1 00:00:00,240 --> 00:00:07,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:10,280 --> 00:00:12,639 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:12,640 --> 00:00:14,760 Speaker 2: the top stories in the coming week from our day 4 00:00:14,760 --> 00:00:17,520 Speaker 2: Break anchors all around the world. Straight ahead on the program, 5 00:00:17,520 --> 00:00:20,480 Speaker 2: and look ahead to this week's Fedroll Preserve policy meeting. 6 00:00:20,560 --> 00:00:22,079 Speaker 2: I'm Tom Busby in New York. 7 00:00:22,320 --> 00:00:25,079 Speaker 3: I'm callin Hetck in Lolton, where we're asking what is 8 00:00:25,120 --> 00:00:29,080 Speaker 3: the place of Europe's financial services sector in an increasingly 9 00:00:29,120 --> 00:00:30,040 Speaker 3: fragmented world. 10 00:00:30,360 --> 00:00:33,040 Speaker 4: I'm dek Risner looking at what we may hear from 11 00:00:33,120 --> 00:00:36,040 Speaker 4: China's ten Cent when the company reports earnings in the 12 00:00:36,040 --> 00:00:36,640 Speaker 4: week ahead. 13 00:00:38,360 --> 00:00:42,440 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 14 00:00:42,440 --> 00:00:46,160 Speaker 1: eleven to three, Yeero, New York, Bloomberg ninety nine to one, Washington, DC, 15 00:00:46,640 --> 00:00:50,920 Speaker 1: Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 16 00:00:51,320 --> 00:00:54,520 Speaker 1: Sirias XM one twenty one, and around the world on 17 00:00:54,600 --> 00:00:57,720 Speaker 1: Bloomberg Radio, dot Com and the Bloomberg Business App. 18 00:01:02,840 --> 00:01:04,640 Speaker 2: Good day to you. I'm Tom Busby, and we begin 19 00:01:04,680 --> 00:01:07,240 Speaker 2: today's program with the Federal Reserve wrapping up a two 20 00:01:07,319 --> 00:01:11,160 Speaker 2: day meeting on Wednesday with its latest decision on interest 21 00:01:11,240 --> 00:01:14,039 Speaker 2: rates and for more on what this means and a 22 00:01:14,200 --> 00:01:17,759 Speaker 2: new dot plot. We're joined by Michael McKee, Bloomberg International 23 00:01:17,800 --> 00:01:21,600 Speaker 2: Economics and Policy correspondent. Well, Michael, A lot goes into 24 00:01:21,600 --> 00:01:26,039 Speaker 2: the Fed's decision, inflation, jobs, egg prices, economic growth, A 25 00:01:26,080 --> 00:01:28,240 Speaker 2: lot of moving parts right now, especially coming out of 26 00:01:28,240 --> 00:01:31,240 Speaker 2: the White House. Is there just too much uncertainty for 27 00:01:31,280 --> 00:01:33,200 Speaker 2: the Fed to make any moved this week? 28 00:01:33,400 --> 00:01:36,960 Speaker 5: Exactly, They've all pretty much said Jay Powell said. John 29 00:01:36,959 --> 00:01:40,080 Speaker 5: Williams told me in an interview on Bloomberg, we just 30 00:01:40,280 --> 00:01:43,280 Speaker 5: can't move at this point, but we don't feel there's 31 00:01:43,280 --> 00:01:46,959 Speaker 5: a need to because the economy is still growing well 32 00:01:47,040 --> 00:01:50,880 Speaker 5: and inflation is under control, and so there's no point 33 00:01:50,960 --> 00:01:52,720 Speaker 5: to moving if we don't have to. 34 00:01:53,120 --> 00:01:57,000 Speaker 2: Now, let's talk about inflation, because we have seen still rising, 35 00:01:57,240 --> 00:01:58,400 Speaker 2: but it's certainly moderating. 36 00:01:58,520 --> 00:01:58,720 Speaker 6: Right. 37 00:01:59,120 --> 00:02:03,560 Speaker 5: Well, we got mixed signals from CPI and from the 38 00:02:03,560 --> 00:02:08,280 Speaker 5: PPI this week. CPI was a little stronger than people anticipated, 39 00:02:08,840 --> 00:02:14,640 Speaker 5: and PPI was weaker than people anticipated, especially considering that 40 00:02:14,760 --> 00:02:19,560 Speaker 5: both of them feed elements into the PCE, the Personal 41 00:02:19,600 --> 00:02:24,800 Speaker 5: Consumption Expenditures Index, which is the fed's inflation target data point. 42 00:02:25,000 --> 00:02:29,400 Speaker 5: And so it looks at this point unfortunately the CPI 43 00:02:29,480 --> 00:02:31,720 Speaker 5: is going to overwhelm the PPI and it's going to 44 00:02:32,160 --> 00:02:35,639 Speaker 5: maybe push the PCE higher, which would keep the FED 45 00:02:35,720 --> 00:02:40,200 Speaker 5: on hold anyway, So we don't get that till the 46 00:02:40,400 --> 00:02:43,520 Speaker 5: end of the month. But the Fed will be able 47 00:02:43,520 --> 00:02:45,320 Speaker 5: to do the same math that all the Wall Street 48 00:02:45,360 --> 00:02:50,680 Speaker 5: economists are doing, and they'll have a justification now besides uncertainty. 49 00:02:50,919 --> 00:02:53,720 Speaker 2: Well, the last PCE we saw it did show the 50 00:02:53,760 --> 00:02:56,040 Speaker 2: lowest level in seven months, right, so there was some 51 00:02:56,080 --> 00:02:56,920 Speaker 2: progress made. 52 00:02:57,200 --> 00:02:59,960 Speaker 5: There's been progress made, but it's been very, very slow. 53 00:03:00,080 --> 00:03:02,040 Speaker 5: And now if we get a little bump up and 54 00:03:02,120 --> 00:03:05,120 Speaker 5: it doesn't signal that inflation is going to break out again, 55 00:03:05,160 --> 00:03:07,720 Speaker 5: but it does show that the Fed has more work 56 00:03:07,720 --> 00:03:08,000 Speaker 5: to do. 57 00:03:08,639 --> 00:03:11,079 Speaker 2: Let's talk about one thing I know is a favorite 58 00:03:11,080 --> 00:03:14,720 Speaker 2: subject of yours, because egg prices. 59 00:03:14,919 --> 00:03:18,400 Speaker 5: Well it's not me, it was. It was the President 60 00:03:18,440 --> 00:03:20,440 Speaker 5: who made a big deal out of it during the campaign. 61 00:03:20,440 --> 00:03:23,959 Speaker 5: He's that I was elected to bring down egg prices, 62 00:03:24,560 --> 00:03:28,520 Speaker 5: and I'm sorry, but so far he's failed. In the CPI, 63 00:03:28,760 --> 00:03:31,880 Speaker 5: egg prices were up in February by ten point four percent, 64 00:03:32,240 --> 00:03:35,200 Speaker 5: and in the PPI you're ready for this, they were 65 00:03:35,320 --> 00:03:39,600 Speaker 5: up fifty four percent for producers from the producers. I mean, 66 00:03:39,600 --> 00:03:41,520 Speaker 5: that's what the chickens are charging at this point. So 67 00:03:43,520 --> 00:03:45,800 Speaker 5: the egg crisis is not behind this yet. 68 00:03:46,160 --> 00:03:49,360 Speaker 2: It's not going anywhere just yet until we figure this out, 69 00:03:49,480 --> 00:03:52,080 Speaker 2: all right, So that's inflation. Let's talk about jobs, because 70 00:03:52,120 --> 00:03:54,640 Speaker 2: we've seen of you know, not a spectacular number in 71 00:03:54,680 --> 00:03:58,760 Speaker 2: February solid, but of course that doesn't include tens of thousands, 72 00:03:59,000 --> 00:04:00,680 Speaker 2: tens of thousands of federal. 73 00:04:00,400 --> 00:04:04,520 Speaker 5: Workers, right, and we don't yet have a good handle 74 00:04:04,600 --> 00:04:08,920 Speaker 5: on how many. There are some estimates that maybe they've 75 00:04:09,200 --> 00:04:14,240 Speaker 5: let go about twenty thousand people between the layoffs and 76 00:04:14,800 --> 00:04:19,880 Speaker 5: the buyouts, but there's no good compilation of that. The 77 00:04:20,000 --> 00:04:24,200 Speaker 5: job is claims figures we got last week showed fifteen 78 00:04:24,279 --> 00:04:27,680 Speaker 5: hundred people filing because the federal workers are counted in 79 00:04:27,720 --> 00:04:32,719 Speaker 5: a separate category, and eight thousand on continuing claims. So 80 00:04:32,800 --> 00:04:35,279 Speaker 5: that's nowhere near the numbers. We expect those to go 81 00:04:35,440 --> 00:04:38,839 Speaker 5: up a lot. But then on Friday was the deadline 82 00:04:39,160 --> 00:04:42,960 Speaker 5: for all of the federal agencies under Trump to submit 83 00:04:43,040 --> 00:04:46,240 Speaker 5: plans to cut like half their workforce. So we could 84 00:04:46,279 --> 00:04:49,279 Speaker 5: see tens of thousands of people losing their jobs, but 85 00:04:49,360 --> 00:04:51,680 Speaker 5: we just don't know. So the FED has to kind 86 00:04:51,680 --> 00:04:56,839 Speaker 5: of stand by and see and then see what impact 87 00:04:57,279 --> 00:04:59,000 Speaker 5: that has on the overall economy. 