June 6, 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 U.S CPI and PPI data and Tesla’s Robotaxi launch.
- In the UK – a look ahead to London’s Tech Summit.
- In Asia – a look ahead to readings on Chinese exports, as well industrial production and retail sales.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:10):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our Daybreak
anchors all around the world. Straight Ahead on the program,
a look ahead to some key inflation data in the
US how that may impact monetary policy for the FED.
I'm Tom Busby in New York.
Speaker 3 (00:25):
I'm Caroline Hedge in London, where we're asking if the
UK has what it takes to become a global tech superpower.
Speaker 4 (00:32):
I'm Doug Christner looking at what we may learn from
next week's data on the Chinese economy.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three to zero, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two 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 2 (01:02):
Good day to you. I'm Tom Busby. We begin today's
program with some key inflation data here in the US.
The consumer price index for May on Wednesday, the producer
price index for that same month out on Thursday. For
more on what to look for and how that data
may impact the fed's next decision on rates. Were joined
by Edward Harrison, senior editor at Bloomberg and author of
(01:23):
Bloomberg's The Everything Risk newsletter. Edward, thank you so much
for being here.
Speaker 5 (01:28):
Well, good to talk to you.
Speaker 4 (01:29):
Tom.
Speaker 2 (01:30):
A slightly better than forecast made jobs report this past
week after a lot of incoming data not as upbeat.
So what does this job's report tell you in regarding
the Fed? And what are you expecting to see in
these May CPI and PPI reports.
Speaker 5 (01:46):
Yeah, so, Tom, I think that the headline number tells
the equity market that the jobs market is not falling apart,
the economy is not falling apart. We got one hundred
and thirty nine thousand added to nonfarm payrolls, which was
ahead of expectations, and we had the unemployment rate staying
solid at four point two percent. Those numbers just on
(02:08):
the surface, it says that you know, the labor markets
not falling apart, and that's what you actually would have
needed to get to galvanize the Federal reserve to cut
rates more quickly than anticipated. So, given that the Fed's
going to be on hold and as a result of that,
(02:29):
the CPI and the PPI are less important in terms
of the Fed's thinking in terms of the rate decision
going forward.
Speaker 2 (02:36):
Well, what are the big drivers for inflation right now,
both for consumers and businesses? And you say it's a
little less important, still key for them, still, you know,
maybe not so much as the PCE, but they're still
going to look at it very closely.
Speaker 5 (02:53):
Well, there are two things. One is that we still
have services inflation, which is above where they would like
it to be. That's still sticky. And then the second
thing is that we're seeing a pass through of the
goods inflation that comes from the tariffs into into the
(03:13):
numbers the companies are talking about passing on the price increases.
So these numbers that we're going to see are from May,
and as a result, you can think of them as
after the fact, after the the the tariffs were put on,
But they're not. They're not consistent with the data, the
incoming data that we're seeing, which is that you know,
(03:36):
there is inflation in the pipeline, and so given that
that means that the Fed is going to continue to
be on the whole. The only reason that they would
actually cut rates more aggressively. Is if we had numbers
that came out last week from the jobs report that
showed the economy stalling in a very precipitous way.
Speaker 2 (03:58):
Well, let's let's continue on with the tariffs, because in
these reports that we're going to see this coming week,
maybe just at least a hint, a little hint of
the impact of the tariffs. But we have that ninety
day reprieve on most tariffs expires in July. Is that
when we're really going to see the impact.
Speaker 5 (04:15):
Well, you know, I think that actually the June CPI
and PPI numbers will show you a little bit more
of what's there. It is interesting that if you look
at just the month on month numbers, the consensus is
for zero point three percent CPI taking out food and energy,
so you know, sort of the core CPI number, which
(04:36):
is higher than it was in April. But you know,
if that number is actually high, let's say zero point
four percent, as you know, a miss to the upside,
then you could say to yourself already in maybe we're
seeing these numbers have impacted. We certainly will see them
therefore impacted in June. That would make the Fed even
(04:58):
more reticent about lowering interest rates, despite by the way,
the fact that Donald Trump last week was saying that
power should lower interest rates by one full percentage point.
Speaker 2 (05:10):
Now, a little more about the tariffs. We know there
are talks slated to happen. They're supposed to happen with China,
the European Union, they've been on and off, even Japan.
But is there any clear read that you're seeing on
what these negotiations are going to bring as far as
you know, a tariff deal, a trade deal with these
countries and the EU.
Speaker 5 (05:31):
No, and there's no clear deal that's there. I think
there are three countries Japan, the EU, and China that
are outstanding which are definitely going to impact inflation and
therefore the economy. There was actually a report from Bloomberg
that the trade negotiators for the United States were fighting
amongst each other in front of the Japanese delegation, and
(05:54):
that certainly doesn't lead to any sort of positive outcome. Moreover,
this whole old taco trade that people talk about, the
fact that Trump eventually backs down only leads to the
negotiators from the other side thinking, you know, we have
some leverage here if we played chicken because eventually he'll
cave on or you know, he'll back out in some regard.
(06:18):
So I think that, you know, there's a lot of
risk associated with that. And just going back to the
jobs numbers for a second, really, even though the equity
market thinks of this in a positive way and it's
not going to galvanize the FED, the internals of the
numbers were actually not as good as you might think.
That the household survey showed labor participation going down. There
(06:38):
were a negative ninety five two month payroll net revision,
so that means that really we only saw forty four
thousand net jobs if you take revisions into account. So
the labor market is slowing, it's just not slowing enough
to galvanize the FED to start to cut rates. And
(06:59):
then you have the backdrop of these negotiations which aren't
really going anywhere at this point, and that sort of
downside risk for equities in particular.
Speaker 2 (07:08):
Well, a lot of variables for the FED to consider,
including the may CPI out on Wednesday, the may PPI
on Thursday. Our thanks to Edward Harrison, senior editor at
Bloomberg and author of Bloomberg's The Everything Risk newsletter. We
turn now to the ev maker Tesla, which is scheduled
to launch its long delayed robo taxi service this week
in Austin, Texas. For more on that expected launch, we're
(07:30):
joined by Craig Trudell, Bloomberg's Global Autos editor. Well, Craig,
thanks so much for joining us. Let's start with what
is Tesla expected to do this Thursday in Austin, And
after all the delays and setbacks, will it be ready?
Speaker 6 (07:44):
You know, that's the big question. But there are so
many questions about Tesla's plans for this upcoming week that
are still very much unanswered. I mean, even starting with
that timing right where Bloomberg was first to report that
the company was aiming for June twelve, we haven't heard
anything to the contrary, at least to the point where
you and I are speaking. But that number still has
(08:06):
not been confirmed by the company. And you know, what
we do know is is Elon Musk has talked about
you know, sort of starting slows, starting with a small
number of Model Y vehicles that they'll run around Austin.
We don't know sort of you know, specifics about what
areas of the city that they expect to run these
(08:26):
these driver lists, you know, rides, we don't know what
time of day, and some of these details are important
because it can make real differences as to you know,
how many other cars are out on the road, how
challenging is it for these cars to sort of navigate
those situations. And so you know, there's a lot of
specifics that the company has yet to address that will
(08:47):
be really important to sort of suss out, you know
in the days toccomme.
Speaker 2 (08:51):
Yeah, not even how many cars they're going to put
on the road this week.
Speaker 6 (08:54):
Yeah, what we've heard Musks say is something on the
order of ten or twenty, So we're talking really small.
This is you know, I guess what you would call
in the tech business a soft launch. And you know,
Musk has talked about, you know, scaling up quickly, but
I think we have to kind of take that with
a grain of salt because he's talked about, you know,
putting driverless cars on the road you know, anytime now,
(09:17):
year after year, and you know, we will see, we
will see if twenty twenty five is his year.
Speaker 2 (09:22):
Well, we know that Tesla has for years been doing
a lot of work. It's been testing these autonomous cars
out on closed roads. It's been gathering data for years
working on machine learning, and it has of course that
controversial some would say misnamed full self driving mode, which
I know you reported on just last week, involved in
a recent string of sometimes deadly crashes. So with all that,
(09:45):
can it still compete against Waimo and GM's Cruise, which
packed it in after ten years because it was just
too expensive.
