1 00:00:00,280 --> 00:00:07,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:10,560 --> 00:00:13,080 Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the 3 00:00:13,080 --> 00:00:15,360 Speaker 2: top stories in the coming week from our Daybreak anchors 4 00:00:15,360 --> 00:00:17,680 Speaker 2: all around the world. Straight Ahead on the program, the 5 00:00:17,760 --> 00:00:20,880 Speaker 2: latest reads on inflation, what it could mean to the 6 00:00:20,880 --> 00:00:23,599 Speaker 2: Federal Reserve. I'm Tom Busby in New York. 7 00:00:23,840 --> 00:00:26,200 Speaker 3: I'm Caroline Netge here in London, where we're looking ahead 8 00:00:26,200 --> 00:00:29,680 Speaker 3: to the UK Chancellor's key speech to the City of London. 9 00:00:30,000 --> 00:00:32,560 Speaker 4: I'm Doug Krisner, looking ahead at what we may learn 10 00:00:32,680 --> 00:00:35,600 Speaker 4: in the coming week about the impact of US tariffs 11 00:00:35,840 --> 00:00:37,360 Speaker 4: on the Japanese economy. 12 00:00:38,400 --> 00:00:42,440 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 13 00:00:42,479 --> 00:00:46,160 Speaker 1: eleven three zero, New York, Bloomberg ninety nine to one, Washington, DC, 14 00:00:46,680 --> 00:00:50,920 Speaker 1: Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 15 00:00:51,360 --> 00:00:54,560 Speaker 1: Sirius XM one twenty one, and around the world on 16 00:00:54,600 --> 00:00:57,760 Speaker 1: Bloomberg Radio, dot Com and the Bloomberg Business App. 17 00:01:02,640 --> 00:01:04,920 Speaker 2: Good day to you. I'm Tom Busby. We begin today's 18 00:01:04,920 --> 00:01:08,120 Speaker 2: program with two fresh readings on inflation. This week, coming 19 00:01:08,120 --> 00:01:11,560 Speaker 2: off a better than forecast June jobs report. What all 20 00:01:11,640 --> 00:01:15,120 Speaker 2: that plus retail sales for June could mean to the Fed. 21 00:01:15,280 --> 00:01:18,920 Speaker 2: For more, we turned to Michael McKee, Bloomberg's International economic 22 00:01:19,120 --> 00:01:22,200 Speaker 2: and policy correspondent. Well, Michael, I want to look back. 23 00:01:22,280 --> 00:01:24,600 Speaker 2: Let's start with that June jobs report just over a 24 00:01:24,600 --> 00:01:27,200 Speaker 2: week ago. What an upside surprise? What does it tell 25 00:01:27,240 --> 00:01:28,960 Speaker 2: you about the labor market? What does it tell you 26 00:01:29,000 --> 00:01:31,680 Speaker 2: about how important it could be to the Fed, to 27 00:01:31,720 --> 00:01:32,280 Speaker 2: the President? 28 00:01:32,720 --> 00:01:34,920 Speaker 5: Well, the upside surprise was in the headline, but when 29 00:01:34,920 --> 00:01:37,400 Speaker 5: you look under the hood, the news wasn't quite as good. 30 00:01:37,440 --> 00:01:41,039 Speaker 5: The unemployment rate did not rise, it fell a little bit, 31 00:01:41,080 --> 00:01:44,160 Speaker 5: but that was because the labor force declined. So that's 32 00:01:44,200 --> 00:01:47,680 Speaker 5: what we call drop an unemployment for the wrong reasons, 33 00:01:48,760 --> 00:01:50,520 Speaker 5: And it does seem to have something to do with 34 00:01:50,520 --> 00:01:55,320 Speaker 5: the President because the number of foreign born workers dropped significantly, 35 00:01:55,520 --> 00:01:58,800 Speaker 5: and long term that could be a problem for the economy. Also, 36 00:01:59,440 --> 00:02:01,760 Speaker 5: what we saw was half of the gain was in 37 00:02:01,800 --> 00:02:06,960 Speaker 5: government employment, and economists are pretty unanimous in suggesting that's 38 00:02:07,000 --> 00:02:11,080 Speaker 5: a seasonal adjustment problem because in June you don't see 39 00:02:11,160 --> 00:02:14,600 Speaker 5: a huge amount of education hiring since school is out, 40 00:02:14,919 --> 00:02:20,240 Speaker 5: and that was what drove it. So we are looking 41 00:02:20,280 --> 00:02:22,880 Speaker 5: at a labor market that is slowing down. 42 00:02:23,080 --> 00:02:26,760 Speaker 6: Would be the conclusion, but not in trouble yet. So 43 00:02:26,840 --> 00:02:28,600 Speaker 6: for the FED, it's kind of a wash. 44 00:02:28,760 --> 00:02:32,120 Speaker 2: Okay, so even Stephen this week though two reads coming 45 00:02:32,200 --> 00:02:34,639 Speaker 2: up for the month of June on inflation. The Consumer 46 00:02:34,639 --> 00:02:37,920 Speaker 2: Price Index out on Tuesday, the Producer Price Index for 47 00:02:38,000 --> 00:02:41,200 Speaker 2: June out on Wednesday. Also retail Sales for June that 48 00:02:41,240 --> 00:02:42,760 Speaker 2: comes out Thursday, another big number. 49 00:02:42,919 --> 00:02:45,799 Speaker 5: It's a big week, and CPI is going to get 50 00:02:45,880 --> 00:02:49,880 Speaker 5: most of the attention because it'll be our broadest picture 51 00:02:50,000 --> 00:02:53,880 Speaker 5: of what the consumer inflation situation is, even if it's 52 00:02:53,919 --> 00:02:58,480 Speaker 5: not the fed's main index for its inflation target, and 53 00:02:58,560 --> 00:03:01,959 Speaker 5: it is expected to rise, and so that should get 54 00:03:01,960 --> 00:03:05,040 Speaker 5: a lot of attention on Wall Street because everybody's been 55 00:03:05,080 --> 00:03:09,160 Speaker 5: waiting for some kind of tariff impact on the price level, 56 00:03:09,560 --> 00:03:11,760 Speaker 5: and so if we see that, people will be a 57 00:03:11,800 --> 00:03:14,919 Speaker 5: little concerned. For the Fed, it might be the producer 58 00:03:14,960 --> 00:03:18,760 Speaker 5: Price Index that's more important in the sense that producer 59 00:03:18,800 --> 00:03:22,480 Speaker 5: prices will tell you what are probably going to be 60 00:03:22,480 --> 00:03:27,640 Speaker 5: a better indication of where underlying tariff inflation pressure is 61 00:03:27,680 --> 00:03:31,120 Speaker 5: coming from, because all the parts that people buy from 62 00:03:31,240 --> 00:03:35,920 Speaker 5: overseas to make other things will start to show up. 63 00:03:36,120 --> 00:03:41,560 Speaker 5: We've had tariffs on steel and aluminum, and that's the 64 00:03:41,640 --> 00:03:45,040 Speaker 5: kind of thing that in theory will show up in 65 00:03:45,080 --> 00:03:48,760 Speaker 5: the producer price index and suggest that we will see 66 00:03:48,800 --> 00:03:51,720 Speaker 5: further consumer price increases down the road. 67 00:03:51,880 --> 00:03:54,800 Speaker 2: Auto parts, lumber all in there too, all in there too. 68 00:03:55,760 --> 00:03:59,240 Speaker 2: And now you mentioned obviously the tariffs. A lot could change. 69 00:03:59,400 --> 00:04:03,560 Speaker 2: Last week we heard President Trump talking about anti American 70 00:04:03,600 --> 00:04:06,280 Speaker 2: bricks nations, a ten percent levy on nations. I mean, 71 00:04:06,840 --> 00:04:09,480 Speaker 2: how bad could it get? Is it all bluster? I mean, 72 00:04:09,480 --> 00:04:10,280 Speaker 2: what do you think? 73 00:04:10,440 --> 00:04:14,080 Speaker 5: Well, so far, it kind of looks like the way 74 00:04:14,120 --> 00:04:17,080 Speaker 5: people are taking it is. Anything could change at any moment, 75 00:04:17,120 --> 00:04:21,480 Speaker 5: because that's been the story of the President's tariff policies. 76 00:04:21,880 --> 00:04:22,760 Speaker 6: But for the. 77 00:04:22,880 --> 00:04:26,040 Speaker 5: Moment, I think what you're going to see is economists 78 00:04:26,040 --> 00:04:28,680 Speaker 5: starting to put pencil to paper when they have some numbers, 79 00:04:28,760 --> 00:04:33,640 Speaker 5: to try to figure out what the effect will be 80 00:04:33,920 --> 00:04:36,680 Speaker 5: on prices and on consumer demand. 81 00:04:36,720 --> 00:04:39,760 Speaker 6: You mentioned retail sales. Retail sales have been. 82 00:04:39,600 --> 00:04:42,440 Speaker 5: Hanging in there at a lower level than they are, 83 00:04:42,520 --> 00:04:45,680 Speaker 5: but if prices go up, then people may stop buying 84 00:04:45,720 --> 00:04:50,039 Speaker 5: some things. So that'll be what the people with the 85 00:04:50,080 --> 00:04:54,839 Speaker 5: Excel spreadsheets are doing. Companies have to figure out what 86 00:04:56,160 --> 00:04:59,360 Speaker 5: they are going to do about supply chains, whether or 87 00:04:59,400 --> 00:05:04,280 Speaker 5: not this means they should invest or not in expansion, 88 00:05:04,360 --> 00:05:07,839 Speaker 5: what they think it's going to mean for their customers, 89 00:05:08,080 --> 00:05:10,679 Speaker 5: so they know whether they're going to have to absorb 90 00:05:10,760 --> 00:05:13,800 Speaker 5: things in their margins and that might have. 91 00:05:13,760 --> 00:05:15,159 Speaker 6: An effect on the stock market. 