food and energy. But now 74 00:04:19,560 --> 00:04:22,160 Speaker 5: that we have these prices going back up, then you 75 00:04:22,279 --> 00:04:26,920 Speaker 5: can expect them to have a negative contribution. They're sending 76 00:04:27,000 --> 00:04:30,440 Speaker 5: the CPI up higher. And there's nothing that people think 77 00:04:30,480 --> 00:04:35,560 Speaker 5: about more than gasoline prices. It has that anchor effect 78 00:04:36,520 --> 00:04:38,840 Speaker 5: in terms of how people think about inflation and where 79 00:04:38,880 --> 00:04:41,600 Speaker 5: it's headed. And so this is not what people want. 80 00:04:42,040 --> 00:04:45,560 Speaker 5: And I would add that, you know OPEK their meeting, 81 00:04:46,240 --> 00:04:49,479 Speaker 5: it will be interesting to see what kind of level 82 00:04:49,560 --> 00:04:53,119 Speaker 5: they're targeting for oil prices. If we're looking at ninety 83 00:04:53,160 --> 00:04:56,560 Speaker 5: dollars a barrel, then that's not a level that is 84 00:04:56,680 --> 00:05:00,080 Speaker 5: going to be pleasant for the inflation numbers. 85 00:05:00,000 --> 00:05:03,880 Speaker 2: You know, food, oil, gasoline, housing. But there are some 86 00:05:04,360 --> 00:05:07,440 Speaker 2: green shoots, some glimmers of hope. Used car prices have 87 00:05:07,560 --> 00:05:09,720 Speaker 2: moved lower, new car prices have moved lower. 88 00:05:09,839 --> 00:05:15,400 Speaker 5: Right, what we're looking for in particular is not just 89 00:05:15,560 --> 00:05:20,360 Speaker 5: in goods and things that were inflated coming down, but 90 00:05:21,120 --> 00:05:27,239 Speaker 5: that core beyond even goods in services, you know, takeout housing, 91 00:05:27,320 --> 00:05:31,600 Speaker 5: even looking at you know, the services sector and the 92 00:05:31,880 --> 00:05:35,359 Speaker 5: core within the services sector of minus housing to see 93 00:05:35,480 --> 00:05:38,160 Speaker 5: what the overall trend is. I think that that is 94 00:05:38,360 --> 00:05:40,400 Speaker 5: going to be the place that people are going to 95 00:05:40,480 --> 00:05:42,279 Speaker 5: be looking as they look at the CPI. 96 00:05:42,600 --> 00:05:44,640 Speaker 2: Now, one last question. We're going to talk about the 97 00:05:44,800 --> 00:05:47,880 Speaker 2: fed's meeting, which is April thirtieth May. First, that's the 98 00:05:47,960 --> 00:05:50,360 Speaker 2: next one. A non starter for a rate cut, but 99 00:05:50,600 --> 00:05:53,880 Speaker 2: everybody's still thinking about that mid June meeting, and between 100 00:05:54,000 --> 00:05:56,279 Speaker 2: now and then, the FED is going to have three 101 00:05:56,440 --> 00:06:01,080 Speaker 2: CPI reports, two PCE reports, and that for a data 102 00:06:01,120 --> 00:06:03,880 Speaker 2: dependent FED is a lot to consider. Is there any 103 00:06:03,960 --> 00:06:06,799 Speaker 2: feeling that by then, by the June eleventh and twelfth 104 00:06:06,880 --> 00:06:10,040 Speaker 2: meeting we are going to see maybe some hope of 105 00:06:10,160 --> 00:06:10,720 Speaker 2: a rate cut. 106 00:06:11,040 --> 00:06:13,800 Speaker 5: I think that these next ones are going to be 107 00:06:14,000 --> 00:06:18,000 Speaker 5: very important, because you know, the FED is looking for 108 00:06:18,080 --> 00:06:20,800 Speaker 5: a trend, and that trend needs to be lower. To 109 00:06:20,920 --> 00:06:23,160 Speaker 5: the degree that the next one or two of these 110 00:06:23,640 --> 00:06:28,760 Speaker 5: CPIPCE reports are not lower, it makes it more difficult 111 00:06:28,800 --> 00:06:30,880 Speaker 5: for the FED to cut in June. When we look 112 00:06:30,960 --> 00:06:34,160 Speaker 5: at some of the people at the FED, Atlanta FED 113 00:06:34,240 --> 00:06:39,360 Speaker 5: President raphae Albostik, he's been an individual who's at the 114 00:06:39,440 --> 00:06:43,159 Speaker 5: leading edge of where the Fed's going. He's actually talking 115 00:06:43,240 --> 00:06:46,360 Speaker 5: about waiting all the way into the fourth quarter. So 116 00:06:46,800 --> 00:06:50,320 Speaker 5: that's an indication of sort of the angst of the 117 00:06:50,400 --> 00:06:53,080 Speaker 5: Fed about how sticky inflation has been. 118 00:06:53,360 --> 00:06:53,600 Speaker 4: Wow. 119 00:06:53,800 --> 00:06:57,000 Speaker 2: Well, the next reading the March CPI data out there Wednesday, 120 00:06:57,200 --> 00:07:00,040 Speaker 2: and our thanks to Edward Harrison, Bloomberg team leader for 121 00:07:00,080 --> 00:07:03,840 Speaker 2: Americas FX and Rates. Well, we turn now to the 122 00:07:03,880 --> 00:07:05,920 Speaker 2: start of the new earning season on Wall Street. It 123 00:07:06,000 --> 00:07:09,200 Speaker 2: kicks off this Friday. We get the latest quarterly reports 124 00:07:09,400 --> 00:07:12,880 Speaker 2: from JP Morgan, Chase, Wells, Fargo, and City Group, some 125 00:07:12,960 --> 00:07:15,600 Speaker 2: of the biggest banks in the US. What will they 126 00:07:15,680 --> 00:07:18,200 Speaker 2: reveal about the health of the banking sector. Well for more, 127 00:07:18,360 --> 00:07:22,400 Speaker 2: We're joined by Alison Williams, Bloomberg Intelligence Senior Analyst, Global 128 00:07:22,480 --> 00:07:25,960 Speaker 2: Banks and Asset Managers. Now, Allison, I want to start 129 00:07:26,080 --> 00:07:28,880 Speaker 2: with where the US banking sector is right now compared 130 00:07:28,880 --> 00:07:31,040 Speaker 2: to the turmoil a year ago. We saw the failure 131 00:07:31,120 --> 00:07:34,600 Speaker 2: of Silicon Valley Bank in March of twenty three, Signature 132 00:07:34,640 --> 00:07:37,160 Speaker 2: Bank in April of that year, First Republic. Where are 133 00:07:37,200 --> 00:07:37,520 Speaker 2: we now? 134 00:07:37,880 --> 00:07:41,680 Speaker 6: So, I think for the banks, that really kicked off 135 00:07:41,720 --> 00:07:45,760 Speaker 6: a lot of concerns about the higher interest rate environment, 136 00:07:46,680 --> 00:07:50,200 Speaker 6: and we saw a lot of deposit outflows and that 137 00:07:50,360 --> 00:07:53,720 Speaker 6: really has been a big focus for investors in terms 138 00:07:53,760 --> 00:07:57,320 Speaker 6: of the impact on net interest income. But for this quarter, 139 00:07:57,720 --> 00:08:01,080 Speaker 6: investors are really going to be focusing on the change 140 00:08:01,360 --> 00:08:05,360 Speaker 6: in interest rate expectations versus the last time we heard 141 00:08:05,400 --> 00:08:08,600 Speaker 6: from the banks, which was in January, and so at 142 00:08:08,640 --> 00:08:11,600 Speaker 6: that point in time, most of the banks gave their 143 00:08:11,640 --> 00:08:17,040 Speaker 6: guidance for net interest income looking for six rate cuts. 144 00:08:17,080 --> 00:08:21,040 Speaker 6: City Group more in the three to six cut region, 145 00:08:21,480 --> 00:08:24,960 Speaker 6: but the market implied rates at this point in time 146 00:08:25,040 --> 00:08:27,880 Speaker 6: are closer to three, and so we do expect that 147 00:08:28,000 --> 00:08:29,880 Speaker 6: there could be some change in the net interest income 148 00:08:29,920 --> 00:08:32,559 Speaker 6: outlook that really affects more of the back half and 149 00:08:32,640 --> 00:08:38,040 Speaker 6: the twenty twenty five expectations. But circling back to deposits again, 150 00:08:38,120 --> 00:08:40,079 Speaker 6: that was the sort of one of the big concerns 151 00:08:40,720 --> 00:08:45,720 Speaker 6: a year ago, deposit pricing. We have seen those deposit 152 00:08:45,920 --> 00:08:50,080 Speaker 6: prices increase, but we do think that this quarter they 153 00:08:50,160 --> 00:08:54,079 Speaker 6: could come in a little bit more muted than perhaps 154 00:08:54,160 --> 00:08:57,680 Speaker 6: had fears. We got some color around that from Bank 155 00:08:57,760 --> 00:09:00,600 Speaker 6: of America who said that they think that they're an 156 00:09:00,720 --> 00:09:04,160 Speaker 6: interestingcome guidance could come in a bit at the higher 157 00:09:04,280 --> 00:09:07,240 Speaker 6: end of their guidance because those costs have not been 158 00:09:07,520 --> 00:09:08,160 Speaker 6: as bad as. 159 00:09:08,160 --> 00:09:08,920 Speaker 7: They had expected. 