Speaker 1: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 1: top stories in the coming week from our Daybreak anchors
Speaker 1: all around the world, and straight ahead on the program,
Speaker 1: Time for another big round of stress tests for the
Speaker 1: nation's big banks. I'm Tom Busby in New York.
Speaker 2: I'm Stephen Carolyn London, who we're looking ahead at the
Speaker 2: gathering of many of the world's top central bankers in
Speaker 2: the Portuguese Hilltop ten of Centro.
Speaker 3: I'm Brian Curtis in Hong Kong. What will it take
Speaker 3: to revive the animal spirits in China?
Speaker 4: I'm palely Lyones in Washington, where the end of the
Speaker 4: second fundraising quarter is rapidly approaching for presidential candidates.
Speaker 5: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 1: If I'm Tom Busby, and we begin today's program with
Speaker 1: the nation's banks still emerging from this spring's banking crisis
Speaker 1: and the stress test they're about to face this week,
Speaker 1: and joining us now to talk about those tests and
Speaker 1: all things bank related. Bloomberg Wall Street reporter Shanali Basik. Now, Shanali,
Speaker 1: let's start by walking us through the history of these tests,
Speaker 1: when they started, how they started, and why they're being done.
Speaker 6: The really important thing about these tests is that they
Speaker 6: started in the wake of the two thousand and eight
Speaker 6: financial crisis, and they were set up as a way
Speaker 6: for bank regulators to really test the health of the
Speaker 6: financial system. And these are the big globally systemic financial institutions,
Speaker 6: the big banks that had to take bailout money in
Speaker 6: the wake of the financial crisis, as well as a
Speaker 6: broader array of financial institutions, you know, mid size banks
Speaker 6: really up to two hundred and fifty billion in assets
Speaker 6: or more that have to go through these tests to
Speaker 6: make sure that the financial system is safe and sound.
Speaker 1: And how is the financial system.
Speaker 6: Well, it's an interesting year, isn't it, because a lot
Speaker 6: of these tests were really formulated before the failure of
Speaker 6: three major banks in the United States, three major mid
Speaker 6: size banks in the United States, now all of those
Speaker 6: banks were in and around that two hundred and fifty
Speaker 6: billion dollars threshold and ended up failing for reasons that
Speaker 6: were much different than what was in the stress test themselves.
Speaker 6: So it shows you that while the stress tests have
Speaker 6: really done a lot to make sure that most of
Speaker 6: the banking system is saving money, putting capital aside to
Speaker 6: cover any potential losses in the future, it's also showing
Speaker 6: you that there are certain things that the Federal Reserve
Speaker 6: has not tested for and just has not really seen
Speaker 6: as an issue until more recently.
Speaker 1: So the question is with Silicon Valley Banks, Signature Bank,
Speaker 1: First Republic, what has the FED learned?
Speaker 6: Well, a few things, and it's not just the Fed.
Speaker 6: The market has also learned that everyone thought that deposits
Speaker 6: were very, very sticky, that when people put money in
Speaker 6: the bank, that they would keep it there. And for
Speaker 6: a lot of history that was true, wasn't it. You
Speaker 6: enter your local bank, you put in your savings, you
Speaker 6: left it there and you didn't think about it. But
Speaker 6: in the age of mobile banking, we saw tens of
Speaker 6: billions of dollars leave these banks essentially overnight. When people
Speaker 6: were worried about the strength of their banks, and that
Speaker 6: is one problem. The other problem is how these banks
Speaker 6: have managed their interest rate risk. In most of these
Speaker 6: FED stress test scenarios, you see interest rates eventually decline,
Speaker 6: and the reason is in a time of severe stress,
Speaker 6: you would see the Federal Reserve lower interest rates to
Speaker 6: meet a market shock, not raise interest rates, Whereas in
Speaker 6: the last year we have seen a tremendous rise in
Speaker 6: interest rates that has impacted these banks and has caused
Speaker 6: some severe stresses on the banking system.
Speaker 1: And that was not accounted for in these tests before
Speaker 1: to go up five percent in fifteen months.
Speaker 6: Exactly, and in many cases just the opposite. There's only
Speaker 6: a few scenarios in which the FED has tested interest
Speaker 6: rates in this manner, and it is something that has
Speaker 6: been seen of something of a blind spot for regulators.
Speaker 1: Now it means clearly that the FED has to make
Speaker 1: these tests a little tougher.
Speaker 6: Well, this is interesting. There's a lot of debate around this.
Speaker 6: This year's tests are tougher. You have GDP falling in
Speaker 6: a scenario that is much more severe than what you
Speaker 6: saw last year. In the scenario that the FED is
Speaker 6: posing to the banks, you're also seeing home prices fall
Speaker 6: pretty significantly. So there are certain things about this stress
Speaker 6: test that are showing you that there could be you know,
Speaker 6: severe stresses that these banks undergo, and the question is
Speaker 6: whether they are able to make it through those stresses.