92 00:05:15,360 --> 00:05:19,839 Speaker 5: So a lot of questions to be answered yet. But 93 00:05:21,200 --> 00:05:25,640 Speaker 5: if we start to get some clarity that we can 94 00:05:26,200 --> 00:05:29,760 Speaker 5: believe in I believe it's not going to change, then 95 00:05:30,160 --> 00:05:34,120 Speaker 5: that is going to give people a chance to start 96 00:05:34,160 --> 00:05:35,839 Speaker 5: figuring out where this all goes. 97 00:05:36,200 --> 00:05:38,760 Speaker 2: Well, I'm sure we'll talk again until then the June 98 00:05:38,839 --> 00:05:42,320 Speaker 2: CPI figure out this Tuesday PPI the following day retail 99 00:05:42,400 --> 00:05:46,400 Speaker 2: sales On Thursday, our thanks to Michael McKee, Bloomberg's International 100 00:05:46,440 --> 00:05:50,359 Speaker 2: Economic and policy correspondent, we turned out to earnings, and 101 00:05:50,400 --> 00:05:53,200 Speaker 2: this week we'll hear from the streaming video giant Netflix 102 00:05:53,279 --> 00:05:56,359 Speaker 2: as it goes deeper into live programming to raise revenue 103 00:05:56,400 --> 00:05:59,160 Speaker 2: and for more on what's behind that push. We're joined 104 00:05:59,160 --> 00:06:02,240 Speaker 2: by Get the Rag and often Bloomberg intelligence analyst on 105 00:06:02,360 --> 00:06:06,760 Speaker 2: US media GITA. Thank you for being here. Although they 106 00:06:06,800 --> 00:06:09,760 Speaker 2: no longer report subscriber numbers, a key metric for Netflix 107 00:06:09,760 --> 00:06:12,799 Speaker 2: as it builds its advertising business. What do you expect 108 00:06:12,839 --> 00:06:15,040 Speaker 2: to see in the latest earnings report out on Thursday. 109 00:06:15,480 --> 00:06:19,480 Speaker 7: Yeah, you're absolutely right. They have stopped reporting subscribers as 110 00:06:19,520 --> 00:06:22,560 Speaker 7: of this year, but the metrics that they want us 111 00:06:22,600 --> 00:06:25,600 Speaker 7: to focus on right now are revenue gains as well 112 00:06:25,640 --> 00:06:29,560 Speaker 7: as operating margin, and they've really been delivering some stellar 113 00:06:29,640 --> 00:06:32,039 Speaker 7: numbers when it comes to both of those metrics. So 114 00:06:32,080 --> 00:06:34,720 Speaker 7: what we're looking for and what they've guided to for 115 00:06:34,839 --> 00:06:37,600 Speaker 7: the second quarter in terms of revenue growth is mid 116 00:06:37,680 --> 00:06:40,920 Speaker 7: teens percentage increases, so about fifteen to fifteen and a 117 00:06:40,960 --> 00:06:45,640 Speaker 7: half percent increase in revenues and a very very strong 118 00:06:45,720 --> 00:06:51,200 Speaker 7: operating margin at thirty three percent. Remember last year was 119 00:06:51,240 --> 00:06:55,000 Speaker 7: absolutely a breakout yere for Netflix. They had six hundred 120 00:06:55,080 --> 00:06:59,280 Speaker 7: basis point expansion in their operating margin, and again they've 121 00:06:59,320 --> 00:07:02,800 Speaker 7: guided to pretty impressive increase for this year as well. 122 00:07:02,920 --> 00:07:06,680 Speaker 7: So you're absolutely right. The focus has really shifted now 123 00:07:06,720 --> 00:07:10,320 Speaker 7: to financial metrics, But that doesn't mean that subscriber growth 124 00:07:11,040 --> 00:07:14,440 Speaker 7: is slowing because they have an absolutely fantastic They had 125 00:07:14,440 --> 00:07:17,880 Speaker 7: a very strong content slate for the second quarter, and 126 00:07:17,920 --> 00:07:20,480 Speaker 7: they continue to put out really good titles and they 127 00:07:20,520 --> 00:07:23,160 Speaker 7: have some really big series that are going to debut 128 00:07:23,280 --> 00:07:25,480 Speaker 7: on their platform through the rest of the year as well. 129 00:07:26,080 --> 00:07:28,840 Speaker 2: Well, it's clear. I mean the share price has almost 130 00:07:28,880 --> 00:07:31,200 Speaker 2: doubled in value in the past twelve months, so they 131 00:07:31,240 --> 00:07:33,840 Speaker 2: are doing everything right. Let's talk about what they have 132 00:07:33,960 --> 00:07:37,480 Speaker 2: done as well as the push into more live programming. 133 00:07:38,080 --> 00:07:40,840 Speaker 2: They've raised prices and that doesn't seem to have heard 134 00:07:40,880 --> 00:07:42,280 Speaker 2: at all either, right. 135 00:07:43,400 --> 00:07:43,880 Speaker 8: Not at all. 136 00:07:43,920 --> 00:07:47,560 Speaker 7: So what Netflix has really done well is they've established 137 00:07:47,600 --> 00:07:50,880 Speaker 7: themselves as a must have platform, so they are the 138 00:07:51,000 --> 00:07:55,640 Speaker 7: go to, kind of default entertainment option out there, which 139 00:07:55,680 --> 00:07:58,920 Speaker 7: gives them a lot of pricing power. They also have 140 00:07:59,320 --> 00:08:03,320 Speaker 7: content is obviously their greatest differentiator. They have a steady 141 00:08:03,360 --> 00:08:07,200 Speaker 7: stream of really popular content on their service. But most 142 00:08:07,240 --> 00:08:09,760 Speaker 7: of all, it's really the user experience. Right, The user 143 00:08:09,800 --> 00:08:14,400 Speaker 7: experience is unparalleled, and that's something that Netflix knows. And 144 00:08:14,800 --> 00:08:16,840 Speaker 7: you know, they're able to raise prices and there has 145 00:08:16,880 --> 00:08:22,040 Speaker 7: been absolutely no backlash or pushback from customers. 146 00:08:22,040 --> 00:08:24,560 Speaker 8: We've seen shown at very very manageable levels. 147 00:08:24,640 --> 00:08:27,880 Speaker 7: So it just gives them more confidence, really emboldens them 148 00:08:27,920 --> 00:08:30,760 Speaker 7: to keep increasing prices at a steady pace even into 149 00:08:30,800 --> 00:08:31,280 Speaker 7: the future. 150 00:08:31,680 --> 00:08:33,719 Speaker 2: Well, let's talk about some of that programming, because they 151 00:08:33,720 --> 00:08:36,840 Speaker 2: have really tried to broaden the lineup to attract new subscribers, 152 00:08:36,880 --> 00:08:39,720 Speaker 2: and it looks like it's working. I mean, the sports, 153 00:08:39,880 --> 00:08:43,360 Speaker 2: there's a WWE, the raw wrestling, UFC matches. We know 154 00:08:43,400 --> 00:08:46,559 Speaker 2: they've been aggressive trying to get Formula one. I mean, 155 00:08:46,600 --> 00:08:49,360 Speaker 2: they are really branching out. And we know in the 156 00:08:49,400 --> 00:08:52,320 Speaker 2: past there's no football games now NFL, but you know 157 00:08:52,360 --> 00:08:55,000 Speaker 2: what worked for them on Christmas Day those two games there, 158 00:08:55,040 --> 00:08:58,800 Speaker 2: those big celebrity boxing matches. I mean, is that the 159 00:08:58,840 --> 00:09:02,120 Speaker 2: future that they see right now? Those live programmings, the 160 00:09:02,160 --> 00:09:04,840 Speaker 2: advertising revenue from that, and are we going to see 161 00:09:04,840 --> 00:09:05,800 Speaker 2: more and more and more of that? 162 00:09:07,000 --> 00:09:09,760 Speaker 7: We're going to see more. There is absolutely no doubt 163 00:09:09,760 --> 00:09:12,920 Speaker 7: about that. You're absolutely right. You bring up the WWE. 164 00:09:12,920 --> 00:09:16,040 Speaker 7: That's been a great source of programming. We see that 165 00:09:16,160 --> 00:09:19,440 Speaker 7: show up in the top ten literally every week, so 166 00:09:19,480 --> 00:09:22,600 Speaker 7: we know that that programming is resonating very well. Again NFL, 167 00:09:22,720 --> 00:09:24,720 Speaker 7: that's something that they tried last year with the Christmas 168 00:09:24,800 --> 00:09:25,280 Speaker 7: Day games. 169 00:09:25,400 --> 00:09:27,080 Speaker 8: They're going to do that again this year. 170 00:09:27,559 --> 00:09:31,760 Speaker 7: They have more of this kind of boxing matches coming up, 171 00:09:32,000 --> 00:09:35,040 Speaker 7: so they're really getting into live programming in a big way. 172 00:09:35,080 --> 00:09:36,199 Speaker 8: And if you think about what the. 173 00:09:36,160 --> 00:09:39,359 Speaker 7: Strategy is here, it's not just to kind of expand 174 00:09:39,440 --> 00:09:43,319 Speaker 7: the entire programming lineup. They're really chasing advertising dollars, and 175 00:09:43,360 --> 00:09:45,800 Speaker 7: we know that they are looking to get at least 176 00:09:45,840 --> 00:09:50,280 Speaker 7: about nine billion dollars in advertising by twenty thirty. That's 177 00:09:50,679 --> 00:09:54,880 Speaker 7: that's a pretty big ask because remember they just introduced advertising. 