1 00:00:00,240 --> 00:00:07,840 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:09,960 --> 00:00:12,360 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:12,360 --> 00:00:14,800 Speaker 2: the top stories in the coming week from our Daybreak 4 00:00:14,800 --> 00:00:17,200 Speaker 2: anchors all around the world. Straight ahead on the program, 5 00:00:17,280 --> 00:00:19,959 Speaker 2: earnings from some of the US's biggest retailers and what 6 00:00:20,120 --> 00:00:23,480 Speaker 2: impact they may already be seeing from the Trump tariffs. 7 00:00:23,680 --> 00:00:26,480 Speaker 2: I'm Tom Busby in New York. I'm Stephen Carolyn London. 8 00:00:26,560 --> 00:00:29,800 Speaker 3: For we're looking at the challenges facing European banking consolidation 9 00:00:29,960 --> 00:00:32,480 Speaker 3: out of an upcoming shareholder Folks in Italy. 10 00:00:32,240 --> 00:00:34,120 Speaker 4: I'm Doug Prisner with a look at what we can 11 00:00:34,200 --> 00:00:37,320 Speaker 4: expect from a slew of Japanese economic data in the 12 00:00:37,320 --> 00:00:37,960 Speaker 4: week ahead. 13 00:00:39,159 --> 00:00:43,159 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 14 00:00:43,240 --> 00:00:46,920 Speaker 1: eleven three year, New York, Bloomberg ninety nine to one, Washington, DC, 15 00:00:47,479 --> 00:00:52,479 Speaker 1: Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, Syria, 16 00:00:52,560 --> 00:00:56,240 Speaker 1: SXM one twenty one, and around the world on Bloomberg Radio, 17 00:00:56,320 --> 00:00:58,480 Speaker 1: dot Com and the Bloomberg Business App. 18 00:01:03,000 --> 00:01:04,840 Speaker 2: Well, good day to you. I'm Tom Busby, and we 19 00:01:04,920 --> 00:01:08,399 Speaker 2: begin today's program with a slumping US housing market this week, 20 00:01:08,440 --> 00:01:11,600 Speaker 2: though some key data including housing starts and existing home 21 00:01:11,640 --> 00:01:14,720 Speaker 2: sales for July, also earnings from the nation's biggest home 22 00:01:14,760 --> 00:01:17,680 Speaker 2: improvement chains, and what those numbers could tell us about 23 00:01:17,720 --> 00:01:20,559 Speaker 2: the housing market. For more, we're joined by Drew Redding, 24 00:01:20,640 --> 00:01:24,520 Speaker 2: Bloomberg Intelligence US homebuilding analyst. Drew, thank you so much 25 00:01:24,600 --> 00:01:27,520 Speaker 2: for being with us. We know all the usual suspects, 26 00:01:27,520 --> 00:01:30,840 Speaker 2: sky high home prices, mortgage rates now just under seven percent. 27 00:01:30,880 --> 00:01:34,200 Speaker 2: Amid those challenges, let's start with what do you expect 28 00:01:34,240 --> 00:01:36,800 Speaker 2: to see in the July housing starts number? 29 00:01:37,040 --> 00:01:38,840 Speaker 5: Yeah, you hit the nail on the head. You know, 30 00:01:38,880 --> 00:01:41,679 Speaker 5: we think that housing starts will come on their further pressure. 31 00:01:42,880 --> 00:01:45,560 Speaker 5: Through one half. We're down about one percent over last year, 32 00:01:45,560 --> 00:01:48,640 Speaker 5: and the weakness has really come from the single family side. 33 00:01:48,920 --> 00:01:52,320 Speaker 5: Single family starts are down about seven percent year to date. 34 00:01:52,720 --> 00:01:56,120 Speaker 5: Why multi family units are up seventeen percent. You know, 35 00:01:56,200 --> 00:01:58,440 Speaker 5: given what we've heard from the builders, we expect that 36 00:01:58,520 --> 00:02:01,360 Speaker 5: we'll continue to see a poolback in single family production 37 00:02:01,640 --> 00:02:04,960 Speaker 5: through the remainder of the year. Now, remember, the public 38 00:02:04,960 --> 00:02:08,480 Speaker 5: builders account for roughly fifty percent of industry volumes, and 39 00:02:08,520 --> 00:02:12,280 Speaker 5: what they've been telling us almost universally, is that they're 40 00:02:12,320 --> 00:02:14,840 Speaker 5: limiting their pace of starts as they look to match 41 00:02:15,080 --> 00:02:18,120 Speaker 5: production with demand. So that's a big piece of the 42 00:02:18,160 --> 00:02:20,480 Speaker 5: pie that we know is going to slow down in 43 00:02:20,520 --> 00:02:23,080 Speaker 5: the coming months. If you look at the inventory levels 44 00:02:23,120 --> 00:02:25,240 Speaker 5: in the new home market, we're at the highest since 45 00:02:25,280 --> 00:02:27,840 Speaker 5: two thousand and seven, and a lot of that is 46 00:02:27,919 --> 00:02:30,959 Speaker 5: under construction or completed inventory. So there's really no incentive 47 00:02:30,960 --> 00:02:34,120 Speaker 5: for builders to keep adding new supply until they start 48 00:02:34,160 --> 00:02:36,760 Speaker 5: to clear out some of that excess spec inventory. 49 00:02:36,960 --> 00:02:38,600 Speaker 2: And how are they going to clear that out? What 50 00:02:38,680 --> 00:02:40,880 Speaker 2: incentives do they have for would be buyers. 51 00:02:41,320 --> 00:02:44,000 Speaker 5: I think everybody understands at this point just how aggressive 52 00:02:44,000 --> 00:02:46,680 Speaker 5: the builders have been in their use of sales incentives. 53 00:02:47,320 --> 00:02:49,880 Speaker 5: You know, what they use is going to depend on 54 00:02:50,000 --> 00:02:52,560 Speaker 5: the buyer type. Typically, you'll see first time or entry 55 00:02:52,600 --> 00:02:55,480 Speaker 5: level home buyers take the mortgage rate buydown. That's the 56 00:02:55,520 --> 00:02:59,200 Speaker 5: predominant incentive out there in the market. But you do see, 57 00:02:59,560 --> 00:03:01,639 Speaker 5: you know, some buyers on the higher end will choose 58 00:03:01,680 --> 00:03:05,920 Speaker 5: to take some type of you know, options in the 59 00:03:05,960 --> 00:03:09,079 Speaker 5: design studio, maybe some structural options, or help with a 60 00:03:09,760 --> 00:03:12,720 Speaker 5: down payment or something like that. But primarily what we're 61 00:03:12,760 --> 00:03:15,240 Speaker 5: seeing is the use of mortgage rate buydowns. Is that's 62 00:03:15,320 --> 00:03:18,520 Speaker 5: really what's eating into builders' margins right now. We've heard 63 00:03:18,520 --> 00:03:21,360 Speaker 5: from a number of the builders during an earning saying 64 00:03:21,360 --> 00:03:24,280 Speaker 5: that they expect that incentives aren't only going to remain 65 00:03:24,320 --> 00:03:25,960 Speaker 5: the same, they think they're actually going to take up 66 00:03:25,960 --> 00:03:27,960 Speaker 5: a little bit higher in the second half of the year. 67 00:03:28,040 --> 00:03:30,640 Speaker 5: So we'll see how that plays out with rates coming 68 00:03:30,680 --> 00:03:33,960 Speaker 5: in a little bit over the last several weeks, but 69 00:03:34,120 --> 00:03:36,480 Speaker 5: certainly incentives are the thing to watch out for in 70 00:03:36,520 --> 00:03:38,440 Speaker 5: the second half of the builders. 71 00:03:38,120 --> 00:03:41,400 Speaker 2: Well, and are those the high prices and the elevated 72 00:03:41,520 --> 00:03:44,920 Speaker 2: rates that are making home sales so difficult. Is it 73 00:03:45,040 --> 00:03:48,960 Speaker 2: pushing more people at all income levels to rent instead 74 00:03:48,960 --> 00:03:51,200 Speaker 2: of buy right now? Are they waiting it out? 75 00:03:51,600 --> 00:03:55,160 Speaker 5: Yeah, certainly. You know, we've seen more demand on the 76 00:03:55,160 --> 00:03:57,360 Speaker 5: rental side of the business. You have rents starting to 77 00:03:57,400 --> 00:03:59,720 Speaker 5: moderate a little bit with some of the supply that's 78 00:03:59,760 --> 00:04:02,560 Speaker 5: come into the market. We had some data come out 79 00:04:02,600 --> 00:04:05,920 Speaker 5: recently on household formation and it was driven exclusively by 80 00:04:06,000 --> 00:04:09,200 Speaker 5: renner households. And as you mentioned, it's the rates and 81 00:04:09,240 --> 00:04:12,840 Speaker 5: it's the prices that are pushing people out of home ownership. 82 00:04:13,080 --> 00:04:14,920 Speaker 5: So you know, rates could come down a little bit. 83 00:04:14,920 --> 00:04:17,719 Speaker 5: We think it'll help the marginal buyer, but home prices 84 00:04:17,760 --> 00:04:19,640 Speaker 5: are still fifty percent higher than they were at the 85 00:04:19,680 --> 00:04:22,120 Speaker 5: end of twenty nineteen. So we think you really need 86 00:04:22,160 --> 00:04:25,320 Speaker 5: a combination of lower rates and maybe prices to come 87 00:04:25,360 --> 00:04:28,160 Speaker 5: down a little bit along with some income growth in 88 00:04:28,240 --> 00:04:30,440 Speaker 5: order to get the housing market moving a little bit better. 