May 9, 2025 • 39 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 eco data and earnings from the retail giant, Walmart.
- In the UK – a look ahead to Portugal’s general election.
- In Asia – a look ahead to Japan industrial production, PPI, and GDP data.
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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 day
Break anchors all around the world. Straight ahead on the program,
but look ahead to some key economic data in the
US how that may impact FED policy moving forward, Plus
a look at earnings from retail giant Walmart. I'm Tom
Busby in New York.
Speaker 3 (00:28):
I'm Caroline Hedkait in London, where we're looking to the
future as Portugal chooses a new leader.
Speaker 4 (00:33):
I'm Charlie Pellett, looking ahead to a big week of
eco data out of Japan.
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 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 2 (01:02):
Good day to you. I'm Tom Busby. We begin today's
program with some key economic data out this week. The
April Consumer Price Index on Tuesday and on Thursday, that
same month's producer price index and retail sales data. For
more on what that all could tell us about the
US consumer, the US economy, and what it may mean
to the Federal Reserve. We're joined by Edward Harrison, editor
(01:23):
of Bloomberg's The Everything Risk newsletter. Good to talk to you,
Tom oh pleasure Man. Pleasure, Well, let's start with inflation.
It looks like inflation at both the consumer producer levels
may be muted. There's good news there. Energy prices flat
despite the President's claims of a dollar ninety eight gas,
eggs price is still elevated, Housing rents through the roof.
(01:44):
But we just don't know about inflation, do we. I mean,
we really have no idea what's going to happen because
of these tariffs.
Speaker 5 (01:52):
No, I mean, this is really a baseline, Tom, for
you know the pre tariff announcement numbers at CPI that
was two point four percent in March but also expected
to be two point four percent in April. That's the CPI.
If you take out footing energy, you're looking at two
point eight percent both in March and April. And those
(02:13):
are levels that are above the Fed's two percent target.
So on both of those they're above and it would therefore,
given the uncertainty, tell the Fed to wait, as they
have told us already last week that they would do
before any sort of impact on the economy comes from
the tariffs, either on employment or on inflation.
Speaker 2 (02:34):
Yeah, Jerome Powell was pretty clear after that announcement the
third time this year that the Fed has left rates unchanged,
that we just have to wait and see. We don't
know what the impact will be on inflation, on jobs,
on the economy exactly.
Speaker 5 (02:48):
And so I think that we're getting a good read
ahead of time, which says that the numbers should be flat,
somewhat elevated relative to where the FED wants them to be,
but flatish. And so if we get any numbers that
are higher than expected, that will tilt the balance toward
(03:08):
the FED holding for longer. Right now, if you look
at markets, it's somewhere between June and July that markets
expect the first rate cut to happen, and that could
be pushed more back towards July if the inflation numbers
before the tariffs look a little bit elevated.
Speaker 2 (03:27):
Well before we get to that June and July, let's talk.
You know, we had this, this is the April number
coming out right now. It's May, but there are talks
going on. We know that. Just this past week the
President talked about a trade deal with the UK, not
the European Union much bigger, but the UK. And this
weekend there are talks between the US and a Chinese
(03:48):
delegation for the first time in Switzerland. Are you hopeful
for something there?
Speaker 5 (03:52):
You know, I'm hopeful in terms of what it tells
us about what the sort of parameters are that we're
dealing with. But we're looking at it. At this point
now is sort of a ten percent baseline across different
countries and then you know, negotiations on top of that
based on the individual deficits with the United States or surpluses.
(04:14):
The UK. You know, they didn't if you remember back
in Liberation Day on the second, they didn't actually have
an additional tariff on top of the ten percent. So
this is the easiest when you know, for Trump to
come out and say this is we have a deal
with them. Look what could happen to you? This is
sort of, you know, a promise to other countries that
(04:37):
come to the table that this is where we're going.
But in the end, ultimately will probably end up in
the mid teens in terms of the percentage versus two
point five percent, which which is what we had before
these tariffs came into place. So that's a big increase.
And if you look at what economists expect, according to
Bloomberger estimates, they expect inflation CPI, which is now going
(05:01):
to be two point four percent for this month. They
expect that to move up to three point five percent
for the entirety of Q four of this year. So
it's going to continue to move up and get to
three point five percent. And so obviously what that means
is is that if the Fed doesn't see weakness in
the labor market, they're going to be on a hold
(05:22):
for the entirety of twenty twenty five.
Speaker 2 (05:24):
And that's key. Once the labor market starts to really deteriorate,
that's going to be the impetus for the FED to
maybe act right exactly.
Speaker 5 (05:32):
So, you know, what the Fed has said is is
we don't really know what's going to happen, and we
also don't know how to tease out what happens as
a result of the tariffs and what's happening as a
result of inflation expectations. The underlying economic et cetera. Because
these numbers go up, we'll just have to wait and see.
Speaker 2 (05:51):
Well, I want to bring it back to retail sales.
In March, we saw a retail sales shoot up one
point four percent. A lot of that was to get
ahead of the tariffs, especially for autos. There was a
real rush in people buying. Do you see in April,
when you know April second, as you said, was in
this Independence day, all these tariffs were announced. Do you
think it may have sparked a lot of consumers to
(06:13):
do more shopping for the month of April or are
people just scared and maybe they were pulling back.
Speaker 5 (06:18):
It's a really good question, and I think that two
surveys that we're looking at, that is CPI and retail sales.
This is the one that's the biggest question mark, especially
because of the volatility associated with people pulling forward their demand.
You know, if you look at the advanced number month
on month, it was one point four percent for the
(06:40):
for the previous month, and the survey here expects it
to be zero point zero percent. That's the bloom big
survey so completely flat in the month of April, so
it could be all over the place. So that's a
huge drop from one month to the next when you.
Speaker 4 (06:58):
Look at it.
Speaker 5 (06:59):
If you take out autos, because you know, there were
a lot of auto buying that went on in March,
the number is a little bit more normalized. You have
zero point five percent increase month on month in the
previous month, and then they expect another zero point three
percent on top of that in April. So that's kind
of like, you know, the slowing trend of growth in
(07:21):
terms of retail sales that economs are expecting. The variation
there is going to be a lot bigger than it
is for CPI.
Speaker 2 (07:31):
Well, a lot to look forward to. That to April
retail sales data out on Thursday, along with April PPI
on Tuesday, the Consumer Price Index, and our thanks to
Edward Harrison, editor of Bloomberg's The Everything Risk newsletter. We
move now to corporate earnings from the world's largest retailer,
Walmart's first quarter results are out this Thursday. What will
they tell us about the US consumer and how retailers
(07:53):
are responding to the Trump tariffs? For more, we're joined
by Jennifer Bartash's Bloomberg Intelligence Senior analyst Retail saples and
packaged food. Jen, thanks so much for joining us. Well,
consumer's a word, a lot of them pulling back worried
about the tariffs is going to send prices higher? Is
Walmart worried?
Speaker 6 (08:11):
Yes, Hi Tom, I think that Walmart is actually one
of the best positioned retailers out there for this really
dynamic environment that we're in. You know, they appeal to
a very wide swath of consumers, and as people are
continuing to search for value, Walmart is a natural destination
for a lot of those shoppers. So as we're looking
(08:32):
at the quarter and their earnings, we had a solid
Easter season. People are looking for value and Walmart is
pretty well positioned to be able to navigate a lot
of this turbulence that we're seeing right now.
Speaker 2 (08:45):
Would you say they're the best retailer to navigate what's
going on right now all the uncertainty out there. I mean,
there's a lot of competition, but they seem to always
figure it out.
Speaker 6 (08:55):
There is indeed a lot of competition, but when you
think about Walmart's scale, the supply chain efficiency that they have,
the fact that they've got a really broad assortment in
their store, They've got a lot of groceries, but they
have you know, other general merchandise as well. It really
puts them in a position where they can have a
lot of different levers they can pull to help make
(09:17):
sure that they can meet consumer needs and still have
the things in stock that the people are looking for.
