July 26, 2025 • 38 mins
Bloomberg Daybreak Weekend with Tom Busby takes a look at some of the stories we'll be tracking in the coming week.
- In the US – a look ahead to a monetary policy decision from the Fed and earnings from some of the “Magnificent Seven” tech companies.
- In the UK – a look at President Trump’s trip to Scotland.
- In Asia – a look at ahead to China PMI data and a conversation on Asia tech investing.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our Daybreak
anchors all around the world, and straight ahead on the program,
well look ahead to this week's monetary policy decision from
the Fed. Also earnings for more of text Magnificent seven.
I'm Tom Busby in New York.
Speaker 3 (00:26):
I'm callin Hepget in London, where we're asking if President
Charump's Scottish golf trip can yield any political wins.
Speaker 4 (00:33):
I'm got Prisner looking at the Chinese economy ahead of
fresh PMI reports in the coming week.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three 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 5 (01:02):
Good day to you.
Speaker 2 (01:03):
I'm Tom Busby, and we begin today's program with this
week's Federal Reserve policy meeting. The Federal issue its latest
decision on interest rates on Wednesday, with a press conference
expected from FED chair Jay Powell to follow what will
the Fed decide and what's behind the central banks thinking?
And for more. We're joined by Edward Harrison, senior editor
at Bloomberg, author of Bloomberg's Everything Risk newsletter. Well, Edward,
(01:27):
a critical decision from the Fed. What are you expecting
to see happen this week?
Speaker 6 (01:33):
Hey, Tom? Yes, it is a critical decision because of
the political pressure that we've seen applied to the Federal Reserve.
The market widely expects interest rates to stay the same,
in particular because we haven't implemented the final round of
tariffs yet, we don't know how the economy's going to
(01:53):
react to that. If you look at the pricing from
the market, it's expecting not just this meeting to be
the same. But there's only a slight chance, maybe a
sixty percent chance that we get a cut in September.
It's first in October when the next rate cut will come.
Speaker 2 (02:11):
Wow, that's well, that's a change. But Chairman Palth has
said time and again he has said it's all about
the data and that the Central Bank has to see
the impact of the Trump tariffs on inflation. So it
really is too soon to make a move because we
just don't know. There's so many moving parts with these tariffs. Correct.
Speaker 6 (02:28):
Yeah, and you know, the interesting bit is is when
the Fed actually moved to lower interest rates in twenty
twenty four, the market's reaction was that this took all
of the risk of a recession off the table, so
much so that interest rates actually went up. So they
lowered the short term interest rates, but they yields on
(02:51):
longer term bonds, the ones that actually matter to people
when they're getting a mortgage and so forth, those are
the ones that went up. And so it was because
the recession risk receded that you actually had a situation
where the Fed was acting one way and long term
yields went the actual opposite direction.
Speaker 2 (03:13):
Well, I think you know on Wall Street we have
seen the major averages add or near all time highs
the last few weeks. Inflation still above the Fed's target,
but it has eased about two point seven percent, the
labor market, resilient, jobless rate, four percent initial jobs. Everything
is working. The Fed's plans have been working. So the
(03:33):
argument could be, well, why not lower interest rates, But
there's a very good reason why they wouldn't correct just
for that reason you were talking about with long term yields.
Speaker 6 (03:41):
Right exactly. They just they don't know if, for instance,
they were to lower interest rates whether or not, suddenly
we would get inflation coming back in, not just because
the tariffs created more inflation, but actually because the economy
was running hot enough to create inflation on its own.
(04:01):
And then suddenly they'd be in a situation where they
made an error and that error would be taken on
by markets to increase interest rates, increase yields across the curve,
expecting the Fed to eventually have to undo that error.
And this is the dilemma that they faced. So they've decided, look,
(04:21):
you know, we're in a good enough position at this
point in time that we can actually wait to do this.
You know what's interesting if you look at the last
FED decision, they released a summary of economic projections and
sort of a by and modal distribution, there are actually
seven of the Fed governors and presidents who think that
(04:43):
they shouldn't lower interest rates at all this year, whereas
nine think that they should lower them two times this year.
And there are four others that are in there, but
you know the total number that the reason that we
have an expectation for two interest rates. It's being lowered
is because of those I think it's eight FED members
(05:04):
who believe that interest rate should be lowered by two,
but they are a decent number who think, you know,
there shouldn't be any interest rate cuts this year.
Speaker 2 (05:12):
And there's been a lot of pressure, obviously from President
Trump on Jerome Palell, a lot of criticism, a lot
of pressure about what the FED is going to do.
And it goes into what you just said, He's not
the only one designing. I mean, there are twelve voting
members of the FOMC. You have all these other governors
and vice presidents and presidents of banks. I mean, it
is not a unilateral decision, is it.
Speaker 6 (05:34):
No, it's not. And the interesting thing about that bimodal
distribution is that obviously we don't know which of the
nineteen dots in this summary are of voting members, but
there are enough members that if the data turned towards
the more inflationary side, you could get the FOMC outside
(05:57):
of Jerome Pale saying no, we don't even want two
interest rate cuts this year. We want one and perhaps
even zero. Because all it takes is us to get
three more dots up into that number, you know, to
go from seven to ten, and then suddenly we don't
have any interest rate cuts at all in twenty twenty five.