89 00:04:30,640 --> 00:04:32,880 Speaker 2: And that goes for the existing home sales as well. 90 00:04:32,960 --> 00:04:36,680 Speaker 2: Same thing, the elevated prices, but they are seeing a 91 00:04:36,680 --> 00:04:41,039 Speaker 2: little more inventory come on the market though for existing homes, right, yeah, 92 00:04:41,080 --> 00:04:41,360 Speaker 2: So we. 93 00:04:41,320 --> 00:04:44,040 Speaker 5: Think with the inventory that's come on the market, we're 94 00:04:44,080 --> 00:04:46,920 Speaker 5: up about twenty five percent year every year and now 95 00:04:46,960 --> 00:04:50,400 Speaker 5: we're within somewhere around ten percent of twenty nineteen levels. 96 00:04:50,760 --> 00:04:52,640 Speaker 5: We think that could help with volumes, but we think 97 00:04:52,640 --> 00:04:55,400 Speaker 5: that it's going to come at the expense of prices. 98 00:04:55,440 --> 00:04:58,320 Speaker 5: So home prices have already start to moderate on a 99 00:04:58,400 --> 00:05:00,520 Speaker 5: year of year pace. If you look at some of 100 00:05:00,520 --> 00:05:03,120 Speaker 5: the biggest markets in the country, we're already down your 101 00:05:03,279 --> 00:05:06,200 Speaker 5: year in terms of prices. So we think that'll continue 102 00:05:06,240 --> 00:05:08,400 Speaker 5: to play out where the existing home market will see 103 00:05:08,400 --> 00:05:12,240 Speaker 5: some volume gains, but you're gonna see prices come down 104 00:05:12,240 --> 00:05:12,720 Speaker 5: a little bit. 105 00:05:13,040 --> 00:05:15,320 Speaker 2: The Fed's next policy meeting just a few weeks away, 106 00:05:15,400 --> 00:05:19,159 Speaker 2: Wall Street pretty much expecting policymakers to lower their benchmark 107 00:05:19,240 --> 00:05:21,880 Speaker 2: lending rate for the first time this year. But what 108 00:05:21,920 --> 00:05:24,560 Speaker 2: would that mean for housing and what would that mean 109 00:05:24,600 --> 00:05:27,240 Speaker 2: for Home Deep Bowl and Low's, which report their latest 110 00:05:27,279 --> 00:05:28,760 Speaker 2: earnings this coming week. 111 00:05:28,920 --> 00:05:30,680 Speaker 5: Yeah, good question. I mean, all you have to do 112 00:05:30,760 --> 00:05:32,880 Speaker 5: is look at the builder stocks to see kind of 113 00:05:32,920 --> 00:05:35,279 Speaker 5: some of the enthusiasm that's out there in terms of 114 00:05:35,320 --> 00:05:38,680 Speaker 5: the potential for FED rate cut. What you have to 115 00:05:38,720 --> 00:05:42,760 Speaker 5: remember is though, that mortgage rates have probably largely already 116 00:05:42,760 --> 00:05:45,760 Speaker 5: priced in any reduction by the FED. So I wouldn't 117 00:05:45,800 --> 00:05:48,960 Speaker 5: expect to see a significantly leg lower mortgage rates just 118 00:05:49,000 --> 00:05:52,719 Speaker 5: from the FED cut. So, you know, mortgage rates have 119 00:05:52,800 --> 00:05:55,839 Speaker 5: come in over fifty basis points. We're at about six 120 00:05:55,880 --> 00:05:59,080 Speaker 5: and a half percent now compared to over seven just 121 00:05:59,640 --> 00:06:03,640 Speaker 5: back in you know, the beginning of July, so we've 122 00:06:03,640 --> 00:06:06,360 Speaker 5: certainly made some significant progress in terms of what that 123 00:06:06,400 --> 00:06:10,200 Speaker 5: means for the home improvement space in Home Depot and Lows. 124 00:06:10,680 --> 00:06:12,920 Speaker 5: You know, one of the big areas of concern has 125 00:06:13,000 --> 00:06:16,640 Speaker 5: been the weakness in big ticket discretionary spending, so think 126 00:06:16,640 --> 00:06:21,600 Speaker 5: to things like kitchens and bathroom models, flooring projects. These 127 00:06:21,640 --> 00:06:24,640 Speaker 5: are things that typically tend to be financed so with 128 00:06:24,760 --> 00:06:26,880 Speaker 5: rates having been as high as they are, we've seen 129 00:06:26,920 --> 00:06:30,320 Speaker 5: people put off those purchasing decisions, you know, so we 130 00:06:30,480 --> 00:06:32,680 Speaker 5: again we think just like it'll help home sales on 131 00:06:32,720 --> 00:06:34,880 Speaker 5: the margin, I think you'll see a little bit more 132 00:06:34,920 --> 00:06:38,479 Speaker 5: of refinancing activity with rates in the in the you know, 133 00:06:38,640 --> 00:06:41,360 Speaker 5: mid to low six percent range, which could on the 134 00:06:41,360 --> 00:06:44,400 Speaker 5: margin spur some of that big ticket spending. And you know, 135 00:06:44,440 --> 00:06:46,839 Speaker 5: when that does start to come back, we think that 136 00:06:47,040 --> 00:06:49,360 Speaker 5: some of the investments home Depot and Lows have made 137 00:06:49,360 --> 00:06:52,600 Speaker 5: over the last couple of years despite this market weakness, 138 00:06:52,920 --> 00:06:54,880 Speaker 5: will really put them in a good position for growth. 139 00:06:55,120 --> 00:06:57,400 Speaker 2: Well, hell, let's hope for good news. New home construction 140 00:06:57,480 --> 00:07:00,240 Speaker 2: numbers for July out on Tuesday, existing home sales for 141 00:07:00,320 --> 00:07:03,920 Speaker 2: that same month on Thursday, Home Depot earnings on Tuesday, 142 00:07:03,960 --> 00:07:07,799 Speaker 2: Lows on Wednesday, our thanks to Drew Redding Bloomberg Intelligence 143 00:07:07,960 --> 00:07:11,200 Speaker 2: US home building analysts. We move next to more corporate 144 00:07:11,200 --> 00:07:14,320 Speaker 2: earnings coming this week from two of the nation's biggest retailers, 145 00:07:14,400 --> 00:07:19,000 Speaker 2: Walmart and Target. With inflation still a worry, are Americans 146 00:07:19,000 --> 00:07:22,120 Speaker 2: spending and are they spending at those stores? And have 147 00:07:22,240 --> 00:07:25,200 Speaker 2: those stores seen any impact so far from the Trump tariffs? 148 00:07:25,200 --> 00:07:28,240 Speaker 2: For all that and more. We're joined by Jennifer Bartash's 149 00:07:28,440 --> 00:07:33,680 Speaker 2: Bloomberg Intelligence senior analyst Retail, staples and packaged food. Well, Jen, 150 00:07:33,920 --> 00:07:35,840 Speaker 2: thank you, and I want to start with actually some 151 00:07:35,880 --> 00:07:37,840 Speaker 2: pretty good news that came out this past Friday from 152 00:07:37,840 --> 00:07:42,320 Speaker 2: the Commerce department. Retail sales advancing in July, help by 153 00:07:42,360 --> 00:07:47,240 Speaker 2: auto sales and all those Black Friday like sales at Amazon, Walmart, Target, 154 00:07:47,280 --> 00:07:50,480 Speaker 2: best Buy and others. Now that is good news, isn't it? 155 00:07:50,520 --> 00:07:53,080 Speaker 2: But what does it tell us about the consumer? Right now? 156 00:07:53,400 --> 00:07:56,840 Speaker 6: It's overall good news with regards to the consumers are 157 00:07:56,880 --> 00:08:00,480 Speaker 6: willing to spend, but they're spending on those sales events. 158 00:08:00,520 --> 00:08:03,760 Speaker 6: And so what that really underscores is that that consumer 159 00:08:04,560 --> 00:08:09,880 Speaker 6: value proposition is so important for these retailers. People are 160 00:08:09,920 --> 00:08:12,600 Speaker 6: willing to spend, but they want deals. They want to 161 00:08:12,600 --> 00:08:15,080 Speaker 6: see prices that they think are good prices, and so 162 00:08:15,520 --> 00:08:19,280 Speaker 6: that's really the takeaway. And when you offer that compelling proposition, 163 00:08:19,800 --> 00:08:22,920 Speaker 6: they are responding. And so there's a little bit of 164 00:08:22,920 --> 00:08:25,680 Speaker 6: money out there. It's not necessarily going to help this 165 00:08:25,800 --> 00:08:28,520 Speaker 6: current quarter of earnings, but it should help next quarter 166 00:08:28,560 --> 00:08:29,320 Speaker 6: earnings for sure. 167 00:08:30,080 --> 00:08:33,400 Speaker 2: Well, let's talk about this quarter earnings. The second earnings 168 00:08:33,480 --> 00:08:36,559 Speaker 2: Walmart was a big winner of all that to online spending, 169 00:08:37,040 --> 00:08:40,120 Speaker 2: also still blow out grocery sales double digit growth and 170 00:08:40,200 --> 00:08:43,600 Speaker 2: online sales. What are you expecting to see in its 171 00:08:43,600 --> 00:08:44,760 Speaker 2: second quarter results? 