July 4, 2025 • 38 mins
Bloomberg Daybreak Weekend with Tom Busby takes a look at some of the stories we'll be tracking in the coming week.
- In the US – a look ahead to Delta earnings and a summer travel outlook.
- In the UK – a look ahead to JP Morgan's Jamie Dimon visit to Ireland ahead of the US tariff deadline for Europe
- In Asia – a look at how recent data from China are providing an ambiguous read on the health of the world's second largest economy.
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Episode Transcript
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Speaker 1 (00:02):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our day
Break anchors all around the world. Straight ahead on the program,
the nation's biggest retailers battle it out for your summer
spending dollars, and what earnings from Delta Airlines will tell
us about travel demand Right now, I'm Tom Busby in
New York.
Speaker 2 (00:20):
I'm Caroline Hetka in London as JP Morgan's Jmie Daman
visits Ireland ahead of the US tariff deadline.
Speaker 3 (00:27):
For Europe, I'm Doug Prisner looking ahead to next week
CPI and PPI reports for China.
Speaker 4 (00:36):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three year, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London,
Sirius XM one twenty one, and around the world on
Bloomberg Radio, dot Com and the Bloomberg Business App.
Speaker 1 (01:00):
Good day to you. I'm Tom Busby. We begin today's
program with what's become a Black Friday sales bonanza in
the middle of summer. Amazon's annual Prime Day July sales
event kicks off with Target, Walmart and others joining in.
How much money is at stake? Are Americans expected to
spend like we did before? And what role could the
Trump tariffs play in sales? For more, we bring in
(01:22):
Poonham Goyle, Senior US e Commerce and retail analysts at
Bloomberg Intelligence. Poonham, thank you so much for joining us
this holiday weekend. Millions of Americans gearing up to spend, spend,
spend at the nation's biggest retailers, and this year is
a little different. I think we have a couple of
competing forces. A pullback in consumer spending, no doubt some
(01:44):
people are spending less, and then fears about these Trump
tariffs that are scheduled to kick in this coming Wednesday,
July ninth. What do you see coming up on these
big sales events?
Speaker 5 (01:57):
You know, you said it exactly right. They're really consumers
are pulling back, and consumers are looking for deals. So
what better way to find deals than on Amazon's Prime
Day sales, which now is a four day event versus
a two day event. Historically, deals matter, and hopefully these
deals draw consumers to Amazon to buy what they want.
Speaker 1 (02:20):
Now, this is a lot of money last year in
twenty four American This is, according to eMarketer, fourteen point
two billion dollars. And as you said, this was only
Amazon had a two day sales event. This year, they've
stretched it to four. Do you think we're going to
see that kind of spending.
Speaker 5 (02:36):
I think spending will be up double digits, including on
this Prime Day. Now, the fact that it's four days
and two days, does that mean that you double what
you're expected to get? Probably not double, because there is
spending that still occurs right on the Amazon platform after
Prime Day. But I think what this helps do is
if you think about what's happened since Amazon has introduced
(02:57):
Prime Day, is that other retailers, as you have followed suit.
So Walmart has its deals, Target has its steals, Best
by Wayfair, you name it. But these deals aren't just
two days, they're longer. So by Amazon going from two
days to four days, they're now in play along with
the rest of them for a longer duration. I think
(03:18):
that's really what helps here.
Speaker 1 (03:20):
And Target is seven days, Walmart is a six day event.
I mean, they are real. They're really stretching things here,
aren't they.
Speaker 5 (03:26):
Yeah? Exactly, So you know, Amazon being just two days.
I think it's smart of them to go to four days,
and I do think it'll help them draw higher sales
because it is a longer event.
Speaker 1 (03:36):
Now, Amazon did something I think really smart this year.
They moved up the dates. Last year, i'll say there
was a two day event. It started July sixteenth. This
year it's starting July ninth, and that's an important day
because that's the day that the across the board Trump
tariffs are supposed to kick in, and we know anything
could change before then. But I think it's a savvy
(03:59):
move to move this up because people are afraid. People
are worried. There's a lot of uncertainty about those tariffs,
how much it's going to change, you know, prices on things,
inflation rising, and it looks like everybody else has followed suit.
Speaker 5 (04:15):
Yeah, you're absolutely right. Look, that day is clearly going
to be an important day and we'll find out what
happens with tariffs. But as tariffs are top of mind
on that day, consumers are also at the tip of
their seats looking for deals because if things do change
and if things get more expensive for the consumer, they're
going to want to buy it now. And the Prime
day sale happens to be just that day and for
(04:36):
the next four days.
Speaker 1 (04:38):
Now, this started kind of the dog days of summer.
People were not spending a lot of money. It started
in twenty fifteen with Amazon, and they've grown into maybe
stretching out not only back to school sales, they've early
those up. I mean, this has really become an annual
event along the lines of Black Friday, hasn't it all
(05:00):
these retailers and consumers.
Speaker 5 (05:02):
Absolutely, the Prime Day sale is a big event. It's
not as big as Black Friday, but still a very
big event, and it comes at a key shopping point
in time, right it's right ahead of back to school,
So consumers have the intent to shop, they have the
urgency to shop, they have the need to shop, and
this year especially, they want the deals right. They're looking
(05:23):
to spend less and get more and the only way
to do that is to go shop on Dal Days.
And this is one of Amazon's biggest deal days outside
of Black Friday.
Speaker 1 (05:35):
Now, Amazon now has two hundred and twenty million subscribers,
and really to get the full benefits of these Prime Days,
you have to be a subscriber. What kind of deals
are we talking about and are there ones that stick
out to you that you've seen that could really really
have a big impact on sales.
Speaker 5 (05:54):
So we'll see the deals this week when you know.
Amazon starts launching them this year. They're doing it a
little differently. They're dropping new deals every day on different categories.
So they're being very targeted in how they get consumers
to keep coming back. Right, you don't want to go
shop the first day and then not come back the
second day. So they're being targeted for their deals. In
terms of what the deals will be, I think you're
(06:15):
going to see the same as you've seen before. You're
going to see deals on electronics. You're going to see
deals on Amazon gadgets, whether it's a Kindle or any
of their other devices. You're going to see them use
their Rufus and Alexa AI assistance to help consumers find deals.
So that's the real new thing here is that Amazon
is going to try to have consumers lean into these
(06:37):
AI tools not only just to compare products on their website,
but also to learn about them, get smarter, and really
see the value in them to help them hit Dappa
and buy now.
Speaker 1 (06:48):
Our thanks to Punamgoyle, Senior US e Commerce and retail
analysts at Bloomberg Intelligence. We turn out to the airline
industry with the latest earnings from Delta Airlines, out on Thursday,
just as the summer travel season is in full swing
or is it for more. We're joined by George ferguson Airlines,
Aerospace and Defense, senior analyst with Bloomberg Intelligence. Well, George,
(07:11):
thank you for being here. I want to start with
what you expect to see from Delta second quarter earnings
this week, which comes after blowout earnings for Q one
three months ago. But since then, I think we both
agree a lot has changed in the industry.
Speaker 6 (07:25):
It has, and thanks for having me on. Delta is
always the first airline to report and usually one of
the stronger airlines in the US industry, and we'd expect
the same this time. I think you know, the big
things that we're going to watch is first US domestic travel.
We think US domestic travel is probably cooling. It's the
(07:46):
biggest driver of revenues profits for the airlines, and so
to give us a good sense for how much that
is cooling right now, it's hard for these airlines to
continue to push to higher profitability if that market isn't working.
And we're expecting across the board that the US airlines
are going to have lower profitability than last year. In
(08:09):
the same quarter, we'll also get a first look at
Europe during the summer vacation season that's been super strong
for the big US full service carriers United, Delta, and American.
You know, we suspect that this market's going to cool
as well, although this is probably because of a slowing economy,
the US dollar weakening a bit. We don't think it's
(08:31):
going to fall off a cliff, but we just can't
see it remaining as super strong as it has been.
Kind of suspect that a lot of these travelers book
pretty far in advance. I have sort of a joke
that on Christmas Morning, everybody wakes up, opens their presence
and then decides where they're going to travel to Europe
that summer in the well heeled families of America, And
(08:52):
so we suspect that two q' is probably going to
hang in there pretty well. But we'll be listening closely
for trends for three Q and into four Q because
again we think there's a bit of a lag that
occurs in bookings into Europe. We still think two Q
may provide some insight into some potential softening in that market.
(09:14):
And I think one of the challenges we'll also have
as we look at Delta, like I said, is you know,
we're expecting that domestic market to soften, and we'll see
some of that in Delta's earnings, but it won't be
a good indicator as good an indicator, but we expect
that at the low cost carriers, because the low cost
carriers really catering to a different clientele, we would expect
(09:37):
that anything Delta reports on the domestic industry is going
to be even softer when we get to some of
the low costs like Jet Blue, Southwest Frontier, those kind
of companies.