Speaker 2 (06:18):
Well, the FETCH two day policy meeting kicks off this
Tuesday at Decision Wednesday, expected at two pm Wall Street time. Then,
of course we're going to hear from fedchair Jerome Powell.
Our thanks to Edward Harrison, senior editor at Bloomberg, author
of Bloomberg's Everything Risk newsletter. We move next to corporate earning.
Some of the Magnificent seven's biggest names reporting this week
meta platforms, Microsoft, Apple, and Amazon, and for more on
(06:42):
what to expect. We're joined by Mandeep Singh, Bloomberg Intelligence,
senior tech industry analysts. Man Deep, thank you so much
for being here. I want to start though, by looking backward,
because last week we got the latest results from Tesla
and Alphabet, very different results. Tesla miss earnings, sales fell
difficult times ahead what Alphabet. There was a real upside surprise,
(07:04):
wasn't there.
Speaker 7 (07:05):
Yeah, And also going into earnings, I think the narrative
was that Google Search has been under a lot of
competitive threat from the likes of Chat GPT and just
what's going on in the LLM space and the numbers
proved otherwise, I mean the fact that Google grow search
(07:26):
double digits at a run rate of two hundred ten
billion dollars. That just goes to show you know, how
much momentum they have in terms of just their integrating
Gemini with their search page. So AI overviews has actually
helped you know, the number of queries. And then the monetization,
(07:47):
I mean ad monetization for Google is really, you know,
something that no one else has been able to even
come close to. And look, we're talking about Meta coming
up as well. So to me, what what will be
interesting is whether Meta shows you know, high teens or
twenty percent plus growth, because that's the sort of expectation
(08:09):
Google has set up with its print. You know, YouTube
did really well. In fact, YouTube plus cloud is almost
one hundred and fifteen billion dollars rundrate growing at over
twenty percent, and so a lot of positives in that
Google print. The one thing I would call out is
a capex pense. So Google ded raise their capex by
(08:29):
ten billion for this year, and they said twenty twenty
six would be another growth year for capex and that
some investors could say would be a Dragon free cash flow,
But I would compare that to a Meta which has
already guided to a higher CAPEX and they are not
monetizing at the same level as Google is with their
(08:52):
cloud business. So that is where it'd be interesting to
see how the market reacts to Meta talking up capex
for second half twenty twenty six.
Speaker 2 (09:01):
Another horse in this race Microsoft, Yeah, which you know
with their open AI commitments and still expected to see
Azure a big, big revenue gainer. How about you know
the rest of the company. Where's Microsoft stand? Because we're
out Wednesday as well.
Speaker 7 (09:16):
I think one thing was clear from google'sprint is Microsoft
Azure business is going to put up another strong quarter.
We are talking another mid thirty five, like mid thirty
percent growth for an Azure, which was a real surprise
last quarter. But now the numbers have gone up for Azure,
so you will see another strong quarter for Azure. But overall, look,
(09:40):
Microsoft has been one of the biggest beneficiaries of this
AI infrastructure spend and the cloud business that it has benefited.
And in Google's case, you know, it's a fifty billion
dollars run rate business cloud growing almost you know, thirty
percent plus now, so that could double to hundred billion
(10:00):
in two years. In Microsoft's case, it's the same kind
of momentum, and that's why cloud is the real beneficiary
of this AI infrastructure spent. On one hand, we call
out how Nvidia is benefited on the chip side. On
the software side, it's the cloud companies. And that's where
I would put Microsoft and Google. Amazon, which is another
(10:21):
one reporting next week and has expoture to cloud, I
think their growth rates are still way down compared to
Google and Microsoft Cloud, which is growing you know, thirty
percent plus. Amazon's growth may still be around that's seventeen
to twenty percent.
Speaker 2 (10:38):
And still strong, still very strong.
Speaker 7 (10:41):
For a business of over one hundred billion dollar run rate.
It's very good growth when you compare them share in cloud.
I do think, you know, Microsoft and Google seem to
be taking share because of this AI workloud shift, and
that's where Amazon has to kind step up in terms
(11:01):
of how they will increase the growth rate for their
cloud business.
Speaker 2 (11:05):
Now the outlier in this horse race for AI, Apple
also next week, has been way behind, has no sign
of even catching up except for partnerships it's making. But
what do you expect there. I mean, the iPhone sixteen
is smash hit. We have services have been very strong,
but are they still behind. They're still going to make
(11:25):
a ton of money, there's no doubt.
Speaker 7 (11:27):
I think with Apple now announcing they're getting into insurance business.
The twenty dollars per month for three devices, that's just
aimed at improving the services run rate. To me, everyone
looks up to Apple for what they will do on
the AI side, and that is a big question mark
(11:48):
whether they have a compelling AI strategy. I think they
are going to go to the partnership route, but right
now we have no signs to suggest there will be
a big upgrade or refresh cycle for their devices because
AI right now is still being used on the cloud.
People are not really using AI assistant that's installed on
(12:11):
the phone. Because these lms are called large anglid models
for a reason. They require a lot of compute and
memory that you can't have on device, and so that's
where Apple has to strike partnerships. They have to enhance
their hardware to run AI on device, and we are
talking about at least at twelve to twenty four month timeframes,
(12:34):
so you're not gonna see anything that investors will find exciting,
at least in this print.