172 00:08:45,320 --> 00:08:48,680 Speaker 6: What's interesting about Walmart is they have arguably the best 173 00:08:48,760 --> 00:08:52,760 Speaker 6: visibility into your mainstream American consumer than any other retailer. 174 00:08:53,320 --> 00:08:57,280 Speaker 6: They touch almost the entire population in the United States 175 00:08:57,280 --> 00:09:00,760 Speaker 6: as to some degree, and so what we're expecting to 176 00:09:00,800 --> 00:09:04,080 Speaker 6: see is just another strong quarter for Walmart. That value 177 00:09:04,080 --> 00:09:07,120 Speaker 6: proposition that I mentioned is something that drives people there. 178 00:09:07,480 --> 00:09:10,320 Speaker 6: But Walmart has been really good about execution, and so 179 00:09:10,480 --> 00:09:14,600 Speaker 6: they've been good about executing in terms of growing their marketplace, 180 00:09:14,720 --> 00:09:18,440 Speaker 6: in terms of off their offerings, improving their the quality 181 00:09:18,480 --> 00:09:21,559 Speaker 6: of their grocery, and continuing to grow market share there. 182 00:09:21,840 --> 00:09:24,640 Speaker 6: So it's a combination of execution as well as the 183 00:09:24,720 --> 00:09:28,400 Speaker 6: value proposition that they offer that really should drive some 184 00:09:28,840 --> 00:09:31,360 Speaker 6: strong results with regards to top lying growth and same 185 00:09:31,360 --> 00:09:32,040 Speaker 6: store sales. 186 00:09:32,800 --> 00:09:35,520 Speaker 2: Now, aside from its food aisles, a lot of what 187 00:09:35,640 --> 00:09:37,560 Speaker 2: is sold at Walmart is imported, a lot of that 188 00:09:37,640 --> 00:09:40,600 Speaker 2: coming from China. What impact have the Trump tariffs had 189 00:09:40,640 --> 00:09:44,120 Speaker 2: on Walmart so far? And can it manage to limit 190 00:09:44,200 --> 00:09:47,280 Speaker 2: passing along those higher costs to shoppers or you know 191 00:09:47,960 --> 00:09:49,640 Speaker 2: or is it coming and we know it's coming. 192 00:09:49,920 --> 00:09:52,800 Speaker 6: I think that there are going to be some costs 193 00:09:52,840 --> 00:09:55,559 Speaker 6: that go up for consumers. But the advantage that Walmart 194 00:09:55,600 --> 00:09:58,080 Speaker 6: has is that it is so big and that scale 195 00:09:58,120 --> 00:10:01,440 Speaker 6: is so large that it can help minimize the amount 196 00:10:01,520 --> 00:10:03,800 Speaker 6: that it does have to pass through to consumers, and 197 00:10:03,840 --> 00:10:06,720 Speaker 6: they can be very selective on which products it hits. 198 00:10:07,440 --> 00:10:11,400 Speaker 6: And so you know, when you're talking about especially general 199 00:10:11,440 --> 00:10:16,240 Speaker 6: merchandise or things like apparel, that's where the tariffs come 200 00:10:16,240 --> 00:10:20,160 Speaker 6: into much more play. But Walmart has that ability to 201 00:10:20,679 --> 00:10:24,600 Speaker 6: negotiate with their suppliers. They've had a very active program 202 00:10:24,600 --> 00:10:27,040 Speaker 6: for a long time in terms of you know, purchasing 203 00:10:27,600 --> 00:10:31,679 Speaker 6: manufactured in the USA goods in their home departments for example, 204 00:10:31,760 --> 00:10:34,600 Speaker 6: and things like that. So they've had long term efforts 205 00:10:34,600 --> 00:10:38,240 Speaker 6: in place to sort of mitigate where they're sourcing from. 206 00:10:38,320 --> 00:10:42,160 Speaker 6: And in the recent year or two they've really diversified 207 00:10:42,200 --> 00:10:44,880 Speaker 6: the sourcing of where they're getting goods from. So that 208 00:10:45,040 --> 00:10:46,800 Speaker 6: makes them a little it makes it a little bit 209 00:10:46,800 --> 00:10:50,240 Speaker 6: easier for them to offset that impact. But inevitably, there 210 00:10:50,280 --> 00:10:52,560 Speaker 6: will be some prices that have to go up and 211 00:10:52,559 --> 00:10:54,479 Speaker 6: that will ultimately impact consumers. 212 00:10:55,240 --> 00:10:57,040 Speaker 2: Well, let's talk about the other side of the coin, 213 00:10:57,080 --> 00:10:59,880 Speaker 2: and that is Target, which has been struggling now for 214 00:11:00,040 --> 00:11:03,520 Speaker 2: couple of years, sales growth stagnating, It's facing a boycott 215 00:11:03,520 --> 00:11:06,480 Speaker 2: after scrapping DEI initiatives. Just last week, the Bank of 216 00:11:06,520 --> 00:11:09,560 Speaker 2: America downgraded the retailer. So what do you expect to 217 00:11:09,559 --> 00:11:11,800 Speaker 2: see in its earnings report this week? 218 00:11:12,120 --> 00:11:14,480 Speaker 6: Very much like the first quarter, We're going to see 219 00:11:14,640 --> 00:11:18,800 Speaker 6: a little bit more divergence between Target and Walmart. And 220 00:11:19,520 --> 00:11:24,360 Speaker 6: Target simply has not yet gotten back to that cachet 221 00:11:24,440 --> 00:11:27,200 Speaker 6: that it once had with its consumers and its core 222 00:11:27,440 --> 00:11:31,840 Speaker 6: its core followers. Their digital sales are slowing, they have 223 00:11:32,360 --> 00:11:35,000 Speaker 6: a different approach to a marketplace which is much more 224 00:11:35,040 --> 00:11:38,760 Speaker 6: limited in scale. And importantly, we're seeing that some of 225 00:11:38,800 --> 00:11:42,720 Speaker 6: the partnerships that we're supposed to help drive growth coming 226 00:11:42,760 --> 00:11:46,120 Speaker 6: to an end. So the partnership that Walmart has with Alta, 227 00:11:46,200 --> 00:11:49,840 Speaker 6: for example, where they had Alta stores within within a 228 00:11:49,880 --> 00:11:53,880 Speaker 6: Target store, is coming to an end, and both retailers 229 00:11:53,920 --> 00:11:56,560 Speaker 6: are sort of going their separate ways. So you know, 230 00:11:56,840 --> 00:11:59,080 Speaker 6: those are the kinds of things where you know, I 231 00:11:59,120 --> 00:12:02,600 Speaker 6: think people are looking at Target and wondering where is 232 00:12:02,640 --> 00:12:05,800 Speaker 6: the future growth going to come from and you know 233 00:12:06,200 --> 00:12:09,120 Speaker 6: they can compete to a certain degree on price, but 234 00:12:09,240 --> 00:12:12,160 Speaker 6: they are much more exposed in terms of tariffs and 235 00:12:12,400 --> 00:12:15,800 Speaker 6: other pressures because of the merchandise mix that they sell. 236 00:12:16,080 --> 00:12:20,480 Speaker 2: Our thanks to Jennifer bartashis Bloomberg Intelligence Senior Analyst, Retail, 237 00:12:20,480 --> 00:12:24,240 Speaker 2: staples and packaged food. Coming up on Bloomberg day Break Weekend, 238 00:12:24,240 --> 00:12:28,320 Speaker 2: we'll look at the challenges facing European banking consolidation plans. 239 00:12:28,360 --> 00:12:31,560 Speaker 2: That's ahead of an upcoming shareholder vote in Italy. I'm 240 00:12:31,600 --> 00:12:44,480 Speaker 2: Tom Busby and this is Bloomberg. This is Bloomberg day 241 00:12:44,480 --> 00:12:46,760 Speaker 2: Break Weekend, our global look ahead at the top stories 242 00:12:46,760 --> 00:12:49,599 Speaker 2: for investors in the coming week. I'm Tom Busby in 243 00:12:49,679 --> 00:12:52,280 Speaker 2: New York. Up later in our program we'll look ahead 244 00:12:52,280 --> 00:12:55,600 Speaker 2: to several key data points in Japan. But first, the 245 00:12:55,679 --> 00:12:58,200 Speaker 2: countdown is on in Italy to a deadline in a 246 00:12:58,240 --> 00:13:02,719 Speaker 2: potential takeover in the bank sector. Medio Banca's shareholders will 247 00:13:02,800 --> 00:13:06,160 Speaker 2: vote on its bid to take over wealth manager Banca Generali. 248 00:13:06,360 --> 00:13:08,920 Speaker 2: It's the latest and a string of potential deals which 249 00:13:09,000 --> 00:13:13,199 Speaker 2: could consolidate Europe's banking sector, but some remain opposed to 250 00:13:13,280 --> 00:13:17,280 Speaker 2: creating bigger financial institutions on the continent. For more, Let's 251 00:13:17,280 --> 00:13:19,760 Speaker 2: go to London and bring in Bloomberg Daybreak. Europe Banker 252 00:13:19,920 --> 00:13:21,120 Speaker 2: Stephen Carroll. 