88 00:04:59,320 --> 00:05:02,080 Speaker 2: Well, let's talk then about interest rates and how it 89 00:05:02,120 --> 00:05:05,919 Speaker 2: affects housing, because I mean, rates have steadily declined, not 90 00:05:06,000 --> 00:05:08,360 Speaker 2: by a whole lot, though still about six point seven 91 00:05:08,360 --> 00:05:11,520 Speaker 2: percent on average for anyone buying a home. I mean, 92 00:05:12,440 --> 00:05:14,920 Speaker 2: is there any any green shoots in sight? And we're 93 00:05:14,920 --> 00:05:17,799 Speaker 2: coming into the all important spring housing season right now. 94 00:05:18,200 --> 00:05:21,760 Speaker 5: There may be a stray dandelion here and there, but 95 00:05:22,360 --> 00:05:27,279 Speaker 5: we've seen mortgage applications rise a little bit with the 96 00:05:27,400 --> 00:05:30,800 Speaker 5: drop in rates, but on a percentage basis, it's from 97 00:05:30,960 --> 00:05:35,760 Speaker 5: very low to still quite low. It isn't in terms 98 00:05:35,800 --> 00:05:38,479 Speaker 5: of numbers, a lot of applications, and there's just not 99 00:05:38,600 --> 00:05:40,960 Speaker 5: a lot on the market these days. And there's also 100 00:05:41,000 --> 00:05:45,640 Speaker 5: a shortage of houses on the new home side, so 101 00:05:46,000 --> 00:05:49,520 Speaker 5: prices are still staying high even though we see interest 102 00:05:49,560 --> 00:05:52,000 Speaker 5: rates mortgage rates come down just a little bit. And 103 00:05:52,040 --> 00:05:56,120 Speaker 5: it's a conundrum because we never had this situation before 104 00:05:56,120 --> 00:05:59,760 Speaker 5: where interest rates had gotten so low that people are 105 00:05:59,760 --> 00:06:02,599 Speaker 5: now locked into their houses because they don't want to 106 00:06:03,000 --> 00:06:06,800 Speaker 5: buy up a mortgage that's four percentage points higher. And 107 00:06:06,839 --> 00:06:09,360 Speaker 5: nobody's quite sure how to make this work yet, and 108 00:06:09,400 --> 00:06:13,040 Speaker 5: the hope is that the FED can continue to bring 109 00:06:13,080 --> 00:06:15,840 Speaker 5: down rates and eventually we'll get to a point where 110 00:06:15,880 --> 00:06:21,200 Speaker 5: people want to move badly enough that they'll accept a 111 00:06:21,279 --> 00:06:24,800 Speaker 5: higher interest rate, a higher mortgage rate, and that builders 112 00:06:24,839 --> 00:06:28,200 Speaker 5: will be able to produce more homes. But a lot 113 00:06:28,240 --> 00:06:30,360 Speaker 5: of what's happening with them is on the local level 114 00:06:30,400 --> 00:06:33,560 Speaker 5: and zoning and things like that, So people in the 115 00:06:33,560 --> 00:06:37,240 Speaker 5: housing industry are not very excited about this spring selling season. 116 00:06:37,240 --> 00:06:40,280 Speaker 2: Oh boy, Yeah, Well, the Federal Open Market Committee meeting 117 00:06:40,320 --> 00:06:43,240 Speaker 2: kicks off Tuesday, a decision expected two pm Wall Street 118 00:06:43,240 --> 00:06:46,440 Speaker 2: time on Wednesday. Our thanks to Michael McKee, Bloomberg Into 119 00:06:46,520 --> 00:06:50,480 Speaker 2: National Economics and Policy correspondent. We move next to corporate 120 00:06:50,480 --> 00:06:53,920 Speaker 2: earnings from the logistics and shipping giant FedEx reporting third 121 00:06:54,000 --> 00:06:56,520 Speaker 2: quarter results after the closing bill this Thursday, and for 122 00:06:56,560 --> 00:06:59,640 Speaker 2: more on how a lot of economic uncertainty may have 123 00:06:59,680 --> 00:07:03,400 Speaker 2: impact those results now President Trump's tariffs may impact the 124 00:07:03,440 --> 00:07:06,680 Speaker 2: company in the future. We're joined by Lee Glasgow. He's 125 00:07:06,720 --> 00:07:11,400 Speaker 2: Bloomberg Intelligence Senior Transport, Logistics and Shipping analysts. Well, Lee, 126 00:07:11,920 --> 00:07:14,240 Speaker 2: thank you for joining us. What do you expect to 127 00:07:14,280 --> 00:07:15,800 Speaker 2: see in this earnings report? 128 00:07:16,240 --> 00:07:18,520 Speaker 6: Yeah? Hey, Tom, Well, earnings are going to be up. 129 00:07:18,840 --> 00:07:21,480 Speaker 6: It's really going to be driven by some margin improvement, 130 00:07:21,840 --> 00:07:26,320 Speaker 6: especially in their express business. You know, that's really just 131 00:07:26,480 --> 00:07:31,760 Speaker 6: being fueled by a bunch of restructuring programs and productivity 132 00:07:31,800 --> 00:07:34,840 Speaker 6: programs that they have in place, something they call Drive 133 00:07:35,120 --> 00:07:39,680 Speaker 6: and Network two point zero. You know, what we're going 134 00:07:39,760 --> 00:07:43,160 Speaker 6: to see though, is probably not the full benefit of 135 00:07:43,200 --> 00:07:46,920 Speaker 6: these programs because volume is going to be relatively tepid. 136 00:07:47,600 --> 00:07:50,400 Speaker 6: Could be you know, up one percent, down one percent 137 00:07:50,400 --> 00:07:54,520 Speaker 6: in the quarter, really really don't know. But you know, 138 00:07:54,640 --> 00:07:58,920 Speaker 6: when volumes start increasing with a better backdrop, you really 139 00:07:59,280 --> 00:08:02,760 Speaker 6: show the best it fits from these cost cutting and 140 00:08:02,880 --> 00:08:08,720 Speaker 6: productivity inducing initiatives that they've undergne. You know, FedEx is 141 00:08:09,000 --> 00:08:12,120 Speaker 6: kind of going through somewhat of a transition. You know, 142 00:08:12,160 --> 00:08:16,720 Speaker 6: they've walked away from less or lower margin business like 143 00:08:16,720 --> 00:08:19,880 Speaker 6: from the US postal service. That will create somewhat of 144 00:08:20,160 --> 00:08:24,680 Speaker 6: a tougher headwind starting in April for you know, when 145 00:08:24,760 --> 00:08:27,080 Speaker 6: when comparing year every year volumes. 146 00:08:27,240 --> 00:08:30,600 Speaker 2: Now, that's a reflection of consumers and businesses pulling back. 147 00:08:31,160 --> 00:08:33,240 Speaker 6: If you look at or listen to a bunch of 148 00:08:33,280 --> 00:08:37,400 Speaker 6: the large retailers their earnings call, they've been I guess 149 00:08:37,440 --> 00:08:41,760 Speaker 6: a little more cautious in terms of the appetite for consumers, uh, 150 00:08:41,920 --> 00:08:45,720 Speaker 6: you know, the e commerce while it's still growing. You know, 151 00:08:45,760 --> 00:08:48,280 Speaker 6: if people have less money to spend and they're spending 152 00:08:48,559 --> 00:08:51,480 Speaker 6: more money at the grocery store, you know, they're gonna 153 00:08:51,520 --> 00:08:54,439 Speaker 6: they're gonna be buying less stuff, and therefore FedEx and 154 00:08:54,600 --> 00:08:57,559 Speaker 6: ups are going to be shipping uh less freight to 155 00:08:57,679 --> 00:09:01,520 Speaker 6: people's doors. And also, you know that trend of you know, 156 00:09:01,600 --> 00:09:04,880 Speaker 6: e commerce and what we call B two C traffic 157 00:09:05,600 --> 00:09:09,600 Speaker 6: is a lot less profitable than you know, an envelope 158 00:09:09,640 --> 00:09:13,640 Speaker 6: going from one law firm to another, because that B 159 00:09:13,679 --> 00:09:17,440 Speaker 6: to B traffic tends to have a lot more shipments 160 00:09:17,440 --> 00:09:19,880 Speaker 6: associated with each of them. So, you know, if FedEx 161 00:09:19,960 --> 00:09:22,280 Speaker 6: a driver would go to a law firm and deliver 162 00:09:22,440 --> 00:09:26,120 Speaker 6: twenty packages and then probably pick up another twenty packages. 163 00:09:26,679 --> 00:09:29,600 Speaker 6: Where when they come to our house to deliver you know, 164 00:09:29,640 --> 00:09:32,440 Speaker 6: a shirt that you ordered, they're probably only delivering one 165 00:09:32,760 --> 00:09:34,760 Speaker 6: or you know, if they're lucky, to packages at the 166 00:09:34,760 --> 00:09:38,480 Speaker 6: same time. And those costs per packages are pretty high. 167 00:09:38,559 --> 00:09:41,520 Speaker 6: And that's really why the company has been so actively 168 00:09:41,559 --> 00:09:44,880 Speaker 6: looking to improve its overall productivity to kind of deal 169 00:09:44,920 --> 00:09:48,040 Speaker 6: with the reality of this new normal for them. 170 00:09:48,559 --> 00:09:50,839 Speaker 2: Well, let me ask you, if those costly home deliveries, 171 00:09:51,280 --> 00:09:54,160 Speaker 2: and certainly people are buying more on the internet, who 172 00:09:54,240 --> 00:09:56,640 Speaker 2: is making up that slack? Is it Amazon or are 173 00:09:56,679 --> 00:09:58,360 Speaker 2: there other players in the field. 