Speaker 2 (12:40):
Well, a lot to look forward to. Meta and Microsoft
earnings out this Wednesday. Amazon and Apple on Thursday are
thanks to Mandeep Sing, Bloomberg Intelligence Senior Tech industry analyst.
And coming up on Bloomberg day Break weekend, we'll look
at whether President Trump's Scottish golf trip can yield any
political wins. I'm Tom Busby and this is Bloomberg. This
(13:10):
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. Up later in our program
and look at some key economic data coming out of
the world's second largest economy. But first, fresh from a
flurry of trade deal announcements, President Trump is in the
UK in Scotland. His trip will be a mixture of
(13:30):
business and pleasure. But in the coming days the President
has set to hold meetings with UK Prime Minister Kure
Starmer and John Swinney, First Minister of Scotland. Can the
duo sweet talk Trumpet to further trade concessions For more,
Let's go to London and bring in Bloomberg day Break
Europe anchor Caroline Hepgar.
Speaker 3 (13:48):
Tom President Donald Trump Count's Scottish ancestry as part of
his heritage. His mother, Mary Anne MacLeod, was one of
thousands of Scotts who left for the US and Canada
at the beginning of the last century in a bid
to escape economic hardship at home. But despite the family ties,
the US President's relationship with the country is a complicated one.
(14:09):
During his last visit to Scotland in twenty eighteen, the
President was booed during an afternoon golf game by demonstrators
at his resort in Turnbury, and the entire trip was
dogged by protests of thousands of people in Glasgow, Edinburgh
and Aberdeen. This time round, controversial White House policies could
make for a similar reception as Trump visits his two
(14:31):
Scottish golf properties. His plan for international trade is also
something the White House Press Secretary Caroline Leavitt expanded on recently.
Speaker 8 (14:40):
Look, I can tell you the trade team and the
President himself continue to be very engaged with countries around
the world when it comes to our trade agreements. But
the August first deadline is just really the start date
for when the United States of America will begin collecting
this revenue from all of the countries around the world
who the President has sent these letters to.
Speaker 5 (14:59):
You could see some more years.
Speaker 8 (15:00):
Before August first, John, you could have some more trade
announcements as well. I can tell you the President, Secretary
of Treasury, Secretary of Commerce, Ambassador Greer all continue to
be in constant communication with our trading partners.
Speaker 3 (15:12):
The White House is Caroline Levitt speaking to reporters there. Well,
do you know what I mean?
Speaker 7 (15:16):
Now?
Speaker 3 (15:16):
It's Bloomberg's Edinburgh based reporter James Laden and our White
House correspondent Skyla Woodhouse. Welcome to both of you. Thank
you for speaking to me. James, Maybe can I start
with you. Trump has long been i'll say, infatuated with Scotland.
The Scot's perhaps a bit less so with him. Just
talk us through the perceptions of President Donald Trump on
the ground.
Speaker 9 (15:36):
Now, Yeah, in your intro you did mention how there
were some demos against him when you was here last
I think those demos were more personality based, whereas I
think the demos that are being planned are both personality
and politics based. So there's a subtle difference there. One
(15:58):
thing I think that you need to sort of remind
yourselves about the Scottish psyche if you like, is that
someone who shall we say, is kind of fairy, brash
and a showman. That doesn't necessarily go down very well
here in Scotland. They tend to admire people who are
(16:18):
a bit more understated. And also Scotland does have a
reputation of cheering for the underdog over the years, and
certainly having a slightly larger big brother, shall we say,
to the South that's been dominating proceedings for several centuries.
That also probably explains why Scott's they prefer the underdog
(16:39):
rather than the top dog.
Speaker 3 (16:41):
H Okay Skyler. And President Trump's also coming to the
UK for full proper state visit in only a few
weeks time. Why do you think he's making this trip
to Scotland now?
Speaker 10 (16:53):
I mean the White House is saying, you know, this
is a moment for the President and Prime Minister Starmer
to refine the trade deal from just a few months ago.
You know, we'll hopefully we'll get an update on what's
maybe some more of the fine print details of that
trade agreement are. And there's obviously a lot happening in
the world right now there's you know, Ukraine and Russia
(17:13):
that has been you know, front and center for President Trump,
and you know, so we're you know, looking to see
if we could see any sort of maybe new agreement
between the two countries there or just sort of what
the strategy you know, might look like. So there's a
lot of talk around national security right now.
Speaker 5 (17:29):
You know.
Speaker 10 (17:30):
So it's kind of a mix of you know, the
presidents who we all know loves to golf and you
know frequently he'll be in Florida, you know, golfing and
things like that. But you know, we're expecting to see
probably a more refined trade deal than what we saw earlier.
Speaker 3 (17:47):
Yeah, absolutely, entire it's hugely important, I mean, both the
kised arma of the UK as a whole and Scotland
in particular as well. Is there going to be any
expectation actually of any progress in terms of trade discussions?
Speaker 2 (17:58):
Do you think?
Speaker 10 (18:00):
I think one thing that's particularly interesting with the trade
agreements that we've just been seeing across the board, Obviously,
this is something that President Trump is very passionate about
and is definitely dominating his second term and as president.