Speaker 1 (09:49):
Well back to Delta now, they telegraph this softening back
in April their last earnings report, right where they withdrew
a full year guidance because of softer demand. And since then,
I mean, we've seen more unrest in the Middle East,
these White House, you know, policies on migrants, travel bands,
the Trump tariffs, I mean, have things even gotten a
little worse than even you suspected?
Speaker 6 (10:11):
Yeah, I mean I think that the backdrop is getting
is definitely getting more difficult. I don't know that they
totally telegraphed more difficult times ahead. You know, the sense
I got was at earnings there was just so much,
so many things changing in the US right tariffs were
being announced. Everybody wasn't sure what it was going to
do to GDP that I think that the company has
(10:33):
just decided that it was most prudent, maybe easiest, just
to pull guidance for the year. But as we went
through the call, there was you know, a lot of
discussion about how they hadn't seen the softening yet in
many of these markets. But again I agree with you.
I think since then the backdrop has gotten a little
bit worse on all those fronts. You know, again, I
(10:55):
think commentary on the back half of the year won't
be as strong. We'll be listening very closely for that,
but all this takes time to filter through, and so
too Q.
Speaker 5 (11:05):
You know, we expect it.
Speaker 6 (11:06):
To be okay, not more profitable than last year, but okay.
Speaker 1 (11:10):
Now, chances are, if you're traveling this summer, you've already
made your flight and hotel bookings. But if not, could
that mean right now it's July there are solid deals
out there for consumers.
Speaker 6 (11:22):
Again, I think that some of the shortest distance between
booking and travel is typically the domestic market. I would
suspect that there's probably some interesting deals out there right
now for the domestic market, because that's the one I
think we'll get softest sooner. And then I think, you know,
you'll see the airlines discount that try to fill those airplanes.
(11:42):
You know, the way we see sort of revenue management
at the airlines nowadays, all these carriers traditionally have sort
of eight plus percent capacity of every airplane that flies.
You know, those revenue managers will get out there and
try to fill those airplanes at the marginal cost of
the seat, and so, like I said, that means you
could get some pretty interesting opportunities. I suspect on some
(12:04):
of the international travel long haul Latin America, Asia, pac
and Europe, I suspect still a good amount of those
seats have been filled and filled earlier in the year,
and so I think you'll see maybe less great deals
in the marketplace for those, but you'll probably see some well.
Speaker 1 (12:22):
Delta Airlines Q two earnings out this Thursday ahead of
Wall Street's opening bell our Thanks to George Ferguson, Senior analyst,
for airlines, aerospace, and defense with Bloomberg Intelligence and coming
up on Bloomberg day Break Weekend, JP Morgan Chase's Jamie
Diamond visits Ireland head of the US tariff deadline for Europe.
I'm Tom Busby and this is Bloomberg. This is Bloomberg
(12:52):
day Break Weekend, our global look ahead at the top
stories for investors in the coming week. I'm Tom Busby
in New York. Up later in our program, China firms
locked in a race to the bottom when it comes
to pricing artificial intelligence. But first, Jamie Diamond, Chairman and
CEO of JP Morgan, visits Ireland this week, just ahead
of this Wednesday's July ninth deadline for US tariffs, which,
(13:14):
if they go ahead as planned, would add fifty percent
duties to most European goods exported to the US. Ireland,
a major beneficiary of global economic integration. That's, according to
the Finance Minister, is aiming to maintain formidable growth while
balancing European interest with its traditionally strong relationship with America.
(13:34):
For more, we turn to Bloomberg Daybreak anchor Caroline Hepger
in the midst.
Speaker 2 (13:38):
Of a boom in Europe's banking sector. JP Morgan, Chair
and CEO Jamie Diamond, will head to Dublin for talks
with the country's second in command on trade, tariffs and
sustaining economic growth the Banking Store. We'll meet with Ireland's
tournished in effect, the Deputy Prime Minister. Just as geopolitical
uncertainty both drives interest in Ireland's goldilock business climate but
(14:01):
also could pose threats to its tech and farmer industry. Well,
joining me now to discuss is Olivia Fletcher, Boomberg's Dublin
bureau reporter, and here in London Blueberg Senior finance reporter
Laura Noonan. Welcome to both of you and thanks for
being with me. Olivia. To you first. Jamie Diamond has
raised the alarm on macroeconomic risk, on bond markets, on
(14:23):
tariff uncertainty. What do you think he's going to be
talking about and thinking about when he's in Ireland. How
much is Ireland at a risk from all of these Well.
Speaker 7 (14:33):
Big question now is how Ireland could remain competitive. You know,
its whole economic model has been based off attracting and
knowing foreign direct investment internationally, got especially from a lot
of US firms. There are a lot of multinational hubs here,
Apple Visor, a lot of the investment banks here as well,
(14:55):
And the key is going to be staying competitives because
was basically the envy of Europe. You know, it's got
this huge budgets. Last year reaped record thirty nine billion
euros in corporate tax receipts. Albeit they are kind of volatile,
but that's a huge, huge amount of money that has
(15:15):
transformed it from one of europe'spores to one of its richest.
But now it's kind of make an headvise, I guess
for maybe the wrong reasons, because Arland is now directly
in Trump's line of sight. It has one of the
biggest trade imbalances with the US, and Howard Lutnick has
repeatedly singled out Land for its huge SURFLUS. So big question,
(15:36):
I guess is how does Ireland continue to attract and
maintain the foreign direct investment that's kind of funded its coffers,
just as Trump is trying to nawse so many of
those US companies back to American shores.
Speaker 2 (15:50):
Laura A lot of uncertainty then around tariffs and trade
and what that means for Ireland, there.
Speaker 8 (15:55):
Is certainly a lot of uncertainty. What I would say
is Ireland has tried to tread very fine line around
Turfs and around the current Trump administration. So Ireland's always
been in a particular position. I think where it is
economically and politically is also similar to where it is
from a geographic perspective. It is midway between it itself
has been between the EU and between the US, and
(16:17):
there has always been close ties between Ireland and the US,
some of which predate Ireland's EU membership. So I think
Ireland is trying to play a very fine line here.
They are very conscious of not wanting to alienate the
US administration anymore than is definitionally necessary. Because Ireland does
have a low corporate tax base, that low corporate tax
(16:38):
base has attracted a lot of multinational activity, a lot
of US activity, which the US administration believes should be
in the US. So that is a definitional problem. But
beyond that, Ireland is trying to position itself as a
friend to the US while also being a good European
So you won't see the Irish administration making the same
(16:59):
kind of combative statements as what you have seen some
of the other eunations doing. In terms of Jamie coming
to Ireland and Jamie Diamond, JP Morgan, Chase CEO, Jamie
loves Ireland. That's the first thing to say. There are
sometimes it's several times, there are some Americans who love Ireland.
Jamie is one of those. So he loves Ireland. I
(17:19):
think he will be stressing the benefits our of the
Irish economy. He'll be spress stressing all the great things
that the Irish landscape has delivered for JP Morgan, They've
already got a couple of thousand people there. One of
the jokes about Jamie coming to Ireland is that Jamie
will come to Ireland to promise a couple of thousand
jobs and then it's up for everyone else to figure
out how to make that happen, or like how to
(17:40):
walk that back. Like he just loves the place. So
I think he will be stressing the strengths of Ireland
and also trying to encourage Ireland to stay the path.
From a stability perspective, one of the other assets Arreold
has had through the recent geopolitical ups and downs is
that there have been a lot of big elections. There's
been a lot of political shifts in a lot of
big countries and the UK. So last year we had
(18:02):
elections and a lot of major EU countries. We had
elections in the US, there was a lot of public
talk about that. Internationally, we also had Irish elections. Nobody
cared because essentially they rearranged the chairs in a very
similar order to the old chairs. And I think that
stability as well has become an asset. So while it
doesn't make Olivia's life uny easier in trying to excite
(18:22):
people about the Irish elections, it does become a selling
point when you think about companies like JP Morrigan, who
in this world have a lot of uncertainty. I think
people do look for stability, and I think Jamie will
be stressing the stability they have found in Ireland and
will be encouraging the country to continue on that route.
Speaker 2 (18:41):
And of course some of these points were reflected in
some recent interviews that we've had, including my Daybreak Europe
co host co Ankers Stephen Carroll, who sat down with
the Irish Finance Minister Pascal Donacue when Bloomberg opened its
brand new bureau in Dublin. So have a listen to
what on a Hue had to say.
Speaker 9 (19:01):
We have a growth outlook for our economy even now
of to maybe even more than two percent per year.
The reason why these companies have part of their global
supply chains here in Ireland is because we have the skill,
the experience and the competitiveness built up to keep them
in our country, and we will look down at how
we can maintained us even if the trade environment around
(19:24):
it does begin to change.
