1 00:00:00,240 --> 00:00:07,680 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:10,480 --> 00:00:13,400 Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the 3 00:00:13,400 --> 00:00:15,960 Speaker 2: top stories in the coming week from our Daybreak anchors 4 00:00:16,000 --> 00:00:18,640 Speaker 2: all around the world. Straight Ahead on the program, we'll 5 00:00:18,640 --> 00:00:21,280 Speaker 2: look to some key jobs data in the US. I'm 6 00:00:21,360 --> 00:00:22,880 Speaker 2: Nathan Hager in Washington. 7 00:00:23,079 --> 00:00:25,840 Speaker 3: I'm Kline Hepkee here in London, where we're looking ahead 8 00:00:25,840 --> 00:00:29,440 Speaker 3: to the EU sending fresh funds to Ukraine. On what 9 00:00:29,560 --> 00:00:31,680 Speaker 3: comes next in this ongoing rule. 10 00:00:32,000 --> 00:00:35,480 Speaker 4: I'm Doug Krisner, looking at whether Australia's economy will show 11 00:00:35,560 --> 00:00:37,360 Speaker 4: signs of cooling in Q one. 12 00:00:38,360 --> 00:00:42,400 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 13 00:00:42,400 --> 00:00:46,120 Speaker 1: eleven three YEO New York, Bloomberg ninety nine to one, Washington, DC, 14 00:00:46,600 --> 00:00:51,640 Speaker 1: Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Syria 15 00:00:51,920 --> 00:00:55,440 Speaker 1: XM one twenty one, and around the world on Bloomberg Radio, 16 00:00:55,480 --> 00:00:57,680 Speaker 1: dot Com and the Bloomberg Business App. 17 00:01:02,880 --> 00:01:06,040 Speaker 2: Good day to you. I'm Nathan Hager. We begin today's 18 00:01:06,080 --> 00:01:09,360 Speaker 2: program with some key economic data in the US. The 19 00:01:09,400 --> 00:01:12,360 Speaker 2: Labor Department's all important non farm payrolls report for the 20 00:01:12,360 --> 00:01:15,119 Speaker 2: month of May is due out this Friday at eight 21 00:01:15,200 --> 00:01:18,000 Speaker 2: thirty am. Wall Street Time for more on the numbers 22 00:01:18,040 --> 00:01:21,840 Speaker 2: and their impact on Federal Reserve policy. We are joined 23 00:01:21,840 --> 00:01:26,440 Speaker 2: by Bloomberg International Economics and Policy correspondent Michael McKee. We've 24 00:01:26,480 --> 00:01:29,280 Speaker 2: been looking at this labor market talking about low higher, 25 00:01:29,480 --> 00:01:33,040 Speaker 2: low fire for so long, Mike, is this print going 26 00:01:33,120 --> 00:01:35,360 Speaker 2: to be low drama? 27 00:01:36,560 --> 00:01:38,760 Speaker 5: Let's just say I hope you have a high tolerance 28 00:01:38,800 --> 00:01:41,840 Speaker 5: for boredom. At least according to what the economists are 29 00:01:41,880 --> 00:01:45,839 Speaker 5: predicting another low, higher, low fire. The unemployment rate doesn't change. 30 00:01:45,880 --> 00:01:49,800 Speaker 5: Four point three percent is the forecast, and that's basically 31 00:01:50,040 --> 00:01:52,440 Speaker 5: what the Fed is looking at. They're less concerned with 32 00:01:52,520 --> 00:01:57,640 Speaker 5: the number of jobs created, and that will basically change 33 00:01:57,680 --> 00:02:01,280 Speaker 5: as the week goes on towards the jobs number as 34 00:02:01,320 --> 00:02:04,800 Speaker 5: we get additional information, But it doesn't look like we're 35 00:02:04,800 --> 00:02:07,040 Speaker 5: going to have any kind of major change in the 36 00:02:07,160 --> 00:02:10,680 Speaker 5: number of jobs. Remember last month with one hundred and 37 00:02:10,680 --> 00:02:14,400 Speaker 5: fifteen thousand, and at this point, because the labor force 38 00:02:14,480 --> 00:02:16,639 Speaker 5: is shrunk, you need far fewer jobs to keep the 39 00:02:16,720 --> 00:02:20,160 Speaker 5: unemployment rate stable. So they won't worry if we come 40 00:02:20,200 --> 00:02:24,640 Speaker 5: in somewhere anywhere, say between fifty thousand and one hundred 41 00:02:24,639 --> 00:02:27,200 Speaker 5: and fifteen thousand, or if it gets a little if 42 00:02:27,200 --> 00:02:29,400 Speaker 5: it gets a little stronger, that and helps them make 43 00:02:29,400 --> 00:02:30,680 Speaker 5: the case for rate increases. 44 00:02:31,000 --> 00:02:34,239 Speaker 2: Yeah, well, what's been keeping the labor market at this 45 00:02:34,720 --> 00:02:37,360 Speaker 2: kind of simmer that we've seen over the last few months. 46 00:02:37,400 --> 00:02:39,920 Speaker 2: Is it just about uncertainty around the war? Is it 47 00:02:40,120 --> 00:02:42,960 Speaker 2: artificial intelligence? What do you see underneath the hut? 48 00:02:43,240 --> 00:02:46,400 Speaker 5: It's all of that. It's in part the fact that 49 00:02:46,600 --> 00:02:50,760 Speaker 5: the labor force has shrunk. But companies just keep reporting 50 00:02:50,840 --> 00:02:53,840 Speaker 5: over and over again to FED officials that I talked to, 51 00:02:54,080 --> 00:02:56,760 Speaker 5: and what we've seen in earnings reports that they're kind 52 00:02:56,760 --> 00:02:59,400 Speaker 5: of frozen at this point because they're waiting. A new 53 00:02:59,480 --> 00:03:04,359 Speaker 5: round of tear are coming in July, and there's still 54 00:03:04,400 --> 00:03:06,640 Speaker 5: the war going on, and we don't know how long 55 00:03:06,720 --> 00:03:09,800 Speaker 5: that's going to last. All the analysts say, if we 56 00:03:09,880 --> 00:03:12,720 Speaker 5: have a ceasefire, it's still going to take a month 57 00:03:12,800 --> 00:03:15,480 Speaker 5: to two months to get enough stuff flowing through the 58 00:03:15,560 --> 00:03:19,040 Speaker 5: strait to where it needs to go to bring down 59 00:03:19,120 --> 00:03:23,120 Speaker 5: prices significantly. And we're not just talking about oil prices. 60 00:03:23,120 --> 00:03:26,800 Speaker 5: We're talking about things like fertilizer, aluminum, other products that 61 00:03:26,840 --> 00:03:29,440 Speaker 5: haven't been able to get out of there. So companies 62 00:03:29,480 --> 00:03:33,840 Speaker 5: are reluctant to make plans and staff up. And also 63 00:03:34,240 --> 00:03:37,240 Speaker 5: they're dealing, as you said, with the AI situation of 64 00:03:37,800 --> 00:03:41,080 Speaker 5: are we going to need these employees or are we 65 00:03:41,160 --> 00:03:45,280 Speaker 5: going to need add different employees somewhere else or cut 66 00:03:45,800 --> 00:03:48,840 Speaker 5: out a department because the computer can do it. So 67 00:03:48,960 --> 00:03:51,160 Speaker 5: there's a lot of reasons for companies not to make 68 00:03:51,200 --> 00:03:53,080 Speaker 5: any big commitments at this point. 69 00:03:53,200 --> 00:03:56,000 Speaker 2: Yeah, I keep coming back to that comment we heard 70 00:03:56,040 --> 00:03:59,840 Speaker 2: recently from Standard Chartered CEO Bill Winters about lower value 71 00:04:00,120 --> 00:04:05,320 Speaker 2: human capital and how artificial intelligence could impact the financial 72 00:04:05,400 --> 00:04:08,640 Speaker 2: services business. Could we start to see some of that 73 00:04:08,920 --> 00:04:13,200 Speaker 2: reflected in the labor department numbers that we're getting this week. 74 00:04:13,600 --> 00:04:15,600 Speaker 5: I don't think they're going to lay off Jamie Diamond, 75 00:04:15,920 --> 00:04:21,400 Speaker 5: but it's a little early to be able to say that. 76 00:04:21,520 --> 00:04:24,279 Speaker 5: We are seeing that there was less hiring last month 77 00:04:24,360 --> 00:04:30,560 Speaker 5: in financial services. But AI is only beginning here, and 78 00:04:30,200 --> 00:04:34,480 Speaker 5: there really aren't any companies other than AI companies who 79 00:04:34,600 --> 00:04:38,120 Speaker 5: have a reasonable handle on the people that they need. 80 00:04:38,400 --> 00:04:42,160 Speaker 5: And we have seen a lot of AI companies announcing layoffs. 81 00:04:42,240 --> 00:04:45,400 Speaker 5: So that's the one area you could watch. It's going 82 00:04:45,440 --> 00:04:48,040 Speaker 5: to be a while till we see any major change 83 00:04:48,040 --> 00:04:49,800 Speaker 5: in any other area. 84 00:04:49,880 --> 00:04:53,520 Speaker 2: Interesting to hear you mentioned the AI companies talking about layoffs, 85 00:04:53,520 --> 00:04:55,640 Speaker 2: because they're not the only ones that have been putting 86 00:04:55,640 --> 00:04:59,040 Speaker 2: out some pretty high profile layoff announcements. How could that 87 00:04:59,320 --> 00:05:01,640 Speaker 2: potentially be reflected in this month's print. 