You know, so I think it'll be interesting to watch
what the fine print looks like. We've we're approaching that
(18:24):
August first deadline with a plethora of countries and we're
starting to see you know, the rates coming in you know,
a different level. So I think it'll be interesting to
see what maybe has changed from the you know, the
deal that was presented a few months ago to now
and to compare and contrast what has changed or what
(18:45):
has not changed.
Speaker 3 (18:47):
James, what do you think the Scottish First Minister John
Swinney is likely to cover maybe try to press with
the US President.
Speaker 9 (18:54):
Well, I guess so the biggest thing here is whiskey.
Personally not a fan, but I mean it's it's the
biggest export that we have up here, and any potential
reducing the tariffs on whiskey I think would go a
long way up here. But at the end of the day,
the personal sign the document is going to be starmer,
(19:16):
So there's a slight set of dichotomy there. Otherwise, I
mean Swinny he is involved a little bit in the
long running staga about whether Turnbury, one of Trump's golf sites,
will ever host the Open again, so there will be
some chat on that, I dare say, But at the
end of the day, the decision comes down to the
(19:39):
rural ancient golf club in Saint Andrew's RNA. But there
will be pressure from Swinny and also from Starma to
try to make this happen. But then to make it
happen you kind of need to have much better communications.
You must have much better roads and rail systems, and
to get that you're going to have to get the
tax player to stump up for it very properly, and
that will be a big.
Speaker 3 (20:00):
Problem in terms of travel. It's obviously quite a privileged
position for the UK to be in and Scotland in
some ways to be hosting, you know, a visit, even
an informal visit from the US president, given how much
is riding on this and President Trump's actually got some
cousins who still live on the kind of ancestral island
where his mother came from. How important do you think
(20:22):
the relationship is at the moment, Skyler, between the US
and the UK as we see these really quite fraught
negotiations with many countries rushing to try to make the
August first deadline.
Speaker 10 (20:33):
I think one thing the traupid administration, you know, they
do a lot of things differently, But ultimately I do
think there is an understanding that the relationship with the
UK is a very important one that obviously has a
very long standing history, you know, so I do think
the administration is looking to sort of continue to keep
(20:54):
that relationship intact and whatever way that might be. I mean,
but it's still very interesting that of the trade deals,
the UK was one of the first to see a
deal and an agreement and there was the Oval event
where Starmar I believed, phoned in, you know, so you know,
they're definitely trying to show a united front between the
(21:14):
two countries, which on the global stage could be very
telling that you know, we have the US and the
UK sort of you know, aligned, even if there are
differences you know, on some things. But now do you
think administration is you know looking to sort of you know,
make sure that that relationship continues to remain stable.
Speaker 3 (21:33):
Yeah, in terms of what you expect then also from
the State visit in September and how important that is.
We've had out the for example, the car and truck
manufacturing figures for the UK. That's a very important market
for Britain, the US sending vehicles there. It's actually just
below the relationship with the EU, but it's still very
important and actually we've seen a big kind of cratering
(21:55):
in terms of the numbers of vehicles that are being
exported and in fact just rolling off the lines here
in the UK. How important is this kind of other
sector issues between the US and the UK And do
you think anything might change, let's say, in the September
State visit. How is that being seen in the US?
Speaker 10 (22:15):
Yeah, I know, it's a good point to mention the
sectors because that's something we're watching very closely in the
mix of all of the trade deals. But when you
boil it down to the sectors, whether it's autos pharmaceuticals,
that's a space you know where we're you know, trying
to see if there's any movement there because we still
haven't really seen a lot of details in the pharma space,
(22:36):
but it has been something the President talks about pretty frequently.
So we're definitely watching that space. But I think in
the US in terms of perception, you know, one thing,
you know, what we've been seeing a lot right now
is there's just a lot of back and forth, and
you know, with this administration, they definitely keep us on
our toes. But you know, they move forward with one
(22:56):
thing and then there can be a shift the policy
a little bit, whether it's more or less, and that
is something we're you know, I think folks are really
paying attention to you because it does shake up what
exactly is going on if you say one thing and
then you know it changes. But the President continues to
(23:17):
say that, you know, if you accept you know, American
products and we can you know, enter that market. You know, well,
we want tearif you or tear affe less. So you
know that's what Trump has been negotiating with around that.
Speaker 3 (23:30):
Yeah, absolutely, James. A thought then from the perspective in Edinburgh.
I mean, I know that you know quite a bit
about golf and all the golf courses that are up
in Scotland. I mean, how important do you think that
the trip is for the US person to spend time
in Scotland? As Skylar is sort of pointing out, the
US person is known for being changeable and maybe that
(23:53):
offers a kind of opening in terms of influence.
Speaker 9 (23:56):
Yeah, it does a bit. It's easier for him certainly
to come to Scotland rather than England. He can't hide
so much if you like in England if he wanted to,
and he does have these two golf properties up here
which are very high profile. They're also very good courses.