178 00:09:54,920 --> 00:09:57,520 Speaker 7: It was only about one one and a half billion 179 00:09:57,559 --> 00:09:59,800 Speaker 7: dollars again estimated in twenty twenty four. 180 00:10:00,000 --> 00:10:01,319 Speaker 8: They've got to really scale that up. 181 00:10:01,400 --> 00:10:05,599 Speaker 7: So the idea here is to really capture more consumer 182 00:10:05,679 --> 00:10:08,079 Speaker 7: media usage time, and so they want to get all 183 00:10:08,120 --> 00:10:09,160 Speaker 7: of these different genres. 184 00:10:09,200 --> 00:10:11,120 Speaker 8: Live sports is something that works really well. 185 00:10:11,720 --> 00:10:15,040 Speaker 7: They did a really very different type of deal just 186 00:10:15,080 --> 00:10:19,200 Speaker 7: a few weeks ago in France where they're actually integrating 187 00:10:19,480 --> 00:10:24,520 Speaker 7: content live content, live TV content from TF one. This 188 00:10:24,559 --> 00:10:27,960 Speaker 7: is the first of its kind deal where they're taking 189 00:10:28,040 --> 00:10:32,040 Speaker 7: a live broadcasting live broadcasters programming and actually putting it 190 00:10:32,120 --> 00:10:34,560 Speaker 7: on Netflix. So again here we're you know, we're just 191 00:10:34,600 --> 00:10:39,240 Speaker 7: looking at them experimenting with different strategies, basically just capturing 192 00:10:39,320 --> 00:10:43,160 Speaker 7: more watch time, increasing engagement, reducing seoan. 193 00:10:43,480 --> 00:10:46,600 Speaker 2: Well, they've also done a similar thing with NASA plus 194 00:10:46,640 --> 00:10:49,560 Speaker 2: they're ad free offering from the US Space Agency, and 195 00:10:50,320 --> 00:10:53,400 Speaker 2: they've had talks with Spotify about even more programming, branching 196 00:10:53,480 --> 00:10:54,800 Speaker 2: out beyond sports. 197 00:10:54,880 --> 00:10:55,080 Speaker 5: Right. 198 00:10:56,040 --> 00:10:59,080 Speaker 7: Yeah, again, this goes back to this whole concept of 199 00:10:59,120 --> 00:11:03,760 Speaker 7: retention monetization. How do you keep driving user growth? And 200 00:11:03,840 --> 00:11:07,360 Speaker 7: it looks like they are not afraid of experimenting and 201 00:11:07,440 --> 00:11:11,439 Speaker 7: you know, really trying all kinds of things to scale 202 00:11:11,480 --> 00:11:13,280 Speaker 7: and to become the dominant. 203 00:11:13,280 --> 00:11:15,320 Speaker 8: I mean, they already are the dominant. 204 00:11:14,880 --> 00:11:17,840 Speaker 7: Streaming platform, but it's just basically expanding that dominance and 205 00:11:17,920 --> 00:11:19,319 Speaker 7: really really cementing it. 206 00:11:19,880 --> 00:11:23,680 Speaker 2: And we've seen Squid Games three, a blockbuster for viewership, 207 00:11:23,679 --> 00:11:26,760 Speaker 2: the most watched program in ninety countries, the final season 208 00:11:26,760 --> 00:11:29,520 Speaker 2: of Stranger Things, and coming out in just a couple 209 00:11:29,559 --> 00:11:31,840 Speaker 2: of weeks, the second season of Wednesday. I mean, they've 210 00:11:31,880 --> 00:11:34,520 Speaker 2: got a full lineup of shows too. 211 00:11:34,640 --> 00:11:35,640 Speaker 8: Yeah. 212 00:11:35,679 --> 00:11:38,920 Speaker 7: Absolutely, so, believe it or not, this is the strongest 213 00:11:39,160 --> 00:11:43,199 Speaker 7: six month period ever in the history of Netflix. They 214 00:11:43,200 --> 00:11:47,000 Speaker 7: have never had three of their you know, biggest series ever. 215 00:11:47,040 --> 00:11:49,440 Speaker 7: I mean, remember squid Game is their biggest series ever, 216 00:11:49,720 --> 00:11:53,040 Speaker 7: against Stranger Things, Wednesday. All those three feature in the 217 00:11:53,040 --> 00:11:56,079 Speaker 7: top five of the most watched series in the history 218 00:11:56,080 --> 00:11:59,080 Speaker 7: of Netflix, maybe in the history of any streaming platform. 219 00:11:59,120 --> 00:12:01,760 Speaker 7: And so we ssolutely believe that is going to drive 220 00:12:01,880 --> 00:12:06,160 Speaker 7: extremely strong subscriber growth. Management itself has kind of characterized 221 00:12:06,160 --> 00:12:08,920 Speaker 7: this slate as, you know, a slight embarrassment of riches. 222 00:12:09,160 --> 00:12:12,000 Speaker 7: You know, they've never had so many big series kind 223 00:12:12,000 --> 00:12:14,520 Speaker 7: of come out, and they're absolutely capitalizing on it. So 224 00:12:14,559 --> 00:12:18,080 Speaker 7: remember they are eventizing this whole stranger things. They're breaking 225 00:12:18,080 --> 00:12:21,120 Speaker 7: it out into two parts. One part comes out, you know, 226 00:12:21,160 --> 00:12:23,960 Speaker 7: around Thanksgiving. The second part comes out on Christmas Day, 227 00:12:24,320 --> 00:12:26,480 Speaker 7: So they're really going to capitalize on it and make 228 00:12:26,559 --> 00:12:29,040 Speaker 7: sure that subscriber momentum is maintained. 229 00:12:29,200 --> 00:12:32,360 Speaker 2: Wow Big and getting bigger. Netflix Q two earnings out 230 00:12:32,400 --> 00:12:35,319 Speaker 2: this Thursday after Wall Street's closing. Bell Our thanks to 231 00:12:35,360 --> 00:12:39,520 Speaker 2: Githa raganathin Bloomberg Intelligence analyst on US media and coming 232 00:12:39,559 --> 00:12:41,480 Speaker 2: up on Bloomberg day Break weekend, I'll look ahead to 233 00:12:41,480 --> 00:12:45,920 Speaker 2: a major speech from UK Chancellor Rachel Reeves. I'm Tom Busby, 234 00:12:46,000 --> 00:12:59,600 Speaker 2: and this is Bloomberg. This is Bloomberg day Break weekend, 235 00:12:59,600 --> 00:13:01,960 Speaker 2: our globe look ahead at the top stories for investors 236 00:13:01,960 --> 00:13:04,440 Speaker 2: in the coming week. I'm Tom Busby in New York. 237 00:13:05,000 --> 00:13:06,960 Speaker 2: Up later in our program, we look ahead to several 238 00:13:07,040 --> 00:13:10,560 Speaker 2: key data points for the Japanese economy. But first UK 239 00:13:10,679 --> 00:13:13,520 Speaker 2: Chancellor Rachel Reeves do to deliver her next major speech 240 00:13:13,640 --> 00:13:17,119 Speaker 2: to City of London at Mansion House on July fifteenth. 241 00:13:17,400 --> 00:13:20,800 Speaker 2: She's expected to lay out the government's growth and competitiveness 242 00:13:20,840 --> 00:13:24,560 Speaker 2: strategy for financial services. But with pressure from within her 243 00:13:24,600 --> 00:13:27,199 Speaker 2: own party to impose a new Wealth tax in Britain, 244 00:13:27,559 --> 00:13:30,800 Speaker 2: what will Reeves's message be for more, Let's bring in 245 00:13:30,840 --> 00:13:34,040 Speaker 2: Bloomberg daybreak earbanker Caroline Hepger in London. 246 00:13:34,080 --> 00:13:37,200 Speaker 3: Tom Rachel Reeves will face an audience in the city 247 00:13:37,240 --> 00:13:40,120 Speaker 3: who may well be relieved to see her still as 248 00:13:40,280 --> 00:13:43,240 Speaker 3: UK Chancellor. The Labour Party has been in power for 249 00:13:43,320 --> 00:13:46,079 Speaker 3: a year in the UK, it has not yet been 250 00:13:46,120 --> 00:13:49,800 Speaker 3: able to deliver the kind of meaningful growth that avoids 251 00:13:49,960 --> 00:13:53,840 Speaker 3: very difficult tax and spending decisions in the autumn budget. 252 00:13:54,559 --> 00:13:58,320 Speaker 3: Paul Johnson, the outgoing director of the leading think tank, 253 00:13:58,400 --> 00:14:02,360 Speaker 3: the Institute for Fiscals Studies, wrote recently on the subject. 254 00:14:02,800 --> 00:14:06,720 Speaker 3: The Chancellor has to somehow reconcile tax and spending, but 255 00:14:06,880 --> 00:14:10,800 Speaker 3: both her own Labour MPs and the Tory opposition are 256 00:14:10,880 --> 00:14:15,280 Speaker 3: still living in a dream world, according to Johnson. David 257 00:14:15,320 --> 00:14:19,440 Speaker 3: Miles from the independent watchdog the Office for Budget Responsibility 258 00:14:19,640 --> 00:14:23,400 Speaker 3: put the Chancellor's difficulties into context when he spoke to 259 00:14:23,480 --> 00:14:25,440 Speaker 3: us recently on Bloomberg Radio. 260 00:14:25,880 --> 00:14:28,520 Speaker 9: If one kept all the policy settings as they are, 261 00:14:28,560 --> 00:14:32,960 Speaker 9: the generosity of various state pensions being uplifted in line 262 00:14:32,960 --> 00:14:36,480 Speaker 9: with a so called triple lock, and health spending likely 263 00:14:36,640 --> 00:14:40,720 Speaker 9: rising simply to reflect what's likely to happen to demographics. 