88 00:05:02,400 --> 00:05:04,960 Speaker 5: Well, the AI people will show up in computers, in 89 00:05:05,000 --> 00:05:09,800 Speaker 5: software and software design, in terms of jobs, in terms 90 00:05:09,839 --> 00:05:15,080 Speaker 5: of other jobs, it's really going to depend on whether 91 00:05:15,279 --> 00:05:19,120 Speaker 5: or not you can tease out an AI effect. Don't 92 00:05:19,160 --> 00:05:22,440 Speaker 5: forget that every company that doesn't do quite as well 93 00:05:22,440 --> 00:05:28,760 Speaker 5: as expected tends to announce layoffs after their earnings because 94 00:05:28,800 --> 00:05:31,320 Speaker 5: they're going to right size their business or something like 95 00:05:31,360 --> 00:05:33,520 Speaker 5: that to try to bring down costs and keep the 96 00:05:33,520 --> 00:05:37,120 Speaker 5: stock price up. So that's not unusual. And the other 97 00:05:37,160 --> 00:05:39,240 Speaker 5: thing that happens is this is a very dynamic labor 98 00:05:39,279 --> 00:05:41,720 Speaker 5: force and there are millions of jobs lost and millions 99 00:05:41,760 --> 00:05:45,480 Speaker 5: of jobs gained each month, and what we talk about 100 00:05:45,560 --> 00:05:49,960 Speaker 5: is the net change. So you'll have all this stuff 101 00:05:50,000 --> 00:05:52,159 Speaker 5: going on in the background and we won't really have 102 00:05:52,279 --> 00:05:55,280 Speaker 5: a good handle on what's happening for a while yet. 103 00:05:55,800 --> 00:05:58,679 Speaker 2: The non farm payrolls report from ay doout this Friday, 104 00:05:58,760 --> 00:06:01,360 Speaker 2: eight thirty am. Well, Street Time, thank you for this, Mike. 105 00:06:01,400 --> 00:06:05,839 Speaker 2: As always, that's Michael McKee, Bloomberg International Economics and Policy correspondent. 106 00:06:06,240 --> 00:06:08,359 Speaker 2: Let's take a look. Now, it's some stocks making news 107 00:06:08,400 --> 00:06:10,960 Speaker 2: in the week ahead. I'm Nathan Hager with Bloomberg Equities 108 00:06:11,000 --> 00:06:14,560 Speaker 2: reporter in Italia Kanijevich, and it looks like this Wednesday 109 00:06:14,600 --> 00:06:15,960 Speaker 2: is going to be the day we see a lot 110 00:06:16,000 --> 00:06:20,919 Speaker 2: of news with a bunch of companies reporting, including Broadcom. 111 00:06:21,440 --> 00:06:24,400 Speaker 2: More of the software story to be told, he in Italia. 112 00:06:24,880 --> 00:06:28,919 Speaker 6: That's right, So yes, Broadcom reports earnings on Judiser, the 113 00:06:28,960 --> 00:06:33,400 Speaker 6: tickets Avgo. You know, lots of expectations, of course for 114 00:06:33,480 --> 00:06:36,719 Speaker 6: this earnings report, because we've heard from CEO who said 115 00:06:36,760 --> 00:06:41,640 Speaker 6: that the company expects to see sales above one hundred 116 00:06:41,680 --> 00:06:45,840 Speaker 6: billion dollars next year. They also said that AI chip 117 00:06:45,880 --> 00:06:49,360 Speaker 6: revenue will be at around ten point seven billion dollars. 118 00:06:49,839 --> 00:06:53,440 Speaker 6: And then if you look back at the latest earnings report, 119 00:06:53,600 --> 00:06:58,160 Speaker 6: we saw that the company posted better than expected quarterly outlook. 120 00:06:58,760 --> 00:07:03,159 Speaker 6: They also announced a solid stock stock buyback program of 121 00:07:03,240 --> 00:07:07,000 Speaker 6: as much as ten billion dollars. We know that companies 122 00:07:07,040 --> 00:07:11,920 Speaker 6: have been buying back their own stocks pretty aggressively this year. 123 00:07:13,040 --> 00:07:17,600 Speaker 6: Analysts are of course really excited by the company's AI 124 00:07:17,720 --> 00:07:22,480 Speaker 6: related revenue. We know that Broadcom expanded agreements with companies 125 00:07:22,840 --> 00:07:27,280 Speaker 6: like Google and Anthropic, and it's also you know, a 126 00:07:27,320 --> 00:07:31,000 Speaker 6: good addition to multi year visibility and contracts. And we 127 00:07:31,080 --> 00:07:35,040 Speaker 6: also saw you know, some optimism across Wall Street analysts 128 00:07:35,080 --> 00:07:40,560 Speaker 6: because on Thursday, Susquehanna Analysts also erased the price target 129 00:07:40,680 --> 00:07:45,520 Speaker 6: on Broadcom to four hundred and ninety from four hundred 130 00:07:45,560 --> 00:07:47,960 Speaker 6: and fifty dollars. And the stock has done really well 131 00:07:48,000 --> 00:07:52,120 Speaker 6: this year on a year today basis, as of Thursday, 132 00:07:52,480 --> 00:07:56,360 Speaker 6: the stock was up by twenty three percent, so it's 133 00:07:56,360 --> 00:07:57,480 Speaker 6: a pretty solid run. 134 00:07:57,720 --> 00:08:00,160 Speaker 2: Yeah, a nice little run there for that stock. So 135 00:08:00,240 --> 00:08:03,160 Speaker 2: we'll be definitely keeping an eye on that one, along 136 00:08:03,200 --> 00:08:06,480 Speaker 2: with another pretty big tech name that's had an even 137 00:08:06,600 --> 00:08:09,920 Speaker 2: better run. This is CrowdStrike, also reporting Wednesday. 138 00:08:10,240 --> 00:08:14,240 Speaker 6: That's right, Yes, so CrowdStrike valuation of course, have searched 139 00:08:15,200 --> 00:08:18,560 Speaker 6: this year, helped by deals to make custom chips for 140 00:08:18,680 --> 00:08:22,160 Speaker 6: companies like open Ai and Anthropic. And again I'm going 141 00:08:22,240 --> 00:08:27,400 Speaker 6: to cite the latest earnings report because CrowdStrike shares kind 142 00:08:27,440 --> 00:08:30,960 Speaker 6: of fluctuated a little bit, but the software company reported 143 00:08:31,440 --> 00:08:35,400 Speaker 6: results that were in line with expectations, and we know 144 00:08:35,640 --> 00:08:40,960 Speaker 6: that this stock, among other software peers were really volatile 145 00:08:41,080 --> 00:08:45,680 Speaker 6: this year because investors were debating potential disruptions coming from AI. 146 00:08:46,280 --> 00:08:51,800 Speaker 6: Cybersecurity stocks in particular were really volatile because Anthropic announced 147 00:08:52,080 --> 00:08:56,000 Speaker 6: new features in its cloud AI model that can scan 148 00:08:56,240 --> 00:09:00,200 Speaker 6: different codes for vulnerabilities. So lots of debates about the 149 00:09:00,200 --> 00:09:06,319 Speaker 6: sustainability of this software sector here in the United States. Nevertheless, 150 00:09:06,320 --> 00:09:09,520 Speaker 6: we also see some optimism on Wall Street. On May 151 00:09:09,559 --> 00:09:14,880 Speaker 6: twenty seventh, Webbush analyst Dan Ives raised the price target 152 00:09:14,880 --> 00:09:19,280 Speaker 6: to crowd Strike Hollings to seven one hundred dollars from 153 00:09:19,320 --> 00:09:23,640 Speaker 6: five hundred and fifty. He maintained outperform rating, and as 154 00:09:23,640 --> 00:09:26,320 Speaker 6: of Thursday, as you mentioned, the stock has been doing 155 00:09:26,360 --> 00:09:29,800 Speaker 6: really well this year. The stock was up by about 156 00:09:29,880 --> 00:09:34,480 Speaker 6: forty three percent, so definitely outperforming broader markets. 