But and then he is having that that's an idea
(24:19):
about Look, I'm here in my homeland of Scotland. I
mean leaving aside the fact that it would take you
what eight hours to get from his site in Aberdeen
to where his mother was born on Lewis. It's kind
of a long long way away. But he will play
up this idea about him, you know, coming home sort
of thing, which you have to say is taken with
(24:40):
a very large salt from many of the local populace
on that. But that's an idea about him coming to
where he thinks his roots are. That probably makes it
easier for him to feel in a way that he
is negotiating or talking with Starmer on something of a
level playing field, you know what I mean. Yes, he's
(25:03):
a visitor, but he also gets the Scottish thing.
Speaker 3 (25:07):
James, thank you so much for being with me today Brimberg,
James Lordon and to skylar Woodhouse on your first trip
to Scotland and here in the UK. Thank you very
much for your time. I'm Caroline hepget here in London.
You can catch us every weekday morning for Bloomberg day Break.
You at the beginning at six am in London.
Speaker 7 (25:22):
That's one.
Speaker 3 (25:22):
I am on Wall Street, Tom.
Speaker 2 (25:24):
Thank you Caroline, and coming up on Bloomberg day Break
weekend to look ahead to some fresh economic data out
of China. I'm Tom Busby and this is Bloomberg. This
is Bloomberg day Break weekend, our global look ahead at
(25:45):
the top stories for investors in the coming week. I'm
Tom Busby in New York. Market watchers turn to fresh
economic data this week for a temperature check on the
world's second largest economy. For more, let's get to the
host of the Daybreak Asia podcast, Doug Crisler.
Speaker 4 (26:01):
Tom. The outlook for the Chinese economy is showing promise,
and recently Bloomberg Economics raised its full year growth forecast
for China to an annual rate of four point eight percent. Now,
to be fair, hurdles do remain and there is still
the need for policy support. In the week ahead, we'll
get a clearer understanding of where things stand with the
release of several PMI readings. They'll help capture sentiment among
(26:25):
Chinese manufacturers and services providers alike to help us look ahead.
I am joined by David Chu. He is China economist
for Bloomberg Economics. David joins us from our studios in
Hong Kong. David, thank you so much for taking time
to chat with me. Can you begin by giving me
kind of your view on what we may learn this
week from the PMI data for China.
Speaker 6 (26:47):
Ah.
Speaker 11 (26:47):
Yes, What we can say is that we expected the
manufacturing PMI to soften the BIDA from last months because
we saw some leading indicators and African indicators pointing to
the slow, marginal slowed down in the manufacturing activities. I
(27:09):
think one of the reasons is that the ft loading export,
it's somehow it has slowed a bit after the peak
in the in June, so I think that is the reason.
Another reason is that we think the cloud of the
trade wall is still there so that people are not
so confident to expand capacity, so that the overall manufacturing
(27:34):
activity should slow down after acceleration in June.
Speaker 4 (27:41):
So when it comes to the services economies in China,
how is domestic demand right now?
Speaker 11 (27:46):
Well for July because it is a summer holiday season,
so that we think the service side will be supportive
to the to the non manufacturing PMI as well. But
on the other hand, we think the the construction is
still steady compared with June. So overall speakning, we think
the non manufacturing activity should accelerate a bit from June.
Speaker 4 (28:11):
Give me your sense of the extent to which the
property market, as negative as it has been, is still
a major drag on the economy. Is that beginning to
change even slightly?
Speaker 11 (28:22):
Not yet. Based on the sales data, we think the
activity in the housing sector is still drag and it
may be even worse than the last month based on
the new home sales data so far. So looking forward,
we don't see any scene that you know, for the
(28:43):
housing sector to rebund soon, even though we have seen
some stimulus by the government over the past several months,
but still it's soft.
Speaker 4 (28:52):
If you had to point to a bright spot for
the Chinese economy right now, what would be.
Speaker 11 (28:58):
I think the production side is all is resilient, although
if you look at the PMI it is still underwater.
But if you look at the production side of the
China economy over the past several quarters, it's still resilient.
But on the other hand, is what drives the economy
(29:18):
or what is the key for the economy is the
consumption side, So that now we emphasize the importance of
consumption one more so that what we are looking at
now is the consumption, not the strong part, which is
good production.
Speaker 4 (29:35):
When I think of the production side, though, I think
of the tendency for there's still to be a little
bit of over capacity in the system. Is that being
taken out slowly and steadily.
Speaker 11 (29:46):
Yes, there has been more and more talks about the
removal of the overcapacity, but we have to say that
over capacity means it is more than demand, so that
I think the government needs to do more in the
consumption side of the boost demand, so that to reduce
(30:06):
the difference or the overcapacity on the one hand, I
mean the relative over capacity compared with the demand site,
but as well we think the government is doing something
to we call it anti involution, so that to reduce
some of the capacity in some way and also let
(30:26):
people have more time to spending so that they can
spend more money.
Speaker 4 (30:33):
We know that the overall economy has been in deflation,
particularly at the wholesale level where you're looking at factory
gate inflation, to what extent do you believe authorities in
China are very concerned about this right now, the stubbornness
of the deflationary story, and I realize that maybe on
the consumer level it's more disinflationary rather than deflationary, but
(30:55):
still there seems to be this overall pull that has
to do with declining prices.