174 00:09:58,760 --> 00:10:03,000 Speaker 6: Yeah, well, obviously Ison, you know, is doing a lot. 175 00:10:03,160 --> 00:10:05,760 Speaker 6: If you know, there were some stats that there's that 176 00:10:06,200 --> 00:10:08,560 Speaker 6: said that they're the leader deliverer, but you know, they 177 00:10:08,559 --> 00:10:12,319 Speaker 6: are also delivering mostly their own stuff where FedEx and 178 00:10:12,360 --> 00:10:18,920 Speaker 6: GPS are going after the businesses outside of Amazon, and 179 00:10:19,160 --> 00:10:22,079 Speaker 6: that is still a large market that they can go after. 180 00:10:22,600 --> 00:10:24,920 Speaker 6: So you know, they are delivering it, and so is 181 00:10:24,960 --> 00:10:27,440 Speaker 6: the US Postal Service for that matter, So you know, 182 00:10:27,480 --> 00:10:30,640 Speaker 6: you there is competition within the market. You know what 183 00:10:30,679 --> 00:10:32,920 Speaker 6: I would also say, you know, not to pivot to 184 00:10:32,920 --> 00:10:36,000 Speaker 6: too hard on this, but you know they're their freight business, 185 00:10:36,080 --> 00:10:39,040 Speaker 6: which is their lesson truckload business. FedEx Freight is the 186 00:10:39,120 --> 00:10:43,240 Speaker 6: largest lesson truckload carrier in North America. That business is 187 00:10:43,320 --> 00:10:46,520 Speaker 6: under pressure too. The good news is that you know, 188 00:10:47,000 --> 00:10:51,400 Speaker 6: uh tonnage might be down by mid single digits, rates 189 00:10:51,640 --> 00:10:54,640 Speaker 6: will probably continue to increase by mid single digits. That's 190 00:10:54,679 --> 00:11:00,280 Speaker 6: a very consolidated market that has a pretty long history 191 00:11:00,360 --> 00:11:04,160 Speaker 6: of good price discipline, so it won't be too corrosive 192 00:11:04,240 --> 00:11:08,520 Speaker 6: to margins. Maybe you know, too corrosive to margins this time. 193 00:11:08,760 --> 00:11:10,880 Speaker 6: And what I would also say on the pricing front 194 00:11:11,240 --> 00:11:14,440 Speaker 6: is that FedEx their express business, which is their parcel business. 195 00:11:14,600 --> 00:11:17,599 Speaker 6: You know, they've been doing a lot of things to 196 00:11:18,120 --> 00:11:21,520 Speaker 6: improve the pricing on that business as well. 197 00:11:22,240 --> 00:11:24,280 Speaker 2: Well, let me ask you back to that freight business. 198 00:11:24,480 --> 00:11:26,920 Speaker 2: Last time we spoke, they were talking about spinning that 199 00:11:27,000 --> 00:11:30,240 Speaker 2: off into a separately traded company. What's the status on 200 00:11:30,320 --> 00:11:32,280 Speaker 2: that and then how is that or will it help 201 00:11:32,320 --> 00:11:33,800 Speaker 2: the signature parcel business. 202 00:11:34,160 --> 00:11:35,800 Speaker 6: Yeah, a couple of months ago they said it is 203 00:11:35,880 --> 00:11:39,040 Speaker 6: going to be an eighteen month process, so it probably 204 00:11:39,080 --> 00:11:42,320 Speaker 6: won't happen until twenty twenty six. Not quite sure why 205 00:11:42,480 --> 00:11:44,760 Speaker 6: it's going to take that long, but you know, that's 206 00:11:44,840 --> 00:11:47,760 Speaker 6: the outlook that they provided. The management has said that 207 00:11:47,800 --> 00:11:51,840 Speaker 6: they're looking to hire a number of salespeople for that division, 208 00:11:52,080 --> 00:11:55,040 Speaker 6: so it looks like they're kind of getting prepared for 209 00:11:55,200 --> 00:11:58,600 Speaker 6: when that becomes a standalone company. So you know, and 210 00:11:58,640 --> 00:12:02,160 Speaker 6: the reason why they're doing that is probably twofold less 211 00:12:02,160 --> 00:12:05,640 Speaker 6: than truckload carriers tend to have a higher multiple, so 212 00:12:05,679 --> 00:12:08,400 Speaker 6: they're trying to unlock some value there with that asset, 213 00:12:08,960 --> 00:12:11,439 Speaker 6: and then secondly, you know, it'll allow management to really 214 00:12:11,480 --> 00:12:15,079 Speaker 6: focus on their parcel business, which is you know, can 215 00:12:15,160 --> 00:12:17,520 Speaker 6: be a very good business. But like I mentioned earlier, 216 00:12:17,720 --> 00:12:21,520 Speaker 6: it's an industry under transition, and you know, these companies, 217 00:12:21,720 --> 00:12:24,360 Speaker 6: whether it's FedEx or ups are kind of doing a 218 00:12:24,400 --> 00:12:27,400 Speaker 6: lot of things right now, whether it's investing in technologies, 219 00:12:27,760 --> 00:12:31,959 Speaker 6: changing the way they deliver things, or even changing their 220 00:12:31,960 --> 00:12:35,160 Speaker 6: air network will probably you know, help them down the road. 221 00:12:35,480 --> 00:12:38,120 Speaker 2: FedEx Q three earnings out this Thursday are thanks to 222 00:12:38,200 --> 00:12:43,000 Speaker 2: Lead Glasgow Bloomberg Intelligence Senior Transport, Logistics and Shipping analyst, 223 00:12:43,320 --> 00:12:45,360 Speaker 2: And coming up on Bloomberg day Break weekend, we'll look 224 00:12:45,360 --> 00:12:49,320 Speaker 2: at where Europe's financial services sector stands in an increasingly 225 00:12:49,440 --> 00:13:04,080 Speaker 2: fragmented world. I'm Tom Busby and this is Bloomberg. This 226 00:13:04,200 --> 00:13:06,400 Speaker 2: is Bloomberg day Break weekend, our global look ahead at 227 00:13:06,440 --> 00:13:08,920 Speaker 2: the top stories for investors in the coming week. I'm 228 00:13:08,920 --> 00:13:11,800 Speaker 2: Tom Busby in New York. Up later in our program 229 00:13:11,800 --> 00:13:13,800 Speaker 2: a look ahead to a rate decision from the Bank 230 00:13:13,800 --> 00:13:16,880 Speaker 2: of Japan and earnings from a top Chinese tech giant. 231 00:13:17,120 --> 00:13:19,960 Speaker 2: But first, as the European Union prepares to square up 232 00:13:20,000 --> 00:13:22,960 Speaker 2: to President Trump's tariffs, the future of the region's financial 233 00:13:22,960 --> 00:13:27,160 Speaker 2: sector remains uncertain. This week in London, Morgan Stanley hosts 234 00:13:27,200 --> 00:13:31,360 Speaker 2: the European Financials Conference, where international trade and geopolitics are 235 00:13:31,440 --> 00:13:34,280 Speaker 2: likely to feature high on the agenda. Now for more, 236 00:13:34,679 --> 00:13:37,200 Speaker 2: let's go to London and bring in Bloomberg Daybreak Europe 237 00:13:37,240 --> 00:13:39,080 Speaker 2: anchor Caroline hepgar. 238 00:13:39,280 --> 00:13:43,120 Speaker 3: Tom Trump tariff's economic growth and defense spending. There are 239 00:13:43,160 --> 00:13:46,960 Speaker 3: some major issues that bankers must reckon with on tariff's 240 00:13:47,040 --> 00:13:50,960 Speaker 3: European Commissioned President Ersina Vondelaine says the EU is not 241 00:13:51,120 --> 00:13:53,880 Speaker 3: the problem. That message came as she delivered a firm 242 00:13:53,960 --> 00:13:58,080 Speaker 3: response to the Trump Administration's tariffs. EU duties on up 243 00:13:58,120 --> 00:14:02,000 Speaker 3: to twenty six billion eurosworth American goods after the US 244 00:14:02,040 --> 00:14:06,920 Speaker 3: administration imposed twenty five percent tariffs on steel and aluminium imports. 