160 00:09:09,160 --> 00:09:12,800 Speaker 6: What were they expecting, Well, deposit prices are increasing, right, 161 00:09:13,080 --> 00:09:16,959 Speaker 6: so as rates have come up, banks sort of got 162 00:09:17,040 --> 00:09:19,319 Speaker 6: an early benefit in terms of the repricing of their 163 00:09:19,440 --> 00:09:21,959 Speaker 6: loan books, but they held off a little bit in 164 00:09:22,120 --> 00:09:27,560 Speaker 6: terms of passing on those price increases to customers because 165 00:09:27,600 --> 00:09:31,520 Speaker 6: we were coming off of those zero percent levels. So 166 00:09:31,640 --> 00:09:34,760 Speaker 6: I think as things sort of adjusted to a normalized environment, 167 00:09:35,320 --> 00:09:37,240 Speaker 6: they were a bit slower to pass on some of 168 00:09:37,320 --> 00:09:42,280 Speaker 6: that benefit. But now that is happening, and so consumers 169 00:09:42,440 --> 00:09:45,959 Speaker 6: are demanding a little bit more yield. They're switching their 170 00:09:46,120 --> 00:09:49,720 Speaker 6: deposits into products that offer a higher yield, and that's 171 00:09:49,720 --> 00:09:53,120 Speaker 6: been happening over the past year. But perhaps that pace 172 00:09:53,240 --> 00:09:54,679 Speaker 6: is starting to slow down a bit. 173 00:09:54,840 --> 00:09:55,040 Speaker 4: Yeah. 174 00:09:55,640 --> 00:09:58,200 Speaker 2: Well, one thing that hasn't slowed down for banks trading. 175 00:09:58,520 --> 00:10:02,680 Speaker 2: We've seen IPO a little growth there, we've seen record 176 00:10:02,840 --> 00:10:05,320 Speaker 2: levels for all the major averages. What does that mean 177 00:10:05,400 --> 00:10:06,000 Speaker 2: for these banks? 178 00:10:06,280 --> 00:10:11,160 Speaker 6: So healthier markets are definitely a boon to the asset 179 00:10:11,200 --> 00:10:15,600 Speaker 6: and wealth management businesses for all these big banks. They 180 00:10:15,679 --> 00:10:18,840 Speaker 6: are diversified banks, and so they are benefiting just from 181 00:10:18,960 --> 00:10:22,960 Speaker 6: the fees, just from the asset levels, but also they'll 182 00:10:22,960 --> 00:10:25,920 Speaker 6: be looking for better flows. That is a key measure 183 00:10:25,960 --> 00:10:27,959 Speaker 6: of health of the businesses. But on the trading and 184 00:10:28,080 --> 00:10:33,520 Speaker 6: fee outlook, trading continues to be relatively resilient, and so 185 00:10:34,200 --> 00:10:37,559 Speaker 6: that fixed income trading does face tougher comparisons, So it 186 00:10:37,640 --> 00:10:40,320 Speaker 6: could be a little bit down, especially for the rates 187 00:10:40,320 --> 00:10:44,480 Speaker 6: and currencies business for someone like City Group, but still 188 00:10:44,760 --> 00:10:50,079 Speaker 6: very healthy historically high levels. Equity trading getting some benefit. 189 00:10:50,280 --> 00:10:52,400 Speaker 6: As you pointed out that we have seen a little 190 00:10:52,440 --> 00:10:56,480 Speaker 6: bit more activity on the IPO front, perhaps not as 191 00:10:56,559 --> 00:10:59,640 Speaker 6: strong as some of the banks would expect, but definitely 192 00:10:59,760 --> 00:11:03,400 Speaker 6: in the US, the US underwriting business is going to 193 00:11:03,480 --> 00:11:07,360 Speaker 6: be helping those fees, the debt underwriting business helping those fees. 194 00:11:07,679 --> 00:11:10,160 Speaker 6: M and A announcements looking a little bit better, but 195 00:11:10,280 --> 00:11:12,280 Speaker 6: it'll take a little while for those fees to kick in. 196 00:11:12,400 --> 00:11:14,400 Speaker 6: But I think the highlight for this quarter for trading 197 00:11:14,440 --> 00:11:17,600 Speaker 6: and fees will be that investment banking feed growth both 198 00:11:17,800 --> 00:11:20,000 Speaker 6: versus a year ago and the fourth quarter. 199 00:11:20,360 --> 00:11:22,959 Speaker 2: But let's talk about now the challenges, and probably the 200 00:11:23,000 --> 00:11:25,680 Speaker 2: biggest one we spoke about this is commercial real estate. 201 00:11:26,080 --> 00:11:28,560 Speaker 2: We just had a vacancy rate of offices last quarter 202 00:11:28,679 --> 00:11:31,600 Speaker 2: twenty percent, just under twenty percent across the US. That's 203 00:11:31,640 --> 00:11:32,480 Speaker 2: got to be devastated. 204 00:11:32,640 --> 00:11:36,960 Speaker 6: And the office business is definitely something that investors are 205 00:11:36,960 --> 00:11:41,160 Speaker 6: focused on. It's something that we're focusing on. But Wells Fargo, 206 00:11:41,640 --> 00:11:44,360 Speaker 6: you know, for example, who has one of the biggest 207 00:11:44,440 --> 00:11:48,240 Speaker 6: exposures among our banks. At least they've already put up 208 00:11:48,240 --> 00:11:51,160 Speaker 6: a pretty healthy reserve against that business, so they've been 209 00:11:51,240 --> 00:11:55,600 Speaker 6: watching it as those trends have been deteriorating. And commercial 210 00:11:55,640 --> 00:11:57,559 Speaker 6: real estate, while it's a big thing I think to 211 00:11:57,640 --> 00:12:00,480 Speaker 6: focus on for the industry, it does tend to be 212 00:12:00,960 --> 00:12:04,240 Speaker 6: a relatively lower exposure across the banks. So even though 213 00:12:04,320 --> 00:12:07,560 Speaker 6: Wells Fargo and now JP Morgan two of the biggest 214 00:12:07,640 --> 00:12:11,800 Speaker 6: lenders out there to commercial real estate, Bank of America 215 00:12:11,840 --> 00:12:14,880 Speaker 6: as well, it is not as big of a share 216 00:12:15,000 --> 00:12:16,839 Speaker 6: of their loan book as it is perhaps for the 217 00:12:16,880 --> 00:12:20,040 Speaker 6: smaller banks. And so what we're really focusing on is 218 00:12:20,160 --> 00:12:22,520 Speaker 6: the credit card business, where we think that is going 219 00:12:22,559 --> 00:12:26,440 Speaker 6: to be the driver of provisions for the largest banks 220 00:12:26,520 --> 00:12:29,599 Speaker 6: because there is loan growth in that business, and that 221 00:12:29,679 --> 00:12:31,959 Speaker 6: loan growth does tend to have higher loss rates. So 222 00:12:32,559 --> 00:12:35,360 Speaker 6: we will see provisions increase because of the growth, because 223 00:12:35,480 --> 00:12:38,280 Speaker 6: credit is normalizing, and because this does tend to be 224 00:12:38,360 --> 00:12:41,280 Speaker 6: a seasonally higher quarter for those types of losses. 225 00:12:41,960 --> 00:12:43,719 Speaker 2: Well, a lot to look forward to this week and 226 00:12:43,760 --> 00:12:47,880 Speaker 2: our thanks to Alison Williams, Bloomberg Intelligence Senior Analyst, Global 227 00:12:47,920 --> 00:12:51,480 Speaker 2: Banks and Asset Managers. And coming up on Bloomberg Daybreak weekend, 228 00:12:52,040 --> 00:12:56,160 Speaker 2: when will European policy makers start to ease monetary policy? 229 00:12:56,520 --> 00:12:59,000 Speaker 2: We look ahead to the next European Central Bank meeting. 230 00:12:59,440 --> 00:13:13,760 Speaker 2: I'm Tom Buzby and this is Bloomberg. This is Bloomberg 231 00:13:13,840 --> 00:13:15,880 Speaker 2: Day Break weekend, our global look ahead at the top 232 00:13:15,920 --> 00:13:18,840 Speaker 2: stories for investors in the coming week. I'm Tom Busby 233 00:13:18,920 --> 00:13:22,240 Speaker 2: in New York. Up later in our program. Has China's 234 00:13:22,240 --> 00:13:26,280 Speaker 2: economy bottomed out? We look ahead to China inflation data. 235 00:13:26,559 --> 00:13:29,679 Speaker 2: But first in the global interest rate race, investors have 236 00:13:29,800 --> 00:13:32,360 Speaker 2: been working on the assumption that the Federal Reserve will 237 00:13:32,400 --> 00:13:35,200 Speaker 2: be the first to make a raid cut, but after 238 00:13:35,280 --> 00:13:38,280 Speaker 2: some encouraging economic data from the Eurozone, could the European 239 00:13:38,360 --> 00:13:41,319 Speaker 2: Central Bank beat the Fed to the punch with a 240 00:13:41,400 --> 00:13:43,920 Speaker 2: surprise cut as early as later this month. For more, 241 00:13:44,320 --> 00:13:46,720 Speaker 2: Let's go to London and bring in Bloomberg Daybreak anchor 242 00:13:46,920 --> 00:13:48,160 Speaker 2: Stephen Carroll. 