1 00:00:02,520 --> 00:00:07,520 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:11,000 --> 00:00:13,960 Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the 3 00:00:13,960 --> 00:00:16,680 Speaker 2: top stories in the coming week from our Daybreak anchors 4 00:00:16,720 --> 00:00:19,439 Speaker 2: all around the world. Straight Ahead on the program, a 5 00:00:19,520 --> 00:00:23,280 Speaker 2: look at the impact of artificial intelligence on the labor force. 6 00:00:23,520 --> 00:00:25,400 Speaker 2: I'm Nathan Hager in Washington. 7 00:00:25,520 --> 00:00:28,600 Speaker 3: I'm Caroline hetgehere in London, where we're looking ahead to 8 00:00:28,680 --> 00:00:31,040 Speaker 3: a key NATO summit in Turkey. 9 00:00:31,400 --> 00:00:34,640 Speaker 4: Nathan, I'm Doug Christner, looking at whether price pressures in 10 00:00:34,720 --> 00:00:36,680 Speaker 4: China's economy are sustainable. 11 00:00:38,640 --> 00:00:42,680 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 12 00:00:42,720 --> 00:00:46,440 Speaker 1: eleven three yoh New York, Bloomberg ninety nine to one, Washington, DC, 13 00:00:46,920 --> 00:00:52,040 Speaker 1: Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Sirius 14 00:00:52,240 --> 00:00:55,760 Speaker 1: XM one twenty one, and around the world on Bloomberg Radio, 15 00:00:55,800 --> 00:00:58,040 Speaker 1: dot Com and the Bloomberg Business App. 16 00:01:02,920 --> 00:01:06,040 Speaker 2: Good day to you. I'm Nathan Hager. We begin today's 17 00:01:06,080 --> 00:01:09,440 Speaker 2: program with a look at the impact of artificial intelligence 18 00:01:09,520 --> 00:01:12,240 Speaker 2: in the US labor force. And it's still early days 19 00:01:12,280 --> 00:01:15,640 Speaker 2: in the debate over how much this rapidly developing technology 20 00:01:15,720 --> 00:01:18,480 Speaker 2: will disrupt the job market. But we are starting to 21 00:01:18,520 --> 00:01:21,960 Speaker 2: see the impact in the economic data. Bloomberg's Maya Prakash 22 00:01:22,280 --> 00:01:24,720 Speaker 2: has been following this and is here with me now, 23 00:01:24,800 --> 00:01:27,200 Speaker 2: so great to speak with you, Maya on the Daybreak 24 00:01:27,200 --> 00:01:31,000 Speaker 2: Weekend program. So where are we seeing AI show up 25 00:01:31,040 --> 00:01:31,520 Speaker 2: in the data. 26 00:01:31,720 --> 00:01:35,400 Speaker 5: Well, we're starting to see the effects in finance and information, 27 00:01:35,880 --> 00:01:38,680 Speaker 5: which continue to be a drag of around twenty five 28 00:01:38,760 --> 00:01:42,679 Speaker 5: thousand jobs on total hiring growth in the US. The 29 00:01:42,720 --> 00:01:47,160 Speaker 5: financial activities sector is a concerning week spot. It's still 30 00:01:47,280 --> 00:01:50,800 Speaker 5: down around eighty two thousand jobs over the last six months, 31 00:01:51,080 --> 00:01:54,800 Speaker 5: while information posted another week month as well at sixty 32 00:01:54,840 --> 00:01:59,800 Speaker 5: eight thousand jobs decline over six months. This month's jobs 33 00:01:59,840 --> 00:02:03,160 Speaker 5: are showed a weaker labor market for a variety of reasons, 34 00:02:03,200 --> 00:02:06,920 Speaker 5: including a downturn in leisure and hospitality, But the underlying 35 00:02:06,920 --> 00:02:10,520 Speaker 5: story in finance and tech remains unchanged, which is that 36 00:02:10,560 --> 00:02:13,959 Speaker 5: they're two sectors that will be particularly affected by AI 37 00:02:14,160 --> 00:02:18,520 Speaker 5: because of their workforce composition and the nature of their tasks. 38 00:02:18,720 --> 00:02:21,079 Speaker 2: Yeah, it's really interesting to hear this start to show 39 00:02:21,160 --> 00:02:24,600 Speaker 2: up when we've heard from so many bank CEOs talking 40 00:02:24,639 --> 00:02:28,720 Speaker 2: about using artificial intelligence to sort of get rid of 41 00:02:28,760 --> 00:02:30,840 Speaker 2: some of those as they well at least one CEO 42 00:02:30,919 --> 00:02:35,600 Speaker 2: put it lower level human capital. So is this the 43 00:02:35,639 --> 00:02:38,400 Speaker 2: start of a trend? Can we say that at this 44 00:02:38,560 --> 00:02:39,960 Speaker 2: point you. 45 00:02:39,960 --> 00:02:43,320 Speaker 5: Could say that. I think you can say this, particularly 46 00:02:43,360 --> 00:02:46,720 Speaker 5: in the finance sector, which is about three times of 47 00:02:46,760 --> 00:02:50,480 Speaker 5: the information sector and a workforce that comprises a lot 48 00:02:50,520 --> 00:02:55,200 Speaker 5: of low paid and routine administrative work. We found that 49 00:02:55,280 --> 00:02:58,320 Speaker 5: around twenty five percent of roles in financial activities are 50 00:02:58,360 --> 00:03:04,280 Speaker 5: administrative ones, from service representatives, insurance claims processors, loans processing 51 00:03:04,360 --> 00:03:06,920 Speaker 5: and that sort of thing. These are exactly the kinds 52 00:03:06,960 --> 00:03:10,280 Speaker 5: of jobs that the BLS expects AI to automate first. 53 00:03:10,320 --> 00:03:13,280 Speaker 5: So we're expecting a broader trend line over the years. 54 00:03:13,600 --> 00:03:15,800 Speaker 2: And does this sort of feed into what we saw 55 00:03:15,840 --> 00:03:18,760 Speaker 2: in the latest non farm payrolls report in terms of 56 00:03:18,880 --> 00:03:22,120 Speaker 2: the downward revisions to the prior months. Is that what's 57 00:03:22,400 --> 00:03:24,880 Speaker 2: showing up in financials and it as well? 58 00:03:25,720 --> 00:03:29,920 Speaker 5: Absolutely so. The revision story was more in other sectors, 59 00:03:30,080 --> 00:03:35,200 Speaker 5: especially in leisure and hospitality. Our financial activities and information 60 00:03:35,360 --> 00:03:38,840 Speaker 5: chart didn't change much. The revisions weren't a particularly large 61 00:03:38,840 --> 00:03:41,440 Speaker 5: factor in the underlying trend of job losses. 62 00:03:41,680 --> 00:03:44,240 Speaker 2: So what's the trend line? Can we talk about a 63 00:03:44,240 --> 00:03:48,360 Speaker 2: trend line at this point about where AI disruption could 64 00:03:48,440 --> 00:03:49,200 Speaker 2: go from here. 65 00:03:50,280 --> 00:03:50,560 Speaker 3: Yeah. 66 00:03:50,640 --> 00:03:55,320 Speaker 5: Absolutely, Well there's a real question, right and we have 67 00:03:55,400 --> 00:03:57,600 Speaker 5: to sort of break it down by sector. In the 68 00:03:57,600 --> 00:04:02,760 Speaker 5: information sector, you have jobs like software engineers and computer 69 00:04:02,840 --> 00:04:06,480 Speaker 5: programmers that make up around fifteen percent of employment and 70 00:04:06,600 --> 00:04:09,440 Speaker 5: are on the higher paid side at around one hundred 71 00:04:09,440 --> 00:04:12,320 Speaker 5: and sixty dollars one hundred and sixty thousand dollars annually. 