Speaker 6: But like I said, there's other stresses, like those deposit
Speaker 6: runs that are not included in these stress tests, and
Speaker 6: so there's a lot of question about whether they're testing
Speaker 6: all the right things and all the right banks.
Speaker 1: And one thing that came up this year an exploratory
Speaker 1: market shock they're testing for what so fighting.
Speaker 6: It doesn't it doesn't it? Well, remember back in two
Speaker 6: thousand and eight, it was really the big trading desks
Speaker 6: that had ran into trouble. And now what the firms
Speaker 6: are doing here is they're trying to test the big
Speaker 6: investment banks in a harder way. Now, these are not
Speaker 6: tests that are likely going to you know, slap them
Speaker 6: with much higher rules after coming out of this exploratory
Speaker 6: market shock. It is a brand new test and it
Speaker 6: is not part of kind of the core things that
Speaker 6: the FED is testing for. But what the implication is
Speaker 6: here is that the FED will most likely start to
Speaker 6: test these trading desks more and more in the future.
Speaker 6: Remember this is all happening in the backdrop of FED
Speaker 6: Chair Powell speaking to Congress and telling them that there
Speaker 6: will be bigger rules, much bigger rules for the biggest banks.
Speaker 6: He wants to raise capital requirements by maybe twenty percent
Speaker 6: for the eight biggest banks, and he wants to potentially
Speaker 6: test those trading desks more rigorously in the future. But
Speaker 6: those are all things that will come up for public
Speaker 6: comment and it won't really be implemented at a greater
Speaker 6: scale for years to come.
Speaker 1: Well, those capital requirements, as you said, he said, Chairman Powell,
Speaker 1: the eight biggest banks, but there are twenty three banks
Speaker 1: being tested, so some of them are not going to
Speaker 1: face that same kind of scrutiny. But will they also
Speaker 1: have to see their capital requirements rise.
Speaker 6: It's not even just that they may potentially see capital
Speaker 6: requirements rise, it's also that there is likely to be
Speaker 6: a greater set of banks in the future. If you remember,
Speaker 6: I was talking about that two hundred and fifty billion
Speaker 6: dollars limit when it came to the asset base that
Speaker 6: the FED was testing for two fifty billion and above.
Speaker 6: Now the FED is saying that they want to really
Speaker 6: lower that bar to about one hundred billion and so
Speaker 6: that will include a much wider array of banks. Now
Speaker 6: let's put that into the contacts. That's not happening this year.
Speaker 6: But if you look at what Mike Mayo saying, for example,
Speaker 6: the outcome that you'll see here is that the moving
Speaker 6: parts here, you'll see the jesups, these big globally systemic
Speaker 6: financials issutions, those eight big banks, they're likely to come
Speaker 6: out of this just fine and keep buybacks pretty robust
Speaker 6: and really reward Wall Street Bank investors. They'll be just fine, essentially.
Speaker 6: But it's the regional banks that Mike Mayo believes may
Speaker 6: need to hold off on buybacks given the degree of
Speaker 6: uncertainty about the rules. And he's saying that and not
Speaker 6: expecting these banks to fail, but he is expecting the
Speaker 6: rules to disproportionately impact the mid size banks that are
Speaker 6: currently in the process. And regulators are worried, and frankly,
Speaker 6: a lot of frankly more Republican lawmakers are very worried
Speaker 6: that putting more rules on these smaller and mid size
Speaker 6: banks will really constrain those banks in the future to
Speaker 6: do things like buybacks as well as lend more into
Speaker 6: the economy, and.
Speaker 1: Will they have to issue more debt some of these banks.
Speaker 6: That's the other thing. And the worry from Wall Street
Speaker 6: then becomes, if the banks have to issue more debt,
Speaker 6: then does their cost of capital start to rise?
Speaker 7: Do they have to.
Speaker 6: Pay more to bring more money in? It's a complicated
Speaker 6: equation here.
Speaker 1: Now, another thing that has changed greatly is mobile banking.
Speaker 1: You hinted before that, you know when First Republic, within
Speaker 1: minutes of the troubles there, one quarter of their deposits
Speaker 1: on people's phones was just removed gone. I mean, has
Speaker 1: the Fed kept up with that evolution in banking? Do
Speaker 1: you think it's.
Speaker 6: Interesting that you asked that too, because we were just
Speaker 6: talking about how the stress test doesn't really account for,
Speaker 6: you know, mass deposit flight, and you know, you don't
Speaker 6: really often see it either. I mean even some of
Speaker 6: the banks that investors were worried about, yes they saw
Speaker 6: a deposit flight, but that deposit flight was not necessarily
Speaker 6: this deposit flight that came from scares of bank runs.