157 00:09:34,600 --> 00:09:37,400 Speaker 2: Yeah, well, we know how bullish dan Ives of Webbush 158 00:09:37,600 --> 00:09:41,560 Speaker 2: is across the AI story, so his perspective definitely won 159 00:09:41,800 --> 00:09:46,880 Speaker 2: to pay attention to. Now, before these tech and software 160 00:09:46,960 --> 00:09:49,720 Speaker 2: companies report, we're going to hear from a big name 161 00:09:49,800 --> 00:09:54,480 Speaker 2: in retail before the bell on Wednesday in Macy's how 162 00:09:54,559 --> 00:09:57,079 Speaker 2: are things at Harold Square these days? 163 00:09:57,120 --> 00:10:00,520 Speaker 6: To Tellia, Yes, so you know, I actually also go 164 00:10:00,600 --> 00:10:03,640 Speaker 6: to mases pretty regularly. When you go to the department store, 165 00:10:03,679 --> 00:10:08,040 Speaker 6: it's very crowded, no signs of you know, any consumer 166 00:10:08,240 --> 00:10:13,960 Speaker 6: concerns or recession, but the stock is flat year to date. 167 00:10:14,800 --> 00:10:17,360 Speaker 6: We of course keep an eye on Macees because it's 168 00:10:17,360 --> 00:10:20,079 Speaker 6: also a bell weather because it's such a huge presence 169 00:10:20,080 --> 00:10:24,960 Speaker 6: across the United States. So Bloomberg Intelligence analysts expect that 170 00:10:25,120 --> 00:10:30,360 Speaker 6: sales may meet consensus based on transaction data, comparable sales 171 00:10:30,400 --> 00:10:33,600 Speaker 6: could be somewhere at around one point three percent EPs 172 00:10:33,640 --> 00:10:39,520 Speaker 6: could top expectations. Now Bloomingdale Sales, which is around the 173 00:10:39,520 --> 00:10:44,480 Speaker 6: corner from Bloomberg office, Yes, yes, so they expected that 174 00:10:45,000 --> 00:10:49,160 Speaker 6: sales have risen to low to smid single digits on 175 00:10:49,200 --> 00:10:53,080 Speaker 6: the earning skull. Of course, people will be watching whatever 176 00:10:53,160 --> 00:10:57,080 Speaker 6: macy says about the progress because they including two hundred 177 00:10:57,360 --> 00:11:03,559 Speaker 6: revitalized stores, all things on consumer trends, luxury spending, teriff 178 00:11:03,559 --> 00:11:07,199 Speaker 6: free funds, and of course the outlook. You know, it's 179 00:11:07,200 --> 00:11:10,920 Speaker 6: interesting because Macy's management also introduced a new letter for 180 00:11:11,240 --> 00:11:15,080 Speaker 6: the shape of US economic growth. They expect E shaped 181 00:11:15,160 --> 00:11:19,960 Speaker 6: economic recovery. Oh where you know, wealthy consumers are doing well, 182 00:11:20,520 --> 00:11:26,120 Speaker 6: middle income consumers hanging in, and lower income consumers are struggling. 183 00:11:26,920 --> 00:11:30,760 Speaker 6: So anyway, latest report, by the way, it was really good. 184 00:11:30,800 --> 00:11:34,880 Speaker 6: The company reported better than expected results, but it did 185 00:11:34,920 --> 00:11:37,600 Speaker 6: not help the stock price. Maybe there are lots of 186 00:11:37,600 --> 00:11:41,760 Speaker 6: concerns about consumer trends going forward, maybe something that we 187 00:11:41,800 --> 00:11:42,960 Speaker 6: have not seen yet. 188 00:11:43,320 --> 00:11:47,240 Speaker 2: Yeah, we'll have to think about new alphabet the letters 189 00:11:47,280 --> 00:11:50,520 Speaker 2: to talk about the economy, not just M the ticker 190 00:11:50,800 --> 00:11:55,640 Speaker 2: K but E very interesting. Thank you for this, Natalia. 191 00:11:55,640 --> 00:11:59,959 Speaker 2: That is Bloomberg Equities reporter Natalia Kenijevich. And coming up 192 00:12:00,040 --> 00:12:03,800 Speaker 2: on Bloomberg Daybreak weekend, the EU is sending fresh funds 193 00:12:03,840 --> 00:12:07,439 Speaker 2: to Ukraine. We'll discuss what comes next in the ongoing 194 00:12:07,480 --> 00:12:11,680 Speaker 2: war with Russia. I'm Nathan Hager, and this is Bloomberg. 195 00:12:22,720 --> 00:12:25,800 Speaker 2: This is Bloomberg Daybreak Weekend, our global look ahead at 196 00:12:25,840 --> 00:12:28,400 Speaker 2: the top stories for investors in the coming week. I'm 197 00:12:28,440 --> 00:12:31,439 Speaker 2: Nathan Hager in Washington. Up later in the program, we'll 198 00:12:31,480 --> 00:12:35,080 Speaker 2: look to some key economic data in Australia. But first, 199 00:12:35,240 --> 00:12:37,840 Speaker 2: Ukraine is now in the fifth year of its war 200 00:12:37,880 --> 00:12:42,280 Speaker 2: against Russian invasion. European allies and Canada have largely taken 201 00:12:42,320 --> 00:12:46,600 Speaker 2: over responsibility for financing Kiev's military aid. The country is 202 00:12:46,640 --> 00:12:49,720 Speaker 2: set to receive the first payout from an EU support 203 00:12:49,760 --> 00:12:53,440 Speaker 2: package in June, followed by two further payments later this year. 204 00:12:53,640 --> 00:12:57,000 Speaker 2: Bloomberg Daybreak europe banker Caroline Hepgar has more. 205 00:12:57,360 --> 00:13:00,600 Speaker 3: Nathan, the conflict in the Middle East has pushed Ukraine 206 00:13:00,760 --> 00:13:04,040 Speaker 3: down the agenda, but in June the country is expected 207 00:13:04,080 --> 00:13:08,040 Speaker 3: to start receiving ninety billion euros from the EU. The 208 00:13:08,200 --> 00:13:11,640 Speaker 3: conflict in the Middle East has pushed Ukraine down the agenda, 209 00:13:11,840 --> 00:13:14,959 Speaker 3: but in June, the country is expected to start receiving 210 00:13:15,320 --> 00:13:20,040 Speaker 3: ninety billion euros from the EU. It's vitally needed funding, 211 00:13:20,559 --> 00:13:24,120 Speaker 3: but it will finance a Ukrainian war machine, which has 212 00:13:24,240 --> 00:13:29,520 Speaker 3: surprised its allies with its ability to innovate. Increasingly, Ukraine's 213 00:13:29,600 --> 00:13:34,000 Speaker 3: drone technology is in demand as a cost effective alternative 214 00:13:34,280 --> 00:13:38,520 Speaker 3: for both the United States and NATO. Meanwhile, Russia is 215 00:13:38,559 --> 00:13:42,760 Speaker 3: having defend off attax on its capital, Moscow and its refineries. 216 00:13:43,280 --> 00:13:48,160 Speaker 3: Tony Haupn leads Bloomberg's coverage of Russia's government and economy 217 00:13:48,400 --> 00:13:51,000 Speaker 3: and joins me, Now, Tony, good to speak to you 218 00:13:51,840 --> 00:13:56,120 Speaker 3: a year ago. Who can forget President Trump telling President 219 00:13:56,240 --> 00:14:01,080 Speaker 3: Zelinsky that Russia holds all the cards in what's become 220 00:14:01,240 --> 00:14:05,560 Speaker 3: a historic dressing down in the Oval Office. If Russia 221 00:14:05,880 --> 00:14:09,040 Speaker 3: does hold all the cards, why is this war still 222 00:14:09,080 --> 00:14:09,520 Speaker 3: going on? 223 00:14:10,200 --> 00:14:13,640 Speaker 7: It's a good question. I think the past year has 224 00:14:13,679 --> 00:14:16,880 Speaker 7: demonstrated quite a lot for both Russia and Ukraine about 225 00:14:17,040 --> 00:14:19,600 Speaker 7: how this war is evolving. A year ago, when Trump 226 00:14:19,600 --> 00:14:22,400 Speaker 7: said those things, it was certainly the case that Ukraine 227 00:14:22,480 --> 00:14:24,920 Speaker 7: was up against it. They were just emerging from a 228 00:14:24,920 --> 00:14:29,320 Speaker 7: difficult winter, there were question marks over continued US military supplies, 229 00:14:29,760 --> 00:14:32,360 Speaker 7: and Russia appeared to be on the front foot and 230 00:14:32,440 --> 00:14:37,120 Speaker 7: advancing slowly, if surely, in the east and south of Ukraine. 231 00:14:37,640 --> 00:14:40,000 Speaker 7: But since then quite a lot has changed. I was 232 00:14:40,080 --> 00:14:43,240 Speaker 7: just recently in Kiev, and I was really struck by 233 00:14:43,280 --> 00:14:46,200 Speaker 7: the degree to which people felt a lot more confident 234 00:14:46,280 --> 00:14:49,680 Speaker 7: now about their positions on the battlefield, about their ability 235 00:14:49,720 --> 00:14:52,320 Speaker 7: to push back Russia. And part of that is to 236 00:14:52,320 --> 00:14:55,440 Speaker 7: do with drone warfare. Their innovations in drone warfare are 237 00:14:55,960 --> 00:14:59,400 Speaker 7: equalizing things on the battlefield. They're helping to make up 238 00:14:59,440 --> 00:15:02,200 Speaker 7: for a short of manpower in comparison to Russia that 239 00:15:02,320 --> 00:15:06,000 Speaker 7: Ukraine has always had. And I think they've also realized 240 00:15:06,000 --> 00:15:08,360 Speaker 7: they've come through what was a really brutal winter just 241 00:15:08,400 --> 00:15:10,760 Speaker 7: this last winter by far the harshest of the war, 242 00:15:11,360 --> 00:15:14,440 Speaker 7: and maybe there's some optimism related to the arrival of spring, 243 00:15:14,520 --> 00:15:16,760 Speaker 7: but they saw I think that you know, Russia tried 244 00:15:16,800 --> 00:15:19,440 Speaker 7: to freeze them into submission. There was a sustained campaign 245 00:15:19,440 --> 00:15:23,480 Speaker 7: of strikes against Ukrainian energy infrastructure all through last winter, 246 00:15:23,760 --> 00:15:27,119 Speaker 7: and it didn't really work. It didn't extract any concessions 247 00:15:27,120 --> 00:15:29,600 Speaker 7: from Ukraine. And at the same time, Ukraine has been 248 00:15:29,640 --> 00:15:35,720 Speaker 7: busy developing its own weapons industry, developing its own drone output. 