253 00:13:21,200 --> 00:13:23,800 Speaker 3: Tom Italy has been at the heart of a wave 254 00:13:23,880 --> 00:13:27,600 Speaker 3: of attempted banking consolidation across Europe, and things are set 255 00:13:27,600 --> 00:13:30,720 Speaker 3: to heat up in the coming weeks. Despite encouragement from 256 00:13:30,760 --> 00:13:33,760 Speaker 3: the European Union, only a few of the potential deals 257 00:13:33,800 --> 00:13:37,959 Speaker 3: are sealing real progress towards completion. Italy's UNI Credit and 258 00:13:38,000 --> 00:13:41,680 Speaker 3: Spain's BBVA have launched attempts to buy rivals, only to 259 00:13:41,679 --> 00:13:45,920 Speaker 3: meet with sometimes bitter opposition from Berlin, Rome and Madrid. 260 00:13:46,600 --> 00:13:50,480 Speaker 3: Medio Banka's CEO, Alberto Nagel says national governments are standing 261 00:13:50,480 --> 00:13:52,960 Speaker 3: in the way of creating bigger banks in the EU. 262 00:13:53,400 --> 00:13:56,760 Speaker 3: His lender is facing an unsolicited takeover offer from rival 263 00:13:56,760 --> 00:14:00,600 Speaker 3: Monte Dupasci, which is supported by its largest shareholder, the government. 264 00:14:01,160 --> 00:14:04,800 Speaker 3: Nagel has repeatedly rejected the bit, which he calls totally inadequate, 265 00:14:04,880 --> 00:14:07,880 Speaker 3: and has in turn mented an acquisition effort for banker, 266 00:14:08,000 --> 00:14:11,559 Speaker 3: generally the wealth management units of the country's biggest insurer. 267 00:14:12,000 --> 00:14:14,800 Speaker 3: It gives the Medio Banker CEO a unique perspective on 268 00:14:14,800 --> 00:14:17,480 Speaker 3: this European wide issue. Here's what he had to say 269 00:14:17,520 --> 00:14:20,320 Speaker 3: about the situation when he spoke to Bloomberg earlier this month. 270 00:14:21,040 --> 00:14:25,760 Speaker 7: Well, we are, as I said, delivering or over delivering 271 00:14:25,800 --> 00:14:28,800 Speaker 7: on our strategy. Our strategy is a strategy where we 272 00:14:28,840 --> 00:14:32,240 Speaker 7: are focusing more and more on wealth management and the 273 00:14:32,360 --> 00:14:36,960 Speaker 7: ib capital lighte on top. We have also worked at 274 00:14:37,200 --> 00:14:38,520 Speaker 7: banker gerial transactions. 275 00:14:38,520 --> 00:14:39,520 Speaker 2: So for our. 276 00:14:39,400 --> 00:14:42,800 Speaker 7: Shahoulder, according to our view, there is no match between 277 00:14:43,280 --> 00:14:47,520 Speaker 7: media banker Stendalon plus banker generally and the possibility to 278 00:14:47,560 --> 00:14:48,560 Speaker 7: be part of a group. 279 00:14:49,160 --> 00:14:53,000 Speaker 8: How you know, biggest probability that mounte Paski actually you 280 00:14:53,040 --> 00:14:55,400 Speaker 8: know gets Media banker at the end of the day. 281 00:14:55,760 --> 00:14:58,520 Speaker 7: Well, this is up to our shoolder. No, we are, 282 00:14:58,920 --> 00:15:03,200 Speaker 7: as I said, recommended to look carefully at the content 283 00:15:03,840 --> 00:15:08,680 Speaker 7: of Montepasti bit because financially it is a discount to 284 00:15:08,840 --> 00:15:13,160 Speaker 7: our market value, you know, as montepask is half of 285 00:15:13,200 --> 00:15:17,720 Speaker 7: our market cup. This transaction is consued where basically our 286 00:15:17,840 --> 00:15:21,680 Speaker 7: shareholders should get sixty percent of the combined entity but 287 00:15:21,840 --> 00:15:25,640 Speaker 7: not pay the premium. So this is something that honestly 288 00:15:25,680 --> 00:15:28,760 Speaker 7: a long term shoholder of Media banker should not accept. 289 00:15:29,280 --> 00:15:32,560 Speaker 3: Medio Banker CEO Alberto Nagel there speaking to Bloomberg's Francy 290 00:15:32,560 --> 00:15:35,600 Speaker 3: in Laqua earlier this month. So what does the future 291 00:15:35,640 --> 00:15:37,960 Speaker 3: of the Italian lender look like and more broadly, what 292 00:15:38,000 --> 00:15:41,560 Speaker 3: does it tell us about the European banking landscape to discuss, 293 00:15:41,600 --> 00:15:44,800 Speaker 3: I'm joined by our senior finance reporter in Milan, Sonia Cerletti, 294 00:15:44,840 --> 00:15:47,080 Speaker 3: and by Bloomberg TV anchor Katie Coopter has been following 295 00:15:47,120 --> 00:15:50,400 Speaker 3: the story across the continent for US. Sonya t you 296 00:15:50,560 --> 00:15:53,600 Speaker 3: first ahead of this shareholder meeting in the coming days 297 00:15:53,680 --> 00:15:56,000 Speaker 3: from Medio Banker, what can you tell us about the 298 00:15:56,320 --> 00:15:58,440 Speaker 3: offer that they're making for Banker generally. 299 00:15:58,760 --> 00:16:01,680 Speaker 8: Yes, as you think before, Italy banking sector is now 300 00:16:01,720 --> 00:16:04,040 Speaker 8: at the center of this fresh wave of merger and 301 00:16:04,080 --> 00:16:08,560 Speaker 8: acquisition activity that kicked off in early November, and at 302 00:16:08,560 --> 00:16:12,320 Speaker 8: the center of the action now there's Medio Banker, who's 303 00:16:12,360 --> 00:16:15,920 Speaker 8: seeking investor approval to go ahead with the bid for 304 00:16:16,040 --> 00:16:22,760 Speaker 8: Banker generally to basically fend off still takeover from rival 305 00:16:22,800 --> 00:16:27,880 Speaker 8: bank Monte de Passylciena nagal Is, the CEO of Media Banker, 306 00:16:28,000 --> 00:16:34,240 Speaker 8: is proposing Banker generally bid as a alternative to Montepasti 307 00:16:34,400 --> 00:16:38,480 Speaker 8: takeover offer and on August twenty one, there is a 308 00:16:38,600 --> 00:16:43,000 Speaker 8: key moment because investors of Medio Banker are called to 309 00:16:43,120 --> 00:16:47,440 Speaker 8: decide whether to go ahead with this bid or they 310 00:16:47,520 --> 00:16:50,880 Speaker 8: can reject the proposal in what would be a big 311 00:16:50,920 --> 00:16:56,400 Speaker 8: blow for Nagala. Another strategy to preserve the bank's independence 312 00:16:56,480 --> 00:17:00,080 Speaker 8: and secure is on a future at the helm of 313 00:17:00,160 --> 00:17:00,560 Speaker 8: the bank. 314 00:17:01,040 --> 00:17:03,440 Speaker 2: What are the expectations ahead of that vote. 315 00:17:03,800 --> 00:17:10,200 Speaker 8: The expectations are uncertain. The vote will be likely very tight. 316 00:17:10,720 --> 00:17:15,280 Speaker 8: We have seen that Nagala has before postponed the meeting 317 00:17:15,800 --> 00:17:20,320 Speaker 8: amy design that he wasn't able to get majority. I 318 00:17:20,359 --> 00:17:23,840 Speaker 8: want to remember that Medieavancan is the fifty percent plus 319 00:17:23,880 --> 00:17:27,160 Speaker 8: one of voting in favor of the bid to go ahead. 320 00:17:28,320 --> 00:17:32,879 Speaker 8: And then he has rescheduled the meeting after some shahoulders 321 00:17:33,000 --> 00:17:37,520 Speaker 8: changed happened, So maybe his eating so that he can 322 00:17:38,040 --> 00:17:42,000 Speaker 8: he cannot get it can get back. For sure, the 323 00:17:42,040 --> 00:17:47,159 Speaker 8: situation is delicate and if he will be able to 324 00:17:47,240 --> 00:17:52,560 Speaker 8: win or lose the meeting is still uncertain. But what 325 00:17:52,640 --> 00:17:56,399 Speaker 8: I want to say is that while the vote will 326 00:17:56,440 --> 00:17:59,840 Speaker 8: be a big green or a big blow for Nagel strategy, 327 00:18:00,119 --> 00:18:05,679 Speaker 8: Nagal attempts to fend off the attempt to fend off Montepaski. 328 00:18:06,240 --> 00:18:11,760 Speaker 8: Montepasci bid the final end game. The final battle will 329 00:18:11,840 --> 00:18:16,960 Speaker 8: be will happen in September when Montepaski will close his 330 00:18:17,080 --> 00:18:20,960 Speaker 8: offer on Medio Banker and from this results a lot 331 00:18:21,000 --> 00:18:24,159 Speaker 8: of things can change, not only for Madio Banka, but 332 00:18:24,280 --> 00:18:26,919 Speaker 8: probably for the whole land escape of Italian banking. 333 00:18:27,840 --> 00:18:30,040 Speaker 3: Just to understand this, why is Nagos okay in to 334 00:18:30,119 --> 00:18:31,600 Speaker 3: review the monte Paski offer. 335 00:18:32,280 --> 00:18:35,920 Speaker 8: Alberto Nagle, first of all, is the longestanding of Media Banker, 336 00:18:36,400 --> 00:18:40,440 Speaker 8: and he has emerged like this central figure in resisting 337 00:18:40,600 --> 00:18:45,120 Speaker 8: montepaski Is approach. I would say that's reluctant, it's rude 338 00:18:45,400 --> 00:18:50,200 Speaker 8: in a sort of combination of strategic and reputational factors. 339 00:18:50,880 --> 00:18:56,040 Speaker 8: For Nagal, Medior Banker's legacy and independence is a core priority. 