1 00:00:02,360 --> 00:00:04,840 Speaker 1: This is Bloomberg day Break Weekend, our global look at 2 00:00:04,880 --> 00:00:06,800 Speaker 1: the top stories in the coming week from our day 3 00:00:06,800 --> 00:00:09,840 Speaker 1: Break anchors all around the world. Straight ahead on the program, 4 00:00:09,920 --> 00:00:13,079 Speaker 1: some key economic points for investors. I'm Tom Busby in 5 00:00:13,119 --> 00:00:14,640 Speaker 1: New York. I'll have that story. 6 00:00:14,800 --> 00:00:17,119 Speaker 2: I'm Stephen Carolyn London, where we're looking ahead to a 7 00:00:17,200 --> 00:00:21,320 Speaker 2: quadrupled bill of Central Bank decisions across Europe as policymakers 8 00:00:21,320 --> 00:00:24,000 Speaker 2: trying to push back on the idea that right bugs 9 00:00:24,000 --> 00:00:24,440 Speaker 2: are coming. 10 00:00:24,600 --> 00:00:28,040 Speaker 3: I'm deg Prisner looking at China downshifting to a slower 11 00:00:28,080 --> 00:00:28,640 Speaker 3: growth path. 12 00:00:28,840 --> 00:00:31,800 Speaker 4: I'm Keilly Lines in Washington, where Congress is getting ready 13 00:00:31,800 --> 00:00:35,440 Speaker 4: to wrap up their work twenty twenty three. 14 00:00:37,159 --> 00:00:41,239 Speaker 5: That's all straight ahead on Bloomberg Daybreak Weekend. The business 15 00:00:41,280 --> 00:00:45,240 Speaker 5: news you need to wrap up your week, Available on Apple, Spotify, 16 00:00:45,400 --> 00:00:50,800 Speaker 5: the Bloomberg Business Appen everywhere you get your podcasts. 17 00:00:53,479 --> 00:00:55,640 Speaker 1: Good day to you. I'm Tom Busby. We begin today's 18 00:00:55,680 --> 00:00:58,320 Speaker 1: program with a big week for the economy. Not only 19 00:00:58,400 --> 00:01:00,800 Speaker 1: will we get the Federal reserves fine I know, decision 20 00:01:00,800 --> 00:01:03,600 Speaker 1: of the year on interest rates, We'll also get two 21 00:01:03,880 --> 00:01:06,880 Speaker 1: key reports on inflation to help us break it all down. 22 00:01:06,920 --> 00:01:10,440 Speaker 1: We're pleased to welcome Bloomberg International Economics and Policy correspondent 23 00:01:10,520 --> 00:01:16,280 Speaker 1: Michael McKee and Bloomberg Intelligence Cheap US Rates strategist Ira Jersey. Now, 24 00:01:16,360 --> 00:01:19,679 Speaker 1: let's start with those key data points coming on inflation, 25 00:01:19,880 --> 00:01:24,119 Speaker 1: with November's Consumer price Index on Tuesday, the producer price 26 00:01:24,160 --> 00:01:27,640 Speaker 1: Index on Wednesday, Ira, what are you expecting to see? 27 00:01:27,680 --> 00:01:31,399 Speaker 6: We are expecting a reasonably high core print actually, and 28 00:01:31,440 --> 00:01:36,160 Speaker 6: remember core inflation in CPI has been coming down pretty dramatically, 29 00:01:36,240 --> 00:01:38,240 Speaker 6: but it looks like it might be in the process 30 00:01:38,240 --> 00:01:41,440 Speaker 6: of stabilizing just a little bit under four percent, which 31 00:01:41,480 --> 00:01:44,240 Speaker 6: is obviously not a good sign for the Fed Reserve 32 00:01:44,319 --> 00:01:47,160 Speaker 6: and the idea that the feder Reserve is going to 33 00:01:47,200 --> 00:01:50,720 Speaker 6: start cutting interest rates. And so I think that the 34 00:01:50,760 --> 00:01:53,680 Speaker 6: CPI report is probably going to be the most meaningful 35 00:01:53,720 --> 00:01:57,440 Speaker 6: report next week, at least for how the FED reacts 36 00:01:57,480 --> 00:02:00,280 Speaker 6: to the current inflationary environm. 37 00:02:00,200 --> 00:02:01,680 Speaker 1: And this comes before the Fed. 38 00:02:01,720 --> 00:02:04,000 Speaker 7: Michael, this is the first day of the FED meeting, 39 00:02:04,000 --> 00:02:06,760 Speaker 7: it's Tuesday. FED decision is on Wednesday, so it is 40 00:02:06,840 --> 00:02:10,000 Speaker 7: new information for them that they will incorporate into their 41 00:02:10,040 --> 00:02:14,680 Speaker 7: decision making. If the core doesn't move, it probably doesn't 42 00:02:14,720 --> 00:02:18,800 Speaker 7: mean anything for this decision because the Fed is basically 43 00:02:18,840 --> 00:02:22,000 Speaker 7: signaled they're going to stay on hold. The issue is 44 00:02:22,240 --> 00:02:26,280 Speaker 7: do we see something in the composition of the CPI 45 00:02:26,480 --> 00:02:28,800 Speaker 7: that would suggest one way or another that it will 46 00:02:29,120 --> 00:02:32,239 Speaker 7: again start falling, or that it's going to stay where 47 00:02:32,240 --> 00:02:35,360 Speaker 7: it is or even go up. One of the things 48 00:02:35,400 --> 00:02:39,760 Speaker 7: that we have been watching is of course housing and 49 00:02:39,880 --> 00:02:44,840 Speaker 7: housing costs, and they FED has expected housing as a 50 00:02:44,880 --> 00:02:48,760 Speaker 7: component of CPI to fall more than it has and 51 00:02:49,200 --> 00:02:51,720 Speaker 7: to slow more than it has. So if it doesn't 52 00:02:51,760 --> 00:02:55,920 Speaker 7: move in this month, then we might get FED official 53 00:02:56,000 --> 00:03:00,800 Speaker 7: starting to worry that if housing is not falling, inflation 54 00:03:00,960 --> 00:03:03,440 Speaker 7: is going to stall out. So that's something to watch 55 00:03:03,440 --> 00:03:04,120 Speaker 7: in the CPI. 56 00:03:04,480 --> 00:03:08,840 Speaker 1: And there is no sign of home prices declining anywhere pretty. 57 00:03:08,639 --> 00:03:11,520 Speaker 7: Much well we had home I mean, of course, rental 58 00:03:11,560 --> 00:03:16,520 Speaker 7: prices are what make up the CPI housing numbers, and 59 00:03:16,600 --> 00:03:19,359 Speaker 7: they were going down. They have started to go back 60 00:03:19,440 --> 00:03:22,920 Speaker 7: up again. They get into the CPI with a big lag, 61 00:03:23,800 --> 00:03:27,480 Speaker 7: sometimes as much as a year, and so we don't 62 00:03:27,520 --> 00:03:29,680 Speaker 7: know where we are in that lag process. We could 63 00:03:29,680 --> 00:03:32,519 Speaker 7: see housing continue to fall for another couple of months 64 00:03:32,560 --> 00:03:36,960 Speaker 7: before higher rates, higher rental rates start pushing it up again. 65 00:03:37,360 --> 00:03:39,880 Speaker 7: So that's the open question for the FED is they're 66 00:03:39,960 --> 00:03:44,320 Speaker 7: they're expecting this drop in housing and it hasn't happened yet. 67 00:03:44,320 --> 00:03:47,400 Speaker 7: And housing is about thirty percent of the CPI, so 68 00:03:47,720 --> 00:03:49,440 Speaker 7: it makes a big difference. 69 00:03:49,240 --> 00:03:51,880 Speaker 1: IIRA, where do you see at housing falling in and 70 00:03:51,920 --> 00:03:54,880 Speaker 1: what other aspects of the CPI are going to be 71 00:03:54,920 --> 00:03:56,480 Speaker 1: important to the Fed on Tuesday? 72 00:03:56,920 --> 00:03:59,280 Speaker 6: Yes, So what's interesting is we were just looking at 73 00:03:59,360 --> 00:04:02,680 Speaker 6: this past week with Eric Adelberg, who's our mortgage strategist, 74 00:04:03,200 --> 00:04:08,080 Speaker 6: and it is that twelve month lag between house prices 75 00:04:08,120 --> 00:04:11,320 Speaker 6: and rental prices and UH and the owner's equivalent rent 76 00:04:11,320 --> 00:04:15,080 Speaker 6: component of CPI is about that right number. And you know, 77 00:04:15,120 --> 00:04:17,560 Speaker 6: you've certainly seen, you know, a little bit of a 78 00:04:17,600 --> 00:04:22,120 Speaker 6: moderation in things like rents and and obviously that that 79 00:04:22,279 --> 00:04:24,560 Speaker 6: is one of the key components. But what I've been 80 00:04:24,560 --> 00:04:28,320 Speaker 6: focused on in most of these reports and CPI in particular, 81 00:04:28,960 --> 00:04:31,960 Speaker 6: but also the not as much retail sales but in 82 00:04:32,000 --> 00:04:34,839 Speaker 6: the overall consumer spending report is what's going on in 83 00:04:34,839 --> 00:04:37,400 Speaker 6: the services market, right, So, so there's been a big 84 00:04:37,440 --> 00:04:41,000 Speaker 6: disconnect in CPI between food and energy prices and then 85 00:04:41,080 --> 00:04:43,440 Speaker 6: core goods what we call core core goods, so that's 86 00:04:43,480 --> 00:04:47,040 Speaker 6: goods excluding energy, and then in core services so again 87 00:04:47,120 --> 00:04:50,240 Speaker 6: it services excluding energy services. And when when you look 88 00:04:50,279 --> 00:04:53,120 Speaker 6: at that service inflation continues to run at a pretty 89 00:04:53,120 --> 00:04:57,080 Speaker 6: decent clip. It's really goods prices that have moderated quite 90 00:04:57,080 --> 00:04:59,839 Speaker 6: a lot, with things like shipping costs coming back into 91 00:05:00,600 --> 00:05:04,880 Speaker 6: you know, historical pre pandemic kind of ranges and also 92 00:05:05,080 --> 00:05:08,800 Speaker 6: just I think just a somewhat slowing of demand for goods, 93 00:05:09,000 --> 00:05:12,760 Speaker 6: but service prices still remain reasonably high. So so I'm 94 00:05:12,760 --> 00:05:15,320 Speaker 6: going to be focused on that stickier part of the 95 00:05:15,360 --> 00:05:20,040 Speaker 6: CPI report and on on inflation on core services, even 96 00:05:20,120 --> 00:05:22,720 Speaker 6: core services x housing which some people call the supercore, 97 00:05:23,839 --> 00:05:27,000 Speaker 6: So because that has been sticky, right, and if that 98 00:05:27,040 --> 00:05:30,280 Speaker 6: continues to run over three percent, then it's it's going 99 00:05:30,360 --> 00:05:32,320 Speaker 6: to be more and more difficult for inflation to start 100 00:05:32,320 --> 00:05:34,600 Speaker 6: coming down. In fact, you know, we've had anamog on 101 00:05:34,640 --> 00:05:37,320 Speaker 6: the Bloomberg Economics team has called this like you know, 102 00:05:37,360 --> 00:05:39,640 Speaker 6: the last the last mile, right, So getting this last 103 00:05:39,760 --> 00:05:41,719 Speaker 6: like one hundred basis points one hundred and fifty basis 104 00:05:41,720 --> 00:05:44,040 Speaker 6: points lower in inflation is going to be much more 105 00:05:44,040 --> 00:05:46,440 Speaker 6: difficult than the first, say five percent was. 106 00:05:47,520 --> 00:05:49,240 Speaker 1: And what do you see the next day in the 107 00:05:49,279 --> 00:05:53,359 Speaker 1: PPI coming out? And I know, energy very volatile this 108 00:05:53,480 --> 00:05:57,960 Speaker 1: last week that it wouldn't factor into the November numbers. 109 00:05:58,000 --> 00:05:59,320 Speaker 1: But how does that play in? 110 00:05:59,680 --> 00:06:02,280 Speaker 6: Yeah, PPI is likely to be a bit lower than 111 00:06:02,600 --> 00:06:06,640 Speaker 6: CPI because remember PPI doesn't take into as much, you know, 112 00:06:06,720 --> 00:06:10,920 Speaker 6: the domestic services costs, right, So so and CPI PPI 113 00:06:11,000 --> 00:06:13,480 Speaker 6: final demand you know, certainly has been slowing, but you 114 00:06:13,520 --> 00:06:17,279 Speaker 6: haven't seen that necessarily correlate with consumer prices quite as much, 115 00:06:17,520 --> 00:06:18,880 Speaker 6: you know, you know, importantly, And I just want to 116 00:06:18,920 --> 00:06:20,760 Speaker 6: go back to CPI just for half a second, because 117 00:06:20,800 --> 00:06:24,719 Speaker 6: I think the market pricing of CPI right now is 118 00:06:24,760 --> 00:06:28,039 Speaker 6: really interesting because we've actually come off where you know, 119 00:06:28,120 --> 00:06:30,480 Speaker 6: for for the next ten years, the market's only expecting 120 00:06:30,560 --> 00:06:35,400 Speaker 6: two point two percent inflation CPI inflation over the next decade. 121 00:06:35,440 --> 00:06:39,200 Speaker 6: So the so for the FED, the market pricing certainly 122 00:06:39,320 --> 00:06:41,839 Speaker 6: is not a concern. Of course, the market did a 123 00:06:41,839 --> 00:06:44,760 Speaker 6: bad job in predicting the big run up in twenty 124 00:06:44,800 --> 00:06:48,520 Speaker 6: twenty two inflation. It was the market was very late 125 00:06:48,560 --> 00:06:51,880 Speaker 6: to that party. But nonetheless, people aren't going in and 126 00:06:51,920 --> 00:06:54,560 Speaker 6: buying a ton of inflation hedges right now that you know, 127 00:06:54,640 --> 00:06:58,240 Speaker 6: most of the most market participants seem to be pretty 128 00:06:58,240 --> 00:07:01,000 Speaker 6: sanguine on the inflation environment, and in both CPI and 129 00:07:01,040 --> 00:07:03,560 Speaker 6: PPI this week, if they come in kind of at 130 00:07:03,680 --> 00:07:06,359 Speaker 6: or slightly below expectations, it is certainly going to be 131 00:07:06,520 --> 00:07:08,960 Speaker 6: very good for the treasury market and you're going to 132 00:07:09,000 --> 00:07:11,720 Speaker 6: see probably a pretty good rally in treasuries. 133 00:07:12,640 --> 00:07:15,720 Speaker 1: Wow, now we have a CPI PPI and we moved 134 00:07:15,720 --> 00:07:19,240 Speaker 1: to the FOMC also coming ahead this week. We did 135 00:07:19,280 --> 00:07:22,560 Speaker 1: a lot of acronyms. Thank you for setting that up. 136 00:07:22,840 --> 00:07:25,960 Speaker 1: Two meetings in a row, keeping the benchmark lending rate unchanged. 137 00:07:26,560 --> 00:07:29,200 Speaker 1: What are you expecting the central bank policy makers to do? 138 00:07:29,360 --> 00:07:30,680 Speaker 1: Why don't we start with Michael Well? 139 00:07:30,680 --> 00:07:32,000 Speaker 7: I think the key thing that they're going to do 140 00:07:32,080 --> 00:07:34,480 Speaker 7: is they put out their new economic forecasts, which lead 141 00:07:34,560 --> 00:07:37,720 Speaker 7: to their new rate forecasts. And what the market's really 142 00:07:37,720 --> 00:07:39,360 Speaker 7: going to want on the first thing the market's going 143 00:07:39,400 --> 00:07:41,320 Speaker 7: to want to know after whether they moved or not, 144 00:07:41,360 --> 00:07:44,120 Speaker 7: and they're not expected to move, is what does the 145 00:07:44,160 --> 00:07:46,880 Speaker 7: dot plot say about twenty twenty four? Right now, we 146 00:07:47,000 --> 00:07:50,520 Speaker 7: got five rate moves priced in by the futures market 147 00:07:50,680 --> 00:07:54,360 Speaker 7: and about that in the swaps market. And the Fed 148 00:07:54,520 --> 00:07:57,640 Speaker 7: had said in September that we'd see a rate cut 149 00:07:57,760 --> 00:08:00,720 Speaker 7: or two next year, So there's a big differference between 150 00:08:00,840 --> 00:08:03,240 Speaker 7: what the FED had been seeing and what the market 151 00:08:03,280 --> 00:08:07,320 Speaker 7: now sees. So does the FED adopt the market view 152 00:08:07,320 --> 00:08:09,560 Speaker 7: that they'll be cutting rates a lot next year, or 153 00:08:09,600 --> 00:08:12,640 Speaker 7: do they stick with the idea that they're not going 154 00:08:12,680 --> 00:08:16,160 Speaker 7: to cut rates a whole lot. That plot shows where 155 00:08:16,200 --> 00:08:17,680 Speaker 7: the Fed thanks rates will be at the end of 156 00:08:17,680 --> 00:08:19,600 Speaker 7: the year, so it won't give a clue about the 157 00:08:19,640 --> 00:08:24,200 Speaker 7: timing unless there were multiple rate cuts in there, then 158 00:08:25,000 --> 00:08:27,600 Speaker 7: people would start to try to figure out when they 159 00:08:27,600 --> 00:08:31,080 Speaker 7: would do those to get the most banged out of 160 00:08:31,080 --> 00:08:34,640 Speaker 7: the buck. We'll also see to pick up what Iira 161 00:08:34,840 --> 00:08:37,760 Speaker 7: was saying, we'll see their new forecasts for inflation, and 162 00:08:37,800 --> 00:08:40,839 Speaker 7: we'll see whether they think inflation is going to be 163 00:08:41,120 --> 00:08:42,959 Speaker 7: coming down or remain sticky. 