72 00:04:13,000 --> 00:04:17,280 Speaker 5: These are jobs that might actually be augmented by AI, 73 00:04:18,040 --> 00:04:21,280 Speaker 5: while you might have sort of lower level layoffs. It 74 00:04:21,360 --> 00:04:25,119 Speaker 5: remains a little bit unclear and difficult to measure whether 75 00:04:26,240 --> 00:04:28,880 Speaker 5: these kinds of roles will be augmented and made more 76 00:04:28,960 --> 00:04:32,880 Speaker 5: valuable and more productive because of advancements in AI, or 77 00:04:32,920 --> 00:04:36,880 Speaker 5: whether they'll be automated away. Where we actually are expecting 78 00:04:36,920 --> 00:04:39,240 Speaker 5: to see a larger trend is in these sort of 79 00:04:39,320 --> 00:04:45,080 Speaker 5: administrative and office roles. Insurance within the financial activities category 80 00:04:45,120 --> 00:04:49,719 Speaker 5: posted a large decline in May. We're expecting sort of 81 00:04:49,800 --> 00:04:54,520 Speaker 5: more lower level and administrative jobs in the financial activity 82 00:04:54,600 --> 00:04:56,960 Speaker 5: sector to see a decline, and then of course in 83 00:04:57,120 --> 00:04:58,360 Speaker 5: entry level jobs as well. 84 00:04:58,600 --> 00:05:01,240 Speaker 2: One of the big promises of artificial intelligence from the 85 00:05:01,279 --> 00:05:04,560 Speaker 2: technologies boosters is that for all the jobs that might 86 00:05:04,600 --> 00:05:07,360 Speaker 2: be disrupted by the technology. There are going to be 87 00:05:07,440 --> 00:05:10,080 Speaker 2: new ones to take their places. Are we starting to 88 00:05:10,120 --> 00:05:12,560 Speaker 2: see that in the data at this point or is 89 00:05:12,560 --> 00:05:14,200 Speaker 2: it still too early at It's. 90 00:05:14,040 --> 00:05:16,120 Speaker 5: A little early to tell. And one thing I would 91 00:05:16,120 --> 00:05:20,720 Speaker 5: also add is that in terms of these overall headcount reductions, 92 00:05:20,800 --> 00:05:24,200 Speaker 5: it's also hard to tell whether the headcount reductions are 93 00:05:24,240 --> 00:05:28,880 Speaker 5: a result of jobs themselves being automated or a result 94 00:05:29,080 --> 00:05:31,960 Speaker 5: of sort of a reallocation of resources. What I mean 95 00:05:32,000 --> 00:05:36,360 Speaker 5: by that is, you know, companies invest across finance and technology, 96 00:05:36,400 --> 00:05:40,960 Speaker 5: investing in AI and making capex investments at huge rates 97 00:05:41,240 --> 00:05:44,080 Speaker 5: and so having to cut labor costs as a result. 98 00:05:44,400 --> 00:05:47,960 Speaker 5: That's not necessarily the same thing as these jobs being 99 00:05:48,000 --> 00:05:51,840 Speaker 5: automated away. So I think that there's an important distinction 100 00:05:52,240 --> 00:05:55,080 Speaker 5: to be made there. And then in terms of you know, 101 00:05:55,360 --> 00:05:58,760 Speaker 5: new job creations, the best place to see that is 102 00:05:59,000 --> 00:06:03,440 Speaker 5: ongoing gains in non residential construction. Other data out this 103 00:06:03,560 --> 00:06:07,239 Speaker 5: week showed construction spending on data centers continues to be strong. 104 00:06:07,680 --> 00:06:10,400 Speaker 5: In the information sector, you might see a variety of 105 00:06:10,440 --> 00:06:14,680 Speaker 5: AI adjacent roles start to pop up, but overall, it's 106 00:06:14,720 --> 00:06:18,880 Speaker 5: still a little early to tell, and technology and models 107 00:06:18,880 --> 00:06:22,520 Speaker 5: are changing so fast that really the trend line could 108 00:06:22,600 --> 00:06:23,760 Speaker 5: change quite significantly. 109 00:06:23,880 --> 00:06:26,280 Speaker 2: All Right, So we've been talking about the disruption to 110 00:06:26,480 --> 00:06:31,160 Speaker 2: particularly financial services and it what other sectors are you 111 00:06:31,279 --> 00:06:34,359 Speaker 2: looking for going forward for potential vulnerabilities. 112 00:06:34,520 --> 00:06:37,800 Speaker 5: We're seeing a little bit of decline in professional and 113 00:06:37,880 --> 00:06:43,920 Speaker 5: business services, particularly in subcategories like accounting, consulting, and advertising. 114 00:06:44,320 --> 00:06:47,520 Speaker 5: We saw strength this month in professional and business services, 115 00:06:47,520 --> 00:06:50,200 Speaker 5: but economists say that this is primarily due to an 116 00:06:50,240 --> 00:06:55,400 Speaker 5: increase in tempiring rather than an overall increase in demand 117 00:06:55,400 --> 00:06:59,279 Speaker 5: for labor. So these sorts of automatable white collar jobs 118 00:06:59,800 --> 00:07:03,200 Speaker 5: in these various subcategories are a potential next week spot. 119 00:07:03,600 --> 00:07:05,680 Speaker 2: Okay, well, thank you for this, Maya, great having you 120 00:07:05,720 --> 00:07:08,880 Speaker 2: on with us. That is Bloomberg's Maya Prakash, part of 121 00:07:08,880 --> 00:07:12,560 Speaker 2: our economic team in Washington, DC. Let's take a look now, 122 00:07:12,600 --> 00:07:14,680 Speaker 2: add some stocks on the move in the week ahead. 123 00:07:14,720 --> 00:07:18,040 Speaker 2: I'm Nathan Hager, joined by Bloomberg News Cross asset reporter 124 00:07:18,160 --> 00:07:21,240 Speaker 2: Avalon Pernell. I think we all know where we're going 125 00:07:21,280 --> 00:07:24,760 Speaker 2: to start this conversation, Avalon, The countdown is on for 126 00:07:25,040 --> 00:07:31,240 Speaker 2: SpaceX to join the Nasdaq one hundred. What can we expect? 127 00:07:31,880 --> 00:07:35,880 Speaker 6: You're absolutely correct, SpaceX is slated to join Nasdaq one 128 00:07:35,960 --> 00:07:39,960 Speaker 6: hundred index on Tuesday, and that inclusion will trigger some 129 00:07:40,040 --> 00:07:43,360 Speaker 6: mandatory buying for all funds that track this key index, 130 00:07:43,720 --> 00:07:48,000 Speaker 6: notably the QQQ ETF, which is very popular passive investment 131 00:07:48,080 --> 00:07:51,640 Speaker 6: vehicle for retail investors especially. We'll also have to buy 132 00:07:51,680 --> 00:07:55,040 Speaker 6: in and as a two trillion dollar company, SpaceX woude 133 00:07:55,120 --> 00:07:59,400 Speaker 6: rank among one of the largest on the Nasdaq Historically speaking, though, 134 00:07:59,480 --> 00:08:03,440 Speaker 6: seasoning rules have delayed IPO entry into these major benchmarks 135 00:08:03,480 --> 00:08:05,920 Speaker 6: for at least a couple of months. As we know, 136 00:08:06,000 --> 00:08:09,440 Speaker 6: SpaceX just launched, so it's very much been fast tracked 137 00:08:09,480 --> 00:08:11,760 Speaker 6: out of that given the fact that it is such 138 00:08:11,800 --> 00:08:14,320 Speaker 6: a big company and it also had a record breaking 139 00:08:14,360 --> 00:08:17,960 Speaker 6: IPO that raised eighty six billion dollars. However, worth noting 140 00:08:18,000 --> 00:08:22,600 Speaker 6: that while Nasdaq did fast track SpaceX's entry, their rival 141 00:08:22,720 --> 00:08:25,280 Speaker 6: SMP Dow Jones said it's still going to keep their 142 00:08:25,360 --> 00:08:27,800 Speaker 6: existing eligibility requirements right. 143 00:08:28,520 --> 00:08:30,400 Speaker 2: So, I like what you did there with saying that 144 00:08:30,440 --> 00:08:34,200 Speaker 2: SpaceX just launched. I mean, the stock itself has kind 145 00:08:34,240 --> 00:08:37,079 Speaker 2: of acted like one of Elon Musk's rockets, a big 146 00:08:37,200 --> 00:08:41,600 Speaker 2: up after the IPO settling kind of back down since then, 147 00:08:42,240 --> 00:08:45,000 Speaker 2: do you see this stock kind of settling at a 148 00:08:45,120 --> 00:08:49,080 Speaker 2: level anytime soon or are we expecting even more volatility. 149 00:08:49,679 --> 00:08:52,320 Speaker 6: Well, we can't predict that. However, what I do find 150 00:08:52,400 --> 00:08:56,680 Speaker 6: really interesting is that along with the entry, we're also 151 00:08:56,720 --> 00:08:59,760 Speaker 6: expecting the quiet period for those IPO underwriters to also 152 00:09:00,200 --> 00:09:02,800 Speaker 6: next week, so investors will be able to expect to 153 00:09:02,840 --> 00:09:06,640 Speaker 6: get analysis from banks like Goldman Sachs, Morgan Stanley, and 154 00:09:06,720 --> 00:09:10,000 Speaker 6: JP Morgan City as well as they initiate coverage of 155 00:09:10,000 --> 00:09:12,080 Speaker 6: the company. So it will be really interesting to see 156 00:09:12,080 --> 00:09:14,840 Speaker 6: how their price targets and analysis of the company stacks 157 00:09:14,920 --> 00:09:15,439 Speaker 6: up as well. 158 00:09:15,720 --> 00:09:19,440 Speaker 2: Absolutely, Yeah, lots more to come when it comes to 159 00:09:19,480 --> 00:09:23,559 Speaker 2: SpaceX and hard to believe, but we're already starting to 160 00:09:23,600 --> 00:09:26,280 Speaker 2: think about second quarter earning season as well. We're going 161 00:09:26,360 --> 00:09:28,240 Speaker 2: to start to hear from the first few companies before 162 00:09:28,240 --> 00:09:33,040 Speaker 2: the big banks open their books, including PepsiCo on Thursday. 