340 00:18:56,560 --> 00:18:59,760 Speaker 8: He affirmed that the core activities of the two banks 341 00:18:59,760 --> 00:19:04,679 Speaker 8: are different, being Mountepasti mainly a retail bank, while Mediobank 342 00:19:04,880 --> 00:19:09,600 Speaker 8: is foxed on wealth and investment banking. For more, there 343 00:19:09,600 --> 00:19:13,760 Speaker 8: are questions around valuation and government. Nagel and is border 344 00:19:13,920 --> 00:19:17,800 Speaker 8: see the terms of Montepasky offer as the underwhelming and 345 00:19:17,840 --> 00:19:23,880 Speaker 8: potential disruptive So valuation is not it is not reflecting 346 00:19:23,920 --> 00:19:27,560 Speaker 8: the real value of the offer. And on the other side, 347 00:19:27,680 --> 00:19:32,840 Speaker 8: there is a there is a there are issues about governance. 348 00:19:32,920 --> 00:19:36,840 Speaker 8: According to Nagal in Italy, nothing is simple and all 349 00:19:36,880 --> 00:19:39,400 Speaker 8: of these m and a sagay is like an intricate 350 00:19:39,520 --> 00:19:45,520 Speaker 8: chess game where there are across shareholders competing alliances overlapping interests. 351 00:19:45,600 --> 00:19:50,160 Speaker 8: That means that every move verberates through the financial system. 352 00:19:50,400 --> 00:19:53,600 Speaker 8: In particular on this bid, what we what we see 353 00:19:53,880 --> 00:19:58,679 Speaker 8: Mediobank's largest shareholders are billionaires taken Francisco, Costa, Girone and 354 00:19:58,760 --> 00:20:03,520 Speaker 8: they'll bet your families. They also have major stakes in 355 00:20:03,640 --> 00:20:07,480 Speaker 8: Montepasti who's doing a bid on a media banker? And 356 00:20:08,480 --> 00:20:12,520 Speaker 8: generally which is which is a media bank as main 357 00:20:13,080 --> 00:20:16,320 Speaker 8: as man as shohoulders too, So there are a lot 358 00:20:16,440 --> 00:20:20,840 Speaker 8: of different interest and nature is a booking a conflict 359 00:20:20,880 --> 00:20:25,359 Speaker 8: of interest too, and so this is another matter of opposition. 360 00:20:25,760 --> 00:20:29,520 Speaker 8: Let's say that the history shows that any will still 361 00:20:29,520 --> 00:20:33,520 Speaker 8: be the see the reluctance of the CEO of the 362 00:20:33,560 --> 00:20:36,200 Speaker 8: target company in agreeing on the bit. 363 00:20:36,720 --> 00:20:40,040 Speaker 3: Yeah, I mean, it's an absolutely fascinating web of cross shareholdings. 364 00:20:40,040 --> 00:20:41,919 Speaker 3: As he describes on you let's seem oute that I 365 00:20:41,920 --> 00:20:44,320 Speaker 3: want to bring in Chrity Coupe, who's been listening into 366 00:20:44,320 --> 00:20:46,399 Speaker 3: the conversation as well, I mean crazy, you've been across 367 00:20:46,400 --> 00:20:49,080 Speaker 3: the banking story across Europe. Just talk to us about 368 00:20:49,080 --> 00:20:52,200 Speaker 3: the motivation behind what's driving this wave of consolidation. 369 00:20:52,560 --> 00:20:54,680 Speaker 9: Well, it's a fascinating story because in some ways it's 370 00:20:54,680 --> 00:20:57,800 Speaker 9: been in the work since the inception of the EU. Frankly, 371 00:20:57,840 --> 00:21:01,000 Speaker 9: and this idea that you want to have a coordinated bid, 372 00:21:01,080 --> 00:21:03,159 Speaker 9: you want to build out a Capital markets UNI, you 373 00:21:03,160 --> 00:21:05,840 Speaker 9: want to bring out a banking union as well, and 374 00:21:05,880 --> 00:21:09,200 Speaker 9: this kind of consolidation is seen as an intermediary step, 375 00:21:09,280 --> 00:21:12,160 Speaker 9: or even just a first step towards that ultimate goal. 376 00:21:12,200 --> 00:21:15,320 Speaker 9: There's a couple of other factors here, though, in that Europe, 377 00:21:15,680 --> 00:21:17,880 Speaker 9: especially in recent years, has really been trying to get 378 00:21:17,920 --> 00:21:22,959 Speaker 9: more competitive and take over market share internationally from some 379 00:21:23,000 --> 00:21:25,520 Speaker 9: of the more US kind of focused banks, but also 380 00:21:26,080 --> 00:21:28,119 Speaker 9: some of the growing competition in Asia as well. So 381 00:21:28,160 --> 00:21:30,240 Speaker 9: that's another piece of it, and the thinking there is 382 00:21:30,280 --> 00:21:32,879 Speaker 9: you have to be stronger at home to be able 383 00:21:33,119 --> 00:21:35,600 Speaker 9: to do that kind of business abroad. The third piece 384 00:21:35,640 --> 00:21:37,119 Speaker 9: of this is kind of a little bit of a 385 00:21:37,200 --> 00:21:40,119 Speaker 9: hangover when it comes to the experience a lot of 386 00:21:40,160 --> 00:21:44,119 Speaker 9: European banks have had from COVID and also from the 387 00:21:44,200 --> 00:21:47,520 Speaker 9: GFC and arguably the sovereign debt crisis as well. This 388 00:21:47,640 --> 00:21:50,760 Speaker 9: idea that if you are already operating in different markets, 389 00:21:50,760 --> 00:21:53,960 Speaker 9: so a hypothetical for unicreditor for BABVA, where you're operating 390 00:21:54,000 --> 00:21:56,439 Speaker 9: your home country of Italy or Spain, but also of 391 00:21:56,480 --> 00:21:59,080 Speaker 9: operations in say the UK or has, say in Germany, 392 00:21:59,240 --> 00:22:02,560 Speaker 9: or name your country. In times of recession, when the 393 00:22:02,560 --> 00:22:06,280 Speaker 9: government needs to take active steps to protect the banking 394 00:22:06,320 --> 00:22:09,880 Speaker 9: sector of that individual country, how easy is it for 395 00:22:10,040 --> 00:22:12,520 Speaker 9: some of those banks that belong to a different home 396 00:22:12,560 --> 00:22:15,439 Speaker 9: country to pull out those funds or to inject that 397 00:22:15,520 --> 00:22:17,600 Speaker 9: kind of liquidity. And there have been concerns in those 398 00:22:17,640 --> 00:22:21,760 Speaker 9: previous crises of who that loyalty kind of belongs to 399 00:22:22,080 --> 00:22:25,320 Speaker 9: and whether being a European bank ultimately means that you 400 00:22:25,400 --> 00:22:28,000 Speaker 9: are a Spanish or an Italian or a German bank. 401 00:22:28,080 --> 00:22:30,959 Speaker 3: First talk to us about some of the other We've 402 00:22:31,000 --> 00:22:33,359 Speaker 3: reflected on some of the Italian moves there with Sonia, 403 00:22:33,400 --> 00:22:35,119 Speaker 3: but talks about some of the other big deals that 404 00:22:35,119 --> 00:22:37,560 Speaker 3: we're watching elsewhere in Europe. I know that BBVA and 405 00:22:37,600 --> 00:22:40,240 Speaker 3: Sabadada is one that you've been particularly monitoring closely. 406 00:22:40,640 --> 00:22:43,360 Speaker 9: I'm fascinated by this story because I think it's such 407 00:22:43,400 --> 00:22:47,720 Speaker 9: a crucial one. Consolidation on the surface seems like such 408 00:22:47,760 --> 00:22:51,320 Speaker 9: a normal natural thing to pursue, especially as you get larger, 409 00:22:51,359 --> 00:22:54,440 Speaker 9: and especially as some of these banking behemoths really pursue 410 00:22:54,480 --> 00:22:56,920 Speaker 9: that kind of scale. I think what gets missed quite 411 00:22:56,960 --> 00:22:58,680 Speaker 9: often in the argument that the likes of Bank of 412 00:22:58,720 --> 00:23:02,840 Speaker 9: Sabadel or arguably other takeover acquisition targets are making is 413 00:23:02,880 --> 00:23:06,000 Speaker 9: simply this idea that the bigger you get, the harder 414 00:23:06,040 --> 00:23:08,600 Speaker 9: it is to service you know, the local bakery that 415 00:23:08,640 --> 00:23:10,840 Speaker 9: has a loan and that's been working with the local 416 00:23:10,840 --> 00:23:14,199 Speaker 9: branch of say Sabadel for centuries or decades or whatever. 417 00:23:14,560 --> 00:23:17,399 Speaker 9: And that's the concern that is ultimately showing up, and 418 00:23:17,480 --> 00:23:19,920 Speaker 9: a lot of these big banks that are under major 419 00:23:20,000 --> 00:23:23,680 Speaker 9: pressure to build out the profitability lean into digital banking. 420 00:23:23,760 --> 00:23:27,399 Speaker 9: It also not only influences or kind of drives the 421 00:23:27,480 --> 00:23:31,119 Speaker 9: question of how can they serve smaller clients, your local clients, 422 00:23:31,160 --> 00:23:34,760 Speaker 9: but also how they can employ the people in certain regions. 423 00:23:34,760 --> 00:23:37,840 Speaker 9: And that's really what has been a consistent sticking point 424 00:23:37,920 --> 00:23:40,040 Speaker 9: in some of these consolidation conversations. 