Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 2: top stories in the coming week from our Daybreak anchors
Speaker 2: all around the world, and straight ahead on the program,
Speaker 2: a look ahead to this week's FED meeting, what it
Speaker 2: means for monetary policy. I'm Tom Busby in New York.
Speaker 1: I'm Caroline Head in London, where we're looking ahead to
Speaker 1: the Eurozones Big economic data job.
Speaker 3: I'm Brian Curtis in Hong Kong. We look ahead to
Speaker 3: the machinations of one key central bank, and then what's
Speaker 3: next for a key industry that would hope to curb
Speaker 3: the power of central banks.
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Speaker 2: Good day to you. I'm Tom Busby. We begin the
Speaker 2: program with a look ahead to this week's Federal Preserve
Speaker 2: Policy Meeting, a decision on rates expected on Wednesday. Twenty
Speaker 2: meetings in a row with either a rate increase or
Speaker 2: no change at all, will the Fed finally vote to
Speaker 2: cut rates for more. We're joined by Michael McKee, Bloomberg
Speaker 2: International Economics and Policy correspondent. Michael, I think the handwriting
Speaker 2: is on the wall. What are you expecting to see
Speaker 2: though this week from the Fed?
Speaker 5: The handwritings on the wall? And for the first time,
Speaker 5: as you mentioned, in a very long time, we're actually
Speaker 5: going into this saying it matters what they do for
Speaker 5: so long. We've been saying they're stuck higher for longer,
Speaker 5: and it doesn't matter what they do at their meeting.
Speaker 6: It's going to be what they.
Speaker 5: Say about the future. Well, that one's going to be
Speaker 5: both because there is a slight chance of a fifty
Speaker 5: basis point move because they didn't fit rule it out
Speaker 5: before the quiet period began. Nobody really thinks that's going
Speaker 5: to happen, but it's out there, so it'll be the
Speaker 5: first thing people will look at is how much did
Speaker 5: they cut? And so that will be important. Then we
Speaker 5: get the summary of economic projections new forecasts for the
Speaker 5: economy and the dot plot, and that'll capture some attention
Speaker 5: as well.
Speaker 2: Now, the Fed has always said we are data dependent.
Speaker 2: Any move we make is all depends on the data.
Speaker 2: Let's talk about the data we saw this past week
Speaker 2: consumer and producer price inflation. How will that factor into
Speaker 2: this decision?
Speaker 6: Kind of a downside surprise.
Speaker 5: Yeah, well that's what cemented. I think the view that
Speaker 5: we do twenty five instead of fifty and really took
Speaker 5: away the hope of the fifties folks, because while we
Speaker 5: got a very small increase in core CPI over what
Speaker 5: was anticipated and the same in PPI, it doesn't suggest
Speaker 5: that the inflation is going to be going the other
Speaker 5: way or there's a huge danger of inflation accelerating. It
Speaker 5: just shows that the battle is not won yet and
Speaker 5: the FED can't rest on its laurels. And so that's
Speaker 5: why people are saying they shouldn't go fifty because that
Speaker 5: might send the wrong message. They want to send the
Speaker 5: message that we are still vigilant against inflation.
Speaker 6: And we're going to keep an eye on it.
Speaker 5: And as last week, Christopher Waller from the Federal Reserve said,
Speaker 5: if data from this point on show that fifty is
Speaker 5: worth doing They can easily do that, but right now
Speaker 5: they're not ready to.
Speaker 2: Now some of the people who are calling for a
Speaker 2: fifty basis point cut, I think the Fed waited too
Speaker 2: long to initiate this cut, that they kind of missed
Speaker 2: the boat at the end of July and we saw
Speaker 2: some very troubling data about jobs. We saw a little
Speaker 2: uptick in inflation growth. Do you think they missed the boat,
Speaker 2: do you think? Or is it steady as she goes
Speaker 2: and they're on the right path.