Speaker 2 (19:26):
So quite a rosy vision then for Ireland's economy, despite
the trade worries from Donahue Olivia, in terms of you know,
the reliance as you say, on corporate tax receipts from
large multinational companies, and also what the government is going
to do with the budget surplus that it's got in
(19:47):
terms of setting up a sovereign wealth fund. What are
the next steps for the Irish government?
Speaker 7 (19:53):
Well, like you say, the picture is perhaps not as
rosy as it once. You know, his Finance Department and
has revised an it's domestic economic outlook, and so has
a central bank. You know, the kind of saying that
while Arland will still see a star plus, the selflus
might not be as high as you know, it was
(20:14):
once anticipated to be. And so the next steps for
the Irish administration are, like I say, to continue to
keep that competitive edge, you know, the Finance Department and
you know, and also Arland's for Indirect Investment Agency. The
idea that keen to stress that while Land has in
the parson have attracted these companies because they are a
(20:35):
strategic tax space. You know, Arland also has a hugely
skilled workforce, and like Law has said as well. Actually
when I went to see the idea recently when the
press conferences, their chair said that Arland stands out as
an oasis of stability to investors. So I think the
key thing for Arland is to you know, remain stable,
(20:56):
which seems like that's something they'll be able to do,
and to continue squirrel and away some of that money
into the sovereign welfare because Island isn't just thinking about
the next three four years. The problems potentially could come
you know, ten years down the line, when you know,
for example, a company might not pull out of Island
right away, but they might just decide not to invest
(21:17):
in a pharmaceutical plant in ten years time. So the
issue isn't necessarily that all these companies are going to
lead right away, it's that what might just not be
there in future, which is harder to measure. So you know,
Ireland is having to look at all kinds of other
ways to continue to attract companies. Also invest more in
research and development. That's quite another thing that's hyped up
on their agenda, things like that.
Speaker 2 (21:37):
Lord to bring you the context also amidst all of
this is that European banks have done incredibly well in
the first half of this year, so there's also that
context to kind of bring into to this that European
banks are again sort of back in focus.
Speaker 8 (21:52):
Yeah, I mean Irish banks are a bit of a
different sector to European banks in the sense that what's
happening there priorly reflects a reprivatization the market. Ireland is
a very particular banking market, so there are basically two
very large banks AIB and Bank of Ireland who dominate
the market one slightly smaller bank. AIB has just returned
to fully private ownership. That has put a lot of
(22:13):
win behind Ireland sales, So I think it's a bit
of a different sector. The Riish banking sector has gone well,
but they also had obviously a very problematic legacy, and
these things do tend to go up in ups and down.
So because they lost a lot of money, they then
tighten their standards a ton. I mean, if you think
about underwriting standard Ireland and probably has some of the toughest.
We have very tough mortgage rules. All those things do
(22:35):
mean that the sector should out performed. So I think
the domestic bank sector is going very well. I did
want to say a word on the foreign banking sector
as well in terms of next steps and what Ireland
is doing. So Ireland will shortly launch its next international
finance strategy. They launched their last one in twenty twenty.
This is basically their strategy to make Ireland they go
to destination for international finance and that will see them
(22:58):
tackle some of the structure or see them they've certainly
been lobbied on some of the structural points. Those are
things like infrastructure. Anyone who's been to Ireland will know
that we do not have a metro from the airport,
which has been a bone of contention. I first wrote
about it in two thousand and four, so there has
been a very there is that there is housing. There
are some issues around tax, both in terms of funds taxation.
(23:19):
We talk a lot about banks, but funds are big
industry in Ireland. Issues around that, issues around the banking
bonus tax. So there are policy issues for the international
finance sector and the international sector more broadly, because we
all care about housing and infrastructure, which I think Ireland
is going to commit to tackling quite soon.
Speaker 2 (23:35):
Olivia a last thought. As with all the other European countries,
Ireland is also under pressure to continue achieving strong economic growth.
Can they continue to deliver that?
Speaker 7 (23:47):
So the forecast suggests, the forecasts from the Department of
Finance and the Central Banks suggests that Ireland will continue
to grow, but at a slower pace. So while Onland
may continue to you know, like Laura said, there.
Speaker 2 (24:01):
Are a lot of roadblocks to that.
Speaker 7 (24:04):
That actually some of the biggest points that the multinationals raised,
we're violand you know, things like fix and infrastructure, energy grid,
increase in housing starts, water supply. So while Island is
probably can of continue to grow, there are definitely roadlocks
to that and that's probably Areland's biggest challenge right now.
Speaker 2 (24:24):
So in terms of the economic growth picture your view, Laura.
Speaker 8 (24:29):
Yeah, so I think without putting in too much about
Green Jersey on is where saying Ireland had the half
fastest growth rate of any country in the EU in
the first quarter and is expected to have one of
the highest growth rates economically, So while it will be
lower than it has been, it will still be one
of the highest in the EU. Yeah.
Speaker 2 (24:44):
Absolutely, Laura, thank you so much for being with us
today here in the radio studio Blueberg Senior Finance Reporter
Laura Noonan, And in Dublin our Dublin bureau reporter Olivia Fletcher.
Speaker 1 (24:54):
Thank you, thanks Caroline. And coming up on Bloomberg day
Break weekend, how China's AI drag risk choking each other.
Speaker 10 (25:02):
Whenever a new craze emerges, there's always just so many
rivals that sort of come out of the woodwork ready
to pounce. And now these sort of same forces are
really in full swing in the booming artificial intelligence industry,
and these AI firms have really been focused on this
sort of classic playbook, which is scaling up their user
bases and racing for market share.
Speaker 1 (25:19):
I'm Tom Busby and this is Bloombery. This is Bloomberg
day Break Weekend, our global look ahead. At the top
stories for investors in the coming week. I'm Tom Busby
in New York. Recent data out of China providing an
(25:41):
ambiguous read on the health of the world's second largest economy.
With that, investors will be closely watching the next round
of inflation data out of Beijing, and for a preview,
let's get to the host of the Daybreak Asia podcast,
Doug Krisner.
Speaker 3 (25:54):
Tom. Many recent data points for the Chinese economy have
been mixed in the last week that saisheen manufacturing PMI
for June seem to improve into expansion. Bloomberg Economic says
this is a reflection of the truth in the US
China trade war. However, the latest flash reading from China
beige Book International shows slowing in June. Most sectors, according
(26:17):
to China Beige Book, weakened as the result of declining
revenue and profits, as well as falling prices and fewer hirings.
Now in the week ahead, we'll get fresh data on
inflation in the form of both the consumer price and
producer price indices for a closer look. Now, I'm joined
by Shazad Kazi. He is the COO also Managing director
(26:38):
at China beij Book International. When we talk about price
activity in China, I'm tempted to use the term deflation,
but maybe that's a bit overused. Can we still use
that term to characterize what's going on on the mainland?
Speaker 11 (26:52):
If you look at the producer side of the equation,
there's no question about the fact that there has been
deflation in and it's tied into the whole concept of
excess capacity and companies having to cut prices to sell
and so forth. But if you look at their CPI measure,
and especially if you look at core CPI, what you
have got going on and the official data even is
(27:14):
a lot of disinflation rather than outright deflation. But the
problem is that there is a profitability challenge in China,
and fundamentally there's a price war going on in so
many sectors that that's what's driving depressing a lot of
those indicators.
Speaker 3 (27:27):
So is this merely an issue of overcapacity or is
there something else that we need to unpack here?
Speaker 11 (27:34):
A lot of it is certainly over capacity. Chinese industrial
sector has produced so much, whether it's you're talking about steel, aluminum, copper,
whether you're talking about cars or evs, now that every
company feels a pressure to cut cut cut prices in
order to sell domestically and even more importantly, to sell abroad,
which is where Chinese overcapacity problem comes in. They cut
(27:54):
prices to the point where every other countries companies tend
to not be very competitive, and then that's they fled
their goods. But ultimately comes back in the form of
weak industrial profits and it comes back in the form
of this disinflation or oftentimes deflation challenge that we're talking
about in China.
Speaker 3 (28:11):
Is there an effective policy response Beijing should employ to
kind of begin to turn things around or is it
more a matter of things being in place right now?
But global markets need to be a little bit more patient.
Speaker 11 (28:24):
So there's no question. You know, this week we got
some policy statements out criticizing these price wars and saying
we have to push back on them by authorities in China.
But you know the reality is that there's no incentive
structure there. As a matter of fact, the incentive structure
is the quite opposite. There's no pressure ultimately on many companies,
especially large state owned companies, to turn a profit. Ever,
(28:45):
and so as long as you have access to cheap
or free loans from banks or you know, that Beijing
is going to bail you out. There's absolutely no desire
to say we have to whether we cannot do these
price cutting. As a matter of fact, the whole reason
you've got this price cutting is because many sectors are
overly subsidized in that country.
Speaker 3 (29:02):
When I think of problems with price activity, I think
of the property market, where in many cases prices are
continuing to decline. Is that still the case?
