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Speaker 1: This is the Bloomberg Daybreak At podcast, available every morning

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Speaker 1: on Apple, Spotify or wherever you listen. It's Wednesday, the

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Speaker 1: fifteenth of May in London. I'm Caroline Hepkitt.

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Speaker 2: And I'm Stephen Carroll. Coming up today, China considers buying

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Speaker 2: millions of unsold homes in a bid to shore up

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Speaker 2: the struggling property sector.

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Speaker 1: Beijing vows to respond to Joe Biden's tariff hikes as

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Speaker 1: putin jets in for talks with President.

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Speaker 2: She plus doubling down on hire for longer. Ahead of

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Speaker 2: today's USCPI print your own Powell signals rates won't be

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Speaker 2: cut for some time.

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Speaker 1: Let's start with a roundup of our top stories.

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Speaker 2: China is considering a plan to save its property market

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Speaker 2: by buying millions of unsold homes. The proposal still at

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Speaker 2: an early stage, but are seeing A China reporter James

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Speaker 2: Mager says it could drastically change the Chinese economic landscape.

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Speaker 3: If this was to happen.

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Speaker 4: It's a huge change for how people live in China.

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Speaker 4: It's a huge change for how the government is working

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Speaker 4: with the housing sector, and it's going to be being

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Speaker 4: massive changes not only for how the government works in

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Speaker 4: the economy, but also how people save their money and

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Speaker 4: where they put their investment. So if this does happen,

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Speaker 4: it is rolled out across the country and the governments

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Speaker 4: of various promises by millions of homes. I think this

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Speaker 4: is a real sea change in not only the housing

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Speaker 4: crisis that we've seen, but also going forward how the

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Speaker 4: economy works.

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Speaker 2: Rebricks James Mager, speaking their sources, say the scheme would

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Speaker 2: see local state owned enterprises buy unsold homes. It's deep

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Speaker 2: discounts using state bank loans. Analyst suggest it would take

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Speaker 2: nearly a trillion dollars to buy all of China's unsold

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Speaker 2: housing inventory.

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Speaker 1: China says new US tariffs amount to quote political manipulation

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Speaker 1: and vowed measures in response. President Joe Biden is increasing

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Speaker 1: import duties to fifty percent for semiconductors, soda cells, and

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Speaker 1: syringes and one hundred percent for electric vehicles imported from China.

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Speaker 5: Por trade depisode with China is down to the lowest

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Speaker 5: level and over a decade, and we're standing up against

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Speaker 5: Chinese government unfair economic practice. Now, when you make tactics

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Speaker 5: like these, they are only you're not competing. It's not

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Speaker 5: companies as cheating and we've seen dammy chair in America.

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Speaker 1: Joe Biden was speaking at the White House. He says

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Speaker 1: the changes will effect around eighteen billion dollars worth of

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Speaker 1: annual imports. A Chinese embassy spokesman said that accusations of

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Speaker 1: Chinese over capacity were a false narrative aimed at hindering

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Speaker 1: the country's economy.

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Speaker 2: Russia's President Vlasimir Putin is heading to China for the

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Speaker 2: first foreign visit of his new term. The two leaders

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Speaker 2: declared a no limits friendship weeks before Putin invaded Ukraine

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Speaker 2: in twenty twenty two. They've met more than forty times

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Speaker 2: since she came to power in twenty twelve. Putin's likely

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Speaker 2: to use the talks with the Chinese president to counter

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Speaker 2: US warnings to China over trade with his country.

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Speaker 1: The US is working on sending Ukraine an additional Patriot

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Speaker 1: missile battery as it loses ground near its second largest city, Harkiv,

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Speaker 1: sources Tel Bloomberg. Ukraine's European allies are also looking to

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Speaker 1: send Kiev additional air defense systems to repel and intensified

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Speaker 1: Russian assault. US Sector of State Anthony Blinken was asked

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Speaker 1: by President Zelenski for two Patriot missile systems. When he

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Speaker 1: visited Kiev yesterday, Blincoln had this message for the country

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Speaker 1: during his trip, I have come.

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Speaker 6: To Ukraine with a message. You are not alone. The

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Speaker 6: United States has been by your side from day one.

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Speaker 6: We are with you today, and we will stay by

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Speaker 6: your side until Ukraine's security, its sovereignty, its ability to

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Speaker 6: choose us on path is guaranteed.

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Speaker 1: Blincoln's reassurance comes after political infighting caused a six month

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Speaker 1: delay in usaid. The funds for a new Patriot system

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Speaker 1: would likely come out of the sixty one billion dollars

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Speaker 1: of assistance recently approved by Congress.