Speaker 5: Well, it's impossible to say, except in hindsight that they
Speaker 5: were behind the curve. The argument is that, as you noted,
Speaker 5: the labor market has slowed a lot. We haven't seen
Speaker 5: consumers spending really slow yet, except that the people's savings
Speaker 5: are kind of dwindling, and so there's a feeling that's
Speaker 5: going to happen at some point. The thing about in
Speaker 5: recessions is they're based on confidence, and all of a sudden,
Speaker 5: people lose confidence, both consumers and businesses lose confidence in
Speaker 5: their ability to pay for new what economics would call investments,
Speaker 5: all the stuff you buy, and so they pull back
Speaker 5: on their spending. And right now it doesn't seem to
Speaker 5: be the case, businesses have slowed down. We don't really
Speaker 5: know whether that's because they are waiting, and it does
Speaker 5: seem logical they are waiting to see the results of
Speaker 5: the presidential election and what the tax and regulatory regime
Speaker 5: will be like going into the new year. Consumers through
Speaker 5: the back to school have been spending. We'll see if
Speaker 5: that continues, but the latest indications from the high frequency
Speaker 5: indications from retailers are that people are still spending. So
Speaker 5: it doesn't look like there has been a seizure of
Speaker 5: lack of confidence seizure among people yet. So it's hard
Speaker 5: to say with any certainty that they may or may
Speaker 5: not have missed the boat. The only thing that you
Speaker 5: do know is that it takes a long time for
Speaker 5: monetary policy to hit the economy. You're going to hear
Speaker 5: after Wednesday, especially Donald Trump, who's already said this, the
Speaker 5: Fed shouldn't be cutting rates and it's going to be unfair,
Speaker 5: and it's going to be a boost to Biden and Harris.
Speaker 5: But it's not because you won't really see any impact
Speaker 5: on the economy until next year from even a twenty
Speaker 5: five basis point cut. So if things deteriorate between now
Speaker 5: and the end of next year, you could say they
Speaker 5: got behind the curve, but we don't know yet.
Speaker 2: Well, we have a big decision this Wednesday from the
Speaker 2: Federal Reserve. Our thanks to Michael McKee, Bloomberg International Economics
Speaker 2: and Policy correspondent for full FED coverage, be sure to
Speaker 2: tune in Wednesday one thirty pm Wall Street Time for
Speaker 2: a Bloomberg surveillance special, The Fed Decides, joined Tom Kaine,
Speaker 2: John Ferrell, and Lisa Abramowitz as they break down the
Speaker 2: decision with the biggest names in finance, economics, and business.
Speaker 2: That's one thirty Wednesday on Bloomberg Radio and Television. We
Speaker 2: move now to the logistics and services delivery giant FedEx,
Speaker 2: and with its busiest time of year nearly here, FedEx
Speaker 2: reports first quarter earnings this Thursday. So how will an
Speaker 2: organizational restructuring impact its earnings ahead of the holiday season. Well,
Speaker 2: for more, we're joined by Lee Clascow. He's Bloomberg Intelligence
Speaker 2: Senior Transport, Logistics and Shipping analyst.
Speaker 6: Will Lee.
Speaker 2: Let's start with what you expect to see in FedEx's
Speaker 2: earnings report this week, coming off a very strong Q
Speaker 2: four in June.
Speaker 7: Yeah, Well, thanks for having me. You know, I think
Speaker 7: that FedEx's should report another solid earnings report. You know,
Speaker 7: they were show me story for so many quarters, and
Speaker 7: they've really shown the market, if you will, that they
Speaker 7: can't execute on their strategy. They have a bunch of
Speaker 7: restructuring plans that are underway that are expected to save
Speaker 7: a significant money, over two billion dollars in physical twenty
Speaker 7: twenty five on top of the one point eight billion
Speaker 7: that they saved in twenty twenty four. So you know,
Speaker 7: they're really doing all the right things. They're restructuring their
Speaker 7: businesses into one main reporting business. They are changing the
Speaker 7: way they operate their air fleet, and they're really taking
Speaker 7: costs out, something that that company didn't do for a
Speaker 7: long time. It really became an old fat company, and
Speaker 7: they're really taking a good look inside and making it
Speaker 7: a much more productive organization.
Speaker 2: Well, they also laid off tens of thousands of workers
Speaker 2: in the last year or so.
Speaker 7: Yeah, I mean they you know, that's always an unfortunate event,
Speaker 7: but you know, they, like I said, there was a
Speaker 7: lot of fat, if you will, that needed to be them.
Speaker 7: And with the you know, advent of technology advancements and
Speaker 7: productivity tools that they're able to use you just simply
Speaker 7: don't need as many people as you once did, whether
Speaker 7: you know that's on the dock or you know in accounting.
Speaker 6: Does robotics play a lot into that?
Speaker 7: Not so much robotics for FedEx. I mean, you know,
Speaker 7: they have really state of the art sorting facilities across
Speaker 7: the country and the world. You know that does a
Speaker 7: lot of that automation, and that's able to save not
Speaker 7: only time but money for the company. So that is
Speaker 7: definitely in net positive, but that's not really what's driving
Speaker 7: I would say the head cuts a lot of that.
Speaker 7: The head count reduction is really on the corporate side.
Speaker 2: Now, in addition to those job cuts, there's also capital expenditure.
Speaker 6: They've really pulled back or are they just you know, really.