Speaker 11 (29:11):
That is, unfortunately the case where you had a brief
period here where prices were beginning to rebound and even
though year over year they were looking weak, you know,
the weakness was certainly starting to dissipate. I would say
that is going away, and you are getting reports at
least directionally saying that prices are again starting to decline.
Speaker 3 (29:31):
Based on the data that you have access to, what
are your expectations for the CPI and PPI prints that
we're going to be looking at in the week ahead.
Speaker 11 (29:39):
Look, if you were to base it strictly on what
we're seeing here, where we're seeing outright, you know, slow
downs in our in our sales prices and disease and
our input costs and disease. That tells us that the
CPI and PPI prints. We should get lower prints there,
we should probably get you know, CPI falling and PPI
probably contracting further.
Speaker 3 (29:58):
But this is nothing really that the cent Bank can address,
or can the PBOC change policy in a way to
kind of reverse this. It seems to be coming back
time and again to the issue of sentiment. Whether you're
talking about consumers or businesses, the sentiment levels have been
just too weak.
Speaker 11 (30:15):
That's exactly right. The sentiment levels have been too weak.
And the problem is that monetary policy in China for
a while now has not been producing the kinds of
results you would expect it to. And by that I
mean that interest rates keep coming down. Yet companies generally
speaking are not particularly inclined to borrow. So in May,
for example, we saw this nice jump a multi high
(30:36):
from a monthly standpoint in our borrowing data. It came
back down to earth in June. So you don't have
this sustained rise in corporate borrowing for several years over
the last almost five years as a matter of fact, now,
because the economy overall is quite weak. So if you're
not investing a lot, if you're not hiring a lot,
if that r and d isn't there. The desire to
(30:57):
borrow is not going to be there. It makes no
sense to leverage.
Speaker 3 (31:00):
In a moment or two, we're going to be talking
about the AI story in China. When you look at
the degree to which tech companies, particularly those that have
been playing in the AI space, have been contributing to growth,
is that moving the needle in any way, not in.
Speaker 11 (31:16):
Any kind of meaningful way where you would see it
showing up I think in big macroeconomic data points. But
the reality is on the ground, the environment is very exciting.
China is doing what they've done with for example, EVS
and other sectors. They are increasingly figuring out ways to
subsidize the indigenization of chip production, AI, quantum, et cetera.
(31:36):
So they're throwing a lot of money at it. You've
got companies that are ipoing in these fields. So certainly
in China, the tech space and the tech industries and
is having an exciting moment.
Speaker 3 (31:45):
Shazad will leave it there, Thank you so much. Shazad
Kazi also Managing director at China Basebook International. And as
I promised, let's shift gears. China's crowded AI landscape is
not only fueling rapid innovation, but fierce competition as well,
and it's that competition that seems to be dragging down profits.
(32:05):
Let's check in with Bloomberg opinion columnist Catherine Thorbek. She
covers all things tech in Asia, and she joins us
from our bureau in Tokyo. Catherine, thank you for making
time to chat with me about this. Give me a
sense of perspective on this. How recent has this kind
of tension between innovation and competition been developing in Ai
in China?
Speaker 10 (32:26):
This is really a story we've seen play out many
times in the history of China's tech sector. You know,
competition is notoriously fierce in the world's second largest economy,
So whenever a new craze emerges, there's always just so
many rivals that sort of come out of the woodwork
ready to pounce. And for example, we saw this in
the food delivery market. There's some food delivery wars that
were going on, and it really became a race to
(32:47):
the bottom when it comes to pricing. You know, we
saw bubble tea being sold for less than twenty five
cents last month, and we also saw it in the
electric vehicle market, which is sort of left behind a
trail of zombie cars. And now, oh, these sort of
same forces are really in full swing in the booming
artificial intelligence industry, and these AI firms have really been
focused on this sort of classic playbook, which is scaling
(33:09):
up their user bases and racing for market share, and
the result has sort of been this rat race. You know,
they're at each other's throats when it comes to pricing,
and it's really become a race to the bottom. But
I think a key difference here is that nobody has
actually figured out has really cracked the key to getting
consumers to pay for these services. So it makes the
issue of monetization or a path to profitability seem a
(33:31):
really long way off. And this is really unique to
China's tech sector. You know, in the States, there's in
Silicon Valley, there's sort of a smaller number of large
players that really dominate the market and they really have
control over pricing, whereas in China, you know, there's just
so many smaller players and as well as the big
tech companies, so competition has been really really fierce, and
(33:51):
I'm just not sure how sustainable it is.
Speaker 3 (33:53):
I'm just wondering when you talk about big tech companies,
I think of Ali Baba, and you would expect maybe
that company or companies like Baba to have some sort
of advantage.
Speaker 10 (34:03):
That's right. So Ali Baba and Byteedance and Tencent, these
sort of big tech players, I think they really can
play the long game and they can sort of sort
of weather this storm a little bit better than these
so called little dragons, which are these sort of startups
that are really driving innovation in China's tech ecosystem. And
so I think the big tech players are definitely in
a better position. But I also think that's a little
(34:24):
bit unfortunate because we really see sort of the biggest
breakthroughs in AI come from these smaller startups, which I
think are at higher risk.
Speaker 5 (34:30):
Here.
Speaker 3 (34:31):
Does the government have a view on what's happening?
Speaker 4 (34:33):
Do you think so?
Speaker 10 (34:34):
I think post deep Seek, there's just been a lot
of exuberance. There's been a lot of top down support
for the AI sector, and so it's sort of driving
this And in some ways it's a double edged sword,
you know, because there's so much excitement for AI and
so much top down support, it has really been driving
widespread adoption of AI services and AI tools throughout China,
which the government wants, but I think it definitely puts
(34:56):
these companies in a crunch when it comes to sort
of figuring out how to make money.
Speaker 3 (35:00):
So when you talk about adoption, is it primarily on
the part of consumers using more AI related devices or
is it in industry as well?
Speaker 10 (35:09):
That's right, So I think consumers definitely demand for AI
services and tools is red hot. You know, we see
so many chatbots, so many people using deep seak across
you know, local governments and across even hospitals. So I
think the adoption has been widespread. And the way I
kind of look at it when we talk about the
sort of top down support was you know, I'm not
going to remember which US president it was, but there
(35:30):
was a president that put electricity in the White House
to sort of signal that, you know, this technology is
safe and we can you know, rapidly adopt it. And
I think there have been a lot of top down
signals coming from Beijing and coming from Hijinping about how
AI is you know, the future and we shouldn't be
afraid of it. And I think we've really seen that
play out when it comes to consumers really sort of
embracing this technology and not being afraid of it and
(35:51):
sort of rushing to adopt it.
Speaker 3 (35:52):
One of the big questions in the States as it
relates to the investments being made in artificial intelligence, is
the ROI turn on those investments. Do we have any
visibility into whether or not this is having kind of
a similar conundrum in China right now?
Speaker 10 (36:09):
Right so, I really think that's sort of the biggest
existential threat hanging over sort of the entire AI ecosystem
in China is that there really is not a clear
path to profitability, and there's not even a clear path
to sort of monetization and making money off of consumers.
You know, so many of these chatbots are being offered
for free, and because you know, competitors are offering them
(36:29):
for free, it basically peer pressures all of the companies
to do the same. And I think there's one statistic
that our Bloomberg Intelligence colleagues wrote which was that I
think all of the top ten AI chat bots at
China generated just one million dollars in revenue from Apple's
iOS app store in twelve months, and during that same
(36:50):
time period, open AI's chat GBT garnered six hundred and
sixty nine million dollars in iOS revenue. So that's quite
a big difference, and that's just one chatbot compared to
ten of So what do.
Speaker 3 (37:01):
We know about the rate of failure here? I mean,
do we have enough data to begin to kind of
quantify that?
Speaker 10 (37:08):
So I think it's too soon to tell. Like I said,
there's you know, this top down support, and there's just
this insatiable hype, especially in the wake of Deep Seek,
and I think for now that's been a really strong
propellant of the AI sector. You know, a former government
official in China last week said that the nation is
on the cusp of generating more than one hundred Deep
Seek like breakthroughs. But I think, you know, if you
look at more than one hundred deep Seeks, you know,
(37:29):
what does that actually mean. That means such fierce competition,
And so I think in the long run, we may
see at least one hundred you know, zombie AI tools
or zombie AI agents. But I think, you know, that's
still a long way off. And for now, you know,
this hype is really driving a lot of exuberance, But
we'll have to see how it plays out.
Speaker 3 (37:47):
Catherine, Thank you so very much. It's always a pleasure.
That is Catherine Thorbeck, Bloomberg opinion columnist. She covers Asia
tech for us here at Bloomberg, and I'm Doug Chrisner.
You can catch us weekdays for the Daybreak Asia Pod.
It's available wherever you get your podcast.