Speaker 2 (09:24):
Now, what are its customers doing right now? Are they spending?
Have higher grocery prices brought in a lot of new customers.
Speaker 6 (09:31):
Yeah. Walmart has actually been for the last several quarters
talking about how higher income households are being pulled into
their ecosphere, which is actually pretty interesting because everybody seems
to be looking for value right now, and a lot
of that did come from the higher food prices, as
you said, But it's also that Walmart has built multiple
(09:53):
facets to its offering, so it's not just about low prices.
It's also about service. So for people who are members
of their Walmart Plus program, the convenience factor plays in
very much to the overall value proposition. You know, Walmart
has you know, pharmacy operations, They've got all kinds of
different things that pull people in, and once you get
(10:14):
into that system, you become kind of sticky. And so
you know, Walmart is got a lot of customers coming in,
and they've got a lot of things that will help
keep them there even once prices sort of normalize from
food inflation and as some of this uncertainty in the
market starts to subside. We think Walmart's actually very well
positioned to hold on to a lot of those customers
(10:36):
that they've gained in recent quarters.
Speaker 2 (10:38):
Yeah, and I see it. You know they've got this
now manager specials. These are price cuts, price matches against competitors.
So clearly this is not just groceries. I mean, they
are going after the best buys and the coals and
the targets of the world with this new initiative.
Speaker 6 (10:53):
It is it's a way for them to gain market share.
And as I you know, as I mentioned, they have
a lot of scale. That means that they have the
ability to really work with suppliers to ensure that they're
getting goods, and they also have the ability to absorb
some of the tariff related costs if needed, which means
that they can have very competitive prices relative to some
(11:15):
of those other retailers that you mentioned.
Speaker 2 (11:17):
Well, let's talk about the tariffs then. Is it better
positioned than most in getting goods from the US from
other countries that may not what I'm saying is not China.
A lot of it obviously comes from China. But are
they more nimble in getting around those tariffs.
Speaker 6 (11:35):
I don't know if it's about being nimble, But when
you look at Walmart's overall operation in the United States,
more than half of their revenue comes from grocery sales,
and the majority of groceries are sourced from the US.
And so when you talk to and you talk to
the company, they'll say that two thirds of their of
the goods they sell are manufactured or bought in the
(11:58):
United States, which leaves only about a third of their
inventory that's subject to imports. Now that a good chunk
of that is coming from China. But again, because Walmart
is such a big player, it gives them a lot
of weight when it comes to dealing with suppliers and
finding ways to optimize what they're ordering and to help
(12:20):
reduce the impact of tariffs. Now, they will not be
completely unscathed. I don't think any retailer will be. By
virtue of their product mix and by virtue of their scale,
I think that Walmart is better positioned to mitigate some
of those terraff related costs than other retailers are well.
Speaker 2 (12:36):
We'll see about first quarter earnings out this Thursday, ahead
of the opening bell on Wall Street. Jennifer bartashis Bloomberg
Intelligence Senior analyst retail, staples and packaged Foods, and coming
up on Bloomberg day Break weekend, we'll look to the
future as Portugal chooses a new leader. I'm Tom Busby,
and this is Bloomberg. This is Bloomberg day Break weekend,
(13:06):
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 a look at some key
economic data in Japan. But first in the coming days,
Portugal holds its third general election in as many years
after the downfall of its center right minority government. This
comes at a complicated time for the European Union as
(13:27):
it navigates trade disputes and pressure to bolster defense capacity.
For more. Let's go to London and bring in Bloomberg
day Break europe banker Caroline.
Speaker 3 (13:35):
Hepgar Tom Portugal is heading to the polls again in
the coming days. The news comes after Luis Montenegro's government
lost a confidence vote in early March, it's set to
once again be a close race between the Prime Minister's
center right AD coalition, which is looking for deeper corporate
and personal income tax cuts, and the center left Social
(13:59):
Life who are proposing VAT exemptions for certain essential products. Now,
at the moment, no single party seems to have enough
support on its own to get an absolute majority in
the Portuguese Parliament. It means that the country will likely
end up with another minority government that has to make
concessions to obtain policy support. This is likely to complicate
(14:24):
fiscal policy making and at a crucial moment for Europe
more broadly, the region's economic situation is something that I've
been discussing with Helen Jewell, who is a mere cio
for Fundamental Equity at Blackrock, setting the backdrop in Europe.
Speaker 7 (14:43):
So Europe has performed incredibly well here today, particularly in
dollar terms, and what's interesting is that what we're not
really seeing at the moment are US investors pivoting into
European stocks. We're seeing more flows coming through from European investors.
When we of our our clients, we have more than
fifty percent of them saying that they're thinking about allocating
(15:05):
more to Europe over the next six to twelve months,
but we're not yet seeing as much of that in
US investors now. Maybe if we continue to see the
euro strengthen we will start to see some kind of
flows moving back into Europe and that will help the
European story. But at the moment, it's difficult to see
what will take it that much further because from a
multiple perspective, Caroline it's trading at a pretty fairly valued level,
(15:30):
and like the UK, which is at a discount, Europe
is at fourteen times pretty fairly valued relative to history.
So I do think Europe will need some kind of
catalyst to take it potentially to that next level. If
we don't see that, if we don't see some kind
of a strong outcome to trade negotiations at some point soon,
(15:51):
we might find it flat. Not to say there won't
be opportunities within it. We saw Ferrari, it was performing well,
strong results, saying their order book is full. Those kind
of names will continue to do well. We still think
European banks domestically focused names will do well, but the
index as a whole, I think, without a catalyst, might
just bubble along the level it is at the moment.
Speaker 8 (16:12):
And top top one you think eurostrength is good news
because it can pull those US investors in without being
worried about downside in the currency. How clean is that
play given the export function of a number of European
companies and the weight the europlate strong europlays on that.
Speaker 7 (16:25):
So that is the key interaction at the moment. The
thing we've seen, however, is that they are not the
names that have significantly outperformed. A few exceptions obviously I
mentioned Ferrari, but I think that's a special case given
the brand that they have. But on the whole, what
has outperformed here to day has been the domestically exposed
names and not those global names because already tariffs have
(16:47):
played down on those. So I think what you're likely
to see is some kind of pressure easing because of
the tariffs, but some kind of from the dollar weakening
kind of offsetting that a little bit. So I think
two things will interapt. But don't forget they are not
the names that have done well year to date. It
has been much more than domestically focused European names that
(17:07):
have driven the European rally that we've seen so far.
Speaker 3 (17:10):
Yeah, in terms of the European rally, how much of
it is affected by the difficult political situation now for
Germany and for Friedrik Mertz.
Speaker 2 (17:18):
And you know, we.
Speaker 3 (17:20):
Saw for example, Germany industrial production rising before the bars
of tariffs, but tariffs again are going to hit Germany
particularly hard.
Speaker 7 (17:28):
So I think what happened earlier this week in Germany
is perhaps just a signal and a reminder that things
aren't always plain sailing. However, the key commitment that has
been made within Europe, particularly by Germany on the infrastructure spend,
is really phenomenal on the defense spend as well, and
that's really important. If you look at the defense spend,
(17:49):
so much of that defense spend historically was for global companies.
Now so much of that is going to be European focused,
and that remains there are going to be bumps along,
and I wonder whether those bumps are what's stopping US
investors coming into Europe by as much as perhaps they should,
given the narrative that we see in Europe and given
the strength of the euro versus the dollar. But I
(18:12):
don't think they are anything more than little bumps in
the road rather than necessarily underlying changes to the structural
narrative that we see in Europe at the moment.
Speaker 3 (18:20):
So that was Helen Jewell there speaking to me and
to my colleague Tom McKenzie about what's going on in
Europe more broadly and amid the pressure on the continent.
What is at stake in Portugal's election. The country has
a population of ten point six million people. The finance
minister expects the country to grow by two percent this year.