249 00:15:35,920 --> 00:15:38,680 Speaker 7: And it feels now that it doesn't necessarily depend as 250 00:15:38,720 --> 00:15:41,840 Speaker 7: it did before a year ago or so to the 251 00:15:41,840 --> 00:15:44,600 Speaker 7: same degree, at least on the US for weapons that 252 00:15:44,680 --> 00:15:47,400 Speaker 7: it's secured. It's the European funding, so some of the 253 00:15:47,400 --> 00:15:50,120 Speaker 7: pressure has been relieved there. As you will remember, late 254 00:15:50,200 --> 00:15:52,040 Speaker 7: last year there was a big question mark over that 255 00:15:52,640 --> 00:15:55,080 Speaker 7: and Russia seems to be running out of answers, so 256 00:15:55,720 --> 00:15:57,320 Speaker 7: they are feeling a bit more confident. I think that 257 00:15:57,320 --> 00:16:01,160 Speaker 7: they can stand their ground and perhaps even force putin 258 00:16:01,280 --> 00:16:02,920 Speaker 7: eventually to the negotiating table. 259 00:16:03,280 --> 00:16:06,440 Speaker 3: That's interesting that you report on that change in mood 260 00:16:06,520 --> 00:16:10,680 Speaker 3: from having visited the country, and as you say, yes, 261 00:16:11,000 --> 00:16:14,160 Speaker 3: more independence in terms of weapons manufacturing. I thought it 262 00:16:14,200 --> 00:16:17,920 Speaker 3: was an extraordinary number that Ukraine saying that it could 263 00:16:17,920 --> 00:16:21,600 Speaker 3: make as many as four million drones a year. And 264 00:16:21,640 --> 00:16:24,520 Speaker 3: on the Russian side, that victory parade that is an 265 00:16:24,560 --> 00:16:29,440 Speaker 3: annual event very much pared back this year. How has 266 00:16:29,560 --> 00:16:33,160 Speaker 3: Ukraine managed to hold on against you know, as you say, 267 00:16:33,200 --> 00:16:36,840 Speaker 3: a much larger and more powerful country if you just look. 268 00:16:36,720 --> 00:16:39,920 Speaker 7: At the two presidents Zelenski and Putin for example, I mean, 269 00:16:40,040 --> 00:16:43,160 Speaker 7: Zelensky has been traveling quite extensively in recent months. He's 270 00:16:43,160 --> 00:16:46,240 Speaker 7: been in the Middle East, offering, as you've noted, Ukrainian 271 00:16:46,320 --> 00:16:50,200 Speaker 7: drone technology to countries there which are suffering from Iranian 272 00:16:50,840 --> 00:16:55,320 Speaker 7: miss island drone strikes. He's been traveling extensively in Europe. Putin, 273 00:16:55,400 --> 00:16:57,840 Speaker 7: it seems, couldn't even go out onto Red Square safely 274 00:16:58,200 --> 00:17:00,600 Speaker 7: without worrying that there might be Ukrainian own attacks. So 275 00:17:00,960 --> 00:17:04,080 Speaker 7: there's a clear sense that, you know, Russia's actions have 276 00:17:04,119 --> 00:17:06,720 Speaker 7: been far more restricted now than they were even a 277 00:17:06,800 --> 00:17:11,680 Speaker 7: year ago. Ukraine is holding on because I think essentially 278 00:17:11,720 --> 00:17:14,320 Speaker 7: for them, you know, this is an existential fight, right 279 00:17:14,960 --> 00:17:17,199 Speaker 7: if they win this war, or if they prevent at 280 00:17:17,240 --> 00:17:19,560 Speaker 7: least Russia from winning this war, then they get to 281 00:17:19,560 --> 00:17:23,439 Speaker 7: survive as a nation. If Russia wins this war, The 282 00:17:23,480 --> 00:17:26,160 Speaker 7: intention clearly is for Ukraine to disappear as a country. Now, 283 00:17:26,160 --> 00:17:29,280 Speaker 7: that's far more motivating to you as a soldier if 284 00:17:29,320 --> 00:17:32,119 Speaker 7: you're defending your home and your family and your country 285 00:17:32,119 --> 00:17:34,639 Speaker 7: and your beliefs against people who might be there just 286 00:17:34,680 --> 00:17:37,239 Speaker 7: because they're able to earn a lot more money than 287 00:17:37,240 --> 00:17:40,160 Speaker 7: they were earning at home. And Russia has relied very 288 00:17:40,160 --> 00:17:44,679 Speaker 7: heavily on very large recruitment bonuses and salary payments to 289 00:17:44,720 --> 00:17:47,760 Speaker 7: persuade people to sign contracts to join the military, so 290 00:17:48,040 --> 00:17:51,159 Speaker 7: they are more motivated. They are innovating much more quickly 291 00:17:51,160 --> 00:17:54,160 Speaker 7: because they've been obliged to innovate much more quickly. That's 292 00:17:54,200 --> 00:17:55,960 Speaker 7: the only way they can really match up against the 293 00:17:55,960 --> 00:17:59,720 Speaker 7: country which has far more resources and far more people. Russia, 294 00:18:00,080 --> 00:18:03,080 Speaker 7: you know, in any measure, can produce a lot more 295 00:18:03,080 --> 00:18:05,920 Speaker 7: than the Ukrainian economy can in terms of its more economy, 296 00:18:05,960 --> 00:18:09,280 Speaker 7: in terms of defense materials, in terms of soldiers. But 297 00:18:09,359 --> 00:18:12,320 Speaker 7: the way to answer that clearly has been to innovate. 298 00:18:12,400 --> 00:18:15,920 Speaker 7: And we've seen the way Ukraine has developed its whole 299 00:18:16,000 --> 00:18:18,040 Speaker 7: drone industry, which is something now the rest of the 300 00:18:18,040 --> 00:18:20,600 Speaker 7: world is looking on with a degree of envy and 301 00:18:20,680 --> 00:18:23,280 Speaker 7: eager to copy. And we've also seen that they've been 302 00:18:23,359 --> 00:18:25,359 Speaker 7: much more innovative in the way that they've deployed their 303 00:18:25,400 --> 00:18:28,439 Speaker 7: military than Russia. Russia has relied in many respects on 304 00:18:28,480 --> 00:18:31,360 Speaker 7: a kind of Soviet era playbook, where you just keep 305 00:18:31,359 --> 00:18:34,399 Speaker 7: throwing large numbers of people into the fight, pushing forward 306 00:18:34,400 --> 00:18:37,560 Speaker 7: in the hope that eventually your opponent will break. Ukrainians 307 00:18:37,600 --> 00:18:39,600 Speaker 7: have been much more nimble on the battlefield than that. 308 00:18:40,080 --> 00:18:46,360 Speaker 3: Motivation and innovation really interesting. In terms of the finances, 309 00:18:46,600 --> 00:18:52,200 Speaker 3: the EU has decided, now that Hungary has lifted its 310 00:18:52,320 --> 00:18:57,840 Speaker 3: veto to hand over this ninety billion euros in this 311 00:18:58,040 --> 00:19:02,240 Speaker 3: loan package, how easy will it be for Ukraine to 312 00:19:02,240 --> 00:19:04,600 Speaker 3: get all of that money? You know, what are they 313 00:19:04,640 --> 00:19:07,680 Speaker 3: going to use it for in terms of supporting their 314 00:19:07,720 --> 00:19:08,800 Speaker 3: wartime economy? 315 00:19:09,200 --> 00:19:11,840 Speaker 7: Yeah, I mean this has been an absolutely crucial decision. 316 00:19:12,640 --> 00:19:14,880 Speaker 7: There was every prospect that Ukraine was going to run 317 00:19:14,920 --> 00:19:18,440 Speaker 7: out of money by about June if this money hadn't appeared, 318 00:19:18,480 --> 00:19:20,119 Speaker 7: and that would have been very difficult for them to 319 00:19:20,119 --> 00:19:21,879 Speaker 7: pay their soldiers. It would have been very difficult for 320 00:19:21,920 --> 00:19:24,359 Speaker 7: them to keep the economy running as smoothly as it 321 00:19:24,400 --> 00:19:28,280 Speaker 7: currently does. So there's big relief all round in Brussels 322 00:19:28,320 --> 00:19:31,920 Speaker 7: and in Kiev that the blockage of this funding has 323 00:19:31,960 --> 00:19:35,359 Speaker 7: been lifted and it should flow reasonably steadily. Now it's 324 00:19:35,400 --> 00:19:37,639 Speaker 7: a commitment for two years and it will be doled 325 00:19:37,680 --> 00:19:40,439 Speaker 7: out in tranches through this year and next year, and 326 00:19:40,480 --> 00:19:44,000 Speaker 7: that will help Ukraine support itself as a government and 327 00:19:44,040 --> 00:19:48,880 Speaker 7: an economy and a war effort that previously they had 328 00:19:48,880 --> 00:19:52,040 Speaker 7: some doubts about. There are still obviously some other issues. 