Speaker 1 (38:03):
Tom, Thank you, Doug. And that does it for this
edition of Bloomberg day Break Weekend. Join us again Monday
morning at five am Wall Street Time for the latest
on markets overseas, in the news you need to start
your day. I'm Tom Buzzby. Stay with us. Top stories
and global business headlines are coming up right now.
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our day
Break anchors all around the world. Straight ahead on the program,
the nation's biggest retailers battle it out for your summer
spending dollars, and what earnings from Delta Airlines will tell
us about travel demand Right now, I'm Tom Busby in
New York.
Speaker 2 (00:20):
I'm Caroline Hetka in London as JP Morgan's Jmie Daman
visits Ireland ahead of the US tariff deadline.
Speaker 3 (00:27):
For Europe, I'm Doug Prisner looking ahead to next week
CPI and PPI reports for China.
Speaker 4 (00:36):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three year, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London,
Sirius XM one twenty one, and around the world on
Bloomberg Radio, dot Com and the Bloomberg Business App.
Speaker 1 (01:00):
Good day to you. I'm Tom Busby. We begin today's
program with what's become a Black Friday sales bonanza in
the middle of summer. Amazon's annual Prime Day July sales
event kicks off with Target, Walmart and others joining in.
How much money is at stake? Are Americans expected to
spend like we did before? And what role could the
Trump tariffs play in sales? For more, we bring in
(01:22):
Poonham Goyle, Senior US e Commerce and retail analysts at
Bloomberg Intelligence. Poonham, thank you so much for joining us
this holiday weekend. Millions of Americans gearing up to spend, spend,
spend at the nation's biggest retailers, and this year is
a little different. I think we have a couple of
competing forces. A pullback in consumer spending, no doubt some
(01:44):
people are spending less, and then fears about these Trump
tariffs that are scheduled to kick in this coming Wednesday,
July ninth. What do you see coming up on these
big sales events?
Speaker 5 (01:57):
You know, you said it exactly right. They're really consumers
are pulling back, and consumers are looking for deals. So
what better way to find deals than on Amazon's Prime
Day sales, which now is a four day event versus
a two day event. Historically, deals matter, and hopefully these
deals draw consumers to Amazon to buy what they want.
Speaker 1 (02:20):
Now, this is a lot of money last year in
twenty four American This is, according to eMarketer, fourteen point
two billion dollars. And as you said, this was only
Amazon had a two day sales event. This year, they've
stretched it to four. Do you think we're going to
see that kind of spending.
Speaker 5 (02:36):
I think spending will be up double digits, including on
this Prime Day. Now, the fact that it's four days
and two days, does that mean that you double what
you're expected to get? Probably not double, because there is
spending that still occurs right on the Amazon platform after
Prime Day. But I think what this helps do is
if you think about what's happened since Amazon has introduced
(02:57):
Prime Day, is that other retailers, as you have followed suit.
So Walmart has its deals, Target has its steals, Best
by Wayfair, you name it. But these deals aren't just
two days, they're longer. So by Amazon going from two
days to four days, they're now in play along with
the rest of them for a longer duration. I think
(03:18):
that's really what helps here.
Speaker 1 (03:20):
And Target is seven days, Walmart is a six day event.
I mean, they are real. They're really stretching things here,
aren't they.
Speaker 5 (03:26):
Yeah? Exactly, So you know, Amazon being just two days.
I think it's smart of them to go to four days,
and I do think it'll help them draw higher sales
because it is a longer event.
Speaker 1 (03:36):
Now, Amazon did something I think really smart this year.
They moved up the dates. Last year, i'll say there
was a two day event. It started July sixteenth. This
year it's starting July ninth, and that's an important day
because that's the day that the across the board Trump
tariffs are supposed to kick in, and we know anything
could change before then. But I think it's a savvy
(03:59):
move to move this up because people are afraid. People
are worried. There's a lot of uncertainty about those tariffs,
how much it's going to change, you know, prices on things,
inflation rising, and it looks like everybody else has followed suit.
Speaker 5 (04:15):
Yeah, you're absolutely right. Look, that day is clearly going
to be an important day and we'll find out what
happens with tariffs. But as tariffs are top of mind
on that day, consumers are also at the tip of
their seats looking for deals because if things do change
and if things get more expensive for the consumer, they're
going to want to buy it now. And the Prime
day sale happens to be just that day and for
(04:36):
the next four days.
Speaker 1 (04:38):
Now, this started kind of the dog days of summer.
People were not spending a lot of money. It started
in twenty fifteen with Amazon, and they've grown into maybe
stretching out not only back to school sales, they've early
those up. I mean, this has really become an annual
event along the lines of Black Friday, hasn't it all
(05:00):
these retailers and consumers.
Speaker 5 (05:02):
Absolutely, the Prime Day sale is a big event. It's
not as big as Black Friday, but still a very
big event, and it comes at a key shopping point
in time, right it's right ahead of back to school,
So consumers have the intent to shop, they have the
urgency to shop, they have the need to shop, and
this year especially, they want the deals right. They're looking
(05:23):
to spend less and get more and the only way
to do that is to go shop on Dal Days.
And this is one of Amazon's biggest deal days outside
of Black Friday.
Speaker 1 (05:35):
Now, Amazon now has two hundred and twenty million subscribers,
and really to get the full benefits of these Prime Days,
you have to be a subscriber. What kind of deals
are we talking about and are there ones that stick
out to you that you've seen that could really really
have a big impact on sales.
Speaker 5 (05:54):
So we'll see the deals this week when you know.
Amazon starts launching them this year. They're doing it a
little differently. They're dropping new deals every day on different categories.
So they're being very targeted in how they get consumers
to keep coming back. Right, you don't want to go
shop the first day and then not come back the
second day. So they're being targeted for their deals. In
terms of what the deals will be, I think you're
(06:15):
going to see the same as you've seen before. You're
going to see deals on electronics. You're going to see
deals on Amazon gadgets, whether it's a Kindle or any
of their other devices. You're going to see them use
their Rufus and Alexa AI assistance to help consumers find deals.
So that's the real new thing here is that Amazon
is going to try to have consumers lean into these
(06:37):
AI tools not only just to compare products on their website,
but also to learn about them, get smarter, and really
see the value in them to help them hit Dappa
and buy now.
Speaker 1 (06:48):
Our thanks to Punamgoyle, Senior US e Commerce and retail
analysts at Bloomberg Intelligence. We turn out to the airline
industry with the latest earnings from Delta Airlines, out on Thursday,
just as the summer travel season is in full swing
or is it for more. We're joined by George ferguson Airlines,
Aerospace and Defense, senior analyst with Bloomberg Intelligence. Well, George,
(07:11):
thank you for being here. I want to start with
what you expect to see from Delta second quarter earnings
this week, which comes after blowout earnings for Q one
three months ago. But since then, I think we both
agree a lot has changed in the industry.
Speaker 6 (07:25):
It has, and thanks for having me on. Delta is
always the first airline to report and usually one of
the stronger airlines in the US industry, and we'd expect
the same this time. I think you know, the big
things that we're going to watch is first US domestic travel.
We think US domestic travel is probably cooling. It's the
(07:46):
biggest driver of revenues profits for the airlines, and so
to give us a good sense for how much that
is cooling right now, it's hard for these airlines to
continue to push to higher profitability if that market isn't working.
And we're expecting across the board that the US airlines
are going to have lower profitability than last year. In
(08:09):
the same quarter, we'll also get a first look at
Europe during the summer vacation season that's been super strong
for the big US full service carriers United, Delta, and American.
You know, we suspect that this market's going to cool
as well, although this is probably because of a slowing economy,
the US dollar weakening a bit. We don't think it's
(08:31):
going to fall off a cliff, but we just can't
see it remaining as super strong as it has been.
Kind of suspect that a lot of these travelers book
pretty far in advance. I have sort of a joke
that on Christmas Morning, everybody wakes up, opens their presence
and then decides where they're going to travel to Europe
that summer in the well heeled families of America, And
(08:52):
so we suspect that two q' is probably going to
hang in there pretty well. But we'll be listening closely
for trends for three Q and into four Q because
again we think there's a bit of a lag that
occurs in bookings into Europe. We still think two Q
may provide some insight into some potential softening in that market.
(09:14):
And I think one of the challenges we'll also have
as we look at Delta, like I said, is you know,
we're expecting that domestic market to soften, and we'll see
some of that in Delta's earnings, but it won't be
a good indicator as good an indicator, but we expect
that at the low cost carriers, because the low cost
carriers really catering to a different clientele, we would expect
(09:37):
that anything Delta reports on the domestic industry is going
to be even softer when we get to some of
the low costs like Jet Blue, Southwest Frontier, those kind
of companies.
Speaker 1 (09:49):
Well back to Delta now, they telegraph this softening back
in April their last earnings report, right where they withdrew
a full year guidance because of softer demand. And since then,
I mean, we've seen more unrest in the Middle East,
these White House, you know, policies on migrants, travel bands,
the Trump tariffs, I mean, have things even gotten a
little worse than even you suspected?