163 00:09:33,720 --> 00:09:35,600 Speaker 2: Going to get a pretty decent look at the consumer 164 00:09:35,640 --> 00:09:37,679 Speaker 2: from this one, I guess absolutely. 165 00:09:37,880 --> 00:09:41,320 Speaker 6: As you mentioned, Pepsi Co has been facing a very 166 00:09:41,400 --> 00:09:44,520 Speaker 6: challenging season this year. Those shares not even up a 167 00:09:44,600 --> 00:09:48,840 Speaker 6: one percent year to date. However, shoppers remain very cautious 168 00:09:48,840 --> 00:09:51,320 Speaker 6: about their spending and also GLP ones are pushing some 169 00:09:51,360 --> 00:09:54,160 Speaker 6: consumers to seek out healthier options, which if you know 170 00:09:54,280 --> 00:09:56,839 Speaker 6: some of the brands that Pepsi is a parent company of, 171 00:09:56,920 --> 00:10:00,280 Speaker 6: like Cheetos, Dorito's, and Gatorade, and maybe sometimes hard to 172 00:10:00,360 --> 00:10:03,880 Speaker 6: come by. That being said, Barclays is writing that Pepsi 173 00:10:03,960 --> 00:10:07,800 Speaker 6: shares have underperformed other staple stocks in recent months as 174 00:10:07,840 --> 00:10:11,520 Speaker 6: investors remain very skeptical about how exactly the durability of 175 00:10:11,559 --> 00:10:15,240 Speaker 6: their turnaround in North America is. And also worth noting 176 00:10:15,320 --> 00:10:17,679 Speaker 6: that looking at options data at the moment, it's currently 177 00:10:17,720 --> 00:10:20,560 Speaker 6: implying about a three percent move after those results. 178 00:10:20,720 --> 00:10:22,400 Speaker 2: Okay, so not a whole lot of a move one 179 00:10:22,400 --> 00:10:24,520 Speaker 2: way or the other. But I mean, it's not just 180 00:10:24,760 --> 00:10:27,840 Speaker 2: changing tastes to think about with PepsiCo. They've been affected 181 00:10:27,880 --> 00:10:31,400 Speaker 2: as well by some of the commodity moves around the 182 00:10:31,440 --> 00:10:33,880 Speaker 2: war in the Middle East as well aluminum prices. You 183 00:10:33,880 --> 00:10:35,880 Speaker 2: got to think about as well, how can we see 184 00:10:35,920 --> 00:10:37,720 Speaker 2: that start to play in some of the results here. 185 00:10:38,080 --> 00:10:41,040 Speaker 6: That's a really great point as well. Bloomberg Intelligence had 186 00:10:41,080 --> 00:10:42,959 Speaker 6: a really great note out talking about how the company's 187 00:10:43,000 --> 00:10:45,719 Speaker 6: growth plan and also their full year outlook are going 188 00:10:45,760 --> 00:10:48,800 Speaker 6: to be really in play in a significant focus on 189 00:10:48,840 --> 00:10:52,120 Speaker 6: the call, especially for that cost inflation piece. As we 190 00:10:52,440 --> 00:10:55,360 Speaker 6: already said, like the consumers are very much stretched at 191 00:10:55,360 --> 00:10:58,600 Speaker 6: this moment, and for companies like Pepsi Co that is 192 00:10:58,679 --> 00:11:00,720 Speaker 6: kind of problematic, So it will be very interesting to 193 00:11:00,760 --> 00:11:05,920 Speaker 6: see how exactly they're also planning to handle these uncertain times, 194 00:11:05,920 --> 00:11:08,400 Speaker 6: to say the least, with the Iran war and other factors. 195 00:11:08,960 --> 00:11:11,880 Speaker 2: And not to be outdone. On Friday, we're going to 196 00:11:11,960 --> 00:11:16,400 Speaker 2: get earnings from Delta Airlines and an update I would 197 00:11:16,440 --> 00:11:19,920 Speaker 2: guess on how travel demand is holding up, not just 198 00:11:20,000 --> 00:11:23,800 Speaker 2: after all the geopolitics, but I mean we're right in 199 00:11:23,840 --> 00:11:25,880 Speaker 2: the heart of summer travel season here Avalon. 200 00:11:26,280 --> 00:11:30,480 Speaker 6: Yes, hopefully you have some travel planned Delta Definitely, as 201 00:11:30,520 --> 00:11:34,800 Speaker 6: you can expect, will be very interesting to see exactly 202 00:11:34,960 --> 00:11:37,160 Speaker 6: what they're going to be saying about those fuel costs 203 00:11:37,200 --> 00:11:39,120 Speaker 6: and also their full year guidance will be top of 204 00:11:39,200 --> 00:11:42,600 Speaker 6: mind for everyone going into that print options data already 205 00:11:42,640 --> 00:11:44,640 Speaker 6: showing that they're beginning to price a potential move of 206 00:11:44,679 --> 00:11:47,920 Speaker 6: about five point eight percent, So definitely, investors will be 207 00:11:48,040 --> 00:11:50,920 Speaker 6: very excited to see what exactly is happening at Delta 208 00:11:51,040 --> 00:11:54,440 Speaker 6: Tdcowan expecting a company to report very strong demand across 209 00:11:54,480 --> 00:11:58,000 Speaker 6: all products and geographies. They also note that a recent 210 00:11:58,120 --> 00:12:02,320 Speaker 6: drop in fuel prices with strong peak season pricing from 211 00:12:02,360 --> 00:12:05,400 Speaker 6: this summer travel should enable the company to produce margins 212 00:12:05,400 --> 00:12:08,880 Speaker 6: that beat expectations, especially into the third quarter, which I 213 00:12:08,920 --> 00:12:10,440 Speaker 6: know we're on the second quarter right now, but people 214 00:12:10,480 --> 00:12:12,720 Speaker 6: are also looking into the future as well, And also 215 00:12:12,760 --> 00:12:14,920 Speaker 6: worth noting that at least for these analysts, they've actually 216 00:12:14,920 --> 00:12:17,720 Speaker 6: already boosted their price target on Delta ahead of the 217 00:12:17,720 --> 00:12:20,480 Speaker 6: print to one hundred and six dollars from ninety two dollars. 218 00:12:20,600 --> 00:12:24,199 Speaker 2: Amazing considering when you look at a chart for Delta Airlines, 219 00:12:24,240 --> 00:12:27,600 Speaker 2: I mean, it's been on a pretty steady trajectory upward 220 00:12:28,200 --> 00:12:31,120 Speaker 2: so far this year. I mean it sounds like analysts 221 00:12:31,160 --> 00:12:34,439 Speaker 2: expect that to continue, even with some of the headwinds 222 00:12:34,440 --> 00:12:37,120 Speaker 2: we've seen for travel so far this year. 223 00:12:37,480 --> 00:12:40,360 Speaker 6: Yes, although I must say that definitely analysts are a 224 00:12:40,400 --> 00:12:43,000 Speaker 6: bit mixed. Even Bloomberg Intelligence had a great note out 225 00:12:43,080 --> 00:12:46,920 Speaker 6: saying that Delta's EBITDA and margins will likely be significantly 226 00:12:47,000 --> 00:12:49,480 Speaker 6: lower as the spike and fuel prices continues to eat 227 00:12:49,480 --> 00:12:51,920 Speaker 6: into profits. So while you do have some people who 228 00:12:52,000 --> 00:12:54,640 Speaker 6: are slightly more bullish, like TD Cowan, there are definitely 229 00:12:54,679 --> 00:12:57,640 Speaker 6: others who are slightly more cautious about what exactly the 230 00:12:57,640 --> 00:13:01,080 Speaker 6: future looks like for airlines, especially like Delta. 231 00:13:01,640 --> 00:13:06,480 Speaker 2: All Right, Bloomberg Cross asset reporter Avalon Purnell, lots of 232 00:13:06,520 --> 00:13:08,720 Speaker 2: stocks to keep an eye on as we head into 233 00:13:08,760 --> 00:13:11,080 Speaker 2: a new week. Here, Avalon, thank you for this, And 234 00:13:11,160 --> 00:13:14,040 Speaker 2: coming up on Bloomberg Daybreak weekend, we'll look ahead to 235 00:13:14,080 --> 00:13:17,960 Speaker 2: a key NATO summit happening in Turkey this week. I'm 236 00:13:18,040 --> 00:13:26,040 Speaker 2: Nathan Hager, and this is Bloomberg. This is Bloomberg Daybreak weekend, 237 00:13:26,120 --> 00:13:28,760 Speaker 2: our global look ahead at the top stories for investors 238 00:13:28,760 --> 00:13:31,840 Speaker 2: in the coming week. I'm Nathan Hager in Washington. Up 239 00:13:31,920 --> 00:13:34,120 Speaker 2: later in the program, we'll look to some key inflation 240 00:13:34,320 --> 00:13:37,719 Speaker 2: data coming out this week in China. But first, NATO's 241 00:13:37,840 --> 00:13:41,160 Speaker 2: thirty two member states meet in Uncorra, Turkey on July 242 00:13:41,320 --> 00:13:44,880 Speaker 2: seventh and eighth. NATO's Secretary General Mark Ruta has been 243 00:13:44,960 --> 00:13:48,560 Speaker 2: pressing allies to commit to higher defense spending, with President 244 00:13:48,600 --> 00:13:52,400 Speaker 2: Trump pushing for five percent of GDP as a benchmark 245 00:13:52,600 --> 00:13:54,920 Speaker 2: for more. Let's get to Bloomberg Daybreak. You're a banker, 246 00:13:54,960 --> 00:13:56,880 Speaker 2: Caroline Hepger in London. 