329 00:19:52,040 --> 00:19:54,800 Speaker 7: They're in talks with the IMF about support packages there, 330 00:19:54,800 --> 00:19:58,560 Speaker 7: and some of that money is dependent on Ukraine making reforms, 331 00:19:58,600 --> 00:20:02,080 Speaker 7: which many in Eliament are opposed to doing because it's 332 00:20:02,119 --> 00:20:04,440 Speaker 7: just difficult to do in a wartime setting if you're 333 00:20:04,720 --> 00:20:08,240 Speaker 7: trying to impose extra cost or a burden of taxes 334 00:20:08,280 --> 00:20:11,200 Speaker 7: on people. But I think there's a general understanding really 335 00:20:11,240 --> 00:20:14,440 Speaker 7: that Ukraine needs this money. It needs to keep functioning, 336 00:20:14,720 --> 00:20:18,280 Speaker 7: because that's part of a general European defense position. 337 00:20:18,400 --> 00:20:18,600 Speaker 1: Right. 338 00:20:18,800 --> 00:20:22,040 Speaker 7: If Ukraine loses this war for lack of funding, it 339 00:20:22,200 --> 00:20:25,080 Speaker 7: just requires everyone else in Europe to spend even more 340 00:20:25,119 --> 00:20:27,960 Speaker 7: than they do now, ramping up their defense spending and 341 00:20:28,000 --> 00:20:31,360 Speaker 7: their defense industries. So in some ways this is viewed 342 00:20:31,359 --> 00:20:33,880 Speaker 7: as an investment really against future spending. 343 00:20:34,440 --> 00:20:39,200 Speaker 3: In terms of the conflict. What might happen next? It's 344 00:20:39,240 --> 00:20:45,400 Speaker 3: a horrible phrase fighting season, but the seasons, as you've indicated, 345 00:20:45,520 --> 00:20:49,000 Speaker 3: play a very big role in the kind of cadence 346 00:20:49,040 --> 00:20:51,760 Speaker 3: of fighting. What do you think might come next? 347 00:20:52,359 --> 00:20:54,800 Speaker 7: Yes, I mean it's inevitable because you know, the winter 348 00:20:54,880 --> 00:20:56,960 Speaker 7: is so harsh there. It's very difficult to move around. 349 00:20:56,960 --> 00:20:59,119 Speaker 7: There's a lot of snow, its very cold. So of 350 00:20:59,119 --> 00:21:01,920 Speaker 7: course then you get spring and everything melts and becomes 351 00:21:02,000 --> 00:21:04,280 Speaker 7: rather muddy, and it's still quite difficult to move. But 352 00:21:04,359 --> 00:21:06,520 Speaker 7: by summer you've got hard ground and people are looking 353 00:21:06,560 --> 00:21:09,320 Speaker 7: to make some progress when that happens, at least to 354 00:21:09,600 --> 00:21:13,959 Speaker 7: improve their positions before the winter weather arrives again. One 355 00:21:14,000 --> 00:21:15,920 Speaker 7: of the interesting things this year has been that there 356 00:21:15,920 --> 00:21:18,080 Speaker 7: was an expectation, I think that you know, Russia was 357 00:21:18,119 --> 00:21:20,320 Speaker 7: going to come out of this winter having bombed Ukraine 358 00:21:20,720 --> 00:21:24,200 Speaker 7: extensively throughout to try and weaken morale and undermine the economy, 359 00:21:24,400 --> 00:21:25,800 Speaker 7: that they were going to come out of this winter 360 00:21:25,880 --> 00:21:28,959 Speaker 7: with some kind of new offensive in spring and summer, 361 00:21:29,240 --> 00:21:32,120 Speaker 7: intending to put pressure on the front line and try 362 00:21:32,119 --> 00:21:36,000 Speaker 7: to break Ukraine in various positions. Ukraine has resisted that 363 00:21:36,240 --> 00:21:39,680 Speaker 7: Russia has not managed in any point on the front 364 00:21:39,720 --> 00:21:42,800 Speaker 7: line to make significant progress. There are still points where 365 00:21:42,840 --> 00:21:44,720 Speaker 7: it is grinding forward, and there are points, it seems 366 00:21:44,720 --> 00:21:47,320 Speaker 7: where Ukraine is managing to push them back, but any 367 00:21:47,400 --> 00:21:50,800 Speaker 7: kind of large scale offensive hasn't occurred, which suggests that 368 00:21:51,080 --> 00:21:53,600 Speaker 7: effectively the whole thing is at a stalemate now on 369 00:21:53,640 --> 00:21:57,359 Speaker 7: the battlefield, and that somewhat explains Russia's decision to revert 370 00:21:57,440 --> 00:22:00,439 Speaker 7: to more intense boling of Kiv that they want to 371 00:22:00,440 --> 00:22:03,440 Speaker 7: try and exert pressure on the civilian population because they're 372 00:22:03,480 --> 00:22:06,680 Speaker 7: not really making much progress against the military. The risk 373 00:22:06,760 --> 00:22:10,040 Speaker 7: there is precisely that the war just grinds on with 374 00:22:10,560 --> 00:22:12,920 Speaker 7: no one able to resolve it and no one able 375 00:22:12,960 --> 00:22:16,639 Speaker 7: to resolve it militarily, and that the diplomacy then sort 376 00:22:16,680 --> 00:22:19,520 Speaker 7: of fails to find some kind of form of words 377 00:22:19,560 --> 00:22:22,119 Speaker 7: that both sides can sign up to. I think that 378 00:22:22,280 --> 00:22:24,639 Speaker 7: is the biggest risk at the moment, because, as the 379 00:22:24,720 --> 00:22:27,520 Speaker 7: US is indicated, there are no active talks going on. 380 00:22:27,880 --> 00:22:30,240 Speaker 7: The US isn't really trying to bring the two sides 381 00:22:30,280 --> 00:22:33,480 Speaker 7: together at this point because its boundwidth is consumed by 382 00:22:33,480 --> 00:22:35,959 Speaker 7: what's going on in Iran and the Middle East, and 383 00:22:36,000 --> 00:22:38,440 Speaker 7: so it's being left to the troops on either side 384 00:22:38,480 --> 00:22:42,719 Speaker 7: to sort of continue their actions, and neither side can 385 00:22:42,760 --> 00:22:45,040 Speaker 7: really demonstrate that they are able to make a decisive 386 00:22:45,080 --> 00:22:48,040 Speaker 7: breakthrough that at least at present will change the course 387 00:22:48,080 --> 00:22:48,520 Speaker 7: of the war. 388 00:22:49,080 --> 00:22:53,280 Speaker 3: As you say, distracted by Iran. How has the US's 389 00:22:53,320 --> 00:22:58,080 Speaker 3: world changed in the war under President Trump in terms 390 00:22:58,119 --> 00:23:03,520 Speaker 3: of diplomatic Is there anything in the offering We started 391 00:23:03,520 --> 00:23:07,440 Speaker 3: by talking about President Charmps meeting with President Zelensky, Maybe 392 00:23:07,440 --> 00:23:11,760 Speaker 3: we should end thinking about the US attitude in all 393 00:23:11,800 --> 00:23:12,080 Speaker 3: of this. 394 00:23:12,920 --> 00:23:15,400 Speaker 7: Yes, I mean, I think secular estate. Marco Rubio's words 395 00:23:15,440 --> 00:23:17,920 Speaker 7: the other day that you know, they seem to be 396 00:23:17,920 --> 00:23:20,280 Speaker 7: the only people who can get this done, but others 397 00:23:20,320 --> 00:23:22,160 Speaker 7: are welcome to try if they want to was kind 398 00:23:22,160 --> 00:23:26,160 Speaker 7: of a slightly sideways dig at Europe's inability to get 399 00:23:26,200 --> 00:23:28,760 Speaker 7: to the table. And one of the things we're currently 400 00:23:28,800 --> 00:23:31,159 Speaker 7: watching for is whether Europe can get its act together 401 00:23:31,560 --> 00:23:35,240 Speaker 7: and find a representative who would then engage with President 402 00:23:35,280 --> 00:23:38,080 Speaker 7: Putin to try and move the diplomacy forward. There's been 403 00:23:38,080 --> 00:23:40,600 Speaker 7: a lot of talk in Europe about re engaging in 404 00:23:40,640 --> 00:23:43,480 Speaker 7: some form with Russia because that's the only way that 405 00:23:43,520 --> 00:23:46,120 Speaker 7: they can really get involved in the diplomacy that ends 406 00:23:46,119 --> 00:23:49,520 Speaker 7: the war. Clearly they're supporting Ukraine and President Keelensky, but 407 00:23:49,560 --> 00:23:53,160 Speaker 7: they don't have engagement with Russia. If that does happen, 408 00:23:53,200 --> 00:23:56,000 Speaker 7: and if they manage to engage in that way, then 409 00:23:57,040 --> 00:23:59,840 Speaker 7: the question for Trump will be whether you know whether 410 00:23:59,840 --> 00:24:02,240 Speaker 7: the US steps back or whether it tries to step 411 00:24:02,280 --> 00:24:04,280 Speaker 7: and they haven't managed to do it. So it's an 412 00:24:04,320 --> 00:24:08,720 Speaker 7: outstanding item in his intro. We'll have to see if 413 00:24:08,760 --> 00:24:11,399 Speaker 7: Europe does find someone, we'll have to see whether Russia 414 00:24:11,480 --> 00:24:14,360 Speaker 7: is willing to engage with that person. And even if 415 00:24:14,359 --> 00:24:19,280 Speaker 7: it is, the outstanding question remains Russia's territorial demands and 416 00:24:19,280 --> 00:24:22,520 Speaker 7: how willing or otherwise Ukraine and not only Ukraine, it's 417 00:24:22,560 --> 00:24:28,840 Speaker 7: allies are to accepting Russian demands. If Russia doesn't feel 418 00:24:28,840 --> 00:24:30,800 Speaker 7: that it can get a deal on the table, then 419 00:24:30,840 --> 00:24:33,040 Speaker 7: put in as indicator that he's ready to keep fighting 420 00:24:33,600 --> 00:24:36,840 Speaker 7: even if there are increasing difficulties, as they clearly are 421 00:24:36,880 --> 00:24:37,920 Speaker 7: in Russia's economy. 