Speaker 6: You know, I all use Jim Bianco, who is a
Speaker 6: research jannalyst that we speak to a lot here at Bloomberg.
Speaker 6: He always called it a deposit walk, not a deposit run,
Speaker 6: because when interest rates started rising, people did start pulling
Speaker 6: their mind from banks and putting into higher yielding places
Speaker 6: like money market funds, and so you did see deposits slowly,
Speaker 6: slowly moving Internet or no Internet, right, they were moving
Speaker 6: because of the economics. But then you saw that crash
Speaker 6: with Silicon Valley Bank, with that sharp deposit flight, and
Speaker 6: so you can argue it in a lot of ways.
Speaker 6: Probably the Internet made it a lot faster and easier
Speaker 6: to move your money. But also people would have moved
Speaker 6: their money anyways.
Speaker 1: Yeah, they would have, and what it could have should
Speaker 1: have been. So much of this really is backward looking, though,
Speaker 1: isn't it.
Speaker 6: Yeah, it is very backward looking, And I think that
Speaker 6: is always the big fear when it comes to these
Speaker 6: stress tests. But I will say this, while people do
Speaker 6: argue about the scope and the scale of the stress tests,
Speaker 6: even bankers themselves believed that the stress tests overall were
Speaker 6: not positive to the banking system because at the end
Speaker 6: of the day, what it did was it forced a
Speaker 6: more prudent way to operate, and it forced regulators and
Speaker 6: the banks to step back and take a look at
Speaker 6: everything they're doing at all points in time across many
Speaker 6: different scenarios. In a systematic way. You will have some
Speaker 6: of the biggest bankers in the world tell you they're
Speaker 6: happy they're there, they just don't need more of it.
Speaker 1: And going into this week, is there a good feeling
Speaker 1: among the biggest banks.
Speaker 6: There's a frustration knowing that these rules are going to
Speaker 6: get more stringent, especially because there are other rules that
Speaker 6: are also changing for the banks, like the FDIC, for example,
Speaker 6: Since the Federal Deposit Insurance Corporation have lost so much
Speaker 6: money with these bank failures, there's a sense that these
Speaker 6: banks are going to have to pay more already to
Speaker 6: the Deposit Insurance Fund, particularly the biggest banks that will
Speaker 6: have to pay the most.
Speaker 1: Thank you very much, Bloomberg Wall Street reporter Shanali bask
Speaker 1: And coming up on Bloomberg Daybreak weekend, here comes that
Speaker 1: big annual forum of European Central bankers. I'm Tom Busby
Speaker 1: and this is Bloomberg. This is Bloomberg day Break weekend,
Speaker 1: our global look ahead at the top stories for investors
Speaker 1: in the coming week. I'm Tom Busby in New York.
Speaker 1: Up later in our program, China's economy hits a rough patch,
Speaker 1: but first central bankers from all around the world will
Speaker 1: be heading to the Portuguese town of CenTra in the
Speaker 1: coming days for the annual forum hosted by the European
Speaker 1: Central Bank. It's happening at a time when policymakers are
Speaker 1: contemplating an end to their monetary tightening. For more, let's
Speaker 1: head to London and bring in Bloomberg Daybreak eurobanker Stephen Carroll.
Speaker 2: Tom It's a fairytale setting for one of the most
Speaker 2: important global gatherings of central bankers. The town of CenTra
Speaker 2: and the hilltops outside Lesbon is dotted with brightly colored
Speaker 2: palaces worthy of a Disney film. The discussions, though, will
Speaker 2: be much more grounded, as the world's top monetary policymakers
Speaker 2: discuss their efforts to bring down inflation. For more on
Speaker 2: this joined biour Economics needs to be reporter yan Orando,
Speaker 2: who's in Frankfurt ahead of the trip to Portugal. Yana,
Speaker 2: great to have you with us before we get to
Speaker 2: the very serious matters at hand, and I don't want
Speaker 2: to play them down, but I do want to talk
Speaker 2: a little bit about Cintra as a place. Can you
Speaker 2: describe it for us? I've tried my best. How would
Speaker 2: you describe CenTra?
Speaker 8: Oh, it's gorgeous. I had the pleasure of spending a
Speaker 8: couple of days there last year, and let me tell you,
Speaker 8: it's definitely worth a trip. You have whimsical palaces, you
Speaker 8: have extravagant villas, you have ruins of a Moorish castle
Speaker 8: that go way back to the eighth, ninth or tenth
Speaker 8: century for good. But it's just it's colorful, it's mysterious,
Speaker 8: and you know, there is a reason why the Portuguese
Speaker 8: kings chose shows that place as their summer retreat. And
Speaker 8: you know, while we're at it, I have to say
Speaker 8: what's also royal about Cintra is the view from cabud Rocca,
Speaker 8: which is the western most point of mainland. It's not
Speaker 8: far from CenTra. It's definitely worth going and and you know,
Speaker 8: it's it's certainly a nice view. So for those of
Speaker 8: you who of those of our listeners who haven't, who
Speaker 8: haven't gone, it's worth easy easy be retreat or not,
Speaker 8: you know, you should go. You should put it on
Speaker 8: your list.