Speaker 11 (31:01):
Yes, I think the government is concerned about the definition
a lot because the PPI is quite correlated with the
profitability of the manufacturing sector. So that you may know
that many of the China's biggest manufacturers, they are ISOs,
(31:21):
they stayed owned enterprises, so that the if they're making
a lot of financial losses, that the government must be
worried about that. I think that is one of the
reasons why the government UH is considering taking some effort
to remove some of the over capacities, based on our
(31:43):
experience in the twenty eighteen round the carting over capacity.
This would raise the PPI effectively, so that to raise
the profitability. But the still the problem is that that
this inflation in the consumption side will probably be still there,
(32:07):
based also based on the experience from twenty eighteen.
Speaker 4 (32:12):
David, thank you so very much. For making time to
chat with us. That is David Chu, China economist for
Bloomberg Economics, joining from our studios in Hong Kong, shifting
gears to tech now and the Chinese consumer. I spoke
with Stephanie Leung, the chief investment officer at Stashaway. We
discussed how developments in artificial intelligence are shaping her investment strategy.
(32:34):
Here's part of that conversation.
Speaker 12 (32:36):
If you look at the latest economic data, it doesn't
look like that the China consumer is doing a v
shape recovery.
Speaker 5 (32:45):
And I think that's because of a few reasons.
Speaker 12 (32:47):
Number one is that, of course, if you look at
kind of where the where a lot of Chinese consumer
hold the wealth is still in the real estate sector
and say sex sector is still in a very very
long row to recovery. And I mean without that, actually
most Chinese consumers are kind of tightening their belts, right,
They're not really spending that much. However, if you look
(33:10):
into kind of I think some of the pockets where
people are spending, and those tends to be kind of
lower ticket items.
Speaker 5 (33:18):
By that, I mean, for example.
Speaker 12 (33:19):
Uh just kind of uh tea drinks for example, or
uh these uh I guess play, I guess.
Speaker 5 (33:28):
Uh, these are like sort of figures.
Speaker 9 (33:31):
Uh.
Speaker 5 (33:31):
For example, one of one.
Speaker 12 (33:33):
Of the companies La Boobooh has has Labou, which is
very very popular kind of figure in China, and the
I mean people are are crazy about these. I mean
these are kind of lower ticket items that that that
gets very very popular in China. So I think these
are themes that you can still play within the Chinese
Chinese consumer sector.
Speaker 5 (33:52):
However, when you look at kind of.
Speaker 12 (33:54):
The bigger ticket items for example auto for example, uh,
I mean even luxury, and these are kind of still
in sort of the role to recovery.
Speaker 4 (34:03):
I would say, I'm going to play to one of
your strengths technology and particularly artificial intelligence. How do you
understand the risk of some of these AI back chat
bots posing some sort of risk to a business, even
for bay Do in China, which has around seventy percent
of the search market. Is AI a way for this
(34:24):
to be reimagined? Do you think and maybe does it
represent a near term risk?
Speaker 2 (34:29):
Yeah?
Speaker 12 (34:30):
I think, I mean you bring a very very good
point right in the sense that, of course, if you
think about the Internet era, search was of a very
profitable business and Google by do pretty much have like
a dominance or monopoly in these businesses. However, if we
enter the AI era, if you think about just what
people go to search engines to do, they're basically asking questions,
(34:53):
and you can ask these questions much more directly and
get much better answers by going to the LM chat
bots to ask the same questions, and they will give
you a much more comprehensive answer rather than just the
templu links that that Google would provide. And I think
that actually creates a sort of a dilemma for companies
(35:13):
like Google in a sense that I mean they know
that that's the direction that things are going. However, of
course they have existing sort of earnings to try to protect,
so they need to. I mean, they are trying to
actually strike a balance between like kind of not cannibalizing
the existing business, but meanwhile making efforts to make sure
that they don't get this kind of extinct in the
(35:35):
new AI era. So, for example, AI, if you go
to Google Search right now, you see that they will
provide a AI generated search summary, and that's sort of
some of the efforts to help the company that migrates.
Speaker 4 (35:49):
So if you're looking at opportunities in AI and China.
Are you more focused on the software side or are
you looking at the hardware story and maybe semiconductors. How
do you play it?
Speaker 1 (36:00):
I think.
Speaker 12 (36:02):
If you look at the semiconductor or hardware side, it's
very very focused in a few kind of companies that
have the technology. So by that, I mean, for example,
n video, Nvidia has the chips that are kind of
ways ahead. And if you look at all the recent
kind of announcements from big big tech companies like for example,
Metas big announcement of the data centers, I mean they
(36:24):
are still predominantly using uh in video technology.
Speaker 11 (36:27):
UH.
Speaker 5 (36:28):
If you look at kind of in China.
Speaker 12 (36:30):
Of course, recently uh President Trump lifted the restriction to
export H twenty chips to China, and I mean Nvidia
is receiving a lot of orders and I mean the
citing supply shortages.
Speaker 5 (36:43):
So still Nvidia is the kind of the.
Speaker 12 (36:45):
Dominant player in the infrastructure layer. Of course, like companies
like Huawei are catching up, but I think they are
still kind of somewhat behind on the application side. I
think that's where it gets more interesting, right, because it's
not it's not that kind of dominated by one.
Speaker 5 (37:04):
Or two players.
