May 15, 2024 • 16 mins
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) China is considering a proposal to have local governments across the country buy millions of unsold homes, people familiar with the matter said, in what would be one of its most ambitious attempts yet to salvage the beleaguered property market.
(2) China blasted the Biden administration's move to increase US tariffs on a wide range of Chinese imports, vowing to take its own action, without giving specifics.
(3) Federal Reserve Chair Jerome Powell said the US central bank must be patient and wait for evidence that inflation continues to cool, doubling down on the need to keep borrowing costs elevated for longer.
(4) Britain's failure to complete its sustainable finance framework is putting billions of pounds worth of funding at risk, according to a UK investor association representing £19 trillion ($24 trillion) of assets.
(5) The UK government has pushed back against a number of recommendations designed to combat sexism and misogyny in the finance industry.
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
This is the Bloomberg Daybreak At podcast, available every morning
on Apple, Spotify or wherever you listen. It's Wednesday, the
fifteenth of May in London. I'm Caroline Hepkitt.
Speaker 2 (00:11):
And I'm Stephen Carroll. Coming up today, China considers buying
millions of unsold homes in a bid to shore up
the struggling property sector.
Speaker 1 (00:19):
Beijing vows to respond to Joe Biden's tariff hikes as
putin jets in for talks with President.
Speaker 2 (00:25):
She plus doubling down on hire for longer. Ahead of
today's USCPI print your own Powell signals rates won't be
cut for some time.
Speaker 1 (00:35):
Let's start with a roundup of our top stories.
Speaker 2 (00:37):
China is considering a plan to save its property market
by buying millions of unsold homes. The proposal still at
an early stage, but are seeing A China reporter James
Mager says it could drastically change the Chinese economic landscape.
Speaker 3 (00:51):
If this was to happen.
Speaker 4 (00:52):
It's a huge change for how people live in China.
It's a huge change for how the government is working
with the housing sector, and it's going to be being
massive changes not only for how the government works in
the economy, but also how people save their money and
where they put their investment. So if this does happen,
it is rolled out across the country and the governments
of various promises by millions of homes. I think this
(01:14):
is a real sea change in not only the housing
crisis that we've seen, but also going forward how the
economy works.
Speaker 2 (01:21):
Rebricks James Mager, speaking their sources, say the scheme would
see local state owned enterprises buy unsold homes. It's deep
discounts using state bank loans. Analyst suggest it would take
nearly a trillion dollars to buy all of China's unsold
housing inventory.
Speaker 1 (01:38):
China says new US tariffs amount to quote political manipulation
and vowed measures in response. President Joe Biden is increasing
import duties to fifty percent for semiconductors, soda cells, and
syringes and one hundred percent for electric vehicles imported from China.
Speaker 5 (01:56):
Por trade depisode with China is down to the lowest
level and over a decade, and we're standing up against
Chinese government unfair economic practice. Now, when you make tactics
like these, they are only you're not competing. It's not
companies as cheating and we've seen dammy chair in America.
Speaker 1 (02:14):
Joe Biden was speaking at the White House. He says
the changes will effect around eighteen billion dollars worth of
annual imports. A Chinese embassy spokesman said that accusations of
Chinese over capacity were a false narrative aimed at hindering
the country's economy.
Speaker 2 (02:30):
Russia's President Vlasimir Putin is heading to China for the
first foreign visit of his new term. The two leaders
declared a no limits friendship weeks before Putin invaded Ukraine
in twenty twenty two. They've met more than forty times
since she came to power in twenty twelve. Putin's likely
to use the talks with the Chinese president to counter
US warnings to China over trade with his country.
Speaker 1 (02:53):
The US is working on sending Ukraine an additional Patriot
missile battery as it loses ground near its second largest city, Harkiv,
sources Tel Bloomberg. Ukraine's European allies are also looking to
send Kiev additional air defense systems to repel and intensified
Russian assault. US Sector of State Anthony Blinken was asked
(03:14):
by President Zelenski for two Patriot missile systems. When he
visited Kiev yesterday, Blincoln had this message for the country
during his trip, I have come.
Speaker 6 (03:23):
To Ukraine with a message. You are not alone. The
United States has been by your side from day one.
We are with you today, and we will stay by
your side until Ukraine's security, its sovereignty, its ability to
choose us on path is guaranteed.