243 00:13:48,360 --> 00:13:50,960 Speaker 1: Tom Inflation in the euro Area may not be slowing 244 00:13:51,040 --> 00:13:53,559 Speaker 1: down as quickly as it was last year, but it's 245 00:13:53,559 --> 00:13:56,040 Speaker 1: still moving in the right direction for the ECB. The 246 00:13:56,120 --> 00:13:59,360 Speaker 1: latest reading shows consumer prices rising in March by two 247 00:13:59,400 --> 00:14:02,120 Speaker 1: point four percent year on year. That's down from a 248 00:14:02,160 --> 00:14:05,360 Speaker 1: pace of two point six percent in February. Spanish Governing 249 00:14:05,400 --> 00:14:07,880 Speaker 1: Council member Pablo Hernandez de cass is among the most 250 00:14:07,960 --> 00:14:11,280 Speaker 1: recent to earmark the June meeting as likely being for 251 00:14:11,360 --> 00:14:14,520 Speaker 1: the first cut in interest rates. Even the most hawkish 252 00:14:14,600 --> 00:14:17,880 Speaker 1: member of the Governing Council, Austria's Robert Holtzman, is warning 253 00:14:17,920 --> 00:14:20,400 Speaker 1: of the perils of holding rates at their current level 254 00:14:20,480 --> 00:14:24,080 Speaker 1: for too long, but could waiting until June risk harming 255 00:14:24,120 --> 00:14:27,440 Speaker 1: the economy. Boomberg opinion columnist Marcus Ashworth has joined those 256 00:14:27,520 --> 00:14:31,080 Speaker 1: calling instead for an April move at this upcoming meeting. 257 00:14:31,360 --> 00:14:34,120 Speaker 1: He points to Bank of France President Fransouovievoia the gallow 258 00:14:34,120 --> 00:14:37,520 Speaker 1: who's often the bell weather for ECB policy changes. De 259 00:14:37,640 --> 00:14:41,040 Speaker 1: Gallo says that a further slow down in growth means 260 00:14:41,080 --> 00:14:43,800 Speaker 1: that the time has come to take out an insurance 261 00:14:44,120 --> 00:14:47,720 Speaker 1: against this second risk by beginning rate cuts. But going 262 00:14:47,840 --> 00:14:50,600 Speaker 1: before the FED doesn't come without its risks, both in 263 00:14:50,680 --> 00:14:54,160 Speaker 1: Europe and globally. It's something we've been discussing with Aaron Captain, 264 00:14:54,160 --> 00:14:56,520 Speaker 1: who's chief economists at UBS Investment Bank. 265 00:14:57,080 --> 00:14:59,480 Speaker 8: So if the FED doesn't cut in June, right, so 266 00:14:59,600 --> 00:15:02,960 Speaker 8: we basically then have less cuts for the FED, so 267 00:15:03,000 --> 00:15:05,600 Speaker 8: a bit more appreciation of the dollar, a bit more 268 00:15:05,640 --> 00:15:08,680 Speaker 8: euro depreciation. So at the margin it's going to add 269 00:15:08,680 --> 00:15:12,160 Speaker 8: a little bit to Eurozone inflation, but really not very much. 270 00:15:12,360 --> 00:15:14,320 Speaker 8: If all that we're doing is sort of a time 271 00:15:14,400 --> 00:15:16,520 Speaker 8: shift of the FED cuts, right, if they just go 272 00:15:16,600 --> 00:15:20,320 Speaker 8: a bit later and they catch up next year, then 273 00:15:20,560 --> 00:15:23,320 Speaker 8: you know, the overall rate differentials don't really move that much, 274 00:15:23,760 --> 00:15:25,720 Speaker 8: and it doesn't fundamentally I think alter sort of the 275 00:15:25,760 --> 00:15:27,160 Speaker 8: inflation outlook in the euro Zone. 276 00:15:28,120 --> 00:15:30,360 Speaker 1: Is there any chance you think of fifty basis points 277 00:15:30,400 --> 00:15:31,720 Speaker 1: cuts from the ECB this year? 278 00:15:32,480 --> 00:15:32,840 Speaker 7: Not now? 279 00:15:33,200 --> 00:15:36,560 Speaker 8: It's difficult to see why. So I think the debates more, 280 00:15:36,640 --> 00:15:38,120 Speaker 8: you know, do you go once a quarter at the 281 00:15:38,160 --> 00:15:40,800 Speaker 8: forecast meetings or do you go every meeting. It looks 282 00:15:40,920 --> 00:15:43,120 Speaker 8: like they want to go once a quarter, although they 283 00:15:43,160 --> 00:15:46,200 Speaker 8: have been a little vague about sort of what the 284 00:15:46,320 --> 00:15:49,920 Speaker 8: speed of the sequences that they have in mind. In 285 00:15:50,000 --> 00:15:52,200 Speaker 8: my mind, you know, the easy bit is the first 286 00:15:52,240 --> 00:15:55,520 Speaker 8: one hundred and fifty basis points, and there's no real 287 00:15:55,600 --> 00:15:57,680 Speaker 8: reason why you want to sort of race through that 288 00:15:58,360 --> 00:16:01,000 Speaker 8: if there's uncertainty about the landing zone. Right, So the 289 00:16:01,080 --> 00:16:03,360 Speaker 8: way I think they think about it is that you know, 290 00:16:03,440 --> 00:16:06,160 Speaker 8: you're at four, you can probably safely cut to about 291 00:16:06,200 --> 00:16:07,640 Speaker 8: two and a half, and then once you get there, 292 00:16:07,680 --> 00:16:10,000 Speaker 8: you got to look around to see whether you're still 293 00:16:10,080 --> 00:16:13,680 Speaker 8: on track, and if, you know, if things are accelerating 294 00:16:13,800 --> 00:16:15,840 Speaker 8: too fast and profits are going up too fast, then 295 00:16:15,880 --> 00:16:18,600 Speaker 8: you stop cutting at that stage. So given sort of 296 00:16:18,720 --> 00:16:21,640 Speaker 8: that type of uncertainty, you don't need to go in fifties. 297 00:16:21,680 --> 00:16:24,680 Speaker 8: I think the debates really do you go in twenty fives? 298 00:16:24,760 --> 00:16:26,480 Speaker 8: And then you know, do you skip meetings or not? 299 00:16:26,760 --> 00:16:26,960 Speaker 4: Yeah? 300 00:16:27,600 --> 00:16:30,440 Speaker 1: I wonder you know, Kasina Guard and others have points 301 00:16:30,440 --> 00:16:32,840 Speaker 1: as the importance of wage data when it comes to 302 00:16:33,040 --> 00:16:37,160 Speaker 1: their decision making process at the ECB. Two is the 303 00:16:37,240 --> 00:16:39,920 Speaker 1: wage days is something that's a big concern for you 304 00:16:40,080 --> 00:16:41,960 Speaker 1: when you're thinking about the broader outlook for the year 305 00:16:42,000 --> 00:16:42,560 Speaker 1: Zone economy. 306 00:16:42,800 --> 00:16:44,840 Speaker 8: No, so based on what we've there's not a lot 307 00:16:44,920 --> 00:16:47,040 Speaker 8: of year to date wage data out yet. But if 308 00:16:47,200 --> 00:16:49,800 Speaker 8: Italy doesn't repeat the big one off that they had 309 00:16:49,920 --> 00:16:53,040 Speaker 8: in December, then our current tracking of negotiated wages is 310 00:16:53,120 --> 00:16:55,480 Speaker 8: that it'll slip below four percent for the first time 311 00:16:55,560 --> 00:16:58,720 Speaker 8: in January. And so it really looks like, you know, 312 00:16:58,800 --> 00:17:01,480 Speaker 8: the negotiated wage track, which is going to be most inertial, 313 00:17:02,000 --> 00:17:04,040 Speaker 8: had been sort of going sideways, is now starting to 314 00:17:04,080 --> 00:17:07,200 Speaker 8: trend lower. The indeed wage tracker, which is sort of 315 00:17:07,280 --> 00:17:11,119 Speaker 8: temp marginal wages of temp agencies, that's already been heading lower. 316 00:17:11,280 --> 00:17:13,439 Speaker 8: And then they have a phone survey which they don't publish, 317 00:17:14,359 --> 00:17:17,080 Speaker 8: and so all indications really are that wages are moving 318 00:17:17,560 --> 00:17:19,760 Speaker 8: in line with their forecast and at this stage are 319 00:17:19,800 --> 00:17:20,400 Speaker 8: not concerning. 