247 00:13:56,760 --> 00:14:00,800 Speaker 3: Nathan, President Trump is expected to gather with other leaders 248 00:14:00,840 --> 00:14:05,679 Speaker 3: and also representatives from Ukraine, Japan, South Korea, Australia and 249 00:14:05,840 --> 00:14:10,440 Speaker 3: New Zealand. European allies are racing to demonstrate credibility on 250 00:14:10,600 --> 00:14:14,400 Speaker 3: spending and beef up capacity as the US has proved 251 00:14:14,440 --> 00:14:19,040 Speaker 3: increasingly erratic, threatening to draw down troops from Germany, which 252 00:14:19,120 --> 00:14:23,920 Speaker 3: has the second largest US deployment outside of Japan. Former 253 00:14:24,040 --> 00:14:28,160 Speaker 3: NATO Secretary General Jen Stoltenberg said in early June that 254 00:14:28,360 --> 00:14:32,800 Speaker 3: US European tensions within the Alliance are more difficult to 255 00:14:32,880 --> 00:14:36,520 Speaker 3: manage now than when he left in twenty twenty four, 256 00:14:36,960 --> 00:14:40,760 Speaker 3: adding that the situation has moved in an even worse direction. 257 00:14:41,600 --> 00:14:45,560 Speaker 3: This is the UK and others are shifting towards drone technology, 258 00:14:45,800 --> 00:14:52,160 Speaker 3: AI enabled capabilities and autonomous platforms now. The International Monetary 259 00:14:52,160 --> 00:14:55,680 Speaker 3: Fund warned, though in April, that the global defense spending 260 00:14:55,960 --> 00:15:00,720 Speaker 3: surge risks widening fiscal deficits over the media in term, 261 00:15:01,120 --> 00:15:06,840 Speaker 3: as most outlays are being financed through higher borrowing. The 262 00:15:07,040 --> 00:15:11,040 Speaker 3: NATO Secretary General Mark Rutter, the current one, met with 263 00:15:11,160 --> 00:15:14,680 Speaker 3: President Champ in the Oval Office ahead of this NATO summit. 264 00:15:15,200 --> 00:15:19,160 Speaker 3: Here he is speaking to Bloomberg's Joe Matthew and Kaylie Larns. 265 00:15:19,640 --> 00:15:22,720 Speaker 7: The United States has to take care of multiple theaters, 266 00:15:22,760 --> 00:15:25,760 Speaker 7: not only Europe, also for example in the Pacific, and 267 00:15:26,000 --> 00:15:30,480 Speaker 7: if a situation would occur where they have to defend 268 00:15:30,680 --> 00:15:34,080 Speaker 7: both sides of the equation, both in the Pacific and Europe, 269 00:15:34,520 --> 00:15:36,560 Speaker 7: they have to avoid the situation in which they have 270 00:15:36,640 --> 00:15:40,040 Speaker 7: spread their resources too thinly. This is why Europeans have 271 00:15:40,120 --> 00:15:43,800 Speaker 7: to step up. This is NATO three point zero. Stronger 272 00:15:43,840 --> 00:15:46,400 Speaker 7: Europe and a stronger NATO. That means that the US 273 00:15:46,440 --> 00:15:49,680 Speaker 7: will stay involved when it comes to the nuclear umbrella, 274 00:15:49,760 --> 00:15:53,200 Speaker 7: but also when it comes to the conventional But over time, 275 00:15:53,240 --> 00:15:56,040 Speaker 7: what you now will see, and this is a structured process, 276 00:15:56,960 --> 00:15:59,240 Speaker 7: is that the Europeans are taking over more and more 277 00:15:59,720 --> 00:16:02,600 Speaker 7: of that leadership rule. For example, when it comes to 278 00:16:02,640 --> 00:16:07,080 Speaker 7: the three combatant commands, they will over the next eighteen 279 00:16:07,120 --> 00:16:12,280 Speaker 7: to twenty four months move from American generals and admirals 280 00:16:12,320 --> 00:16:16,280 Speaker 7: to European generals and admirals. So that's also an example 281 00:16:16,800 --> 00:16:19,120 Speaker 7: of European stepping up. But also when it comes to Ukraine, 282 00:16:19,440 --> 00:16:21,680 Speaker 7: the fact that US is still providing all the support 283 00:16:21,680 --> 00:16:24,240 Speaker 7: but paid for by Europeans in Canada, which is only fair, 284 00:16:24,320 --> 00:16:28,080 Speaker 7: So europe stepping up the US staying heavily involved when 285 00:16:28,120 --> 00:16:32,680 Speaker 7: it comes to the conventional nuclear detterns in Europe. 286 00:16:32,960 --> 00:16:36,560 Speaker 3: So that was NATO's Mark Rutter speaking to Bloomberg there well. 287 00:16:36,640 --> 00:16:40,240 Speaker 3: Joining us now to discuss the upcoming summit are Bloomberg's 288 00:16:40,240 --> 00:16:44,920 Speaker 3: EU Defense and Foreign policy reporter Andre Paalaciano and Bloomberg's 289 00:16:44,960 --> 00:16:48,600 Speaker 3: European Government editor Rich Bravo. Welcome to both of you. 290 00:16:48,720 --> 00:16:49,800 Speaker 3: Thanks for speaking to me. 291 00:16:50,680 --> 00:16:50,920 Speaker 1: Rich. 292 00:16:51,360 --> 00:16:56,480 Speaker 3: How fraught is the relationship between NATO's European members and 293 00:16:56,560 --> 00:16:58,240 Speaker 3: the United States right now? 294 00:16:59,320 --> 00:17:03,040 Speaker 8: It's really hard to overstate how delicate this relationship is 295 00:17:03,080 --> 00:17:08,479 Speaker 8: between Europe and the European allies in NATO and the US. 296 00:17:09,280 --> 00:17:13,600 Speaker 8: I mean currently you have a very contentious trade relationship 297 00:17:14,080 --> 00:17:20,840 Speaker 8: which is undergoing of certain negotiations. The EU eventually agreed 298 00:17:20,880 --> 00:17:24,680 Speaker 8: to accept a very what they think is an unfair 299 00:17:25,480 --> 00:17:29,119 Speaker 8: trade agreement in which they're paying fifteen or there is 300 00:17:29,160 --> 00:17:32,520 Speaker 8: a fifteen percent levy on all European exports to the US, 301 00:17:32,600 --> 00:17:36,879 Speaker 8: and Europe has removed all tariffs on US products. So 302 00:17:37,840 --> 00:17:43,119 Speaker 8: the underlying theme here is that when they approach NATO 303 00:17:43,200 --> 00:17:47,160 Speaker 8: and they approach defense issues, they approach this understanding that 304 00:17:47,520 --> 00:17:53,680 Speaker 8: every issue with Trump is related, trade, defense, security, geopolitics. 305 00:17:53,720 --> 00:17:56,600 Speaker 8: Everything is in the same bag. So when you look 306 00:17:56,640 --> 00:18:01,080 Speaker 8: at a deteriorating relationship with the US, you can just 307 00:18:01,200 --> 00:18:04,560 Speaker 8: look at the defense angle or the trade angle, because 308 00:18:04,760 --> 00:18:08,680 Speaker 8: all of these things are related. And when the US 309 00:18:08,760 --> 00:18:14,080 Speaker 8: becomes unhappy about the trade situation, then Trump will bring 310 00:18:14,160 --> 00:18:18,760 Speaker 8: up the threat of removing security for the continent. So 311 00:18:20,080 --> 00:18:25,600 Speaker 8: things have gotten really contentious and fraud with the European 312 00:18:25,600 --> 00:18:26,359 Speaker 8: allies in NATO. 313 00:18:26,920 --> 00:18:31,600 Speaker 3: Yeah, so it's all interlaced, intertwined, and President Trump will 314 00:18:31,600 --> 00:18:33,960 Speaker 3: be there in person, So you have to add on 315 00:18:34,040 --> 00:18:38,000 Speaker 3: to that that sometimes things can pivot on a social 316 00:18:38,040 --> 00:18:43,160 Speaker 3: media post. Andrea, how quickly is the United States withdrawing 317 00:18:43,280 --> 00:18:46,560 Speaker 3: troops from Europe? How do the Europeans see this? 318 00:18:48,240 --> 00:18:53,120 Speaker 9: Well, it's very much an ongoing, unfolding process. There has been, indeed, 319 00:18:53,600 --> 00:18:58,280 Speaker 9: the social media post announcement, as you just mentioned, that 320 00:18:58,600 --> 00:19:01,680 Speaker 9: the US would be with drowing five thousand troops from 321 00:19:01,880 --> 00:19:06,359 Speaker 9: from Europe. That hasn't happened yet. It is expected to 322 00:19:06,359 --> 00:19:09,600 Speaker 9: happen soon, but it hasn't happened yet. However, that was 323 00:19:09,800 --> 00:19:12,120 Speaker 9: kind of the tip of the iceberg. Really, when when 324 00:19:12,200 --> 00:19:15,160 Speaker 9: we think about the US disengaging from the European continent. 