245 00:14:07,360 --> 00:14:11,200 Speaker 3: The EU is also targeting goods from Republican led states, 246 00:14:11,240 --> 00:14:14,640 Speaker 3: according to a senior EU official, but it is also 247 00:14:14,760 --> 00:14:19,440 Speaker 3: leading to downgrades in economic growth for major European economies 248 00:14:19,440 --> 00:14:23,480 Speaker 3: such as France, and there may be further escalations with 249 00:14:23,640 --> 00:14:26,600 Speaker 3: EU metals tariffs that had been put in place during 250 00:14:26,680 --> 00:14:30,600 Speaker 3: Trump's first term and later suspended due to be reintroduced 251 00:14:30,680 --> 00:14:33,240 Speaker 3: in full on the second of April, along with some 252 00:14:33,480 --> 00:14:37,240 Speaker 3: levees that have never previously been in force. So all 253 00:14:37,280 --> 00:14:42,400 Speaker 3: of this situation leaves Europe's economy in flux. Then there 254 00:14:42,480 --> 00:14:46,120 Speaker 3: is the need for greater defense spending amidst renewed efforts 255 00:14:46,200 --> 00:14:50,120 Speaker 3: to secure peace between Russia and Ukraine, and questions about 256 00:14:50,160 --> 00:14:54,040 Speaker 3: how that surge in military spending will be funded on 257 00:14:54,120 --> 00:14:58,080 Speaker 3: the continent. There are also more regular topics on the 258 00:14:58,120 --> 00:15:01,200 Speaker 3: minds of the leaders in European five finance who are 259 00:15:01,320 --> 00:15:04,800 Speaker 3: due to gather here in London for the upcoming Morgan 260 00:15:04,880 --> 00:15:10,480 Speaker 3: Stanley European Financials Conference. Think inflation, interest rates, and deregulation, 261 00:15:10,680 --> 00:15:16,360 Speaker 3: for example, how much will sweeping US rollbacks affect bankers here. 262 00:15:17,360 --> 00:15:21,560 Speaker 3: In the past, this Morgan Stanley event has attracted CEOs, 263 00:15:21,600 --> 00:15:25,960 Speaker 3: including UBS's Sergio Amoti. Remember he used the gathering last 264 00:15:26,040 --> 00:15:29,800 Speaker 3: year to share part of the rationale behind his firm's 265 00:15:29,920 --> 00:15:34,360 Speaker 3: acquisition of rival credit Sweese. So how are the giants 266 00:15:34,400 --> 00:15:37,880 Speaker 3: of the financial sector thinking about the future. It's a 267 00:15:37,920 --> 00:15:42,240 Speaker 3: conversation I've been having with Bloomberg's finance reporter Laura Noonan. 268 00:15:43,080 --> 00:15:45,160 Speaker 7: Yeah, it's pretty much got all the big names. I mean, 269 00:15:45,160 --> 00:15:47,360 Speaker 7: they have a superb lineup every year, and this year 270 00:15:47,680 --> 00:15:51,040 Speaker 7: basically pretty much every important European bank CEO is going 271 00:15:51,080 --> 00:15:53,120 Speaker 7: to be there and is going to be speaking. So 272 00:15:53,560 --> 00:15:57,440 Speaker 7: you've got the likes of like Deutsche Bang CEO, Christian Sewing, Ubsser, 273 00:15:57,520 --> 00:16:02,840 Speaker 7: is Imati Santanderra's Exeter and Beteen Unicredits, Andrea Ortchell, who's 274 00:16:02,840 --> 00:16:05,360 Speaker 7: of course very interesting at the moment be in Pcos. 275 00:16:05,360 --> 00:16:08,760 Speaker 7: Basically everybody is going so we're expecting lots of news 276 00:16:08,760 --> 00:16:09,160 Speaker 7: out of this. 277 00:16:09,760 --> 00:16:13,240 Speaker 3: Yeah, deregulation is surely going to be a big theme 278 00:16:13,480 --> 00:16:16,360 Speaker 3: for the financial industry this year. Do you think it 279 00:16:16,400 --> 00:16:18,280 Speaker 3: will come up doing the discussions? 280 00:16:19,400 --> 00:16:22,480 Speaker 7: Yeah, I think the debate is really gaining pace here 281 00:16:22,640 --> 00:16:25,720 Speaker 7: in Europe now, so I think obviously what's happening in 282 00:16:25,760 --> 00:16:27,920 Speaker 7: the US is causing lots of banks to push quite 283 00:16:27,920 --> 00:16:30,120 Speaker 7: hard on this, and we're definitely seeing early signs at 284 00:16:30,120 --> 00:16:34,440 Speaker 7: the European Commission is listening and Europe at large is listening. 285 00:16:34,520 --> 00:16:36,840 Speaker 7: So we had a story earlier this week or possibly 286 00:16:36,920 --> 00:16:39,600 Speaker 7: late last week about them accelerating a review of the 287 00:16:39,640 --> 00:16:43,200 Speaker 7: competitiveness of European banking, and that's going to now happen 288 00:16:43,280 --> 00:16:45,440 Speaker 7: by the end of next year. They've also said that 289 00:16:45,440 --> 00:16:48,040 Speaker 7: they will remain alert. They're looking at what they can 290 00:16:48,080 --> 00:16:51,320 Speaker 7: do around the latest package of the bank capital rule. 291 00:16:51,360 --> 00:16:53,480 Speaker 7: So I think there's a big push and there is 292 00:16:53,520 --> 00:16:56,000 Speaker 7: some responsiveness. So I think now is probably the moment 293 00:16:56,280 --> 00:16:59,160 Speaker 7: when we're going to see the European banks take the 294 00:16:59,200 --> 00:17:01,880 Speaker 7: early signs indications that the EU is ready to act 295 00:17:01,920 --> 00:17:04,040 Speaker 7: and really try to drive home as much change as 296 00:17:04,080 --> 00:17:06,240 Speaker 7: they can. And certainly what's happening in the US is 297 00:17:06,280 --> 00:17:08,359 Speaker 7: giving them a lot of power. The Europeans are big 298 00:17:08,359 --> 00:17:11,199 Speaker 7: fans at the level playing field, and if the banks 299 00:17:11,200 --> 00:17:14,920 Speaker 7: can argue that banks in the US are getting concessions 300 00:17:15,000 --> 00:17:17,560 Speaker 7: and that they will be disadvantaged on the global stage 301 00:17:17,600 --> 00:17:20,600 Speaker 7: if they don't get the same, then that is going 302 00:17:20,680 --> 00:17:22,399 Speaker 7: to be a persuasive argument. And the one thing I 303 00:17:22,440 --> 00:17:24,439 Speaker 7: will say as well as people often say this is 304 00:17:24,440 --> 00:17:27,120 Speaker 7: only an issue for the big banks who compete internationally, 305 00:17:27,200 --> 00:17:29,800 Speaker 7: but it's not. It's also an issue for the smaller 306 00:17:29,840 --> 00:17:33,240 Speaker 7: banks who are listed, who are competing for investment internationally. 307 00:17:33,560 --> 00:17:35,800 Speaker 7: So they can definitely inmit those arguments and they will. 308 00:17:36,359 --> 00:17:40,200 Speaker 3: Okay, but how has Europe's financial services sector them reacted 309 00:17:40,280 --> 00:17:43,000 Speaker 3: to the tariff news I mean, if there's so much 310 00:17:43,080 --> 00:17:45,960 Speaker 3: of the influence of the US coming to the European 311 00:17:46,000 --> 00:17:48,280 Speaker 3: banking space, what are they thinking about when it comes 312 00:17:48,320 --> 00:17:49,560 Speaker 3: to Trump tariffs. 313 00:17:50,000 --> 00:17:52,640 Speaker 7: I mean, tariffs are bad in that tariffs a bad 314 00:17:52,680 --> 00:17:55,800 Speaker 7: for the overall economy, and banks are if you take aside, 315 00:17:56,240 --> 00:17:58,760 Speaker 7: if you exclude the investment bank portion, which does do 316 00:17:58,800 --> 00:18:02,159 Speaker 7: well on volatility, banks are mostly pure plays on the economy. 317 00:18:02,440 --> 00:18:04,359 Speaker 7: And if you take the view the tariffs at a 318 00:18:04,400 --> 00:18:07,639 Speaker 7: macro level hurt economic growth, then they are going to 319 00:18:07,640 --> 00:18:10,479 Speaker 7: be bad for banks who are dependent on economic growth. 320 00:18:10,720 --> 00:18:12,880 Speaker 7: They are especially bad for banks that do a lot 321 00:18:12,920 --> 00:18:16,280 Speaker 7: across border business in areas that could be affected by tariffs. 322 00:18:16,280 --> 00:18:19,720 Speaker 7: So I think tariffs are a net negative, but they're 323 00:18:19,760 --> 00:18:21,800 Speaker 7: also you know, when you're in banks, you think about 324 00:18:21,800 --> 00:18:23,639 Speaker 7: two things. There's the things that you can control and 325 00:18:23,640 --> 00:18:25,840 Speaker 7: the things there's the things that you can't. And they're 326 00:18:26,040 --> 00:18:28,359 Speaker 7: maybe at the very very senior level. Some of the 327 00:18:28,720 --> 00:18:31,200 Speaker 7: most senior bankers think that if they make big statements 328 00:18:31,240 --> 00:18:34,280 Speaker 7: they can help shape the narrative. But for most bankers 329 00:18:34,560 --> 00:18:36,720 Speaker 7: this is something which is outside of their control and 330 00:18:36,760 --> 00:18:39,280 Speaker 7: they'll just have to try to work around it as 331 00:18:39,320 --> 00:18:39,920 Speaker 7: best they can. 332 00:18:40,720 --> 00:18:46,720 Speaker 3: What about the geopolitics then obviously a big topic for us, 333 00:18:46,400 --> 00:18:49,200 Speaker 3: for people in business in general. But again, do you 334 00:18:49,240 --> 00:18:52,960 Speaker 3: think that's something that is driving trends or driving anythinking 335 00:18:53,119 --> 00:18:55,439 Speaker 3: in the banking and financial services sector. 336 00:18:56,359 --> 00:18:59,160 Speaker 7: So I think banking has become more balganized, and that's 337 00:18:59,160 --> 00:19:01,880 Speaker 7: something we've seen from the two thousand and seven eight 338 00:19:02,240 --> 00:19:05,000 Speaker 7: crisis onwards. Banks are less global than they were, and 339 00:19:05,000 --> 00:19:07,719 Speaker 7: European banks in particular are a lot less global than 340 00:19:07,720 --> 00:19:09,880 Speaker 7: they were, and in a sense that does lead them 341 00:19:09,920 --> 00:19:12,919 Speaker 7: somewhat less exposed to geopolitical trends and they would have 342 00:19:13,040 --> 00:19:14,680 Speaker 7: been two decades ago. 343 00:19:14,720 --> 00:19:14,800 Speaker 6: Now. 344 00:19:14,880 --> 00:19:17,000 Speaker 7: It's not to say it doesn't matter at all, but 345 00:19:17,080 --> 00:19:20,720 Speaker 7: it doesn't matter as much. It will matter more to banks. 