422 00:24:39,040 --> 00:24:43,320 Speaker 3: Indeed, yeah, all of this as Europe prepares to disburse 423 00:24:43,400 --> 00:24:48,600 Speaker 3: those funds over to Ukraine in support of their wartime economy. 424 00:24:48,600 --> 00:24:51,800 Speaker 3: But what of the diplomatic efforts, Tony, A pleasure to 425 00:24:51,840 --> 00:24:54,480 Speaker 3: speak to you as always, Thank you so much Tony Halpin, 426 00:24:54,560 --> 00:24:58,840 Speaker 3: who leads Ballomberg's coverage of Russia's government and the economy, 427 00:24:58,880 --> 00:25:01,440 Speaker 3: talking us through the later when it comes to Ukraine. 428 00:25:01,840 --> 00:25:04,240 Speaker 3: I'm Caroline Hepkee here in London and you can catch 429 00:25:04,320 --> 00:25:07,240 Speaker 3: us every weekday morning here for Bloomberg Daybreak Europe. That's 430 00:25:07,280 --> 00:25:10,719 Speaker 3: beginning at six am in London, one am on Wall Street. 431 00:25:10,960 --> 00:25:15,040 Speaker 2: Nathan, Thanks Caroline, and coming up on Bloomberg day Break Weekend, 432 00:25:15,080 --> 00:25:19,200 Speaker 2: we'll look ahead to Australia's first quarter GDP. I'm Nathan Hager, 433 00:25:19,400 --> 00:25:33,840 Speaker 2: and this is Bloomberg. This is Bloomberg day Break Weekend, 434 00:25:33,920 --> 00:25:36,679 Speaker 2: our global look ahead at the top stories for investors 435 00:25:36,760 --> 00:25:39,920 Speaker 2: in the coming week. I'm Nathan Hager in Washington. This 436 00:25:39,960 --> 00:25:43,280 Speaker 2: week we get the reading on Australia's first quarter GDP 437 00:25:43,640 --> 00:25:46,240 Speaker 2: with a closer look, Let's get to Doug Krisner, host 438 00:25:46,320 --> 00:25:48,440 Speaker 2: of the Bloomberg Daybreak Asia podcast. 439 00:25:49,000 --> 00:25:53,320 Speaker 4: Thanks Nathan. Australia's economy has been in an upswing for 440 00:25:53,359 --> 00:25:56,000 Speaker 4: a while, so it seems the question now is whether 441 00:25:56,119 --> 00:25:59,239 Speaker 4: the momentum has shifted. For a closer look, let's bring 442 00:25:59,320 --> 00:26:03,680 Speaker 4: in Bloomberg economist James McIntyre, who covers the Asia Pacific 443 00:26:03,720 --> 00:26:07,560 Speaker 4: for us from our bureau in Sydney and he joins 444 00:26:07,640 --> 00:26:10,440 Speaker 4: us from our studios there. James, thank you so very much. 445 00:26:11,000 --> 00:26:14,800 Speaker 4: What are we expecting to learn from this GDP data. 446 00:26:15,440 --> 00:26:18,040 Speaker 8: Yeah, what we're expecting to see from the late the 447 00:26:18,040 --> 00:26:22,720 Speaker 8: March quarter reading for Australia is how the economy was 448 00:26:22,840 --> 00:26:27,520 Speaker 8: faring in the initial parts and then some of the 449 00:26:27,560 --> 00:26:30,960 Speaker 8: beginnings of the hit from the energy price shock. So 450 00:26:31,119 --> 00:26:33,160 Speaker 8: Austraya is a bit interesting when it comes to how 451 00:26:33,200 --> 00:26:35,760 Speaker 8: the economy is going to get buffeted by the closure 452 00:26:35,760 --> 00:26:38,000 Speaker 8: of the Strait of hor moves. As a very very 453 00:26:38,080 --> 00:26:41,119 Speaker 8: large energy exporter, especially when it comes to natural gas, 454 00:26:41,400 --> 00:26:44,160 Speaker 8: it delivers an export boom, the spike and ore prices 455 00:26:44,200 --> 00:26:48,159 Speaker 8: and the gas market shortages with Qatar being taken offline. 456 00:26:48,600 --> 00:26:51,879 Speaker 8: But as while we export gas, we import all of 457 00:26:51,920 --> 00:26:56,000 Speaker 8: the petroleum products from Asia, and those Asian refinery disruptions 458 00:26:56,160 --> 00:26:59,280 Speaker 8: are costing consumers, so we should see some of the 459 00:26:59,359 --> 00:27:03,640 Speaker 8: beginnings of that within the GDP data. But overall we're 460 00:27:03,720 --> 00:27:06,760 Speaker 8: likely to see the quarterly pace of growth is back 461 00:27:06,800 --> 00:27:09,280 Speaker 8: a bit. We had a very very strong zero point 462 00:27:09,280 --> 00:27:12,840 Speaker 8: eight percent quarter on quarter growth in the last the 463 00:27:12,840 --> 00:27:16,040 Speaker 8: final STANZA of twenty twenty five, that's likely to slow 464 00:27:16,080 --> 00:27:18,640 Speaker 8: down to zero point five or below for this first 465 00:27:18,720 --> 00:27:21,440 Speaker 8: quarter of the year. The real question when it comes 466 00:27:21,520 --> 00:27:24,560 Speaker 8: to the RBA and what it might mean for monetary 467 00:27:24,560 --> 00:27:26,359 Speaker 8: policy and what they're going to be thinking about is 468 00:27:26,760 --> 00:27:29,880 Speaker 8: where is the second quarter for the economy, Because after 469 00:27:29,920 --> 00:27:34,280 Speaker 8: this March quarter data, we've seen consumer confidence at record 470 00:27:34,320 --> 00:27:37,199 Speaker 8: low levels as a result of all of the uncertainty 471 00:27:37,240 --> 00:27:39,159 Speaker 8: stemming from the war with her own. 472 00:27:39,119 --> 00:27:42,640 Speaker 4: So what about the tension between overall economic growth and 473 00:27:43,160 --> 00:27:45,520 Speaker 4: the poll of inflation? I mean, what is happening on 474 00:27:45,560 --> 00:27:46,520 Speaker 4: the inflation front. 475 00:27:47,080 --> 00:27:50,640 Speaker 8: We've had a spike up in inflation, but we've also 476 00:27:50,800 --> 00:27:54,320 Speaker 8: had a real full court press going on from the 477 00:27:54,400 --> 00:27:58,400 Speaker 8: Australian government when it comes to dealing with the fuel crisis. 478 00:27:58,880 --> 00:28:01,680 Speaker 8: So the direct impact of has been petrol prices spiking, 479 00:28:01,800 --> 00:28:06,040 Speaker 8: but the government has given it's halved its tax and 480 00:28:06,119 --> 00:28:09,320 Speaker 8: handback another chunk of tax, which has meant that overall 481 00:28:09,920 --> 00:28:14,920 Speaker 8: petrol prices or gasoline is about level pegging with where 482 00:28:14,960 --> 00:28:17,600 Speaker 8: it was last year in pre war. There's a diesel 483 00:28:17,640 --> 00:28:20,520 Speaker 8: price shock that's hitting the economy. That's when it comes 484 00:28:20,560 --> 00:28:23,080 Speaker 8: to the inflation side of things. The spike up and 485 00:28:23,119 --> 00:28:26,119 Speaker 8: the spike down at the headline level is likely to 486 00:28:26,760 --> 00:28:29,640 Speaker 8: give us a bit of volatility, but we have seen 487 00:28:29,760 --> 00:28:33,520 Speaker 8: a big cushion there from government action. Second round effects 488 00:28:33,560 --> 00:28:35,560 Speaker 8: are going to be really what's interesting over the next 489 00:28:35,600 --> 00:28:38,760 Speaker 8: little while as we see the next six, twelve and 490 00:28:38,800 --> 00:28:41,680 Speaker 8: eighteen months, as we see the diesel hit to the 491 00:28:41,680 --> 00:28:46,440 Speaker 8: economy affecting all of the transport around and Australia is 492 00:28:46,480 --> 00:28:50,760 Speaker 8: a small population, big land rail doesn't get a lot 493 00:28:50,760 --> 00:28:52,880 Speaker 8: of love. It's a lot of trucks driving a lot 494 00:28:52,920 --> 00:28:55,920 Speaker 8: of things around. That's a diesel economy, and also mining 495 00:28:55,920 --> 00:28:59,640 Speaker 8: and agriculture as well, and so when we see diesel 496 00:29:00,320 --> 00:29:03,720 Speaker 8: fertilizer those disruptions, that's going to push up food prices 497 00:29:03,760 --> 00:29:07,120 Speaker 8: down the track. So we've pushed the initial impact of inflation, 498 00:29:07,800 --> 