325 00:19:15,560 --> 00:19:19,840 Speaker 9: That was the one social media, very visible announcement that 326 00:19:19,840 --> 00:19:22,600 Speaker 9: that Trump made. But what's much more serious is that 327 00:19:23,280 --> 00:19:29,359 Speaker 9: the US has reviewed it's so called NATO force model. 328 00:19:29,800 --> 00:19:31,920 Speaker 9: What does that mean. It's the it's the assets and 329 00:19:32,000 --> 00:19:35,040 Speaker 9: the troops that the US would send to Europe if 330 00:19:35,080 --> 00:19:37,480 Speaker 9: there was a war or a major crisis in Europe, 331 00:19:37,760 --> 00:19:41,720 Speaker 9: and that has been slashed massively. And because these troops 332 00:19:41,880 --> 00:19:44,800 Speaker 9: are not technically in Europe yet, but they would be deployed, 333 00:19:45,400 --> 00:19:48,840 Speaker 9: these changes are effective immediately. Basically, so if there is 334 00:19:48,880 --> 00:19:52,920 Speaker 9: a war in Europe tomorrow, these changes would already apply. 335 00:19:53,640 --> 00:19:57,159 Speaker 9: And on top of that, when Hexseth came to Brussels 336 00:19:57,840 --> 00:20:03,040 Speaker 9: a few days ago, he all so delivered another shaker 337 00:20:03,200 --> 00:20:08,200 Speaker 9: two allies in the name of a six month forest 338 00:20:08,240 --> 00:20:10,960 Speaker 9: Pasture review, which means that in the next six months, 339 00:20:10,960 --> 00:20:12,919 Speaker 9: the US will be looking at all of its forces, 340 00:20:12,960 --> 00:20:16,200 Speaker 9: all of its assets that are currently in Europe and 341 00:20:16,720 --> 00:20:19,920 Speaker 9: will be deciding whether they're all necessary there and there 342 00:20:19,920 --> 00:20:23,120 Speaker 9: we can expect the really serious stratauns to happen from 343 00:20:23,920 --> 00:20:25,440 Speaker 9: the assets currently in Europe. 344 00:20:26,200 --> 00:20:28,639 Speaker 3: Yeah, and so you can sort of feel the tectonic 345 00:20:28,720 --> 00:20:31,880 Speaker 3: plates can't do shifting. I mean the e five countries, 346 00:20:31,920 --> 00:20:36,400 Speaker 3: So these are the most important, perhaps European countries. They 347 00:20:36,440 --> 00:20:39,080 Speaker 3: met ahead of the NATO summit Andrea, and they have 348 00:20:39,320 --> 00:20:43,359 Speaker 3: said that they're trying to make NATO more European. What 349 00:20:43,480 --> 00:20:47,040 Speaker 3: has changed in terms of defense spending? You just heard 350 00:20:47,080 --> 00:20:50,080 Speaker 3: earlier from Mark Rutta, who is there with the kind 351 00:20:50,080 --> 00:20:54,720 Speaker 3: of gold embossed bar shots in the White House, and 352 00:20:54,800 --> 00:21:00,000 Speaker 3: this idea of pledging and increasing defense spending in Europe? 353 00:21:00,200 --> 00:21:02,840 Speaker 3: What is moving? How are we thinking about this? 354 00:21:04,040 --> 00:21:07,440 Speaker 9: So indeed Mark Rote went to the White House, showcased 355 00:21:07,480 --> 00:21:12,359 Speaker 9: big numbers, praised allies for spending so much more, and 356 00:21:12,720 --> 00:21:16,600 Speaker 9: indeed that's you know, that's it is true countries in 357 00:21:16,680 --> 00:21:19,160 Speaker 9: Europe have been spending a lot more than they were 358 00:21:19,240 --> 00:21:24,000 Speaker 9: a few years ago. But as these things go, some 359 00:21:24,040 --> 00:21:26,720 Speaker 9: of the countries of NATO took this more seriously than others. 360 00:21:26,760 --> 00:21:29,200 Speaker 9: So we have countries like Germany who have really been 361 00:21:30,000 --> 00:21:35,920 Speaker 9: doling out the billion dollar contracts procuring buying weapons and 362 00:21:35,960 --> 00:21:39,760 Speaker 9: really ramping up. Others haven't really done. So we have 363 00:21:39,840 --> 00:21:42,720 Speaker 9: a number of countries that are still hovering about around 364 00:21:42,720 --> 00:21:45,800 Speaker 9: two percent, which used to be the previous target, and 365 00:21:46,080 --> 00:21:48,760 Speaker 9: don't seem to be on a path on a credible 366 00:21:48,760 --> 00:21:53,320 Speaker 9: path to reach these three point five plus one point 367 00:21:53,320 --> 00:21:57,480 Speaker 9: five for defense related spending, so five in total anytime soon. 368 00:21:58,560 --> 00:22:01,919 Speaker 9: So yes, across the science it's not very consistent. But 369 00:22:01,960 --> 00:22:07,920 Speaker 9: also there is a real difference between pledging money, announcing spending, 370 00:22:08,280 --> 00:22:12,760 Speaker 9: announcing contracts, and having those actual capabilities. And so because 371 00:22:12,800 --> 00:22:16,840 Speaker 9: as we were saying, a lot of the US pivot 372 00:22:18,040 --> 00:22:22,679 Speaker 9: is effective immediately. And also we have been giving this 373 00:22:22,760 --> 00:22:26,359 Speaker 9: six months timeline for the US Force Pasture review, we 374 00:22:26,440 --> 00:22:30,520 Speaker 9: are talking about timelines that Europe simply cannot match. So 375 00:22:31,720 --> 00:22:35,199 Speaker 9: this is exactly the scenario, the nightmare scenario for Europe, 376 00:22:35,200 --> 00:22:38,760 Speaker 9: basically that the US will withdraw too quickly without giving 377 00:22:38,800 --> 00:22:41,080 Speaker 9: them the time to actually ramp up and have the 378 00:22:41,119 --> 00:22:44,640 Speaker 9: actual weapons and men to replace them. 379 00:22:45,320 --> 00:22:49,159 Speaker 3: In terms of the threat assessment, though, now, how do 380 00:22:49,200 --> 00:22:51,960 Speaker 3: we think about the biggest threats to Europe? What do 381 00:22:52,000 --> 00:22:54,960 Speaker 3: we think about the Russian threat to Europe? Is that 382 00:22:55,000 --> 00:22:57,000 Speaker 3: the still the main one, which. 383 00:22:57,880 --> 00:23:03,080 Speaker 8: Well, that's obviously a massive concern in Europe, particularly in 384 00:23:03,119 --> 00:23:07,880 Speaker 8: the Baltic States. But obviously the Russia's war in Ukraine 385 00:23:08,000 --> 00:23:12,639 Speaker 8: has depleted its economy and military quite significantly. So the 386 00:23:13,440 --> 00:23:18,040 Speaker 8: concerns about a near term threat are not very high. 387 00:23:18,119 --> 00:23:21,199 Speaker 8: But we've also seen an increase in drone incursions and 388 00:23:21,240 --> 00:23:26,199 Speaker 8: an increase in hybrid attacks, which show that Moscow is 389 00:23:26,920 --> 00:23:31,640 Speaker 8: testing NATO's waters and they want to see what NATO's 390 00:23:31,640 --> 00:23:33,760 Speaker 8: reaction is to these incursions. 391 00:23:34,000 --> 00:23:38,280 Speaker 3: Okay, theoretical, Well, let's think about the next few days. Then, 392 00:23:38,480 --> 00:23:40,119 Speaker 3: do you think there's going to be a sting in 393 00:23:40,160 --> 00:23:45,240 Speaker 3: the tail over Iran? Trump, heg Seth, Rubio have all 394 00:23:45,320 --> 00:23:49,160 Speaker 3: been critical about the lack of European support for this 395 00:23:49,680 --> 00:23:50,440 Speaker 3: US war. 396 00:23:51,359 --> 00:23:53,920 Speaker 8: Yes, you've hit on a very good point there. The 397 00:23:55,200 --> 00:24:00,400 Speaker 8: role that Europe has played, well, more specifically, the role 398 00:24:00,440 --> 00:24:03,920 Speaker 8: that Europe has not played in the Iran war has 399 00:24:04,760 --> 00:24:08,080 Speaker 8: really upset Trump and and hag Seth in the in 400 00:24:08,119 --> 00:24:13,399 Speaker 8: the American administration, obviously, Italy and Spain did not allow 401 00:24:13,520 --> 00:24:17,400 Speaker 8: the US to use certain of its bases under certain circumstances, 402 00:24:17,520 --> 00:24:21,280 Speaker 8: and this is something that Trump has returned to repeatedly. 