Speaker 12 (37:05):
I think in the application side you can see a
lot of very creative uses of the underlying technology in
terms of driving usage, driving revenue, or cutting costs. And
here I think you can see that in the US
there are different companies in different verticals kind of it
GUS making big strides and also in China right if
(37:26):
you look at kind of the software companies, I think
they are one of the first to benefit from these
AI coding agents, for example, and these actually benefit a
lot more companies than just the infrastructure.
Speaker 4 (37:37):
Later that was definitely young the CIO at Stashaway, I'm
Doug Chrisner. Catch us weekdays for the Daybreak as your podcast.
It's available wherever you get your podcast. Tom.
Speaker 2 (37:48):
Thank you Doug. And that does it for this edition
of Bloomberg day Break Weekend. Join us again Monday morning,
five am Wall Street Time for the latest on markets
overseas and the news you need to start your day.
I'm Tom Buzzby.
Speaker 5 (38:00):
Stay with us.
Speaker 2 (38:01):
Top stories and global business headlines are coming up right now.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our Daybreak
anchors all around the world, and straight ahead on the program,
well look ahead to this week's monetary policy decision from
the Fed. Also earnings for more of text Magnificent seven.
I'm Tom Busby in New York.
Speaker 3 (00:26):
I'm callin Hepget in London, where we're asking if President
Charump's Scottish golf trip can yield any political wins.
Speaker 4 (00:33):
I'm got Prisner looking at the Chinese economy ahead of
fresh PMI reports in the coming week.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three 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 5 (01:02):
Good day to you.
Speaker 2 (01:03):
I'm Tom Busby, and we begin today's program with this
week's Federal Reserve policy meeting. The Federal issue its latest
decision on interest rates on Wednesday, with a press conference
expected from FED chair Jay Powell to follow what will
the Fed decide and what's behind the central banks thinking?
And for more. We're joined by Edward Harrison, senior editor
at Bloomberg, author of Bloomberg's Everything Risk newsletter. Well, Edward,
(01:27):
a critical decision from the Fed. What are you expecting
to see happen this week?
Speaker 6 (01:33):
Hey, Tom? Yes, it is a critical decision because of
the political pressure that we've seen applied to the Federal Reserve.
The market widely expects interest rates to stay the same,
in particular because we haven't implemented the final round of
tariffs yet, we don't know how the economy's going to
(01:53):
react to that. If you look at the pricing from
the market, it's expecting not just this meeting to be
the same. But there's only a slight chance, maybe a
sixty percent chance that we get a cut in September.
It's first in October when the next rate cut will come.
Speaker 2 (02:11):
Wow, that's well, that's a change. But Chairman Palth has
said time and again he has said it's all about
the data and that the Central Bank has to see
the impact of the Trump tariffs on inflation. So it
really is too soon to make a move because we
just don't know. There's so many moving parts with these tariffs. Correct.
Speaker 6 (02:28):
Yeah, and you know, the interesting bit is is when
the Fed actually moved to lower interest rates in twenty
twenty four, the market's reaction was that this took all
of the risk of a recession off the table, so
much so that interest rates actually went up. So they
lowered the short term interest rates, but they yields on
(02:51):
longer term bonds, the ones that actually matter to people
when they're getting a mortgage and so forth, those are
the ones that went up. And so it was because
the recession risk receded that you actually had a situation
where the Fed was acting one way and long term
yields went the actual opposite direction.
Speaker 2 (03:13):
Well, I think you know on Wall Street we have
seen the major averages add or near all time highs
the last few weeks. Inflation still above the Fed's target,
but it has eased about two point seven percent, the
labor market, resilient, jobless rate, four percent initial jobs. Everything
is working. The Fed's plans have been working. So the
(03:33):
argument could be, well, why not lower interest rates, But
there's a very good reason why they wouldn't correct just
for that reason you were talking about with long term yields.
Speaker 6 (03:41):
Right exactly. They just they don't know if, for instance,
they were to lower interest rates whether or not, suddenly
we would get inflation coming back in, not just because
the tariffs created more inflation, but actually because the economy
was running hot enough to create inflation on its own.
(04:01):
And then suddenly they'd be in a situation where they
made an error and that error would be taken on
by markets to increase interest rates, increase yields across the curve,
expecting the Fed to eventually have to undo that error.
And this is the dilemma that they faced. So they've decided, look,
(04:21):
you know, we're in a good enough position at this
point in time that we can actually wait to do this.
You know what's interesting if you look at the last
FED decision, they released a summary of economic projections and
sort of a by and modal distribution, there are actually
seven of the Fed governors and presidents who think that
(04:43):
they shouldn't lower interest rates at all this year, whereas
nine think that they should lower them two times this year.
And there are four others that are in there, but
you know the total number that the reason that we
have an expectation for two interest rates. It's being lowered
is because of those I think it's eight FED members
(05:04):
who believe that interest rate should be lowered by two,
but they are a decent number who think, you know,
there shouldn't be any interest rate cuts this year.
Speaker 2 (05:12):
And there's been a lot of pressure, obviously from President
Trump on Jerome Palell, a lot of criticism, a lot
of pressure about what the FED is going to do.
And it goes into what you just said, He's not
the only one designing. I mean, there are twelve voting
members of the FOMC. You have all these other governors
and vice presidents and presidents of banks. I mean, it
is not a unilateral decision, is it.