264 00:14:40,840 --> 00:14:43,560 Speaker 9: And if there's no change in the tax system, in otherwords, 265 00:14:43,720 --> 00:14:46,120 Speaker 9: if nothing changes and you just let the system carry 266 00:14:46,120 --> 00:14:49,280 Speaker 9: on as it is, it looks like it's going to 267 00:14:49,320 --> 00:14:52,440 Speaker 9: generate a stock of debt that that doesn't get under 268 00:14:52,440 --> 00:14:55,480 Speaker 9: control and in the longer run, in anyway, carries on 269 00:14:55,560 --> 00:14:57,920 Speaker 9: going up. The message of our certainly isn't you know 270 00:14:58,000 --> 00:15:01,400 Speaker 9: this specific policy needs to chase angel that specific policy 271 00:15:01,520 --> 00:15:03,920 Speaker 9: is to change. It's just that there are pressures which 272 00:15:03,960 --> 00:15:07,680 Speaker 9: have to be offset over the long run or else 273 00:15:07,680 --> 00:15:10,680 Speaker 9: through on a trajectory which is likely unsustainable. 274 00:15:11,560 --> 00:15:16,080 Speaker 3: So that was the obr's David Miles. But those difficulties 275 00:15:16,120 --> 00:15:19,880 Speaker 3: are still some weeks away. For this Mansion House speech 276 00:15:19,920 --> 00:15:23,600 Speaker 3: will be focus more narrowly on the specifics of the 277 00:15:23,640 --> 00:15:27,640 Speaker 3: financial industry in Britain amid a push in the US 278 00:15:28,080 --> 00:15:31,960 Speaker 3: to power ahead with deregulation, tariffs and tax cuts. 279 00:15:32,080 --> 00:15:32,240 Speaker 10: Well. 280 00:15:32,320 --> 00:15:35,080 Speaker 3: Joining me now is Bloomberg's UK Government reporter Joe Mays 281 00:15:35,200 --> 00:15:38,400 Speaker 3: and Bloomberg opinion columnist Paul J. Davies. Welcome to both 282 00:15:38,440 --> 00:15:39,760 Speaker 3: of you, and thank you for being with me. 283 00:15:40,400 --> 00:15:40,560 Speaker 10: Joe. 284 00:15:40,640 --> 00:15:43,640 Speaker 3: Can we just start by thinking about what we expect 285 00:15:43,680 --> 00:15:47,080 Speaker 3: in terms of tone from Rachel Reeves. Obviously we had 286 00:15:47,080 --> 00:15:50,320 Speaker 3: that moment of tearfulness in the House of Commons quite recently, 287 00:15:50,760 --> 00:15:53,480 Speaker 3: followed by lots of beaming smiles and hugs with the 288 00:15:53,520 --> 00:15:56,479 Speaker 3: Prime Minister. Does Reeves retain her authority? 289 00:15:56,880 --> 00:15:58,840 Speaker 11: I think we can expect the kind of tone which 290 00:15:58,840 --> 00:16:01,160 Speaker 11: you'd normally get from a child, and imagine how speeds, 291 00:16:01,160 --> 00:16:06,440 Speaker 11: which is projecting a positive, grateful attitude towards the city 292 00:16:06,520 --> 00:16:09,320 Speaker 11: for the massive contribution it makes to the tax space, 293 00:16:09,440 --> 00:16:12,080 Speaker 11: to the economy, and then setting out what she's done 294 00:16:12,120 --> 00:16:13,800 Speaker 11: to help them so far and what she plans to 295 00:16:13,800 --> 00:16:16,040 Speaker 11: do to make their lives even better going into the future. 296 00:16:16,280 --> 00:16:18,240 Speaker 11: You're right that it comes against this backdrop of that 297 00:16:18,320 --> 00:16:20,760 Speaker 11: very dramatic moment we had in the House of Commons 298 00:16:20,800 --> 00:16:23,200 Speaker 11: where the pound was moving on these fears that she 299 00:16:23,280 --> 00:16:25,920 Speaker 11: might have resigned or been sacked. Yeah, I think she 300 00:16:25,960 --> 00:16:29,320 Speaker 11: came out of that episode actually strengthened with the city 301 00:16:29,400 --> 00:16:32,120 Speaker 11: and with financial markets because it really showed how markets 302 00:16:32,160 --> 00:16:34,080 Speaker 11: were worried that she was going to be replaced by 303 00:16:34,080 --> 00:16:37,280 Speaker 11: a more left wing alternative and so by staying, and 304 00:16:37,320 --> 00:16:40,640 Speaker 11: you saw the reaction of the pound and guilts rallying 305 00:16:40,760 --> 00:16:42,880 Speaker 11: when she was confirmed she was going to stay. I 306 00:16:42,920 --> 00:16:45,200 Speaker 11: think that shows that investors feel like she is probably 307 00:16:45,200 --> 00:16:47,760 Speaker 11: the safest bets when it comes to labour chance. That's 308 00:16:47,760 --> 00:16:51,600 Speaker 11: her fiscal discipline, commitment to those fiscal rules. So I 309 00:16:51,640 --> 00:16:55,200 Speaker 11: think she'll go into this mansion house feeling somewhat emboldened 310 00:16:55,200 --> 00:16:58,400 Speaker 11: by that episode, and I wanted to show the city 311 00:16:58,400 --> 00:17:01,520 Speaker 11: that she's still informed. She's got plans to make the 312 00:17:01,520 --> 00:17:02,920 Speaker 11: economy grow and. 313 00:17:02,960 --> 00:17:06,000 Speaker 3: Do better, and maybe that that lesson has become evident 314 00:17:06,040 --> 00:17:09,520 Speaker 3: to her own party, within the Parliamentary Labor Party. Maybe 315 00:17:09,960 --> 00:17:12,199 Speaker 3: what do you think she's going to announce then? I mean, 316 00:17:12,359 --> 00:17:15,360 Speaker 3: there are so many rumors already, but let's start by 317 00:17:15,400 --> 00:17:18,679 Speaker 3: thinking about icers, which is a particular investment product in 318 00:17:18,720 --> 00:17:23,560 Speaker 3: the UK. I mean eighteen million people have investments in ers. 319 00:17:24,200 --> 00:17:26,840 Speaker 11: I think this is the most eye catching announcement we're expecting. 320 00:17:26,960 --> 00:17:31,040 Speaker 11: Was this change to the twenty thousand pounds limit that 321 00:17:31,080 --> 00:17:33,960 Speaker 11: you can currently put in a cash icer tax free 322 00:17:34,000 --> 00:17:36,960 Speaker 11: on the interest. We're expecting her to announce a reduction 323 00:17:37,119 --> 00:17:40,879 Speaker 11: in that twenty thousand pounds limit on cash, so that 324 00:17:40,920 --> 00:17:42,680 Speaker 11: you could still have twenty thousand pounds in an ISA, 325 00:17:42,800 --> 00:17:44,480 Speaker 11: but more of it would have to be in equities 326 00:17:44,480 --> 00:17:46,639 Speaker 11: and stocks. I think that's the push she wants to 327 00:17:46,680 --> 00:17:51,520 Speaker 11: make to move more capital into British shares British stocks 328 00:17:51,600 --> 00:17:53,240 Speaker 11: in a bid to get growth going. It's all part 329 00:17:53,240 --> 00:17:55,800 Speaker 11: of that growth message. Now, it wouldn't be without controversy. 330 00:17:55,840 --> 00:17:57,600 Speaker 11: We know that for some people this is something they 331 00:17:57,680 --> 00:17:59,479 Speaker 11: do not like. They like the idea of having kind 332 00:17:59,520 --> 00:18:03,720 Speaker 11: of safe cash as their form of saving, but then 333 00:18:04,520 --> 00:18:06,920 Speaker 11: will be reacted negatively maybe, But I think that's what 334 00:18:07,000 --> 00:18:08,240 Speaker 11: the bigges and Ulsomber are expecting. 335 00:18:08,440 --> 00:18:11,119 Speaker 3: Yeah, and some of the banks and the lenders that 336 00:18:11,200 --> 00:18:13,840 Speaker 3: operate the isers that offer the iceers, you know, have 337 00:18:13,920 --> 00:18:16,520 Speaker 3: also got a stake in this too and have pushed 338 00:18:16,520 --> 00:18:19,719 Speaker 3: back somewhat against maybe some of the changes. Paul, let 339 00:18:19,760 --> 00:18:21,880 Speaker 3: me bring you in at this point. So that's kind 340 00:18:21,880 --> 00:18:24,840 Speaker 3: of setting the tone and maybe the eye catching announcements. 341 00:18:24,840 --> 00:18:27,800 Speaker 3: But obviously the City of London wants the detail, and 342 00:18:27,960 --> 00:18:32,199 Speaker 3: particularly on regulation in terms of maybe the idea of 343 00:18:32,240 --> 00:18:35,320 Speaker 3: scrapping ring fencing rules, which is a rule that dates 344 00:18:35,359 --> 00:18:39,000 Speaker 3: back to the financial crisis. Any thoughts about whether that 345 00:18:39,080 --> 00:18:41,040 Speaker 3: might be part of this mansion house speech. 346 00:18:41,160 --> 00:18:43,239 Speaker 12: Yeah, well, this is one of the key sort of 347 00:18:43,280 --> 00:18:45,960 Speaker 12: I guess, most tangible debates at the moment in regulations. 