403 00:24:22,200 --> 00:24:27,680 Speaker 8: They're not happy with the fact that that that Germany, 404 00:24:28,280 --> 00:24:33,600 Speaker 8: Germany's Merits and other European leaders, particularly Pedro Sanchez in Spain, 405 00:24:33,680 --> 00:24:38,840 Speaker 8: have been critical of the war. The Pope was critical 406 00:24:39,000 --> 00:24:44,439 Speaker 8: and Trump got into a social media battle of source 407 00:24:44,560 --> 00:24:49,200 Speaker 8: with Prime Minister Maloney over over those comments. But this 408 00:24:49,280 --> 00:24:53,440 Speaker 8: is a big issue between Europe and the US, and 409 00:24:54,200 --> 00:24:58,800 Speaker 8: Europe has been trying more recently to sort of paper 410 00:24:58,840 --> 00:25:01,560 Speaker 8: over those and give as much support as they can. 411 00:25:01,680 --> 00:25:06,119 Speaker 8: So you saw France and the UK launch a joint 412 00:25:06,200 --> 00:25:09,800 Speaker 8: expeditionary mission that would clear minds in the Strait of 413 00:25:09,800 --> 00:25:13,880 Speaker 8: horror moves once fighting had ended. This is again all 414 00:25:13,920 --> 00:25:17,080 Speaker 8: on paper and whether it ever comes to pass remains 415 00:25:17,080 --> 00:25:20,119 Speaker 8: to be seen. But Europe is really bending over backwards 416 00:25:20,160 --> 00:25:23,800 Speaker 8: to try and play Kate Trump on the issue of Iran. 417 00:25:23,920 --> 00:25:26,879 Speaker 3: Why Thanks to Bloomberg's EU Defense and Foreign policy reporter 418 00:25:27,000 --> 00:25:31,560 Speaker 3: Andrea Palashiano and to Bloomberg's European Government editor Rich Bravo. 419 00:25:31,640 --> 00:25:33,560 Speaker 3: Really great to speak to both of you. We will 420 00:25:33,560 --> 00:25:38,000 Speaker 3: have full coverage of everything from anchor across Bloomberg platforms. 421 00:25:38,160 --> 00:25:40,600 Speaker 3: I'm Caline Hebge here in London. You can catch us 422 00:25:40,600 --> 00:25:44,000 Speaker 3: every weekday morning here for Bloomberg Daybreak Europe. That begins 423 00:25:44,160 --> 00:25:47,480 Speaker 3: at six am in London, one am on Wall Street. 424 00:25:47,800 --> 00:25:51,320 Speaker 2: Nathan, Thanks Caroline and coming up on Bloomberg Daybreak weekend. 425 00:25:51,560 --> 00:25:54,280 Speaker 2: Key inflation data out of China in the coming week. 426 00:25:54,359 --> 00:25:57,520 Speaker 2: We'll get a preview of what to expect. I'm Nathan Hager, 427 00:25:57,640 --> 00:26:11,280 Speaker 2: and this is Bloomberg. I'm Nathan Hager in Washington with 428 00:26:11,320 --> 00:26:14,040 Speaker 2: your global look ahead of the top stories for investors 429 00:26:14,160 --> 00:26:17,040 Speaker 2: in the coming week, when we'll get the latest readings 430 00:26:17,080 --> 00:26:20,920 Speaker 2: on inflation in China. For a closer look, let's get 431 00:26:20,920 --> 00:26:24,320 Speaker 2: to Doug Krisner, host of the Bloomberg Daybreak Asia podcast. 432 00:26:24,560 --> 00:26:29,000 Speaker 4: Thanks Nathan. As we know, after years of deflation, especially 433 00:26:29,000 --> 00:26:33,160 Speaker 4: at the wholesale level, China has upward momentum now in prices. 434 00:26:33,560 --> 00:26:36,560 Speaker 4: We'll get the official numbers for June in the week ahead. Now, 435 00:26:36,600 --> 00:26:40,199 Speaker 4: the May readings on inflation showed producer prices rising for 436 00:26:40,280 --> 00:26:43,320 Speaker 4: a third straight month to the highest level since July 437 00:26:43,480 --> 00:26:47,480 Speaker 4: twenty twenty two, and at the consumer level, prices rose 438 00:26:47,480 --> 00:26:50,120 Speaker 4: at an annual rate of one point two percent, mainly 439 00:26:50,200 --> 00:26:54,200 Speaker 4: because of higher gasoline along with gold, jewelry, and services. 440 00:26:54,600 --> 00:26:58,320 Speaker 4: So the big question now is will these trends remain intact. 441 00:26:58,800 --> 00:27:02,119 Speaker 4: Let's bring in Bloomberg's Out Wong. He is the leader 442 00:27:02,160 --> 00:27:05,399 Speaker 4: of the news team that covers China's government and economy, 443 00:27:05,840 --> 00:27:08,320 Speaker 4: and Alan joins from our studios in Hong Kong. Thank 444 00:27:08,359 --> 00:27:10,520 Speaker 4: you for being here. I want to begin if we 445 00:27:10,560 --> 00:27:13,080 Speaker 4: can by looking at what happened in the last week 446 00:27:13,119 --> 00:27:17,560 Speaker 4: with the official PMI data on the factory side, improved 447 00:27:17,640 --> 00:27:21,800 Speaker 4: manufacturing activity and then the non manufacturing came in at 448 00:27:21,800 --> 00:27:24,480 Speaker 4: a positive reading. Give me a sense of what's happening 449 00:27:24,880 --> 00:27:27,200 Speaker 4: in the big picture right now with the Chinese economy. 450 00:27:27,280 --> 00:27:30,840 Speaker 10: The big picture still shows that there's still broadly speaking, 451 00:27:31,080 --> 00:27:35,359 Speaker 10: very weak consumption appetite from the many millions of people 452 00:27:35,440 --> 00:27:39,320 Speaker 10: in China, whereas the export market and demand for China's 453 00:27:39,359 --> 00:27:43,760 Speaker 10: factory output has remained relatively strong, and so that was 454 00:27:43,760 --> 00:27:45,879 Speaker 10: a story of the PMI as well. We're seeing that 455 00:27:46,160 --> 00:27:52,360 Speaker 10: global demand for good helped China's activity accelerate from what 456 00:27:52,640 --> 00:27:56,160 Speaker 10: economists expected based on a PMI number from last week. 457 00:27:56,359 --> 00:27:56,960 Speaker 7: So if we. 458 00:27:56,880 --> 00:27:59,200 Speaker 4: Try to understand what we may see in terms of 459 00:27:59,240 --> 00:28:02,840 Speaker 4: the inflation for the week ahead, does the PMI kind 460 00:28:02,880 --> 00:28:06,680 Speaker 4: of give us any guidance in some way? 461 00:28:07,680 --> 00:28:11,960 Speaker 10: Absolutely. The story to watch is the divergence in the 462 00:28:12,040 --> 00:28:15,199 Speaker 10: Chinese economy, and then the PMI just shows that the 463 00:28:15,240 --> 00:28:22,679 Speaker 10: export orders have been stronger than domestic subgauges. And we 464 00:28:22,800 --> 00:28:26,280 Speaker 10: expected to see some of that also with the price data, 465 00:28:26,680 --> 00:28:30,280 Speaker 10: because we've been seeing that consumer prices have been hovering 466 00:28:30,560 --> 00:28:35,200 Speaker 10: just above zero, while factory gay prices have swung sharply 467 00:28:35,320 --> 00:28:39,200 Speaker 10: from years of deflation into positive territory earlier this year. 468 00:28:39,840 --> 00:28:42,200 Speaker 10: So the kind of divergence we saw in May might 469 00:28:42,200 --> 00:28:47,040 Speaker 10: well continue in June, where the prices for producers rose 470 00:28:47,080 --> 00:28:49,920 Speaker 10: a lot more than consumer prices. That's just a very 471 00:28:49,960 --> 00:28:52,680 Speaker 10: long way to say that. Well, domestic demand remains very weak, 472 00:28:53,920 --> 00:28:56,240 Speaker 10: but export demands is just helping out here and there. 473 00:28:56,880 --> 00:29:00,160 Speaker 4: We are three months into war in Iran and we 474 00:29:00,160 --> 00:29:02,720 Speaker 4: have seen crude oil prices come down from the high. 475 00:29:02,800 --> 00:29:05,360 Speaker 4: They do remain elevated at the moment, whether you're looking 476 00:29:05,400 --> 00:29:09,720 Speaker 4: at WTI or Brent. And I'm wondering whether the story 477 00:29:09,880 --> 00:29:12,760 Speaker 4: on oil, given the moderation that we have seen in 478 00:29:13,040 --> 00:29:16,440 Speaker 4: oil prices, is going to show up in a way 479 00:29:16,480 --> 00:29:21,200 Speaker 4: that may kind of undermine some of the positive momentum 480 00:29:21,200 --> 00:29:23,480 Speaker 4: that we have had in inflation in China. 