(18:42):
But successive governments have been and gone and a raft
of smaller parties are vying for a share of the
vote in an increasingly heated election campaign. I've been speaking
to Bloomberg's Portugal bureau chief, jau Lima Jaho, just talk
us through the main contenders who are vying for power
(19:02):
in this election in Portugal.
Speaker 9 (19:04):
So you have the ruling party is actually the ruling coalition,
center right coalition, led by Prime Minister Luisian Montenegru, and
he actually called a confidence motion in March and he
lost that vote and ultimately that's what triggered this early election.
It's Portal's third early election in three years, and he'll
be competing against the socialist leader Peter nun Santuche. Those
(19:27):
are the two main centrist parties in Portugal, and they've
more or less dominated politics in the fifty years that
Portos had democracy, and they seem to be heading again
for a tight race. The center right the prime Minister's coalition,
and the center right is leading by about five six
seven percentage points depending on the latest polls, and the
(19:47):
Socialists are still very very close. And still it's not
clear if prime minister will be able to keep his
job or if you'll have a socialist government. But for
now the prime Minister is still in the lead in
the latest opinion.
Speaker 3 (20:00):
Okay, interesting, but three governments in three years, or at
least three elections in three years, that's a lot of
political uncertainty. Do people think that there will be perhaps
more stability as a result of this vote.
Speaker 9 (20:12):
It really depends on how strong or weak the next
government will be. Portuless had this tradition of having weak
minority governments, and at the moment, none of the neither
the socialist nor the center right collision seem like they
will be getting an absolute majority. I could say some
commentators have said there's an element of election fatigue and
ports at the moment, but we'll have to see that
(20:33):
there will be probably more pressure felt by lawmakers and
by whoever's in government to try to you know, coalesce
and find a solution that will let the government last
more than just a year, as has been the case
in the recent years.
Speaker 3 (20:48):
Do you foresee more political maneuvering then, if a minority
government is looking for external support.
Speaker 9 (20:54):
Yes, definitely. I mean the whichever party wins, whichever the
two main centrist parties win, and they will have to
compromise to get backing from others to get a budget approved.
For example, that happened last year. For instance, the center
right government had to compromise on tax cuts. It wants
to push through deeper tax cuts, but to get the
(21:15):
abstension of the Socialists, which was necessary to let the
budget pass, it had to settle for short, smaller tax cuts.
And similarly that will happen if the Socialists win. They
will probably have to find backing from parties on the
further to the left, and they will have to find
compromise on different policy areas.
Speaker 3 (21:34):
There are those tectonic plates in Europe shifting, aren't there, not,
least because of the Trump administration in the United States,
Additional defense spending infrastructure spending across Europe, the idea of
trying to battle weak economic growth, and so many other
challenges for Britain sorry for, and so many other challenges
(21:57):
for Europe. Just tell us about how the candidates are
thinking about their relationship with the EU and all of
these challenges.
Speaker 10 (22:07):
Well.
Speaker 9 (22:07):
In Portugal, the center right and the center left they
share many positions in terms of the big policy issues
of foreign policy of defense. For instance, the center right
government recently announced it would use an escape course of
an EU rule allowing it to spend more than a
(22:30):
certain limit defined for EU countries in order to boost
defense spending, and it mentioned that it addressed this issue
before making the announcement with the socialists, So that kind
of underlines how the center right and center left in
certain key policy areas like defense, foreign policy, they share
this consensus and there is agreement on major major policy issues,
(22:55):
especially when when it has to do with defense and
foreign policy. More domestically, there are differences obviously, but again
in terms of the bigger EU issues defense diplomatic relations,
there tends to be a shared view between center right
and center left.
Speaker 3 (23:11):
So if there isn't much between them, then in terms
of those sort of big policy lies what will be
the top priority for a new government once elected.
Speaker 9 (23:21):
Where there is a clear divide, for instance, in terms
of for instance, tax policy and where to cut taxes.
So the center right is talking about continuing to cut
corporate taxes and income taxes, while the socialists are proposing
removing VT tax from certain essential food products. So they
argue that that's that kind of tax cut when you
(23:44):
tackle VAT is a way of benefiting everyone. And they
argue that the center right, in focusing on corporate tax
and income tax is only helping a part of the population,
of part the smaller group of the population. On the
other hand, the center right will say that you need
(24:04):
to create wealth first before redistributing it, and that's why
they are betting more on cutting corporate tax for instance. Again,
it's a debate that's you know, been going on in
center right between center right and center left for many
countries for decades, and that's here that still is at
the moment one of the key policy divides going into
this election.
Speaker 3 (24:24):
And so what sort of economic position is Portugal in
then at also this time of real global financial and
trade uncertainty.
Speaker 9 (24:34):
Well, Portugal together with Spain, for example, has been doing
better than the EU average in terms of growth. It's
it's obviously there was obviously the post COVID boom, but
it's continued to benefit from exports, from from tourism, continuing
to have strong growth, you know, well beyond the post
immediate post COVID period. And so the Bank of Portugal,
(24:55):
for instance, in in March it raised its forecast for
the country's growth this year to two point three percent.
So there's been steady overperformance compared to other U countries. However,
we're under the Trump administration. There's obviously been new announcements
in terms of taris and so on, and that effect
(25:16):
might not have filtered through to the Portuguese economy yet,
so that outlook could still change. So there's still a
lot of uncertainty. That's something the Central Bank governor has
pointed at and has stressed repeatedly that there is a
lot of uncertainty at the moment.
Speaker 3 (25:30):
That was Bloomberg's Jao Lima speaking to us form Lisbon.
My thanks to Joo. Now we'll have full coverage of course,
as Portugal heads the polls here on Bloomberg Radio over
the next few days. I'm Caroline Hepkea in London. You
can catch us every weekday morning for Bloomberg day Break.
You up beginning at six am in London. That's one
am on Wall Street. Tom.
Speaker 2 (25:50):
Thank you, Caroline, And coming up on Bloomberg Daybreak weekend,
we look ahead to some key economic indicators out this
week in Japan. I'm Tom Busby, and this is Bloomberg.
(26:10):
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. We turn our focus
now to Japan, where a trio of high impact economic
indicators will be released this week, and for a closer
look at what those data points could mean, we turn
to Bloomberg's Charlie Pellett.
Speaker 4 (26:28):
Tom Japan has been walking a delicate economic tightrope, balancing
sluggish growth, sticky inflation under week Yen, We're expecting updates
on GDP, factory output and producer prices, three key indicators
that could give us a clearer picture of where things stand.
Are we looking at a rebound or more signs of strain?
(26:51):
And to answer that question, we're joined now by Paul Jackson,
Asia Ekogov, editor for Bloomberg News. He joins us from
our studios in token Paul, let's start with GDP. What
are economists expecting and what would a surprise in either direction?
Speaker 11 (27:07):
Tell us, Well, I think we're expecting another week start
to the year. I think we had somewhat inflated GDP
figures the end of last year. They were a bit flattering.
It was largely a kind of lull in imports that
gave us the two point two percent annualized growth there.
So I think we're going to be flipping towards a
(27:30):
contraction in this first quarter. Now that's a bad sign because,
as you know, US President Donald Trump has unleashed this
barrage of tariffs on the world. This Liberation Day that
took place at the beginning of April. Means that if
you're starting with a week quarter, the second quarter isn't
(27:52):
looking pretty. In fact, it's looking a.
Speaker 4 (27:54):
Lot worse on the ground in Tokyo. So the Japanese
people follow tariff developments that closely.
Speaker 11 (28:02):
Well, I think there is a lot of fear and
uncertainty about what this all means for Japan's economy. I mean,
you're right, you know, does the average person on the
street follow closely the GDP figure or the latest number
on tariffs, know, but they do get an impression of
is the news kind of good or bad? And if
(28:24):
you're looking at consumer confidence at the moment, we saw
that falling to the lowest level in two years in April,
So our consumers worried about the state the outlook for
the economy where tariffs are taking the world, Yes, I
think you can conclude that they are worried about it.