Speaker 1 (03:44):
Blincoln's reassurance comes after political infighting caused a six month
delay in usaid. The funds for a new Patriot system
would likely come out of the sixty one billion dollars
of assistance recently approved by Congress.
Speaker 2 (03:59):
The Federals charge your own power has called for patients
before the US Center Bank cuts interest rates, Doubling down
on his message that borrowing costs need to stay higher
for longer, Powell told an audience at the Foreign Bankers
Association in Amsterdam that he needs to see more evidence
inflation is easing.
Speaker 7 (04:16):
The first quarter in the United States was notable for
its lack of further progress on inflation. We had higher
readings in the first quarter, and higher than we expected.
We did not expect this to be a smooth road.
But these were higher than I think anybody expected, and
so what that has told us is that we'll need
to be patient and let restrictive policy do its work.
Speaker 2 (04:38):
Poll also said while he still expects inflation to move
down on a monthly basis, he's not as confident as
he was. The comments from the FED chair came as
markets wait today's USCPI reading. The data expected to show
inflationary pressures moderating in April, with core CPI projected to
have risen by zero point three percent month on month.
Speaker 1 (04:56):
Now to some UK news, two thirds of the biggest
financial services firms are planning to move investments out of
the UK due to the country's poor green record. The
UK Sustainable Investment and Finance Association says that the government's
repeated backtracking on key green policies and lack of detailed
planning is driving ESG focused money away. The nineteen trillion
(05:21):
pound Investor Association urged ministers to accelerate transition plans and
make pension ESG rules.
Speaker 2 (05:28):
Clearer, and the UK government is ignoring recommendations to ban
the use of NDAs in sexual harassment cases in the workplace.
MP's looking into sexism in the financial sector had recommended
the move after an inquiry. Bloombergs ta Wa Adabaio has
the story.
Speaker 8 (05:43):
Non disclosure agreements in workplace sexual harassment disputes risk silencing
victims and protecting perpetrators. That was the verdict of the
Treasury Committee's inquiry into city culture. They're the second group
of lawmakers to recommend banning NDA use in haral cases
this year, but the government disagrees. Responding to the findings
(06:05):
and ministers emphasize the importance of NDAs in some circumstances,
particularly when it comes to protecting commercially sensitive information. Harriet Baldwin,
chair of the Treasury Select Committee, referred to measures like
removing NDAs as logical steps which would have a huge
impact in a statement following the news. Despite rejecting the
(06:27):
Select Committee's recommendation, the government says it has committed to
legislation which would invalidate NDAs if they prevent victims reporting
crimes in London. Tia Adebayo Bloomberg Radio.
Speaker 2 (06:40):
Now at a moment, we'll get more on that Chinese
proposal to shore up its troubled property sector and look
ahead to market expectations for today's US inflation print. But
first another story, or should I say, a number that
caught our eye this morning eyewatering. If you've ever had
to go through as UK taxpayers spent a total of
seven hundred and ninety eight years on hold to HMRC
(07:02):
in the last tax year.
Speaker 1 (07:03):
Okay, that's one tax Okay, that's incredible. I think this
has come as an absolute shock in a way in
the UK because HMLC in the past has always been
quite accessible, very different to the tax system in the
United States. So I don't think you can ring anybody up.
But HMRC, you know, in the past, was quite easy
to access and get your question on your tax form
(07:24):
whatever you were filling in answered. But this number after
some significant cuts to HMRC.
Speaker 2 (07:30):
Yeah, that's right. So they're figures in the National Audit
Office showing that almost half of calls are going unanswered.
It's set to get worse too. The tax Authority set
to miss its correspondence targets for a fifth year in
a row. And now part of this is down to
a shift within HMRC to more digital services, but also
demand being up to because more people are paying tax
because of fiscal drag, the thresholds being frozen. But you
(07:52):
pointed to some of the cuts there. These are actually
cuts that were ordered by Richie Sunak when he was
chancellor in twenty twenty one. He asked HMRC to find,
say things where it's seventy five million pounds a year
by twenty twenty four. Twe twenty five is the year
that we're in now at target the tax authority has
struggled to meet despite cutting staff by nine percent over
four years.
Speaker 1 (08:12):
Yeah, well, this is a story I think of particular
interest in the UK.