346 00:19:21,040 --> 00:19:22,679 Speaker 7: You know, we've already seen some of the banks You've 347 00:19:22,680 --> 00:19:25,800 Speaker 7: had exposures to Eastern Europe and that has been a 348 00:19:25,880 --> 00:19:28,119 Speaker 7: challenging period for them as they've tried to navigate that. 349 00:19:28,240 --> 00:19:30,720 Speaker 7: I think banks, you have, big US businesses will be 350 00:19:30,760 --> 00:19:35,080 Speaker 7: waiting to see how they're positioned on that geopolitical tensions. 351 00:19:35,080 --> 00:19:37,720 Speaker 7: Then that hit the overall macro picture again for banks. 352 00:19:37,760 --> 00:19:40,000 Speaker 7: So much of this does come back to the macro picture, 353 00:19:40,040 --> 00:19:43,720 Speaker 7: and if and if you have geopolitical tensions spiking, say 354 00:19:43,760 --> 00:19:46,000 Speaker 7: oil prices, and if that leads to inflation and that 355 00:19:46,320 --> 00:19:49,280 Speaker 7: takes economy to a certain place, that's the impact that 356 00:19:49,320 --> 00:19:51,560 Speaker 7: they will you know, that will inevitably have an impact 357 00:19:51,600 --> 00:19:54,200 Speaker 7: on lots of these businesses. So yes, they're definitely thinking 358 00:19:54,320 --> 00:19:57,119 Speaker 7: very hard about this. But also the investment banks, the 359 00:19:57,160 --> 00:19:59,800 Speaker 7: trade banks, they will also spy an opportunity here. They 360 00:19:59,800 --> 00:20:02,239 Speaker 7: will say, oh, we can help clients to navigate these 361 00:20:02,359 --> 00:20:04,679 Speaker 7: unprecented times, and they will try to use that to 362 00:20:04,720 --> 00:20:08,840 Speaker 7: win advisory business. So probably a net negative, but with 363 00:20:09,000 --> 00:20:10,800 Speaker 7: some positives built in there too, if that. 364 00:20:10,720 --> 00:20:15,680 Speaker 3: Makes sense, Yes, absolutely. Meanwhile, of course factored into that 365 00:20:15,760 --> 00:20:19,240 Speaker 3: may be lead into that thinking will be the expectation 366 00:20:19,359 --> 00:20:22,840 Speaker 3: of increased defense spending. That's a huge issue for Europe. 367 00:20:22,880 --> 00:20:25,919 Speaker 3: Will helping to meet the funding deficit be on the 368 00:20:25,960 --> 00:20:29,360 Speaker 3: minds of financial services leaders in Europe? 369 00:20:30,320 --> 00:20:32,480 Speaker 7: So I think yeah, absolutely. I mean one of the 370 00:20:32,520 --> 00:20:34,520 Speaker 7: big questions is how much of this will be done 371 00:20:34,560 --> 00:20:36,880 Speaker 7: through public money versus how much have we done through 372 00:20:37,240 --> 00:20:39,399 Speaker 7: the private money? And then to the extent that it 373 00:20:39,440 --> 00:20:41,920 Speaker 7: is not public money, will it be bank lending, will 374 00:20:41,920 --> 00:20:45,240 Speaker 7: it be capital markets? As your listeners will know, the 375 00:20:45,280 --> 00:20:48,159 Speaker 7: Capital Markets Union is very much tied into the strategic 376 00:20:48,240 --> 00:20:51,520 Speaker 7: need to fund raise around these things. At the same time, 377 00:20:51,600 --> 00:20:53,960 Speaker 7: we are seeing a sea change in terms of how 378 00:20:54,640 --> 00:20:58,080 Speaker 7: investors and private equity funds and even banks themselves view 379 00:20:58,119 --> 00:21:01,200 Speaker 7: defense assets. I mean, they have been assets that people 380 00:21:01,280 --> 00:21:03,639 Speaker 7: have not really wanted to get too deep in previously 381 00:21:03,680 --> 00:21:07,199 Speaker 7: because of ESG concerns, concerns that it looks bad. And 382 00:21:07,280 --> 00:21:11,320 Speaker 7: I think we're definitely seeing a change in defense looking 383 00:21:11,359 --> 00:21:14,000 Speaker 7: like something good to put money in versus something bad 384 00:21:14,040 --> 00:21:16,320 Speaker 7: to put money. And I think that's something. And I 385 00:21:16,359 --> 00:21:18,520 Speaker 7: was talking to someone about this yesterday who's in the market, 386 00:21:18,600 --> 00:21:20,119 Speaker 7: and they were saying, you know how they have traditionally 387 00:21:20,160 --> 00:21:22,399 Speaker 7: thought that, you know, they can't be seen to be 388 00:21:22,440 --> 00:21:24,520 Speaker 7: doing this, but now there's quite a lot of money 389 00:21:24,560 --> 00:21:26,560 Speaker 7: to be made here, and I think you will see 390 00:21:26,600 --> 00:21:29,680 Speaker 7: these kind of pragmatic shifts take place. But also because 391 00:21:29,680 --> 00:21:32,959 Speaker 7: there's such a clear public narrative around defense is a 392 00:21:33,000 --> 00:21:35,600 Speaker 7: patriotic thing for Europe. But I think something that we 393 00:21:35,640 --> 00:21:37,960 Speaker 7: are definitely seeing from the US trend is that there's 394 00:21:38,000 --> 00:21:41,800 Speaker 7: more of a Europe first, America first, and having a 395 00:21:41,840 --> 00:21:44,720 Speaker 7: common thing which we are different too. I mean, I'm 396 00:21:44,720 --> 00:21:46,560 Speaker 7: not going to say enemy, but having Europe kind of 397 00:21:46,560 --> 00:21:50,000 Speaker 7: galvanized as one. People are quite hopeful that could be 398 00:21:50,040 --> 00:21:53,480 Speaker 7: positive for European banks, for European policy, for capital markets union, 399 00:21:53,520 --> 00:21:55,919 Speaker 7: because it just makes everyone pull in the same direction. 400 00:21:56,080 --> 00:21:59,440 Speaker 7: Often in Europe we suffer because people are all pulling 401 00:21:59,440 --> 00:22:01,639 Speaker 7: in different You know, we have the EU, but it 402 00:22:01,680 --> 00:22:03,959 Speaker 7: is essentially a lot of different member states and they 403 00:22:04,000 --> 00:22:06,119 Speaker 7: all want different things, whereas in this case that you 404 00:22:06,200 --> 00:22:08,040 Speaker 7: all want the same thing, and that can be a 405 00:22:08,080 --> 00:22:09,960 Speaker 7: powerful galvanizing force for the sector. 406 00:22:10,000 --> 00:22:13,840 Speaker 3: I think yes, well, defense being seen as far more 407 00:22:13,920 --> 00:22:19,399 Speaker 3: existential obviously, but also maybe more ethical, more necessary. Look 408 00:22:19,560 --> 00:22:25,399 Speaker 3: these major issues aside, then how do you think about 409 00:22:25,600 --> 00:22:28,679 Speaker 3: the ECB ECB policy in all of this? In recent 410 00:22:28,760 --> 00:22:33,080 Speaker 3: days we had the ECBN it watches an event in 411 00:22:33,119 --> 00:22:37,639 Speaker 3: Frankfurt with Christine Legard talking about, you know, the idea 412 00:22:37,640 --> 00:22:41,480 Speaker 3: of inflation, whether or not you know two percent is possible, 413 00:22:41,520 --> 00:22:43,760 Speaker 3: the pressures that they're are on getting to that two 414 00:22:43,760 --> 00:22:47,400 Speaker 3: percent goal. How does the European financial sector now think 415 00:22:47,440 --> 00:22:48,840 Speaker 3: about ECB policy? 416 00:22:49,400 --> 00:22:52,560 Speaker 7: So interest racist is always really interesting because there's this 417 00:22:52,640 --> 00:22:55,800 Speaker 7: kind of hypothetical theory around banking, which is banks do 418 00:22:55,920 --> 00:22:58,760 Speaker 7: better when interest rates they're high because the gap between 419 00:22:58,760 --> 00:23:00,560 Speaker 7: what you charge for lending and what you pay for 420 00:23:00,600 --> 00:23:05,679 Speaker 7: deposits increases, then the interest margin compression expansion. In theory, 421 00:23:05,720 --> 00:23:07,399 Speaker 7: it plays out a little bit differently. And what we 422 00:23:07,440 --> 00:23:09,680 Speaker 7: will have seen throughout the last cycle is that European 423 00:23:09,720 --> 00:23:12,720 Speaker 7: banks didn't take the kind of loan losses people expected 424 00:23:12,840 --> 00:23:15,800 Speaker 7: as interest rates rose, and there is hope. I think 425 00:23:15,840 --> 00:23:17,880 Speaker 7: that if interest rates are now coming down in quite 426 00:23:17,920 --> 00:23:20,679 Speaker 7: a systematic way, that means that the pain that some 427 00:23:20,720 --> 00:23:24,440 Speaker 7: people thought was deferred will actually be just pushed out completely. 