(28:45):
And if we have a step back into the reverse
for the economy in the first quarter, then the tariffs
hit in the second quarter. I think we're at risk
of a technical recession in Japan, which is not going
to be a good look for Prime Minister Ishiba as
he faces an Upper House election in the summer.
Speaker 4 (29:05):
Well, industrial production certainly has been under pressure. What sectors
are driving that trend and is there any sign of
a potential turnound?
Speaker 11 (29:13):
Well, I think we saw in Asia we saw a
kind of boost in auto output once you know, the
Donald Trump was talking about putting these twenty five percent
tariffs on autos, and we saw in other countries like
a huge jump in auto exports starting in February and
(29:34):
also taking place in March. But what we've seen is
while that trend was similar in Japan in February, in March,
the output of auto's was not as strong as you
would have expected with you'd be expecting some front loading
right ahead of those tariffs. And I think this takes
us to one of the key fears for Japan and
(29:55):
policymakers here is that the tariffs on the auto's that's
really gonna hurt Japan. I mean, the auto sector employees
eight percent of Japan's workforce, and about a third of
Japan's exports to the US are car car related.
Speaker 4 (30:14):
Now, there was that Nikay report recently that Japan's government
was mulling leveraging shipbuilding in tariff negotiations with the Trump administration.
How did tariffs play into the broader outlook, Well.
Speaker 11 (30:27):
The broader outlook careerly, it's that auto sector is the
key thing that Japan wants a US to dial back autos.
That's going to have huge implications for the economy, as
I've mentioned, just for the sheer scale of those exports
to the US and the number of people it employees
(30:49):
in Japan. So in these trade negotiations. We've already had
two rounds. You know, Japan is going to have to
give Trump something in return for maybe pegging back the
tariffs on autos. And what can Japan do. I mean,
offering some shipbuilding help could be won. Buying some more
(31:13):
agricultural goods from the US might be another. The cards
another thing they can offer the US to try and
convince the officials there to lower these tariffs. Now so far,
what we're hearing in local media reports is that the
US is pretty firm on those auto tariffs, the reciprocal tariffs. Okay,
(31:35):
we'll lower those, but that twenty five percent on autos
is staying. That's what we're hearing now and that's a
big concern for policymakers here, Paul.
Speaker 4 (31:44):
Looking ahead to we've got data coming up on producer prices.
They have been sticky. How are businesses coping with input
costs and could that data shape the Bank of Japan's
next move.
Speaker 11 (31:55):
Well, we've seen these input costs around about the growing
around about the four percent mark up. So if you've
got inflation, overall inflation's three point six percent. Core inflation,
which is focused on by the central bank is three
point two percent, so you can see those input prices
are higher than consumer inflation levels. So what that tells
(32:17):
you is that producers are taking a squeeze, they're taking
a hit as they're trying to absorb those costs. Now,
on the one hand, that sounds bad, but in terms
of the optics the dynamics of Japan's economy, we've seen
a lot of change here over the last two or
three years. This is an economy that has seen very
little inflation for decades. Now we've had three years of
(32:41):
inflation of two percent or more, which is the Bank
of Japan's goal. And what we've seen is businesses have
gone from having to absorb almost all of those input
cost increases to being able to spread most of the
input costs increases onto consumers now, not all, but most.
(33:02):
So these are positive developments for the economy. The question
is is can consumers up their spending in real terms,
not just keeping up with inflation, but expand their spending,
which will be a sign that they're getting comfortable with
the new reality of Japan's economy.
Speaker 4 (33:23):
I've got another major question for you, then, having to
deal with uncertainty, not just for the economic data here
in the US very tough to make planning decisions, either
at the corporate level the individual level. Do you go
out and buy something now because of potential tariffs? Certainly
one of the big questions for investors how much of
the incoming data do you think is already priced into
(33:44):
markets given all of the uncertainty.
Speaker 11 (33:46):
Well, I mean that really is a very difficult question
to answer. I mean, if we look at how stocks
have been performing over the year, we started around the
forty thousand mark for the nie K, and I think
when the real fear and concern over the tariffs hit
in April, we got down to about the thirty one
(34:08):
thousand marks. I mean, that's quite quite a downward move.
So where are we now. We're about thirty seven thousand marks,
so we've you know, retraced most of those losses, so
we're nearly, you know, we're heading back to where we were,
but we're still definitely below I would say there's a
huge amount of uncertainty here. We've seen Donald Trump in
(34:31):
his first presidency and again this time round. You know,
he can change tach very quickly. The implications can be
huge for economies. So I think the big fear we're
over that there is a general understanding that he is
a deal maker. So you know, the top end level
(34:53):
figures of these tariffs, that feels like, you know, the
worst it could be and will be likely negotiated down.
But the devil is in the detail. How much lower
can Japanese policymakers bring those tariff levels down to protect
its economy?
Speaker 4 (35:10):
Paul Jackson, Asia ecogov editor for Bloomberg News in Tokyo
switching gears now, Hong Kong's economy has expanded at the
fastest pace in more than a year, benefiting from a
recovery in tourism and an export bump before Donald Trump's
drastic tariff hikes. The upbeat result may vindicate efforts by
(35:31):
policymakers to make the city an attractive destination again after
its image suffered from strict pandemic measures and a crackdown
on freedoms. And for a closer look, we heard from
Rosanna Law, Hong Kong's Culture, Sports and Tourism secretary, and
she spoke with Bloomberg's Steven Engel.
Speaker 10 (35:50):
I actually see pretty handsome increase of visitors from outside
of Asia or within the shorthold of Asia. For our
long haul, which primarily means a flight more than five
hours for the long haul visitors. We see double digit
growth last year and this year thirty one percent growth
(36:12):
from Australia. I think close to twenty percent growth for
the US and the UK for example. I think these
are signs that people are actually still traveling, and with
the resumption of flight capacity, the subsequent or consequential drop
(36:33):
in air flight ticket affairs, and also the fully operational
free runway system of Hong Kong. Actually we see that
our overseas visitors are coming back.
Speaker 8 (36:43):
Are you doing enough to attract those non Chinese visitors?
Speaker 10 (36:46):
We are doing more and more. Actually, the Hong Kong
Tourism BARD has been doing quite a lot in these
US in countries. I actually just now led the delegation
to the Middle East. I went to Dubai, abudah b
and Rearb and UH. We were doing a UH trade
(37:06):
delegation visit to the Arabic traffic market. And I think
we are keeping and increasing our work in the traditional markets,
that's no question about it. We are also exploring new markets.
So the figure, the figures actually speaks for themselves. What
(37:27):
are you doing for the US market?
Speaker 9 (37:29):
The US market because there's threats that perhaps those Hong
Kong trade offices might be closed.
Speaker 8 (37:34):
We all know about the trade war.
Speaker 10 (37:35):
Well, we are doing nothing to the US. We we
maintained a zero tariff, separate customs territory, a founding member
of the w t O UH. We have not imposed
any reciprocal reciprocal tariffs. I don't know how is simplical.
That is because Hong Kong adopts zero tariff, so we're
(37:56):
doing nothing. We basically did nothing to under my any
of it. On the other hand, we actually welcome everybody.
Hong Kong store is always open and you can see
for yourself the increase in the visitors from the United States.
You can see that Hollywood movies are now still being
(38:17):
staged in Hong Kong all the time, even when we
are faced with different Fritz or fritsoft tariff or other things.
Hong Kong we makes a free.
Speaker 4 (38:29):
Pot rose andne law. Hong Kong's Culture, Sports and Tourism Secretary,
and I'm Charlie Pellette. Tune in weekdays to the Daybreak
Asia podcast for a look at the story shaping markets, finance,
and geopolitics in the Asia Pacific region. It's available wherever
you get your podcasts.