164 00:08:43,480 --> 00:08:43,720 Speaker 5: Iira. 165 00:08:44,679 --> 00:08:44,880 Speaker 8: Yeah. 166 00:08:44,880 --> 00:08:46,840 Speaker 6: The SEP I agree, is probably going to be the 167 00:08:46,840 --> 00:08:50,199 Speaker 6: most interesting thing in fact, the treasury market. Again to 168 00:08:50,240 --> 00:08:51,960 Speaker 6: point you to a piece that we did just this 169 00:08:52,040 --> 00:08:56,400 Speaker 6: past week about when the market moves during FED days, 170 00:08:56,440 --> 00:08:59,120 Speaker 6: and it really moves the most when you get the 171 00:08:59,160 --> 00:09:02,520 Speaker 6: summary of economic projections and the dreaded dot blot. So 172 00:09:02,520 --> 00:09:06,120 Speaker 6: so if the dots move significantly both for the twenty 173 00:09:06,160 --> 00:09:09,480 Speaker 6: twenty four dot and also potentially the longer run dot 174 00:09:09,520 --> 00:09:12,960 Speaker 6: if either of those medians move meaningfully from where they 175 00:09:13,040 --> 00:09:16,800 Speaker 6: were during the September Summary of Economic Projection. You know, 176 00:09:16,840 --> 00:09:18,959 Speaker 6: I think we can reprice a lot of a lot 177 00:09:18,960 --> 00:09:23,920 Speaker 6: of the rates markets repriced for cuts and or hikes. 178 00:09:24,440 --> 00:09:26,960 Speaker 6: You know, I continue to be of the belief that 179 00:09:27,000 --> 00:09:29,800 Speaker 6: the Fed Reserve is going to probably start cutting later 180 00:09:29,920 --> 00:09:32,880 Speaker 6: than what the market's priced. So the market will likely 181 00:09:32,960 --> 00:09:36,640 Speaker 6: continue to price for cuts sometime within the next say 182 00:09:36,679 --> 00:09:39,600 Speaker 6: at the third meeting out from wherever we are, until 183 00:09:39,600 --> 00:09:44,200 Speaker 6: they actually start cutting, even if those cuts are not materialized. 184 00:09:44,200 --> 00:09:47,480 Speaker 6: So that creates an opportunity for investors to kind of 185 00:09:47,520 --> 00:09:51,120 Speaker 6: fade that type of activity. Now that doesn't mean necessarily 186 00:09:51,160 --> 00:09:53,800 Speaker 6: that you know, long term yields necessarily need to sell 187 00:09:53,840 --> 00:09:55,760 Speaker 6: off and you wind up seeing ten year yields at 188 00:09:55,760 --> 00:09:58,160 Speaker 6: five percent again or anything like that. But it does 189 00:09:58,280 --> 00:10:00,679 Speaker 6: mean that the shape of a cur could shift a 190 00:10:00,720 --> 00:10:03,680 Speaker 6: little bit where some of the recent of what we 191 00:10:03,720 --> 00:10:06,320 Speaker 6: call bull steepening, so two year yields going down faster 192 00:10:06,400 --> 00:10:08,719 Speaker 6: than ten year yields, some of that might reverse a 193 00:10:08,720 --> 00:10:11,640 Speaker 6: little bit, especially if we're right and the Federal Reserve 194 00:10:12,080 --> 00:10:14,800 Speaker 6: kind of takes some of the some of these cuts 195 00:10:14,840 --> 00:10:16,800 Speaker 6: that are being priced off the table, and J Powell 196 00:10:16,840 --> 00:10:17,559 Speaker 6: could do that well. 197 00:10:17,559 --> 00:10:20,920 Speaker 1: Our thanks to Bloomberg International Economics and Policy correspondent Michael 198 00:10:21,000 --> 00:10:26,160 Speaker 1: McKee and Bloomberg Intelligence Chief US rate strategist Ira Jersey. 199 00:10:26,360 --> 00:10:28,640 Speaker 1: Coming up on Bloomberg day Break weekend, the Fed not 200 00:10:28,800 --> 00:10:31,600 Speaker 1: the only one making an interest rate decision. Up next, 201 00:10:31,640 --> 00:10:34,600 Speaker 1: we'll take you to Europe to preview two key central 202 00:10:34,600 --> 00:10:47,520 Speaker 1: bank decisions. I'm Tom Busby, and this is Bloomberg. This 203 00:10:47,600 --> 00:10:49,880 Speaker 1: is Bloomberg day Break weekend, our global look ahead at 204 00:10:49,920 --> 00:10:52,480 Speaker 1: the top stories for investors in the coming week. I'm 205 00:10:52,520 --> 00:10:55,120 Speaker 1: Tom Busby in New York. Up later in our program 206 00:10:55,120 --> 00:10:57,360 Speaker 1: a look at the health of the Chinese economy. But 207 00:10:57,440 --> 00:11:01,559 Speaker 1: first we just previewed the upcoming Federal Reserve decision. It's 208 00:11:01,600 --> 00:11:03,920 Speaker 1: also a big week ahead for central banks in Europe, 209 00:11:03,920 --> 00:11:06,200 Speaker 1: with both the Bank of England and the European Central 210 00:11:06,240 --> 00:11:09,920 Speaker 1: Bank meeting on Thursday. Market bets on raid cuts by 211 00:11:09,920 --> 00:11:12,960 Speaker 1: policymakers in London and Frankfurt have been ramping up, but 212 00:11:13,080 --> 00:11:16,719 Speaker 1: there's more data coming in that could temper that enthusiasm 213 00:11:16,760 --> 00:11:19,600 Speaker 1: for more. Let's go to London and bring in Bloomberg Daybreak. 214 00:11:19,600 --> 00:11:21,600 Speaker 1: Europe Banker Stephen Carroll. 215 00:11:21,440 --> 00:11:24,720 Speaker 2: Tom We're set for a quadruple bill of central bank 216 00:11:24,760 --> 00:11:28,560 Speaker 2: meetings on Thursday in Europe. Monetary policy decisions expected in 217 00:11:28,600 --> 00:11:33,120 Speaker 2: the UK, the euro Area, Switzerland and Norway now, although 218 00:11:33,120 --> 00:11:36,280 Speaker 2: no interest rate changes are expected, given the ramping up 219 00:11:36,360 --> 00:11:39,280 Speaker 2: of market bets over when the first cuts will come 220 00:11:39,559 --> 00:11:42,040 Speaker 2: and how much central banks will cut by in twenty 221 00:11:42,120 --> 00:11:45,719 Speaker 2: twenty four, every word will be parsed for signs of 222 00:11:45,800 --> 00:11:49,520 Speaker 2: whether policymakers will be taking some festive cheer from the 223 00:11:49,600 --> 00:11:52,880 Speaker 2: recent data. In the euro Area, the headline inflation rate 224 00:11:52,920 --> 00:11:56,679 Speaker 2: has slowed faster than expected, to two point four percent 225 00:11:56,760 --> 00:12:00,240 Speaker 2: in November. I've been looking ahead to the ECB Bank 226 00:12:00,280 --> 00:12:03,480 Speaker 2: of England decisions with our chief europe economist, Jamie Rush. 227 00:12:03,600 --> 00:12:06,439 Speaker 2: I started by asking him if, given that's lowing inflation 228 00:12:06,480 --> 00:12:09,520 Speaker 2: in the euro Area, the ECB can consider it's race 229 00:12:09,600 --> 00:12:11,360 Speaker 2: hiking mission a success. 230 00:12:11,440 --> 00:12:13,240 Speaker 8: Well, I think the answer is kind of yes and no. 231 00:12:13,520 --> 00:12:16,280 Speaker 8: So if you look at kind of broad strokes, then yeah, 232 00:12:16,320 --> 00:12:20,120 Speaker 8: the ECB's basically done its job. So underlying inflation has 233 00:12:20,120 --> 00:12:22,880 Speaker 8: been falling back for pretty much the last six months. 234 00:12:24,080 --> 00:12:27,560 Speaker 8: The economy is pretty week. There's wage growth pretty weak 235 00:12:27,600 --> 00:12:29,960 Speaker 8: as well, so I mean, what more is there to do. 236 00:12:30,000 --> 00:12:33,640 Speaker 8: They've raised rates substantially, is having an effect. But I 237 00:12:33,640 --> 00:12:35,960 Speaker 8: think when you look at the dig into the detail 238 00:12:36,720 --> 00:12:38,760 Speaker 8: we are going to see over the next few months 239 00:12:38,800 --> 00:12:41,720 Speaker 8: that it's quite a bumpy trajectory for inflation. As energy 240 00:12:41,760 --> 00:12:44,559 Speaker 8: support measures are withdrawn and as base effects kind of 241 00:12:44,600 --> 00:12:47,320 Speaker 8: have an impact on the December readings, we're going to 242 00:12:47,320 --> 00:12:49,760 Speaker 8: see actually inflation is probably going to go back up 243 00:12:49,800 --> 00:12:51,680 Speaker 8: to about three point two percent next month. 244 00:12:51,920 --> 00:12:54,719 Speaker 2: And within of course the twenty countries in the Euro 245 00:12:54,840 --> 00:12:57,160 Speaker 2: Area as well, are there ones that we could worry 246 00:12:57,200 --> 00:13:00,280 Speaker 2: about that will drive part of that potential optic And 247 00:13:00,320 --> 00:13:03,480 Speaker 2: if it's going to come back to a slightly higher level, well, I. 248 00:13:03,400 --> 00:13:05,960 Speaker 8: Think we're immediately going to see that inflation is going 249 00:13:06,000 --> 00:13:09,199 Speaker 8: to jump to four percent in Germany and in Spain 250 00:13:09,480 --> 00:13:12,679 Speaker 8: we will see a similar size increase as well, so 251 00:13:12,720 --> 00:13:14,840 Speaker 8: heading towards four and a half percent over the coming months. 