Speaker 6 (09:53):
Yeah, you know, I think with Cruise the sort of
you know, thing that we took away from. One of
the things to take away from that was, you know,
it can come down to a single crash, a single
crash that in Crusi's case, actually didn't result in a fatality,
but it was a gruesome one and unfortunate one. Nonetheless,
the company's handling of that and sort of running a
(10:14):
foul of you know, the local regulators that was working
with in San Francisco, you know, really ultimately led to
GM deciding, you know what, we're going to pull the
plug on this company. And I go back to you know,
twenty eighteen, there was a similar incident in the case
of Uber right where they had a self driving test
vehicle that was involved in a fatal crash, and that
(10:36):
ultimately led Uber to decide to get out of this space.
So part of the reason why this is such a
big story in terms of, you know, having a closer
look at one of the fatal crashes that has resulted
from people using full self driving is we the public
are much less tolerant of crashes in which a robot
(10:57):
or sort of you know, something other and a human
is involved in running the car. And you know, in
this case, it was a crash that you know, sort
of avoided the headlines. Initially, it took the US safety regulator,
the National Highway Traffic Safety Administration, investigating full self driving
(11:17):
on the basis of this and a few other crashes
for it to really come to light and get our
attention and lead to us seeking out some public records
to learn more about what happened.
Speaker 2 (11:28):
And these aren't isolated incidents with with Tesla and it's
full self driving. I mean, there is there is a
paper trail on this, right, a number of incidents.
Speaker 6 (11:38):
That's right, full self driving has not been around as
long as autopilot, but that's the other sort of branding
that that Tesla has used for sort of lower level
capability of you know, driver ass as features and I
would say, you know, when you look at this, you
know long track record of autopilot and full self driving,
there have been a string of investigations into whether these
(12:00):
are defective, and one of those investigations involving autopilot actually
got to the point where Nitsa said to Tesla, look,
we think that there's a safety risk here that you
need to address for the recall. It led to Tesla
recalling two million cars, and you know, in a matter
of a few months, Nitsa came back to Tesla and said,
you know what, we're not sure that the remedy that
(12:21):
you offered to address you know, what we were raising
was sufficient. And so not only is Tesla under investigation
with respect to full self driving, it's also you know,
under a pending investigation a query as to whether that
recall that it did to sort of, you know, make
autopilots safer to use, whether or not that went far enough.
Speaker 2 (12:43):
Well, Thursday, June twelfth, the expected launch date for the
Tesla robotaxi in Austin, Texas. Our thanks to Bloomberg's Global
autos editor Craig Drudell, coming up on Bloomberg Day Break weekend, Well,
look at whether the UK has what it takes to
become a global tech superpower. I'm Tom Busby and this
this is Bloomberg. This is Bloomberg day Break weekend, our
(13:04):
global look ahead at the top stories for investors in
the coming week. I'm Tom Busby and New York Up.
Later in our program we'll look ahead to some key
economic data coming out in China. But first, tech leaders
from around the world will gather in the UK capital
for the London Tech Summit, with speakers ranging from the
inventor of the World Wide Web to renowned professors, even
some tech CEOs. Forty thousand tech enthusiasts set to flock
(13:28):
to Olympia for a week of panel discussions. But with
stiff competition from innovators around the world, can the UK
keep up with the global tech revolution for more, Let's
get to London and bring in Bloomberg Daybreak Europe anchor
Caroline Hepgar Tom.
Speaker 3 (13:43):
The Great Tech Race has been a permanent feature of
the corporate world for much of twenty twenty five. The
rise of the Chinese artificial intelligence startup Deep Seek has
only added attention to the issue. In February, the company
released an open source model that it said rivaled software
from the top American AI developers, and it claimed to
(14:05):
have done so for a fraction of the development cost
using less powerful hardware. And now global businesses including Meta,
are busy buying several hundreds of acres in a bid
to build data centers capable of fueling their AI focused dreams.
Primig Intelligence is senior tech industry analyst says the world's
(14:27):
biggest tech firms are all in when it comes to
leveling up their artificial intelligence capabilities.
Speaker 7 (14:34):
Just look at how far they have come in terms
of you know, infrastructure, Like a company like Google, Not
only are they designing their own data centers and you know,
creating their own chips, and now they are you know,
procuring power do they extend that they want to make
sure that these AI chips, which can have volatile power needs,
(14:59):
are more optimize when it comes to the efficiency of
their infrastructure. And that's why these hyperscaler companies really have
got so many different aspects to their mode. So it's
not just about the search algorithm or in the case
of Meta, you know, their social media knowledge graph. It
is about the entirety of how they run their infrastructure,
(15:21):
and that is what is a long term mode because
nobody else can operate at the scale at which these
hyperscalers are operating right now.
Speaker 3 (15:30):
That was Bloomberg Intelligence's man Deep Singh speaking there. Well.
The UK's role in the AI and wider technology arms
race is something that I've been discussing with Bloomberg Daybreak
Europe anchor Tom McKenzie. As London Tech Week approaches, this
is always a really exciting week, isn't it. In London,
(15:51):
CEOs and visionaries are going to be arguing surely that
the UK can be one of the AI capitals of
the world.
Speaker 8 (15:59):
Absolutely, and we're going to have government presence there at
London Tech Week. You have London Tech Week and you
have Founders Forum as well. In Paris, by the way,
you have Vivtech which is also drawing a lot of
these big names there. So there's the competition between Paris
and London next week as well. But certainly the government's involved.
Peter Carr will be there of course, the Secrety of
State in terms of science and innovation and technology. You
(16:19):
also have the likes of Matt Clifford, who is the
Prime Minister's advisor on AI, and they will be making
the case that London is the place to invest and
to innovate, and there are some data that backs that up.
In terms of fun flows, you have seen more money
moving into the tech sector last year from venture capital
into London into the UK than into France and Germany combined.
(16:42):
And we have some big name startups now that are
raising real capital and have an impact, companies like Wave
in the mobility space, which is valued at a little
over two billion US dollars. You have companies like Synthesia,
eleven Labs, Polyai, Luminance, Revolute, which is huge in terms
of fintech. So we do have examples of successful startups here.
(17:03):
There is money flowing in, but there is a lot
more to do, and in terms of positioning the UK
when it comes to AI, that is going to be
crucial in terms of the conversations I think going forward
and the kind of traction that government ministers can get
and that companies can get in terms of fundraising.
Speaker 3 (17:19):
Yeah, I mean the UK government website talking about London
becoming the epicenter of global innovation.
Speaker 9 (17:25):
That's one side of things.
Speaker 3 (17:27):
On the other, in recent days we've seen why saying
that it's going to move its listing primary listing to
the US. So there are some concerns also, aren't there.
Speaker 8 (17:37):
And I'm glad you brought up wise because that really
points to one of the key hurdles, one of the
key headwinds for the UK. This, of course, the money
transfer business listed in twenty twenty one to great fanfare.
It's been one of the few tech companies listed in
the UK now, as you say, making that decision to
(17:58):
put its primal listing in the US, which tells a
bigger story. It tells a story about the valuations these
companies think they can get in the US market versus
here in the UK. It tells a story about companies
including for example, Delivery that was bought over and bought
by door Dash, Dark Trace which is brought by private equity.
(18:19):
The companies that are able to build here in terms
of the tech sector, they often then go to the
US to raise the bigger funds and to list. And
that is not a trend that we have seen stopping
despite changes that London Stock has changed have tried to
make so capital access to capital and the capital markets
is really key when it comes to the question of
how you scale and how you grow these businesses.
Speaker 3 (18:40):
What about regulation when it comes to tech. I mean,
obviously global companies have a huge market in Europe and
the UK being sort of attached to that. What about
the idea of deregulation or how we regulate artificial intelligence
and other bits of the tech sphere.
Speaker 8 (19:00):
Keir Starmer's government is actually taking a more proactive approach
in terms of looking at the opportunities versus the risk.
So the emphasis has shifted. Some would say that's because
the growth needs of this economy are so much more
acute that if you're looking for one alexir of growth,
AI could be that, So you have to reach for
the opportunities. The UK is still trying to carve out
what the regulatory framework is going to be. We have
(19:21):
an AI strategy. The European Union does have its AI
Safety Act that is being implemented gradually towards the end
of this year and into twenty twenty six. There's a
lot of pushback against that regulation still from the tech industry.