Speaker 2: It's always a good time to visit CenTra anyway. The
Speaker 2: theme of this year's EASYB Forum, taking place in Cinra
Speaker 2: is macroeconomic stabilization and a volatile inflation environment. It's quite
Speaker 2: a mouthful. What are the big themes that you'll be
Speaker 2: watching out for.
Speaker 8: Yeah, it's certainly an agenda that's featuring many of the
Speaker 8: challenges central banks face today. So they have some really
Speaker 8: interesting papers they'll be discussing on, for example, inflation expectations
Speaker 8: and an economy facing supply shocks, obviously, you know, very
Speaker 8: very very relevant today, on the cost of inflation, on
Speaker 8: the future size of central bank balance sheets, on the
Speaker 8: optimal mix between monetary and fiscal policy. There will be
Speaker 8: discussions on energy markets, on lessons learned from forecasting mistakes,
Speaker 8: so all of that highly highly relevant to the policy
Speaker 8: debate now. And of course the highlight of each CINRA
Speaker 8: conference is the policy panel that features the Governor of
Speaker 8: the Bank of England, the FED chair, the Governor of
Speaker 8: the Bank of Japan, and of course the ECB President
Speaker 8: Christine Lagarde.
Speaker 2: Yeah, of course, it's a really fascinating moment to be
Speaker 2: discussing monetary policy as well, as we have global central
Speaker 2: banks shifting in many cases towards the end of their
Speaker 2: hiking cycle, or at least that's the current expectations the ECB,
Speaker 2: of course, given that they're the hosts out in force
Speaker 2: at this event. Are the Hawks and the Doves getting
Speaker 2: an equal share of time? Do you think here?
Speaker 8: Well, we've certainly invited all of them to join us
Speaker 8: on TV for interviews, so it's.
Speaker 2: Up to them, and they're WELLcom on radio as well well.
Speaker 8: I will make sure to tell them. But jokes side,
Speaker 8: all of the ECB board members will make an appearance
Speaker 8: during the panel discussions and during the conference, and of
Speaker 8: course lots of Governing Council members will be in attendance.
Speaker 8: They are known to ask questions during the sessions, so
Speaker 8: we will hear from from a fair share of them,
Speaker 8: and I'm certainly looking forward to catching up with them,
Speaker 8: you know, one by one and in big groups. It's
Speaker 8: a nice atmosphere there. You really get to spend some
Speaker 8: time with them and.
Speaker 2: Get insights, of course, into those all important decisions coming
Speaker 2: up for central banks. The ECB's next meeting is in July.
Speaker 2: What's the current thinking about where the ECB is on
Speaker 2: its rate tightening path.
Speaker 8: Well, certainly inflation is not going in the direction that
Speaker 8: the ECB wants to see it go, or at least
Speaker 8: not fast enough. They did revise up their inflation outlook
Speaker 8: at the last meeting, and that's certainly not you know,
Speaker 8: what you want to do in this situation. So they
Speaker 8: have been very determined in suggesting or even almost pre
Speaker 8: announcing that raids will will rise again in July, that
Speaker 8: at least one more rate hike is coming. We are
Speaker 8: hearing from a lot of Governing Council members now about
Speaker 8: September whether that, you know, should be on the table,
Speaker 8: whether that should already be considered sort of a done deal.
Speaker 8: So so it's going to be very interesting to see
Speaker 8: where where they see monetary policy heading, but also where
Speaker 8: you know, how they see the monetary tightening in place
Speaker 8: already since since last July, actually how that is reaching
Speaker 8: the economy. And you know, we've we've seen some transmission
Speaker 8: problems because of labor market strength and and a shortage
Speaker 8: of workers there. So they're really dealing with the situation
Speaker 8: they they haven't they haven't seen before. There is no
Speaker 8: textbook example of how to deal with their challenges we're facing,
Speaker 8: and that's interesting. So it's about where rates are heading
Speaker 8: and and but also how how you how you go
Speaker 8: beyond uh you know, once you're freege to peak, how
Speaker 8: how policy pans out after that?