00:29:11,440 Speaker 8: but there's still a few inflation bogies lying in wait 499 00:29:11,480 --> 00:29:13,520 Speaker 8: for us down as we moved through the rest of 500 00:29:13,520 --> 00:29:13,880 Speaker 8: the year. 501 00:29:14,080 --> 00:29:16,200 Speaker 4: So you alluded a moment ago to the fact that 502 00:29:16,240 --> 00:29:19,520 Speaker 4: the consumer seems to be struggling. Obviously energy price is 503 00:29:19,520 --> 00:29:21,680 Speaker 4: a big component in that. But I'm wondering about the 504 00:29:21,760 --> 00:29:23,960 Speaker 4: labor market and how well that is holding up. 505 00:29:25,080 --> 00:29:27,560 Speaker 8: Yeah, So the labor market has been it's been a 506 00:29:27,640 --> 00:29:31,480 Speaker 8: real despite GDP per capita and being negative for quite 507 00:29:31,480 --> 00:29:34,680 Speaker 8: some time and having a GDP per capita recession, and 508 00:29:34,720 --> 00:29:39,080 Speaker 8: so more consumers in the economy has kept the economy 509 00:29:39,080 --> 00:29:41,640 Speaker 8: ticking along. We've actually found jobs for all of those 510 00:29:41,720 --> 00:29:44,440 Speaker 8: migrants as well, and that's been a really strong point 511 00:29:44,600 --> 00:29:47,880 Speaker 8: of the economy for twenty twenty four and twenty twenty five. 512 00:29:47,920 --> 00:29:50,640 Speaker 8: But we've begun to see some of that momentum slow 513 00:29:51,040 --> 00:29:55,160 Speaker 8: We've just had recently, we've had the April labor market 514 00:29:55,280 --> 00:29:59,200 Speaker 8: data and that's shown some cracks emerging and the unemployment 515 00:29:59,280 --> 00:30:02,320 Speaker 8: rate ticking up to its highest level in a couple 516 00:30:02,320 --> 00:30:06,480 Speaker 8: of years. Our view is that's likely to push further. 517 00:30:06,560 --> 00:30:09,880 Speaker 8: There's been some cuts in the recent budget to some 518 00:30:10,080 --> 00:30:13,720 Speaker 8: very employment heavy parts of the economy that the government 519 00:30:13,880 --> 00:30:16,440 Speaker 8: was providing a lot of injecting a lot of money into, 520 00:30:16,800 --> 00:30:20,840 Speaker 8: especially around health, age care, and disability services. Big cuts 521 00:30:20,840 --> 00:30:24,560 Speaker 8: in those areas means that those employment intensive bits of 522 00:30:24,640 --> 00:30:28,200 Speaker 8: economic growth are actually going to pull backwards. And meanwhile, 523 00:30:28,240 --> 00:30:31,680 Speaker 8: we've got resources side of the economy benefiting from higher 524 00:30:31,840 --> 00:30:36,080 Speaker 8: energy prices and some higher commodity prices. There's not a 525 00:30:36,080 --> 00:30:39,120 Speaker 8: lot of jobs when it comes to mining, to digging 526 00:30:39,120 --> 00:30:41,840 Speaker 8: the things out of the ground. And so this swing 527 00:30:41,920 --> 00:30:44,400 Speaker 8: in the economy means that the labor market outlook isn't 528 00:30:44,480 --> 00:30:47,480 Speaker 8: quite as favorable going forward as it's been, and so 529 00:30:47,520 --> 00:30:50,600 Speaker 8: we should see the unemployment rate ticking higher over the 530 00:30:50,640 --> 00:30:51,400 Speaker 8: course of this year. 531 00:30:51,520 --> 00:30:54,560 Speaker 4: I'm wondering about the real estate market. I mean, Australia's 532 00:30:54,880 --> 00:30:59,240 Speaker 4: homes are among the most expensive in the developed world. 533 00:31:00,160 --> 00:31:03,400 Speaker 4: Of home price has been holding up, and is there 534 00:31:03,440 --> 00:31:08,040 Speaker 4: anything that has been done to address the shortage of 535 00:31:08,080 --> 00:31:08,840 Speaker 4: housing supply. 536 00:31:09,880 --> 00:31:13,240 Speaker 8: Well, the government's been trying to get a lot at 537 00:31:13,280 --> 00:31:15,760 Speaker 8: the federal level. The government's been trying to get a 538 00:31:15,800 --> 00:31:20,880 Speaker 8: lot of traction on improving the supply of housing. Some 539 00:31:20,920 --> 00:31:24,719 Speaker 8: of that responsibility rests with the state governments. And in 540 00:31:24,760 --> 00:31:27,760 Speaker 8: that recent budget where we were just discussing before, there 541 00:31:27,920 --> 00:31:30,640 Speaker 8: was a program by the government to inject a lot 542 00:31:30,680 --> 00:31:33,480 Speaker 8: of money into rolling out the infrastructure so that we 543 00:31:33,520 --> 00:31:35,960 Speaker 8: can get some of the greenfield's developments on the edge 544 00:31:35,960 --> 00:31:38,920 Speaker 8: of the city's new homes out the back in new suburbs, 545 00:31:39,840 --> 00:31:43,920 Speaker 8: the infrastructure for those laid out and laid out faster 546 00:31:44,080 --> 00:31:46,000 Speaker 8: so that we can get moving. But there's a lot 547 00:31:46,040 --> 00:31:48,680 Speaker 8: of pressure from the government on states to open up 548 00:31:48,840 --> 00:31:54,320 Speaker 8: planning and the restrictions that are holding back the intensification 549 00:31:54,960 --> 00:31:57,160 Speaker 8: in the inner and middle parts of our cities. That's 550 00:31:57,200 --> 00:31:59,600 Speaker 8: what's really needed to get that housing where the jobs are. 551 00:32:00,000 --> 00:32:02,080 Speaker 8: When it comes to the price side of the economy, 552 00:32:02,600 --> 00:32:06,400 Speaker 8: you've really had a bifurcation, a two speed on two 553 00:32:06,480 --> 00:32:09,880 Speaker 8: different fronts when it comes to the economy. Sydney and Melbourne, 554 00:32:09,880 --> 00:32:13,840 Speaker 8: the big population centers, they have seen how their housing 555 00:32:13,880 --> 00:32:17,400 Speaker 8: markets slow over the course of the last year or so, 556 00:32:17,800 --> 00:32:22,120 Speaker 8: whereas the other smaller capitals Brisbane, Adelaide, Perth, they've seen 557 00:32:22,760 --> 00:32:25,720 Speaker 8: very very strong house price growth. They've been more affordable, 558 00:32:25,760 --> 00:32:29,400 Speaker 8: they've got the resources side of the equation when it 559 00:32:29,400 --> 00:32:33,000 Speaker 8: comes to the upside in the economy, and so those 560 00:32:33,040 --> 00:32:36,080 Speaker 8: housing markets are roaring ahead. But even when we look 561 00:32:36,080 --> 00:32:39,720 Speaker 8: at Sydney and Melbourne, a government politicy to support first 562 00:32:39,720 --> 00:32:44,000 Speaker 8: home buyers and help them overcome the deposit gap by 563 00:32:44,200 --> 00:32:49,160 Speaker 8: the government underwriting five percent deposits for them as has 564 00:32:49,280 --> 00:32:53,800 Speaker 8: actually really pushed up all of the prices that first 565 00:32:53,880 --> 00:32:56,000 Speaker 8: home buyers can reach at the lower and up to 566 00:32:56,040 --> 00:32:59,440 Speaker 8: the middle end of the market. So that's been really 567 00:32:59,520 --> 00:33:02,600 Speaker 8: a strong point for Sydney and Melbourne Whereas ever since 568 00:33:02,680 --> 00:33:06,000 Speaker 8: November last year when it became clear that inflation might 569 00:33:06,040 --> 00:33:09,000 Speaker 8: be stirring a little and the RBA might be beginning 570 00:33:09,040 --> 00:33:11,920 Speaker 8: to take back its rate cuts that are delivered in 571 00:33:11,960 --> 00:33:15,080 Speaker 8: twenty twenty five. It's delivered three so far in twenty 572 00:33:15,120 --> 00:33:17,640 Speaker 8: twenty six. But that top end of the housing market, 573 00:33:17,840 --> 00:33:21,520 Speaker 8: very interest rates sensitive, that has seen a big slide 574 00:33:21,520 --> 00:33:25,120 Speaker 8: down and that's likely to be continuing. As we see 575 00:33:25,920 --> 00:33:29,200 Speaker 8: the announcement from the government around taxation changes to housing, 576 00:33:29,600 --> 00:33:33,080 Speaker 8: it might actually broaden out some of that reticence, some 577 00:33:33,160 --> 00:33:37,560 Speaker 8: of that hit to confidence and see that price softening 578 00:33:38,160 --> 00:33:40,960 Speaker 8: become a little bit more pervasive across the rest of 579 00:33:40,960 --> 00:33:43,040 Speaker 8: the housing market, not just the top end of Sydney 580 00:33:43,040 --> 00:33:43,600 Speaker 8: and Melbourne. 