Speaker 7: FedEx was famous for buying a lot of planes, maybe
Speaker 7: even if they didn't need them. What they have done
Speaker 7: is they've refreshed their fleet into a much more fuel
Speaker 7: efficient fleet, getting rid of some of the older, less
Speaker 7: efficient planes, and they're also parking a lot more equipment.
Speaker 7: So you know the reality is they don't need as
Speaker 7: many planes as they once did. And not only does
Speaker 7: it need as many, but you know, not just because
Speaker 7: from a restructuring of their air freight network. They also
Speaker 7: don't need as many because a lot of the planes
Speaker 7: either can can do more with less, if you will.
Speaker 2: Now, speaking of freight, you have reported that there's a
Speaker 2: possibility of them spinning off that freight unit.
Speaker 6: Is that still in play?
Speaker 7: Yeah, so they're freight unit is or less than truckload business.
Speaker 7: That's it's a very good business, but it's currently under
Speaker 7: a strategic review. You know, we expect that could generate
Speaker 7: an enterprise value of between thirty and thirty three billion
Speaker 7: dollars for the company. You know, right now, the less
Speaker 7: than truckload market is having a little issues with demand.
Speaker 6: Demand is down for a.
Speaker 7: Lot of the carriers that are in the market, and
Speaker 7: the reason for that is we're really coming up against
Speaker 7: tough comparisons. One of their large competitors went out of
Speaker 7: business last year and we're kind of past that anniversary. Also,
Speaker 7: you know, the ism has been in contraction territory for
Speaker 7: something like twenty one over the last twenty two months.
Speaker 7: So that's not great for LTL demand because it tends
Speaker 7: to be a leading indicator.
Speaker 2: Now a lot of businesses and consumers pulling back on
Speaker 2: spending times are tight, especially as we're coming into the holidays.
Speaker 2: Do you think there's going to be a lot fewer
Speaker 2: packages people choosing ground instead of air. I mean is
Speaker 2: how will this affect FedEx in the coming months.
Speaker 7: Yeah, So the consumer is obviously an important constituent for
Speaker 7: not only FedEx ups, Deutsche Posts, but really all modes
Speaker 7: of transportation that I cover. We're relatively bullish on the consumer.
Speaker 7: You know, we think that a couple of things are
Speaker 7: going to happen a you know, we are transitioning back
Speaker 7: from buying services to now going back to buying stuff.
Speaker 7: We all so believe that we are going to have
Speaker 7: a real peak season this year pecause of that, and
Speaker 7: seasonality is continuing is coming back into the market because
Speaker 7: we've gone so many years from the pandemic of these
Speaker 7: crazy dislocations that made comparisons next to them possible. So
Speaker 7: you know, we're getting back to seasonality. We think there's
Speaker 7: going to be a peak, which I think could surprise
Speaker 7: demand on the upside. And we're really gonna be paying
Speaker 7: close attention during the earnings call on Thursday on when
Speaker 7: management talks about you know, what they are expecting from
Speaker 7: peak from their conversations with their shippers.
Speaker 2: Well FedEx fiscal first quarter earnings out after Wall Street's
Speaker 2: closing bell this Thursday, and our thanks to Lee Classical
Speaker 2: Bloomberg Intelligence senior transport, logistics and shipping analysts. Coming up
Speaker 2: on Bloomberg day Break weekend to look ahead to the
Speaker 2: eurozones big economic data drop. I'm Tom Busby and this
Speaker 2: is Bloomberg. This is Bloomberg day Break weekend, our global
Speaker 2: look ahead at the top stories for investors in the
Speaker 2: coming week. I'm Tom Busby in New York. Up later
Speaker 2: in our program, we look ahead to a meeting from
Speaker 2: one of the key central banks in Asia, the Bank
Speaker 2: of Japan. But first, as expected, the European Central Bank
Speaker 2: cut rates again at its most recent policy meeting, three
Speaker 2: months after its first cut in five years. Will lower
Speaker 2: borrowing costs lead to economic prosperity for the block for more,
Speaker 2: Let's go to London and bring in Bloomberg day Break
Speaker 2: europbanker Caroline hepgar.
Speaker 1: Tom in Europe, it seems that rake huts are like buses.
Speaker 1: You wait five years for one, and then two arrive
Speaker 1: in quick succession. When the EU became one of the
Speaker 1: first major central banks to cut its lending rate, this summer,
Speaker 1: it hearted progress made on tackling inflation. This time around,
Speaker 1: the bank delivered another twenty five basis point cut, citing
Speaker 1: further progress against their economic goals. But European Central Bank
Speaker 1: President Christine Lagarde says that you per area growth risks
Speaker 1: are now tilted to the downside. Speaking at a news
Speaker 1: conference in Frankfurt following the committee's decision to once again
Speaker 1: lower boring costs, she emphasized the importance of economic data
Speaker 1: going forwards.