Speaker 2 (38:48):
Tom, Thanks Charlie, 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. 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 day
Break anchors all around the world. Straight ahead on the program,
but look ahead to some key economic data in the
US how that may impact FED policy moving forward, Plus
a look at earnings from retail giant Walmart. I'm Tom
Busby in New York.
Speaker 3 (00:28):
I'm Caroline Hedkait in London, where we're looking to the
future as Portugal chooses a new leader.
Speaker 4 (00:33):
I'm Charlie Pellett, looking ahead to a big week of
eco data out of Japan.
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 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 2 (01:02):
Good day to you. I'm Tom Busby. We begin today's
program with some key economic data out this week. The
April Consumer Price Index on Tuesday and on Thursday, that
same month's producer price index and retail sales data. For
more on what that all could tell us about the
US consumer, the US economy, and what it may mean
to the Federal Reserve. We're joined by Edward Harrison, editor
(01:23):
of Bloomberg's The Everything Risk newsletter. Good to talk to you,
Tom oh pleasure Man. Pleasure, Well, let's start with inflation.
It looks like inflation at both the consumer producer levels
may be muted. There's good news there. Energy prices flat
despite the President's claims of a dollar ninety eight gas,
eggs price is still elevated, Housing rents through the roof.
(01:44):
But we just don't know about inflation, do we. I mean,
we really have no idea what's going to happen because
of these tariffs.
Speaker 5 (01:52):
No, I mean, this is really a baseline, Tom, for
you know the pre tariff announcement numbers at CPI that
was two point four percent in March but also expected
to be two point four percent in April. That's the CPI.
If you take out footing energy, you're looking at two
point eight percent both in March and April. And those
(02:13):
are levels that are above the Fed's two percent target.
So on both of those they're above and it would therefore,
given the uncertainty, tell the Fed to wait, as they
have told us already last week that they would do
before any sort of impact on the economy comes from
the tariffs, either on employment or on inflation.
Speaker 2 (02:34):
Yeah, Jerome Powell was pretty clear after that announcement the
third time this year that the Fed has left rates unchanged,
that we just have to wait and see. We don't
know what the impact will be on inflation, on jobs,
on the economy exactly.
Speaker 5 (02:48):
And so I think that we're getting a good read
ahead of time, which says that the numbers should be flat,
somewhat elevated relative to where the FED wants them to be,
but flatish. And so if we get any numbers that
are higher than expected, that will tilt the balance toward
(03:08):
the FED holding for longer. Right now, if you look
at markets, it's somewhere between June and July that markets
expect the first rate cut to happen, and that could
be pushed more back towards July if the inflation numbers
before the tariffs look a little bit elevated.
Speaker 2 (03:27):
Well before we get to that June and July, let's talk.
You know, we had this, this is the April number
coming out right now. It's May, but there are talks
going on. We know that. Just this past week the
President talked about a trade deal with the UK, not
the European Union much bigger, but the UK. And this
weekend there are talks between the US and a Chinese
(03:48):
delegation for the first time in Switzerland. Are you hopeful
for something there?
Speaker 5 (03:52):
You know, I'm hopeful in terms of what it tells
us about what the sort of parameters are that we're
dealing with. But we're looking at it. At this point
now is sort of a ten percent baseline across different
countries and then you know, negotiations on top of that
based on the individual deficits with the United States or surpluses.
(04:14):
The UK. You know, they didn't if you remember back
in Liberation Day on the second, they didn't actually have
an additional tariff on top of the ten percent. So
this is the easiest when you know, for Trump to
come out and say this is we have a deal
with them. Look what could happen to you? This is
sort of, you know, a promise to other countries that
(04:37):
come to the table that this is where we're going.
But in the end, ultimately will probably end up in
the mid teens in terms of the percentage versus two
point five percent, which which is what we had before
these tariffs came into place. So that's a big increase.
And if you look at what economists expect, according to
Bloomberger estimates, they expect inflation CPI, which is now going
(05:01):
to be two point four percent for this month. They
expect that to move up to three point five percent
for the entirety of Q four of this year. So
it's going to continue to move up and get to
three point five percent. And so obviously what that means
is is that if the Fed doesn't see weakness in
the labor market, they're going to be on a hold
(05:22):
for the entirety of twenty twenty five.
Speaker 2 (05:24):
And that's key. Once the labor market starts to really deteriorate,
that's going to be the impetus for the FED to
maybe act right exactly.
Speaker 5 (05:32):
So, you know, what the Fed has said is is
we don't really know what's going to happen, and we
also don't know how to tease out what happens as
a result of the tariffs and what's happening as a
result of inflation expectations. The underlying economic et cetera. Because
these numbers go up, we'll just have to wait and see.
Speaker 2 (05:51):
Well, I want to bring it back to retail sales.
In March, we saw a retail sales shoot up one
point four percent. A lot of that was to get
ahead of the tariffs, especially for autos. There was a
real rush in people buying. Do you see in April,
when you know April second, as you said, was in
this Independence day, all these tariffs were announced. Do you
think it may have sparked a lot of consumers to
(06:13):
do more shopping for the month of April or are
people just scared and maybe they were pulling back.
Speaker 5 (06:18):
It's a really good question, and I think that two
surveys that we're looking at, that is CPI and retail sales.
This is the one that's the biggest question mark, especially
because of the volatility associated with people pulling forward their demand.
You know, if you look at the advanced number month
on month, it was one point four percent for the
(06:40):
for the previous month, and the survey here expects it
to be zero point zero percent. That's the bloom big
survey so completely flat in the month of April, so
it could be all over the place. So that's a
huge drop from one month to the next when you.
Speaker 4 (06:58):
Look at it.
Speaker 5 (06:59):
If you take out autos, because you know, there were
a lot of auto buying that went on in March,
the number is a little bit more normalized. You have
zero point five percent increase month on month in the
previous month, and then they expect another zero point three
percent on top of that in April. So that's kind
of like, you know, the slowing trend of growth in
(07:21):
terms of retail sales that economs are expecting. The variation
there is going to be a lot bigger than it
is for CPI.
Speaker 2 (07:31):
Well, a lot to look forward to. That to April
retail sales data out on Thursday, along with April PPI
on Tuesday, the Consumer Price Index, and our thanks to
Edward Harrison, editor of Bloomberg's The Everything Risk newsletter. We
move now to corporate earnings from the world's largest retailer,
Walmart's first quarter results are out this Thursday. What will
they tell us about the US consumer and how retailers
(07:53):
are responding to the Trump tariffs? For more, we're joined
by Jennifer Bartash's Bloomberg Intelligence Senior analyst Retail saples and
packaged food. Jen, thanks so much for joining us. Well,
consumer's a word, a lot of them pulling back worried
about the tariffs is going to send prices higher? Is
Walmart worried?
Speaker 6 (08:11):
Yes, Hi Tom, I think that Walmart is actually one
of the best positioned retailers out there for this really
dynamic environment that we're in. You know, they appeal to
a very wide swath of consumers, and as people are
continuing to search for value, Walmart is a natural destination
for a lot of those shoppers. So as we're looking
(08:32):
at the quarter and their earnings, we had a solid
Easter season. People are looking for value and Walmart is
pretty well positioned to be able to navigate a lot
of this turbulence that we're seeing right now.
Speaker 2 (08:45):
Would you say they're the best retailer to navigate what's
going on right now all the uncertainty out there. I mean,
there's a lot of competition, but they seem to always
figure it out.
Speaker 6 (08:55):
There is indeed a lot of competition, but when you
think about Walmart's scale, the supply chain efficiency that they have,
the fact that they've got a really broad assortment in
their store, They've got a lot of groceries, but they
have you know, other general merchandise as well. It really
puts them in a position where they can have a
lot of different levers they can pull to help make
(09:17):
sure that they can meet consumer needs and still have
the things in stock that the people are looking for.
Speaker 2 (09:24):
Now, what are its customers doing right now? Are they spending?