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Speaker 2: The Federals charge your own power has called for patients

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Speaker 2: before the US Center Bank cuts interest rates, Doubling down

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Speaker 2: on his message that borrowing costs need to stay higher

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Speaker 2: for longer, Powell told an audience at the Foreign Bankers

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Speaker 2: Association in Amsterdam that he needs to see more evidence

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Speaker 2: inflation is easing.

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Speaker 7: The first quarter in the United States was notable for

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Speaker 7: its lack of further progress on inflation. We had higher

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Speaker 7: readings in the first quarter, and higher than we expected.

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Speaker 7: We did not expect this to be a smooth road.

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Speaker 7: But these were higher than I think anybody expected, and

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Speaker 7: so what that has told us is that we'll need

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Speaker 7: to be patient and let restrictive policy do its work.

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Speaker 2: Poll also said while he still expects inflation to move

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Speaker 2: down on a monthly basis, he's not as confident as

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Speaker 2: he was. The comments from the FED chair came as

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Speaker 2: markets wait today's USCPI reading. The data expected to show

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Speaker 2: inflationary pressures moderating in April, with core CPI projected to

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Speaker 2: have risen by zero point three percent month on month.

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Speaker 1: Now to some UK news, two thirds of the biggest

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Speaker 1: financial services firms are planning to move investments out of

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Speaker 1: the UK due to the country's poor green record. The

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Speaker 1: UK Sustainable Investment and Finance Association says that the government's

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Speaker 1: repeated backtracking on key green policies and lack of detailed

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Speaker 1: planning is driving ESG focused money away. The nineteen trillion

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Speaker 1: pound Investor Association urged ministers to accelerate transition plans and

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Speaker 1: make pension ESG rules.

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Speaker 2: Clearer, and the UK government is ignoring recommendations to ban

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Speaker 2: the use of NDAs in sexual harassment cases in the workplace.

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Speaker 2: MP's looking into sexism in the financial sector had recommended

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Speaker 2: the move after an inquiry. Bloombergs ta Wa Adabaio has

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Speaker 2: the story.

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Speaker 8: Non disclosure agreements in workplace sexual harassment disputes risk silencing

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Speaker 8: victims and protecting perpetrators. That was the verdict of the

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Speaker 8: Treasury Committee's inquiry into city culture. They're the second group

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Speaker 8: of lawmakers to recommend banning NDA use in haral cases

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Speaker 8: this year, but the government disagrees. Responding to the findings

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Speaker 8: and ministers emphasize the importance of NDAs in some circumstances,

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Speaker 8: particularly when it comes to protecting commercially sensitive information. Harriet Baldwin,

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Speaker 8: chair of the Treasury Select Committee, referred to measures like

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Speaker 8: removing NDAs as logical steps which would have a huge

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Speaker 8: impact in a statement following the news. Despite rejecting the

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Speaker 8: Select Committee's recommendation, the government says it has committed to

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Speaker 8: legislation which would invalidate NDAs if they prevent victims reporting

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Speaker 8: crimes in London. Tia Adebayo Bloomberg Radio.

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Speaker 2: Now at a moment, we'll get more on that Chinese

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Speaker 2: proposal to shore up its troubled property sector and look

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Speaker 2: ahead to market expectations for today's US inflation print. But

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Speaker 2: first another story, or should I say, a number that

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Speaker 2: caught our eye this morning eyewatering. If you've ever had

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Speaker 2: to go through as UK taxpayers spent a total of

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Speaker 2: seven hundred and ninety eight years on hold to HMRC

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Speaker 2: in the last tax year.

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Speaker 1: Okay, that's one tax Okay, that's incredible. I think this

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Speaker 1: has come as an absolute shock in a way in

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Speaker 1: the UK because HMLC in the past has always been

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Speaker 1: quite accessible, very different to the tax system in the

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Speaker 1: United States. So I don't think you can ring anybody up.

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Speaker 1: But HMRC, you know, in the past, was quite easy

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Speaker 1: to access and get your question on your tax form

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Speaker 1: whatever you were filling in answered. But this number after

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Speaker 1: some significant cuts to HMRC.

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Speaker 2: Yeah, that's right. So they're figures in the National Audit

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Speaker 2: Office showing that almost half of calls are going unanswered.