Speaker 8: So the President, the Vice President and I welcome you
Speaker 8: today to our press conference. The Governing Council today decided
Speaker 8: to lower the deposit facility rate, the rate through which
Speaker 8: we steer the monetary policy stance, by twenty five basis points.
Speaker 8: Based on our updated assessment of the inflation outlook, the
Speaker 8: dynamics of underlying inflation, and the strength of monetary policy transmission,
Speaker 8: it is now appropriate to take another step in moderating
Speaker 8: the degree of monetary policy restriction. Recent inflation data have
Speaker 8: come in broadly as expected, and the latest ECB staff
Speaker 8: projections confirm the previous inflation outlook. Fiscal and structural policies
Speaker 8: should be aimed at making the economy more productive and
Speaker 8: competitive which would help to raise the potential growth and
Speaker 8: reduce price pressures in the medium term. Mario Draggy's report
Speaker 8: on the Future of European Competitiveness and then recall it
Speaker 8: as report on empowering the Single Market stress the urgent
Speaker 8: need for reform and provide concrete proposals to make this happen.
Speaker 8: The risks to economic growth remain tilted to the downside.
Speaker 8: Lower demand for your area exports, owing for instance, to
Speaker 8: a weaker world economy or an escalation in trade tensions
Speaker 8: between major economies, would weigh on your area growth. We
Speaker 8: have consistently said, and we repeat again that we shall
Speaker 8: remain data dependent, and that is particularly justified in view
Speaker 8: of the uncertainty that abounds.
Speaker 1: That was the European Central Bank President Christine Lagarde speaking there.
Speaker 1: Despite the upbeat sentiment of Eurozone policy makers, growth is
Speaker 1: faltering across the region's largest economies and consumer confidence remains
Speaker 1: below pre pandemic levels. The ECB's latest projections downgraded output
Speaker 1: over the next three years, whilst the outlook for underlying
Speaker 1: inflation nudged higher for this year and twenty twenty five.
Speaker 1: In the coming days, markets will receive more European inflation
Speaker 1: data alongside the Bloomberg September Eurozone Economic Survey, which may
Speaker 1: help to guide the two remaining ECB policy meetings that
Speaker 1: are left this year. All of this is something I've
Speaker 1: been discussing with Bloomberg's senior Euro Area economist David Powell.
Speaker 9: The most important data point will beginning this upcoming week
Speaker 9: to you.
Speaker 10: Is that the finallying on CPI for the month of August,
Speaker 10: and that will allow us and others to look at
Speaker 10: as a more grammar look at underlying measures of inflation.
Speaker 10: But basically, broadly speaking, those measures are coming down. The
Speaker 10: headline number isn't very far from the ECB's target right
Speaker 10: now and all moving in the right direction. A real
Speaker 10: number that's is concerned to the ECB's services inflation that
Speaker 10: has remained uncomfortably high at over four percent, and that's
Speaker 10: what the ECB is focused on. This is the second reading,
Speaker 10: so it's unlike it moved that much from the from
Speaker 10: the first reading, so it'll be more important for the
Speaker 10: ECV on terms of inflation. We get the reading for
Speaker 10: September and that's out on the first in October.
Speaker 1: Is there a danger that the ECB has been overconfident
Speaker 1: on tackling inflation. They haven't ruled out a further cut
Speaker 1: in October.
Speaker 10: Well, these policy rates, deposit rate is in very restrictive territory.
Speaker 10: We think that kind of a neutral level would be
Speaker 10: about two percent. So monetary policy has been very tight.
Speaker 10: We have seen that in the economy, with the economy
Speaker 10: having flatlines for a long time in your area, and
Speaker 10: they have made significant progress on inflation. Like I said,
Speaker 10: the headline number now is now very close to the target.
Speaker 10: And when we look at measures of cost pressure, so
Speaker 10: wage growth and negotiated wages, things like that, they're all
Speaker 10: moving in the right direction. And an ECV can't wait
Speaker 10: until they're actually there to cut because voluntary policy operates
Speaker 10: with the long leag They've got to be more forward
Speaker 10: looking and they see everything going in the direction they
Speaker 10: want it to be going, and I think monetary policy
Speaker 10: can be less restrictive.
Speaker 9: Now.
Speaker 1: Expect, though, is for the economy in Europe to remain
Speaker 1: under significant pressure. You saw it in the ECB's forecasts
Speaker 1: from this week's bank meeting. How will markets react if
Speaker 1: the incoming economic data isn't positive? Will there be concerns
Speaker 1: that the ECB has left it too late.