Have higher grocery prices brought in a lot of new customers.
Speaker 6 (09:31):
Yeah. Walmart has actually been for the last several quarters
talking about how higher income households are being pulled into
their ecosphere, which is actually pretty interesting because everybody seems
to be looking for value right now, and a lot
of that did come from the higher food prices, as
you said, But it's also that Walmart has built multiple
(09:53):
facets to its offering, so it's not just about low prices.
It's also about service. So for people who are members
of their Walmart Plus program, the convenience factor plays in
very much to the overall value proposition. You know, Walmart
has you know, pharmacy operations, They've got all kinds of
different things that pull people in, and once you get
(10:14):
into that system, you become kind of sticky. And so
you know, Walmart is got a lot of customers coming in,
and they've got a lot of things that will help
keep them there even once prices sort of normalize from
food inflation and as some of this uncertainty in the
market starts to subside. We think Walmart's actually very well
positioned to hold on to a lot of those customers
(10:36):
that they've gained in recent quarters.
Speaker 2 (10:38):
Yeah, and I see it. You know they've got this
now manager specials. These are price cuts, price matches against competitors.
So clearly this is not just groceries. I mean, they
are going after the best buys and the coals and
the targets of the world with this new initiative.
Speaker 6 (10:53):
It is it's a way for them to gain market share.
And as I you know, as I mentioned, they have
a lot of scale. That means that they have the
ability to really work with suppliers to ensure that they're
getting goods, and they also have the ability to absorb
some of the tariff related costs if needed, which means
that they can have very competitive prices relative to some
(11:15):
of those other retailers that you mentioned.
Speaker 2 (11:17):
Well, let's talk about the tariffs then. Is it better
positioned than most in getting goods from the US from
other countries that may not what I'm saying is not China.
A lot of it obviously comes from China. But are
they more nimble in getting around those tariffs.
Speaker 6 (11:35):
I don't know if it's about being nimble, But when
you look at Walmart's overall operation in the United States,
more than half of their revenue comes from grocery sales,
and the majority of groceries are sourced from the US.
And so when you talk to and you talk to
the company, they'll say that two thirds of their of
the goods they sell are manufactured or bought in the
(11:58):
United States, which leaves only about a third of their
inventory that's subject to imports. Now that a good chunk
of that is coming from China. But again, because Walmart
is such a big player, it gives them a lot
of weight when it comes to dealing with suppliers and
finding ways to optimize what they're ordering and to help
(12:20):
reduce the impact of tariffs. Now, they will not be
completely unscathed. I don't think any retailer will be. By
virtue of their product mix and by virtue of their scale,
I think that Walmart is better positioned to mitigate some
of those terraff related costs than other retailers are well.
Speaker 2 (12:36):
We'll see about first quarter earnings out this Thursday, ahead
of the opening bell on Wall Street. Jennifer bartashis Bloomberg
Intelligence Senior analyst retail, staples and packaged Foods, and coming
up on Bloomberg day Break weekend, we'll look to the
future as Portugal chooses a new leader. I'm Tom Busby,
and this is Bloomberg. This is Bloomberg day Break weekend,
(13:06):
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 a look at some key
economic data in Japan. But first in the coming days,
Portugal holds its third general election in as many years
after the downfall of its center right minority government. This
comes at a complicated time for the European Union as
(13:27):
it navigates trade disputes and pressure to bolster defense capacity.
For more. Let's go to London and bring in Bloomberg
day Break europe banker Caroline.
Speaker 3 (13:35):
Hepgar Tom Portugal is heading to the polls again in
the coming days. The news comes after Luis Montenegro's government
lost a confidence vote in early March, it's set to
once again be a close race between the Prime Minister's
center right AD coalition, which is looking for deeper corporate
and personal income tax cuts, and the center left Social
(13:59):
Life who are proposing VAT exemptions for certain essential products. Now,
at the moment, no single party seems to have enough
support on its own to get an absolute majority in
the Portuguese Parliament. It means that the country will likely
end up with another minority government that has to make
concessions to obtain policy support. This is likely to complicate
(14:24):
fiscal policy making and at a crucial moment for Europe
more broadly, the region's economic situation is something that I've
been discussing with Helen Jewell, who is a mere cio
for Fundamental Equity at Blackrock, setting the backdrop in Europe.
Speaker 7 (14:43):
So Europe has performed incredibly well here today, particularly in
dollar terms, and what's interesting is that what we're not
really seeing at the moment are US investors pivoting into
European stocks. We're seeing more flows coming through from European investors.
When we of our our clients, we have more than
fifty percent of them saying that they're thinking about allocating
(15:05):
more to Europe over the next six to twelve months,
but we're not yet seeing as much of that in
US investors now. Maybe if we continue to see the
euro strengthen we will start to see some kind of
flows moving back into Europe and that will help the
European story. But at the moment, it's difficult to see
what will take it that much further because from a
multiple perspective, Caroline it's trading at a pretty fairly valued level,
(15:30):
and like the UK, which is at a discount, Europe
is at fourteen times pretty fairly valued relative to history.
So I do think Europe will need some kind of
catalyst to take it potentially to that next level. If
we don't see that, if we don't see some kind
of a strong outcome to trade negotiations at some point soon,
(15:51):
we might find it flat. Not to say there won't
be opportunities within it. We saw Ferrari, it was performing well,
strong results, saying their order book is full. Those kind
of names will continue to do well. We still think
European banks domestically focused names will do well, but the
index as a whole, I think, without a catalyst, might
just bubble along the level it is at the moment.
Speaker 8 (16:12):
And top top one you think eurostrength is good news
because it can pull those US investors in without being
worried about downside in the currency. How clean is that
play given the export function of a number of European
companies and the weight the europlate strong europlays on that.
Speaker 7 (16:25):
So that is the key interaction at the moment. The
thing we've seen, however, is that they are not the
names that have significantly outperformed. A few exceptions obviously I
mentioned Ferrari, but I think that's a special case given
the brand that they have. But on the whole, what
has outperformed here to day has been the domestically exposed
names and not those global names because already tariffs have
(16:47):
played down on those. So I think what you're likely
to see is some kind of pressure easing because of
the tariffs, but some kind of from the dollar weakening
kind of offsetting that a little bit. So I think
two things will interapt. But don't forget they are not
the names that have done well year to date. It
has been much more than domestically focused European names that
(17:07):
have driven the European rally that we've seen so far.
Speaker 3 (17:10):
Yeah, in terms of the European rally, how much of
it is affected by the difficult political situation now for
Germany and for Friedrik Mertz.
Speaker 2 (17:18):
And you know, we.
Speaker 3 (17:20):
Saw for example, Germany industrial production rising before the bars
of tariffs, but tariffs again are going to hit Germany
particularly hard.
Speaker 7 (17:28):
So I think what happened earlier this week in Germany
is perhaps just a signal and a reminder that things
aren't always plain sailing. However, the key commitment that has
been made within Europe, particularly by Germany on the infrastructure spend,
is really phenomenal on the defense spend as well, and
that's really important. If you look at the defense spend,
(17:49):
so much of that defense spend historically was for global companies.
Now so much of that is going to be European focused,
and that remains there are going to be bumps along,
and I wonder whether those bumps are what's stopping US
investors coming into Europe by as much as perhaps they should,
given the narrative that we see in Europe and given
the strength of the euro versus the dollar. But I
(18:12):
don't think they are anything more than little bumps in
the road rather than necessarily underlying changes to the structural
narrative that we see in Europe at the moment.
Speaker 3 (18:20):
So that was Helen Jewell there speaking to me and
to my colleague Tom McKenzie about what's going on in
Europe more broadly and amid the pressure on the continent.
What is at stake in Portugal's election. The country has
a population of ten point six million people. The finance
minister expects the country to grow by two percent this year.