Where the UK lands on this will be interesting, Will
it align more with less a fair approach that we're
starting seeing at least the federal level in the US
(19:44):
when it comes to AI. Or will it start to
take account of the risk factors and take lessons from
what Europe's craft in terms of their regulations. It may
find a middle spot.
Speaker 3 (19:54):
So do you think that artificial intelligence will dominate given
the questions about tak up about disruption?
Speaker 9 (20:01):
How important is that going to be on the agenda
artificial intelligence?
Speaker 8 (20:04):
There is one name that I have not mentioned yet,
and that is Jensen Huang of Nvidia, of course, the
CEO of that company that makes the AI accelerators that
has become the litmus test of AI demand that underpins
so much of this AI revolution that we're seeing. Jensen
Huang will be a keynote speaker at London Tech Week.
He will also be at Viva Tech, the event taking
place in Paris. So watch for any announcements from the
(20:27):
CEO of Nvidia. They are building and funding the build out,
of course of data centers in the US. They've announced
plans to invest in data centers in the UAE. What
is the data center story in the UK? What is
the data story data center story in Europe? How much
is Nvidia going to be investing in the infrastructure that
underpins the advancements and innovations that we're seeing in AI
(20:50):
and how is the UK trying to get a piece
of that. I think that's going to be something really
worth watching next week what we hear from Gensen Wang.
Speaker 3 (20:56):
Yeah, although I have sort of heard this idea that
maybe those data centers are going to become less energy
hungry and so maybe, you know, as we get the
leaps forward in tech, that might be something in the future.
Going back to your point there about the UK and
its non EU status, does that help or hinder when
it comes to tech firms with regulation, with fundraising?
Speaker 9 (21:21):
How are we seeing things now?
Speaker 8 (21:22):
If you look just at the data in terms of
fun flows, in terms of talent, in terms of the
numbers of startups, then the UK again is ahead of
a number of its European peers. I think on the
regulatory question, the jury is probably still out. The screaming
question when you're in Continental Europe maan izon An event
(21:43):
a few weeks ago and the CEOs and the investors
I spoke to there in Germany talking about regulation in Europe. Regulation, regulation, regulation,
That's what they were banging on about in terms of
one of the key headwinds that are holding back, that
is holding back the build out of tech and the
ability to invest and scale in that economy, whether it's
ESG or DEI or AI regulations. One person at this
(22:07):
event quoted this line saying, you need to invest in Asia,
do business in the US, and holiday in Europe, and
they want to get away from that. In the UK,
it's slightly it is slightly different. We do not have
the EUAI Act. We don't have the same ESG and
DEI regulations that they have in Europe that those particular
participants were complaining about. We're starting to I'm trying to
(22:28):
find our footing in terms of what the AAR regulation
is going to look like. Here in the UK, we
have seen again the talent flow as well, some evidence
that talent is being drawn to the UK from the
US in small numbers, but some venture counselors I've spoken
to have said that as a result of the politics
of the US, we're seeing some of that talent move
to the UK. So we're benefiting from that. But talent
is another key piece of this because you can have
(22:49):
investors and you can have founders, but then finding the people,
the CFOs and the coos to actually implement that strategy
that is proving a challenge that kind of talent. There's
still a shortage there when it.
Speaker 3 (22:59):
Come k Yeah, and the UK doesn't often perform well
when it comes to management in the UK if you
look at the kind of indices and yeah, we've you know,
the government here really wants Oxford and Cambridge in that
arc there to be a kind of Silicon Valley esque,
don't they. But look on again on this on the
big picture, the UK and Europe have to compete with
(23:21):
the US and China when it comes to kind of
transformational technology, don't they.
Speaker 7 (23:27):
They do.
Speaker 8 (23:27):
They have to compete with real innovation in the Chinese market,
not just from deep Sat, which of course created all
those headlines, the large language model that is open source
and that was much cheaper to build according to the
team who run that. There's all sorts of innovations coming
through from key tech players in China and it is
a race right now between China and the US. That
(23:49):
is where the race is at. Can Europe catch up?
It remains a key question. We do have players large
language model company called mistral over in France. Can the
UK play Where is the value in this? Is the
value in those larger language models or is it in
the companies that are building the solutions on top of that,
like eleven Labs, which does things like audio translation here
in the UK. Is it in legal and finance? We're
(24:11):
very strong of course in terms of financial services and
legal services companies like Luminance AI, which does AI for
the legal sector. Is that where our strength is rather
than the foundation models? Where is the value? And that
still remains a debate.
Speaker 3 (24:23):
This makes me laugh because months ago, Tommy, you were
telling me about how important it was to understand how
those apps work, Which kind of leads me to my
last thought, which is that you're not just at London
Tech Week, but you're also launching a brand new show
covering all things tech. It's such an important time now
more than ever. What are you going to hope to
(24:44):
bring us.
Speaker 9 (24:45):
In that show?
Speaker 8 (24:46):
I don't think I can overstress what this moment is
in terms of the significance. You look at the defense, space,
you look at energy, you look at space technology. In
all those areas the UK and Europe need to be
stepping up. These changes are going to happen rapidly with
all of those sectors. AI is going to be powering
a lot of it, whether it is energy, defense or
space tech, and what we hope to do with Bloomberg
(25:09):
Tech Europe is to chart some of that invasion, talk
about where they close the gap is and how we
close that gap, and speak to some of the key leaders,
whether it is Demsisabis, whether it is Arms CEO Rennie
has who I'll be speaking to next week, and key funders,
venture capitalists and key founders as well across Europe and
the UK.
Speaker 3 (25:27):
I bet it's going to be a great show, and
of course we'll have lots of those snippets of all
of those great interviews on Bloomberg Radio.
Speaker 9 (25:34):
Thank you so much, Tom for being with me.
Speaker 3 (25:36):
Bloomberg's Tom McKenzie will have full coverage of all the
key moments for you from London Tech Week across Bloomberg platforms.
I'm Caline Hepge here in London. You can catch us
every weekday morning for Bloomberg Daybreak you at the beginning
at six am in London.
Speaker 9 (25:50):
That's one am on Wall Street.
Speaker 2 (25:52):
Tom, Thanks Caroline, And coming up on Bloomberg day Break weekend,
we'll look ahead to some fresh economic data out of China.
I'm Tom Busby and this is Bloomberg. This is Bloomberg
(26:13):
day Break Weekend, our global look ahead at the top
stories for investors in the coming week. I'm Tom Busby
in New York. Last week we learned China's services activity
expanded at a faster pace in May. It was a
positive sign for the country as it looks to stabilize
trade relations with the US following a call between Presidents
Trump and She. This week, we'll get fresh data and
(26:33):
a clearer view of the health of the world's second
largest economy. For more, let's get to the host of
the Daybreak Asia podcast, Doug Krisner.
Speaker 4 (26:40):
Tom. The trade truce between the US and China is
a month old, and it appears to be on shaky ground.
Distrust between Washington and Beijing is running deep, and the
question is whether a talk between Presidents Trump and She
will produce a positive outcome. So how well is the
Chinese economy holding up under the weight of this trade conflict.
(27:01):
We'll get some insight in the week ahead with readings
on Chinese exports, as well as industrial production and retail sales,
to name a few. Joining me now for a closer
look at the broader Chinese economy is John lou. He
is Bloomberg Executive editor for Greater China, John joins us
from our studios in Beijing. Good of you to make
time to chat with me. There's a lot to cover here,
(27:24):
but can we just start with kind of a summary
of how you see the macro in China right now.
Speaker 10 (27:30):
I would describe it as being relatively stable, but in
a relatively weak state. So I think the data that
we've gotten as it refers to manufacturing, as it refers
to trade, has shown that the economy has taken a
hit from the tariffs imposed by the United States. We
saw a pretty sharp drop off in shipments to the
(27:54):
United States, a twenty percent decline in exports in the
month of April. As we understand it, after the the
sort of detent that came together in Geneva, trade did
pick up. So we are expecting to see better trade
numbers for the month of May because American importers are
trying to get their goods in while the getting was good,
(28:15):
but still we're expecting inflation factory gate prices to remain
weak in May. That speaks to domestic consumption, domestic demand
still not picking up.