425 00:23:40,400 --> 00:23:42,320 Speaker 3: Talk to us about how this is playing out between 426 00:23:42,520 --> 00:23:46,080 Speaker 3: national capitals in Europe and the European Union because the EUM, 427 00:23:46,080 --> 00:23:48,080 Speaker 3: and if you read the Drageo or the letter reports, 428 00:23:48,119 --> 00:23:51,440 Speaker 3: you know, banking consolidation, capital markets scene in deeper capital markets, 429 00:23:51,480 --> 00:23:54,960 Speaker 3: all things everyone seems really happy about until you get 430 00:23:55,000 --> 00:23:57,159 Speaker 3: some of the national governments involved, who say, we like 431 00:23:57,240 --> 00:23:59,680 Speaker 3: the idea, but in this particular case, we don't think 432 00:23:59,680 --> 00:24:02,600 Speaker 3: that it's appropriate for the market. How much of attention 433 00:24:02,800 --> 00:24:04,960 Speaker 3: is there between those two sides, Oh. 434 00:24:04,800 --> 00:24:08,800 Speaker 9: My gosh, attention couldn't be more tense. Frankly, it's fascinating 435 00:24:08,840 --> 00:24:11,760 Speaker 9: because it also goes back to this question of who 436 00:24:11,840 --> 00:24:14,439 Speaker 9: is actually in charge of a European country. Is it 437 00:24:14,480 --> 00:24:16,879 Speaker 9: the local government or is it the folks over in 438 00:24:16,960 --> 00:24:19,480 Speaker 9: Brussels for example. And this is something you see a 439 00:24:19,560 --> 00:24:23,119 Speaker 9: tenuous conversation you see in any industry. Really, it's not 440 00:24:23,200 --> 00:24:25,280 Speaker 9: just coming up in banking consolidation. You've seen it in 441 00:24:25,359 --> 00:24:29,040 Speaker 9: things like foreign policy narratives. You've seen it in defense rearmament. 442 00:24:29,119 --> 00:24:31,600 Speaker 9: You've seen it in kind of local investment in things 443 00:24:31,640 --> 00:24:35,119 Speaker 9: like infrastructure. Whose burden is that to decide those policies? 444 00:24:35,160 --> 00:24:37,840 Speaker 9: Not to mention regulation as well. Things like tech regulation 445 00:24:38,160 --> 00:24:40,240 Speaker 9: have largely been driven out of Brussels, but there have 446 00:24:40,240 --> 00:24:44,359 Speaker 9: been local conversations about that as well. From a banking standpoint, again, 447 00:24:44,440 --> 00:24:47,600 Speaker 9: this is something where Brussels is thinking about Europe as 448 00:24:47,600 --> 00:24:50,600 Speaker 9: a whole and how it can compete on the international 449 00:24:50,600 --> 00:24:53,439 Speaker 9: stage as a whole, what it can and the argument 450 00:24:53,480 --> 00:24:55,720 Speaker 9: that a lot of local governments are making, especially as 451 00:24:55,760 --> 00:24:58,760 Speaker 9: politics starts to drive the conversation, is are you thinking 452 00:24:58,840 --> 00:25:01,919 Speaker 9: about the peace employed in a certain region of a 453 00:25:01,960 --> 00:25:05,240 Speaker 9: certain country that could be driving a national narrative or 454 00:25:05,280 --> 00:25:08,560 Speaker 9: a national shift or a change in local regulation. And 455 00:25:08,560 --> 00:25:11,080 Speaker 9: that's where the tension comes between what you're thinking of 456 00:25:11,200 --> 00:25:13,840 Speaker 9: in Brussels versus Madrid or Rome or Paris. 457 00:25:13,960 --> 00:25:16,199 Speaker 2: Okay, Chrity go. Thank you very much for talking us 458 00:25:16,200 --> 00:25:16,480 Speaker 2: through that. 459 00:25:16,600 --> 00:25:19,280 Speaker 3: And to our senior finance supporter in Milan, Sonia Serletti, 460 00:25:19,560 --> 00:25:22,320 Speaker 3: helping us to look ahead to that key shareholder meeting 461 00:25:22,520 --> 00:25:24,280 Speaker 3: happening in the coming days. 462 00:25:24,680 --> 00:25:26,000 Speaker 2: I'm Stephen Carolyn London. 463 00:25:26,000 --> 00:25:28,360 Speaker 3: You can catch us every weekday morning here for Bloomberg 464 00:25:28,440 --> 00:25:30,080 Speaker 3: Daybreak here at beginning at six. 465 00:25:29,880 --> 00:25:32,800 Speaker 2: Am in London and one am on Wall Street. Tom. 466 00:25:33,200 --> 00:25:36,119 Speaker 2: Thank you, Steven and coming up on Bloomberg day Break weekend, 467 00:25:36,119 --> 00:25:38,440 Speaker 2: we'll check in on the health of the Japanese economy 468 00:25:38,560 --> 00:25:41,720 Speaker 2: with the release of several key data points. I'm Tom 469 00:25:41,760 --> 00:25:56,040 Speaker 2: Busby and this is Bloomberg. This is Bloomberg day Break Weekend, 470 00:25:56,080 --> 00:25:58,359 Speaker 2: our global look ahead at the top stories for investors 471 00:25:58,400 --> 00:26:01,359 Speaker 2: in the coming week. I'm Tom in New York. We 472 00:26:01,440 --> 00:26:03,840 Speaker 2: turn next to Japan and the release this week of 473 00:26:03,880 --> 00:26:09,160 Speaker 2: several key data points, including CPI, PMI surveys and trade figures. 474 00:26:09,480 --> 00:26:12,040 Speaker 2: Bloomberg's Doug Krisner checks in on the health of the 475 00:26:12,119 --> 00:26:13,160 Speaker 2: Japanese economy. 476 00:26:13,520 --> 00:26:16,760 Speaker 4: Tom. As you know, Japan is heavily reliant on exports 477 00:26:16,800 --> 00:26:19,840 Speaker 4: to the US, and as such, companies in the country 478 00:26:19,840 --> 00:26:23,320 Speaker 4: have been struggling with the effects of US tariff policy, 479 00:26:23,600 --> 00:26:26,200 Speaker 4: and judging by the recent record highs for the Japanese 480 00:26:26,240 --> 00:26:29,919 Speaker 4: equity market, those dark clouds seem to be lifting. For 481 00:26:30,040 --> 00:26:33,200 Speaker 4: a closer look, I'm joined by Taro Komurahi, is japan 482 00:26:33,280 --> 00:26:37,200 Speaker 4: economist for Bloomberg Economics, joining from our studios in the 483 00:26:37,280 --> 00:26:39,880 Speaker 4: Japanese capital. Taro, thank you so much for making time 484 00:26:39,880 --> 00:26:41,919 Speaker 4: to chat with me. Before we get into some of 485 00:26:41,960 --> 00:26:45,760 Speaker 4: the details, can you give me a sense of how 486 00:26:45,880 --> 00:26:50,280 Speaker 4: well the economy is performing, especially in light of the 487 00:26:50,359 --> 00:26:51,160 Speaker 4: US tariffs. 488 00:26:52,000 --> 00:26:55,680 Speaker 10: Of course, thanks for having me on. Actually the US tarifs, 489 00:26:55,960 --> 00:27:00,280 Speaker 10: although Japanese government was able to lower it and the 490 00:27:00,359 --> 00:27:05,080 Speaker 10: threatened rate, particularly the lowering the sectoral tariff to the 491 00:27:05,119 --> 00:27:10,320 Speaker 10: auto was a big relief for markets. They reduced from 492 00:27:10,320 --> 00:27:14,640 Speaker 10: twenty five percent to fifteen percent in general, but still 493 00:27:14,960 --> 00:27:19,639 Speaker 10: that was a lot higher than previously levied. And obviously 494 00:27:19,880 --> 00:27:22,359 Speaker 10: the auto sector is a key sector for Japan. But 495 00:27:22,560 --> 00:27:27,960 Speaker 10: that said, so far the damage is likely to be muted. 496 00:27:28,200 --> 00:27:30,720 Speaker 10: I think there are several reasons. Of course, the Japanese 497 00:27:30,800 --> 00:27:36,280 Speaker 10: carmakers are experienced in dealing with many jolts, including the 498 00:27:36,320 --> 00:27:38,920 Speaker 10: trade friction with the United States. They had it back 499 00:27:38,920 --> 00:27:45,120 Speaker 10: in nineteen nineties and previous administration. Also, another key factor 500 00:27:45,359 --> 00:27:49,119 Speaker 10: is a week y and it's traded around one forty 501 00:27:49,800 --> 00:27:55,800 Speaker 10: eight one fifty per dollar, and this is far weaker 502 00:27:55,840 --> 00:28:01,440 Speaker 10: than the surveyed exporters break even exchange, which is tallied 503 00:28:01,720 --> 00:28:06,080 Speaker 10: around one thirty. So there's a buffer for exporters to 504 00:28:06,640 --> 00:28:11,480 Speaker 10: ship their products to the US and still securing the profits. 505 00:28:11,480 --> 00:28:15,000 Speaker 10: So therefore it's a profit hit for many exporters, particularly 506 00:28:15,080 --> 00:28:19,720 Speaker 10: for automakers. But still it doesn't necessarily mean that they 507 00:28:19,760 --> 00:28:23,120 Speaker 10: have to slam the brakes on their production line. 508 00:28:23,160 --> 00:28:26,639 Speaker 4: So I'm curious about how fiscal policy may enter the 509 00:28:26,680 --> 00:28:29,879 Speaker 4: story here. Because we had an election recently that created 510 00:28:29,920 --> 00:28:32,720 Speaker 4: a bit of upheaval. One of the things that people 511 00:28:32,760 --> 00:28:36,159 Speaker 4: began addressing was this issue of more government spending. Is 512 00:28:36,400 --> 00:28:38,520 Speaker 4: that likely to be the case? Do you think will 513 00:28:38,560 --> 00:28:39,040 Speaker 4: that happen? 