481 00:29:24,160 --> 00:29:27,400 Speaker 10: Yeah, certainly, I think it's a double s sore. First 482 00:29:27,400 --> 00:29:32,160 Speaker 10: of all, China has seen its price inflation improved to 483 00:29:32,560 --> 00:29:36,720 Speaker 10: a more healthy level because of the war, but then 484 00:29:36,920 --> 00:29:41,120 Speaker 10: those increases were quite contained in sectors that were exposed 485 00:29:41,120 --> 00:29:44,600 Speaker 10: to higher oil prices. And also, of course the global 486 00:29:44,600 --> 00:29:48,600 Speaker 10: AI boom. So even if oil prices return to lower level, 487 00:29:48,880 --> 00:29:53,640 Speaker 10: that just means that those sectors closely linked to oil 488 00:29:53,640 --> 00:29:58,720 Speaker 10: prices will see a falling prices and the broader economy 489 00:29:59,280 --> 00:30:02,280 Speaker 10: hasn't really been touched by all this conflict in terms 490 00:30:02,320 --> 00:30:06,280 Speaker 10: of prices. So the glass half Foovill is that when 491 00:30:06,360 --> 00:30:10,360 Speaker 10: prices come down, the consumers might feel more secure to spend. 492 00:30:10,680 --> 00:30:15,040 Speaker 10: Companies might well, most companies might feel less pressure to 493 00:30:17,000 --> 00:30:22,920 Speaker 10: on their profit margins, but the in terms of headline numbers, 494 00:30:22,960 --> 00:30:25,000 Speaker 10: we might see a lower number, and that just the 495 00:30:25,080 --> 00:30:29,400 Speaker 10: reminder to policymakers that there might be there's expectation for 496 00:30:29,480 --> 00:30:32,280 Speaker 10: them to do more to improve a domestic demand and 497 00:30:32,320 --> 00:30:33,800 Speaker 10: to support the prices. 498 00:30:34,160 --> 00:30:36,800 Speaker 4: So when you talk about weak domestic demand, two things 499 00:30:36,800 --> 00:30:39,680 Speaker 4: come to my mind. One is the property market, which 500 00:30:39,880 --> 00:30:41,920 Speaker 4: still seems to be I'm going to use the term 501 00:30:42,040 --> 00:30:45,560 Speaker 4: lackluster and that's probably an understatement. And the other thing 502 00:30:46,200 --> 00:30:48,160 Speaker 4: happens to be food prices. Can you give me a 503 00:30:48,200 --> 00:30:51,560 Speaker 4: sense of what's happening in those markets food and property? 504 00:30:52,560 --> 00:30:55,840 Speaker 10: Of course, yeah, the home price story hasn't really changed 505 00:30:55,840 --> 00:30:59,280 Speaker 10: in the last few years. China's properly market remains in 506 00:30:59,320 --> 00:31:02,840 Speaker 10: a downturn, and then there's been some signs of an 507 00:31:02,920 --> 00:31:05,400 Speaker 10: upswing that were turned out to be quite short lived, 508 00:31:05,680 --> 00:31:09,320 Speaker 10: and with the most recent months data, we see actually 509 00:31:09,360 --> 00:31:13,640 Speaker 10: an unexpected resumption of a decline in home prices, both 510 00:31:13,680 --> 00:31:17,600 Speaker 10: for new and used homes. In terms of food prices, 511 00:31:17,960 --> 00:31:21,920 Speaker 10: pork has been a persistent drag on the CPI. There's 512 00:31:21,960 --> 00:31:24,720 Speaker 10: been a sustained decline in pop prices and keeping food 513 00:31:24,760 --> 00:31:29,080 Speaker 10: inflation in the negative territory. UH, but that reflects mostly 514 00:31:29,240 --> 00:31:31,440 Speaker 10: oversupply in the hawks sector. That had to do with 515 00:31:31,560 --> 00:31:38,400 Speaker 10: the fact that there was UH African swine fever spreading 516 00:31:39,240 --> 00:31:43,200 Speaker 10: across the country which affected the supply of live hawks, 517 00:31:43,520 --> 00:31:47,160 Speaker 10: and then in the aftermath of that, hawk producers they 518 00:31:47,280 --> 00:31:50,240 Speaker 10: just overbuilt. And UH, now that we're seeing an oversupply, 519 00:31:50,320 --> 00:31:53,040 Speaker 10: So we've seen the pendulum swinging the other way now, 520 00:31:53,240 --> 00:31:56,800 Speaker 10: pot prices being one of the biggest CPI components in 521 00:31:56,800 --> 00:31:59,480 Speaker 10: the food category, so it's now dragging prices down. 522 00:32:00,080 --> 00:32:01,719 Speaker 4: You and I have talked in the past about the 523 00:32:01,760 --> 00:32:07,400 Speaker 4: excess capacity issue, particularly where electric vehicles are showing up, 524 00:32:07,520 --> 00:32:10,280 Speaker 4: and I'm wondering whether or not prices have come down 525 00:32:10,320 --> 00:32:14,160 Speaker 4: in a meaningful way for the big EV manufacturers and 526 00:32:14,560 --> 00:32:17,880 Speaker 4: how that's showing up in domestic demand or whether these 527 00:32:17,920 --> 00:32:22,720 Speaker 4: big car companies in China are still looking to markets 528 00:32:23,200 --> 00:32:26,320 Speaker 4: offshore to find a place for their goods. 529 00:32:27,400 --> 00:32:34,320 Speaker 10: The intense domestic competition is still keeping car makers very well, 530 00:32:34,440 --> 00:32:37,640 Speaker 10: giving them very limited space to raise prices. In fact, 531 00:32:37,640 --> 00:32:41,000 Speaker 10: prices still remain at a very low level, and they 532 00:32:41,360 --> 00:32:44,719 Speaker 10: naturally they're looking to export their cars overseas where they 533 00:32:44,760 --> 00:32:48,440 Speaker 10: can find high profit margins. So that story hasn't really changed, 534 00:32:48,760 --> 00:32:53,440 Speaker 10: and we're seeing that in export prices. We're categories for 535 00:32:53,840 --> 00:32:57,120 Speaker 10: things that are associated with global AI investment boom have 536 00:32:57,200 --> 00:33:02,400 Speaker 10: seen higher prices, but then for sectors that are in 537 00:33:02,520 --> 00:33:07,160 Speaker 10: traditional manufacturing, for example of for toys, the prices remain deflated, 538 00:33:08,080 --> 00:33:11,680 Speaker 10: which just goes to show that China's problem of destructive 539 00:33:12,200 --> 00:33:13,720 Speaker 10: over competition remains. 540 00:33:14,160 --> 00:33:16,160 Speaker 4: So we've talked about some of the hard data, let's 541 00:33:16,160 --> 00:33:18,840 Speaker 4: talk about some of the soft data, particularly when you're 542 00:33:18,920 --> 00:33:22,520 Speaker 4: measuring consumer sentiment. Yeah, you could make the case that 543 00:33:22,640 --> 00:33:25,719 Speaker 4: PMI is a sentiment indicator as well, but give me 544 00:33:25,760 --> 00:33:28,600 Speaker 4: a sense of how people are feeling right now in China. 545 00:33:29,080 --> 00:33:31,320 Speaker 4: Just about the overall performance of the economy. 546 00:33:33,520 --> 00:33:37,000 Speaker 10: We're seeing higher youth unemployment rate in fact, I released 547 00:33:37,000 --> 00:33:40,200 Speaker 10: a couple of months ago was the highest since they 548 00:33:40,240 --> 00:33:44,040 Speaker 10: revammed that indicator two years ago. And the overall employment 549 00:33:44,160 --> 00:33:48,719 Speaker 10: stays at a reasonably low level for China around five percent. 550 00:33:49,640 --> 00:33:52,120 Speaker 10: But then in terms of consumer sentiment, it really the 551 00:33:52,160 --> 00:33:55,080 Speaker 10: macro numbers tell the story better than than a trip 552 00:33:55,120 --> 00:33:59,960 Speaker 10: to China, because we're just seeing that retail sales were 553 00:34:00,040 --> 00:34:02,560 Speaker 10: at one of its weakest in the latest release, and 554 00:34:03,200 --> 00:34:06,080 Speaker 10: it just shows that people don't feel secure enough to 555 00:34:06,160 --> 00:34:08,440 Speaker 10: open their wallets. There are many reasons for that. I 556 00:34:08,440 --> 00:34:11,920 Speaker 10: think global turmoil in the oil market, geopolical to conflict, 557 00:34:12,360 --> 00:34:17,560 Speaker 10: and also and an uncertain outlook for people's income in China. 558 00:34:17,600 --> 00:34:20,360 Speaker 10: They all wait on the sentiments to spend. 