581 00:33:43,720 --> 00:33:46,960 Speaker 4: As long as we're talking about home prices, maybe another 582 00:33:47,080 --> 00:33:51,200 Speaker 4: antipothy and jurisdiction, let's go to New Zealand. Once home 583 00:33:51,280 --> 00:33:55,280 Speaker 4: of the world's biggest housing boom, it now appears as 584 00:33:55,320 --> 00:33:57,920 Speaker 4: though that home prices in New Zealand are in a 585 00:33:58,080 --> 00:34:02,160 Speaker 4: prolonged downturn. Give me a sense of what's happening here. 586 00:34:02,760 --> 00:34:06,520 Speaker 8: Yeah, So the team led by the New Zealand Bureau 587 00:34:06,600 --> 00:34:09,000 Speaker 8: has put out a big take on New Zealand's housing market, 588 00:34:09,040 --> 00:34:12,720 Speaker 8: and what that piece was looking at was the big, big, 589 00:34:14,120 --> 00:34:17,279 Speaker 8: I hate to use the b word bust, but the 590 00:34:17,320 --> 00:34:20,759 Speaker 8: big prolonged decline in New Zealand house prices. So New 591 00:34:20,840 --> 00:34:23,320 Speaker 8: Zealand does have ups and downs in its housing market, 592 00:34:23,440 --> 00:34:26,120 Speaker 8: like every economy, but this has been one of the 593 00:34:26,239 --> 00:34:28,440 Speaker 8: longer ones. And we've seen over about four and a 594 00:34:28,480 --> 00:34:32,600 Speaker 8: half years now since late twenty twenty one. House prices 595 00:34:32,640 --> 00:34:35,520 Speaker 8: has peaked then and they have not recovered and they've 596 00:34:35,520 --> 00:34:39,319 Speaker 8: continued to track sideways. What's happened there is we've had 597 00:34:39,320 --> 00:34:41,920 Speaker 8: a sixteen percent fall from the peak to where we 598 00:34:41,960 --> 00:34:44,840 Speaker 8: are now and things still don't look all that great 599 00:34:46,000 --> 00:34:48,160 Speaker 8: when we think about the inflation that's happened over the 600 00:34:48,200 --> 00:34:52,120 Speaker 8: time since that time, since twenty twenty one, especially that 601 00:34:52,200 --> 00:34:57,040 Speaker 8: inflation shock post Russia's invasion of Ukraine. That real house 602 00:34:57,080 --> 00:35:01,680 Speaker 8: price decline very significant. So many consequences this for the economy. 603 00:35:01,680 --> 00:35:05,279 Speaker 8: But what's driven it, well classic and sorry to be 604 00:35:05,320 --> 00:35:09,400 Speaker 8: an economist here, but supply and demand. So what's happened 605 00:35:09,440 --> 00:35:12,400 Speaker 8: is that in New Zealand's economy it's been in and 606 00:35:12,400 --> 00:35:14,799 Speaker 8: out of recession for the last couple of years. The 607 00:35:14,920 --> 00:35:18,080 Speaker 8: labor market. We've seen the unemployment it's been very weak. 608 00:35:18,120 --> 00:35:22,160 Speaker 8: We've seen elevated unemployment there and net overseas migration, which 609 00:35:22,200 --> 00:35:25,720 Speaker 8: is usually a big positive for New Zealand's economy because 610 00:35:25,760 --> 00:35:28,360 Speaker 8: Australia has been doing well in New Zealand's been weak. 611 00:35:28,480 --> 00:35:30,880 Speaker 8: As a New Zealander or as an Australian, you can 612 00:35:30,960 --> 00:35:34,440 Speaker 8: choose to live and work in either country. That's a 613 00:35:34,480 --> 00:35:37,840 Speaker 8: deal that we have between both economies. We have a 614 00:35:37,840 --> 00:35:40,680 Speaker 8: common economic market. And so what's happened is with the 615 00:35:40,680 --> 00:35:43,839 Speaker 8: weakness in New Zealand, we've seen New Zealanders move over 616 00:35:43,880 --> 00:35:47,560 Speaker 8: to Australia, and when they do that, the demand for housing, 617 00:35:48,080 --> 00:35:51,120 Speaker 8: whether it's the rental market or to purchase is weak there. 618 00:35:51,760 --> 00:35:54,920 Speaker 8: Then New Zealand managed to do what so many countries 619 00:35:54,920 --> 00:35:59,000 Speaker 8: in the anglosphere have struggled with over the recent decades. 620 00:35:59,239 --> 00:36:02,200 Speaker 8: They managed to get there how unlock their housing supply, 621 00:36:02,640 --> 00:36:05,440 Speaker 8: get those regulations that are holding the supply of housing 622 00:36:05,560 --> 00:36:09,360 Speaker 8: back removed in some instances, or really freed up so 623 00:36:09,400 --> 00:36:11,840 Speaker 8: the market could deliver a lot of housing. And it did. 624 00:36:12,200 --> 00:36:14,799 Speaker 8: And so what we've had we've got this combination of 625 00:36:15,040 --> 00:36:18,759 Speaker 8: a recession, a high unemployment rate, weak migration and a 626 00:36:18,800 --> 00:36:22,759 Speaker 8: strong supply of dwellings. Guess what nobody's you know, the 627 00:36:22,840 --> 00:36:26,520 Speaker 8: price is the thing that's correcting there, and it's been 628 00:36:26,560 --> 00:36:27,720 Speaker 8: there for quite some time. 629 00:36:28,239 --> 00:36:31,800 Speaker 4: I'm curious, though, James, about non keyw home buyers, whether 630 00:36:31,840 --> 00:36:35,400 Speaker 4: there has been or was an influx of foreign buying 631 00:36:35,520 --> 00:36:39,560 Speaker 4: and maybe that trend shifted a bit. Is that something 632 00:36:39,600 --> 00:36:41,680 Speaker 4: that we need to consider that was. 633 00:36:41,640 --> 00:36:44,239 Speaker 8: There, That was there, and it was very much at 634 00:36:44,239 --> 00:36:46,839 Speaker 8: the higher end, and you had some big names. There 635 00:36:46,960 --> 00:36:51,160 Speaker 8: was a trend for quite some time for you know, 636 00:36:51,200 --> 00:36:55,840 Speaker 8: some notable figures Silicon Valley, Peter Teel for example, buying 637 00:36:55,840 --> 00:36:59,200 Speaker 8: the New Zealand bug out joints. So if everything goes 638 00:36:59,239 --> 00:37:02,320 Speaker 8: wrong upon a plane and you fly across the Pacific, 639 00:37:02,719 --> 00:37:06,320 Speaker 8: and you'll be safe and sound in New Zealand, the 640 00:37:06,400 --> 00:37:09,200 Speaker 8: land of milk and honey, while whilst the world tears 641 00:37:09,239 --> 00:37:13,080 Speaker 8: itself apart there you know. So that was a trend 642 00:37:13,360 --> 00:37:16,600 Speaker 8: very much something that really pushed up some of the 643 00:37:16,680 --> 00:37:22,280 Speaker 8: higher end prices. The New Zealand government, different governments cut 644 00:37:22,280 --> 00:37:25,319 Speaker 8: back on that, put in place residency restrictions so we 645 00:37:25,360 --> 00:37:29,440 Speaker 8: didn't have that, you know, kind of foreigners just buying 646 00:37:29,520 --> 00:37:33,920 Speaker 8: up and holding these places as a kind of a 647 00:37:33,960 --> 00:37:37,360 Speaker 8: doomsday card. Instead you had to be a resident, and 648 00:37:37,840 --> 00:37:41,400 Speaker 8: so there was that program. The new government introduced a 649 00:37:41,480 --> 00:37:44,520 Speaker 8: Golden visa you could if you brought five million dollars 650 00:37:44,520 --> 00:37:48,400 Speaker 8: worth of funds, you could either purchase a home or 651 00:37:48,480 --> 00:37:51,719 Speaker 8: purchase a business and that would guarantee New Zealand citizenship. 652 00:37:52,040 --> 00:37:53,760 Speaker 8: That didn't really get taken up as well. 653 00:37:54,200 --> 00:37:56,480 Speaker 4: James will leave is there. It is always a pleasure. 654 00:37:56,480 --> 00:37:59,520 Speaker 4: Thank you so very much, Bloomberg economist James McIntyre. He 655 00:37:59,680 --> 00:38:03,400 Speaker 4: covered there is the economies of the Asia Pacific, notably 656 00:38:03,480 --> 00:38:06,399 Speaker 4: Australia and New Zealand. I'm Doug Christner. You can catch 657 00:38:06,480 --> 00:38:10,520 Speaker 4: us for the Daybreak Asia podcast weekdays. It's available wherever 658 00:38:10,560 --> 00:38:12,480 Speaker 4: you get your podcast. Nathan. 659 00:38:12,960 --> 00:38:15,080 Speaker 2: Thanks Doug, and that does it for this edition of 660 00:38:15,120 --> 00:38:18,279 Speaker 2: Bloomberg day Break Weekend. Join us again Monday morning at 661 00:38:18,320 --> 00:38:20,880 Speaker 2: five am Wall Street Time for the latest on markets 662 00:38:20,880 --> 00:38:23,319 Speaker 2: overseas and the news you need to start your day. 663 00:38:23,760 --> 00:38:27,000 Speaker 2: I'm Nathan Hager. Stay with us. Top stories and global 664 00:38:27,040 --> 00:38:30,359 Speaker 2: business headlines are coming up right now.