Speaker 6 (10:11):
Yeah, I mean I think that the backdrop is getting
is definitely getting more difficult. I don't know that they
totally telegraphed more difficult times ahead. You know, the sense
I got was at earnings there was just so much,
so many things changing in the US right tariffs were
being announced. Everybody wasn't sure what it was going to
do to GDP that I think that the company has
(10:33):
just decided that it was most prudent, maybe easiest, just
to pull guidance for the year. But as we went
through the call, there was you know, a lot of
discussion about how they hadn't seen the softening yet in
many of these markets. But again I agree with you.
I think since then the backdrop has gotten a little
bit worse on all those fronts. You know, again, I
(10:55):
think commentary on the back half of the year won't
be as strong. We'll be listening very closely for that,
but all this takes time to filter through, and so
too Q.
Speaker 5 (11:05):
You know, we expect it.
Speaker 6 (11:06):
To be okay, not more profitable than last year, but okay.
Speaker 1 (11:10):
Now, chances are, if you're traveling this summer, you've already
made your flight and hotel bookings. But if not, could
that mean right now it's July there are solid deals
out there for consumers.
Speaker 6 (11:22):
Again, I think that some of the shortest distance between
booking and travel is typically the domestic market. I would
suspect that there's probably some interesting deals out there right
now for the domestic market, because that's the one I
think we'll get softest sooner. And then I think, you know,
you'll see the airlines discount that try to fill those airplanes.
(11:42):
You know, the way we see sort of revenue management
at the airlines nowadays, all these carriers traditionally have sort
of eight plus percent capacity of every airplane that flies.
You know, those revenue managers will get out there and
try to fill those airplanes at the marginal cost of
the seat, and so, like I said, that means you
could get some pretty interesting opportunities. I suspect on some
(12:04):
of the international travel long haul Latin America, Asia, pac
and Europe, I suspect still a good amount of those
seats have been filled and filled earlier in the year,
and so I think you'll see maybe less great deals
in the marketplace for those, but you'll probably see some well.
Speaker 1 (12:22):
Delta Airlines Q two earnings out this Thursday ahead of
Wall Street's opening bell our Thanks to George Ferguson, Senior analyst,
for airlines, aerospace, and defense with Bloomberg Intelligence and coming
up on Bloomberg day Break Weekend, JP Morgan Chase's Jamie
Diamond visits Ireland head of the US tariff deadline for Europe.
I'm Tom Busby and this is Bloomberg. This is Bloomberg
(12:52):
day Break Weekend, our global look ahead at the top
stories for investors in the coming week. I'm Tom Busby
in New York. Up later in our program, China firms
locked in a race to the bottom when it comes
to pricing artificial intelligence. But first, Jamie Diamond, Chairman and
CEO of JP Morgan, visits Ireland this week, just ahead
of this Wednesday's July ninth deadline for US tariffs, which,
(13:14):
if they go ahead as planned, would add fifty percent
duties to most European goods exported to the US. Ireland,
a major beneficiary of global economic integration. That's, according to
the Finance Minister, is aiming to maintain formidable growth while
balancing European interest with its traditionally strong relationship with America.
(13:34):
For more, we turn to Bloomberg Daybreak anchor Caroline Hepger
in the midst.
Speaker 2 (13:38):
Of a boom in Europe's banking sector. JP Morgan, Chair
and CEO Jamie Diamond, will head to Dublin for talks
with the country's second in command on trade, tariffs and
sustaining economic growth the Banking Store. We'll meet with Ireland's
tournished in effect, the Deputy Prime Minister. Just as geopolitical
uncertainty both drives interest in Ireland's goldilock business climate but
(14:01):
also could pose threats to its tech and farmer industry. Well,
joining me now to discuss is Olivia Fletcher, Boomberg's Dublin
bureau reporter, and here in London Blueberg Senior finance reporter
Laura Noonan. Welcome to both of you and thanks for
being with me. Olivia. To you first. Jamie Diamond has
raised the alarm on macroeconomic risk, on bond markets, on
(14:23):
tariff uncertainty. What do you think he's going to be
talking about and thinking about when he's in Ireland. How
much is Ireland at a risk from all of these Well.
Speaker 7 (14:33):
Big question now is how Ireland could remain competitive. You know,
its whole economic model has been based off attracting and
knowing foreign direct investment internationally, got especially from a lot
of US firms. There are a lot of multinational hubs here,
Apple Visor, a lot of the investment banks here as well,
(14:55):
And the key is going to be staying competitives because
was basically the envy of Europe. You know, it's got
this huge budgets. Last year reaped record thirty nine billion
euros in corporate tax receipts. Albeit they are kind of volatile,
but that's a huge, huge amount of money that has
(15:15):
transformed it from one of europe'spores to one of its richest.
But now it's kind of make an headvise, I guess
for maybe the wrong reasons, because Arland is now directly
in Trump's line of sight. It has one of the
biggest trade imbalances with the US, and Howard Lutnick has
repeatedly singled out Land for its huge SURFLUS. So big question,
(15:36):
I guess is how does Ireland continue to attract and
maintain the foreign direct investment that's kind of funded its coffers,
just as Trump is trying to nawse so many of
those US companies back to American shores.
Speaker 2 (15:50):
Laura A lot of uncertainty then around tariffs and trade
and what that means for Ireland, there.
Speaker 8 (15:55):
Is certainly a lot of uncertainty. What I would say
is Ireland has tried to tread very fine line around
Turfs and around the current Trump administration. So Ireland's always
been in a particular position. I think where it is
economically and politically is also similar to where it is
from a geographic perspective. It is midway between it itself
has been between the EU and between the US, and
(16:17):
there has always been close ties between Ireland and the US,
some of which predate Ireland's EU membership. So I think
Ireland is trying to play a very fine line here.
They are very conscious of not wanting to alienate the
US administration anymore than is definitionally necessary. Because Ireland does
have a low corporate tax base, that low corporate tax
(16:38):
base has attracted a lot of multinational activity, a lot
of US activity, which the US administration believes should be
in the US. So that is a definitional problem. But
beyond that, Ireland is trying to position itself as a
friend to the US while also being a good European
So you won't see the Irish administration making the same
(16:59):
kind of combative statements as what you have seen some
of the other eunations doing. In terms of Jamie coming
to Ireland and Jamie Diamond, JP Morgan, Chase CEO, Jamie
loves Ireland. That's the first thing to say. There are
sometimes it's several times, there are some Americans who love Ireland.
Jamie is one of those. So he loves Ireland. I
(17:19):
think he will be stressing the benefits our of the
Irish economy. He'll be spress stressing all the great things
that the Irish landscape has delivered for JP Morgan, They've
already got a couple of thousand people there. One of
the jokes about Jamie coming to Ireland is that Jamie
will come to Ireland to promise a couple of thousand
jobs and then it's up for everyone else to figure
out how to make that happen, or like how to
(17:40):
walk that back. Like he just loves the place. So
I think he will be stressing the strengths of Ireland
and also trying to encourage Ireland to stay the path.
From a stability perspective, one of the other assets Arreold
has had through the recent geopolitical ups and downs is
that there have been a lot of big elections. There's
been a lot of political shifts in a lot of
big countries and the UK. So last year we had
(18:02):
elections and a lot of major EU countries. We had
elections in the US, there was a lot of public
talk about that. Internationally, we also had Irish elections. Nobody
cared because essentially they rearranged the chairs in a very
similar order to the old chairs. And I think that
stability as well has become an asset. So while it
doesn't make Olivia's life uny easier in trying to excite
(18:22):
people about the Irish elections, it does become a selling
point when you think about companies like JP Morrigan, who
in this world have a lot of uncertainty. I think
people do look for stability, and I think Jamie will
be stressing the stability they have found in Ireland and
will be encouraging the country to continue on that route.
Speaker 2 (18:41):
And of course some of these points were reflected in
some recent interviews that we've had, including my Daybreak Europe
co host co Ankers Stephen Carroll, who sat down with
the Irish Finance Minister Pascal Donacue when Bloomberg opened its
brand new bureau in Dublin. So have a listen to
what on a Hue had to say.
Speaker 9 (19:01):
We have a growth outlook for our economy even now
of to maybe even more than two percent per year.
The reason why these companies have part of their global
supply chains here in Ireland is because we have the skill,
the experience and the competitiveness built up to keep them
in our country, and we will look down at how
we can maintained us even if the trade environment around
(19:24):
it does begin to change.
Speaker 2 (19:26):
So quite a rosy vision then for Ireland's economy, despite
the trade worries from Donahue Olivia, in terms of you know,
the reliance as you say, on corporate tax receipts from
large multinational companies, and also what the government is going
to do with the budget surplus that it's got in
(19:47):
terms of setting up a sovereign wealth fund. What are
the next steps for the Irish government?