559 00:34:20,440 --> 00:34:23,279 Speaker 4: So where does that leave policy makers allen, whether we're 560 00:34:23,280 --> 00:34:26,560 Speaker 4: talking on the monetary side, the central bank and the 561 00:34:26,719 --> 00:34:29,879 Speaker 4: impact of monetary policy on the currency, or whether we're 562 00:34:29,920 --> 00:34:34,560 Speaker 4: talking about the central government and fiscal policy, what are regulators? 563 00:34:34,560 --> 00:34:36,800 Speaker 4: What are policy makers trying to do at the moment 564 00:34:36,840 --> 00:34:39,160 Speaker 4: to maybe improve the outlook a bit. 565 00:34:39,640 --> 00:34:44,040 Speaker 10: The PBOC, this Chinese central Bank, has been maintaining an 566 00:34:44,160 --> 00:34:48,759 Speaker 10: accommodative monetary policy to support growth, which a lot of 567 00:34:48,760 --> 00:34:55,640 Speaker 10: economistsy is not enough to improve domestic demand, and there 568 00:34:55,680 --> 00:34:58,120 Speaker 10: are no obvious signs that they want to change that. 569 00:35:01,360 --> 00:35:04,319 Speaker 10: And then it's it shows in the credit data that 570 00:35:04,360 --> 00:35:09,680 Speaker 10: the demand in China for borrowing money to invest remains 571 00:35:09,760 --> 00:35:15,840 Speaker 10: extraordinarily weak. And then previous previously lowered rates market rates 572 00:35:15,880 --> 00:35:20,640 Speaker 10: did not really stimulate a loan demand, so that that 573 00:35:21,000 --> 00:35:25,759 Speaker 10: plus the inflationary environment might just give the central bank 574 00:35:25,840 --> 00:35:30,440 Speaker 10: some reason to moderate any attempt to carry out easing. 575 00:35:30,920 --> 00:35:34,360 Speaker 10: And overall, I mean the bank has been very cautious 576 00:35:34,520 --> 00:35:39,760 Speaker 10: to maintain that policy stance, and having driven this message 577 00:35:39,840 --> 00:35:44,319 Speaker 10: home repeatedly, I think the market has well understood that 578 00:35:44,360 --> 00:35:47,000 Speaker 10: the bank isn't likely to carry out any drastic step 579 00:35:47,040 --> 00:35:49,560 Speaker 10: in the meat in a short term. And we did 580 00:35:49,560 --> 00:35:52,280 Speaker 10: a survey actually just a couple of weeks ago showing 581 00:35:52,320 --> 00:35:57,719 Speaker 10: that economists now forecast no policy rate cut this year, 582 00:35:58,120 --> 00:36:02,000 Speaker 10: according to the median estimate, and that was pushedback from 583 00:36:02,239 --> 00:36:05,160 Speaker 10: the estimate of one cut for the remainder. 584 00:36:04,880 --> 00:36:05,279 Speaker 11: Of the year. 585 00:36:05,480 --> 00:36:07,759 Speaker 4: Alan Willie bit there, thank you so very much. That 586 00:36:07,880 --> 00:36:10,640 Speaker 4: is Bloomberg's Alan Wong. He is the leader of our 587 00:36:10,719 --> 00:36:14,279 Speaker 4: news team covering China's economy and government, joining from our 588 00:36:14,360 --> 00:36:17,799 Speaker 4: studios in Hong Kong in New York City, we had 589 00:36:17,800 --> 00:36:21,160 Speaker 4: the chance to speak with NBA Hall of Famer Yao Ming. 590 00:36:21,719 --> 00:36:25,160 Speaker 4: Ming discussed the global expansion of the NBA and the 591 00:36:25,200 --> 00:36:28,480 Speaker 4: popularity of basketball around the world. Here he is speaking 592 00:36:28,560 --> 00:36:31,239 Speaker 4: with Bloomberg's Romain Bostik and Katie Greifeld. 593 00:36:31,719 --> 00:36:35,080 Speaker 12: Your old life story, certainly your professional story is kind 594 00:36:35,080 --> 00:36:38,720 Speaker 12: of rooted in that connection between Shanghai and the US, 595 00:36:39,080 --> 00:36:42,480 Speaker 12: and obviously you're coming into the NBA being the first 596 00:36:43,840 --> 00:36:47,640 Speaker 12: Chinese player to be drafted number one in the NBA draft, 597 00:36:47,680 --> 00:36:51,040 Speaker 12: and you became a cultural icon not only for the 598 00:36:51,120 --> 00:36:54,600 Speaker 12: Chinese people back home, but also for the NBA fan 599 00:36:54,719 --> 00:36:57,520 Speaker 12: base here, an NBA that was really trying to expand 600 00:36:57,560 --> 00:37:01,080 Speaker 12: its reach globally. When you look at the business ties 601 00:37:01,320 --> 00:37:04,000 Speaker 12: between these two nations and the two cities for that matter, 602 00:37:04,360 --> 00:37:06,680 Speaker 12: is it still strong today as it was back then? 603 00:37:07,000 --> 00:37:10,080 Speaker 11: Of course, of course basketball is the most popular sports 604 00:37:10,120 --> 00:37:13,160 Speaker 11: in the WARLD. I know this, you know, fifth World 605 00:37:13,160 --> 00:37:16,360 Speaker 11: Cup now is probably the top the headline for the 606 00:37:16,400 --> 00:37:18,799 Speaker 11: only newspaper today. But I have to say that the 607 00:37:18,840 --> 00:37:21,760 Speaker 11: basketball is shoulder to shoulder in China to the compared 608 00:37:21,800 --> 00:37:26,480 Speaker 11: to football or soccer what you call and that influences 609 00:37:26,520 --> 00:37:29,279 Speaker 11: so many of a young generation that they play on 610 00:37:29,960 --> 00:37:33,239 Speaker 11: the basketball field every day after school. Uh, sometimes they 611 00:37:33,239 --> 00:37:39,640 Speaker 11: skipped school for that and uh and after me, there's 612 00:37:39,760 --> 00:37:42,239 Speaker 11: many young young fellows who joined the NBA. 613 00:37:42,920 --> 00:37:43,160 Speaker 3: Uh. 614 00:37:43,239 --> 00:37:45,759 Speaker 11: You know, the last year we have a young young 615 00:37:45,800 --> 00:37:49,360 Speaker 11: player called Young Hanson who Hanson Young who joined the 616 00:37:49,400 --> 00:37:53,040 Speaker 11: Portland Trailer Blazers. I'm sure there's a many young player 617 00:37:53,200 --> 00:37:57,000 Speaker 11: like him that ego to to reach their you know, 618 00:37:57,200 --> 00:38:00,799 Speaker 11: reach their sky hopefully here in that few years. So 619 00:38:01,360 --> 00:38:06,279 Speaker 11: basketball really really connecting us together on the same few 620 00:38:06,480 --> 00:38:07,839 Speaker 11: and that's the magic of it. 621 00:38:08,520 --> 00:38:10,279 Speaker 1: Well, to follow up on that, I mean, what do 622 00:38:10,280 --> 00:38:13,200 Speaker 1: you think the key is to getting more young Chinese 623 00:38:13,239 --> 00:38:17,360 Speaker 1: players into the NBA Because that push internationally continues and 624 00:38:17,400 --> 00:38:18,719 Speaker 1: you are still seeing. 625 00:38:19,320 --> 00:38:21,840 Speaker 5: That that take place. But how do you think that 626 00:38:22,000 --> 00:38:24,120 Speaker 5: sort of expands I think. 627 00:38:24,080 --> 00:38:26,920 Speaker 11: There's no secret I know what a basketball world what 628 00:38:27,040 --> 00:38:29,440 Speaker 11: NBA did for a last a couple of decades, you know, 629 00:38:29,640 --> 00:38:32,399 Speaker 11: since the last commissioner, David Stan and Adam Silver. Today 630 00:38:32,440 --> 00:38:35,080 Speaker 11: they are did the incredible job to expand the sports 631 00:38:35,120 --> 00:38:37,680 Speaker 11: not only in China, but it is across the world too. 632 00:38:37,840 --> 00:38:40,319 Speaker 4: That was NBA Hall of Famer Yao Ming speaking to 633 00:38:40,320 --> 00:38:44,360 Speaker 4: Bloomberg's Romaine Bostic and Katie Greifeld. I'm Doug Christner. You 634 00:38:44,400 --> 00:38:47,000 Speaker 4: can catch us weekdays for the Daybreak as your podcast. 635 00:38:47,360 --> 00:38:49,640 Speaker 4: It's available wherever you get your podcast. 636 00:38:50,040 --> 00:38:53,200 Speaker 2: Nathan, Thanks Doug. And that does it for this edition 637 00:38:53,280 --> 00:38:56,520 Speaker 2: of Bloomberg Daybreak Weekend. Join us again Monday morning at 638 00:38:56,520 --> 00:38:59,680 Speaker 2: five am Wall Street Time for the latest don markets, overseas, 639 00:38:59,719 --> 00:39:02,200 Speaker 2: and the news you need to start your day. I'm 640 00:39:02,280 --> 00:39:05,680 Speaker 2: Nathan Hager. Stay with us. Top stories and global business 641 00:39:05,680 --> 00:39:07,239 Speaker 2: headlines are coming up right now.