Speaker 2 (08:17):
The Treasury has announced extra funding for HMRC after this
report coming out, so an additional fifty one million pounds
for HMRC to try and tackle this issue, but still
would be a shortfall based on the cuts they had
to find.
Speaker 1 (08:29):
Indeed, Isabella Ward has written about this story in depth
on the Blue Big Tunnel if you want to know
more about hmrc's situation. But that's one of the stories
that caught our right today. In the meantime, it's bring
you more though on this bloomberg scoop from China that
Beijing is now considering a proposal to have local governments
(08:50):
buy millions of unsold homes in an effort to shore
up the property market. Our executive editor for Greater China,
John lu joins us now for more. Hi, John, good morning.
Can you tell us about this plan.
Speaker 3 (09:02):
So, the plan as we understand it that's being considered
at the moment, and there's a lot between now and
this actually happening, is that the central government would get
local governments and state owned enterprises at the local level
to go out and buy empty apartments at a very
large discount and to fund that with loans from state
(09:25):
owned banks. And so the obvious advantage of doing this
is the big issue with the property crisis in China
right now is a lack of demand from home buyers.
Home sales are down forty seven percent from a year
ago in the first four months of this year, and
the stockpile of homes trying to be sold is somewhere
near an eight year highe So this would go very
(09:46):
directly to that problem if the government were to choose
to do.
Speaker 2 (09:50):
So, But it would be a pretty dramatic step. Would
it be enough to try and address the sort of
bigger underlying issues that have affected the broader the economy.
Speaker 3 (10:01):
I think it would be a dramatic step. The government
has already tried this on a very limited basis. There
were eight cities around the country that got a little
bit of money to try and to go and buy
some empty apartments and turn that turn those empty apartments
into subsidized homes for lower income families. Would it actually
(10:22):
solve the problem? It would help, because I think the
problem right now is there is just too many homes
and not enough people to living them. And is it
going to solve the problem of once people buy new
homes or are they going to do with their old homes?
And the long term problem, which is we have a
population that is shrinking in China, so over the next
thirty forty fifty years there are going to be fewer
(10:42):
and fewer people who need homes. So it'll help, it
won't absolutely solve the problem.
Speaker 1 (10:48):
Okay, really interesting, John, Look, that's the domestic issue for China.
But there's also obviously these spot with the United States.
Watching China's response to the latest tariffs from the US,
it's seeing resolute measures. What could that look like?
Speaker 3 (11:04):
I think as Beijing is trying to consider what it
needs or should do, I think it's going to have
to balance on one hand, the need to show the
domestic audience the audience here in China that the government
is standing up for China. It's not gonna let Washington
bully it around by putting tariffs on Chinese goods. But
at the same time, the government also wants the economy
(11:25):
to grow faster, and if they want faster growth, they're
gonna want fdi. That means going after someone like Apple
or Tesla would be in many ways self defeating because
those companies employ millions of people in China and manufacturing.
To go after them would in effect be shooting yourself
in the foot. And so I think they're going to
try to find something in between, so very carefully.
Speaker 2 (11:47):
Okay, Johnny, you are Executive Adger for Greater China, Thank
you very much.
Speaker 1 (11:52):
Now, Joan Powell says the Federal Reserve must be patient
before cutting interest rates. The Central Bank chief reiterated his
message ahead of today CPI print and after yesterday's producer
price data came in hotter than expected. Let's bring in
our market's live stratch is Mary Nikola now for more
Good morning, Mary, thanks for being with us. Did your
own Powell give us any additional hints about his thinking
(12:15):
in the speech that he gave in Amsterdam?
Speaker 9 (12:18):
Overall, Jerome Powell has been very consistent on his messaging
that we need to be patient on inflation, we need
to be patient when it comes to easing. But one
thing has been very clear is that the next step
is easing rather than hiking. So that provides some comfort
to the markets. Although they might not be ready yet
to cut, it's still a clear indication that the next
(12:41):
path is easing. So now we just wait for the
data to come through.
Speaker 2 (12:47):
Well, reading into the data that we have already, the
PPI data yesterday, what sort of signals were there in
that that might help us to inform where the fat
goes next.