320 00:17:21,000 --> 00:17:23,680 Speaker 1: That was Aaron Captain, chief economist at UBS Investment Bank, 321 00:17:23,720 --> 00:17:26,800 Speaker 1: speaking to us on Bloomberg Daybreak Europe. Now, the ECB 322 00:17:26,920 --> 00:17:29,919 Speaker 1: expects CPI to fall to two point two percent by August, 323 00:17:30,119 --> 00:17:32,159 Speaker 1: but it could happen as soon as this month, according 324 00:17:32,160 --> 00:17:35,639 Speaker 1: to estimates by Bloomberg Economics. Kicking off rate trimming is 325 00:17:35,720 --> 00:17:38,480 Speaker 1: one thing, but questions still remain about what comes next 326 00:17:38,560 --> 00:17:41,720 Speaker 1: for the ECB after the first cut, whether it comes 327 00:17:41,800 --> 00:17:45,000 Speaker 1: in April or in June. At the moment, money markets 328 00:17:45,000 --> 00:17:48,120 Speaker 1: are pricing in three quarter point reductions starting in June. 329 00:17:48,440 --> 00:17:51,120 Speaker 1: I've been discussing the path ahead with senior Euro Area 330 00:17:51,160 --> 00:17:55,200 Speaker 1: economist for Bloomberg Economics David Powell. Just how surprising would 331 00:17:55,200 --> 00:17:57,359 Speaker 1: an April cut be or how likely is it? 332 00:17:58,000 --> 00:18:01,640 Speaker 7: An April cut is very unlikely at this stage. For example, 333 00:18:01,720 --> 00:18:04,560 Speaker 7: there's almost no probability of that being priced into the 334 00:18:04,640 --> 00:18:08,760 Speaker 7: markets right now. Some time ago, there was a debate 335 00:18:08,920 --> 00:18:12,160 Speaker 7: whether this was going to happen in April or in June. 336 00:18:12,200 --> 00:18:13,399 Speaker 7: That was back at the beginning of the year, and 337 00:18:13,440 --> 00:18:16,439 Speaker 7: that was fully priced in that April cuts. There has 338 00:18:16,480 --> 00:18:19,080 Speaker 7: been a big shift in market pricing we've seen, and 339 00:18:19,160 --> 00:18:22,000 Speaker 7: that's really been thanks to the communication we've seen from 340 00:18:22,040 --> 00:18:25,080 Speaker 7: the ECB who have started to rule out some time 341 00:18:25,160 --> 00:18:30,159 Speaker 7: ago the possibility of an April cut, Although there have 342 00:18:30,359 --> 00:18:33,600 Speaker 7: been some doves in the Governing Council who've continued to 343 00:18:33,720 --> 00:18:36,520 Speaker 7: speak about it from time to time. It's not of 344 00:18:36,640 --> 00:18:38,439 Speaker 7: you held by the consensus at all. 345 00:18:38,640 --> 00:18:42,600 Speaker 1: Just mischievously hinting that perhaps there's something could happen, even 346 00:18:42,640 --> 00:18:45,159 Speaker 1: though there's no likelihood of it as you see it 347 00:18:45,200 --> 00:18:48,359 Speaker 1: as well. So what's the risk of waiting longer for 348 00:18:48,640 --> 00:18:51,600 Speaker 1: Christine Legard and colleagues or is there a risk in 349 00:18:51,680 --> 00:18:53,160 Speaker 1: them waiting to June. 350 00:18:53,720 --> 00:18:56,920 Speaker 7: Well, the difference between April and June is not that huge. 351 00:18:57,240 --> 00:19:01,280 Speaker 7: Although the ECB cannot wait until is actually down to 352 00:19:01,359 --> 00:19:04,399 Speaker 7: two percent to start cutting because monetary policy works with 353 00:19:04,480 --> 00:19:06,600 Speaker 7: a lag somewhere between a year and a year and 354 00:19:06,680 --> 00:19:09,240 Speaker 7: a half. So if they don't, if they don't actually 355 00:19:09,400 --> 00:19:14,080 Speaker 7: cut until inflation is back to target, the full impact 356 00:19:14,119 --> 00:19:15,960 Speaker 7: of that cut won't be felt for some time later, 357 00:19:16,000 --> 00:19:19,879 Speaker 7: and the economy could already have suffered some significant damage 358 00:19:19,920 --> 00:19:22,400 Speaker 7: by them at a time when the economy has hardly grown. 359 00:19:22,440 --> 00:19:25,800 Speaker 7: In fact, the UR economy is not expanded at all 360 00:19:25,920 --> 00:19:27,720 Speaker 7: for nearly a year and a half, and if we 361 00:19:27,840 --> 00:19:31,320 Speaker 7: compare that flatlining that we saw last year in the 362 00:19:31,440 --> 00:19:34,399 Speaker 7: UR area, that's very different from the US where it 363 00:19:34,440 --> 00:19:38,360 Speaker 7: expanded by three percent. So they can't wait forever to cut, 364 00:19:38,520 --> 00:19:42,080 Speaker 7: but probably the difference between April and June is not huge, 365 00:19:42,280 --> 00:19:43,840 Speaker 7: and it looks like it's coming in June. 366 00:19:44,480 --> 00:19:48,320 Speaker 1: The process of deflation has been reasonably steady in the 367 00:19:48,440 --> 00:19:52,840 Speaker 1: Euro Area. Are there worrying aspects within that? Are there 368 00:19:53,040 --> 00:19:56,800 Speaker 1: risk zones within the members of the Euro Area that 369 00:19:56,960 --> 00:20:00,440 Speaker 1: could actually bump inflation up in the wrong direction before 370 00:20:00,480 --> 00:20:01,440 Speaker 1: we get to right cuts? 371 00:20:01,800 --> 00:20:05,160 Speaker 7: Yeah, well, inflation has come down, as you said, considerably 372 00:20:05,400 --> 00:20:08,080 Speaker 7: from where it was at its peak. In fact, it's 373 00:20:08,119 --> 00:20:11,359 Speaker 7: not very far from the target now, and we expect 374 00:20:11,440 --> 00:20:14,680 Speaker 7: headline inflation to actually drop below target this summer. But 375 00:20:14,760 --> 00:20:17,160 Speaker 7: there are still some bits of worry when you look 376 00:20:17,200 --> 00:20:19,280 Speaker 7: at the details of the report. In fact, we just 377 00:20:19,359 --> 00:20:22,400 Speaker 7: had the inflation report for March and both the headline 378 00:20:22,400 --> 00:20:25,520 Speaker 7: and core continue to come down. But services inflation, which 379 00:20:25,520 --> 00:20:28,480 Speaker 7: the ECB is watching very closely, has been sticky at 380 00:20:28,560 --> 00:20:32,640 Speaker 7: four percent for months now. That will probably come down 381 00:20:32,720 --> 00:20:35,920 Speaker 7: in the months ahead as wage growth decelerates, but that's 382 00:20:36,000 --> 00:20:39,000 Speaker 7: keeping the ECB worried and as part of the reason 383 00:20:39,040 --> 00:20:42,359 Speaker 7: they're moving cautiously delaying the first cut to June. They'll 384 00:20:42,400 --> 00:20:45,320 Speaker 7: probably pause after that and not cut again until September, 385 00:20:45,840 --> 00:20:47,680 Speaker 7: and they would like to see that come down before 386 00:20:47,720 --> 00:20:48,879 Speaker 7: they move more aggressively. 387 00:20:49,640 --> 00:20:51,560 Speaker 1: And of course the flip side of they say is 388 00:20:51,720 --> 00:20:53,880 Speaker 1: and those who do want to see right cuts come 389 00:20:53,960 --> 00:20:56,840 Speaker 1: faster is the weakness in the euro Area economy. Late 390 00:20:56,880 --> 00:20:59,600 Speaker 1: interesting to see the latest round of pm I numbers 391 00:20:59,640 --> 00:21:02,800 Speaker 1: showing a little bit of strength returning the Eurozone composite 392 00:21:02,800 --> 00:21:05,520 Speaker 1: pi I number the final reading for March, seeing it 393 00:21:05,680 --> 00:21:09,800 Speaker 1: nudge back into expansion territory. How weak is the euros 394 00:21:09,880 --> 00:21:12,320 Speaker 1: and economy at this point, Well, the your area is 395 00:21:12,440 --> 00:21:12,960 Speaker 1: pretty weak. 396 00:21:13,040 --> 00:21:15,240 Speaker 7: Like I said, it hasn't expanded for nearly a year 397 00:21:15,280 --> 00:21:18,119 Speaker 7: and a half. That stands in very stark contrast the 398 00:21:18,240 --> 00:21:21,480 Speaker 7: United States, which, as I already said, spend the three 399 00:21:21,520 --> 00:21:23,960 Speaker 7: percent last year. It just gives you a sense of 400 00:21:24,040 --> 00:21:26,880 Speaker 7: how weak it is in Europe. However, the economy will 401 00:21:26,960 --> 00:21:31,160 Speaker 7: probably gain some momentum this year is inflation comes down. 402 00:21:31,280 --> 00:21:34,639 Speaker 7: Real incomes are being boosted and that allows real consumption 403 00:21:35,520 --> 00:21:38,159 Speaker 7: to rise, so people have a bit more money to 404 00:21:38,240 --> 00:21:40,880 Speaker 7: spend with inflation coming in. We're seeing that in the numbers. 