Speaker 2: Yeah, you want to stay with us. I want to
Speaker 2: get bring us in some of the market's perspective on
Speaker 2: this too. And a conversation that we had on Bloomberg
Speaker 2: Radio in the past few days with Sonia Martin is
Speaker 2: chief f extrastist at DZ Bank. We asked her about
Speaker 2: about her expectations for euro dollar given this shifting point
Speaker 2: in central bank policies on both sides of the Atlantic.
Speaker 3: I think the.
Speaker 7: Market's some overreacted to the c B a little bit.
Speaker 7: I mean, yes, they were hawkish, but so was the Fed.
Speaker 7: To be honest, if anything, and just really short term,
Speaker 7: I think there's a risk that we're going to see
Speaker 7: your doll trading lower again. I think the big turnaround
Speaker 7: has to come from the fundamentals. You know, when US
Speaker 7: goes into a recession and your zone performs better, which
Speaker 7: is like to happen as we move into the autumn.
Speaker 7: I think that's going to be the point where your
Speaker 7: dollar has the potential to really go above one ten
Speaker 7: and move hired to support one fifteen is sort of
Speaker 7: our target, but I don't think the timing is right yet.
Speaker 2: Which of the major center banks do you think is
Speaker 2: most at risk of a policy mistake. Then, given that
Speaker 2: delicate position therein that you outlined.
Speaker 7: Well, there's always been just because of who's to judge
Speaker 7: whether it was a mistake or not, because we will
Speaker 7: never know what the alternative was. There's certainly a risk
Speaker 7: over shooting, I think definitely. When we're looking at the
Speaker 7: banks of England right now, I think ultimately the mistake
Speaker 7: or not will be determined by the ability of the
Speaker 7: central banks to then reverse course once the timing is right.
Speaker 7: I mean, you may have hiked once so many times,
Speaker 7: that's not really going to hurt the economy and massively,
Speaker 7: I think to get the timing right to change course
Speaker 7: when inflation will still be kind of persistently high, that's
Speaker 7: going to be the real the real skill, and that's
Speaker 7: you know, that's not going to happen till next year.
Speaker 2: I think that Sony Martin from DZ Bank jan Arande
Speaker 2: is still with us.
Speaker 1: Jana.
Speaker 2: You mentioned there are some of the special guests at
Speaker 2: this ECB event in CenTra Jerome pal from the Fed,
Speaker 2: Casure Away from the Bank of Japan, Andrew Bailey from
Speaker 2: the Bank of England. How much do these central bankers
Speaker 2: share the same challenges as the ECB When.
Speaker 8: You look at the FED at the in the US,
Speaker 8: most of their problems are demand driven. So we had
Speaker 8: massive fiscal stimulus following the pandemic. A lot of a
Speaker 8: lot of what we see in the US is really
Speaker 8: demand driven, So in that sense, there is something the
Speaker 8: FED can do about about it with rate increases. When
Speaker 8: you look at the Bank of England, on the other hand,
Speaker 8: their problems have a lot to do with supply, and
Speaker 8: one factor that plays into the cards here is Brexit.
Speaker 8: Of course massive impact on the labor market, but also
Speaker 8: on trade. So there the Bank of England really is
Speaker 8: in a tough position. And you know, with rates potentially
Speaker 8: having to go up all the way to six percent,
Speaker 8: there was certainly a big risk that it would crush
Speaker 8: the economy. So it's going to be very very interesting
Speaker 8: to have all these central bankers on one podium, having
Speaker 8: them respond and discuss. I'm certainly looking forward to that.
Speaker 2: Yeah, some fascinating conversations ahead. Thank you Toomberg's ECB reporter
Speaker 2: Jana Randew and Yano're bringing us coverage of the CenTra
Speaker 2: ECB forum on Bloomberg Radio as well. I'm Stephen Carroll
Speaker 2: in London. You can catch us every weekday morning. Here
Speaker 2: for Bloomberg Daybreak Europe. Begetting at six am in London
Speaker 2: and one am on Wall Street.
Speaker 1: Tom, thank you Steven, And coming up on Bloomberg day
Speaker 1: Break weekend to look at China's economy, at prospects for
Speaker 1: stimulus amid some key economic data. I'm Tom Busby, and
Speaker 1: this is Bloomberg.
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Speaker 5: Radio dot Com. This is Bloomberg Daybreak Weekend.
Speaker 1: I'm Tom Busby in New York with your global look
Speaker 1: ahead at the top stories for investors in the coming week.
Speaker 1: You know all the talk about how China's economy would
Speaker 1: come roaring back post pandemic, after all the COVID shutdowns eased. Well,
Speaker 1: the economy did pick up, but not nearly by as
Speaker 1: much as some expected. And now China is in the
Speaker 1: spotlight in the coming week with some key economic data
Speaker 1: as economic growth falters. Now for more, let's go to
Speaker 1: Hong Kong and Bloomberg Daybreak Asia host Brian Curtis and
Speaker 1: his colleague Doug Krisner.