Speaker 10: Yeah, I think generally speaking in the your area as
Speaker 10: well as in the US, so around the world, there
Speaker 10: are concerned that that tight monetary policy is really taking
Speaker 10: it all on the economy, and of course the markets
Speaker 10: are react negatively when.
Speaker 9: We get the bad data.
Speaker 10: We're seeing that not only in Europe, in the US
Speaker 10: as well, and.
Speaker 1: So in terms of what that means for others who
Speaker 1: are affected by interest rates, particularly for the European banking space,
Speaker 1: what do you expect from that.
Speaker 9: Well, A lot of banks, of course are benefit from
Speaker 9: the rise in interest rate because their interest rate income
Speaker 9: has gone up, and then they will have a negative
Speaker 9: impact as that comes down, although it won't be immediate
Speaker 9: because for many of these institutions they have longer term
Speaker 9: they have longer term assets and liabilities. They will be
Speaker 9: benefitting for a while from higher interest rates, and we
Speaker 9: have we've we've seen that in the government bond space
Speaker 9: where Italy has.
Speaker 10: Had a very high demand for its bond in recent
Speaker 10: in recent options in order for investors to take advantage
Speaker 10: of these higher interest rates before they come down.
Speaker 1: Will be the effect on the European Central Bank If
Speaker 1: the FED cuts by fifty basis points in the days ahead.
Speaker 10: Well, the the the e c D has been moving
Speaker 10: on its own at its own pace. The e c
Speaker 10: B cut before the FED, and so it really at
Speaker 10: a monetary policy based on what's happening in Europe. Having
Speaker 10: said that, of course, not ignoring what the SAID does.
Speaker 10: What the FED does is an impact on the exchange rate,
Speaker 10: and they'll be watching it closely if the if the
Speaker 10: FED were to have an aggressive move, it would probably
Speaker 10: increase the probability of the ECB moving more aggressively as well,
Speaker 10: meaning it would increase the probability of a move in October,
Speaker 10: although at this stage we don't think that Planckly, what
Speaker 10: do you make.
Speaker 1: Of the idea of higher for longer? Is that really
Speaker 1: true for Europe?
Speaker 10: Well, we have we moved away from that now. The
Speaker 10: CD had its first cut in June and then we
Speaker 10: had to cut yet announced and we think the CB
Speaker 10: will cut again in December, so they have the higher
Speaker 10: the longer idea of this idea of kind of reaching
Speaker 10: a plateau is the chief Aponos the Maank of England
Speaker 10: referred to as a table mountain approach. You kind of
Speaker 10: get up and it's very flat for a long time.
Speaker 10: But this isn't looking like table mountain. It's certainly more
Speaker 10: like a like a a peak that we've come down
Speaker 10: and we think will continue to come down after December.
Speaker 10: In the next year, you'll probably be having cut at
Speaker 10: a quarterly pace.
Speaker 1: How much concern is that within the ECB around the
Speaker 1: growth prospects of Europe? I mean, the US also is
Speaker 1: perhaps cooling, but only a little, and the underlying strength
Speaker 1: of the economy has been evident for months. China has
Speaker 1: seen kind of a lot of big disinflationary pressures. How
Speaker 1: much concern and Europe is exposed to that, How much
Speaker 1: concern is there within the ECB about the slowing pace
Speaker 1: of the economy.
Speaker 10: Well, the ECB has a single mandate just inflation reserved,
Speaker 10: a dual mandate focusing on inflation and employment, so the
Speaker 10: ACB doesn't have to pay as much attention to employment
Speaker 10: as epent. But of course in order to meet this
Speaker 10: sensation objective, it has to look at what's going on
Speaker 10: the economy, because an economy it's too week will produce
Speaker 10: inflation that's below target, and we saw that.
Speaker 9: For many years preceding the pandemic.
Speaker 10: But at this stage they really focused on the inflation
Speaker 10: numbers as a whole, although there are voices that are
Speaker 10: becoming increasingly concerned about the slowdown the economy and the
Speaker 10: potential for that to lead to an undershooting inflation eventually,
Speaker 10: and that's probably why we've seen some more of support
Speaker 10: for a back to back cut at the ECB, needing
Speaker 10: another move in October. As it's reported by Bloomberg.
Speaker 1: News David, there's always a concern amongst the different members
Speaker 1: of the European Union and the Eurozone indeed about the
Speaker 1: differing performance of certain countries and whether or not interest
Speaker 1: rates happen to suit them at the particular business cycle
Speaker 1: that they are in. Who is most worried now?
Speaker 10: Well, when we look around Europe, there are the various
Speaker 10: economies that performed differently. The President of ECV, Christiane Regard,
Speaker 10: highlighted it for press conference with this month that Spain
Speaker 10: and Netherlands.