(18:42):
But successive governments have been and gone and a raft
of smaller parties are vying for a share of the
vote in an increasingly heated election campaign. I've been speaking
to Bloomberg's Portugal bureau chief, jau Lima Jaho, just talk
us through the main contenders who are vying for power
(19:02):
in this election in Portugal.
Speaker 9 (19:04):
So you have the ruling party is actually the ruling coalition,
center right coalition, led by Prime Minister Luisian Montenegru, and
he actually called a confidence motion in March and he
lost that vote and ultimately that's what triggered this early election.
It's Portal's third early election in three years, and he'll
be competing against the socialist leader Peter nun Santuche. Those
(19:27):
are the two main centrist parties in Portugal, and they've
more or less dominated politics in the fifty years that
Portos had democracy, and they seem to be heading again
for a tight race. The center right the prime Minister's coalition,
and the center right is leading by about five six
seven percentage points depending on the latest polls, and the
(19:47):
Socialists are still very very close. And still it's not
clear if prime minister will be able to keep his
job or if you'll have a socialist government. But for
now the prime Minister is still in the lead in
the latest opinion.
Speaker 3 (20:00):
Okay, interesting, but three governments in three years, or at
least three elections in three years, that's a lot of
political uncertainty. Do people think that there will be perhaps
more stability as a result of this vote.
Speaker 9 (20:12):
It really depends on how strong or weak the next
government will be. Portuless had this tradition of having weak
minority governments, and at the moment, none of the neither
the socialist nor the center right collision seem like they
will be getting an absolute majority. I could say some
commentators have said there's an element of election fatigue and
ports at the moment, but we'll have to see that
(20:33):
there will be probably more pressure felt by lawmakers and
by whoever's in government to try to you know, coalesce
and find a solution that will let the government last
more than just a year, as has been the case
in the recent years.
Speaker 3 (20:48):
Do you foresee more political maneuvering then, if a minority
government is looking for external support.
Speaker 9 (20:54):
Yes, definitely. I mean the whichever party wins, whichever the
two main centrist parties win, and they will have to
compromise to get backing from others to get a budget approved.
For example, that happened last year. For instance, the center
right government had to compromise on tax cuts. It wants
to push through deeper tax cuts, but to get the
(21:15):
abstension of the Socialists, which was necessary to let the
budget pass, it had to settle for short, smaller tax cuts.
And similarly that will happen if the Socialists win. They
will probably have to find backing from parties on the
further to the left, and they will have to find
compromise on different policy areas.
Speaker 3 (21:34):
There are those tectonic plates in Europe shifting, aren't there, not,
least because of the Trump administration in the United States,
Additional defense spending infrastructure spending across Europe, the idea of
trying to battle weak economic growth, and so many other
challenges for Britain sorry for, and so many other challenges
(21:57):
for Europe. Just tell us about how the candidates are
thinking about their relationship with the EU and all of
these challenges.
Speaker 10 (22:07):
Well.
Speaker 9 (22:07):
In Portugal, the center right and the center left they
share many positions in terms of the big policy issues
of foreign policy of defense. For instance, the center right
government recently announced it would use an escape course of
an EU rule allowing it to spend more than a
(22:30):
certain limit defined for EU countries in order to boost
defense spending, and it mentioned that it addressed this issue
before making the announcement with the socialists, So that kind
of underlines how the center right and center left in
certain key policy areas like defense, foreign policy, they share
this consensus and there is agreement on major major policy issues,
(22:55):
especially when when it has to do with defense and
foreign policy. More domestically, there are differences obviously, but again
in terms of the bigger EU issues defense diplomatic relations,
there tends to be a shared view between center right
and center left.
Speaker 3 (23:11):
So if there isn't much between them, then in terms
of those sort of big policy lies what will be
the top priority for a new government once elected.
Speaker 9 (23:21):
Where there is a clear divide, for instance, in terms
of for instance, tax policy and where to cut taxes.
So the center right is talking about continuing to cut
corporate taxes and income taxes, while the socialists are proposing
removing VT tax from certain essential food products. So they
argue that that's that kind of tax cut when you
(23:44):
tackle VAT is a way of benefiting everyone. And they
argue that the center right, in focusing on corporate tax
and income tax is only helping a part of the population,
of part the smaller group of the population. On the
other hand, the center right will say that you need
(24:04):
to create wealth first before redistributing it, and that's why
they are betting more on cutting corporate tax for instance. Again,
it's a debate that's you know, been going on in
center right between center right and center left for many
countries for decades, and that's here that still is at
the moment one of the key policy divides going into
this election.
Speaker 3 (24:24):
And so what sort of economic position is Portugal in
then at also this time of real global financial and
trade uncertainty.
Speaker 9 (24:34):
Well, Portugal together with Spain, for example, has been doing
better than the EU average in terms of growth. It's
it's obviously there was obviously the post COVID boom, but
it's continued to benefit from exports, from from tourism, continuing
to have strong growth, you know, well beyond the post
immediate post COVID period. And so the Bank of Portugal,
(24:55):
for instance, in in March it raised its forecast for
the country's growth this year to two point three percent.
So there's been steady overperformance compared to other U countries. However,
we're under the Trump administration. There's obviously been new announcements
in terms of taris and so on, and that effect
(25:16):
might not have filtered through to the Portuguese economy yet,
so that outlook could still change. So there's still a
lot of uncertainty. That's something the Central Bank governor has
pointed at and has stressed repeatedly that there is a
lot of uncertainty at the moment.
Speaker 3 (25:30):
That was Bloomberg's Jao Lima speaking to us form Lisbon.
My thanks to Joo. Now we'll have full coverage of course,
as Portugal heads the polls here on Bloomberg Radio over
the next few days. I'm Caroline Hepkea in London. You
can catch us every weekday morning for Bloomberg day Break.
You up beginning at six am in London. That's one
am on Wall Street. Tom.
Speaker 2 (25:50):
Thank you, Caroline, And coming up on Bloomberg Daybreak weekend,
we look ahead to some key economic indicators out this
week in Japan. I'm Tom Busby, and this is Bloomberg.
(26:10):
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. We turn our focus
now to Japan, where a trio of high impact economic
indicators will be released this week, and for a closer
look at what those data points could mean, we turn
to Bloomberg's Charlie Pellett.
Speaker 4 (26:28):
Tom Japan has been walking a delicate economic tightrope, balancing
sluggish growth, sticky inflation under week Yen, We're expecting updates
on GDP, factory output and producer prices, three key indicators
that could give us a clearer picture of where things stand.
Are we looking at a rebound or more signs of strain?
(26:51):
And to answer that question, we're joined now by Paul Jackson,
Asia Ekogov, editor for Bloomberg News. He joins us from
our studios in token Paul, let's start with GDP. What
are economists expecting and what would a surprise in either direction?
Speaker 11 (27:07):
Tell us, Well, I think we're expecting another week start
to the year. I think we had somewhat inflated GDP
figures the end of last year. They were a bit flattering.
It was largely a kind of lull in imports that
gave us the two point two percent annualized growth there.
So I think we're going to be flipping towards a
(27:30):
contraction in this first quarter. Now that's a bad sign because,
as you know, US President Donald Trump has unleashed this
barrage of tariffs on the world. This Liberation Day that
took place at the beginning of April. Means that if
you're starting with a week quarter, the second quarter isn't
(27:52):
looking pretty. In fact, it's looking a.
Speaker 4 (27:54):
Lot worse on the ground in Tokyo. So the Japanese
people follow tariff developments that closely.
Speaker 11 (28:02):
Well, I think there is a lot of fear and
uncertainty about what this all means for Japan's economy. I mean,
you're right, you know, does the average person on the
street follow closely the GDP figure or the latest number
on tariffs, know, but they do get an impression of
is the news kind of good or bad? And if
(28:24):
you're looking at consumer confidence at the moment, we saw
that falling to the lowest level in two years in April,
So our consumers worried about the state the outlook for
the economy where tariffs are taking the world, Yes, I
think you can conclude that they are worried about it.