514 00:28:39,680 --> 00:28:43,440 Speaker 10: Exactly? You need to watch carefully on the developments on 515 00:28:43,600 --> 00:28:48,240 Speaker 10: Japanese political landscape, and as you mentioned, it's obvious that 516 00:28:48,320 --> 00:28:52,200 Speaker 10: the government is likely to be more fiscally expansionary. The 517 00:28:52,280 --> 00:28:57,240 Speaker 10: current Prime Minister Ishiba is known as fiscal restraint or 518 00:28:57,920 --> 00:29:01,960 Speaker 10: he cares about fiscal soundness. That said, he lost the election, 519 00:29:02,400 --> 00:29:05,160 Speaker 10: and even if he stays on, he needs to I 520 00:29:05,200 --> 00:29:09,400 Speaker 10: think expand fiscal stimulus in order to withdraw concession from 521 00:29:09,440 --> 00:29:13,560 Speaker 10: the opposition parties. And if he steps down, that means 522 00:29:13,680 --> 00:29:19,160 Speaker 10: further expansionary pressure to fiscal policy, because any potential candidate 523 00:29:19,400 --> 00:29:24,400 Speaker 10: for next prime minister is likely to be more having 524 00:29:24,520 --> 00:29:30,280 Speaker 10: affinity for more expansion than a current Ishiba. So therefore, 525 00:29:30,280 --> 00:29:33,520 Speaker 10: going forward towards the end of the year or the 526 00:29:33,560 --> 00:29:36,800 Speaker 10: next year, I think the fiscal stimulus is likely to 527 00:29:36,800 --> 00:29:40,520 Speaker 10: be announced, and that could bolster the domestic demand and 528 00:29:40,600 --> 00:29:44,000 Speaker 10: probably support the equity prices. 529 00:29:44,360 --> 00:29:47,360 Speaker 4: As you well know, inflation in Japan has been well 530 00:29:47,400 --> 00:29:50,120 Speaker 4: above the boj's target for some time. Now, we have 531 00:29:50,160 --> 00:29:53,040 Speaker 4: a CPI print in the week ahead, give me your 532 00:29:53,160 --> 00:29:56,320 Speaker 4: sense of what's happening on the price side and what 533 00:29:56,520 --> 00:29:59,240 Speaker 4: may follow when it comes to the next move from 534 00:29:59,240 --> 00:30:00,000 Speaker 4: the Bank of Japan. 535 00:30:00,760 --> 00:30:05,160 Speaker 10: Exactly. So, inflation is very hot. If you have an 536 00:30:05,200 --> 00:30:08,280 Speaker 10: image that the Japan is the deflationary country, it's it's 537 00:30:08,320 --> 00:30:12,280 Speaker 10: already in the history book. It's Japan is now in inflation. 538 00:30:12,720 --> 00:30:19,080 Speaker 10: And as expect, the July CPI print will still over 539 00:30:19,360 --> 00:30:23,680 Speaker 10: over three percent headline three point zero and core core 540 00:30:23,760 --> 00:30:29,239 Speaker 10: CPI remain heated around three point four percent, and the 541 00:30:29,320 --> 00:30:34,320 Speaker 10: downside risks. That suggests is Japan is probably facing a 542 00:30:34,360 --> 00:30:40,200 Speaker 10: staguflationary pressure because typical conditions are met, inflation is surging, 543 00:30:41,360 --> 00:30:46,840 Speaker 10: the government is likely to be more phiscally expansionary, and 544 00:30:46,960 --> 00:30:51,760 Speaker 10: the boj it's getting actually taking a more concious approach 545 00:30:51,840 --> 00:30:55,760 Speaker 10: towards the next rate hike. I expect the next rate 546 00:30:55,840 --> 00:30:59,479 Speaker 10: hike is going to happen in October. That said, the 547 00:30:59,480 --> 00:31:03,959 Speaker 10: Bay based on their communication, the Bank of Japan emphasizes 548 00:31:04,120 --> 00:31:10,240 Speaker 10: they will take a risk management approach. So therefore, before that, 549 00:31:10,320 --> 00:31:13,600 Speaker 10: the BOJ was just raising rates if they judge the 550 00:31:13,640 --> 00:31:19,719 Speaker 10: inflation is solid. But they're starting to have a telegraphing 551 00:31:19,760 --> 00:31:23,400 Speaker 10: a signal that, you know, even the inflation is picking up, 552 00:31:24,000 --> 00:31:26,280 Speaker 10: it's going to depend on the situation. And I reckon 553 00:31:26,560 --> 00:31:31,080 Speaker 10: behind that stance, there's a political uncertainty going on. You know, 554 00:31:31,560 --> 00:31:35,680 Speaker 10: the BOJ doesn't want to make any waves. When political waves, 555 00:31:35,680 --> 00:31:38,680 Speaker 10: I mean when the government is trying to expand their 556 00:31:38,680 --> 00:31:42,360 Speaker 10: fiscal stimulus, it doesn't mesh with the boj's hiking rates. 557 00:31:42,360 --> 00:31:46,760 Speaker 10: So I think the BOJ is reading the circumstances and 558 00:31:47,920 --> 00:31:52,000 Speaker 10: trying to judge when the political situation is conducive for 559 00:31:52,360 --> 00:31:55,840 Speaker 10: hiking rates. So therefore my baseline is October. But I 560 00:31:55,840 --> 00:31:58,880 Speaker 10: think the risk is skewed towards the delayed size, So 561 00:31:58,920 --> 00:32:01,600 Speaker 10: that means basically the j is turning a little bit dobvish. 562 00:32:01,880 --> 00:32:05,760 Speaker 10: That will add to inflationary pressure. So probably Japan is 563 00:32:05,880 --> 00:32:10,280 Speaker 10: edging into the situation where the FED or ECB had 564 00:32:10,320 --> 00:32:11,960 Speaker 10: experienced a few years ago. 565 00:32:12,200 --> 00:32:13,880 Speaker 4: Charles, maybe you can give me a sense of the 566 00:32:13,960 --> 00:32:16,880 Speaker 4: labor market as well, not just with the employment picture 567 00:32:16,920 --> 00:32:20,280 Speaker 4: but also on the wage side. Are things holding up 568 00:32:20,320 --> 00:32:21,600 Speaker 4: reasonably well right now? 569 00:32:22,240 --> 00:32:25,040 Speaker 10: I think we just are also picking up sharply, adding 570 00:32:25,080 --> 00:32:29,480 Speaker 10: onto inflationary pressure. As you know, Japan is an Asian population, 571 00:32:29,760 --> 00:32:31,880 Speaker 10: and the labor shortage is serious. If you come to 572 00:32:31,960 --> 00:32:35,560 Speaker 10: Japan and come to restaurants, you know how the shortage 573 00:32:35,560 --> 00:32:38,520 Speaker 10: of staffs are going on. You need to wait many 574 00:32:38,520 --> 00:32:43,080 Speaker 10: minutes for your plate to come. That means the corporates 575 00:32:43,120 --> 00:32:46,200 Speaker 10: are very willing to hike rates in order to retain 576 00:32:46,280 --> 00:32:49,720 Speaker 10: workers or obtain workers. And I think that kind of 577 00:32:49,920 --> 00:32:55,719 Speaker 10: cycle won't stop as long as Japanese structural labor shortages 578 00:32:55,800 --> 00:32:57,960 Speaker 10: will be solved, and I don't think that's going to 579 00:32:58,000 --> 00:33:01,200 Speaker 10: happen in coming a few years. So therefore the recent 580 00:33:01,520 --> 00:33:06,040 Speaker 10: big movements that the sharp wage raises in Japan will continue, 581 00:33:06,320 --> 00:33:09,000 Speaker 10: and that will feed into the inflation, and so the 582 00:33:09,000 --> 00:33:10,880 Speaker 10: bus needs to be really cautious. 583 00:33:11,240 --> 00:33:14,040 Speaker 4: So having said that, then how would you characterize the 584 00:33:14,040 --> 00:33:17,520 Speaker 4: health of the Japanese consumer right now? Giving everything that 585 00:33:17,560 --> 00:33:21,040 Speaker 4: we're talking about in terms of employment and wage growth, 586 00:33:21,280 --> 00:33:23,040 Speaker 4: how are consumers in Japan feeling? 587 00:33:23,960 --> 00:33:27,200 Speaker 10: I think you need to think about two types of 588 00:33:27,280 --> 00:33:34,000 Speaker 10: consumers which are in opposite directions. One is the younger generation. 