348 00:18:46,080 --> 00:18:50,080 Speaker 12: And it's pretty interesting because there's a split between Rachel 349 00:18:50,119 --> 00:18:53,160 Speaker 12: Reeves seeming prepared to perhaps ditch it as a way 350 00:18:53,200 --> 00:18:55,560 Speaker 12: of hopefully enhancing growth. Everything that they're trying to do 351 00:18:55,600 --> 00:18:58,240 Speaker 12: is find ways to enhance growth. Bank of England has 352 00:18:58,280 --> 00:19:02,080 Speaker 12: come out against it. Andrew Bailey, governor has said that 353 00:19:02,119 --> 00:19:04,359 Speaker 12: he thinks it should remain, and there's a split in 354 00:19:04,400 --> 00:19:07,720 Speaker 12: the industry as well. So you know, Berkleay's Bank has 355 00:19:07,760 --> 00:19:11,200 Speaker 12: defended it quite strongly and thinks it's very important as 356 00:19:11,240 --> 00:19:14,000 Speaker 12: a way of protecting depositors. I mean, you remember that 357 00:19:14,080 --> 00:19:18,160 Speaker 12: the whole point of this thing is to keep ordinary 358 00:19:18,240 --> 00:19:24,639 Speaker 12: consumers deposits separate from the volatile, exciting, dangerous world of 359 00:19:24,680 --> 00:19:26,679 Speaker 12: investment banking and trading and so on and so forth. 360 00:19:27,520 --> 00:19:30,280 Speaker 12: So Barkley thinks it's important to keep that. Other banks, 361 00:19:30,280 --> 00:19:33,840 Speaker 12: particularly HSBC, thinks it be much better to find a 362 00:19:33,840 --> 00:19:38,000 Speaker 12: way of releasing more of that money for you know, 363 00:19:38,119 --> 00:19:42,200 Speaker 12: growth investment inside the UK and beyond. And they're unhappy 364 00:19:42,240 --> 00:19:45,679 Speaker 12: that big global banks like JP Morgan and Goldman Sachs 365 00:19:46,119 --> 00:19:49,720 Speaker 12: can use their small sort of UK deposit gathering businesses 366 00:19:50,160 --> 00:19:53,640 Speaker 12: Chase UK or Marcus to raise cheap funding, which they're 367 00:19:53,680 --> 00:19:56,679 Speaker 12: then free to use for whatever they want wherever they 368 00:19:56,680 --> 00:20:01,040 Speaker 12: want because they remain below this threshold. I mean, I 369 00:20:01,080 --> 00:20:03,760 Speaker 12: think what we might see ultimately is maybe a compromise 370 00:20:03,840 --> 00:20:07,280 Speaker 12: whereby you know, the banks like HSBC and Barclays get 371 00:20:07,280 --> 00:20:12,119 Speaker 12: to use the first thirty five billion of UK retail deposits, 372 00:20:12,119 --> 00:20:16,200 Speaker 12: which is the threshold for you know, ring fencing your 373 00:20:16,320 --> 00:20:19,639 Speaker 12: UK operations, separating it from investment. Then maybe they'll get 374 00:20:19,680 --> 00:20:22,240 Speaker 12: to use that first thirty five billion in a freer 375 00:20:22,320 --> 00:20:25,320 Speaker 12: way to kind of you know, to put into investment 376 00:20:25,359 --> 00:20:28,760 Speaker 12: banking or some kinds of corporate lending or something more 377 00:20:28,800 --> 00:20:32,720 Speaker 12: growth orientated, and that could satisfy both sides to some degree. 378 00:20:32,880 --> 00:20:35,359 Speaker 3: Yeah, And I think this goes to the argument about 379 00:20:35,480 --> 00:20:39,520 Speaker 3: whether the government's changes all of these tweaks, these small 380 00:20:39,600 --> 00:20:43,360 Speaker 3: incremental tweaks, actually going to add up to something more major. 381 00:20:43,440 --> 00:20:47,480 Speaker 3: And meaningfully change the trajectory when it comes to economic growth, 382 00:20:47,560 --> 00:20:50,960 Speaker 3: or in fact, this focus on financial services. We know 383 00:20:51,000 --> 00:20:53,920 Speaker 3: that financial services is one out of the eight growth 384 00:20:54,160 --> 00:20:56,880 Speaker 3: areas that the government is focused on, but how much 385 00:20:56,920 --> 00:20:59,320 Speaker 3: are they really relying on financial services? It's sort of 386 00:20:59,359 --> 00:21:01,840 Speaker 3: an interesting quat, isn't it, in terms of what other 387 00:21:02,400 --> 00:21:05,879 Speaker 3: maybe smaller banks are concerned about the increase potentially in 388 00:21:05,920 --> 00:21:09,000 Speaker 3: capital requirements for smaller lenders, how big a difference would 389 00:21:09,040 --> 00:21:09,400 Speaker 3: that make. 390 00:21:09,480 --> 00:21:11,240 Speaker 12: Yeah, so, I guess one of the debates around ring 391 00:21:11,320 --> 00:21:15,400 Speaker 12: fencing has been is this is keeping it away of 392 00:21:15,840 --> 00:21:18,680 Speaker 12: restricting competition from smaller banks because it puts a cap 393 00:21:18,720 --> 00:21:21,719 Speaker 12: on their growth to some degree. Those smaller banks like 394 00:21:21,800 --> 00:21:24,520 Speaker 12: you know, Starling or One Savings Bank, they're kind of 395 00:21:24,600 --> 00:21:28,840 Speaker 12: much more worried about these kind of emrel capital requirements 396 00:21:28,880 --> 00:21:32,040 Speaker 12: which kick in sooner and are much more costly, very 397 00:21:32,119 --> 00:21:34,800 Speaker 12: quickly in terms of the amount of capital and and 398 00:21:34,840 --> 00:21:37,000 Speaker 12: sort of you know, loss absorbing debts, which is the 399 00:21:37,080 --> 00:21:39,879 Speaker 12: kind of capital that you have to issue as those banks, 400 00:21:39,960 --> 00:21:42,119 Speaker 12: so they would much rather see a change there, And 401 00:21:42,160 --> 00:21:43,920 Speaker 12: there is a kind of an idea I think that 402 00:21:44,280 --> 00:21:47,280 Speaker 12: maybe the point at which that kicks in might be 403 00:21:47,280 --> 00:21:49,480 Speaker 12: lifted as well currently from sort of fifteen to twenty 404 00:21:49,560 --> 00:21:53,600 Speaker 12: billion pounds of assets up towards that thirty five billion 405 00:21:53,640 --> 00:21:54,919 Speaker 12: where the ring fencing kicks in. 406 00:21:55,480 --> 00:21:59,080 Speaker 3: Okay, So that on regulation, Joe. In terms of other things, 407 00:21:59,160 --> 00:22:02,359 Speaker 3: that could also so feature in the next few days 408 00:22:02,400 --> 00:22:06,719 Speaker 3: a shakeup of the pension system, especially if auto enrollment. 409 00:22:06,840 --> 00:22:09,640 Speaker 3: I mean, pensions are such a major issue for the UK, 410 00:22:10,280 --> 00:22:14,480 Speaker 3: not enough savings, not enough good returns for investors. What 411 00:22:14,680 --> 00:22:16,000 Speaker 3: might a shake up look like? 412 00:22:16,440 --> 00:22:18,200 Speaker 11: Yeah, so I think the government would like to see 413 00:22:18,359 --> 00:22:21,040 Speaker 11: more money going into pensions, firstly so that more could 414 00:22:21,040 --> 00:22:23,399 Speaker 11: be invested in the economy. That'll be a growth story 415 00:22:23,440 --> 00:22:25,879 Speaker 11: for them, but also for us and our retirement savings 416 00:22:25,880 --> 00:22:27,720 Speaker 11: and do we have enough. So I think we could 417 00:22:27,800 --> 00:22:32,199 Speaker 11: see changes, as you mentioned, to the contribution levels for 418 00:22:32,680 --> 00:22:35,200 Speaker 11: what gets paid into pensions. So at the moment you 419 00:22:35,240 --> 00:22:38,119 Speaker 11: have the system where minimum contributions of eight percent by 420 00:22:38,119 --> 00:22:41,360 Speaker 11: employees only three percent by the employer, and there's some 421 00:22:42,480 --> 00:22:45,560 Speaker 11: talk about that three percent number perhaps going up. Now 422 00:22:45,840 --> 00:22:48,400 Speaker 11: Torsten Bell, the Pensions Minister, has said that the rates 423 00:22:48,440 --> 00:22:50,840 Speaker 11: won't change for this parliament, but there could be an announcement 424 00:22:50,760 --> 00:22:53,400 Speaker 11: that says we're looking at in the longer term. Could 425 00:22:53,440 --> 00:22:54,280 Speaker 11: that number change? 426 00:22:54,400 --> 00:22:54,520 Speaker 8: Now? 427 00:22:54,560 --> 00:22:57,560 Speaker 11: Businesses would be reluctant to that because it would mean 428 00:22:57,600 --> 00:22:59,399 Speaker 11: more costs for them if they had to pay more 429 00:22:59,400 --> 00:23:01,680 Speaker 11: into our pension, But it might be something that does 430 00:23:02,240 --> 00:23:04,800 Speaker 11: boost retirement savings, boost the economy. So I think that's 431 00:23:04,840 --> 00:23:07,320 Speaker 11: one to potentially look out for, Paul. 432 00:23:07,359 --> 00:23:10,240 Speaker 3: The city functions as part of a global financial system. 