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Speaker 2: It's set to get worse too. The tax Authority set

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Speaker 2: to miss its correspondence targets for a fifth year in

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Speaker 2: a row. And now part of this is down to

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Speaker 2: a shift within HMRC to more digital services, but also

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Speaker 2: demand being up to because more people are paying tax

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Speaker 2: because of fiscal drag, the thresholds being frozen. But you

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Speaker 2: pointed to some of the cuts there. These are actually

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Speaker 2: cuts that were ordered by Richie Sunak when he was

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Speaker 2: chancellor in twenty twenty one. He asked HMRC to find,

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Speaker 2: say things where it's seventy five million pounds a year

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Speaker 2: by twenty twenty four. Twe twenty five is the year

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Speaker 2: that we're in now at target the tax authority has

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Speaker 2: struggled to meet despite cutting staff by nine percent over

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Speaker 2: four years.

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Speaker 1: Yeah, well, this is a story I think of particular

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Speaker 1: interest in the UK.

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Speaker 2: The Treasury has announced extra funding for HMRC after this

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Speaker 2: report coming out, so an additional fifty one million pounds

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Speaker 2: for HMRC to try and tackle this issue, but still

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Speaker 2: would be a shortfall based on the cuts they had

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Speaker 2: to find.

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Speaker 1: Indeed, Isabella Ward has written about this story in depth

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Speaker 1: on the Blue Big Tunnel if you want to know

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Speaker 1: more about hmrc's situation. But that's one of the stories

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Speaker 1: that caught our right today. In the meantime, it's bring

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Speaker 1: you more though on this bloomberg scoop from China that

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Speaker 1: Beijing is now considering a proposal to have local governments

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Speaker 1: buy millions of unsold homes in an effort to shore

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Speaker 1: up the property market. Our executive editor for Greater China,

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Speaker 1: John lu joins us now for more. Hi, John, good morning.

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Speaker 1: Can you tell us about this plan.

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Speaker 3: So, the plan as we understand it that's being considered

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Speaker 3: at the moment, and there's a lot between now and

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Speaker 3: this actually happening, is that the central government would get

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Speaker 3: local governments and state owned enterprises at the local level

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Speaker 3: to go out and buy empty apartments at a very

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Speaker 3: large discount and to fund that with loans from state

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Speaker 3: owned banks. And so the obvious advantage of doing this

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Speaker 3: is the big issue with the property crisis in China

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Speaker 3: right now is a lack of demand from home buyers.

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Speaker 3: Home sales are down forty seven percent from a year

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Speaker 3: ago in the first four months of this year, and

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Speaker 3: the stockpile of homes trying to be sold is somewhere

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Speaker 3: near an eight year highe So this would go very

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Speaker 3: directly to that problem if the government were to choose

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Speaker 3: to do.

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Speaker 2: So, But it would be a pretty dramatic step. Would

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Speaker 2: it be enough to try and address the sort of

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Speaker 2: bigger underlying issues that have affected the broader the economy.

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Speaker 3: I think it would be a dramatic step. The government

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Speaker 3: has already tried this on a very limited basis. There

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Speaker 3: were eight cities around the country that got a little

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Speaker 3: bit of money to try and to go and buy

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Speaker 3: some empty apartments and turn that turn those empty apartments

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Speaker 3: into subsidized homes for lower income families. Would it actually

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Speaker 3: solve the problem? It would help, because I think the

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Speaker 3: problem right now is there is just too many homes

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Speaker 3: and not enough people to living them. And is it

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Speaker 3: going to solve the problem of once people buy new

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Speaker 3: homes or are they going to do with their old homes?

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Speaker 3: And the long term problem, which is we have a

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Speaker 3: population that is shrinking in China, so over the next

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Speaker 3: thirty forty fifty years there are going to be fewer

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Speaker 3: and fewer people who need homes. So it'll help, it

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Speaker 3: won't absolutely solve the problem.

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Speaker 1: Okay, really interesting, John, Look, that's the domestic issue for China.

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Speaker 1: But there's also obviously these spot with the United States.

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Speaker 1: Watching China's response to the latest tariffs from the US,

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Speaker 1: it's seeing resolute measures. What could that look like?

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Speaker 3: I think as Beijing is trying to consider what it

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Speaker 3: needs or should do, I think it's going to have

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Speaker 3: to balance on one hand, the need to show the

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Speaker 3: domestic audience the audience here in China that the government

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Speaker 3: is standing up for China. It's not gonna let Washington

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Speaker 3: bully it around by putting tariffs on Chinese goods. But

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Speaker 3: at the same time, the government also wants the economy

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Speaker 3: to grow faster, and if they want faster growth, they're

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Speaker 3: gonna want fdi. That means going after someone like Apple

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Speaker 3: or Tesla would be in many ways self defeating because

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Speaker 3: those companies employ millions of people in China and manufacturing.

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Speaker 3: To go after them would in effect be shooting yourself

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Speaker 3: in the foot. And so I think they're going to

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Speaker 3: try to find something in between, so very carefully.