Speaker 4 (28:28):
We had comments recently from Treasury Secretary Scott Bessant saying
that China needs to shift to a more consumption led
economy to help ease global imbalances. It seems to be
stating the obvious right now, what is the government in
Beijing doing to try to address the issue of stronger
domestic demand?
Speaker 10 (28:49):
So at a very high three thousand foot level, Beijing
and Washington are in agreement on that. Chinese officials back
ten fifteen years been saying the Chinese economy is unbalanced.
It needs more domestic consumption, it needs to depend less
on exports and investment. The problem is how to do
(29:10):
that restructuring reconfiguration of what is the world's second biggest
economy well over ten trillion dollars. How to do that
without causing some hiccup and growth that would be destabilizing
for the country. That is the problem. And so what
we have instead seeing is it's much easier when growth
(29:31):
is slow, when it's weak, for the government here in
Beijing to double down on what has worked, and that
has been manufacturing, that has been investment, that has been exports.
And we've seen that through the course of COVID and
in this most recent set of trade tensions that we've.
Speaker 4 (29:46):
Had deflation continues to be a huge problem. Are authorities
worried about it reaching a dangerous level? Do you think?
Speaker 10 (29:53):
I think there's a lot of concern about deflation. I
don't think we are at a point yet where it
is causing alarm amongst policymakers. Here in Beijing. The PPI,
the factory gate prices for Chinese companies, has been declining
for the better part of three years. It speaks to
Chinese companies not having the ability, the pricing ability when
(30:15):
they're trying to offload, to get to distribute, to sell
their products. That speaks to excess capacity in the Chinese economy.
That's the result of trade barriers on one hand, but
also the real estate problems that have happened here and
there being a weakness and domestic demand. So there is worry,
but we are still not at a level where I
(30:35):
think it's going to trigger the Chinese government to go
into overdrive stimulus mode and start churning out new policies
to try and address it.
Speaker 4 (30:44):
One of the things that I think Beijing would like
to have happen as part of any negotiation in dealing
with the trade war, if we can call it that
certainly the situation with these very very drastic tariffs is
some type of relaxation when it comes to X controls
on high technology. How is the high tech sector and
(31:05):
I use that term very broadly, John, how is it
performing in China right now?
Speaker 10 (31:09):
So? I think we've seen some breakthroughs in twenty twenty five.
Deep Seek is probably the best known of those. There
have been some breakthroughs in terms of robotics here in China,
and so I think the state of the Chinese Chinese
technology at the moment is it is still able to
be innovative and come up with new products. The problem,
(31:29):
I think is scale. How quickly can China scale AI applications?
How quickly can China scale robotics? And I think this
is where the technology, the limitations that the United States
has placed on Chinese access to technology, I think this
is where that comes in and starts to hurt the
Chinese economy. If China could get its hands on more
(31:52):
Nvidia chips, for example, it could roll out AI at
a much larger scale than what it's been able to
do now. And so there is a eagerness and interest
in Beijing to have some of these technology curves removed.
But at the same time, I think you have also
seen Beijing trying to use its leverage when it comes
to rare earth, when it comes to critical minerals and
(32:14):
how that affects technology companies and manufacturers in the United
States as a way to try and bring that issue
onto the table. And so I think it is ultimately
going to be a negotiation between the two.
Speaker 4 (32:25):
Governments to put a finer point on some of the
controls that the US has established. When you look at
a company like Huawei, are they moving closer to being
able to compete with a company like in Nvidia when
it comes to those very sophisticated AI chips.
Speaker 10 (32:42):
So I think this is where the issue of scale
comes into play. Huawei can design some of the world's
most leading AI chips. They can produce a few of them,
you know, at a time, small lots. The problem becomes
they cannot produce large amounts at economically very viable prices
(33:03):
because they don't have access to the latest chip manufacturing technology,
the things that TSMC has, the things that Nvidia has
access to, and that has been the real hurdle for
Chinese technology, Chinese Semiconductor's Chinese AI and that is why
Beijing really wants some relaxation in these curves that the
(33:23):
United States has put in.
Speaker 4 (33:25):
So I mentioned a moment ago the monthly activity data
industrial production, retail sales to critical data points. Talk to
me a little bit about the health of the Chinese
consumer right now and what we may see in that
retail sales number.
Speaker 10 (33:39):
So we've just come off of a holiday at the
beginning of May, a three day weekend here for the
Dragon Boat Festival, and that showed while overall consumer spending
during the holiday was up, the spending per trip was down.
And so I think it speaks to the fact that
people are still going out there, are going to lunches
(34:01):
and dinners, and they're going shopping, and they're going out to,
you know, have a holiday, but they're doing it less.
And when they're doing it, they're trying to spend a
little less. They're holding onto their wallets a little tighter.
And that is still I think, ultimately a reflection of
the real estate crash that we've had here in China,
the fact that so much of household wealth is tied
(34:22):
up in the home and when people see the value
of their homes go down, they feel poorer themselves, even
if their financial situation hasn't actually changed.
Speaker 4 (34:31):
Are consumers caught up in a lot of the rhetoric
around the trade ward do they have a point of
view when it comes to what Donald Trump and the
Trump administration is imposing on China.
Speaker 10 (34:42):
So I think this is a it goes two ways.
On one hand, it is affecting consumer confidence. The average
individual here in China understands that trade is an important
part of the economy, and if China is not able
to sell products into the United States, that's going to
make the job market less stable. It's going to make
(35:05):
it weaker. People are going to be a little bit
more concerned about their future prospects, and so as a result,
they may constrain some of their discretionary spending. But at
the same time, one of the other effects has been
people broadly see the tariffs as being American aggression, and
that has resulted in a lot of on the ground
(35:26):
support Foreshiugen Ping and for the government here to retaliate,
to play hardball with us, and so it kind of
creates a situation where people are feeling the effect and
feeling the hit in terms of confidence, But at the
same time, ready to continue going on, ready to continue
fighting the strang ward to.
Speaker 4 (35:45):
What extent is the government working to try to create
new markets right now to compensate for the fact that
demand coming from the US may be much less.
Speaker 10 (35:55):
So I think April was a very interesting month as
an ill of that. In April, Chinese exports to the
US fell by twenty percent, but Chinese exports to India
to Southeast Asia increase by twenty percent. And so there
is an effort by the Chinese government, by Chinese companies
to look for new markets where they can send their
(36:18):
products if those products cannot go to the United States.
That is one thing that they're doing now. The question
is how long can that last? Because if companies are
diverting all those products about half a trillion dollars worth
of exports to the United States in twenty twenty four,
if that's all or much of that is being diverted
to other markets, much smaller markets in Southeast Asia and
(36:39):
India relative to the United States, how long will those
markets allow those products to come in freely without they
themselves putting up trade barriers. And so this is a
question of yes, this is working now, but how long
will it work into the future.
Speaker 4 (36:52):
What about the trading partners that China already relies heavily on,
and I'm thinking of South Korea, Japan to some extent,
certainly Australia. How are those relationships.
Speaker 10 (37:02):
They are tense because part of what is happening in
these negotiations between the United States and South Korea and
Japan and Australia is this push to try and get
those countries to cut off Chinese sort of Chinese manufacturers
sending their goods to South Korea, for example, so that
(37:24):
they can be on sent to the United States. We
saw that when the US reached an agreement with the UK.
We've seen that with the US pushing for Mexico to
stop Chinese manufacturers from doing that. And so there is
an effort to buy the United States to put pressure
on these allies to cut themselves off from the Chinese
(37:44):
supply chain. China, on its part, is putting pressure on
those same countries to not do that, and so it's
actually caused a lot of these countries to be put
in a very difficult position and they're having to play
a balance that none of them wants to be in.
Speaker 4 (37:58):
John, Thank you so much much for helping us set
the stage as we look forward to the data in
the coming week on exports along with industrial production and
retail sales. He's John Lou Bloomberg, Executive Editor for Greater China,
and I'm Doug Chrisner. You can catch us weekdays for
the Daybreak Asia podcast. It's available wherever you get your podcast.