252 00:13:14,840 --> 00:13:17,760 Speaker 8: And again it's to do that energy withdrawal stuff. And 253 00:13:18,720 --> 00:13:21,160 Speaker 8: Germany hasn't even said its budget for next year. That 254 00:13:21,200 --> 00:13:23,520 Speaker 8: creates another risk that they have to kind of pull 255 00:13:23,559 --> 00:13:25,920 Speaker 8: the rug under energy support measures even more, and that's 256 00:13:25,920 --> 00:13:28,480 Speaker 8: going to push up inflation as energy bills go up 257 00:13:28,559 --> 00:13:31,640 Speaker 8: so there is this kind of very near term risk 258 00:13:31,880 --> 00:13:34,959 Speaker 8: around the path for inflation, and that could actually mean 259 00:13:34,960 --> 00:13:36,640 Speaker 8: that the ECB is a little bit more cautious than 260 00:13:36,720 --> 00:13:37,600 Speaker 8: people are expecting. 261 00:13:37,760 --> 00:13:40,840 Speaker 2: What about the impact of the rate ikes on the 262 00:13:40,920 --> 00:13:43,160 Speaker 2: economic performance of these countries. I've had data in the 263 00:13:43,160 --> 00:13:46,360 Speaker 2: past few days, particularly looking at Germany's manufacturing sector in Dostri, 264 00:13:46,440 --> 00:13:49,840 Speaker 2: of production weaker than expected, factory orders weaker than expected 265 00:13:49,880 --> 00:13:52,320 Speaker 2: as well. How much of the pain has already been 266 00:13:52,320 --> 00:13:54,559 Speaker 2: inflicted on these economies or is there more to come? 267 00:13:55,280 --> 00:13:58,000 Speaker 8: Well, I mean, industrial production in Germany is exceptionally weak 268 00:13:58,040 --> 00:13:59,840 Speaker 8: and it is going to drag on the economy, maybe 269 00:13:59,840 --> 00:14:02,160 Speaker 8: take about zero point four percent off the level of 270 00:14:02,160 --> 00:14:04,600 Speaker 8: GDP in the fourth quarter, So that's quite a lot. 271 00:14:05,320 --> 00:14:07,800 Speaker 8: But I think when you look at what the models 272 00:14:07,840 --> 00:14:10,480 Speaker 8: tell us the impact of montmed policy should be, it 273 00:14:10,480 --> 00:14:12,720 Speaker 8: tells us that the hiking cycle should take about four 274 00:14:12,760 --> 00:14:15,760 Speaker 8: percent off the level of GDP, and we haven't seen 275 00:14:15,800 --> 00:14:19,480 Speaker 8: that yet, so I think we're probably somewhere around about 276 00:14:19,480 --> 00:14:23,200 Speaker 8: halfway through the transmission of that. And actually the real 277 00:14:23,240 --> 00:14:25,560 Speaker 8: mystery is why the economy is held up so well, 278 00:14:25,320 --> 00:14:28,160 Speaker 8: not why it's so weak. So you know, that's actually 279 00:14:28,200 --> 00:14:30,120 Speaker 8: one of the things that we're puzzling over as economists 280 00:14:30,120 --> 00:14:32,360 Speaker 8: is why interest rates haven't tanked the economy in the 281 00:14:32,360 --> 00:14:33,040 Speaker 8: way you'd expect. 282 00:14:33,160 --> 00:14:35,120 Speaker 2: Yeah, and of course that's part of the dilemma facing 283 00:14:35,120 --> 00:14:37,400 Speaker 2: central bankers as well. The markets are getting very excited 284 00:14:37,440 --> 00:14:41,720 Speaker 2: already about interest rate cuts, particularly from the CB. How 285 00:14:41,760 --> 00:14:43,480 Speaker 2: far away do you see them as being. 286 00:14:43,920 --> 00:14:46,440 Speaker 8: Well, I think I think market pricing is probably a 287 00:14:46,480 --> 00:14:50,960 Speaker 8: little bit overdone. The idea that you would raise interest 288 00:14:51,040 --> 00:14:53,840 Speaker 8: rates as much as central banks have done and then 289 00:14:53,880 --> 00:14:56,800 Speaker 8: immediately start cutting and we have to it just seems 290 00:14:56,960 --> 00:14:58,640 Speaker 8: it seems a bit implausible to me, And I think 291 00:14:58,680 --> 00:15:02,200 Speaker 8: it was described as fiction by one of the the ECB. 292 00:15:03,960 --> 00:15:08,120 Speaker 8: Science fiction in fact, dismal science fiction perhaps, So yeah, 293 00:15:08,160 --> 00:15:11,520 Speaker 8: it's kind of think I think, given that what the 294 00:15:11,720 --> 00:15:14,400 Speaker 8: motives for the hikes, the hikes were to guard against 295 00:15:14,520 --> 00:15:18,360 Speaker 8: persistent inflation, we haven't yet seen that that is completely 296 00:15:18,440 --> 00:15:20,840 Speaker 8: under control. I'd be really surprised if the ECB jumps 297 00:15:20,880 --> 00:15:21,200 Speaker 8: the gun. 298 00:15:21,560 --> 00:15:25,200 Speaker 2: So how in your timing wise, when do you see 299 00:15:25,200 --> 00:15:26,320 Speaker 2: the first rate card happening? 300 00:15:26,720 --> 00:15:28,840 Speaker 8: So, I think I think March. I mean, we're going 301 00:15:28,880 --> 00:15:31,480 Speaker 8: to finish our Christmas dinners and it's going to be March. 302 00:15:31,640 --> 00:15:35,840 Speaker 8: So I think that's probably too soon. Our forecast is 303 00:15:35,840 --> 00:15:38,360 Speaker 8: for the first cut in June. There's plenty of like 304 00:15:38,440 --> 00:15:41,760 Speaker 8: ground ground lane before then. You know, there's a risk 305 00:15:41,840 --> 00:15:43,880 Speaker 8: that if the economy turns out weaker than expected or 306 00:15:43,920 --> 00:15:46,120 Speaker 8: inflation takes another dive down, then that could come a 307 00:15:46,160 --> 00:15:47,080 Speaker 8: little bit sooner than June. 308 00:15:47,080 --> 00:15:49,600 Speaker 2: Should expect that data dependency mantra to stay. Let's think 309 00:15:49,600 --> 00:15:52,560 Speaker 2: about the Bank of England then, how different is the 310 00:15:52,600 --> 00:15:56,040 Speaker 2: situation facing Andrew Bailey and colleagues in London versus that 311 00:15:56,160 --> 00:15:56,880 Speaker 2: was in Frankfurst. 312 00:15:57,240 --> 00:15:59,320 Speaker 8: I think it's completely different as has been As was 313 00:15:59,400 --> 00:16:03,479 Speaker 8: kind of pretty clear from the outset here, the Eurozone 314 00:16:04,520 --> 00:16:07,080 Speaker 8: didn't have the wages problem that the UK has. I mean, 315 00:16:07,120 --> 00:16:09,080 Speaker 8: wages were growing at seven eight percent in the UK. 316 00:16:09,160 --> 00:16:10,880 Speaker 8: That just has not been a feature of the Eurozone 317 00:16:10,960 --> 00:16:15,000 Speaker 8: labor market that's created this huge influence on the kind 318 00:16:15,000 --> 00:16:18,080 Speaker 8: of second round effects on inflation in the UK. So 319 00:16:18,280 --> 00:16:20,680 Speaker 8: bank has a bigger problem. They've had to hype rates 320 00:16:20,680 --> 00:16:23,640 Speaker 8: by a bit more they felt compelled to, and therefore 321 00:16:23,760 --> 00:16:25,160 Speaker 8: they're going to have to cut a little bit later 322 00:16:25,240 --> 00:16:28,600 Speaker 8: as well. And that's I think that's an inevitability. 323 00:16:28,920 --> 00:16:31,640 Speaker 2: So what about the inflation trajectory for the UK is 324 00:16:31,640 --> 00:16:35,440 Speaker 2: so the risk of the same bumpy trajectory from here 325 00:16:35,640 --> 00:16:38,240 Speaker 2: when we think about where things are looking into next. 326 00:16:38,200 --> 00:16:41,000 Speaker 8: Year, Yeah, I mean I think it's we're going to 327 00:16:41,000 --> 00:16:43,840 Speaker 8: see bumps along the way. But again the general picture 328 00:16:43,880 --> 00:16:46,280 Speaker 8: I think is downward. We have some things which we 329 00:16:46,360 --> 00:16:48,920 Speaker 8: know are pushing down, like and the kind of withdraw 330 00:16:49,080 --> 00:16:52,160 Speaker 8: the energy price shock is obviously passing through the economy. 331 00:16:52,520 --> 00:16:55,320 Speaker 8: Goods inflation that's coming down as well, so you know, 332 00:16:55,360 --> 00:16:57,200 Speaker 8: things are kind of moving the right direction. I mean, 333 00:16:57,240 --> 00:16:59,040 Speaker 8: the big question is what happens to the services because 334 00:16:59,040 --> 00:17:01,000 Speaker 8: of this wages problem, And we know that in the 335 00:17:01,040 --> 00:17:03,320 Speaker 8: services sector wages is a huge part of the costs 336 00:17:03,880 --> 00:17:05,800 Speaker 8: and so that is probably what the banking is going 337 00:17:05,840 --> 00:17:08,679 Speaker 8: to be focusing on to be as a measure of 338 00:17:08,680 --> 00:17:10,880 Speaker 8: whether it's done its job and whether rates can come down. 339 00:17:11,119 --> 00:17:13,440 Speaker 2: Looking at the trajectory for wages though as well, does 340 00:17:13,440 --> 00:17:16,200 Speaker 2: that mean that we will see more real terms wage 341 00:17:16,240 --> 00:17:20,200 Speaker 2: increases as inflation slows, but perhaps the momentum remains behind 342 00:17:20,359 --> 00:17:21,720 Speaker 2: and wage growth. 