Speaker 9 (12:56):
Yeah, it's interesting about PPI because the real key thing
that that gets markets excited about PPI is what's going
to feed into the core PCE numbers, which is essentially
what the Fed watches. And so far the message from
yesterday is that there's mixed signals, especially on the components
that feed into the PCE, and so we're going to
(13:16):
have to wait for CPI and CPI, as you've noted earlier,
is expected to moderate, but if it still comes in
around three point six percent, which is where the consensus is,
it's still relatively high and doesn't give the FED confidence
to start thinking about easing just yet, and we'll probably
double down on that, you know, higher for longer mantra.
Speaker 1 (13:41):
Okay. In terms of the reaction then, and we were
already seeing markets preparing for the data point, and in
fact last month there was also quite a significant market reaction.
We've seen the stock and bond rally cool. What are
you thinking the reaction may be in markets?
Speaker 9 (13:58):
Yeah, the main thing is is going to be if
it comes cooler than expected, markets are going to get excited.
There's there's that's the likely scenario and most likely scenario.
I think where it becomes toxic is if you see
a combination of if you see higher yield sorry CPI,
(14:21):
because activity data is showing that things are slowing down.
So if you have a combination of slower activity data
and higher prices, you get this narrative and concerns about
about stagflation. And that's the opposite of what equities want
in terms of UH to rally and to continue to rally.
(14:44):
So it's more about any moderation is going to be
seen as positive and any sort of uptick is just
going to fuel concerns about stagflation.
Speaker 2 (14:55):
What about concerns around the state of household finances in
the US as well? In New York Fare report talking
about US househeld debt rising to a record high in
the first quarter, borrowers struggling to keep up. Is this
a sign of trouble when we're thinking about the inflation
out look, you.
Speaker 9 (15:13):
Know, there's it's it's it's starting to show some of
the cracks and some of the implications of higher rates.
Obviously we're already seeing it in things like rents and
how people just are are are staying and are renting
rather than buying because mortgage rates are too high. So
there's a there's an element already of that. And then
(15:33):
of course when you have household debt increasing, that of
course doesn't bode well for the economy because one of
the key things that has been fueling the rally in
equity has been the resilience of the US consumer. And
so actually today US retail sales will be quite important
in terms of gauging where is the US consumer at
this point, And if you continue to see some improvement
(15:56):
in uh in in in activity from the UN consumer,
that obviously allays a lot of these concerns, Yeah that
we're seeing.
Speaker 2 (16:06):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 1 (16:13):
Look for us on your podcast feed every morning, on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 2 (16:19):
You can also listen live each morning on London Dab Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 1 (16:24):
Our flagship New York station, is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
I'm Caroline Hipka and.
Speaker 2 (16:33):
I'm Stephen Carroll. Join us again tomorrow morning for all
the news you need to start your day right here
on Bloomberg Daybreak Europe
This is the Bloomberg Daybreak At podcast, available every morning
on Apple, Spotify or wherever you listen. It's Wednesday, the
fifteenth of May in London. I'm Caroline Hepkitt.
Speaker 2 (00:11):
And I'm Stephen Carroll. Coming up today, China considers buying
millions of unsold homes in a bid to shore up
the struggling property sector.
Speaker 1 (00:19):
Beijing vows to respond to Joe Biden's tariff hikes as
putin jets in for talks with President.
Speaker 2 (00:25):
She plus doubling down on hire for longer. Ahead of
today's USCPI print your own Powell signals rates won't be
cut for some time.
Speaker 1 (00:35):
Let's start with a roundup of our top stories.
Speaker 2 (00:37):
China is considering a plan to save its property market
by buying millions of unsold homes. The proposal still at
an early stage, but are seeing A China reporter James
Mager says it could drastically change the Chinese economic landscape.
Speaker 3 (00:51):
If this was to happen.
Speaker 4 (00:52):
It's a huge change for how people live in China.
It's a huge change for how the government is working
with the housing sector, and it's going to be being
massive changes not only for how the government works in
the economy, but also how people save their money and
where they put their investment. So if this does happen,
it is rolled out across the country and the governments
of various promises by millions of homes. I think this
(01:14):
is a real sea change in not only the housing
crisis that we've seen, but also going forward how the
economy works.
Speaker 2 (01:21):
Rebricks James Mager, speaking their sources, say the scheme would
see local state owned enterprises buy unsold homes. It's deep
discounts using state bank loans. Analyst suggest it would take
nearly a trillion dollars to buy all of China's unsold
housing inventory.