Speaker 2 (38:18):
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 and the news you need to start
your day. I'm Tom Busby. Stay with us. Top stories
and global business headlines are coming up right now.
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:10):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our Daybreak
anchors all around the world. Straight Ahead on the program,
a look ahead to some key inflation data in the
US how that may impact monetary policy for the FED.
I'm Tom Busby in New York.
Speaker 3 (00:25):
I'm Caroline Hedge in London, where we're asking if the
UK has what it takes to become a global tech superpower.
Speaker 4 (00:32):
I'm Doug Christner looking at what we may learn from
next week's data on the Chinese economy.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three to zero, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two 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 2 (01:02):
Good day to you. I'm Tom Busby. We begin today's
program with some key inflation data here in the US.
The consumer price index for May on Wednesday, the producer
price index for that same month out on Thursday. For
more on what to look for and how that data
may impact the fed's next decision on rates. Were joined
by Edward Harrison, senior editor at Bloomberg and author of
(01:23):
Bloomberg's The Everything Risk newsletter. Edward, thank you so much
for being here.
Speaker 5 (01:28):
Well, good to talk to you.
Speaker 4 (01:29):
Tom.
Speaker 2 (01:30):
A slightly better than forecast made jobs report this past
week after a lot of incoming data not as upbeat.
So what does this job's report tell you in regarding
the Fed? And what are you expecting to see in
these May CPI and PPI reports.
Speaker 5 (01:46):
Yeah, so, Tom, I think that the headline number tells
the equity market that the jobs market is not falling apart,
the economy is not falling apart. We got one hundred
and thirty nine thousand added to nonfarm payrolls, which was
ahead of expectations, and we had the unemployment rate staying
solid at four point two percent. Those numbers just on
(02:08):
the surface, it says that you know, the labor markets
not falling apart, and that's what you actually would have
needed to get to galvanize the Federal reserve to cut
rates more quickly than anticipated. So, given that the Fed's
going to be on hold and as a result of that,
(02:29):
the CPI and the PPI are less important in terms
of the Fed's thinking in terms of the rate decision
going forward.
Speaker 2 (02:36):
Well, what are the big drivers for inflation right now,
both for consumers and businesses? And you say it's a
little less important, still key for them, still, you know,
maybe not so much as the PCE, but they're still
going to look at it very closely.
Speaker 5 (02:53):
Well, there are two things. One is that we still
have services inflation, which is above where they would like
it to be. That's still sticky. And then the second
thing is that we're seeing a pass through of the
goods inflation that comes from the tariffs into into the
(03:13):
numbers the companies are talking about passing on the price increases.
So these numbers that we're going to see are from May,
and as a result, you can think of them as
after the fact, after the the the tariffs were put on,
But they're not. They're not consistent with the data, the
incoming data that we're seeing, which is that you know,
(03:36):
there is inflation in the pipeline, and so given that
that means that the Fed is going to continue to
be on the whole. The only reason that they would
actually cut rates more aggressively. Is if we had numbers
that came out last week from the jobs report that
showed the economy stalling in a very precipitous way.
Speaker 2 (03:58):
Well, let's let's continue on with the tariffs, because in
these reports that we're going to see this coming week,
maybe just at least a hint, a little hint of
the impact of the tariffs. But we have that ninety
day reprieve on most tariffs expires in July. Is that
when we're really going to see the impact.
Speaker 5 (04:15):
Well, you know, I think that actually the June CPI
and PPI numbers will show you a little bit more
of what's there. It is interesting that if you look
at just the month on month numbers, the consensus is
for zero point three percent CPI taking out food and energy,
so you know, sort of the core CPI number, which
(04:36):
is higher than it was in April. But you know,
if that number is actually high, let's say zero point
four percent, as you know, a miss to the upside,
then you could say to yourself already in maybe we're
seeing these numbers have impacted. We certainly will see them
therefore impacted in June. That would make the Fed even
(04:58):
more reticent about lowering interest rates, despite by the way,
the fact that Donald Trump last week was saying that
power should lower interest rates by one full percentage point.
Speaker 2 (05:10):
Now, a little more about the tariffs. We know there
are talks slated to happen. They're supposed to happen with China,
the European Union, they've been on and off, even Japan.
But is there any clear read that you're seeing on
what these negotiations are going to bring as far as
you know, a tariff deal, a trade deal with these
countries and the EU.
Speaker 5 (05:31):
No, and there's no clear deal that's there. I think
there are three countries Japan, the EU, and China that
are outstanding which are definitely going to impact inflation and
therefore the economy. There was actually a report from Bloomberg
that the trade negotiators for the United States were fighting
amongst each other in front of the Japanese delegation, and
(05:54):
that certainly doesn't lead to any sort of positive outcome. Moreover,
this whole old taco trade that people talk about, the
fact that Trump eventually backs down only leads to the
negotiators from the other side thinking, you know, we have
some leverage here if we played chicken because eventually he'll
cave on or you know, he'll back out in some regard.
(06:18):
So I think that, you know, there's a lot of
risk associated with that. And just going back to the
jobs numbers for a second, really, even though the equity
market thinks of this in a positive way and it's
not going to galvanize the FED, the internals of the
numbers were actually not as good as you might think.
That the household survey showed labor participation going down. There
(06:38):
were a negative ninety five two month payroll net revision,
so that means that really we only saw forty four
thousand net jobs if you take revisions into account. So
the labor market is slowing, it's just not slowing enough
to galvanize the FED to start to cut rates. And
(06:59):
then you have the backdrop of these negotiations which aren't
really going anywhere at this point, and that sort of
downside risk for equities in particular.
Speaker 2 (07:08):
Well, a lot of variables for the FED to consider,
including the may CPI out on Wednesday, the may PPI
on Thursday. Our thanks to Edward Harrison, senior editor at
Bloomberg and author of Bloomberg's The Everything Risk newsletter. We
turn now to the ev maker Tesla, which is scheduled
to launch its long delayed robo taxi service this week
in Austin, Texas. For more on that expected launch, we're
(07:30):
joined by Craig Trudell, Bloomberg's Global Autos editor. Well, Craig,
thanks so much for joining us. Let's start with what
is Tesla expected to do this Thursday in Austin, And
after all the delays and setbacks, will it be ready?
Speaker 6 (07:44):
You know, that's the big question. But there are so
many questions about Tesla's plans for this upcoming week that
are still very much unanswered. I mean, even starting with
that timing right where Bloomberg was first to report that
the company was aiming for June twelve, we haven't heard
anything to the contrary, at least to the point where
you and I are speaking. But that number still has
(08:06):
not been confirmed by the company. And you know, what
we do know is is Elon Musk has talked about
you know, sort of starting slows, starting with a small
number of Model Y vehicles that they'll run around Austin.
We don't know sort of you know, specifics about what
areas of the city that they expect to run these
(08:26):
these driver lists, you know, rides, we don't know what
time of day, and some of these details are important
because it can make real differences as to you know,
how many other cars are out on the road, how
challenging is it for these cars to sort of navigate
those situations. And so you know, there's a lot of
specifics that the company has yet to address that will
(08:47):
be really important to sort of suss out, you know
in the days toccomme.
Speaker 2 (08:51):
Yeah, not even how many cars they're going to put
on the road this week.
Speaker 6 (08:54):
Yeah, what we've heard Musks say is something on the
order of ten or twenty, So we're talking really small.
This is you know, I guess what you would call
in the tech business a soft launch. And you know,
Musk has talked about, you know, scaling up quickly, but
I think we have to kind of take that with
a grain of salt because he's talked about, you know,
putting driverless cars on the road you know, anytime now,
(09:17):
year after year, and you know, we will see, we
will see if twenty twenty five is his year.
Speaker 2 (09:22):
Well, we know that Tesla has for years been doing
a lot of work. It's been testing these autonomous cars
out on closed roads. It's been gathering data for years
working on machine learning, and it has of course that
controversial some would say misnamed full self driving mode, which
I know you reported on just last week, involved in
a recent string of sometimes deadly crashes. So with all that,
(09:45):
can it still compete against Waimo and GM's Cruise, which
packed it in after ten years because it was just
too expensive.