589 00:33:34,840 --> 00:33:39,920 Speaker 10: They're enjoying the recent surges and wages because they're going 590 00:33:40,000 --> 00:33:44,280 Speaker 10: to work longer. The corporates are willing to invest in 591 00:33:44,400 --> 00:33:48,640 Speaker 10: those young workers and so therefore, actually their consumption is 592 00:33:48,680 --> 00:33:53,400 Speaker 10: picking up, and we see in the data for leisure 593 00:33:53,480 --> 00:33:57,560 Speaker 10: or entertainment related goods or services are picking up, and 594 00:33:57,600 --> 00:34:00,640 Speaker 10: also their prices are also picking up a push from 595 00:34:00,680 --> 00:34:04,480 Speaker 10: a demand side. That said, now, when you think about 596 00:34:04,480 --> 00:34:09,320 Speaker 10: the older generation, like older than their fifties or sixties, pensioners, 597 00:34:10,320 --> 00:34:13,560 Speaker 10: of course pensioners are not enjoying the wage rises, and 598 00:34:13,640 --> 00:34:19,240 Speaker 10: also in Japanese pension system, there the pensions they receive 599 00:34:19,640 --> 00:34:23,240 Speaker 10: by design won't pick up as much as inflation does, 600 00:34:23,440 --> 00:34:27,680 Speaker 10: so therefore they are struggling to make their end smeets 601 00:34:28,280 --> 00:34:31,359 Speaker 10: in their daily lives, particularly the food prices. The rise 602 00:34:31,440 --> 00:34:35,120 Speaker 10: prices are rising sharp sharper than the general inflation. And 603 00:34:35,200 --> 00:34:38,200 Speaker 10: also the workers in their fifties or forties are not 604 00:34:38,440 --> 00:34:41,880 Speaker 10: enjoying wage raises as much as the younger generation does. 605 00:34:42,440 --> 00:34:47,759 Speaker 10: So I think there's a dual situation going on. For youth, 606 00:34:47,880 --> 00:34:52,960 Speaker 10: the consumption is strong, but for older generation, their sentiment 607 00:34:53,080 --> 00:34:54,880 Speaker 10: is damped by inflation. 608 00:34:55,320 --> 00:34:57,840 Speaker 4: Taro, thank you so much for joining us. Taro Komora 609 00:34:58,120 --> 00:35:01,960 Speaker 4: is senior Japan economist for Bloomberg Economics. So now we 610 00:35:02,040 --> 00:35:05,040 Speaker 4: have a better understanding of the Japanese consumer, let's broaden 611 00:35:05,160 --> 00:35:08,719 Speaker 4: things out a bit. Matthew Driver is the executive vice 612 00:35:08,760 --> 00:35:12,560 Speaker 4: president for services for the apack at MasterCard. He's on 613 00:35:12,600 --> 00:35:15,279 Speaker 4: the line from Sydney. Matthew, thank you so much for 614 00:35:15,280 --> 00:35:18,320 Speaker 4: making time to chat with me. I know consumers across 615 00:35:18,320 --> 00:35:22,400 Speaker 4: the Asia Pacific are as varied as the economies themselves. Japan, 616 00:35:22,880 --> 00:35:25,800 Speaker 4: for example, is dealing with levels of inflation it hasn't 617 00:35:25,800 --> 00:35:29,000 Speaker 4: seen in decades. Other countries, as we know, are dealing 618 00:35:29,040 --> 00:35:32,600 Speaker 4: with very, very different dynamics. But I'm hoping you can 619 00:35:32,640 --> 00:35:36,359 Speaker 4: speak to the overall level of consumer spending that you're 620 00:35:36,400 --> 00:35:38,839 Speaker 4: seeing across the apac What is it right now? 621 00:35:39,640 --> 00:35:39,879 Speaker 7: Yeah? 622 00:35:39,920 --> 00:35:43,000 Speaker 11: Sure, Look, I think and thanks for hosting and having 623 00:35:43,000 --> 00:35:45,600 Speaker 11: me on the show. Look, despite the macro econ of 624 00:35:45,640 --> 00:35:50,359 Speaker 11: a concertainty, consumer spending across APAK remains healthy. I think 625 00:35:50,400 --> 00:35:52,880 Speaker 11: that's driven by a couple of factors that are important. 626 00:35:53,280 --> 00:35:56,280 Speaker 11: You've really got low unemployment, You've had a decent amount 627 00:35:56,320 --> 00:36:01,160 Speaker 11: of real wage growth, and that's really helped right to 628 00:36:01,760 --> 00:36:05,400 Speaker 11: essentially and sure that you've got demand across segments. I 629 00:36:05,440 --> 00:36:08,200 Speaker 11: think our Economics Institute forecast. 630 00:36:07,719 --> 00:36:08,880 Speaker 5: Steady GDP growth. 631 00:36:09,200 --> 00:36:11,680 Speaker 11: So what we are seeing is broad based. You know, 632 00:36:11,920 --> 00:36:14,879 Speaker 11: is the customer is pretty resilient. There's been a little 633 00:36:14,920 --> 00:36:18,080 Speaker 11: bit of stress in some places as rates have been 634 00:36:18,160 --> 00:36:20,359 Speaker 11: higher for longer, but you have to think about there 635 00:36:20,400 --> 00:36:22,680 Speaker 11: are also some longer term drivers that are going to 636 00:36:22,680 --> 00:36:26,360 Speaker 11: be quite positive. Right You've seen interest rates are starting 637 00:36:26,400 --> 00:36:30,160 Speaker 11: to come down number one. Number twos, You've got some 638 00:36:30,239 --> 00:36:33,319 Speaker 11: easing of fuel prices. That's point number two. And point 639 00:36:33,400 --> 00:36:36,439 Speaker 11: number three is you know, goods continue to be cheap. 640 00:36:36,480 --> 00:36:39,960 Speaker 11: China's leaning into the region and so that's helping, you know, 641 00:36:40,160 --> 00:36:41,680 Speaker 11: on the value side as well. 642 00:36:42,040 --> 00:36:44,800 Speaker 4: Do you have a sense of whether US tariff policy 643 00:36:44,960 --> 00:36:49,680 Speaker 4: has adversely impacted consumer sentiment in the region. 644 00:36:50,000 --> 00:36:53,560 Speaker 11: Look, I think that you know, we're really trying to 645 00:36:53,600 --> 00:36:57,240 Speaker 11: think through you know, the impact of you know, towerists. 646 00:36:57,239 --> 00:37:01,040 Speaker 11: I think, look, it's a complicated environment, but AGEA specific 647 00:37:01,040 --> 00:37:03,960 Speaker 11: continues to navigate that there are going to be some 648 00:37:05,000 --> 00:37:10,120 Speaker 11: shaping or some some some alterations and adjustments. But also 649 00:37:10,200 --> 00:37:13,120 Speaker 11: I think while those dynamics post some challenges. They also 650 00:37:13,200 --> 00:37:16,399 Speaker 11: underscore that the region is very resilient and adaptable, right. 651 00:37:16,880 --> 00:37:19,839 Speaker 11: I think that post COVID, some of the supply chains 652 00:37:19,840 --> 00:37:24,279 Speaker 11: have become pretty flexible. That's been very very important. And 653 00:37:24,320 --> 00:37:27,480 Speaker 11: while terriffs have raised input, you know, import costs to 654 00:37:27,480 --> 00:37:33,160 Speaker 11: a certain degree, more price sensitive markets, there's been you know, 655 00:37:33,640 --> 00:37:37,880 Speaker 11: trying to I guess adjust, you know, consumer spending has 656 00:37:37,920 --> 00:37:40,400 Speaker 11: been a little bit of value shifting, like we talked about. 657 00:37:40,960 --> 00:37:43,000 Speaker 11: But what we're really trying to do is make sure 658 00:37:43,080 --> 00:37:47,320 Speaker 11: that you know, we're helping our customers navigate that with 659 00:37:47,320 --> 00:37:50,719 Speaker 11: with insights and intelligence. So I think that despite you know, 660 00:37:50,800 --> 00:37:53,000 Speaker 11: some of that uncertainty, people are probably putting off some 661 00:37:53,040 --> 00:37:57,640 Speaker 11: of the longer term transactions, right, They're really focusing on 662 00:37:58,040 --> 00:38:02,160 Speaker 11: how do they ensure that they're driving value today, shifting 663 00:38:02,200 --> 00:38:04,600 Speaker 11: the patterns of spend a little bit. And so with 664 00:38:04,760 --> 00:38:06,840 Speaker 11: that in mind, and the fact, as I mentioned earlier, 665 00:38:07,200 --> 00:38:12,560 Speaker 11: we are seeing pretty steady demand and that's really reflecting 666 00:38:12,600 --> 00:38:14,320 Speaker 11: the resilience of the consumer overall. 667 00:38:14,480 --> 00:38:16,600 Speaker 4: Matthew, thank you so much for making time to chat 668 00:38:16,600 --> 00:38:20,279 Speaker 4: with me. Matthew Driver is executive vice president of Services 669 00:38:20,320 --> 00:38:23,520 Speaker 4: for the APAC at MasterCard, and I'm Doug Christner. You 670 00:38:23,560 --> 00:38:26,920 Speaker 4: can catch us weekdays for the Daybreak Asia podcast. It's 671 00:38:26,960 --> 00:38:28,840 Speaker 4: available wherever you get your podcast. 672 00:38:29,200 --> 00:38:32,040 Speaker 2: Tom. Thank you Doug. And that does it for this 673 00:38:32,239 --> 00:38:35,000 Speaker 2: edition of Bloomberg day Break Weekend. Join us again Monday 674 00:38:35,000 --> 00:38:37,000 Speaker 2: morning at five am Wall Street Time for the latest 675 00:38:37,000 --> 00:38:39,640 Speaker 2: on markets overseas and the news you need to start 676 00:38:39,640 --> 00:38:43,040 Speaker 2: your day. I'm Tom Buzzby. Stay with us. Top stories 677 00:38:43,040 --> 00:38:46,759 Speaker 2: and global business headlines are coming up right now