Speaker 1 (01:38):
China says new US tariffs amount to quote political manipulation
and vowed measures in response. President Joe Biden is increasing
import duties to fifty percent for semiconductors, soda cells, and
syringes and one hundred percent for electric vehicles imported from China.
Speaker 5 (01:56):
Por trade depisode with China is down to the lowest
level and over a decade, and we're standing up against
Chinese government unfair economic practice. Now, when you make tactics
like these, they are only you're not competing. It's not
companies as cheating and we've seen dammy chair in America.
Speaker 1 (02:14):
Joe Biden was speaking at the White House. He says
the changes will effect around eighteen billion dollars worth of
annual imports. A Chinese embassy spokesman said that accusations of
Chinese over capacity were a false narrative aimed at hindering
the country's economy.
Speaker 2 (02:30):
Russia's President Vlasimir Putin is heading to China for the
first foreign visit of his new term. The two leaders
declared a no limits friendship weeks before Putin invaded Ukraine
in twenty twenty two. They've met more than forty times
since she came to power in twenty twelve. Putin's likely
to use the talks with the Chinese president to counter
US warnings to China over trade with his country.
Speaker 1 (02:53):
The US is working on sending Ukraine an additional Patriot
missile battery as it loses ground near its second largest city, Harkiv,
sources Tel Bloomberg. Ukraine's European allies are also looking to
send Kiev additional air defense systems to repel and intensified
Russian assault. US Sector of State Anthony Blinken was asked
(03:14):
by President Zelenski for two Patriot missile systems. When he
visited Kiev yesterday, Blincoln had this message for the country
during his trip, I have come.
Speaker 6 (03:23):
To Ukraine with a message. You are not alone. The
United States has been by your side from day one.
We are with you today, and we will stay by
your side until Ukraine's security, its sovereignty, its ability to
choose us on path is guaranteed.
Speaker 1 (03:44):
Blincoln's reassurance comes after political infighting caused a six month
delay in usaid. The funds for a new Patriot system
would likely come out of the sixty one billion dollars
of assistance recently approved by Congress.
Speaker 2 (03:59):
The Federals charge your own power has called for patients
before the US Center Bank cuts interest rates, Doubling down
on his message that borrowing costs need to stay higher
for longer, Powell told an audience at the Foreign Bankers
Association in Amsterdam that he needs to see more evidence
inflation is easing.
Speaker 7 (04:16):
The first quarter in the United States was notable for
its lack of further progress on inflation. We had higher
readings in the first quarter, and higher than we expected.
We did not expect this to be a smooth road.
But these were higher than I think anybody expected, and
so what that has told us is that we'll need
to be patient and let restrictive policy do its work.
Speaker 2 (04:38):
Poll also said while he still expects inflation to move
down on a monthly basis, he's not as confident as
he was. The comments from the FED chair came as
markets wait today's USCPI reading. The data expected to show
inflationary pressures moderating in April, with core CPI projected to
have risen by zero point three percent month on month.
Speaker 1 (04:56):
Now to some UK news, two thirds of the biggest
financial services firms are planning to move investments out of
the UK due to the country's poor green record. The
UK Sustainable Investment and Finance Association says that the government's
repeated backtracking on key green policies and lack of detailed
planning is driving ESG focused money away. The nineteen trillion
(05:21):
pound Investor Association urged ministers to accelerate transition plans and
make pension ESG rules.
Speaker 2 (05:28):
Clearer, and the UK government is ignoring recommendations to ban
the use of NDAs in sexual harassment cases in the workplace.
MP's looking into sexism in the financial sector had recommended
the move after an inquiry. Bloombergs ta Wa Adabaio has
the story.
Speaker 8 (05:43):
Non disclosure agreements in workplace sexual harassment disputes risk silencing
victims and protecting perpetrators. That was the verdict of the
Treasury Committee's inquiry into city culture. They're the second group
of lawmakers to recommend banning NDA use in haral cases
this year, but the government disagrees. Responding to the findings
(06:05):
and ministers emphasize the importance of NDAs in some circumstances,
particularly when it comes to protecting commercially sensitive information. Harriet Baldwin,
chair of the Treasury Select Committee, referred to measures like
removing NDAs as logical steps which would have a huge
impact in a statement following the news. Despite rejecting the
(06:27):
Select Committee's recommendation, the government says it has committed to
legislation which would invalidate NDAs if they prevent victims reporting
crimes in London. Tia Adebayo Bloomberg Radio.