343 00:17:21,920 --> 00:17:25,840 Speaker 8: Yeah, I mean, as if prices starts to fall then 344 00:17:25,920 --> 00:17:28,040 Speaker 8: then yeah, we will start to see that real incomes 345 00:17:28,040 --> 00:17:32,040 Speaker 8: are recovering I mean, prices haven't really changed a huge 346 00:17:32,040 --> 00:17:34,280 Speaker 8: amount for the past six months anything, but when the 347 00:17:34,280 --> 00:17:36,680 Speaker 8: actual energy price shock hits, I mean, we've all started, 348 00:17:36,720 --> 00:17:38,639 Speaker 8: we've all paid. The level of prices is up. That 349 00:17:38,640 --> 00:17:41,760 Speaker 8: hasn't changed. The higher level of prices is going to 350 00:17:41,760 --> 00:17:44,280 Speaker 8: be something that stays with us. The inflation rate will 351 00:17:44,320 --> 00:17:45,840 Speaker 8: come down a bit, but that's not going to provide 352 00:17:45,880 --> 00:17:49,119 Speaker 8: a huge amount of support to spending. So obviously I 353 00:17:49,119 --> 00:17:52,080 Speaker 8: think it's it's unlikely that as inflation heads down, we're 354 00:17:52,119 --> 00:17:54,479 Speaker 8: going to get a huge revival of consumption, especially with 355 00:17:55,280 --> 00:17:57,159 Speaker 8: uncertainty how the outlook about as it is. 356 00:17:57,280 --> 00:18:00,520 Speaker 2: That was our chief europe economist, Jamie Rush. I've as 357 00:18:00,520 --> 00:18:03,840 Speaker 2: been getting a market's perspective on this from Daniel Cassali, 358 00:18:03,920 --> 00:18:07,920 Speaker 2: who's an investment strategist at Evelyn Partners. We talked about 359 00:18:08,040 --> 00:18:11,919 Speaker 2: how markets are processing the expectations of rate cuts. When 360 00:18:11,960 --> 00:18:15,040 Speaker 2: I started by asking him when he expects to see 361 00:18:15,119 --> 00:18:16,200 Speaker 2: the ECB move. 362 00:18:16,520 --> 00:18:18,520 Speaker 9: It's likely to happen probably in the first half of 363 00:18:18,840 --> 00:18:21,720 Speaker 9: next year, or maybe possibly later. Is really a question 364 00:18:21,840 --> 00:18:24,240 Speaker 9: or catamouse here between who cuts first, is at the 365 00:18:24,359 --> 00:18:27,360 Speaker 9: US or is it the ECB. I think the main 366 00:18:27,359 --> 00:18:29,719 Speaker 9: message here is the fact that interest rates have certainly 367 00:18:29,760 --> 00:18:32,399 Speaker 9: peked and likely to come down, and that probably means 368 00:18:32,400 --> 00:18:35,119 Speaker 9: that the risk of an economic hard landing where central 369 00:18:35,119 --> 00:18:38,959 Speaker 9: banks race rates too aggressively is probably significantly reduced, and 370 00:18:39,000 --> 00:18:40,879 Speaker 9: that the likelihood is now that we may now have 371 00:18:41,200 --> 00:18:45,080 Speaker 9: a soft economic landing, which means probably less likelihood of 372 00:18:45,080 --> 00:18:45,680 Speaker 9: a recession. 373 00:18:46,080 --> 00:18:48,320 Speaker 2: So how does that look then for your outlook for 374 00:18:48,840 --> 00:18:52,960 Speaker 2: investment opportunities If the soft landing narrative is taking holds, 375 00:18:53,320 --> 00:18:54,920 Speaker 2: how do you think you're going to see opportunities in 376 00:18:54,960 --> 00:18:56,080 Speaker 2: the first half of next year. 377 00:18:56,280 --> 00:18:58,560 Speaker 9: Well, I think if we do have this soft landing, 378 00:18:58,600 --> 00:19:00,920 Speaker 9: which means growth holds up, and also the fact that 379 00:19:00,960 --> 00:19:03,639 Speaker 9: you might have lower inflation along with the possibility of 380 00:19:03,800 --> 00:19:06,359 Speaker 9: interest rate cuts, it probably means we might get some 381 00:19:06,400 --> 00:19:09,720 Speaker 9: of that rotation coming out of the AI theme into 382 00:19:09,760 --> 00:19:11,840 Speaker 9: other areas of the market, in other words, a broadening 383 00:19:11,920 --> 00:19:13,919 Speaker 9: out of the market, and that could include things like 384 00:19:13,960 --> 00:19:17,120 Speaker 9: small cat and unloved areas such as energy. It still 385 00:19:17,160 --> 00:19:19,359 Speaker 9: means that the overall equity market would still likely increase 386 00:19:19,440 --> 00:19:22,600 Speaker 9: because it'll start surpricing less risk of an economic hard landing. 387 00:19:23,240 --> 00:19:25,439 Speaker 9: So it does tell us that if we do have 388 00:19:25,480 --> 00:19:29,040 Speaker 9: a soft economic landing, it's probably going to be constructive stocks. 389 00:19:29,400 --> 00:19:32,440 Speaker 2: So that was Daniel Cassali Investment Stratus that Evelyn Partner 390 00:19:32,440 --> 00:19:34,680 Speaker 2: is speaking to me on Bloomberg Radio. And of course 391 00:19:34,720 --> 00:19:36,800 Speaker 2: we will have full coverage of all of these Central 392 00:19:36,880 --> 00:19:40,600 Speaker 2: Bank decisions this week. I'm Stephen Caroll in London. You 393 00:19:40,600 --> 00:19:43,920 Speaker 2: can catch us every weekday morning here for Bloomberg Daybreak Europe, 394 00:19:43,960 --> 00:19:46,800 Speaker 2: beginning at six am in London and one am on 395 00:19:46,880 --> 00:19:47,600 Speaker 2: Wall Streets. 396 00:19:47,640 --> 00:19:50,960 Speaker 1: Tom Hard thanks to Bloomberg Daybreak Europe Banker Stephen Carroll, 397 00:19:51,000 --> 00:19:53,200 Speaker 1: and coming up on Bloomberg day Break weekend, we take 398 00:19:53,240 --> 00:19:55,919 Speaker 1: you to Asia to see how the Chinese economy is 399 00:19:55,920 --> 00:19:59,439 Speaker 1: doing in this post COVID world. I'm Tom Busby and 400 00:19:59,520 --> 00:20:12,080 Speaker 1: this is Bloomberg. I'm Tom Busby in New York with 401 00:20:12,119 --> 00:20:14,400 Speaker 1: your global look ahead at the top stories for investors 402 00:20:14,400 --> 00:20:17,880 Speaker 1: in the coming week. The Chinese economy struggling this year 403 00:20:17,880 --> 00:20:20,760 Speaker 1: in its post COVID recovery. For months, the optimists have 404 00:20:20,800 --> 00:20:23,840 Speaker 1: been hoping for signs of a turning point. Could there 405 00:20:23,960 --> 00:20:27,080 Speaker 1: be a glimmer of improvement in the week ahead. Bloomberg 406 00:20:27,160 --> 00:20:29,920 Speaker 1: Daybreak Asia co host Doug Krisner has a preview. 407 00:20:30,240 --> 00:20:32,520 Speaker 3: Tom. It's been tough to make the case that the 408 00:20:32,520 --> 00:20:35,280 Speaker 3: worst is over for the Chinese economy. Just last week, 409 00:20:35,560 --> 00:20:38,880 Speaker 3: Moody's cut its outlook for Chinese sovereign bonds to negative. 410 00:20:39,160 --> 00:20:39,320 Speaker 5: Now. 411 00:20:39,320 --> 00:20:41,880 Speaker 3: The firm pointed to risk like the use of debt 412 00:20:41,920 --> 00:20:45,240 Speaker 3: to support local governments, as well as a spiraling downturn 413 00:20:45,280 --> 00:20:48,480 Speaker 3: in the property market. In the coming week, Beijing will 414 00:20:48,480 --> 00:20:52,080 Speaker 3: be reporting monthly economic activity for the month of November, 415 00:20:52,119 --> 00:20:55,520 Speaker 3: so we'll have industrial production and retail sales among the 416 00:20:55,560 --> 00:20:58,480 Speaker 3: data points. Both of those figures are expected to rise 417 00:20:58,520 --> 00:21:02,640 Speaker 3: from October levels. What are these readings really telling us, Well, 418 00:21:02,720 --> 00:21:07,159 Speaker 3: let's ask Eric Ju. He is Bloomberg's economist covering China 419 00:21:07,280 --> 00:21:10,159 Speaker 3: and Hong Kong. Eric joins us from our studios in 420 00:21:10,240 --> 00:21:13,359 Speaker 3: Hong Kong. Eric, thanks for being with us. Obviously, the 421 00:21:13,440 --> 00:21:16,359 Speaker 3: economy is facing many problems right now, but I'm wondering 422 00:21:16,400 --> 00:21:20,080 Speaker 3: if all of this fits under the broad heading of 423 00:21:20,280 --> 00:21:23,720 Speaker 3: weak sentiment. Is that the biggest problem right now affecting China? 