Speaker 6 (09:53):
Yeah, you know, I think with Cruise the sort of
you know, thing that we took away from. One of
the things to take away from that was, you know,
it can come down to a single crash, a single
crash that in Crusi's case, actually didn't result in a fatality,
but it was a gruesome one and unfortunate one. Nonetheless,
the company's handling of that and sort of running a
(10:14):
foul of you know, the local regulators that was working
with in San Francisco, you know, really ultimately led to
GM deciding, you know what, we're going to pull the
plug on this company. And I go back to you know,
twenty eighteen, there was a similar incident in the case
of Uber right where they had a self driving test
vehicle that was involved in a fatal crash, and that
(10:36):
ultimately led Uber to decide to get out of this space.
So part of the reason why this is such a
big story in terms of, you know, having a closer
look at one of the fatal crashes that has resulted
from people using full self driving is we the public
are much less tolerant of crashes in which a robot
(10:57):
or sort of you know, something other and a human
is involved in running the car. And you know, in
this case, it was a crash that you know, sort
of avoided the headlines. Initially, it took the US safety regulator,
the National Highway Traffic Safety Administration, investigating full self driving
(11:17):
on the basis of this and a few other crashes
for it to really come to light and get our
attention and lead to us seeking out some public records
to learn more about what happened.
Speaker 2 (11:28):
And these aren't isolated incidents with with Tesla and it's
full self driving. I mean, there is there is a
paper trail on this, right, a number of incidents.
Speaker 6 (11:38):
That's right, full self driving has not been around as
long as autopilot, but that's the other sort of branding
that that Tesla has used for sort of lower level
capability of you know, driver ass as features and I
would say, you know, when you look at this, you
know long track record of autopilot and full self driving,
there have been a string of investigations into whether these
(12:00):
are defective, and one of those investigations involving autopilot actually
got to the point where Nitsa said to Tesla, look,
we think that there's a safety risk here that you
need to address for the recall. It led to Tesla
recalling two million cars, and you know, in a matter
of a few months, Nitsa came back to Tesla and said,
you know what, we're not sure that the remedy that
(12:21):
you offered to address you know, what we were raising
was sufficient. And so not only is Tesla under investigation
with respect to full self driving, it's also you know,
under a pending investigation a query as to whether that
recall that it did to sort of, you know, make
autopilots safer to use, whether or not that went far enough.
Speaker 2 (12:43):
Well, Thursday, June twelfth, the expected launch date for the
Tesla robotaxi in Austin, Texas. Our thanks to Bloomberg's Global
autos editor Craig Drudell, coming up on Bloomberg Day Break weekend, Well,
look at whether the UK has what it takes to
become a global tech superpower. I'm Tom Busby and this
this is Bloomberg. This is Bloomberg day Break weekend, our
(13:04):
global look ahead at the top stories for investors in
the coming week. I'm Tom Busby and New York Up.
Later in our program we'll look ahead to some key
economic data coming out in China. But first, tech leaders
from around the world will gather in the UK capital
for the London Tech Summit, with speakers ranging from the
inventor of the World Wide Web to renowned professors, even
some tech CEOs. Forty thousand tech enthusiasts set to flock
(13:28):
to Olympia for a week of panel discussions. But with
stiff competition from innovators around the world, can the UK
keep up with the global tech revolution for more, Let's
get to London and bring in Bloomberg Daybreak Europe anchor
Caroline Hepgar Tom.
Speaker 3 (13:43):
The Great Tech Race has been a permanent feature of
the corporate world for much of twenty twenty five. The
rise of the Chinese artificial intelligence startup Deep Seek has
only added attention to the issue. In February, the company
released an open source model that it said rivaled software
from the top American AI developers, and it claimed to
(14:05):
have done so for a fraction of the development cost
using less powerful hardware. And now global businesses including Meta,
are busy buying several hundreds of acres in a bid
to build data centers capable of fueling their AI focused dreams.
Primig Intelligence is senior tech industry analyst says the world's
(14:27):
biggest tech firms are all in when it comes to
leveling up their artificial intelligence capabilities.
Speaker 7 (14:34):
Just look at how far they have come in terms
of you know, infrastructure, Like a company like Google, Not
only are they designing their own data centers and you know,
creating their own chips, and now they are you know,
procuring power do they extend that they want to make
sure that these AI chips, which can have volatile power needs,
(14:59):
are more optimize when it comes to the efficiency of
their infrastructure. And that's why these hyperscaler companies really have
got so many different aspects to their mode. So it's
not just about the search algorithm or in the case
of Meta, you know, their social media knowledge graph. It
is about the entirety of how they run their infrastructure,
(15:21):
and that is what is a long term mode because
nobody else can operate at the scale at which these
hyperscalers are operating right now.
Speaker 3 (15:30):
That was Bloomberg Intelligence's man Deep Singh speaking there. Well.
The UK's role in the AI and wider technology arms
race is something that I've been discussing with Bloomberg Daybreak
Europe anchor Tom McKenzie. As London Tech Week approaches, this
is always a really exciting week, isn't it. In London,
(15:51):
CEOs and visionaries are going to be arguing surely that
the UK can be one of the AI capitals of
the world.
Speaker 8 (15:59):
Absolutely, and we're going to have government presence there at
London Tech Week. You have London Tech Week and you
have Founders Forum as well. In Paris, by the way,
you have Vivtech which is also drawing a lot of
these big names there. So there's the competition between Paris
and London next week as well. But certainly the government's involved.
Peter Carr will be there of course, the Secrety of
State in terms of science and innovation and technology. You
(16:19):
also have the likes of Matt Clifford, who is the
Prime Minister's advisor on AI, and they will be making
the case that London is the place to invest and
to innovate, and there are some data that backs that up.
In terms of fun flows, you have seen more money
moving into the tech sector last year from venture capital
into London into the UK than into France and Germany combined.
(16:42):
And we have some big name startups now that are
raising real capital and have an impact, companies like Wave
in the mobility space, which is valued at a little
over two billion US dollars. You have companies like Synthesia,
eleven Labs, Polyai, Luminance, Revolute, which is huge in terms
of fintech. So we do have examples of successful startups here.
(17:03):
There is money flowing in, but there is a lot
more to do, and in terms of positioning the UK
when it comes to AI, that is going to be
crucial in terms of the conversations I think going forward
and the kind of traction that government ministers can get
and that companies can get in terms of fundraising.
Speaker 3 (17:19):
Yeah, I mean the UK government website talking about London
becoming the epicenter of global innovation.
Speaker 9 (17:25):
That's one side of things.
Speaker 3 (17:27):
On the other, in recent days we've seen why saying
that it's going to move its listing primary listing to
the US. So there are some concerns also, aren't there.
Speaker 8 (17:37):
And I'm glad you brought up wise because that really
points to one of the key hurdles, one of the
key headwinds for the UK. This, of course, the money
transfer business listed in twenty twenty one to great fanfare.
It's been one of the few tech companies listed in
the UK now, as you say, making that decision to
(17:58):
put its primal listing in the US, which tells a
bigger story. It tells a story about the valuations these
companies think they can get in the US market versus
here in the UK. It tells a story about companies
including for example, Delivery that was bought over and bought
by door Dash, Dark Trace which is brought by private equity.
(18:19):
The companies that are able to build here in terms
of the tech sector, they often then go to the
US to raise the bigger funds and to list. And
that is not a trend that we have seen stopping
despite changes that London Stock has changed have tried to
make so capital access to capital and the capital markets
is really key when it comes to the question of
how you scale and how you grow these businesses.
Speaker 3 (18:40):
What about regulation when it comes to tech. I mean,
obviously global companies have a huge market in Europe and
the UK being sort of attached to that. What about
the idea of deregulation or how we regulate artificial intelligence
and other bits of the tech sphere.
Speaker 8 (19:00):
Keir Starmer's government is actually taking a more proactive approach
in terms of looking at the opportunities versus the risk.
So the emphasis has shifted. Some would say that's because
the growth needs of this economy are so much more
acute that if you're looking for one alexir of growth,
AI could be that, So you have to reach for
the opportunities. The UK is still trying to carve out
what the regulatory framework is going to be. We have
(19:21):
an AI strategy. The European Union does have its AI
Safety Act that is being implemented gradually towards the end
of this year and into twenty twenty six. There's a
lot of pushback against that regulation still from the tech industry.