Speaker 2 (06:40):
Now at a moment, we'll get more on that Chinese
proposal to shore up its troubled property sector and look
ahead to market expectations for today's US inflation print. But
first another story, or should I say, a number that
caught our eye this morning eyewatering. If you've ever had
to go through as UK taxpayers spent a total of
seven hundred and ninety eight years on hold to HMRC
(07:02):
in the last tax year.
Speaker 1 (07:03):
Okay, that's one tax Okay, that's incredible. I think this
has come as an absolute shock in a way in
the UK because HMLC in the past has always been
quite accessible, very different to the tax system in the
United States. So I don't think you can ring anybody up.
But HMRC, you know, in the past, was quite easy
to access and get your question on your tax form
(07:24):
whatever you were filling in answered. But this number after
some significant cuts to HMRC.
Speaker 2 (07:30):
Yeah, that's right. So they're figures in the National Audit
Office showing that almost half of calls are going unanswered.
It's set to get worse too. The tax Authority set
to miss its correspondence targets for a fifth year in
a row. And now part of this is down to
a shift within HMRC to more digital services, but also
demand being up to because more people are paying tax
because of fiscal drag, the thresholds being frozen. But you
(07:52):
pointed to some of the cuts there. These are actually
cuts that were ordered by Richie Sunak when he was
chancellor in twenty twenty one. He asked HMRC to find,
say things where it's seventy five million pounds a year
by twenty twenty four. Twe twenty five is the year
that we're in now at target the tax authority has
struggled to meet despite cutting staff by nine percent over
four years.
Speaker 1 (08:12):
Yeah, well, this is a story I think of particular
interest in the UK.
Speaker 2 (08:17):
The Treasury has announced extra funding for HMRC after this
report coming out, so an additional fifty one million pounds
for HMRC to try and tackle this issue, but still
would be a shortfall based on the cuts they had
to find.
Speaker 1 (08:29):
Indeed, Isabella Ward has written about this story in depth
on the Blue Big Tunnel if you want to know
more about hmrc's situation. But that's one of the stories
that caught our right today. In the meantime, it's bring
you more though on this bloomberg scoop from China that
Beijing is now considering a proposal to have local governments
(08:50):
buy millions of unsold homes in an effort to shore
up the property market. Our executive editor for Greater China,
John lu joins us now for more. Hi, John, good morning.
Can you tell us about this plan.
Speaker 3 (09:02):
So, the plan as we understand it that's being considered
at the moment, and there's a lot between now and
this actually happening, is that the central government would get
local governments and state owned enterprises at the local level
to go out and buy empty apartments at a very
large discount and to fund that with loans from state
(09:25):
owned banks. And so the obvious advantage of doing this
is the big issue with the property crisis in China
right now is a lack of demand from home buyers.
Home sales are down forty seven percent from a year
ago in the first four months of this year, and
the stockpile of homes trying to be sold is somewhere
near an eight year highe So this would go very
(09:46):
directly to that problem if the government were to choose
to do.
Speaker 2 (09:50):
So, But it would be a pretty dramatic step. Would
it be enough to try and address the sort of
bigger underlying issues that have affected the broader the economy.
Speaker 3 (10:01):
I think it would be a dramatic step. The government
has already tried this on a very limited basis. There
were eight cities around the country that got a little
bit of money to try and to go and buy
some empty apartments and turn that turn those empty apartments
into subsidized homes for lower income families. Would it actually
(10:22):
solve the problem? It would help, because I think the
problem right now is there is just too many homes
and not enough people to living them. And is it
going to solve the problem of once people buy new
homes or are they going to do with their old homes?
And the long term problem, which is we have a
population that is shrinking in China, so over the next
thirty forty fifty years there are going to be fewer
(10:42):
and fewer people who need homes. So it'll help, it
won't absolutely solve the problem.
Speaker 1 (10:48):
Okay, really interesting, John, Look, that's the domestic issue for China.
But there's also obviously these spot with the United States.
Watching China's response to the latest tariffs from the US,
it's seeing resolute measures. What could that look like?