424 00:21:24,520 --> 00:21:28,040 Speaker 10: I think yeah, I think you know. In terms of data, 425 00:21:28,119 --> 00:21:31,159 Speaker 10: I can start with you next week's activity data. I 426 00:21:31,160 --> 00:21:35,320 Speaker 10: think the headline number will look quite rosy. It's accelerating 427 00:21:35,359 --> 00:21:39,120 Speaker 10: from October, but we probably we don't need to read 428 00:21:39,160 --> 00:21:41,920 Speaker 10: too much into those year and year figures. But remember 429 00:21:42,080 --> 00:21:45,960 Speaker 10: we have a very depressed level last year when China 430 00:21:46,040 --> 00:21:50,520 Speaker 10: was struggling, you know, at initie of COVID reopening. So 431 00:21:51,000 --> 00:21:54,240 Speaker 10: I think it's more What would be more interesting will 432 00:21:54,359 --> 00:21:57,640 Speaker 10: be watched for is the months and months figures, probably 433 00:21:57,640 --> 00:21:58,800 Speaker 10: for next week's reading. 434 00:21:58,960 --> 00:22:02,359 Speaker 3: So you're talking about retail sales here or industrial production 435 00:22:02,480 --> 00:22:02,840 Speaker 3: or both. 436 00:22:03,320 --> 00:22:06,960 Speaker 10: I think both will be accelerating on year and year numbers, 437 00:22:07,040 --> 00:22:10,520 Speaker 10: but that won't tell you much about the underlying so 438 00:22:10,680 --> 00:22:13,919 Speaker 10: weak momentum. If you look at PMI data, if we 439 00:22:13,960 --> 00:22:17,600 Speaker 10: look at those high frequency numbers we are tracking, actually 440 00:22:17,600 --> 00:22:21,560 Speaker 10: we will see production and both consumption still looks quite 441 00:22:21,880 --> 00:22:25,920 Speaker 10: weak in November, even considering we have some working day 442 00:22:25,920 --> 00:22:29,639 Speaker 10: boost compared to the holiday in October. So yeah, so 443 00:22:29,680 --> 00:22:33,080 Speaker 10: you might see quite strong headline year on year figures, 444 00:22:33,160 --> 00:22:35,920 Speaker 10: but that don't tell you in the underlying truth. 445 00:22:36,280 --> 00:22:38,840 Speaker 3: We'll also get data on fixed asset investment, and we 446 00:22:38,960 --> 00:22:42,680 Speaker 3: know the story with direct or foreign direct investment. It's 447 00:22:42,680 --> 00:22:45,680 Speaker 3: down sharply, and that's an area that President She attempted 448 00:22:45,680 --> 00:22:49,000 Speaker 3: to address during the recent APEX summit. How difficult will 449 00:22:49,040 --> 00:22:52,639 Speaker 3: it be to get foreign capital to flow back into China. 450 00:22:53,160 --> 00:22:57,000 Speaker 10: I think it's a big ask and I think the 451 00:22:57,040 --> 00:23:00,320 Speaker 10: government still needs I think the president she mentioned in 452 00:23:00,440 --> 00:23:04,160 Speaker 10: his US trip that the government will think about will 453 00:23:04,200 --> 00:23:08,520 Speaker 10: implement more heart warming, right, so called heart warming measures 454 00:23:08,560 --> 00:23:13,200 Speaker 10: to attract investors back to China. But I think it's 455 00:23:13,000 --> 00:23:15,200 Speaker 10: a it's a couple of reasons why it's it's quite 456 00:23:15,240 --> 00:23:19,119 Speaker 10: difficult right now. So some obvious challenges, you know, the 457 00:23:19,200 --> 00:23:22,360 Speaker 10: jeopity risk rising. So I think for some foreign business 458 00:23:22,480 --> 00:23:27,160 Speaker 10: it's not investing in China. It's not only not purely 459 00:23:27,240 --> 00:23:30,480 Speaker 10: you know, business or e comedy decision, it's sometimes also 460 00:23:30,480 --> 00:23:33,600 Speaker 10: a political decision. Right. We hear some business that they 461 00:23:33,640 --> 00:23:37,160 Speaker 10: are forced out of at least partially, you know, out 462 00:23:37,160 --> 00:23:41,000 Speaker 10: of China. It's not only it's not entirely a business decision. 463 00:23:41,080 --> 00:23:44,160 Speaker 10: But so I think on that front, China probably it's 464 00:23:44,240 --> 00:23:46,959 Speaker 10: it's China cannot do much about that because it's not 465 00:23:47,160 --> 00:23:51,080 Speaker 10: purely you know, something China can control. But at the 466 00:23:51,080 --> 00:23:53,760 Speaker 10: same time, we think what China can can do, what 467 00:23:53,880 --> 00:23:58,040 Speaker 10: China can boost those confidence, is they try to promote 468 00:23:58,040 --> 00:24:01,800 Speaker 10: growth in China. Right have to you know, lift the 469 00:24:01,920 --> 00:24:06,600 Speaker 10: overall sentiment the including both market and also also business 470 00:24:06,640 --> 00:24:10,879 Speaker 10: sentiment overall, and if the China can bring those growth 471 00:24:11,040 --> 00:24:14,800 Speaker 10: a healthy and more sustainable long term growth back, I 472 00:24:14,840 --> 00:24:18,920 Speaker 10: think the business would still see opportunity in China. 473 00:24:19,000 --> 00:24:21,480 Speaker 3: We'll also get the jobless figure. And this is interesting 474 00:24:21,560 --> 00:24:25,480 Speaker 3: because for several months now Beijing has not been reporting 475 00:24:25,480 --> 00:24:27,560 Speaker 3: youth unemployment and I believe the last time that we 476 00:24:27,640 --> 00:24:30,679 Speaker 3: had a reading it was well above twenty percent. Obviously, 477 00:24:30,720 --> 00:24:32,840 Speaker 3: that's a major issue and I think for many in 478 00:24:32,880 --> 00:24:36,199 Speaker 3: the government deeply concerning is there any way that the 479 00:24:36,240 --> 00:24:39,400 Speaker 3: government can address this problem? Are they doing something about it? 480 00:24:39,520 --> 00:24:42,760 Speaker 10: Yeah? I think right now. I heard a story that 481 00:24:43,240 --> 00:24:46,600 Speaker 10: you know, some some local governments they are they're tasked 482 00:24:46,760 --> 00:24:50,480 Speaker 10: with creating some maybe temporary job tunited for for those 483 00:24:50,560 --> 00:24:54,160 Speaker 10: young people fresh graduates. They can you know, get some 484 00:24:54,160 --> 00:24:57,480 Speaker 10: some some jobs in local level, very local level, you know, 485 00:24:57,560 --> 00:25:01,800 Speaker 10: those townships, those village of government, and it's not well paid, 486 00:25:01,960 --> 00:25:05,080 Speaker 10: but still that give them some opportunity at least to 487 00:25:05,240 --> 00:25:09,240 Speaker 10: delay those unemployment, right, So, trying to give some more experience. 488 00:25:09,480 --> 00:25:11,480 Speaker 10: But I think that's such something the government trying to 489 00:25:11,520 --> 00:25:13,800 Speaker 10: stabilize in the near term, but I think in the 490 00:25:13,840 --> 00:25:17,720 Speaker 10: longer term it's that they have to think hard about 491 00:25:18,119 --> 00:25:20,639 Speaker 10: what would be opportunities for those young people. 492 00:25:20,880 --> 00:25:22,880 Speaker 3: So when you look at the trade story, I'm wondering 493 00:25:23,240 --> 00:25:26,719 Speaker 3: the extent to which the slowdown that's happening globally and 494 00:25:26,800 --> 00:25:30,600 Speaker 3: in many economies, whether you're talking about developed economies let's 495 00:25:30,640 --> 00:25:34,000 Speaker 3: say Europe, the United States, to a lesser extent, Australia, 496 00:25:34,520 --> 00:25:38,600 Speaker 3: whether the weakness there that's manifesting is is contributing to 497 00:25:39,000 --> 00:25:44,080 Speaker 3: a significant drag in the export space for China, is it? Yeah? 498 00:25:44,119 --> 00:25:48,240 Speaker 10: I think this year it's harder for the expert in China. 499 00:25:48,280 --> 00:25:52,080 Speaker 10: I think that the external demand has been quite weak, 500 00:25:52,160 --> 00:25:55,120 Speaker 10: and given our expectation that globe economy will further slow 501 00:25:55,200 --> 00:25:57,560 Speaker 10: down next year, I don't think we're going to see 502 00:25:57,560 --> 00:26:02,199 Speaker 10: a very quick pickup in trade in exports in the 503 00:26:02,240 --> 00:26:05,959 Speaker 10: new term. Of course, the headline numbers might get better. 