Speaker 3: Tom will be getting China's PMIS in the coming week,
Speaker 3: and the early indicators are not particularly great. In the
Speaker 3: last reading, the official PMI came in at forty eight
Speaker 3: point eight. China's overall economic activity has now reclaimed its
Speaker 3: pre COVID levels, but it doesn't seem all that sustainable.
Speaker 9: Investors are getting a steady stream of more promises of
Speaker 9: stimulus from policymakers, but the effects so far appear negligible.
Speaker 9: Consumption is sluggish and exports have been declining.
Speaker 3: Joining us now to try to chart a path forward
Speaker 3: for the economy is David Chu from Bloomberg Economics. David,
Speaker 3: thanks very much for joining us in our studios here
Speaker 3: in Hong Kong. Have policy makers done enough to kind
Speaker 3: of light the fire under the economy?
Speaker 10: Nope, not yet. What I can say is that yes,
Speaker 10: they are considering some stimulus package and the market is
Speaker 10: also expecting for that. But I have to say that
Speaker 10: there is a risk that the market that may have
Speaker 10: overpriced in the potential stimulus. I mean, maybe investors are
Speaker 10: too much optimistic about the size of the package.
Speaker 9: David, do you have a sense of why the government
Speaker 9: is being so careful here so as not to roll
Speaker 9: out a strong stimulus package.
Speaker 10: I think two main reasons. One is that the policy
Speaker 10: rooms are now more limited than before, because if you
Speaker 10: look at the monetary policy, if you look at the
Speaker 10: base rates or the policy rates, and if you look
Speaker 10: at the devisit in the in the fiscal site, you
Speaker 10: would see that, you know, the room is smaller than before.
Speaker 10: The second thing is that I think the government is
Speaker 10: still concerned about the high debt level in China because
Speaker 10: according to the bs NOW, China's led to GDP racial
Speaker 10: is almost three hundred percent, so it's a huge amount
Speaker 10: of debt, so that the government to make concern that
Speaker 10: aggressive stimulus may lead to more accumulation of the debt.
Speaker 3: In the past few days, we heard from even Wang
Speaker 3: hu Ning, who is the number four official in the
Speaker 3: Communist Party, really stressing how they needed to boost consumption.
Speaker 3: Would they consider do you think handing out cash to
Speaker 3: citizens that's something that they have avoided in the past,
Speaker 3: but it has worked elsewhere, including right here in Hong Kong.
Speaker 10: Well, I think this is something ambiguous because yes, people
Speaker 10: have been calling about vosure or cash to citizen, just
Speaker 10: like what is happening in Hong Kong. But there is
Speaker 10: also some concern that maybe this money, if it is
Speaker 10: allocated to people, people may not spend it at all,
Speaker 10: They may save it in bank so that it won't
Speaker 10: be transferred into consumption. And another view is that because
Speaker 10: China relies on government investment for more than two decades,
Speaker 10: so that it is a belief that the government can
Speaker 10: make investment directly that may form demand. So in the
Speaker 10: view of some government officials, this can be a more
Speaker 10: effective way to lift up the economy or in the
Speaker 10: in the demand side, which is more directly than giving
Speaker 10: money to to people.
Speaker 9: We know that the ailing property market, the housing market
Speaker 9: has been a very big problem. There may have been
Speaker 9: some disappointment in the last week when the five year
Speaker 9: loan prime rate was only reduced by ten basis points.
Speaker 9: Some economists that we're looking for a larger cut as
Speaker 9: a way of kind of engendering a little bit more
Speaker 9: enthusiasm for housing. It's interesting to me that Bloomberg Economics
Speaker 9: is saying that new home prices could gradually recover this
Speaker 9: year by the second half of the year. How is
Speaker 9: this going to happen. How are consumers in China going
Speaker 9: to begin to feel differently about the property market?
Speaker 10: Well, I think I agree that ten biebs cut in
Speaker 10: the rate may not play a lot to the housing market.
Speaker 10: What we were expecting was that the government can do
Speaker 10: something more in the monetary side, so that to give
Speaker 10: more confidence to people, not only because of the rig
Speaker 10: cut itself, but also because of the confidence that can
Speaker 10: be lifted by such kind of easing or by this
Speaker 10: signal effect. Uh So, based on this, we think that
Speaker 10: ten PEPs cut is just the start of the whole
Speaker 10: procedure in the monetary side, and we are now looking
Speaker 10: for a more cut in both the policy rates and
Speaker 10: also the triple are in the next half of the year.