405 00:21:41,240 --> 00:21:45,680 Speaker 7: The services sector is once again recovering in Europe, but 406 00:21:45,760 --> 00:21:48,000 Speaker 7: that'll probably continue throughout the course of the year and 407 00:21:48,080 --> 00:21:50,560 Speaker 7: the economy will gain some momentum, but nothing like we're 408 00:21:50,560 --> 00:21:52,520 Speaker 7: seeing across the Atlantic. 409 00:21:52,800 --> 00:21:54,680 Speaker 1: What about the question of wage data. This is something 410 00:21:54,720 --> 00:21:57,360 Speaker 1: that Christine Lagart has signaled and repeated occasions as being 411 00:21:57,520 --> 00:22:00,840 Speaker 1: absolutely key for the European Center Bank decision making. Do 412 00:22:00,960 --> 00:22:04,359 Speaker 1: we have any early indications of what the wage picture is? 413 00:22:05,200 --> 00:22:10,080 Speaker 7: Well, wage growth has probably peaked the most comprehensive set 414 00:22:10,119 --> 00:22:12,520 Speaker 7: of data WEEGN, and that comes with the national accounts. 415 00:22:12,680 --> 00:22:14,560 Speaker 7: I mean know a couple of quarters ago that peaked 416 00:22:14,960 --> 00:22:18,439 Speaker 7: wage growth and is coming down. Specifically, it's the compensation 417 00:22:18,600 --> 00:22:21,040 Speaker 7: per employee they look at, and we'll get another round 418 00:22:21,119 --> 00:22:24,159 Speaker 7: of that in the early part of June and that 419 00:22:24,240 --> 00:22:26,400 Speaker 7: will cover the first quarter, and that's what the ECB 420 00:22:26,600 --> 00:22:30,400 Speaker 7: is waiting for to cut to confirm that wage growth 421 00:22:30,440 --> 00:22:33,359 Speaker 7: continues to come down, although before that we'll get some 422 00:22:33,520 --> 00:22:37,360 Speaker 7: data un negotiated wages towards the end of May. Christine 423 00:22:37,400 --> 00:22:40,680 Speaker 7: Legarda already has highlighted that in his speech in Frankfurt 424 00:22:40,680 --> 00:22:42,800 Speaker 7: a couple of weeks ago, that they'll be looking very 425 00:22:42,840 --> 00:22:46,080 Speaker 7: closely at that for some initial signs of wage growth 426 00:22:46,240 --> 00:22:47,640 Speaker 7: continuing to decelerate. 427 00:22:47,920 --> 00:22:50,399 Speaker 1: So let's talk us through your expectations then for the 428 00:22:50,480 --> 00:22:53,560 Speaker 1: rest of the year. So no cut at the upcoming meeting. 429 00:22:53,720 --> 00:22:56,040 Speaker 1: We're looking towards the start of summer for things like 430 00:22:56,080 --> 00:22:57,840 Speaker 1: that to start moving. What does the rest of the 431 00:22:57,920 --> 00:22:59,919 Speaker 1: year look like for the EACYB from this point of view? 432 00:23:00,160 --> 00:23:03,960 Speaker 7: Well, as I mentioned, the ECB is really focused on 433 00:23:04,080 --> 00:23:07,040 Speaker 7: this wage data and that comes in the national accounts, 434 00:23:07,040 --> 00:23:08,919 Speaker 7: so it only comes once a quarter. So we get 435 00:23:09,080 --> 00:23:11,399 Speaker 7: kind of batch of that for the first quarter in 436 00:23:11,560 --> 00:23:13,880 Speaker 7: the beginning of June, and then we have to wait 437 00:23:13,920 --> 00:23:16,360 Speaker 7: another three months of beinning of September until we get 438 00:23:16,480 --> 00:23:18,680 Speaker 7: data on that again. That'll be for the second quarter. 439 00:23:18,960 --> 00:23:22,760 Speaker 7: Conveniently for the ECB, that also aligns with their forecast months, 440 00:23:23,080 --> 00:23:26,000 Speaker 7: so they'll have fresh inflation forecasts and they own staff 441 00:23:26,080 --> 00:23:30,240 Speaker 7: economists in June as well as September. And if both 442 00:23:30,320 --> 00:23:33,119 Speaker 7: of those are going in the right direction, meaning of 443 00:23:33,200 --> 00:23:37,480 Speaker 7: that the staff forecast are inflation continuing to decelerate as 444 00:23:37,520 --> 00:23:40,320 Speaker 7: they have been forecasting for a while, that will allow 445 00:23:40,400 --> 00:23:44,280 Speaker 7: them to cut in June, probably pause in July as 446 00:23:44,320 --> 00:23:47,280 Speaker 7: they wait for that quarterly data again in September, and 447 00:23:47,359 --> 00:23:50,760 Speaker 7: then cut again in September. By then, headline inflation is 448 00:23:51,040 --> 00:23:54,399 Speaker 7: likely to be below target. In core inflation is not 449 00:23:54,480 --> 00:23:56,159 Speaker 7: going to be far behind it's going to be a 450 00:23:56,240 --> 00:24:00,480 Speaker 7: lot more difficult to justify restrictive policy stands when inflation 451 00:24:00,600 --> 00:24:03,800 Speaker 7: is actually below target. So from September we think that 452 00:24:03,920 --> 00:24:07,040 Speaker 7: they will cut it at each of the remaining meetings 453 00:24:07,119 --> 00:24:09,680 Speaker 7: of the year, and that equates to about one hundred 454 00:24:09,720 --> 00:24:12,560 Speaker 7: basis points and easing throughout the course of this year. 455 00:24:12,880 --> 00:24:13,480 Speaker 7: How much of a. 456 00:24:13,520 --> 00:24:17,280 Speaker 1: Dilemma is it for the ECB to go before the FED. 457 00:24:17,359 --> 00:24:18,920 Speaker 1: I know the ECB of course will tell you that 458 00:24:18,960 --> 00:24:21,480 Speaker 1: they make their own decisions and they're not that conscious 459 00:24:21,520 --> 00:24:24,080 Speaker 1: of it, but surely one is reliant on the other. 460 00:24:24,680 --> 00:24:28,520 Speaker 7: If we look back at this tightening cycle it's taken place, 461 00:24:28,960 --> 00:24:30,920 Speaker 7: the FED has kind of taken the lead on it, 462 00:24:31,280 --> 00:24:36,000 Speaker 7: the ECB followed, and the ECB probably wouldn't mind if 463 00:24:36,040 --> 00:24:40,159 Speaker 7: the FED took the lead again on cutting. And they 464 00:24:40,240 --> 00:24:42,520 Speaker 7: may not have that luxury though, of just kind of 465 00:24:42,600 --> 00:24:45,240 Speaker 7: following the FED, because, like I said, the UR economy 466 00:24:45,320 --> 00:24:48,880 Speaker 7: is much weaker than the US economy. So if things 467 00:24:49,000 --> 00:24:51,639 Speaker 7: remain strong, and most of the data coming out of 468 00:24:51,680 --> 00:24:54,480 Speaker 7: the US suggest they will, the FED may be able 469 00:24:54,520 --> 00:24:57,320 Speaker 7: to put off monetary easing, and that's not a luxury 470 00:24:57,359 --> 00:24:59,520 Speaker 7: that the ECB has at this stage. So it may 471 00:24:59,600 --> 00:25:02,160 Speaker 7: not have choice. It may have to go on its 472 00:25:02,200 --> 00:25:04,880 Speaker 7: own and then allow the FED to go later. 473 00:25:05,160 --> 00:25:07,320 Speaker 1: How much of a risk would a weaker euro though 474 00:25:07,359 --> 00:25:10,040 Speaker 1: be to the inflation outlook if they we do If 475 00:25:10,119 --> 00:25:11,920 Speaker 1: as expected, the ECB does go before the Fed. 476 00:25:12,280 --> 00:25:15,800 Speaker 7: Obviously the ECB is so he is looking at the 477 00:25:17,000 --> 00:25:20,440 Speaker 7: exchange rate, what it does to inflation, in growth and 478 00:25:20,520 --> 00:25:23,720 Speaker 7: other things. However, it's not really on the ECB's radar 479 00:25:23,800 --> 00:25:27,879 Speaker 7: at this stage. They're not talking about exchange rate volatility 480 00:25:28,040 --> 00:25:30,240 Speaker 7: or a weekier or strong or anything like that. So 481 00:25:31,359 --> 00:25:33,959 Speaker 7: I suspect that that's not too important for them at 482 00:25:34,000 --> 00:25:38,040 Speaker 7: this stage when they contemplate the path of interest rates. 483 00:25:38,480 --> 00:25:42,000 Speaker 1: That was David Powell from Bloomberg Economics. I'm Stephen Carroll 484 00:25:42,040 --> 00:25:44,399 Speaker 1: in London. You can catch us every weekday morning here 485 00:25:44,440 --> 00:25:46,760 Speaker 1: for Bloomberg Daybreak. You're at beginning at six am in 486 00:25:46,840 --> 00:25:50,679 Speaker 1: London and one am on Wall Street. Tom, Thank you, Steven. 487 00:25:50,760 --> 00:25:54,120 Speaker 1: And coming up on Bloomberg Daybreak weekend. Has China's economy 488 00:25:54,160 --> 00:25:57,520 Speaker 1: bottomed out? We look ahead to China inflation data. I'm 489 00:25:57,600 --> 00:25:59,680 Speaker 1: Tom Busby and this is Bloomberg. 