Where the UK lands on this will be interesting, Will
it align more with less a fair approach that we're
starting seeing at least the federal level in the US
(19:44):
when it comes to AI. Or will it start to
take account of the risk factors and take lessons from
what Europe's craft in terms of their regulations. It may
find a middle spot.
Speaker 3 (19:54):
So do you think that artificial intelligence will dominate given
the questions about tak up about disruption?
Speaker 9 (20:01):
How important is that going to be on the agenda
artificial intelligence?
Speaker 8 (20:04):
There is one name that I have not mentioned yet,
and that is Jensen Huang of Nvidia, of course, the
CEO of that company that makes the AI accelerators that
has become the litmus test of AI demand that underpins
so much of this AI revolution that we're seeing. Jensen
Huang will be a keynote speaker at London Tech Week.
He will also be at Viva Tech, the event taking
place in Paris. So watch for any announcements from the
(20:27):
CEO of Nvidia. They are building and funding the build out,
of course of data centers in the US. They've announced
plans to invest in data centers in the UAE. What
is the data center story in the UK? What is
the data story data center story in Europe? How much
is Nvidia going to be investing in the infrastructure that
underpins the advancements and innovations that we're seeing in AI
(20:50):
and how is the UK trying to get a piece
of that. I think that's going to be something really
worth watching next week what we hear from Gensen Wang.
Speaker 3 (20:56):
Yeah, although I have sort of heard this idea that
maybe those data centers are going to become less energy
hungry and so maybe, you know, as we get the
leaps forward in tech, that might be something in the future.
Going back to your point there about the UK and
its non EU status, does that help or hinder when
it comes to tech firms with regulation, with fundraising?
Speaker 9 (21:21):
How are we seeing things now?
Speaker 8 (21:22):
If you look just at the data in terms of
fun flows, in terms of talent, in terms of the
numbers of startups, then the UK again is ahead of
a number of its European peers. I think on the
regulatory question, the jury is probably still out. The screaming
question when you're in Continental Europe maan izon An event
(21:43):
a few weeks ago and the CEOs and the investors
I spoke to there in Germany talking about regulation in Europe. Regulation, regulation, regulation,
That's what they were banging on about in terms of
one of the key headwinds that are holding back, that
is holding back the build out of tech and the
ability to invest and scale in that economy, whether it's
ESG or DEI or AI regulations. One person at this
(22:07):
event quoted this line saying, you need to invest in Asia,
do business in the US, and holiday in Europe, and
they want to get away from that. In the UK,
it's slightly it is slightly different. We do not have
the EUAI Act. We don't have the same ESG and
DEI regulations that they have in Europe that those particular
participants were complaining about. We're starting to I'm trying to
(22:28):
find our footing in terms of what the AAR regulation
is going to look like. Here in the UK, we
have seen again the talent flow as well, some evidence
that talent is being drawn to the UK from the
US in small numbers, but some venture counselors I've spoken
to have said that as a result of the politics
of the US, we're seeing some of that talent move
to the UK. So we're benefiting from that. But talent
is another key piece of this because you can have
(22:49):
investors and you can have founders, but then finding the people,
the CFOs and the coos to actually implement that strategy
that is proving a challenge that kind of talent. There's
still a shortage there when it.
Speaker 3 (22:59):
Come k Yeah, and the UK doesn't often perform well
when it comes to management in the UK if you
look at the kind of indices and yeah, we've you know,
the government here really wants Oxford and Cambridge in that
arc there to be a kind of Silicon Valley esque,
don't they. But look on again on this on the
big picture, the UK and Europe have to compete with
(23:21):
the US and China when it comes to kind of
transformational technology, don't they.
Speaker 7 (23:27):
They do.
Speaker 8 (23:27):
They have to compete with real innovation in the Chinese market,
not just from deep Sat, which of course created all
those headlines, the large language model that is open source
and that was much cheaper to build according to the
team who run that. There's all sorts of innovations coming
through from key tech players in China and it is
a race right now between China and the US. That
(23:49):
is where the race is at. Can Europe catch up?
It remains a key question. We do have players large
language model company called mistral over in France. Can the
UK play Where is the value in this? Is the
value in those larger language models or is it in
the companies that are building the solutions on top of that,
like eleven Labs, which does things like audio translation here
in the UK. Is it in legal and finance? We're
(24:11):
very strong of course in terms of financial services and
legal services companies like Luminance AI, which does AI for
the legal sector. Is that where our strength is rather
than the foundation models? Where is the value? And that
still remains a debate.
Speaker 3 (24:23):
This makes me laugh because months ago, Tommy, you were
telling me about how important it was to understand how
those apps work, Which kind of leads me to my
last thought, which is that you're not just at London
Tech Week, but you're also launching a brand new show
covering all things tech. It's such an important time now
more than ever. What are you going to hope to
(24:44):
bring us.
Speaker 9 (24:45):
In that show?
Speaker 8 (24:46):
I don't think I can overstress what this moment is
in terms of the significance. You look at the defense, space,
you look at energy, you look at space technology. In
all those areas the UK and Europe need to be
stepping up. These changes are going to happen rapidly with
all of those sectors. AI is going to be powering
a lot of it, whether it is energy, defense or
space tech, and what we hope to do with Bloomberg
(25:09):
Tech Europe is to chart some of that invasion, talk
about where they close the gap is and how we
close that gap, and speak to some of the key leaders,
whether it is Demsisabis, whether it is Arms CEO Rennie
has who I'll be speaking to next week, and key funders,
venture capitalists and key founders as well across Europe and
the UK.
Speaker 3 (25:27):
I bet it's going to be a great show, and
of course we'll have lots of those snippets of all
of those great interviews on Bloomberg Radio.
Speaker 9 (25:34):
Thank you so much, Tom for being with me.
Speaker 3 (25:36):
Bloomberg's Tom McKenzie will have full coverage of all the
key moments for you from London Tech Week across Bloomberg platforms.
I'm Caline Hepge here in London. You can catch us
every weekday morning for Bloomberg Daybreak you at the beginning
at six am in London.
Speaker 9 (25:50):
That's one am on Wall Street.
Speaker 2 (25:52):
Tom, Thanks Caroline, And coming up on Bloomberg day Break weekend,
we'll look ahead to some fresh economic data out of China.
I'm Tom Busby and this is Bloomberg. This is Bloomberg
(26:13):
day Break Weekend, our global look ahead at the top
stories for investors in the coming week. I'm Tom Busby
in New York. Last week we learned China's services activity
expanded at a faster pace in May. It was a
positive sign for the country as it looks to stabilize
trade relations with the US following a call between Presidents
Trump and She. This week, we'll get fresh data and
(26:33):
a clearer view of the health of the world's second
largest economy. For more, let's get to the host of
the Daybreak Asia podcast, Doug Krisner.
Speaker 4 (26:40):
Tom. The trade truce between the US and China is
a month old, and it appears to be on shaky ground.
Distrust between Washington and Beijing is running deep, and the
question is whether a talk between Presidents Trump and She
will produce a positive outcome. So how well is the
Chinese economy holding up under the weight of this trade conflict.
(27:01):
We'll get some insight in the week ahead with readings
on Chinese exports, as well as industrial production and retail sales,
to name a few. Joining me now for a closer
look at the broader Chinese economy is John lou. He
is Bloomberg Executive editor for Greater China, John joins us
from our studios in Beijing. Good of you to make
time to chat with me. There's a lot to cover here,
(27:24):
but can we just start with kind of a summary
of how you see the macro in China right now.
Speaker 10 (27:30):
I would describe it as being relatively stable, but in
a relatively weak state. So I think the data that
we've gotten as it refers to manufacturing, as it refers
to trade, has shown that the economy has taken a
hit from the tariffs imposed by the United States. We
saw a pretty sharp drop off in shipments to the
(27:54):
United States, a twenty percent decline in exports in the
month of April. As we understand it, after the the
sort of detent that came together in Geneva, trade did
pick up. So we are expecting to see better trade
numbers for the month of May because American importers are
trying to get their goods in while the getting was good,
(28:15):
but still we're expecting inflation factory gate prices to remain
weak in May. That speaks to domestic consumption, domestic demand
still not picking up.