Speaker 9: Are doing very well, others are not.
Speaker 10: If there's one country that had stopped doing well right now,
Speaker 10: it's Germany. Germany's industrial sector who has had a number
Speaker 10: of hits in recent years from high energy prices as
Speaker 10: result of the war in Ukraine and softening demand in China,
Speaker 10: which is one of its largest export markets, and it
Speaker 10: really does continue to kind of be in thedulgence right now,
Speaker 10: and it's looking like a sick man of Europe as
Speaker 10: it was called for many years before before labor market
Speaker 10: reforms were introduced.
Speaker 1: My thanks, sir to Bloomberg's David Power for taking us
Speaker 1: through the data to watch when it comes to the
Speaker 1: European Central Bank. I'm Caroline Hetger here in London. You
Speaker 1: can catch us every weekday morning for Bloomberg day Break Europe.
Speaker 1: Began at six am in London. That's one am on
Speaker 1: Wall Street.
Speaker 6: Tom, Thank you, Caroline.
Speaker 2: And coming up on Bloomberg day Break weekend, we look
Speaker 2: ahead to a monetary policy decision from the Bank of Japan.
Speaker 2: I'm Tom Busby and this is Bloomberg. This is Bloomberg
Speaker 2: day Break Weekend, our global look ahead at the top
Speaker 2: stories for investors in the coming week. I'm Tom Busby
Speaker 2: in New York. We turn now to Asia and what
Speaker 2: could be a big decision from the Bank of Japan,
Speaker 2: which is weighing just how far to adjust its policy
Speaker 2: easing settings. We get more from Bloomberg Daybreak Asia co
Speaker 2: hosts Brian Curtis and Doug Krisner.
Speaker 3: Tom the Bank of Japan meets in the coming week,
Speaker 3: and this smart money is suggesting no major surprise is expected.
Speaker 3: But what are BOJ officials thinking. Well, a Bank of
Speaker 3: Japan board member says the BOJ will adjust policy provided
Speaker 3: the economy performs in line with projections. We welcome Paul
Speaker 3: Jackson to the air waves Bloomberg Economy Editor to take
Speaker 3: a closer look at what we might expect. Paul bog
Speaker 3: official seem a little nervous here about the volatility that
Speaker 3: was caused by the rate hike in July. So let
Speaker 3: me go out on a limb and say, not likely
Speaker 3: they will make a move this month.
Speaker 11: Yeah, I think you're right there. I think it's a
Speaker 11: time to wait and watch given the extreme volatility we
Speaker 11: saw after that July rate hike. Remember this is only
Speaker 11: the second time the Bank of Japan has raised rates
Speaker 11: in the last seventeen years, so we saw in very
Speaker 11: sharp volatility afterwards the nick K stock index and its
Speaker 11: biggest drop on record following the rate hike. Of course,
Speaker 11: one of the key factors was also US data, which
Speaker 11: fed into the narrative for the Federal Reserve rate cuts.
Speaker 11: So it wasn't just the BOJ rate hike that caused
Speaker 11: that volatility, But still I think there's enough reason there
Speaker 11: for the central Bank in Japan to want to just
Speaker 11: wait and see look at market stability and also to
Speaker 11: look at the impact of that second rate hike in July.
Speaker 11: So I think the widely held consensus for next week
Speaker 11: is there's going to be no move from the Bank
Speaker 11: of Japan, but that does not mean rate hikes aren't
Speaker 11: in the pipeline coming ahead.
Speaker 12: The enormous volatility with the unwinding of that yen carry
Speaker 12: trade as well, which then brings to my mind the
Speaker 12: concern that the BOJ may have when it watches the
Speaker 12: currency perform in markets. Is there a kind of a
Speaker 12: comfort zone that the BOJ has, do you think for
Speaker 12: the en visa e. The dollar?
Speaker 11: Ah, well, that's that's a very interesting question. Of course,
Speaker 11: the BOJ would argue that it is not targeting any
Speaker 11: currency levels. But let's face it. You know, the yen
Speaker 11: has been extremely weak against the dollar, and while that
Speaker 11: really helps its global companies, its companies with a lot
Speaker 11: of exports, it inflates the earnings for those companies. For
Speaker 11: domestic operations, it's the opposite. It raises all the costs
Speaker 11: puts pressure on them, and it also makes the power
Speaker 11: of the end for the average Japanese consumer, especially for
Speaker 11: thinking of going abroad, much weaker. So in terms of levels,
Speaker 11: i'd say one sixty is definitely two weak. We see
Speaker 11: a lot of talk about the end getting too strong
Speaker 11: when it's you know, between one hundred, one hundred and ten,
Speaker 11: So we're a long way off that, but for sure
Speaker 11: that the narrative is going to change towards. Is the
Speaker 11: end strengthening too much we get past one twenty, I
Speaker 11: would say.