490 00:26:09,720 --> 00:26:12,160 Speaker 2: This is Bloomberg day Break weekend, our global look ahead 491 00:26:12,160 --> 00:26:14,359 Speaker 2: at the top stories for investors in the coming week. 492 00:26:14,840 --> 00:26:17,639 Speaker 2: I'm Tom Busby in New York. The early indicators on 493 00:26:17,800 --> 00:26:20,760 Speaker 2: China's economy show there may have been a small improvement 494 00:26:20,920 --> 00:26:23,719 Speaker 2: during the first quarter. Even so, the majority of Chinese 495 00:26:23,760 --> 00:26:28,240 Speaker 2: financial institutions surveyed by Bloomberg Economics doubt the economy has 496 00:26:28,320 --> 00:26:30,840 Speaker 2: bottomed out, and a big question is whether it's stuck 497 00:26:31,160 --> 00:26:33,760 Speaker 2: in deflation. We'll get some insight in the week ahead. 498 00:26:33,960 --> 00:26:36,879 Speaker 2: Let's get to Doug Christner, co host of Daybreak Asia 499 00:26:37,040 --> 00:26:37,880 Speaker 2: for a closer look. 500 00:26:38,280 --> 00:26:40,639 Speaker 3: Tom, I think we can say the big issue is confidence. 501 00:26:40,840 --> 00:26:40,959 Speaker 7: Now. 502 00:26:41,000 --> 00:26:45,119 Speaker 3: The latest PMI data show improvement, but so much about 503 00:26:45,119 --> 00:26:49,120 Speaker 3: the overall Chinese economy does remain fragile, especially where consumer 504 00:26:49,200 --> 00:26:52,560 Speaker 3: demand is concerned. We know that retail demand is weak. 505 00:26:53,040 --> 00:26:54,640 Speaker 3: Pricing power seems absent. 506 00:26:55,280 --> 00:26:55,440 Speaker 7: Now. 507 00:26:55,480 --> 00:26:58,720 Speaker 3: The readings on producer and consumer prices are due midweek. 508 00:26:59,040 --> 00:27:00,760 Speaker 3: We're going to preview the day and now and talk 509 00:27:00,800 --> 00:27:04,680 Speaker 3: about the current challenges for the Chinese economy with Bloomberg 510 00:27:04,760 --> 00:27:07,560 Speaker 3: reporters Jill Desis and Alan Wong. Jill is one of 511 00:27:07,640 --> 00:27:11,119 Speaker 3: our news desk editors, and Alan is an editor on 512 00:27:11,359 --> 00:27:14,840 Speaker 3: the China ECOGV team. Thanks to both of you, for 513 00:27:15,000 --> 00:27:17,159 Speaker 3: joining us, Jill, I want to begin with you when 514 00:27:17,240 --> 00:27:20,680 Speaker 3: I start with the story about prices, particularly at the 515 00:27:20,720 --> 00:27:23,760 Speaker 3: wholesale level, producer prices. I guess in China it's known 516 00:27:23,800 --> 00:27:27,840 Speaker 3: as factory gate prices. We saw numbers in February at 517 00:27:27,880 --> 00:27:30,960 Speaker 3: a decline that was pretty rapid, and that extended a 518 00:27:31,080 --> 00:27:35,000 Speaker 3: slide in kind of a deflationary trend to seventeen months. 519 00:27:35,240 --> 00:27:38,960 Speaker 3: What's the conversation like around what we might expect in 520 00:27:39,000 --> 00:27:39,639 Speaker 3: the week ahead. 521 00:27:40,560 --> 00:27:43,000 Speaker 9: Yeah, Doug, I think that at this point, really those 522 00:27:43,280 --> 00:27:48,240 Speaker 9: factory gate prices continue to remain under pressure. We're still expecting, 523 00:27:48,480 --> 00:27:51,639 Speaker 9: or at least a economists are still expecting a continued 524 00:27:51,760 --> 00:27:55,600 Speaker 9: slide once we get those numbers for March survey estimate 525 00:27:55,720 --> 00:27:58,919 Speaker 9: is below two percent declines even I mean we're approaching 526 00:27:58,960 --> 00:28:02,240 Speaker 9: three percent declines. Think, so, there doesn't really seem to 527 00:28:02,320 --> 00:28:04,720 Speaker 9: be any kind of a meaningful turnaround in terms of 528 00:28:04,760 --> 00:28:09,480 Speaker 9: getting rid of these these issues around producer price deflation. 529 00:28:09,800 --> 00:28:12,159 Speaker 9: It's interesting because I think that at this point the 530 00:28:12,280 --> 00:28:15,640 Speaker 9: deflationary pressure story in China is just so much more 531 00:28:15,680 --> 00:28:20,520 Speaker 9: centered around consumer deflation, just because you know, from a 532 00:28:20,640 --> 00:28:23,680 Speaker 9: from a demand perspective, there's not a ton of concerns 533 00:28:24,080 --> 00:28:26,720 Speaker 9: around you know, China's ability to you know, making goods 534 00:28:26,720 --> 00:28:28,720 Speaker 9: and exporting them. I think it's much more about what 535 00:28:28,840 --> 00:28:31,280 Speaker 9: the domestics demand story says about China right now. 536 00:28:31,480 --> 00:28:34,960 Speaker 3: So, Alan, assuming that the numbers do show further deflation 537 00:28:35,080 --> 00:28:38,080 Speaker 3: both at the wholesale and retail level, does that create 538 00:28:38,160 --> 00:28:40,959 Speaker 3: any kind of urgency for the government to step up support. 539 00:28:41,200 --> 00:28:44,480 Speaker 10: Yeah, the urgency has always been there, and numbers, even 540 00:28:44,560 --> 00:28:49,640 Speaker 10: if they're not positive, will just only add to the 541 00:28:50,120 --> 00:28:53,160 Speaker 10: common consensus that there is a need for China to 542 00:28:53,240 --> 00:28:56,240 Speaker 10: ramp up its fiscal measures to stimulate demand. 543 00:28:56,480 --> 00:28:57,920 Speaker 3: Jill, you were going to weigh in, Yeah. 544 00:28:58,120 --> 00:29:02,640 Speaker 9: I think what's really interesting about the stimulus support story 545 00:29:02,720 --> 00:29:06,280 Speaker 9: when it comes to domestic demand is, look, we were 546 00:29:06,360 --> 00:29:08,840 Speaker 9: back at the NPC at the beginning of March really 547 00:29:08,960 --> 00:29:11,680 Speaker 9: sort of waiting on what kinds of stimulus support measures 548 00:29:11,720 --> 00:29:14,280 Speaker 9: would actually be announced, and I think, you know, economists 549 00:29:14,320 --> 00:29:16,360 Speaker 9: were generally disappointed. But I did think one thing that 550 00:29:16,480 --> 00:29:18,600 Speaker 9: was kind of interesting is that, at least when it 551 00:29:18,640 --> 00:29:21,160 Speaker 9: comes to trying to stimulate consumer demand, there's a lot 552 00:29:21,160 --> 00:29:23,360 Speaker 9: of talk about trading and old products for new ones 553 00:29:23,400 --> 00:29:25,479 Speaker 9: and stuff like that. I think what economists, you're really 554 00:29:25,520 --> 00:29:26,920 Speaker 9: waiting on is whether there's going to be a big 555 00:29:27,000 --> 00:29:28,600 Speaker 9: dollar amount put behind that in the future. 556 00:29:28,800 --> 00:29:32,240 Speaker 3: So Alan, if we're really talking about depressed sentiment, I mean, 557 00:29:32,320 --> 00:29:34,320 Speaker 3: the property market seems to be the root cause. I 558 00:29:34,400 --> 00:29:36,800 Speaker 3: think we can agree on that much. I mean, or 559 00:29:36,840 --> 00:29:39,240 Speaker 3: maybe it's just such a big part of the story. 560 00:29:39,320 --> 00:29:42,160 Speaker 3: What is your sense based on Bloomberg reporting? Where are 561 00:29:42,320 --> 00:29:45,160 Speaker 3: things right now visa VI the housing market? 562 00:29:45,600 --> 00:29:48,800 Speaker 10: Yeah, we're seeing a two track recovery in the Chinese economy. 563 00:29:48,920 --> 00:29:52,000 Speaker 10: On the industrial side, things has been we were seeing 564 00:29:52,040 --> 00:29:54,720 Speaker 10: green shoots on that front, but then in terms of 565 00:29:54,840 --> 00:29:59,480 Speaker 10: the property slum it's still very much in a sorry state. 566 00:30:00,560 --> 00:30:05,400 Speaker 10: We seeing that housing start a week, but housing completion 567 00:30:05,800 --> 00:30:10,040 Speaker 10: is stabilizing, so that means that new homes on being 568 00:30:10,080 --> 00:30:13,360 Speaker 10: built and that has some down with pressure on commodity 569 00:30:13,480 --> 00:30:17,520 Speaker 10: prices for example, and that also reflects on the weak 570 00:30:17,720 --> 00:30:19,000 Speaker 10: sentiment in China in general. 