Speaker 4 (28:28):
We had comments recently from Treasury Secretary Scott Bessant saying
that China needs to shift to a more consumption led
economy to help ease global imbalances. It seems to be
stating the obvious right now, what is the government in
Beijing doing to try to address the issue of stronger
domestic demand?
Speaker 10 (28:49):
So at a very high three thousand foot level, Beijing
and Washington are in agreement on that. Chinese officials back
ten fifteen years been saying the Chinese economy is unbalanced.
It needs more domestic consumption, it needs to depend less
on exports and investment. The problem is how to do
(29:10):
that restructuring reconfiguration of what is the world's second biggest
economy well over ten trillion dollars. How to do that
without causing some hiccup and growth that would be destabilizing
for the country. That is the problem. And so what
we have instead seeing is it's much easier when growth
(29:31):
is slow, when it's weak, for the government here in
Beijing to double down on what has worked, and that
has been manufacturing, that has been investment, that has been exports.
And we've seen that through the course of COVID and
in this most recent set of trade tensions that we've.
Speaker 4 (29:46):
Had deflation continues to be a huge problem. Are authorities
worried about it reaching a dangerous level? Do you think?
Speaker 10 (29:53):
I think there's a lot of concern about deflation. I
don't think we are at a point yet where it
is causing alarm amongst policymakers. Here in Beijing. The PPI,
the factory gate prices for Chinese companies, has been declining
for the better part of three years. It speaks to
Chinese companies not having the ability, the pricing ability when
(30:15):
they're trying to offload, to get to distribute, to sell
their products. That speaks to excess capacity in the Chinese economy.
That's the result of trade barriers on one hand, but
also the real estate problems that have happened here and
there being a weakness and domestic demand. So there is worry,
but we are still not at a level where I
(30:35):
think it's going to trigger the Chinese government to go
into overdrive stimulus mode and start churning out new policies
to try and address it.
Speaker 4 (30:44):
One of the things that I think Beijing would like
to have happen as part of any negotiation in dealing
with the trade war, if we can call it that
certainly the situation with these very very drastic tariffs is
some type of relaxation when it comes to X controls
on high technology. How is the high tech sector and
(31:05):
I use that term very broadly, John, how is it
performing in China right now?
Speaker 10 (31:09):
So? I think we've seen some breakthroughs in twenty twenty five.
Deep Seek is probably the best known of those. There
have been some breakthroughs in terms of robotics here in China,
and so I think the state of the Chinese Chinese
technology at the moment is it is still able to
be innovative and come up with new products. The problem,
(31:29):
I think is scale. How quickly can China scale AI applications?
How quickly can China scale robotics? And I think this
is where the technology, the limitations that the United States
has placed on Chinese access to technology, I think this
is where that comes in and starts to hurt the
Chinese economy. If China could get its hands on more
(31:52):
Nvidia chips, for example, it could roll out AI at
a much larger scale than what it's been able to
do now. And so there is a eagerness and interest
in Beijing to have some of these technology curves removed.
But at the same time, I think you have also
seen Beijing trying to use its leverage when it comes
to rare earth, when it comes to critical minerals and
(32:14):
how that affects technology companies and manufacturers in the United
States as a way to try and bring that issue
onto the table. And so I think it is ultimately
going to be a negotiation between the two.
Speaker 4 (32:25):
Governments to put a finer point on some of the
controls that the US has established. When you look at
a company like Huawei, are they moving closer to being
able to compete with a company like in Nvidia when
it comes to those very sophisticated AI chips.
Speaker 10 (32:42):
So I think this is where the issue of scale
comes into play. Huawei can design some of the world's
most leading AI chips. They can produce a few of them,
you know, at a time, small lots. The problem becomes
they cannot produce large amounts at economically very viable prices
(33:03):
because they don't have access to the latest chip manufacturing technology,
the things that TSMC has, the things that Nvidia has
access to, and that has been the real hurdle for
Chinese technology, Chinese Semiconductor's Chinese AI and that is why
Beijing really wants some relaxation in these curves that the
(33:23):
United States has put in.
Speaker 4 (33:25):
So I mentioned a moment ago the monthly activity data
industrial production, retail sales to critical data points. Talk to
me a little bit about the health of the Chinese
consumer right now and what we may see in that
retail sales number.
Speaker 10 (33:39):
So we've just come off of a holiday at the
beginning of May, a three day weekend here for the
Dragon Boat Festival, and that showed while overall consumer spending
during the holiday was up, the spending per trip was down.
And so I think it speaks to the fact that
people are still going out there, are going to lunches
(34:01):
and dinners, and they're going shopping, and they're going out to,
you know, have a holiday, but they're doing it less.
And when they're doing it, they're trying to spend a
little less. They're holding onto their wallets a little tighter.
And that is still I think, ultimately a reflection of
the real estate crash that we've had here in China,
the fact that so much of household wealth is tied
(34:22):
up in the home and when people see the value
of their homes go down, they feel poorer themselves, even
if their financial situation hasn't actually changed.
Speaker 4 (34:31):
Are consumers caught up in a lot of the rhetoric
around the trade ward do they have a point of
view when it comes to what Donald Trump and the
Trump administration is imposing on China.
Speaker 10 (34:42):
So I think this is a it goes two ways.
On one hand, it is affecting consumer confidence. The average
individual here in China understands that trade is an important
part of the economy, and if China is not able
to sell products into the United States, that's going to
make the job market less stable. It's going to make
(35:05):
it weaker. People are going to be a little bit
more concerned about their future prospects, and so as a result,
they may constrain some of their discretionary spending. But at
the same time, one of the other effects has been
people broadly see the tariffs as being American aggression, and
that has resulted in a lot of on the ground
(35:26):
support Foreshiugen Ping and for the government here to retaliate,
to play hardball with us, and so it kind of
creates a situation where people are feeling the effect and
feeling the hit in terms of confidence, But at the
same time, ready to continue going on, ready to continue
fighting the strang ward to.
Speaker 4 (35:45):
What extent is the government working to try to create
new markets right now to compensate for the fact that
demand coming from the US may be much less.
Speaker 10 (35:55):
So I think April was a very interesting month as
an ill of that. In April, Chinese exports to the
US fell by twenty percent, but Chinese exports to India
to Southeast Asia increase by twenty percent. And so there
is an effort by the Chinese government, by Chinese companies
to look for new markets where they can send their
(36:18):
products if those products cannot go to the United States.
That is one thing that they're doing now. The question
is how long can that last? Because if companies are
diverting all those products about half a trillion dollars worth
of exports to the United States in twenty twenty four,
if that's all or much of that is being diverted
to other markets, much smaller markets in Southeast Asia and
(36:39):
India relative to the United States, how long will those
markets allow those products to come in freely without they
themselves putting up trade barriers. And so this is a
question of yes, this is working now, but how long
will it work into the future.
Speaker 4 (36:52):
What about the trading partners that China already relies heavily on,
and I'm thinking of South Korea, Japan to some extent,
certainly Australia. How are those relationships.
Speaker 10 (37:02):
They are tense because part of what is happening in
these negotiations between the United States and South Korea and
Japan and Australia is this push to try and get
those countries to cut off Chinese sort of Chinese manufacturers
sending their goods to South Korea, for example, so that
(37:24):
they can be on sent to the United States. We
saw that when the US reached an agreement with the UK.
We've seen that with the US pushing for Mexico to
stop Chinese manufacturers from doing that. And so there is
an effort to buy the United States to put pressure
on these allies to cut themselves off from the Chinese
(37:44):
supply chain. China, on its part, is putting pressure on
those same countries to not do that, and so it's
actually caused a lot of these countries to be put
in a very difficult position and they're having to play
a balance that none of them wants to be in.
Speaker 4 (37:58):
John, Thank you so much much for helping us set
the stage as we look forward to the data in
the coming week on exports along with industrial production and
retail sales. He's John Lou Bloomberg, Executive Editor for Greater China,
and I'm Doug Chrisner. You can catch us weekdays for
the Daybreak Asia podcast. It's available wherever you get your podcast.
Speaker 2 (38:18):
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 and the news you need to start
your day. I'm Tom Busby. Stay with us. Top stories
and global business headlines are coming up right now.
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