Speaker 3: It's hard to argue with the math. At the moment,
Speaker 3: it looks like US rates are heading down, that Japanese
Speaker 3: rates are heading up, and when you put that all together,
Speaker 3: it would seem to argue for a stronger yen. The
Speaker 3: pace is what matters, I suppose the most. The pace
Speaker 3: was just too abrupt when we had the July rate hike,
Speaker 3: so some modulation there. But the end will get stronger
Speaker 3: from here, right.
Speaker 11: I think the end is going to get stronger, But
Speaker 11: I think we should be wary of thinking that the
Speaker 11: Bank of Japan has seen that volatility and is now
Speaker 11: scared off hiking again. I think they've been very consistent
Speaker 11: in the messaging that no, no, If forecasts are met
Speaker 11: as we hope, then we are going to continue hiking. Now,
Speaker 11: is it going to be every quarter? No, I don't
Speaker 11: think so, but I think the consensus is that December
Speaker 11: or January is probably the timing for the next rate hike.
Speaker 11: And don't forget we had a story with people familiar
Speaker 11: and their views that BOG officials see this idea that
Speaker 11: a nominal interest rate about one percent is probably around
Speaker 11: the minimum level for the neutral rate. So if you
Speaker 11: think of it in those terms, that's three quarter percentage
Speaker 11: rate hikes that could be in the pipeline.
Speaker 12: Paul, take a step back. Help us understand the macro
Speaker 12: view of the Japanese economy right now, economic growth and inflation,
Speaker 12: how are they performing well?
Speaker 11: The economy has been sputtering. We've been lacking a consumption
Speaker 11: in real terms, and that's really down to inflation. Don't forget,
Speaker 11: Japan has not been used to inflation. It's had decades
Speaker 11: of deflation. The goal in Japan has been to create inflation,
Speaker 11: not crush it, so the optics are very different in Japan.
Speaker 11: Inflation at the moment overall is at two point eight
Speaker 11: percent and that's been really weighing on consumer spending. Really,
Speaker 11: we're looking to see if the economy is kind of
Speaker 11: engaging gears and is now moving towards growth of the
Speaker 11: positive inflation cycle that allows more right hikes.
Speaker 3: Paul, Thank you, Paul Jackson, Bloomberg Economy Editor. Next up,
Speaker 3: we segue from the world of central banks to the
Speaker 3: world of limiting the power of central banks. Cryptos. Coming
Speaker 3: up later this month a very big conference Token twenty
Speaker 3: forty nine. It's going to take place in Singapore. A
Speaker 3: lot of very interesting topics coming up, such as the metaverse, DeFi, NFTs, Gold, Macro,
Speaker 3: of course, Web three dios, and a whole lot more.
Speaker 3: In Joining us now on the program to discuss what
Speaker 3: might be said is Suver shri Ghosh, Bloomberg Crypto Currency
Speaker 3: Reporter with us in our Singapore studio, Suva. I know
Speaker 3: the US elections is a big issue with regard to crypto.
Speaker 3: When we get to this Token twenty forty nine Singapore agenda,
Speaker 3: what will the biggest issue p.
Speaker 13: Firstly, I would like to kind of just give a
Speaker 13: quick summary about this Token twenty forty nine because why
Speaker 13: we care is important. You know, this is the most popular,
Speaker 13: most well represented crypto conference globally that Singapore hosts every year,
Speaker 13: and this time there will be twenty thousand people attending
Speaker 13: globally from across the world, which is double that of
Speaker 13: last year. Coming to your question over here, the main
Speaker 13: themes as we go into the US elections is, of
Speaker 13: course what will be the outcome of the US elections
Speaker 13: results on crypto, especially given that there are two candidates,
Speaker 13: one has very clearly talked about pro crypto, you know, stance,
Speaker 13: and then there is Kamala Harris who hasn't yet given
Speaker 13: a very clear indication of stance on crypto. So that
Speaker 13: will be a very big theme that I expect to
Speaker 13: play out in this conference in Token twenty forty nine
Speaker 13: which starts next week. So we will clearly and very
Speaker 13: openly speak to a lot of venture capital funds and
Speaker 13: are there are big ones coming from US, from Europe,
Speaker 13: from all across the world for four to twenty forty
Speaker 13: nine in Singapore, and we are going to speak to
Speaker 13: them to understand where will they put their money in.