571 00:30:19,280 --> 00:30:21,280 Speaker 9: The other thing too, I think it's a really interesting 572 00:30:21,320 --> 00:30:23,640 Speaker 9: stimular story when it comes to the housing market as well, 573 00:30:23,760 --> 00:30:26,320 Speaker 9: because the government has taken several steps to try to 574 00:30:26,400 --> 00:30:29,719 Speaker 9: prop up support there. I think most recently, Chinese lenders 575 00:30:29,760 --> 00:30:33,960 Speaker 9: slashed a key rate for mortgages in February and attempt 576 00:30:34,000 --> 00:30:37,080 Speaker 9: to stimulate demand into March didn't really seem to move 577 00:30:37,080 --> 00:30:39,440 Speaker 9: the needle there much. So that's just, you know, to 578 00:30:39,560 --> 00:30:41,680 Speaker 9: kind of put this in perspective. Another thing that analysts 579 00:30:41,680 --> 00:30:44,280 Speaker 9: are looking out for is whether these continued rate cuts 580 00:30:44,320 --> 00:30:46,840 Speaker 9: are actually going to help prop up the property market 581 00:30:46,880 --> 00:30:48,719 Speaker 9: as well, because they really haven't done much so far. 582 00:30:49,040 --> 00:30:52,040 Speaker 3: And as both of you know, US Treasury Secretary Yellen 583 00:30:52,160 --> 00:30:53,800 Speaker 3: is in China. One of the things that she is 584 00:30:53,840 --> 00:30:57,760 Speaker 3: addressing is this issue of industrial overcapacity and how it's 585 00:30:58,040 --> 00:31:01,000 Speaker 3: having a negative impact not just on the Chinese economy, 586 00:31:01,200 --> 00:31:04,480 Speaker 3: but many economies around the world. I spoke earlier about 587 00:31:04,520 --> 00:31:08,760 Speaker 3: that with George Barboris, managing director at K two Asset Management. 588 00:31:08,840 --> 00:31:09,880 Speaker 3: Here's what he had to say. 589 00:31:10,080 --> 00:31:12,080 Speaker 11: Some people would say there's some cognitive dissonance with some 590 00:31:12,120 --> 00:31:14,480 Speaker 11: of the policy coming out of Beijing, but in reality, 591 00:31:14,600 --> 00:31:16,480 Speaker 11: they're taking a step back from the grand to play 592 00:31:16,600 --> 00:31:19,720 Speaker 11: the long term. They will unload cheaper products to the 593 00:31:19,800 --> 00:31:22,440 Speaker 11: rest of the world that will allow it, and North 594 00:31:22,440 --> 00:31:25,280 Speaker 11: America will maintain them. They've obviously died up those tariffs 595 00:31:25,280 --> 00:31:27,760 Speaker 11: and the current administration from the previous one, they can 596 00:31:27,840 --> 00:31:30,080 Speaker 11: allow these cheap goods to come through which they won't, 597 00:31:30,160 --> 00:31:33,280 Speaker 11: and that would be very CPI will fall very quickly. 598 00:31:33,640 --> 00:31:36,120 Speaker 11: But China's just got a different playbook at the moment 599 00:31:36,160 --> 00:31:38,120 Speaker 11: to where we're were three years ago, and the middle 600 00:31:38,160 --> 00:31:39,760 Speaker 11: class of China going to pay that price. 601 00:31:40,040 --> 00:31:43,760 Speaker 3: That is George Bevoris, they're from K two asset Management. Now, 602 00:31:43,840 --> 00:31:46,440 Speaker 3: Alan if we can agree that there is an overcapacity 603 00:31:46,560 --> 00:31:48,680 Speaker 3: problem in China, It's kind of curious, isn't it that 604 00:31:49,160 --> 00:31:52,480 Speaker 3: Beijing is still intent on using industrial policy as a 605 00:31:52,560 --> 00:31:54,480 Speaker 3: way of driving growth. What do you think? 606 00:31:54,680 --> 00:31:57,040 Speaker 10: Yeah, there is a need for it to find ways 607 00:31:57,080 --> 00:32:00,800 Speaker 10: to grow its economy because of the persistent property slum. 608 00:32:01,280 --> 00:32:05,560 Speaker 10: China is pouring money into manufacturing and has designated three 609 00:32:06,640 --> 00:32:11,840 Speaker 10: new industries as its new Big Three industries, namely evs, 610 00:32:11,920 --> 00:32:16,200 Speaker 10: electric vehicles, solar cells, and batteries. So it's trying to 611 00:32:16,280 --> 00:32:18,560 Speaker 10: ramp up production on these things and then obviously that 612 00:32:19,240 --> 00:32:22,520 Speaker 10: creates more competition in China and drive down prices. But 613 00:32:22,840 --> 00:32:25,480 Speaker 10: the US is right in thinking that what if China 614 00:32:25,920 --> 00:32:29,360 Speaker 10: exports lots of cheap cars to the US, what's going 615 00:32:29,400 --> 00:32:33,480 Speaker 10: to happen to domestic makers of cars? And this is 616 00:32:33,560 --> 00:32:35,560 Speaker 10: going to be high on the agenda of Yellen's trip 617 00:32:35,680 --> 00:32:36,040 Speaker 10: to China. 618 00:32:36,360 --> 00:32:38,800 Speaker 3: We know that the government will released the Work Report 619 00:32:38,880 --> 00:32:41,440 Speaker 3: back in March and with it this plan to unleash 620 00:32:41,560 --> 00:32:44,600 Speaker 3: new productive forces. High tech is a big part of 621 00:32:44,680 --> 00:32:48,360 Speaker 3: that story. Innovation another way of driving growth. Jill, do 622 00:32:48,440 --> 00:32:50,000 Speaker 3: you have a sense of what this may look like 623 00:32:50,080 --> 00:32:53,520 Speaker 3: if we take EV's, if we take solar panels out 624 00:32:53,520 --> 00:32:56,880 Speaker 3: of the equation, what does high tech and innovation look like? 625 00:32:57,040 --> 00:32:59,120 Speaker 9: I don't really know that you can totally take EV's 626 00:32:59,160 --> 00:33:02,680 Speaker 9: and solar panels of the equation there, Doug, because I 627 00:33:02,720 --> 00:33:04,960 Speaker 9: think that is pretty central to this idea of what 628 00:33:05,080 --> 00:33:06,920 Speaker 9: China is trying to accomplish here, right. I mean, we 629 00:33:07,040 --> 00:33:09,600 Speaker 9: know that no matter what happens with the property sector, 630 00:33:09,720 --> 00:33:11,840 Speaker 9: even if Beijing is able to put a floor under 631 00:33:11,880 --> 00:33:14,840 Speaker 9: this crisis, we are not going to see real estate 632 00:33:14,920 --> 00:33:17,040 Speaker 9: contribute to GDP in the way that we have in 633 00:33:17,080 --> 00:33:20,640 Speaker 9: the years past. That's just absolutely done. So what China 634 00:33:20,720 --> 00:33:22,520 Speaker 9: really needs to do in terms of this long term 635 00:33:22,560 --> 00:33:26,320 Speaker 9: strategy for new productive forces is find ways to replace 636 00:33:26,520 --> 00:33:30,200 Speaker 9: bits of how the property sector contributed to GDP with 637 00:33:30,440 --> 00:33:32,520 Speaker 9: some of these other sectors. And so that does mean 638 00:33:32,880 --> 00:33:35,960 Speaker 9: investing a lot more into evs and solar panels, which 639 00:33:36,000 --> 00:33:39,240 Speaker 9: is of course obviously leading to some of these overcapacity 640 00:33:39,320 --> 00:33:41,080 Speaker 9: challenges that you're seeing out of the US when it 641 00:33:41,120 --> 00:33:44,280 Speaker 9: comes to China, the fact that they're subsidizing so much. 642 00:33:45,160 --> 00:33:47,480 Speaker 9: But I think that at this point, I mean, it's 643 00:33:47,520 --> 00:33:50,000 Speaker 9: still a fairly vague slogan, right, I mean, how else 644 00:33:50,040 --> 00:33:52,920 Speaker 9: do you really prescribe, you know, describe new productive forces? 