428 00:23:24,520 --> 00:23:27,439 Speaker 7: Because people have managed to adjust to interest rates, they 429 00:23:27,440 --> 00:23:31,280 Speaker 7: haven't begun defaulting on their loans. There's always a time lag, 430 00:23:31,320 --> 00:23:33,520 Speaker 7: but if interest rates are now cruising down the way, 431 00:23:33,760 --> 00:23:36,600 Speaker 7: maybe that lag default won't actually come through, which we'd 432 00:23:36,640 --> 00:23:39,760 Speaker 7: be beneficial for a bank. So structurally, if we move 433 00:23:39,800 --> 00:23:43,119 Speaker 7: to a lower interest rate environment, that is bad, but 434 00:23:43,200 --> 00:23:45,760 Speaker 7: I think in this case there are reasons to see 435 00:23:45,800 --> 00:23:48,720 Speaker 7: positives in it as well, because it does mean that 436 00:23:48,960 --> 00:23:51,840 Speaker 7: those fears, because there's always been a fear about loan losses, 437 00:23:51,880 --> 00:23:53,800 Speaker 7: and it goes back to the crisis as well. Even 438 00:23:54,119 --> 00:23:56,560 Speaker 7: when loan losses are low, people are like, but are 439 00:23:56,640 --> 00:23:58,800 Speaker 7: they actually that low? Are the banks hiding something? Are 440 00:23:58,800 --> 00:24:01,000 Speaker 7: we just waiting for misery around the corner. And I 441 00:24:01,040 --> 00:24:05,719 Speaker 7: think some of those concerns about unrealized loan losses, our 442 00:24:05,760 --> 00:24:08,080 Speaker 7: loan losses we haven't actually recognized yet. I think some 443 00:24:08,119 --> 00:24:10,840 Speaker 7: of those are going to start to fade as we 444 00:24:10,880 --> 00:24:12,240 Speaker 7: see interest rates come down. 445 00:24:12,600 --> 00:24:15,280 Speaker 3: My thanks to Bloomberg's Laura Noonan, and we will have 446 00:24:15,400 --> 00:24:18,800 Speaker 3: full coverage of all the action for Morgan Stanley's twenty 447 00:24:18,920 --> 00:24:23,840 Speaker 3: twenty five European Financials Conference here on Bloomberg. I'm Caroline 448 00:24:23,880 --> 00:24:26,200 Speaker 3: Heapkeet in London. You can catch us every weekday morning 449 00:24:26,359 --> 00:24:29,119 Speaker 3: for Bloomberg Daybreak here at beginning at six am in London. 450 00:24:29,280 --> 00:24:30,720 Speaker 3: That's one am on Wall Street. 451 00:24:30,760 --> 00:24:34,040 Speaker 2: Tom, Thank you, Caroline. And coming up on Bloomberg day 452 00:24:34,040 --> 00:24:36,320 Speaker 2: Break weekend to look ahead to a rate decision from 453 00:24:36,320 --> 00:24:40,080 Speaker 2: the Bank of Japan. I'm Tom Busby and this is Bloomberg. 454 00:24:50,880 --> 00:24:53,200 Speaker 2: This is Bloomberg day Break weekend, our global look ahead 455 00:24:53,200 --> 00:24:55,399 Speaker 2: at the top stories for investors in the coming week. 456 00:24:55,600 --> 00:24:58,520 Speaker 2: I'm Tom Busby in New York. We'll be following a 457 00:24:58,560 --> 00:25:00,600 Speaker 2: couple of stories out of Asia this wee week, including 458 00:25:00,600 --> 00:25:03,480 Speaker 2: a rate decision from the Bank of Japan and earnings 459 00:25:03,480 --> 00:25:06,760 Speaker 2: from Chinese tech giant ten Cent. For more, let's get 460 00:25:06,800 --> 00:25:09,880 Speaker 2: to the host of the Debreak Asia podcast, Doug Krisner. 461 00:25:10,400 --> 00:25:13,119 Speaker 4: Tom. This report will come after ten Cent unveiled and 462 00:25:13,280 --> 00:25:16,359 Speaker 4: AI model last month. The company claims it outdoes the 463 00:25:16,440 --> 00:25:19,840 Speaker 4: chatbot from deep Seek. Now we know that China's AI 464 00:25:20,000 --> 00:25:24,320 Speaker 4: sector has been seeing rapid development, especially since last year's 465 00:25:24,320 --> 00:25:27,760 Speaker 4: splash from Deep Seek. So ten Cent will join Ali 466 00:25:27,760 --> 00:25:30,560 Speaker 4: Baba and Byte Dance in this race to capture market 467 00:25:30,600 --> 00:25:34,359 Speaker 4: share in artificial intelligence in China. For more, I'm joined 468 00:25:34,359 --> 00:25:36,800 Speaker 4: by Robert Lee. He is a senior tech analyst for 469 00:25:36,880 --> 00:25:41,040 Speaker 4: Bloomberg Intelligence. Robert joining from Hong Kong. Robert, It's always 470 00:25:41,080 --> 00:25:43,639 Speaker 4: a pleasure. Thanks for making time. Can we talk about 471 00:25:43,720 --> 00:25:46,320 Speaker 4: the hype right now that may be happening in certain 472 00:25:46,359 --> 00:25:49,119 Speaker 4: pockets of high technology in China? Are you seeing a 473 00:25:49,119 --> 00:25:51,560 Speaker 4: lot of it? And is ten Cent getting caught up 474 00:25:51,560 --> 00:25:51,840 Speaker 4: in it? 475 00:25:52,359 --> 00:25:52,439 Speaker 6: So? 476 00:25:52,520 --> 00:25:54,800 Speaker 8: I think we need to divide this up into two 477 00:25:54,920 --> 00:25:58,000 Speaker 8: questions really, you know, one is relating to the progress 478 00:25:58,040 --> 00:26:01,000 Speaker 8: that China's making in high tech and AI particular, and 479 00:26:01,080 --> 00:26:04,800 Speaker 8: I think the evidence is clearly there, as exemplified by Deepseek. 480 00:26:05,200 --> 00:26:07,320 Speaker 8: You know, China is well positioned as the number two 481 00:26:07,320 --> 00:26:10,200 Speaker 8: globally behind the US in AI, and if anything, they're 482 00:26:10,200 --> 00:26:13,200 Speaker 8: actually narrowing the gap. It's perhaps a little bit meaningless 483 00:26:13,200 --> 00:26:15,439 Speaker 8: to try and put you know, an actual time at 484 00:26:15,480 --> 00:26:17,280 Speaker 8: a six months behind, a year behind. 485 00:26:17,680 --> 00:26:18,959 Speaker 9: They're very closely behind. 486 00:26:19,040 --> 00:26:21,480 Speaker 8: I think, you know, the evidence, there's more than enough 487 00:26:21,520 --> 00:26:22,960 Speaker 8: evidence there to suggest that. 488 00:26:23,280 --> 00:26:24,720 Speaker 9: And obviously here. 489 00:26:24,520 --> 00:26:27,520 Speaker 8: In China we've had the so called Two Sessions or 490 00:26:27,640 --> 00:26:31,119 Speaker 8: National People's Congress, where a lot of senior leaders stand 491 00:26:31,200 --> 00:26:34,600 Speaker 8: up give their view, you know, where the future economic 492 00:26:34,880 --> 00:26:37,920 Speaker 8: plans are developed, and high tech and AI in particular 493 00:26:38,200 --> 00:26:38,840 Speaker 8: has been. 494 00:26:38,800 --> 00:26:39,920 Speaker 9: The core focus of that. 495 00:26:40,280 --> 00:26:43,879 Speaker 8: So if the weight of continued to state behind these companies, 496 00:26:44,240 --> 00:26:46,960 Speaker 8: you know, China's well placed to continue narrowing the gap. 497 00:26:47,240 --> 00:26:49,760 Speaker 9: So that's the first question. The second is how these 498 00:26:49,760 --> 00:26:52,080 Speaker 9: companies going to monetize? So I think this is. 499 00:26:52,080 --> 00:26:54,879 Speaker 8: A question that applies to all tech companies globally. At 500 00:26:54,920 --> 00:26:59,399 Speaker 8: the moment, the hyperscalers and others are spending you know, 501 00:26:59,520 --> 00:27:02,679 Speaker 8: humonger amounts on capex. I think the last number that 502 00:27:02,760 --> 00:27:05,479 Speaker 8: was quoted for the big US tap platforms was around 503 00:27:05,800 --> 00:27:07,160 Speaker 8: three hundred and fifty. 504 00:27:06,840 --> 00:27:10,560 Speaker 9: Billion US dollars in capex. Monetization is beginning. 505 00:27:10,160 --> 00:27:12,400 Speaker 8: To come through but it's at a very low level 506 00:27:12,560 --> 00:27:15,520 Speaker 8: at the moment. So Tyna into ten Cent. Ten Cent 507 00:27:15,600 --> 00:27:19,040 Speaker 8: has a foundational AI model and a lot of submodels, 508 00:27:19,040 --> 00:27:21,440 Speaker 8: and as you said in your preview, you know, it's 509 00:27:21,480 --> 00:27:25,760 Speaker 8: generating models almost week by week. There's a proliferation of 510 00:27:25,800 --> 00:27:28,560 Speaker 8: models out there at the moment. It's using those to 511 00:27:28,800 --> 00:27:32,800 Speaker 8: generate cost savings and synergies within its business, so that 512 00:27:32,800 --> 00:27:35,920 Speaker 8: will help to support margins, etc. Going forward, But I 513 00:27:35,960 --> 00:27:38,560 Speaker 8: would argue it's you know, it's unlikely at this point 514 00:27:38,560 --> 00:27:41,720 Speaker 8: to have a transformational impact on their business. 