Speaker 13: Because in the back of the theme of US elections,
Speaker 13: there are a lot of projects as well. We saw
Speaker 13: in the last two years, there are projects which had
Speaker 13: and companies which is moved, which were moving out of
Speaker 13: US for a not so favorable climate towards crypto. Then
Speaker 13: these are very crucial stuff that you're looking to cover
Speaker 13: from the crypto.
Speaker 12: Cryptocurrencies I think we can agree. I mean rose in
Speaker 12: popularity pretty dramatically during the pandemic, and then twenty twenty
Speaker 12: two happened in November, the cryptocurrency crash. There was a
Speaker 12: lot of conversation before that about venture capitalist interested not
Speaker 12: only in crypto but in blockchain technology more broadly. Is
Speaker 12: now the notion of artificial intelligence really providing a lot
Speaker 12: of very tough competition for new money that would have
Speaker 12: otherwise maybe flown or flowed into the crypto space or
Speaker 12: the blockchain space.
Speaker 13: I mean, the thing is that you know, the money
Speaker 13: is of course a part of money is limited, and
Speaker 13: venture capital obviously would like to optimize the returns for
Speaker 13: their LPs when it comes to choosing between AI and crypto.
Speaker 13: Of course, in the last year or so, AI was
Speaker 13: a fat but we have been seeing that that fat
Speaker 13: is slightly fading and people are looking more for projects
Speaker 13: which are detailed use case rather than just pure play infrastructure,
Speaker 13: be it in AI or in crypto. So to answer
Speaker 13: your question in a short wait, it's basically venture capital
Speaker 13: funds are looking to invest where the use case is
Speaker 13: more prominent than just going by the tag, which is
Speaker 13: either AI and crypto. And I think personally speaking that
Speaker 13: this will merge in this conference as well, where AI
Speaker 13: and crypto will come together, they will intersect, and we
Speaker 13: will see a lot of investors looking for those kinds
Speaker 13: of projects.
Speaker 3: There's a lot of technical aspects to this. For instance,
Speaker 3: we've seen mining difficulty increase for bitcoin, and you'd have
Speaker 3: thought that that would lead to higher prices, and perhaps
Speaker 3: to a certain degree that happened, but bitcoin has actually
Speaker 3: dropped about ten percent since you have this software code adjustment,
Speaker 3: So you're seeing quite a lot of whipping around volatility
Speaker 3: in cryptos. Will that continue?
Speaker 13: Interesting question, and yes, crypto is a volatile asset and
Speaker 13: it is likely to go ahead in that way, meaning
Speaker 13: that the volatility is likely to continue. Of course, the
Speaker 13: initial support was from the exchange traded funds that were
Speaker 13: there in the US that piled up a lot of bitcoins.
Speaker 13: But then after that the initial demand fizzled out and
Speaker 13: we again saw macroeconomic conditions paramitter like inflation growth, all
Speaker 13: this taking over, and Bitcoin was reflecting that as well.
Speaker 13: In terms of volatility going ahead. You bring a very
Speaker 13: interesting point about mining. Yes, the mining ban in China
Speaker 13: had an impact, but we are seeing you know, spurts
Speaker 13: of mining growth in different parts of the world, and
Speaker 13: that is giving rise to some kind of support on
Speaker 13: the bitcoin prices. At the back end of it, however, yes,
Speaker 13: bitcoin is a volatile asset and no one can say
Speaker 13: what would be the future of the price is going ahead,
Speaker 13: whether the demand and supply will continue to match to
Speaker 13: push prices higher or not. But this token twenty forty
Speaker 13: nine will clearly show the trend of investor demand as
Speaker 13: well as what miners are saying over here, because that's
Speaker 13: going to be crucial for the you know, the aspect
Speaker 13: of what will happen to bitcoin price is going ahead.
Speaker 3: Suva, thanks so much for joining us, Suva. Shrik Ghosh there,
Speaker 3: Bloomberg Crypto Current see reporter. We'll have Dan moorehead, the
Speaker 3: founder and CEO at Pantera Capital speaking there. Mike Novograt's
Speaker 3: a big name as well, CEO at Galaxy Digital. That's
Speaker 3: all coming up in this conference. I'm Brian Curtis in
Speaker 3: Hong Kong along with Doug Crisner. You can catch us
Speaker 3: every weekday here for Bloomberg day Break Asia, beginning at
Speaker 3: eight am in Hong Kong and eight pm on Wall Street.
Speaker 2: Tom, Thank you Brian, and thank you Doug. And that
Speaker 2: does it for this edition of Bloomberg day Break Weekend.
Speaker 2: Join us again Monday morning at five am Wall Street
Speaker 2: time for the latest on markets overseas and the news
Speaker 2: you need to start your day. I'm Tom Buzzby. Stay
Speaker 2: with us. Top stories and global business headlines are coming
Speaker 2: up right now