645 00:33:53,080 --> 00:33:54,680 Speaker 10: Yeah, And I think one thing i' added is that 646 00:33:55,640 --> 00:34:00,440 Speaker 10: the idea for this new new productive forces is China 647 00:34:00,480 --> 00:34:04,200 Speaker 10: wants to climb up the value chain in areas like Ai. 648 00:34:04,440 --> 00:34:06,240 Speaker 10: China also want to make I mean, wanted to play 649 00:34:06,280 --> 00:34:09,279 Speaker 10: a much bigger role in the Chinese economy because it 650 00:34:09,280 --> 00:34:11,719 Speaker 10: will make people more productive and then the workforce will 651 00:34:11,760 --> 00:34:14,160 Speaker 10: be a lot more skilled and this will make China 652 00:34:14,280 --> 00:34:16,480 Speaker 10: a lot more competitive in the longer term. 653 00:34:16,600 --> 00:34:19,439 Speaker 3: Well, you mentioned workforce there, Alan Jill. I mean, where 654 00:34:19,480 --> 00:34:21,439 Speaker 3: are we right now when you look at the labor market, 655 00:34:21,520 --> 00:34:24,799 Speaker 3: particularly youth unemployment. Do we have a sense of where 656 00:34:24,840 --> 00:34:26,439 Speaker 3: the unemployment rate is these days? 657 00:34:26,640 --> 00:34:29,040 Speaker 9: Oh? Gosh, Doug, Well, I think that with the youth 658 00:34:29,120 --> 00:34:31,640 Speaker 9: unemployment rate, there's just been so much chatter about that 659 00:34:31,719 --> 00:34:33,600 Speaker 9: one over the last year, right, I mean, we saw 660 00:34:33,680 --> 00:34:36,760 Speaker 9: that one just removed from the official database for several 661 00:34:36,880 --> 00:34:39,880 Speaker 9: months in twenty twenty three, as policymakers said that they 662 00:34:39,880 --> 00:34:43,319 Speaker 9: were retooling it. Ultimately, now they're still putting it out, 663 00:34:43,360 --> 00:34:47,440 Speaker 9: although they've stopped highlighting it in their big regular press conferences. 664 00:34:47,560 --> 00:34:49,320 Speaker 9: It does seem like it's ticked down a bit to 665 00:34:49,400 --> 00:34:52,960 Speaker 9: around fifteen percent or so rather than the north of 666 00:34:53,040 --> 00:34:55,919 Speaker 9: twenty percent that we were seeing in twenty twenty three, 667 00:34:56,160 --> 00:34:59,480 Speaker 9: though obviously still a major issue. I mean, look, young 668 00:34:59,560 --> 00:35:02,319 Speaker 9: people in China, these recent graduates have really been hit 669 00:35:02,840 --> 00:35:06,239 Speaker 9: tremendously over the past several years, not just because of 670 00:35:06,239 --> 00:35:08,960 Speaker 9: the economic slowdown and all the pandemic controls and all 671 00:35:09,000 --> 00:35:12,200 Speaker 9: of that, but also this whole realignment within China around 672 00:35:12,520 --> 00:35:16,080 Speaker 9: how the tech sector has handled this crackdown, this austerity campaign. 673 00:35:16,200 --> 00:35:18,040 Speaker 9: All of that has led to jobs drying up, and 674 00:35:18,120 --> 00:35:21,320 Speaker 9: I think, you know, some levels of dissatisfaction still, particularly 675 00:35:21,400 --> 00:35:22,400 Speaker 9: among China's use well. 676 00:35:22,440 --> 00:35:25,520 Speaker 3: And if we can agree that consumers really have been 677 00:35:25,719 --> 00:35:28,759 Speaker 3: keeping a pretty tight leash on spending, is there a 678 00:35:28,880 --> 00:35:32,759 Speaker 3: way that the government might address this through means other 679 00:35:32,840 --> 00:35:36,400 Speaker 3: than just lowering interest rates. Are their ideas floating around, 680 00:35:36,880 --> 00:35:40,120 Speaker 3: maybe to issue some type of coupons directly that could 681 00:35:40,200 --> 00:35:43,520 Speaker 3: be used to purchase goods. Are people beginning to get 682 00:35:43,560 --> 00:35:44,360 Speaker 3: a little creative. 683 00:35:44,520 --> 00:35:47,800 Speaker 10: I think they are on the China's top economic planet 684 00:35:47,960 --> 00:35:50,880 Speaker 10: and the RC actually recently met to just talk about 685 00:35:51,080 --> 00:35:53,359 Speaker 10: how they could implement this program. And some of those 686 00:35:53,400 --> 00:35:57,080 Speaker 10: people and the companies they met are a consumer goods 687 00:35:57,120 --> 00:36:01,480 Speaker 10: company and importantly recycling companies, because they're going to encourage 688 00:36:01,520 --> 00:36:05,200 Speaker 10: consumers to replace old goods, durable goods and cars and 689 00:36:06,200 --> 00:36:09,000 Speaker 10: factories to replace the equipment. So that's going to create 690 00:36:09,040 --> 00:36:12,200 Speaker 10: a lot more demand if implemented the way it wants 691 00:36:12,280 --> 00:36:17,319 Speaker 10: to for new equipment and appliances and what's that way 692 00:36:17,320 --> 00:36:18,960 Speaker 10: it's going to go. China's going to have to deal 693 00:36:19,000 --> 00:36:21,520 Speaker 10: with that in some way. Yeah. 694 00:36:21,640 --> 00:36:23,920 Speaker 9: I think Alan did a really good job of summing 695 00:36:24,000 --> 00:36:28,040 Speaker 9: up the plans that are actually in consideration here. But 696 00:36:28,160 --> 00:36:30,560 Speaker 9: I think the really important thing to underscore is that 697 00:36:30,719 --> 00:36:34,719 Speaker 9: in terms of direct cash handouts, China's just absolutely not 698 00:36:34,960 --> 00:36:37,000 Speaker 9: going there. I think that it would take a tremendous 699 00:36:37,040 --> 00:36:39,520 Speaker 9: amount for China to actually consider something like that. They've 700 00:36:39,560 --> 00:36:43,520 Speaker 9: been incredibly critical of what Western governments in particular were 701 00:36:43,560 --> 00:36:45,640 Speaker 9: doing in terms of cash hand ats to households during 702 00:36:45,680 --> 00:36:48,360 Speaker 9: the pandemic and it seems like that's still a bridge 703 00:36:48,440 --> 00:36:50,840 Speaker 9: too far for China's government, right, But it was very interesting. 704 00:36:50,920 --> 00:36:53,239 Speaker 3: There was a report just in the last week I 705 00:36:53,440 --> 00:36:58,960 Speaker 3: published where President she was considering a US style quantitative 706 00:36:59,080 --> 00:37:01,680 Speaker 3: easing as a way of providing a little bit more 707 00:37:01,800 --> 00:37:04,880 Speaker 3: liquidity into the market and may be a little bit 708 00:37:04,920 --> 00:37:08,480 Speaker 3: more risk taking. Can you imagine a world alan where 709 00:37:09,120 --> 00:37:13,000 Speaker 3: quantitative easing shows up in part of the pboc's playbook. 710 00:37:13,120 --> 00:37:15,960 Speaker 10: I think so far talks of Chinese style q E 711 00:37:16,200 --> 00:37:21,120 Speaker 10: is still premature. The line that Cgpen said was taken 712 00:37:21,160 --> 00:37:25,520 Speaker 10: out of a new book published featuring his quotes from 713 00:37:25,600 --> 00:37:28,920 Speaker 10: months ago, and there's still no sign, no follow up 714 00:37:29,000 --> 00:37:32,520 Speaker 10: on whether the Chinese Central Bank will do something similar. 715 00:37:33,040 --> 00:37:36,400 Speaker 10: And you know, just generally speaking, China is trying to 716 00:37:36,840 --> 00:37:39,920 Speaker 10: prove that there is a way to grow its economy 717 00:37:40,080 --> 00:37:44,680 Speaker 10: without resorting to Western style stimulus measures that created problems 718 00:37:44,719 --> 00:37:49,320 Speaker 10: that we saw in the global financial crisis. So I 719 00:37:49,400 --> 00:37:52,520 Speaker 10: think it's still too early to say whether that's going 720 00:37:52,560 --> 00:37:52,879 Speaker 10: to happen. 721 00:37:53,239 --> 00:37:56,040 Speaker 3: Joe Lisis Alan Wong, thank you so much for joining 722 00:37:56,120 --> 00:37:58,520 Speaker 3: us here to help us understand what's going on in 723 00:37:58,600 --> 00:38:00,880 Speaker 3: the Chinese economy and what we may see in the 724 00:38:00,920 --> 00:38:03,759 Speaker 3: week ahead with that inflation data. I'm Doug Krisner. You 725 00:38:03,800 --> 00:38:06,680 Speaker 3: can join Brian Curtis and myself weekdays here from Bloomberg 726 00:38:06,719 --> 00:38:09,919 Speaker 3: Daybreak Asia beginning at eight am in Hong Kong eight 727 00:38:10,040 --> 00:38:11,400 Speaker 3: pm on Wall Street. 728 00:38:11,800 --> 00:38:13,960 Speaker 2: Tom, Thank you, Doug, and that does it for this 729 00:38:14,200 --> 00:38:16,960 Speaker 2: edition of Bloomberg day Break Weekend. Join us again Monday 730 00:38:17,000 --> 00:38:19,400 Speaker 2: morning at five am Wall Street time for the latest 731 00:38:19,480 --> 00:38:22,080 Speaker 2: on markets overseas and the news you need to start 732 00:38:22,120 --> 00:38:25,680 Speaker 2: your day. I'm Tom Busby. Stay with us. Top stories 733 00:38:25,719 --> 00:38:28,200 Speaker 2: and global business headlines are coming up right now.