(28:45):
And if we have a step back into the reverse
for the economy in the first quarter, then the tariffs
hit in the second quarter. I think we're at risk
of a technical recession in Japan, which is not going
to be a good look for Prime Minister Ishiba as
he faces an Upper House election in the summer.
Speaker 4 (29:05):
Well, industrial production certainly has been under pressure. What sectors
are driving that trend and is there any sign of
a potential turnound?
Speaker 11 (29:13):
Well, I think we saw in Asia we saw a
kind of boost in auto output once you know, the
Donald Trump was talking about putting these twenty five percent
tariffs on autos, and we saw in other countries like
a huge jump in auto exports starting in February and
(29:34):
also taking place in March. But what we've seen is
while that trend was similar in Japan in February, in March,
the output of auto's was not as strong as you
would have expected with you'd be expecting some front loading
right ahead of those tariffs. And I think this takes
us to one of the key fears for Japan and
(29:55):
policymakers here is that the tariffs on the auto's that's
really gonna hurt Japan. I mean, the auto sector employees
eight percent of Japan's workforce, and about a third of
Japan's exports to the US are car car related.
Speaker 4 (30:14):
Now, there was that Nikay report recently that Japan's government
was mulling leveraging shipbuilding in tariff negotiations with the Trump administration.
How did tariffs play into the broader outlook, Well.
Speaker 11 (30:27):
The broader outlook careerly, it's that auto sector is the
key thing that Japan wants a US to dial back autos.
That's going to have huge implications for the economy, as
I've mentioned, just for the sheer scale of those exports
to the US and the number of people it employees
(30:49):
in Japan. So in these trade negotiations. We've already had
two rounds. You know, Japan is going to have to
give Trump something in return for maybe pegging back the
tariffs on autos. And what can Japan do. I mean,
offering some shipbuilding help could be won. Buying some more
(31:13):
agricultural goods from the US might be another. The cards
another thing they can offer the US to try and
convince the officials there to lower these tariffs. Now so far,
what we're hearing in local media reports is that the
US is pretty firm on those auto tariffs, the reciprocal tariffs. Okay,
(31:35):
we'll lower those, but that twenty five percent on autos
is staying. That's what we're hearing now and that's a
big concern for policymakers here, Paul.
Speaker 4 (31:44):
Looking ahead to we've got data coming up on producer prices.
They have been sticky. How are businesses coping with input
costs and could that data shape the Bank of Japan's
next move.
Speaker 11 (31:55):
Well, we've seen these input costs around about the growing
around about the four percent mark up. So if you've
got inflation, overall inflation's three point six percent. Core inflation,
which is focused on by the central bank is three
point two percent, so you can see those input prices
are higher than consumer inflation levels. So what that tells
(32:17):
you is that producers are taking a squeeze, they're taking
a hit as they're trying to absorb those costs. Now,
on the one hand, that sounds bad, but in terms
of the optics the dynamics of Japan's economy, we've seen
a lot of change here over the last two or
three years. This is an economy that has seen very
little inflation for decades. Now we've had three years of
(32:41):
inflation of two percent or more, which is the Bank
of Japan's goal. And what we've seen is businesses have
gone from having to absorb almost all of those input
cost increases to being able to spread most of the
input costs increases onto consumers now, not all, but most.
(33:02):
So these are positive developments for the economy. The question
is is can consumers up their spending in real terms,
not just keeping up with inflation, but expand their spending,
which will be a sign that they're getting comfortable with
the new reality of Japan's economy.
Speaker 4 (33:23):
I've got another major question for you, then, having to
deal with uncertainty, not just for the economic data here
in the US very tough to make planning decisions, either
at the corporate level the individual level. Do you go
out and buy something now because of potential tariffs? Certainly
one of the big questions for investors how much of
the incoming data do you think is already priced into
(33:44):
markets given all of the uncertainty.
Speaker 11 (33:46):
Well, I mean that really is a very difficult question
to answer. I mean, if we look at how stocks
have been performing over the year, we started around the
forty thousand mark for the nie K, and I think
when the real fear and concern over the tariffs hit
in April, we got down to about the thirty one
(34:08):
thousand marks. I mean, that's quite quite a downward move.
So where are we now. We're about thirty seven thousand marks,
so we've you know, retraced most of those losses, so
we're nearly, you know, we're heading back to where we were,
but we're still definitely below I would say there's a
huge amount of uncertainty here. We've seen Donald Trump in
(34:31):
his first presidency and again this time round. You know,
he can change tach very quickly. The implications can be
huge for economies. So I think the big fear we're
over that there is a general understanding that he is
a deal maker. So you know, the top end level
(34:53):
figures of these tariffs, that feels like, you know, the
worst it could be and will be likely negotiated down.
But the devil is in the detail. How much lower
can Japanese policymakers bring those tariff levels down to protect
its economy?
Speaker 4 (35:10):
Paul Jackson, Asia ecogov editor for Bloomberg News in Tokyo
switching gears now, Hong Kong's economy has expanded at the
fastest pace in more than a year, benefiting from a
recovery in tourism and an export bump before Donald Trump's
drastic tariff hikes. The upbeat result may vindicate efforts by
(35:31):
policymakers to make the city an attractive destination again after
its image suffered from strict pandemic measures and a crackdown
on freedoms. And for a closer look, we heard from
Rosanna Law, Hong Kong's Culture, Sports and Tourism secretary, and
she spoke with Bloomberg's Steven Engel.
Speaker 10 (35:50):
I actually see pretty handsome increase of visitors from outside
of Asia or within the shorthold of Asia. For our
long haul, which primarily means a flight more than five
hours for the long haul visitors. We see double digit
growth last year and this year thirty one percent growth
(36:12):
from Australia. I think close to twenty percent growth for
the US and the UK for example. I think these
are signs that people are actually still traveling, and with
the resumption of flight capacity, the subsequent or consequential drop
(36:33):
in air flight ticket affairs, and also the fully operational
free runway system of Hong Kong. Actually we see that
our overseas visitors are coming back.
Speaker 8 (36:43):
Are you doing enough to attract those non Chinese visitors?
Speaker 10 (36:46):
We are doing more and more. Actually, the Hong Kong
Tourism BARD has been doing quite a lot in these
US in countries. I actually just now led the delegation
to the Middle East. I went to Dubai, abudah b
and Rearb and UH. We were doing a UH trade
(37:06):
delegation visit to the Arabic traffic market. And I think
we are keeping and increasing our work in the traditional markets,
that's no question about it. We are also exploring new markets.
So the figure, the figures actually speaks for themselves. What
(37:27):
are you doing for the US market?
Speaker 9 (37:29):
The US market because there's threats that perhaps those Hong
Kong trade offices might be closed.
Speaker 8 (37:34):
We all know about the trade war.
Speaker 10 (37:35):
Well, we are doing nothing to the US. We we
maintained a zero tariff, separate customs territory, a founding member
of the w t O UH. We have not imposed
any reciprocal reciprocal tariffs. I don't know how is simplical.
That is because Hong Kong adopts zero tariff, so we're
(37:56):
doing nothing. We basically did nothing to under my any
of it. On the other hand, we actually welcome everybody.
Hong Kong store is always open and you can see
for yourself the increase in the visitors from the United States.
You can see that Hollywood movies are now still being
(38:17):
staged in Hong Kong all the time, even when we
are faced with different Fritz or fritsoft tariff or other things.
Hong Kong we makes a free.
Speaker 4 (38:29):
Pot rose andne law. Hong Kong's Culture, Sports and Tourism Secretary,
and I'm Charlie Pellette. Tune in weekdays to the Daybreak
Asia podcast for a look at the story shaping markets, finance,
and geopolitics in the Asia Pacific region. It's available wherever
you get your podcasts.
Speaker 2 (38:48):
Tom, Thanks Charlie, 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. Stay with us. Top stories and global business
headlines are coming up right now.
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