433 00:23:10,600 --> 00:23:13,760 Speaker 3: We're seeing really big changes in the US in lots 434 00:23:13,800 --> 00:23:17,560 Speaker 3: of ways. Is London keeping up? Some banks that I 435 00:23:17,640 --> 00:23:21,840 Speaker 3: speak to actually are very positive about positioning themselves in London, 436 00:23:22,040 --> 00:23:26,480 Speaker 3: the trading hub, the hours and so on. Should we 437 00:23:26,520 --> 00:23:28,920 Speaker 3: be Can we be optimistic and London keep up? 438 00:23:29,520 --> 00:23:29,720 Speaker 4: Yeah? 439 00:23:29,720 --> 00:23:32,040 Speaker 12: I mean there are you know, there's a whole lot 440 00:23:32,080 --> 00:23:34,960 Speaker 12: of issues surrounding this, obviously. I mean, I think the 441 00:23:35,119 --> 00:23:37,880 Speaker 12: risk with the debate that we're having in the UK 442 00:23:38,080 --> 00:23:40,959 Speaker 12: over financial services regulation and what we need to do 443 00:23:41,000 --> 00:23:44,040 Speaker 12: to kind of tweak things slightly to encourage growth, risks 444 00:23:44,080 --> 00:23:48,879 Speaker 12: being completely overtaken by a big deregulatory wave in the US. 445 00:23:48,920 --> 00:23:51,280 Speaker 12: I mean, I think in the City, the kind of 446 00:23:51,280 --> 00:23:55,200 Speaker 12: the long term debate and the issue that they want 447 00:23:55,200 --> 00:23:57,320 Speaker 12: the government to address with the Bank of England with 448 00:23:57,400 --> 00:24:01,960 Speaker 12: the FCA is one of you know, a very risk 449 00:24:02,000 --> 00:24:05,040 Speaker 12: averse kind of culture and approach to not only the 450 00:24:05,119 --> 00:24:07,480 Speaker 12: kind of rules we have, but how they are applied. 451 00:24:07,880 --> 00:24:10,160 Speaker 12: And they would love to see you a bit more 452 00:24:10,160 --> 00:24:14,040 Speaker 12: freedom and a bit more growth focus and competition focus 453 00:24:14,080 --> 00:24:17,240 Speaker 12: in the attitude of regulators. And there's signs that that's 454 00:24:17,240 --> 00:24:19,680 Speaker 12: starting to happen. The Bank of England is looking at 455 00:24:19,840 --> 00:24:23,000 Speaker 12: has already delayed, you know, stricter capital requirements for the 456 00:24:23,040 --> 00:24:26,240 Speaker 12: trading books of investment banks, and is looking at ways 457 00:24:26,280 --> 00:24:29,680 Speaker 12: to make the remaining capital requirements for banks a bit 458 00:24:29,720 --> 00:24:32,280 Speaker 12: more flexible so they could sort of operate at a 459 00:24:32,320 --> 00:24:35,200 Speaker 12: lower level of capital during times of crisis. 460 00:24:35,560 --> 00:24:37,639 Speaker 3: Thank you so much, Bloomberg's UK. I'ment to report to 461 00:24:37,680 --> 00:24:40,399 Speaker 3: j Mays and to our opinion columnists Paul J. Davies. 462 00:24:40,400 --> 00:24:43,040 Speaker 3: Thank you so much for your time. I'm Kroline hepgar 463 00:24:43,119 --> 00:24:45,600 Speaker 3: Here in London. You can catch us every weekday morning 464 00:24:45,600 --> 00:24:48,440 Speaker 3: for Blueberg Daybreak. Youre at beginning at six am in London. 465 00:24:48,720 --> 00:24:50,439 Speaker 3: That's one am on Wall Street. 466 00:24:50,880 --> 00:24:53,960 Speaker 2: Tom, thank you, Caroline, and coming up on Bloomberg Daybreak 467 00:24:53,960 --> 00:24:56,600 Speaker 2: weekend to look into the impact of US tariff policy 468 00:24:56,720 --> 00:25:00,560 Speaker 2: on the Japanese economy. I'm Tom Busby And this is Bloomberg. 469 00:25:11,720 --> 00:25:14,280 Speaker 2: This is Bloomberg Daybreak Weekend, our global look ahead at 470 00:25:14,280 --> 00:25:16,720 Speaker 2: the top stories for investors in the coming week. I'm 471 00:25:16,800 --> 00:25:19,400 Speaker 2: Tom Busby in New York. In the week ahead, we'll 472 00:25:19,400 --> 00:25:22,880 Speaker 2: get several key data points for the Japanese economy likely 473 00:25:22,960 --> 00:25:26,080 Speaker 2: to show the impact of US tariff policy. For more, 474 00:25:26,440 --> 00:25:28,800 Speaker 2: let's get to the host of the Daybreak Asia podcast, 475 00:25:29,000 --> 00:25:29,760 Speaker 2: Doug Krisner. 476 00:25:30,240 --> 00:25:33,639 Speaker 4: Tom, the Japanese economy was beginning to show signs of 477 00:25:33,760 --> 00:25:38,600 Speaker 4: vitality and inflation before President Trump unleashed his tariff policy, 478 00:25:38,840 --> 00:25:41,480 Speaker 4: and now the story in Japan seems to be about 479 00:25:41,560 --> 00:25:45,760 Speaker 4: economic uncertainty, especially since Washington and Tokyo are still trying 480 00:25:45,800 --> 00:25:48,320 Speaker 4: to reach a trade agreement. Now in the coming week, 481 00:25:48,720 --> 00:25:51,680 Speaker 4: we'll get the reading on Japanese core machine orders as 482 00:25:51,720 --> 00:25:56,040 Speaker 4: well as the print on industrial production plus trade figures 483 00:25:56,040 --> 00:25:58,280 Speaker 4: for the month of June. And to help me preview 484 00:25:58,320 --> 00:26:02,440 Speaker 4: these readings and the impact US tariffs are having, I'm 485 00:26:02,520 --> 00:26:07,879 Speaker 4: joined by Katya Dmitrieva, Bloomberg Asia Economy reporter. Katya is 486 00:26:07,880 --> 00:26:10,080 Speaker 4: based in Hong Kong. Thank you for making time to 487 00:26:10,160 --> 00:26:12,119 Speaker 4: chat with me. Can I ask you right out of 488 00:26:12,160 --> 00:26:15,080 Speaker 4: the gate, how dark is the cloud hanging over the 489 00:26:15,160 --> 00:26:17,480 Speaker 4: Japanese economy right now, well. 490 00:26:17,320 --> 00:26:20,199 Speaker 10: It's pretty dark right now. And if we were going 491 00:26:20,240 --> 00:26:22,760 Speaker 10: to take that metaphor further, I mean you're getting not 492 00:26:22,800 --> 00:26:26,240 Speaker 10: just storm clouds with thunder and lightning, because you have 493 00:26:26,720 --> 00:26:30,720 Speaker 10: an economy that for the past few years has been 494 00:26:30,760 --> 00:26:35,240 Speaker 10: trying to engineer inflation and has been fairly successful at 495 00:26:35,240 --> 00:26:37,520 Speaker 10: doing that. Right, they were in a period of deflation 496 00:26:37,720 --> 00:26:41,320 Speaker 10: and then pretty flat growth, prices started to perk up, 497 00:26:41,960 --> 00:26:45,640 Speaker 10: the Central Bank started to hike interest rates with planning 498 00:26:45,720 --> 00:26:49,320 Speaker 10: to continue to do that, and then enter President Donald 499 00:26:49,359 --> 00:26:53,919 Speaker 10: Trump in tariffs, and now the economic outlook is looking 500 00:26:54,000 --> 00:26:56,800 Speaker 10: a lot more uncertain. So they went from trying to 501 00:26:56,920 --> 00:27:01,439 Speaker 10: increase prices to now the risk is a technical recession 502 00:27:02,359 --> 00:27:06,640 Speaker 10: with two back to back quarters of negative growth, and 503 00:27:07,280 --> 00:27:11,040 Speaker 10: the reason for that is largely because of tariffs and 504 00:27:11,119 --> 00:27:15,399 Speaker 10: tariffs on autos in particular. Japan's number one market for 505 00:27:15,520 --> 00:27:18,480 Speaker 10: car exports is the US. It has been for some time, 506 00:27:19,160 --> 00:27:21,720 Speaker 10: and the twenty five percent tariffs that were added on 507 00:27:21,840 --> 00:27:26,280 Speaker 10: cars in April by the US government is hurting them already. 508 00:27:26,359 --> 00:27:30,040 Speaker 10: We actually saw signs of that recently, so Japan's automakers 509 00:27:30,760 --> 00:27:33,760 Speaker 10: cut their export prices to North America by a record amount. 510 00:27:33,920 --> 00:27:38,840 Speaker 10: So what that signals is that essentially producers are not 511 00:27:39,000 --> 00:27:41,600 Speaker 10: willing to face a decline in orders. They're trying to 512 00:27:41,680 --> 00:27:44,320 Speaker 10: keep the demand going and trying to remain competitive in 513 00:27:44,320 --> 00:27:47,520 Speaker 10: the US market by cutting their prices. But of course, 514 00:27:47,640 --> 00:27:52,240 Speaker 10: if they're cutting prices, that means other companies are cutting 515 00:27:52,440 --> 00:27:56,120 Speaker 10: their costs and prices along the chain, which means in 516 00:27:56,359 --> 00:28:01,199 Speaker 10: Japan overall inflation might actually face some dampening here. So 517 00:28:01,600 --> 00:28:02,640 Speaker 10: it's a huge risk. 518 00:28:02,720 --> 00:28:05,480 Speaker 4: So when I'm listening to you, I'm thinking of Japan Inc. 519 00:28:05,560 --> 00:28:07,600 Speaker 4: And the degree to which margins are going to be 520 00:28:07,680 --> 00:28:08,320 Speaker 4: under pressure. 521 00:28:08,440 --> 00:28:12,160 Speaker 10: Yeah. Absolutely, I mean, this is not good for Japanese companies, 522 00:28:12,359 --> 00:28:17,439 Speaker 10: and they're hoping that President Trump and Prime Minister Ishiba 523 00:28:17,480 --> 00:28:21,439 Speaker 10: can sort of reach an agreement on trade. But the 524 00:28:21,520 --> 00:28:24,240 Speaker 10: signals we've gotten from the Japanese government is very much 525 00:28:24,720 --> 00:28:27,720 Speaker 10: we'd rather be patient. We'd rather wait for the right deal, 526 00:28:28,160 --> 00:28:31,680 Speaker 10: even if it means that we may initially get hit 527 00:28:31,720 --> 00:28:33,560 Speaker 10: with tariffs. But we don't want to rush into this 528 00:28:33,680 --> 00:28:36,640 Speaker 10: because they want to protect their domestic sector as well. 529 00:28:36,720 --> 00:28:39,640 Speaker 10: They want to ensure not just that they can continue 530 00:28:39,640 --> 00:28:42,360 Speaker 10: to sell cars and other goods, into the US. They 531 00:28:42,360 --> 00:28:45,480 Speaker 10: want to make sure that their agriculture sector, for example, 532 00:28:45,560 --> 00:28:50,400 Speaker 10: doesn't get slammed by US agricultural goods if they change 533 00:28:50,400 --> 00:28:52,960 Speaker 10: those non tariff barriers, which of course Trump wants. Trump 534 00:28:53,000 --> 00:28:57,520 Speaker 10: wants to have more US exports and support US farmers. 