515 00:27:42,200 --> 00:27:43,960 Speaker 9: And then as the third question, or. 516 00:27:43,960 --> 00:27:47,680 Speaker 8: Related to what I just said, what about the outside monetization, 517 00:27:47,920 --> 00:27:51,200 Speaker 8: are there enterprise clients or consumer clients going to pay 518 00:27:51,240 --> 00:27:53,440 Speaker 8: for these things? Well, I think is most of us 519 00:27:53,560 --> 00:27:57,080 Speaker 8: understand at the moment the vast majority of AI tools 520 00:27:57,119 --> 00:27:59,679 Speaker 8: available to a consumer at the moment are free to 521 00:27:59,720 --> 00:28:03,040 Speaker 8: act us. So we need to overcome that in order 522 00:28:03,080 --> 00:28:04,920 Speaker 8: to generate an ROI. 523 00:28:05,320 --> 00:28:08,399 Speaker 4: So I'm wondering whether there's an important differentiation that we 524 00:28:08,480 --> 00:28:10,840 Speaker 4: need to pursue. Here in the US, we have these 525 00:28:10,880 --> 00:28:14,199 Speaker 4: advanced AI data centers that are being powered by the 526 00:28:14,320 --> 00:28:19,280 Speaker 4: GPUs manufactured by Nvidia. China is restricted from access to that. 527 00:28:19,880 --> 00:28:22,360 Speaker 4: Is that an important point to kind of tease out 528 00:28:22,400 --> 00:28:23,080 Speaker 4: a little bit here. 529 00:28:23,840 --> 00:28:26,680 Speaker 8: It absolutely is, but I think probably things have moved 530 00:28:26,720 --> 00:28:28,800 Speaker 8: a bit beyond that now. So again, if we had 531 00:28:28,800 --> 00:28:31,639 Speaker 8: this conversation twelve months or so ago, well, which we 532 00:28:31,680 --> 00:28:36,679 Speaker 8: probably did, you know, there there were major worries on 533 00:28:36,720 --> 00:28:39,600 Speaker 8: the China front at that point that these export controls, 534 00:28:39,680 --> 00:28:44,520 Speaker 8: you know, would really forestall the AI developments you know, 535 00:28:44,560 --> 00:28:47,480 Speaker 8: of Chinese companies, and as we've already established, that hasn't 536 00:28:47,480 --> 00:28:50,240 Speaker 8: been the case. So why I think first of all, 537 00:28:50,400 --> 00:28:55,520 Speaker 8: these big platforms preemptively built stock before the sanctions, if 538 00:28:55,520 --> 00:28:58,400 Speaker 8: you like, came into place. Also that you know, there 539 00:28:58,400 --> 00:29:01,840 Speaker 8: are still a large number of countries globally on friendly 540 00:29:01,920 --> 00:29:04,320 Speaker 8: terms with China, so I think, you know, I think 541 00:29:04,320 --> 00:29:07,120 Speaker 8: there's anecdotal evidence at the very least that China's pulled 542 00:29:07,120 --> 00:29:09,680 Speaker 8: in favors from friends. You know, it's very, very hard 543 00:29:09,800 --> 00:29:13,959 Speaker 8: to enforce these controls. And then thirdly, you've got an 544 00:29:13,960 --> 00:29:18,680 Speaker 8: increasing supply of domestic supplied AI accelerators from the likes 545 00:29:18,680 --> 00:29:22,719 Speaker 8: of Huawei. So combination of three factors have enabled Chinese 546 00:29:22,800 --> 00:29:27,920 Speaker 8: companies on the software side to continue their developments relatively unhindered. 547 00:29:28,320 --> 00:29:30,720 Speaker 8: So I think we're probably through the worst of the 548 00:29:31,000 --> 00:29:32,440 Speaker 8: uncertainty on that point. 549 00:29:32,920 --> 00:29:34,760 Speaker 9: You know, sure, Chinese AI. 550 00:29:34,600 --> 00:29:39,200 Speaker 8: Accelerators are still probably two or three generations behind Nvidia. 551 00:29:39,640 --> 00:29:42,720 Speaker 8: But again going back to the Deep Sea announcement, this 552 00:29:42,880 --> 00:29:48,080 Speaker 8: technological challenge, the potential shortage on chips has forced Chinese 553 00:29:48,080 --> 00:29:51,200 Speaker 8: engineers and developers to innovate more and they've moved towards 554 00:29:51,680 --> 00:29:56,400 Speaker 8: lower cost, less computationally intensive models that are more adept 555 00:29:56,560 --> 00:29:59,480 Speaker 8: at running on these lower spect local chips. So again 556 00:29:59,520 --> 00:30:03,480 Speaker 8: that's a with them to continue their developments. But the 557 00:30:03,520 --> 00:30:05,840 Speaker 8: main question I keep coming back to, how are they 558 00:30:05,880 --> 00:30:07,320 Speaker 8: going to monetize. 559 00:30:07,320 --> 00:30:09,920 Speaker 4: The ROI that we're all waiting for. Let's get back 560 00:30:09,960 --> 00:30:14,480 Speaker 4: to ten Cent. Compare the company's cloud performance and the 561 00:30:14,520 --> 00:30:17,160 Speaker 4: revenue that we're expecting on that front with some of 562 00:30:17,200 --> 00:30:19,880 Speaker 4: the things that ten Cent is known for like e 563 00:30:19,880 --> 00:30:21,680 Speaker 4: commerce and video games. 564 00:30:22,120 --> 00:30:25,720 Speaker 8: Well, the numbers have been changing over the last two years, 565 00:30:25,720 --> 00:30:28,600 Speaker 8: but ten Cent, over you know, the last two to 566 00:30:28,640 --> 00:30:32,200 Speaker 8: three years, has been well positioned as China's second largest 567 00:30:33,120 --> 00:30:38,800 Speaker 8: cloud computing company. However, Tencent and Ali Baba have progressively 568 00:30:38,880 --> 00:30:43,800 Speaker 8: lost share over that period. The dynamics or competitive dynamics 569 00:30:43,800 --> 00:30:47,280 Speaker 8: of the China cloud market are very different to the US. 570 00:30:47,560 --> 00:30:50,760 Speaker 8: It's a far more fragmented market. And then obviously you've 571 00:30:50,800 --> 00:30:52,880 Speaker 8: got a lot of state involvement in the market, a 572 00:30:52,880 --> 00:30:57,479 Speaker 8: lot of state owned companies or so called soees. So 573 00:30:58,120 --> 00:30:59,920 Speaker 8: what we've seen over the last two or three years 574 00:31:00,200 --> 00:31:06,320 Speaker 8: is these state aligned companies again Huawei, the national telco companies, 575 00:31:06,400 --> 00:31:10,880 Speaker 8: the big three China Telcom, China Mobile, China unicorm taking 576 00:31:10,960 --> 00:31:14,320 Speaker 8: share progressively from Ali Barbera and ten Cent. Now with 577 00:31:14,400 --> 00:31:17,080 Speaker 8: the new growth in AI, obviously that should help reignite 578 00:31:17,160 --> 00:31:20,600 Speaker 8: growth or Ali Barbara and ten Cent. But the issue 579 00:31:20,640 --> 00:31:23,080 Speaker 8: both of them have and there is incremental upside and 580 00:31:23,120 --> 00:31:25,680 Speaker 8: out side of the business. You know, for Ali Barba 581 00:31:25,840 --> 00:31:29,040 Speaker 8: the bulk of its earnings growth and earnings potential is 582 00:31:29,120 --> 00:31:32,280 Speaker 8: driven by e commerce, not cloud. And for ten Cent 583 00:31:32,360 --> 00:31:35,520 Speaker 8: again the bulk of their earnings is in social media, 584 00:31:35,640 --> 00:31:38,960 Speaker 8: in video games and advertising. So the cloud business is 585 00:31:39,000 --> 00:31:43,640 Speaker 8: a relatively small portion of the business. So AI demand 586 00:31:43,720 --> 00:31:46,760 Speaker 8: and development should help drive incremental revenue on that, but 587 00:31:46,840 --> 00:31:49,080 Speaker 8: I would argue it's not big enough portion of their 588 00:31:49,120 --> 00:31:52,760 Speaker 8: overall group revenue to really move the needle to again 589 00:31:52,840 --> 00:31:54,720 Speaker 8: to any significant degree. 590 00:31:54,880 --> 00:31:56,840 Speaker 4: So when we hear from ten Cent this week, do 591 00:31:56,840 --> 00:31:59,560 Speaker 4: you have a sense of how the company may guide 592 00:31:59,680 --> 00:32:02,840 Speaker 4: us in terms of expectations on CAPEX spending. 593 00:32:03,240 --> 00:32:06,760 Speaker 8: It's never a major feature for their business, and again 594 00:32:06,800 --> 00:32:09,520 Speaker 8: the reason for that is they're a software business and 595 00:32:09,560 --> 00:32:12,840 Speaker 8: they're not particularly capitally intensive, excluding. 596 00:32:12,280 --> 00:32:13,760 Speaker 9: Their cloud business. 