504 00:26:06,200 --> 00:26:09,480 Speaker 10: That's again that's some basic facts due to a low 505 00:26:09,600 --> 00:26:12,119 Speaker 10: levels last year. But I think if you look at 506 00:26:12,160 --> 00:26:15,640 Speaker 10: amongts and amounts, look at sequential momentum, we haven't seen 507 00:26:15,720 --> 00:26:21,800 Speaker 10: a very strong signal that those shipping orders foreign demand 508 00:26:21,840 --> 00:26:23,280 Speaker 10: are picking up quickly. 509 00:26:23,440 --> 00:26:26,199 Speaker 3: When you look at the property sector, it counts for 510 00:26:26,200 --> 00:26:29,560 Speaker 3: about twenty percent of GDP. I don't know whether that 511 00:26:29,560 --> 00:26:32,960 Speaker 3: figure will be consistent as we move into the new year. 512 00:26:33,119 --> 00:26:36,080 Speaker 3: But do you see anything that can be done to 513 00:26:36,080 --> 00:26:39,119 Speaker 3: turn around the property market that the government could still 514 00:26:39,160 --> 00:26:40,680 Speaker 3: do that it hasn't done already. 515 00:26:40,840 --> 00:26:43,440 Speaker 10: First of all, I don't think it's a government's talcke 516 00:26:43,600 --> 00:26:46,320 Speaker 10: that to turn around the property I think that's that's 517 00:26:46,400 --> 00:26:49,520 Speaker 10: initiated by the government. They're trying to reduce the reliance 518 00:26:49,560 --> 00:26:52,080 Speaker 10: of the economy and property sector. I think at the 519 00:26:52,160 --> 00:26:56,360 Speaker 10: height it's like one court of the e colony. It's 520 00:26:56,440 --> 00:26:59,320 Speaker 10: already down to like twenty percent this year, and the 521 00:26:59,400 --> 00:27:04,000 Speaker 10: probably will continue to be reduced. I think that's a 522 00:27:04,640 --> 00:27:07,280 Speaker 10: long term or median term goal of the government that 523 00:27:07,359 --> 00:27:10,959 Speaker 10: they try to make economy rely less on property and 524 00:27:11,040 --> 00:27:16,240 Speaker 10: also reducing the financial risk related to property bubbles. But 525 00:27:16,280 --> 00:27:19,800 Speaker 10: the thing is you rely less on property and what 526 00:27:20,080 --> 00:27:23,120 Speaker 10: other sectors you can find out to feel the holes 527 00:27:23,320 --> 00:27:24,200 Speaker 10: left by property. 528 00:27:24,280 --> 00:27:27,560 Speaker 3: Well, I'm confused because if the PBOC is lowering interest 529 00:27:27,640 --> 00:27:32,280 Speaker 3: rates largely to help lower mortgage rates, isn't there some 530 00:27:32,359 --> 00:27:35,280 Speaker 3: acknowledgment that the property market are Recovery in the property 531 00:27:35,280 --> 00:27:38,240 Speaker 3: market is necessary as a way of improving sentiment and 532 00:27:38,320 --> 00:27:40,320 Speaker 3: then helping to support growth. 533 00:27:40,680 --> 00:27:43,600 Speaker 10: No, I don't think the market rates is helping much. 534 00:27:43,640 --> 00:27:46,399 Speaker 10: I think that the fundamental problem in the property market 535 00:27:46,440 --> 00:27:49,760 Speaker 10: that people are losing confidence, that they don't think the 536 00:27:50,000 --> 00:27:53,440 Speaker 10: market in a booming at all. So in the longer term, 537 00:27:53,440 --> 00:27:56,399 Speaker 10: in mediate term, they're expecting more correction in the market, 538 00:27:56,520 --> 00:27:59,600 Speaker 10: pricess will further jobs. So no one is willing to 539 00:27:59,720 --> 00:28:02,720 Speaker 10: enter market right now, even if there's a real demand, 540 00:28:02,960 --> 00:28:05,720 Speaker 10: you know, for for property. So I think, you know, 541 00:28:06,480 --> 00:28:10,520 Speaker 10: lower mortgage rates, you know, relaxing the purchase it's not 542 00:28:10,560 --> 00:28:12,399 Speaker 10: going to It's going to help on the margin, but 543 00:28:12,520 --> 00:28:15,960 Speaker 10: probably won't help much. It's not because people people are 544 00:28:15,960 --> 00:28:18,439 Speaker 10: not buying because the costs are too high. People are 545 00:28:18,480 --> 00:28:21,560 Speaker 10: not buying just then they no longer you know, have 546 00:28:21,640 --> 00:28:22,959 Speaker 10: confidence in the market. 547 00:28:23,080 --> 00:28:24,600 Speaker 3: So before I let you go, I want to ask 548 00:28:24,600 --> 00:28:26,960 Speaker 3: you about the new year twenty twenty four. Is it 549 00:28:27,000 --> 00:28:28,720 Speaker 3: going to be a repeat of what we have seen 550 00:28:28,920 --> 00:28:31,120 Speaker 3: in twenty three so far? 551 00:28:31,359 --> 00:28:34,920 Speaker 10: I would say we haven't seen a big game changer 552 00:28:35,040 --> 00:28:38,640 Speaker 10: for next year, So our baseline would be like trying 553 00:28:38,640 --> 00:28:42,440 Speaker 10: to continue to model through so with some public increase, 554 00:28:42,480 --> 00:28:46,320 Speaker 10: the public investment stimulus, trying to offset the drag from 555 00:28:46,760 --> 00:28:51,080 Speaker 10: mitigate the drag from property slam. So we haven't seen 556 00:28:51,200 --> 00:28:54,040 Speaker 10: a big confidence lifter so far. But the way you're 557 00:28:54,080 --> 00:28:56,520 Speaker 10: thinking is the government can come up with, you know, 558 00:28:57,040 --> 00:29:01,560 Speaker 10: more substantial, you know, measures to trying to revive those 559 00:29:01,920 --> 00:29:04,840 Speaker 10: confidence and a sentiment that would be a helpful lot. 560 00:29:04,960 --> 00:29:06,480 Speaker 3: Eric will leave it there. Thank you so much for 561 00:29:06,520 --> 00:29:08,440 Speaker 3: being with us in helping us set up the week 562 00:29:08,440 --> 00:29:11,840 Speaker 3: ahead for the Chinese economy. Eric Hu is a Bloomberg 563 00:29:11,840 --> 00:29:15,280 Speaker 3: economist covering at China and Hong Kong. Joining us from 564 00:29:15,320 --> 00:29:18,040 Speaker 3: our studios in Hong Kong. I'm Doug Prisner. You can 565 00:29:18,120 --> 00:29:21,360 Speaker 3: join Brian Curtis and myself weekdays here for Bloomberg day 566 00:29:21,360 --> 00:29:24,680 Speaker 3: Break Asia, beginning at seven am in Hong Kong, six 567 00:29:24,760 --> 00:29:26,120 Speaker 3: pm on Wall Street. 568 00:29:26,160 --> 00:29:28,320 Speaker 1: Tom all right, thanks to Bloomberg day Break Asia co 569 00:29:28,400 --> 00:29:31,280 Speaker 1: host Doug Crisner, and coming up here on Bloomberg day 570 00:29:31,280 --> 00:29:34,920 Speaker 1: Break Weekend. It's the last week of work for Congress 571 00:29:35,080 --> 00:29:39,080 Speaker 1: before the holiday break. Can that body get anything accomplished 572 00:29:39,080 --> 00:29:42,360 Speaker 1: by year's end? I'm Tom Busby, and this is Bloomberg. 573 00:29:52,400 --> 00:29:54,840 Speaker 1: This is Bloomberg day Break Weekend, our global look ahead, 574 00:29:54,880 --> 00:29:57,440 Speaker 1: the top stories for investors in the coming week. I'm 575 00:29:57,480 --> 00:30:00,240 Speaker 1: Tom Busby in New York still a few weeks left 576 00:30:00,280 --> 00:30:02,840 Speaker 1: in the year, but not for Congress. With just one 577 00:30:03,080 --> 00:30:06,400 Speaker 1: final week of work before the holiday break, can lawmakers 578 00:30:06,440 --> 00:30:08,120 Speaker 1: get anything done this week? 579 00:30:08,400 --> 00:30:08,600 Speaker 5: Well? 580 00:30:08,640 --> 00:30:10,640 Speaker 1: For more, let's head to our Bloomberg ninety nine one 581 00:30:10,720 --> 00:30:13,680 Speaker 1: news room in Washington and Bloomberg Sound On co host 582 00:30:13,880 --> 00:30:15,240 Speaker 1: Kaylee Lines Yeah. 583 00:30:15,320 --> 00:30:17,640 Speaker 4: Tom. The end of the working year is coming quickly 584 00:30:17,720 --> 00:30:20,640 Speaker 4: for Congress, as both the House and the Senate will 585 00:30:20,680 --> 00:30:23,520 Speaker 4: go home for the holidays lead this coming week, and 586 00:30:23,720 --> 00:30:26,640 Speaker 4: it's not really clear whether they'll be able to accomplish 587 00:30:26,760 --> 00:30:29,320 Speaker 4: much with their last few days in Washington of twenty 588 00:30:29,360 --> 00:30:32,040 Speaker 4: twenty three. Joining us now with more is Megan Scully, 589 00:30:32,080 --> 00:30:35,920 Speaker 4: who helps lead Bloomberg's congressional coverage. So, Megan, they have 590 00:30:35,960 --> 00:30:38,640 Speaker 4: a lot left on their to do list, supplemental funding, 591 00:30:38,760 --> 00:30:41,280 Speaker 4: a border security deal that perhaps needs to go with 592 00:30:41,320 --> 00:30:44,360 Speaker 4: that in order for Ukraine and Israeli to get through, 593 00:30:44,880 --> 00:30:47,600 Speaker 4: you have to try to get maybe some appropriations matters 594 00:30:47,680 --> 00:30:50,320 Speaker 4: buttoned up so you don't have a shutdown. Does any 595 00:30:50,320 --> 00:30:53,200 Speaker 4: of that have a material chance of being accomplished before 596 00:30:53,240 --> 00:30:54,760 Speaker 4: they go home for their holiday break. 