Speaker 7 (19:53):
Well, like you say, the picture is perhaps not as
rosy as it once. You know, his Finance Department and
has revised an it's domestic economic outlook, and so has
a central bank. You know, the kind of saying that
while Arland will still see a star plus, the selflus
might not be as high as you know, it was
(20:14):
once anticipated to be. And so the next steps for
the Irish administration are, like I say, to continue to
keep that competitive edge, you know, the Finance Department and
you know, and also Arland's for Indirect Investment Agency. The
idea that keen to stress that while Land has in
the parson have attracted these companies because they are a
(20:35):
strategic tax space. You know, Arland also has a hugely
skilled workforce, and like Law has said as well. Actually
when I went to see the idea recently when the
press conferences, their chair said that Arland stands out as
an oasis of stability to investors. So I think the
key thing for Arland is to you know, remain stable,
(20:56):
which seems like that's something they'll be able to do,
and to continue squirrel and away some of that money
into the sovereign welfare because Island isn't just thinking about
the next three four years. The problems potentially could come
you know, ten years down the line, when you know,
for example, a company might not pull out of Island
right away, but they might just decide not to invest
(21:17):
in a pharmaceutical plant in ten years time. So the
issue isn't necessarily that all these companies are going to
lead right away, it's that what might just not be
there in future, which is harder to measure. So you know,
Ireland is having to look at all kinds of other
ways to continue to attract companies. Also invest more in
research and development. That's quite another thing that's hyped up
on their agenda, things like that.
Speaker 2 (21:37):
Lord to bring you the context also amidst all of
this is that European banks have done incredibly well in
the first half of this year, so there's also that
context to kind of bring into to this that European
banks are again sort of back in focus.
Speaker 8 (21:52):
Yeah, I mean Irish banks are a bit of a
different sector to European banks in the sense that what's
happening there priorly reflects a reprivatization the market. Ireland is
a very particular banking market, so there are basically two
very large banks AIB and Bank of Ireland who dominate
the market one slightly smaller bank. AIB has just returned
to fully private ownership. That has put a lot of
(22:13):
win behind Ireland sales, So I think it's a bit
of a different sector. The Riish banking sector has gone well,
but they also had obviously a very problematic legacy, and
these things do tend to go up in ups and down.
So because they lost a lot of money, they then
tighten their standards a ton. I mean, if you think
about underwriting standard Ireland and probably has some of the toughest.
We have very tough mortgage rules. All those things do
(22:35):
mean that the sector should out performed. So I think
the domestic bank sector is going very well. I did
want to say a word on the foreign banking sector
as well in terms of next steps and what Ireland
is doing. So Ireland will shortly launch its next international
finance strategy. They launched their last one in twenty twenty.
This is basically their strategy to make Ireland they go
to destination for international finance and that will see them
(22:58):
tackle some of the structure or see them they've certainly
been lobbied on some of the structural points. Those are
things like infrastructure. Anyone who's been to Ireland will know
that we do not have a metro from the airport,
which has been a bone of contention. I first wrote
about it in two thousand and four, so there has
been a very there is that there is housing. There
are some issues around tax, both in terms of funds taxation.
(23:19):
We talk a lot about banks, but funds are big
industry in Ireland. Issues around that, issues around the banking
bonus tax. So there are policy issues for the international
finance sector and the international sector more broadly, because we
all care about housing and infrastructure, which I think Ireland
is going to commit to tackling quite soon.
Speaker 2 (23:35):
Olivia a last thought. As with all the other European countries,
Ireland is also under pressure to continue achieving strong economic growth.
Can they continue to deliver that?
Speaker 7 (23:47):
So the forecast suggests, the forecasts from the Department of
Finance and the Central Banks suggests that Ireland will continue
to grow, but at a slower pace. So while Onland
may continue to you know, like Laura said, there.
Speaker 2 (24:01):
Are a lot of roadblocks to that.
Speaker 7 (24:04):
That actually some of the biggest points that the multinationals raised,
we're violand you know, things like fix and infrastructure, energy grid,
increase in housing starts, water supply. So while Island is
probably can of continue to grow, there are definitely roadlocks
to that and that's probably Areland's biggest challenge right now.
Speaker 2 (24:24):
So in terms of the economic growth picture your view, Laura.
Speaker 8 (24:29):
Yeah, so I think without putting in too much about
Green Jersey on is where saying Ireland had the half
fastest growth rate of any country in the EU in
the first quarter and is expected to have one of
the highest growth rates economically, So while it will be
lower than it has been, it will still be one
of the highest in the EU. Yeah.
Speaker 2 (24:44):
Absolutely, Laura, thank you so much for being with us
today here in the radio studio Blueberg Senior Finance Reporter
Laura Noonan, And in Dublin our Dublin bureau reporter Olivia Fletcher.
Speaker 1 (24:54):
Thank you, thanks Caroline. And coming up on Bloomberg day
Break weekend, how China's AI drag risk choking each other.
Speaker 10 (25:02):
Whenever a new craze emerges, there's always just so many
rivals that sort of come out of the woodwork ready
to pounce. And now these sort of same forces are
really in full swing in the booming artificial intelligence industry,
and these AI firms have really been focused on this
sort of classic playbook, which is scaling up their user
bases and racing for market share.
Speaker 1 (25:19):
I'm Tom Busby and this is Bloombery. This is Bloomberg
day Break Weekend, our global look ahead. At the top
stories for investors in the coming week. I'm Tom Busby
in New York. Recent data out of China providing an
(25:41):
ambiguous read on the health of the world's second largest economy.
With that, investors will be closely watching the next round
of inflation data out of Beijing, and for a preview,
let's get to the host of the Daybreak Asia podcast,
Doug Krisner.
Speaker 3 (25:54):
Tom. Many recent data points for the Chinese economy have
been mixed in the last week that saisheen manufacturing PMI
for June seem to improve into expansion. Bloomberg Economic says
this is a reflection of the truth in the US
China trade war. However, the latest flash reading from China
beige Book International shows slowing in June. Most sectors, according
(26:17):
to China Beige Book, weakened as the result of declining
revenue and profits, as well as falling prices and fewer hirings.
Now in the week ahead, we'll get fresh data on
inflation in the form of both the consumer price and
producer price indices for a closer look. Now, I'm joined
by Shazad Kazi. He is the COO also Managing director
(26:38):
at China beij Book International. When we talk about price
activity in China, I'm tempted to use the term deflation,
but maybe that's a bit overused. Can we still use
that term to characterize what's going on on the mainland?
Speaker 11 (26:52):
If you look at the producer side of the equation,
there's no question about the fact that there has been
deflation in and it's tied into the whole concept of
excess capacity and companies having to cut prices to sell
and so forth. But if you look at their CPI measure,
and especially if you look at core CPI, what you
have got going on and the official data even is
(27:14):
a lot of disinflation rather than outright deflation. But the
problem is that there is a profitability challenge in China,
and fundamentally there's a price war going on in so
many sectors that that's what's driving depressing a lot of
those indicators.
Speaker 3 (27:27):
So is this merely an issue of overcapacity or is
there something else that we need to unpack here?
Speaker 11 (27:34):
A lot of it is certainly over capacity. Chinese industrial
sector has produced so much, whether it's you're talking about steel, aluminum, copper,
whether you're talking about cars or evs, now that every
company feels a pressure to cut cut cut prices in
order to sell domestically and even more importantly, to sell abroad,
which is where Chinese overcapacity problem comes in. They cut
(27:54):
prices to the point where every other countries companies tend
to not be very competitive, and then that's they fled
their goods. But ultimately comes back in the form of
weak industrial profits and it comes back in the form
of this disinflation or oftentimes deflation challenge that we're talking
about in China.
Speaker 3 (28:11):
Is there an effective policy response Beijing should employ to
kind of begin to turn things around or is it
more a matter of things being in place right now?
But global markets need to be a little bit more patient.
Speaker 11 (28:24):
So there's no question. You know, this week we got
some policy statements out criticizing these price wars and saying
we have to push back on them by authorities in China.
But you know the reality is that there's no incentive
structure there. As a matter of fact, the incentive structure
is the quite opposite. There's no pressure ultimately on many companies,
especially large state owned companies, to turn a profit. Ever,
(28:45):
and so as long as you have access to cheap
or free loans from banks or you know, that Beijing
is going to bail you out. There's absolutely no desire
to say we have to whether we cannot do these
price cutting. As a matter of fact, the whole reason
you've got this price cutting is because many sectors are
overly subsidized in that country.
Speaker 3 (29:02):
When I think of problems with price activity, I think
of the property market, where in many cases prices are
continuing to decline. Is that still the case?
Speaker 11 (29:11):
That is, unfortunately the case where you had a brief
period here where prices were beginning to rebound and even
though year over year they were looking weak, you know,
the weakness was certainly starting to dissipate. I would say
that is going away, and you are getting reports at
least directionally saying that prices are again starting to decline.