Speaker 3 (11:04):
I think as Beijing is trying to consider what it
needs or should do, I think it's going to have
to balance on one hand, the need to show the
domestic audience the audience here in China that the government
is standing up for China. It's not gonna let Washington
bully it around by putting tariffs on Chinese goods. But
at the same time, the government also wants the economy
(11:25):
to grow faster, and if they want faster growth, they're
gonna want fdi. That means going after someone like Apple
or Tesla would be in many ways self defeating because
those companies employ millions of people in China and manufacturing.
To go after them would in effect be shooting yourself
in the foot. And so I think they're going to
try to find something in between, so very carefully.
Speaker 2 (11:47):
Okay, Johnny, you are Executive Adger for Greater China, Thank
you very much.
Speaker 1 (11:52):
Now, Joan Powell says the Federal Reserve must be patient
before cutting interest rates. The Central Bank chief reiterated his
message ahead of today CPI print and after yesterday's producer
price data came in hotter than expected. Let's bring in
our market's live stratch is Mary Nikola now for more
Good morning, Mary, thanks for being with us. Did your
own Powell give us any additional hints about his thinking
(12:15):
in the speech that he gave in Amsterdam?
Speaker 9 (12:18):
Overall, Jerome Powell has been very consistent on his messaging
that we need to be patient on inflation, we need
to be patient when it comes to easing. But one
thing has been very clear is that the next step
is easing rather than hiking. So that provides some comfort
to the markets. Although they might not be ready yet
to cut, it's still a clear indication that the next
(12:41):
path is easing. So now we just wait for the
data to come through.
Speaker 2 (12:47):
Well, reading into the data that we have already, the
PPI data yesterday, what sort of signals were there in
that that might help us to inform where the fat
goes next.
Speaker 9 (12:56):
Yeah, it's interesting about PPI because the real key thing
that that gets markets excited about PPI is what's going
to feed into the core PCE numbers, which is essentially
what the Fed watches. And so far the message from
yesterday is that there's mixed signals, especially on the components
that feed into the PCE, and so we're going to
(13:16):
have to wait for CPI and CPI, as you've noted earlier,
is expected to moderate, but if it still comes in
around three point six percent, which is where the consensus is,
it's still relatively high and doesn't give the FED confidence
to start thinking about easing just yet, and we'll probably
double down on that, you know, higher for longer mantra.
Speaker 1 (13:41):
Okay. In terms of the reaction then, and we were
already seeing markets preparing for the data point, and in
fact last month there was also quite a significant market reaction.
We've seen the stock and bond rally cool. What are
you thinking the reaction may be in markets?
Speaker 9 (13:58):
Yeah, the main thing is is going to be if
it comes cooler than expected, markets are going to get excited.
There's there's that's the likely scenario and most likely scenario.
I think where it becomes toxic is if you see
a combination of if you see higher yield sorry CPI,
(14:21):
because activity data is showing that things are slowing down.
So if you have a combination of slower activity data
and higher prices, you get this narrative and concerns about
about stagflation. And that's the opposite of what equities want
in terms of UH to rally and to continue to rally.
(14:44):
So it's more about any moderation is going to be
seen as positive and any sort of uptick is just
going to fuel concerns about stagflation.
Speaker 2 (14:55):
What about concerns around the state of household finances in
the US as well? In New York Fare report talking
about US househeld debt rising to a record high in
the first quarter, borrowers struggling to keep up. Is this
a sign of trouble when we're thinking about the inflation
out look, you.
Speaker 9 (15:13):
Know, there's it's it's it's starting to show some of
the cracks and some of the implications of higher rates.
Obviously we're already seeing it in things like rents and
how people just are are are staying and are renting
rather than buying because mortgage rates are too high. So
there's a there's an element already of that. And then
(15:33):
of course when you have household debt increasing, that of
course doesn't bode well for the economy because one of
the key things that has been fueling the rally in
equity has been the resilience of the US consumer. And
so actually today US retail sales will be quite important
in terms of gauging where is the US consumer at
this point, And if you continue to see some improvement
(15:56):
in uh in in in activity from the UN consumer,
that obviously allays a lot of these concerns, Yeah that
we're seeing.
Speaker 2 (16:06):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 1 (16:13):
Look for us on your podcast feed every morning, on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 2 (16:19):
You can also listen live each morning on London Dab Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 1 (16:24):
Our flagship New York station, is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
I'm Caroline Hipka and.
Speaker 2 (16:33):
I'm Stephen Carroll. Join us again tomorrow morning for all
the news you need to start your day right here
on Bloomberg Daybreak Europe
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