Speaker 10: So we we are you can see that we are
Speaker 10: expecting more. But on the other hand, I have to
Speaker 10: say that it may be a very optimistic view that
Speaker 10: the housing prices can recover in the next half of
Speaker 10: the of the year, because we what we see in
Speaker 10: the market is that the confidence is still fragile, and
Speaker 10: the sentiment in the housing in the household sector is
Speaker 10: still weak, so that we don't see any silver bullet
Speaker 10: to boost the confidence in the short term.
Speaker 3: So so I wonder if if consumption is still weak,
Speaker 3: it may be that some people are not even confident
Speaker 3: in the stability of the jobs. I know you've been
Speaker 3: looking at search engine data just as a means of
Speaker 3: kind of trying to understand how people feel about their
Speaker 3: jobs and what are you seeing.
Speaker 10: Yeah, I totally agree with that, because we also look
Speaker 10: at the search engine data to see how many people
Speaker 10: were searching for the word unemployment or loose drop. The
Speaker 10: level it's still similar as in the pandemic area. It
Speaker 10: tells us that even China reopened from the pandemic, people
Speaker 10: are still as cultuous as before. So it is about
Speaker 10: forty percent higher than the pre pandemic level. It means
Speaker 10: that it means that, you know, the concern in the
Speaker 10: in the labor market is still very strong.
Speaker 9: Yeah, and I think the latest reading on youth unemployment
Speaker 9: is twenty point eight percent. At a time when universities
Speaker 9: in China are graduating about a million students a year,
Speaker 9: this is particularly difficult. I would imagine where the young
Speaker 9: people are concerned.
Speaker 10: Yes, I think that is also a signal, especially for
Speaker 10: the weak confidence in the private sector, because usually the
Speaker 10: young people are hired, used to be hired by private sector,
Speaker 10: by the servicing sector, but now they have a high
Speaker 10: drop less ratio. It means that these sectors, uh, they
Speaker 10: are slowing and uh the private entrepreneurs that are not
Speaker 10: willing to uh to invest to to expand their business.
Speaker 10: So that is a concern.
Speaker 3: If it was one thing, David that you think they
Speaker 3: could do to try to stoke a renewal and confidence,
Speaker 3: because that's obviously, I mean, both businesses and consumers are
Speaker 3: lacking confidence.
Speaker 10: What might it be, Well, people have been talking about
Speaker 10: giving money directly to people. Another view I think is
Speaker 10: that the government can consider to reduce the cost for hiring.
Speaker 10: Because you know that China has the cost of for
Speaker 10: a company to hire each person, you know, two thousand
Speaker 10: and three thousand a month. So I mean the cost
Speaker 10: the cost giving to the government in the forms of
Speaker 10: pension fund, social security fund or tax. So I think
Speaker 10: the government can do something to reduce this part of
Speaker 10: cost so that to make the employer more active to
Speaker 10: hire new employees.
Speaker 9: It's going to be very interesting to see where we
Speaker 9: go from here, not just in more fiscal stimulus, but
Speaker 9: more stimulus on the monetary side. David, thank you so
Speaker 9: much for being with us. David Chew from Bloomberg Economics.
Speaker 9: I'm Doug Krisner along with Brian Curtis in Hong Kong,
Speaker 9: and you can catch us weekdays here for Bloomberg Daybreak
Speaker 9: Asia beginning at six am in Hong Kong six pm
Speaker 9: on Wall Street.
Speaker 1: Tom, thank you, Brian and Doug, and coming up here
Speaker 1: on Bloomberg day Break Weekend. The fundraising race to be
Speaker 1: nominee for US president is intensifying as November twenty twenty
Speaker 1: four gets closer. Lots of activity right now as we
Speaker 1: bump up against the end of the quarter. I'm Tom
Speaker 1: Busby and this is Bloomberg. This is Bloomberg day Break Weekend,
Speaker 1: our global look ahead at the top stories for investors
Speaker 1: in the coming week. I'm Tom Busby in New York.
Speaker 1: The fundraising scramble is on for those hoping to be
Speaker 1: elected president in twenty twenty four. For more, let's head
Speaker 1: to our Bloomberg ninety nine one newsroom in Washington and
Speaker 1: Bloomberg Sound on co host Kaylee Lines.
Speaker 4: Yeah, Tom, the dash for cash is on in a
Speaker 4: major way. Is it's the last week of June that's
Speaker 4: coming up upon us, and that means the end of
Speaker 4: the second fundraising quarter, So candidates are rushing to get
Speaker 4: their campaign coffers as full as possible before that June
Speaker 4: thirtieth day hits. Here to talk more about this with
Speaker 4: us is Bloomberg's national politics reporter Nancy Cook. So Nancy,
Speaker 4: just talk to us about why it's important to, you know,
Speaker 4: raise all this money into the end of the quarter. Anyway,
Speaker 4: why do quarterly numbers matter.