535 00:28:57,560 --> 00:28:59,600 Speaker 10: So it's they're kind of at an impasse right now. 536 00:28:59,640 --> 00:29:02,080 Speaker 10: And the difficult thing is, and the scary thing is 537 00:29:02,120 --> 00:29:06,719 Speaker 10: for other countries, is that Japan has been far and 538 00:29:06,760 --> 00:29:09,640 Speaker 10: above one of the most active countries when it comes 539 00:29:09,680 --> 00:29:13,160 Speaker 10: to trade negotiations. So they have flown their trade team 540 00:29:13,440 --> 00:29:16,120 Speaker 10: to the US at least seven times, and we ran 541 00:29:16,160 --> 00:29:19,280 Speaker 10: the calculations for how many hours that is in the 542 00:29:19,320 --> 00:29:21,680 Speaker 10: air and how many miles that is. So they're far 543 00:29:21,720 --> 00:29:25,000 Speaker 10: and above every other country in that regard. And if 544 00:29:25,080 --> 00:29:28,080 Speaker 10: even they can't reach an agreement and avoid for them 545 00:29:28,120 --> 00:29:31,840 Speaker 10: it would be twenty five percent tariffs as of August first, 546 00:29:32,280 --> 00:29:32,920 Speaker 10: then who. 547 00:29:32,760 --> 00:29:35,800 Speaker 4: Can On top of that, Japan is the largest investor 548 00:29:35,840 --> 00:29:38,080 Speaker 4: in the US. It has been for the past five years. 549 00:29:38,200 --> 00:29:41,280 Speaker 4: It's also a crucial security Ally, I would think that 550 00:29:41,320 --> 00:29:43,680 Speaker 4: there is a level of good will that's a part 551 00:29:43,680 --> 00:29:44,640 Speaker 4: of this story as well. 552 00:29:45,400 --> 00:29:47,760 Speaker 10: There should be, And it's a similar case to South 553 00:29:47,840 --> 00:29:50,840 Speaker 10: Korea and to Taiwan as well. I mean, these are 554 00:29:50,880 --> 00:29:54,680 Speaker 10: allies in Asia of Americas for some time, and that's 555 00:29:54,680 --> 00:29:59,960 Speaker 10: something that the Prime Minister and trade delegations have flagged 556 00:30:00,120 --> 00:30:02,480 Speaker 10: time and time again, both in meetings with the administration 557 00:30:02,560 --> 00:30:05,400 Speaker 10: and also publicly and in the media, is that there 558 00:30:05,520 --> 00:30:07,600 Speaker 10: is a lot of common ground and they do hope 559 00:30:07,600 --> 00:30:11,800 Speaker 10: that they can reach some sort of resolution. And the data, 560 00:30:11,840 --> 00:30:14,920 Speaker 10: at least for Japan's side, is really going to underscore 561 00:30:14,960 --> 00:30:18,720 Speaker 10: that next week, because you had mentioned we're getting some 562 00:30:18,760 --> 00:30:22,600 Speaker 10: of the industrial production data that's probably going to slow down. 563 00:30:23,000 --> 00:30:26,720 Speaker 10: We're getting producer prices and consumer prices. This is something 564 00:30:26,720 --> 00:30:29,520 Speaker 10: at the Central Bank and the government really wants to 565 00:30:29,560 --> 00:30:32,360 Speaker 10: see perking up, and it's it's probably going to slow 566 00:30:32,400 --> 00:30:36,160 Speaker 10: again for CPI. It's going to probably the fourth month 567 00:30:36,160 --> 00:30:39,680 Speaker 10: in a row. And then we also have export. Both 568 00:30:39,680 --> 00:30:42,400 Speaker 10: of those fell in May, and it sets up this 569 00:30:42,520 --> 00:30:48,400 Speaker 10: interesting dichotomy between Southeast Asia and North Asia because South Korea, 570 00:30:48,640 --> 00:30:52,040 Speaker 10: Japan we've seen a slowing of exports, but Southeast Asia 571 00:30:52,520 --> 00:30:57,080 Speaker 10: has really accelerated because a lot of the stuff essentially 572 00:30:57,160 --> 00:31:00,360 Speaker 10: from China is going through there onto the US. That'll 573 00:31:00,400 --> 00:31:02,520 Speaker 10: be something interesting to watch in the data as well. 574 00:31:02,560 --> 00:31:06,120 Speaker 10: But really next week, I think the message from Japanese 575 00:31:06,200 --> 00:31:09,040 Speaker 10: data is going to be they need to reach an agreement. 576 00:31:09,080 --> 00:31:11,960 Speaker 10: They need to reach an agreement soon, otherwise their economy 577 00:31:12,000 --> 00:31:12,480 Speaker 10: is at risk. 578 00:31:12,680 --> 00:31:16,520 Speaker 4: So any notion of the Bank of Japan positioning itself 579 00:31:16,560 --> 00:31:20,280 Speaker 4: to begin to hike interest rates is off the table 580 00:31:20,320 --> 00:31:22,560 Speaker 4: at this point. I don't see a way for the 581 00:31:22,560 --> 00:31:24,880 Speaker 4: BOJ to be able to execute on that mission. 582 00:31:25,080 --> 00:31:30,080 Speaker 10: It'll be really tough, especially if there is an economic 583 00:31:30,880 --> 00:31:34,120 Speaker 10: even if it's a technical recession, Even if policymakers can 584 00:31:34,160 --> 00:31:36,560 Speaker 10: sort of look through some of this data as short 585 00:31:36,640 --> 00:31:40,440 Speaker 10: term fluctuations related to ongoing trade talks. I mean, it's 586 00:31:40,520 --> 00:31:43,320 Speaker 10: really hard to think of a world where as a 587 00:31:43,360 --> 00:31:47,920 Speaker 10: central bank, you high rates into a recession or during 588 00:31:47,960 --> 00:31:51,040 Speaker 10: a recession. Just doesn't happen, and they only have to 589 00:31:51,040 --> 00:31:53,440 Speaker 10: look around the world, to the Federal Reserve, to the 590 00:31:53,560 --> 00:31:59,640 Speaker 10: US to see the exact same uncertainty over there minutes 591 00:31:59,680 --> 00:32:02,760 Speaker 10: we're really least this week, and it clearly shows there's 592 00:32:02,800 --> 00:32:06,680 Speaker 10: a debate and there's uncertainty about whether what to do 593 00:32:06,760 --> 00:32:11,160 Speaker 10: with interest rates because the economy is looking like they 594 00:32:11,160 --> 00:32:15,239 Speaker 10: can start taking action, but tariffs are showing that there 595 00:32:15,280 --> 00:32:17,640 Speaker 10: might be some economic uncertainty and they might need to 596 00:32:18,280 --> 00:32:21,720 Speaker 10: potentially cut interest rates. So there's that cut versus raise 597 00:32:22,400 --> 00:32:27,000 Speaker 10: debate happening across central banks globally, and what it likely 598 00:32:27,080 --> 00:32:30,600 Speaker 10: means is just holding until you get some clarity and 599 00:32:30,640 --> 00:32:35,280 Speaker 10: then looking back in hindsight and saying okay, you know, either' 600 00:32:35,320 --> 00:32:37,840 Speaker 10: patting yourselves on the back or saying, ooh, we moved 601 00:32:37,840 --> 00:32:39,720 Speaker 10: a bit too slow on that. I mean, it's not 602 00:32:39,800 --> 00:32:41,080 Speaker 10: a great situation. 603 00:32:40,880 --> 00:32:44,600 Speaker 4: Right being behind the curve rather than being prudent and 604 00:32:44,680 --> 00:32:47,959 Speaker 4: trying to wait for the data to drive the decision making. 605 00:32:48,280 --> 00:32:50,400 Speaker 4: One of the debates you mentioned the Fed minutes as 606 00:32:50,440 --> 00:32:53,000 Speaker 4: to whether or not the East tariffs are inflationary. But 607 00:32:53,040 --> 00:32:56,680 Speaker 4: I'm really curious about what it means for the political 608 00:32:56,720 --> 00:32:59,760 Speaker 4: future of Prime minister issue of the situation that Japan 609 00:33:00,160 --> 00:33:03,600 Speaker 4: in right now vis a VI, these tariffs that have 610 00:33:03,640 --> 00:33:06,720 Speaker 4: been put in place, and the fact that maybe we're 611 00:33:06,720 --> 00:33:09,400 Speaker 4: going to see a tariff freight that is permanent, much 612 00:33:09,440 --> 00:33:12,280 Speaker 4: higher than the one that exists now, is this in 613 00:33:12,320 --> 00:33:14,480 Speaker 4: any way a political setback for Ishiba. 