Speaker 3 (29:31):
Based on the data that you have access to, what
are your expectations for the CPI and PPI prints that
we're going to be looking at in the week ahead.
Speaker 11 (29:39):
Look, if you were to base it strictly on what
we're seeing here, where we're seeing outright, you know, slow
downs in our in our sales prices and disease and
our input costs and disease. That tells us that the
CPI and PPI prints. We should get lower prints there,
we should probably get you know, CPI falling and PPI
probably contracting further.
Speaker 3 (29:58):
But this is nothing really that the cent Bank can address,
or can the PBOC change policy in a way to
kind of reverse this. It seems to be coming back
time and again to the issue of sentiment. Whether you're
talking about consumers or businesses, the sentiment levels have been
just too weak.
Speaker 11 (30:15):
That's exactly right. The sentiment levels have been too weak.
And the problem is that monetary policy in China for
a while now has not been producing the kinds of
results you would expect it to. And by that I
mean that interest rates keep coming down. Yet companies generally
speaking are not particularly inclined to borrow. So in May,
for example, we saw this nice jump a multi high
(30:36):
from a monthly standpoint in our borrowing data. It came
back down to earth in June. So you don't have
this sustained rise in corporate borrowing for several years over
the last almost five years as a matter of fact, now,
because the economy overall is quite weak. So if you're
not investing a lot, if you're not hiring a lot,
if that r and d isn't there. The desire to
(30:57):
borrow is not going to be there. It makes no
sense to leverage.
Speaker 3 (31:00):
In a moment or two, we're going to be talking
about the AI story in China. When you look at
the degree to which tech companies, particularly those that have
been playing in the AI space, have been contributing to growth,
is that moving the needle in any way, not in.
Speaker 11 (31:16):
Any kind of meaningful way where you would see it
showing up I think in big macroeconomic data points. But
the reality is on the ground, the environment is very exciting.
China is doing what they've done with for example, EVS
and other sectors. They are increasingly figuring out ways to
subsidize the indigenization of chip production, AI, quantum, et cetera.
(31:36):
So they're throwing a lot of money at it. You've
got companies that are ipoing in these fields. So certainly
in China, the tech space and the tech industries and
is having an exciting moment.
Speaker 3 (31:45):
Shazad will leave it there, Thank you so much. Shazad
Kazi also Managing director at China Basebook International. And as
I promised, let's shift gears. China's crowded AI landscape is
not only fueling rapid innovation, but fierce competition as well,
and it's that competition that seems to be dragging down profits.
(32:05):
Let's check in with Bloomberg opinion columnist Catherine Thorbek. She
covers all things tech in Asia, and she joins us
from our bureau in Tokyo. Catherine, thank you for making
time to chat with me about this. Give me a
sense of perspective on this. How recent has this kind
of tension between innovation and competition been developing in Ai
in China?
Speaker 10 (32:26):
This is really a story we've seen play out many
times in the history of China's tech sector. You know,
competition is notoriously fierce in the world's second largest economy,
So whenever a new craze emerges, there's always just so
many rivals that sort of come out of the woodwork
ready to pounce. And for example, we saw this in
the food delivery market. There's some food delivery wars that
were going on, and it really became a race to
(32:47):
the bottom when it comes to pricing. You know, we
saw bubble tea being sold for less than twenty five
cents last month, and we also saw it in the
electric vehicle market, which is sort of left behind a
trail of zombie cars. And now, oh, these sort of
same forces are really in full swing in the booming
artificial intelligence industry, and these AI firms have really been
focused on this sort of classic playbook, which is scaling
(33:09):
up their user bases and racing for market share, and
the result has sort of been this rat race. You know,
they're at each other's throats when it comes to pricing,
and it's really become a race to the bottom. But
I think a key difference here is that nobody has
actually figured out has really cracked the key to getting
consumers to pay for these services. So it makes the
issue of monetization or a path to profitability seem a
(33:31):
really long way off. And this is really unique to
China's tech sector. You know, in the States, there's in
Silicon Valley, there's sort of a smaller number of large
players that really dominate the market and they really have
control over pricing, whereas in China, you know, there's just
so many smaller players and as well as the big
tech companies, so competition has been really really fierce, and
(33:51):
I'm just not sure how sustainable it is.
Speaker 3 (33:53):
I'm just wondering when you talk about big tech companies,
I think of Ali Baba, and you would expect maybe
that company or companies like Baba to have some sort
of advantage.
Speaker 10 (34:03):
That's right. So Ali Baba and Byteedance and Tencent, these
sort of big tech players, I think they really can
play the long game and they can sort of sort
of weather this storm a little bit better than these
so called little dragons, which are these sort of startups
that are really driving innovation in China's tech ecosystem. And
so I think the big tech players are definitely in
a better position. But I also think that's a little
(34:24):
bit unfortunate because we really see sort of the biggest
breakthroughs in AI come from these smaller startups, which I
think are at higher risk.
Speaker 5 (34:30):
Here.
Speaker 3 (34:31):
Does the government have a view on what's happening?
Speaker 4 (34:33):
Do you think so?
Speaker 10 (34:34):
I think post deep Seek, there's just been a lot
of exuberance. There's been a lot of top down support
for the AI sector, and so it's sort of driving
this And in some ways it's a double edged sword,
you know, because there's so much excitement for AI and
so much top down support, it has really been driving
widespread adoption of AI services and AI tools throughout China,
which the government wants, but I think it definitely puts
(34:56):
these companies in a crunch when it comes to sort
of figuring out how to make money.
Speaker 3 (35:00):
So when you talk about adoption, is it primarily on
the part of consumers using more AI related devices or
is it in industry as well?
Speaker 10 (35:09):
That's right, So I think consumers definitely demand for AI
services and tools is red hot. You know, we see
so many chatbots, so many people using deep seak across
you know, local governments and across even hospitals. So I
think the adoption has been widespread. And the way I
kind of look at it when we talk about the
sort of top down support was you know, I'm not
going to remember which US president it was, but there
(35:30):
was a president that put electricity in the White House
to sort of signal that, you know, this technology is
safe and we can you know, rapidly adopt it. And
I think there have been a lot of top down
signals coming from Beijing and coming from Hijinping about how
AI is you know, the future and we shouldn't be
afraid of it. And I think we've really seen that
play out when it comes to consumers really sort of
embracing this technology and not being afraid of it and
(35:51):
sort of rushing to adopt it.
Speaker 3 (35:52):
One of the big questions in the States as it
relates to the investments being made in artificial intelligence, is
the ROI turn on those investments. Do we have any
visibility into whether or not this is having kind of
a similar conundrum in China right now?
Speaker 10 (36:09):
Right so, I really think that's sort of the biggest
existential threat hanging over sort of the entire AI ecosystem
in China is that there really is not a clear
path to profitability, and there's not even a clear path
to sort of monetization and making money off of consumers.
You know, so many of these chatbots are being offered
for free, and because you know, competitors are offering them
(36:29):
for free, it basically peer pressures all of the companies
to do the same. And I think there's one statistic
that our Bloomberg Intelligence colleagues wrote which was that I
think all of the top ten AI chat bots at
China generated just one million dollars in revenue from Apple's
iOS app store in twelve months, and during that same
(36:50):
time period, open AI's chat GBT garnered six hundred and
sixty nine million dollars in iOS revenue. So that's quite
a big difference, and that's just one chatbot compared to
ten of So what do.
Speaker 3 (37:01):
We know about the rate of failure here? I mean,
do we have enough data to begin to kind of
quantify that?
Speaker 10 (37:08):
So I think it's too soon to tell. Like I said,
there's you know, this top down support, and there's just
this insatiable hype, especially in the wake of Deep Seek,
and I think for now that's been a really strong
propellant of the AI sector. You know, a former government
official in China last week said that the nation is
on the cusp of generating more than one hundred Deep
Seek like breakthroughs. But I think, you know, if you
look at more than one hundred deep Seeks, you know,
(37:29):
what does that actually mean. That means such fierce competition,
And so I think in the long run, we may
see at least one hundred you know, zombie AI tools
or zombie AI agents. But I think, you know, that's
still a long way off. And for now, you know,
this hype is really driving a lot of exuberance, But
we'll have to see how it plays out.
Speaker 3 (37:47):
Catherine, Thank you so very much. It's always a pleasure.
That is Catherine Thorbeck, Bloomberg opinion columnist. She covers Asia
tech for us here at Bloomberg, and I'm Doug Chrisner.
You can catch us weekdays for the Daybreak Asia Pod.
It's available wherever you get your podcast.
Speaker 1 (38:03):
Tom, Thank you, Doug. And that does it for this
edition of Bloomberg day Break Weekend. Join us again Monday
morning at five am Wall Street Time for the latest
on markets overseas, in the news you need to start
your day. I'm Tom Buzzby. Stay with us. Top stories
and global business headlines are coming up right now.
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