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Speaker 2: Okay, Johnny, you are Executive Adger for Greater China, Thank

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Speaker 2: you very much.

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Speaker 1: Now, Joan Powell says the Federal Reserve must be patient

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Speaker 1: before cutting interest rates. The Central Bank chief reiterated his

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Speaker 1: message ahead of today CPI print and after yesterday's producer

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Speaker 1: price data came in hotter than expected. Let's bring in

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Speaker 1: our market's live stratch is Mary Nikola now for more

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Speaker 1: Good morning, Mary, thanks for being with us. Did your

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Speaker 1: own Powell give us any additional hints about his thinking

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Speaker 1: in the speech that he gave in Amsterdam?

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Speaker 9: Overall, Jerome Powell has been very consistent on his messaging

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Speaker 9: that we need to be patient on inflation, we need

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Speaker 9: to be patient when it comes to easing. But one

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Speaker 9: thing has been very clear is that the next step

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Speaker 9: is easing rather than hiking. So that provides some comfort

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Speaker 9: to the markets. Although they might not be ready yet

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Speaker 9: to cut, it's still a clear indication that the next

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Speaker 9: path is easing. So now we just wait for the

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Speaker 9: data to come through.

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Speaker 2: Well, reading into the data that we have already, the

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Speaker 2: PPI data yesterday, what sort of signals were there in

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Speaker 2: that that might help us to inform where the fat

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Speaker 2: goes next.

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Speaker 9: Yeah, it's interesting about PPI because the real key thing

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Speaker 9: that that gets markets excited about PPI is what's going

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Speaker 9: to feed into the core PCE numbers, which is essentially

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Speaker 9: what the Fed watches. And so far the message from

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Speaker 9: yesterday is that there's mixed signals, especially on the components

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Speaker 9: that feed into the PCE, and so we're going to

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Speaker 9: have to wait for CPI and CPI, as you've noted earlier,

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Speaker 9: is expected to moderate, but if it still comes in

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Speaker 9: around three point six percent, which is where the consensus is,

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Speaker 9: it's still relatively high and doesn't give the FED confidence

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Speaker 9: to start thinking about easing just yet, and we'll probably

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Speaker 9: double down on that, you know, higher for longer mantra.

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Speaker 1: Okay. In terms of the reaction then, and we were

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Speaker 1: already seeing markets preparing for the data point, and in

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Speaker 1: fact last month there was also quite a significant market reaction.

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Speaker 1: We've seen the stock and bond rally cool. What are

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Speaker 1: you thinking the reaction may be in markets?

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Speaker 9: Yeah, the main thing is is going to be if

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Speaker 9: it comes cooler than expected, markets are going to get excited.

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Speaker 9: There's there's that's the likely scenario and most likely scenario.

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Speaker 9: I think where it becomes toxic is if you see

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Speaker 9: a combination of if you see higher yield sorry CPI,

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Speaker 9: because activity data is showing that things are slowing down.

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Speaker 9: So if you have a combination of slower activity data

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Speaker 9: and higher prices, you get this narrative and concerns about

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Speaker 9: about stagflation. And that's the opposite of what equities want

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Speaker 9: in terms of UH to rally and to continue to rally.

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Speaker 9: So it's more about any moderation is going to be

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Speaker 9: seen as positive and any sort of uptick is just

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Speaker 9: going to fuel concerns about stagflation.

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Speaker 2: What about concerns around the state of household finances in

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Speaker 2: the US as well? In New York Fare report talking

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Speaker 2: about US househeld debt rising to a record high in

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Speaker 2: the first quarter, borrowers struggling to keep up. Is this

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Speaker 2: a sign of trouble when we're thinking about the inflation

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Speaker 2: out look, you.

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Speaker 9: Know, there's it's it's it's starting to show some of

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Speaker 9: the cracks and some of the implications of higher rates.

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Speaker 9: Obviously we're already seeing it in things like rents and

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Speaker 9: how people just are are are staying and are renting

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Speaker 9: rather than buying because mortgage rates are too high. So

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Speaker 9: there's a there's an element already of that. And then

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Speaker 9: of course when you have household debt increasing, that of

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Speaker 9: course doesn't bode well for the economy because one of

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Speaker 9: the key things that has been fueling the rally in

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Speaker 9: equity has been the resilience of the US consumer. And

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Speaker 9: so actually today US retail sales will be quite important

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Speaker 9: in terms of gauging where is the US consumer at

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Speaker 9: this point, And if you continue to see some improvement

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Speaker 9: in uh in in in activity from the UN consumer,

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Speaker 9: that obviously allays a lot of these concerns, Yeah that

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Speaker 9: we're seeing.

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