597 00:32:14,160 --> 00:32:17,880 Speaker 8: But absolutely, I'm sure the cloud spending, as we saw 598 00:32:17,960 --> 00:32:20,800 Speaker 8: Ali Barba is going to increase, whether it's going to 599 00:32:20,800 --> 00:32:23,719 Speaker 8: increase to such a significant degree. 600 00:32:24,120 --> 00:32:26,640 Speaker 9: And then, just briefly for people who are not familiar. 601 00:32:26,320 --> 00:32:29,800 Speaker 8: With that, at Ali Baba's results three or four weeks ago, 602 00:32:30,480 --> 00:32:33,720 Speaker 8: they disclosed they're going to spend over fifty billion US 603 00:32:33,840 --> 00:32:37,480 Speaker 8: dollars on CAPEX and cloud related spend over the next 604 00:32:37,560 --> 00:32:38,160 Speaker 8: three years. 605 00:32:38,440 --> 00:32:39,600 Speaker 9: So that amount. 606 00:32:39,320 --> 00:32:42,160 Speaker 8: Exceeds what they've spent in the last ten years. So 607 00:32:42,240 --> 00:32:45,640 Speaker 8: that is a significant acceleration and investment there. So I'm 608 00:32:45,640 --> 00:32:48,400 Speaker 8: sure we'll see something similar at ten Cent, but probably 609 00:32:48,440 --> 00:32:51,400 Speaker 8: to a lesser degree. And that ties into who they 610 00:32:51,400 --> 00:32:55,200 Speaker 8: are where they are. They're a very conservative company. They've 611 00:32:55,200 --> 00:32:57,840 Speaker 8: been playing the long game in AI. They're not in 612 00:32:57,840 --> 00:33:01,040 Speaker 8: a rush, you know, they're doing taking a slow and 613 00:33:01,160 --> 00:33:02,160 Speaker 8: steady approach. 614 00:33:02,600 --> 00:33:05,080 Speaker 4: Robert, thank you so much for helping us understand what 615 00:33:05,120 --> 00:33:07,800 Speaker 4: the issues are for ten Cent As we look ahead 616 00:33:07,840 --> 00:33:10,560 Speaker 4: to the company's earnings this week, Robert Lee, a senior 617 00:33:10,600 --> 00:33:14,480 Speaker 4: tech analyst for Bloomberg Intelligence, we move from Hong Kong 618 00:33:14,600 --> 00:33:17,160 Speaker 4: to Tokyo, where in the week ahead we'll get a 619 00:33:17,240 --> 00:33:20,160 Speaker 4: rate decision from the Bank of Japan. Now, recent data 620 00:33:20,200 --> 00:33:23,600 Speaker 4: show the Japanese economy expanded in the final quarter of 621 00:33:23,680 --> 00:33:27,840 Speaker 4: last year at a slower pace than the preliminary report indicated. 622 00:33:28,040 --> 00:33:30,720 Speaker 4: This may give the Bank of Japan reason to hold 623 00:33:30,720 --> 00:33:33,640 Speaker 4: policy steady for more. Let's bring in Paul Jackson. He 624 00:33:33,800 --> 00:33:37,480 Speaker 4: is Asia Economy editor for Bloomberg News. Paul joins us 625 00:33:37,480 --> 00:33:40,200 Speaker 4: from our radio studio in Tokyo. Talk to me a 626 00:33:40,200 --> 00:33:43,560 Speaker 4: little bit about any concern that may be there in 627 00:33:43,600 --> 00:33:46,239 Speaker 4: the market right now in Japan given this move up 628 00:33:46,280 --> 00:33:48,280 Speaker 4: that we have seen in JGB yields. 629 00:33:48,800 --> 00:33:54,600 Speaker 10: Well, I think the market concerns largely reflect the reality 630 00:33:54,680 --> 00:33:57,560 Speaker 10: that the boj has now pulled away a year ago 631 00:33:57,600 --> 00:34:01,000 Speaker 10: from protecting these yields, being a lid on them, so 632 00:34:01,400 --> 00:34:03,440 Speaker 10: they can kind of go up and up and up. 633 00:34:03,880 --> 00:34:07,880 Speaker 10: Now there has been an optick to the highest levels 634 00:34:07,880 --> 00:34:12,520 Speaker 10: in the benchmark yield, to the levels that we last 635 00:34:12,600 --> 00:34:16,879 Speaker 10: saw during the global financial crisis before then. Even so, 636 00:34:17,040 --> 00:34:19,680 Speaker 10: these our levels that are are much higher than they 637 00:34:19,680 --> 00:34:23,960 Speaker 10: have been for a long time. That's causing some concern 638 00:34:24,840 --> 00:34:28,680 Speaker 10: amongst market players and also for policymakers. Don't forget that 639 00:34:29,280 --> 00:34:35,000 Speaker 10: Japan has the biggest debt load amongst advanced economies in 640 00:34:35,040 --> 00:34:39,640 Speaker 10: the world, so rising yields on benchmark bonds is a 641 00:34:39,680 --> 00:34:43,080 Speaker 10: problem for long term financing of the debt. And I 642 00:34:43,120 --> 00:34:47,080 Speaker 10: think what we're seeing here from policymakers, not only from 643 00:34:47,160 --> 00:34:51,160 Speaker 10: the Central Bank governor Uda, but also from the Finance 644 00:34:51,239 --> 00:34:55,120 Speaker 10: Minister Kato, is that policymakers are trying to just reassure, 645 00:34:55,280 --> 00:34:58,959 Speaker 10: just say, hey, look, this is kind of natural. We're 646 00:34:59,000 --> 00:35:04,840 Speaker 10: back towards a kind of more market focused determination of 647 00:35:04,920 --> 00:35:09,280 Speaker 10: yield pricing, and there's no need to get too overly 648 00:35:09,400 --> 00:35:13,080 Speaker 10: concerned here. These market movements are normal. 649 00:35:13,000 --> 00:35:16,000 Speaker 4: And it seems logical that it would also would reflect 650 00:35:16,040 --> 00:35:18,760 Speaker 4: expectations that the boj is going to begin raising interest 651 00:35:18,840 --> 00:35:19,239 Speaker 4: rates soon. 652 00:35:19,320 --> 00:35:22,520 Speaker 10: Right, Yeah, I think we're going to continue seeing interest 653 00:35:22,600 --> 00:35:27,960 Speaker 10: rate rises in Japan. We've still got inflation. Inflation is 654 00:35:28,040 --> 00:35:31,920 Speaker 10: going to be above or in line with the boj's 655 00:35:31,960 --> 00:35:35,560 Speaker 10: target for We're getting close to three years now, so 656 00:35:35,880 --> 00:35:38,239 Speaker 10: those interest rates are going to keep going up now, 657 00:35:38,320 --> 00:35:40,760 Speaker 10: They're not going to go nuts. It's not like every meeting. 658 00:35:41,239 --> 00:35:43,640 Speaker 10: It's not back to back at rate hikes. We're not 659 00:35:43,719 --> 00:35:48,239 Speaker 10: expecting anything at the March meeting. But I think we 660 00:35:48,880 --> 00:35:54,359 Speaker 10: are seeing, you know, pretty hard baked team expectations that 661 00:35:54,440 --> 00:35:56,920 Speaker 10: the Bank of Japan is going to be raising rates 662 00:35:57,040 --> 00:35:58,600 Speaker 10: every six months or so. 663 00:35:59,000 --> 00:36:01,960 Speaker 4: We had the February reading on producer prices. You and 664 00:36:02,000 --> 00:36:04,839 Speaker 4: I were talking a moment ago. This is pretty much 665 00:36:04,840 --> 00:36:06,960 Speaker 4: in line with what the market was expecting, right that 666 00:36:07,120 --> 00:36:10,080 Speaker 4: four percent a year on year increase in PPI. 667 00:36:10,520 --> 00:36:13,719 Speaker 10: Yeah, I think so. I think that the main takeaway 668 00:36:13,760 --> 00:36:18,440 Speaker 10: from this is we've got high input prices coming in. 669 00:36:18,520 --> 00:36:22,560 Speaker 10: That means that's going to feed into inflation going forward. 670 00:36:22,640 --> 00:36:27,279 Speaker 10: So inflation isn't going to disappear anytime soon, and so 671 00:36:27,840 --> 00:36:30,720 Speaker 10: that feeds into the idea that the Bank of Japan 672 00:36:31,440 --> 00:36:35,080 Speaker 10: will keep raising interest rates. Now. Is inflation like six 673 00:36:35,160 --> 00:36:39,160 Speaker 10: or seven percent requiring urgent attention? No, So I think 674 00:36:39,200 --> 00:36:42,840 Speaker 10: we're going to see a continuation of gradual rate hikes. 675 00:36:43,040 --> 00:36:46,640 Speaker 4: That is Paul Jackson, Asia Economy editor for Bloomberg News, 676 00:36:46,960 --> 00:36:49,400 Speaker 4: and I'm Doug Krisner. You can catch US weekdays for 677 00:36:49,440 --> 00:36:54,919 Speaker 4: the Daybreak Asia podcast. It's available wherever you get your podcast. Tom, Well, 678 00:36:54,960 --> 00:36:57,120 Speaker 4: thank you Doug. And that does it for this edition 679 00:36:57,120 --> 00:36:59,759 Speaker 4: of Bloomberg day Break Weekend. Join us again Monday morning. 680 00:37:00,000 --> 00:37:02,840 Speaker 4: I am Wall Street Time for the latest on markets overseas, 681 00:37:02,840 --> 00:37:05,359 Speaker 4: in the news you need to start your day. I'm 682 00:37:05,400 --> 00:37:06,920 Speaker 4: Tom Buzby. Stay with us. 683 00:37:06,960 --> 00:37:10,040 Speaker 2: Top stories and global business headlines are coming up right now.