614 00:33:14,720 --> 00:33:17,960 Speaker 10: It's a political setback in the sense that if we 615 00:33:18,000 --> 00:33:20,640 Speaker 10: see the impact of the tariffs roll through into an 616 00:33:20,680 --> 00:33:26,560 Speaker 10: economic crisis in addition to consumers having to pay a 617 00:33:26,600 --> 00:33:29,400 Speaker 10: lot more for a staple. You know, I've seen this 618 00:33:29,520 --> 00:33:33,480 Speaker 10: called the rice election, for example, because rice prices have 619 00:33:33,760 --> 00:33:37,360 Speaker 10: soared this year in Japan and there have been lineups 620 00:33:37,360 --> 00:33:39,880 Speaker 10: and the government had to sort of unleash their strategic 621 00:33:39,960 --> 00:33:42,600 Speaker 10: reserves of rice. And you know, in case listeners don't know, 622 00:33:42,760 --> 00:33:44,680 Speaker 10: rice is a food staple. It's sort of like if 623 00:33:44,680 --> 00:33:48,200 Speaker 10: the same thing happened with bread prices in North America. 624 00:33:48,400 --> 00:33:50,920 Speaker 10: There's been a lot of pushback on that. The government 625 00:33:50,960 --> 00:33:52,960 Speaker 10: has been very keen to come out in front of 626 00:33:52,960 --> 00:33:56,200 Speaker 10: that and do as much as they can to lower prices. 627 00:33:56,320 --> 00:33:59,120 Speaker 10: And also, frankly, this is why they want to protect 628 00:33:59,160 --> 00:34:03,280 Speaker 10: their agriculturals from imports abroad. They want to protect their 629 00:34:03,320 --> 00:34:07,000 Speaker 10: farmers feeble to continue to produce rice and other agricultural goods. 630 00:34:07,080 --> 00:34:09,120 Speaker 4: I'm uncertain as to whether or not the impact of 631 00:34:09,160 --> 00:34:13,240 Speaker 4: these tariffs on the Japanese economy is having any effect 632 00:34:13,280 --> 00:34:15,320 Speaker 4: on the way in which people in Japan are feeling 633 00:34:15,400 --> 00:34:18,120 Speaker 4: about the United States. Katya, you and I have talked 634 00:34:18,160 --> 00:34:21,960 Speaker 4: in the past about how this trade war between China 635 00:34:22,000 --> 00:34:24,960 Speaker 4: and the US is changing the attitude of people in 636 00:34:25,040 --> 00:34:26,480 Speaker 4: China toward the United States. 637 00:34:26,560 --> 00:34:30,440 Speaker 10: Right, There's definitely been a visceral reaction on social media 638 00:34:31,320 --> 00:34:31,920 Speaker 10: both ways. 639 00:34:31,960 --> 00:34:32,480 Speaker 8: In China. 640 00:34:32,560 --> 00:34:35,800 Speaker 10: You know, you have a lot of netizines basically saying, 641 00:34:35,840 --> 00:34:39,120 Speaker 10: you know, Trump is making China great again because you know, 642 00:34:39,239 --> 00:34:42,120 Speaker 10: China just has to sit back and wait for the 643 00:34:42,239 --> 00:34:46,080 Speaker 10: US to isolate itself and China can form all these 644 00:34:46,120 --> 00:34:48,399 Speaker 10: trade agreements and trade deals and come out on top. 645 00:34:48,480 --> 00:34:51,440 Speaker 10: And then you have the other half basically coming out 646 00:34:51,440 --> 00:34:54,759 Speaker 10: against the US and against Trump in this because of 647 00:34:54,800 --> 00:34:57,440 Speaker 10: the economic pain it could have in China. I think 648 00:34:57,480 --> 00:35:01,560 Speaker 10: in Japan, the bigger issue, to be honest, among people 649 00:35:01,680 --> 00:35:04,960 Speaker 10: has been the currency and the impact that that's had 650 00:35:05,000 --> 00:35:10,360 Speaker 10: on tourism and on more Americans and Westerners living in 651 00:35:10,440 --> 00:35:13,840 Speaker 10: Japan and also traveling through Japan. There's been a huge 652 00:35:13,880 --> 00:35:16,000 Speaker 10: pushback domestically against that. 653 00:35:16,320 --> 00:35:19,360 Speaker 4: So do you have a sense of this tension between 654 00:35:19,400 --> 00:35:23,680 Speaker 4: the US and Japan having an impact on Japanese relations 655 00:35:23,719 --> 00:35:27,200 Speaker 4: with China? Is that at all possible that Japan begins 656 00:35:27,239 --> 00:35:31,400 Speaker 4: to perhaps look for other markets or to fortify the 657 00:35:31,480 --> 00:35:34,600 Speaker 4: relationship with China in a way where that trading relationship 658 00:35:34,680 --> 00:35:36,560 Speaker 4: is maybe improved to some extent. 659 00:35:37,040 --> 00:35:40,719 Speaker 10: Yeah, there is that happening for sure. As the US 660 00:35:40,760 --> 00:35:45,120 Speaker 10: continues to isolate itself and issue tariffs. As a country, 661 00:35:45,280 --> 00:35:47,959 Speaker 10: you're just going to look to do business with other 662 00:35:48,280 --> 00:35:51,520 Speaker 10: major economies, and especially if they're in your neighborhood. That 663 00:35:51,600 --> 00:35:55,360 Speaker 10: definitely helps, you know. There was a former South Korean 664 00:35:55,640 --> 00:35:58,680 Speaker 10: official that I was speaking with a few months ago 665 00:35:58,719 --> 00:36:01,880 Speaker 10: who made this exact point, who said, you know, if 666 00:36:02,080 --> 00:36:06,560 Speaker 10: your previous friend becomes your enemy, you're going to look 667 00:36:06,560 --> 00:36:09,279 Speaker 10: for other friends. You're going to look for other people 668 00:36:09,280 --> 00:36:11,640 Speaker 10: that you can form agreements with. And it's true that 669 00:36:11,920 --> 00:36:15,120 Speaker 10: the Asian region has the most integrated trade of any 670 00:36:15,160 --> 00:36:18,120 Speaker 10: other region in the world. So more than fifty percent 671 00:36:18,160 --> 00:36:20,759 Speaker 10: of trade agreements are within the region, and so a 672 00:36:20,760 --> 00:36:24,239 Speaker 10: lot of the growth in trade and exports and imports 673 00:36:24,280 --> 00:36:28,320 Speaker 10: and demand frankly comes from within the region. The issue 674 00:36:28,360 --> 00:36:32,000 Speaker 10: with that, unfortunately right now, is that China's economy isn't 675 00:36:32,080 --> 00:36:34,480 Speaker 10: doing as well as it was a few years ago 676 00:36:34,560 --> 00:36:38,839 Speaker 10: pre pandemic. So that's one consideration that, yes they have 677 00:36:39,440 --> 00:36:42,600 Speaker 10: a huge population, Yes they have consumers with a lot 678 00:36:42,640 --> 00:36:45,799 Speaker 10: of savings, there's still not unleashing those savings. And so 679 00:36:45,880 --> 00:36:48,800 Speaker 10: if you bet on the Chinese consumer and the Chinese economy, 680 00:36:49,320 --> 00:36:52,440 Speaker 10: you might kind of end up in a similar place 681 00:36:53,480 --> 00:36:55,560 Speaker 10: as dealing with tariffs on the US. In other words, 682 00:36:55,600 --> 00:36:58,080 Speaker 10: you're not going to see the same amount of growth. 683 00:36:58,160 --> 00:37:01,080 Speaker 10: So there are a few considerations on both sides. But 684 00:37:01,120 --> 00:37:03,239 Speaker 10: of course we've seen more trade agreements made. You know, 685 00:37:03,360 --> 00:37:06,920 Speaker 10: China has traveled through Latin America, they did the Southeast 686 00:37:06,920 --> 00:37:10,640 Speaker 10: Asia tour, meeting with leaders, so we've definitely seen those 687 00:37:11,160 --> 00:37:14,440 Speaker 10: ties grow closer. The question is how serious is it 688 00:37:14,480 --> 00:37:18,440 Speaker 10: and is China willing to make changes to its own market, 689 00:37:18,560 --> 00:37:23,520 Speaker 10: especially in services and access of other countries' service providers 690 00:37:23,560 --> 00:37:25,680 Speaker 10: within China is one of the main issues. So if 691 00:37:25,680 --> 00:37:29,080 Speaker 10: they can tweak that, great, but it remains to be 692 00:37:29,120 --> 00:37:30,440 Speaker 10: seen how serious they are about it. 693 00:37:30,520 --> 00:37:33,040 Speaker 4: Katya, we've certainly covered a lot of ground. Thanks so 694 00:37:33,160 --> 00:37:37,239 Speaker 4: very much, Bloomberg's Katya Dimitrieva. Katya is our Asia Economy 695 00:37:37,320 --> 00:37:40,520 Speaker 4: reporter based in Hong Kong. I'm Doug Kristner. You can 696 00:37:40,560 --> 00:37:44,240 Speaker 4: catch us weekdays for the Daybreak Asia podcast. It's available 697 00:37:44,239 --> 00:37:46,480 Speaker 4: wherever you get your podcast. Tom. 698 00:37:46,920 --> 00:37:49,120 Speaker 2: Thank you, Doug, and that does it for this edition 699 00:37:49,160 --> 00:37:52,120 Speaker 2: of Bloomberg day Break Weekend. Join us again Monday morning 700 00:37:52,160 --> 00:37:54,239 Speaker 2: at five am Wall Street Time. For the latest on 701 00:37:54,360 --> 00:37:57,160 Speaker 2: markets overseas and the news you need to start your day. 702 00:37:57,560 --> 00:38:01,000 Speaker 2: I'm Tom Busby. Stay with US. Stories and global business 703 00:38:01,040 --> 00:38:02,799 Speaker 2: headlines are coming up right now.