Speaker 11: Well, so basically we have not seen fundraising numbers yet
Speaker 11: for many of these candidates. You know, President Joe Biden
Speaker 11: really just jumped into the election this spring, Florida Governor
Speaker 11: Ron de Santis really just jumped in. And so the
Speaker 11: quarterly Federal Election Commission fundraising reports, which are due by
Speaker 11: July fifteenth, really will be the first snapshot we have
Speaker 11: of both the Democratic field and the Republican field and
Speaker 11: how people are doing it raising money both from like
Speaker 11: big donors like billionaires, but also you know people who
Speaker 11: give like ten dollars or twenty dollars.
Speaker 4: So do we have an idea of what these filings
Speaker 4: ultimately may look like. Who is being successful at raising
Speaker 4: money right now?
Speaker 11: So I would say that all the candidates are out
Speaker 11: there doing a ton of fundraising right now. Joe Biden
Speaker 11: just did a swing through California. Ron DeSantis just did
Speaker 11: a swing through California. He did a swing through Texas,
Speaker 11: and so like everybody's going to places where there are
Speaker 11: big money, like New York, California, Texas, like the big
Speaker 11: money places. I would say I spoke with a source
Speaker 11: who told me that we can expect the Biden numbers
Speaker 11: to be good, not like President obama reelection good, but
Speaker 11: that he is, you know, having a fine time raising money.
Speaker 11: I think that there is a sense that a lot
Speaker 11: of Democrats feel sort of lukewarm about the idea of
Speaker 11: a second Biden term. However, they are very motivated by
Speaker 11: the threat of another term for former President Donald Trump,
Speaker 11: and I think donors really are motivated to give to
Speaker 11: keep Donald Trump out of office. With Trump, what I
Speaker 11: will be looking for is, you know, he does not
Speaker 11: have a lot of support among the donor class. A
Speaker 11: lot of billionaires don't want to get involved with him again.
Speaker 11: They think he's a chaotic president. They don't like his rhetoric,
Speaker 11: they think he's decisive, but he still has a ton
Speaker 11: of support amongst small dollar people who send in like
Speaker 11: ten or twenty dollars, And we've really seen his fundraising
Speaker 11: surge after these last two indictments. And then finally the
Speaker 11: third sort of major candidate, the second runner up so
Speaker 11: far in the GOP primary, Ron DeSantis. You know, he
Speaker 11: I think it remains to be seen whether he can
Speaker 11: master retail politics like meeting and greeting voters in Iowa,
Speaker 11: New Hampshire, but he is not having problems raising money.
Speaker 11: You know, he raised over eight million dollars in the
Speaker 11: first twenty four hours after he announced his campaign. What
Speaker 11: I will be looking for specifically with that report is
Speaker 11: is he raising money both from rich people and from
Speaker 11: everyday people or is it concentrated in one or the other,
Speaker 11: Because if he is not raising money from the small
Speaker 11: dollar donors, that means there's just a lack of grassroots
Speaker 11: support and that will really hurt him in those early
Speaker 11: primary states.
Speaker 4: So this could kind of help us as journalists, but
Speaker 4: also the American people understand who's really gaining traction among
Speaker 4: the American population and I wonder too how this filters
Speaker 4: in as we look ahead, Yes, the end of the
Speaker 4: quarter this coming week on June thirtieth, and you have
Speaker 4: to file by July fifteenth, but looking ahead to August
Speaker 4: twenty third, in the first GOP primary debate, ultimately, how
Speaker 4: do the kinds of donation numbers? And that idea factor
Speaker 4: into that, considering you need to have a certain number
Speaker 4: of donors to even make the debate stage you do, and.
Speaker 11: So I think the threshold is forty thousand donors, and
Speaker 11: so you have to have just a certain amount of
Speaker 11: support to enter the debate. So that's a key criteria.
Speaker 11: But the other thing is is that really to last
Speaker 11: through the fall, you're going to have a certain amount
Speaker 11: of money. There are so many Republicans in the field now,
Speaker 11: it is such a wide GOP field.
Speaker 4: Bloomberg's national politics reporter Nancy Cook, thank you so much,
Speaker 4: and Tom, we'll send it back to you.
Speaker 5: Thank you. Kaylee.
Speaker 1: That was Bloomberg's sound on co host Kaylee Lines, reporting
Speaker 1: from our Bloomberg ninety nine one newsroom in Washington, and
Speaker 1: you can hear sound on weekdays one to three pm
Speaker 1: on Bloomberg Radio. And that does it for this edition
Speaker 1: of Bloomberg day Break Weekend. Join us again Monday morning
Speaker 1: at Wall Street Time for the latest on markets overseas
Speaker 1: and the news you need to start your day. I'm
Speaker 1: Tom Buzzby. Stay with us. Top stories and global business
Speaker 1: headlines are coming up right now.