597 00:30:55,080 --> 00:30:59,760 Speaker 11: I think the appropriations matters are effectively shelved until January. 598 00:31:00,200 --> 00:31:04,000 Speaker 11: The focus right now is on Ukraine and the border 599 00:31:04,040 --> 00:31:08,200 Speaker 11: security package that they're trying to meld together, but even 600 00:31:08,240 --> 00:31:13,400 Speaker 11: that seems unlikely of getting through both chambers before they 601 00:31:13,480 --> 00:31:16,960 Speaker 11: leave for the congressional recess. One of one leading House 602 00:31:17,000 --> 00:31:19,880 Speaker 11: Republican at the end of the week said he thought 603 00:31:19,920 --> 00:31:22,600 Speaker 11: the chances were near zero that that would actually get 604 00:31:22,600 --> 00:31:23,640 Speaker 11: done well. 605 00:31:23,640 --> 00:31:25,360 Speaker 4: So it becomes a question of whether it can get 606 00:31:25,440 --> 00:31:27,680 Speaker 4: done at all. If it doesn't happen in twenty twenty three, 607 00:31:27,840 --> 00:31:30,000 Speaker 4: how much harder or easier will it be to get 608 00:31:30,040 --> 00:31:31,440 Speaker 4: done in twenty twenty four. 609 00:31:31,720 --> 00:31:33,960 Speaker 11: I think the key to all of this is Speaker 610 00:31:34,000 --> 00:31:38,200 Speaker 11: Mike Johnson. There's been so much talk about Senate Democrats 611 00:31:38,200 --> 00:31:41,560 Speaker 11: and Republicans negotiating a deal on border security, which is 612 00:31:41,600 --> 00:31:44,520 Speaker 11: not related to Ukraine at all, but would unlock the 613 00:31:44,680 --> 00:31:47,560 Speaker 11: Ukraine funding. Essentially, we get a deal on the border, 614 00:31:47,560 --> 00:31:51,520 Speaker 11: then we can move on Ukraine and one big package 615 00:31:51,840 --> 00:31:54,880 Speaker 11: in the House, though it is much trickier. You have 616 00:31:55,120 --> 00:31:59,160 Speaker 11: ultra conservatives, the hardliners who throughout former Speaker Kevin McCarthy, 617 00:31:59,400 --> 00:32:03,960 Speaker 11: who oppose Ukraine aid, and they've said they could maybe 618 00:32:03,960 --> 00:32:05,680 Speaker 11: go along with it, or at least turn a blind 619 00:32:05,720 --> 00:32:08,360 Speaker 11: eye to it if they passed the border first, and 620 00:32:08,560 --> 00:32:11,480 Speaker 11: if the border, if they see a significant reduction in 621 00:32:11,520 --> 00:32:14,880 Speaker 11: border crossings, that means that would take time, and that 622 00:32:14,920 --> 00:32:18,200 Speaker 11: would mean Ukraine Aid would pass much later. There's plenty 623 00:32:18,200 --> 00:32:21,400 Speaker 11: of support in the House for getting Ukraine Aid over 624 00:32:21,440 --> 00:32:25,880 Speaker 11: the finish line. But does Speaker Johnson want to risk 625 00:32:26,000 --> 00:32:30,040 Speaker 11: his job by infuriating his right flank in order to 626 00:32:30,080 --> 00:32:31,320 Speaker 11: do so well? 627 00:32:31,440 --> 00:32:31,520 Speaker 5: That? 628 00:32:31,760 --> 00:32:34,920 Speaker 4: I feel like is always the question we've asked, especially 629 00:32:35,000 --> 00:32:37,680 Speaker 4: when he passed a continuing resolution early on in his 630 00:32:37,720 --> 00:32:41,320 Speaker 4: speakership with Democratic support, which is basically the exact same 631 00:32:41,360 --> 00:32:45,080 Speaker 4: thing that Kevin McCarthy got outsted because of Also interesting 632 00:32:45,320 --> 00:32:47,960 Speaker 4: that now it seems we're back to this idea when 633 00:32:47,960 --> 00:32:51,600 Speaker 4: we think about appropriations of the debt sealing deal from 634 00:32:52,000 --> 00:32:54,959 Speaker 4: what six months ago actually being the top line numbers 635 00:32:55,240 --> 00:32:57,360 Speaker 4: we're going to go with. Speaker Johnson sent out a 636 00:32:57,360 --> 00:32:59,880 Speaker 4: Dear Colleague leutter this past week that said, it's the 637 00:33:00,200 --> 00:33:03,840 Speaker 4: off the land the Fiscal Responsibility Act. So even if 638 00:33:03,840 --> 00:33:06,000 Speaker 4: this Ukraine and border stuff is getting harder, does that 639 00:33:06,080 --> 00:33:09,400 Speaker 4: actually mean the actual budget might be easier Because we're 640 00:33:09,400 --> 00:33:11,040 Speaker 4: going to stick with the top line numbers we already 641 00:33:11,080 --> 00:33:11,480 Speaker 4: agreed to. 642 00:33:11,760 --> 00:33:15,360 Speaker 11: We're still early yet so we have six weeks to go. 643 00:33:15,600 --> 00:33:17,520 Speaker 11: You know, it's a two step shut down, right. We 644 00:33:17,600 --> 00:33:21,360 Speaker 11: have the January nineteenth for many of the federal agencies, 645 00:33:21,360 --> 00:33:23,760 Speaker 11: but the Defense Department, which is half of all federal 646 00:33:23,800 --> 00:33:28,520 Speaker 11: discretionary spending, doesn't actually shut down until February. Second, I 647 00:33:28,600 --> 00:33:31,560 Speaker 11: think that there's a lot of time for things to 648 00:33:31,600 --> 00:33:35,040 Speaker 11: go right or looking at this Congress, go wrong in 649 00:33:35,120 --> 00:33:37,800 Speaker 11: the next six weeks, and the devil's going to be 650 00:33:37,840 --> 00:33:40,400 Speaker 11: in the details in terms of coming to an agreement, 651 00:33:40,840 --> 00:33:43,880 Speaker 11: even if they can agree to adhere to those top 652 00:33:43,960 --> 00:33:47,160 Speaker 11: line levels, and it seems as though even the hard 653 00:33:47,240 --> 00:33:49,360 Speaker 11: right is willing to go along with that. Right now, 654 00:33:49,720 --> 00:33:52,640 Speaker 11: it's a matter of where that money actually goes, programmed 655 00:33:52,680 --> 00:33:55,760 Speaker 11: by program and that's where we could see the fight 656 00:33:55,960 --> 00:33:58,320 Speaker 11: really start to percolate in January. 657 00:33:58,640 --> 00:34:01,800 Speaker 4: All right, Megan Scully, who ups lead Bloomberg's congressional coverage. 658 00:34:01,960 --> 00:34:04,040 Speaker 4: Not sure we are feeling much more optimistic after this 659 00:34:04,120 --> 00:34:07,160 Speaker 4: conversation that stuff's going to get done before the year 660 00:34:07,240 --> 00:34:09,800 Speaker 4: is over. But twenty twenty four it's always somewhat of 661 00:34:09,840 --> 00:34:13,080 Speaker 4: a new start. Thank you so much, and Tom, Happy 662 00:34:13,120 --> 00:34:13,879 Speaker 4: almost new year. 663 00:34:13,960 --> 00:34:16,680 Speaker 1: I guess, thank you, Kaylee. That was Bloomberg's Sound On 664 00:34:16,840 --> 00:34:19,719 Speaker 1: co host Kaylee Lines, reporting from our Bloomberg ninety nine 665 00:34:19,719 --> 00:34:22,240 Speaker 1: to one newsroom in Washington. And you can hear sound 666 00:34:22,280 --> 00:34:25,000 Speaker 1: on weekdays one to three pm Wall Street Time on 667 00:34:25,040 --> 00:34:27,920 Speaker 1: Bloomberg Radio. And that does it for this edition of 668 00:34:27,920 --> 00:34:30,759 Speaker 1: Bloomberg day Break Weekend. Join us again Monday morning at 669 00:34:30,800 --> 00:34:32,920 Speaker 1: five am Wall Street Time for the latest on the 670 00:34:32,920 --> 00:34:35,960 Speaker 1: market's overseas and the news you need to start your day. 671 00:34:36,320 --> 00:34:39,280 Speaker 1: I'm Tom Buzzby. Stay with us. Top stories and global 672 00:34:39,280 --> 00:34:42,239 Speaker 1: business headlines are coming up right now.