Speaker 6 (05:34):
No, it's not. And the interesting thing about that bimodal
distribution is that obviously we don't know which of the
nineteen dots in this summary are of voting members, but
there are enough members that if the data turned towards
the more inflationary side, you could get the FOMC outside
(05:57):
of Jerome Pale saying no, we don't even want two
interest rate cuts this year. We want one and perhaps
even zero. Because all it takes is us to get
three more dots up into that number, you know, to
go from seven to ten, and then suddenly we don't
have any interest rate cuts at all in twenty twenty five.
Speaker 2 (06:18):
Well, the FETCH two day policy meeting kicks off this
Tuesday at Decision Wednesday, expected at two pm Wall Street time. Then,
of course we're going to hear from fedchair Jerome Powell.
Our thanks to Edward Harrison, senior editor at Bloomberg, author
of Bloomberg's Everything Risk newsletter. We move next to corporate earning.
Some of the Magnificent seven's biggest names reporting this week
meta platforms, Microsoft, Apple, and Amazon, and for more on
(06:42):
what to expect. We're joined by Mandeep Singh, Bloomberg Intelligence,
senior tech industry analysts. Man Deep, thank you so much
for being here. I want to start though, by looking backward,
because last week we got the latest results from Tesla
and Alphabet, very different results. Tesla miss earnings, sales fell
difficult times ahead what Alphabet. There was a real upside surprise,
(07:04):
wasn't there.
Speaker 7 (07:05):
Yeah, And also going into earnings, I think the narrative
was that Google Search has been under a lot of
competitive threat from the likes of Chat GPT and just
what's going on in the LLM space and the numbers
proved otherwise, I mean the fact that Google grow search
(07:26):
double digits at a run rate of two hundred ten
billion dollars. That just goes to show you know, how
much momentum they have in terms of just their integrating
Gemini with their search page. So AI overviews has actually
helped you know, the number of queries. And then the monetization,
(07:47):
I mean ad monetization for Google is really, you know,
something that no one else has been able to even
come close to. And look, we're talking about Meta coming
up as well. So to me, what what will be
interesting is whether Meta shows you know, high teens or
twenty percent plus growth, because that's the sort of expectation
(08:09):
Google has set up with its print. You know, YouTube
did really well. In fact, YouTube plus cloud is almost
one hundred and fifteen billion dollars rundrate growing at over
twenty percent, and so a lot of positives in that
Google print. The one thing I would call out is
a capex pense. So Google ded raise their capex by
(08:29):
ten billion for this year, and they said twenty twenty
six would be another growth year for capex and that
some investors could say would be a Dragon free cash flow,
But I would compare that to a Meta which has
already guided to a higher CAPEX and they are not
monetizing at the same level as Google is with their
(08:52):
cloud business. So that is where it'd be interesting to
see how the market reacts to Meta talking up capex
for second half twenty twenty six.
Speaker 2 (09:01):
Another horse in this race Microsoft, Yeah, which you know
with their open AI commitments and still expected to see
Azure a big, big revenue gainer. How about you know
the rest of the company. Where's Microsoft stand? Because we're
out Wednesday as well.
Speaker 7 (09:16):
I think one thing was clear from google'sprint is Microsoft
Azure business is going to put up another strong quarter.
We are talking another mid thirty five, like mid thirty
percent growth for an Azure, which was a real surprise
last quarter. But now the numbers have gone up for Azure,
so you will see another strong quarter for Azure. But overall, look,
(09:40):
Microsoft has been one of the biggest beneficiaries of this
AI infrastructure spend and the cloud business that it has benefited.
And in Google's case, you know, it's a fifty billion
dollars run rate business cloud growing almost you know, thirty
percent plus now, so that could double to hundred billion
(10:00):
in two years. In Microsoft's case, it's the same kind
of momentum, and that's why cloud is the real beneficiary
of this AI infrastructure spent. On one hand, we call
out how Nvidia is benefited on the chip side. On
the software side, it's the cloud companies. And that's where
I would put Microsoft and Google. Amazon, which is another
(10:21):
one reporting next week and has expoture to cloud, I
think their growth rates are still way down compared to
Google and Microsoft Cloud, which is growing you know, thirty
percent plus. Amazon's growth may still be around that's seventeen
to twenty percent.
Speaker 2 (10:38):
And still strong, still very strong.
Speaker 7 (10:41):
For a business of over one hundred billion dollar run rate.
It's very good growth when you compare them share in cloud.
I do think, you know, Microsoft and Google seem to
be taking share because of this AI workloud shift, and
that's where Amazon has to kind step up in terms
(11:01):
of how they will increase the growth rate for their
cloud business.
Speaker 2 (11:05):
Now the outlier in this horse race for AI, Apple
also next week, has been way behind, has no sign
of even catching up except for partnerships it's making. But
what do you expect there. I mean, the iPhone sixteen
is smash hit. We have services have been very strong,
but are they still behind. They're still going to make
(11:25):
a ton of money, there's no doubt.
Speaker 7 (11:27):
I think with Apple now announcing they're getting into insurance business.
The twenty dollars per month for three devices, that's just
aimed at improving the services run rate. To me, everyone
looks up to Apple for what they will do on
the AI side, and that is a big question mark
(11:48):
whether they have a compelling AI strategy. I think they
are going to go to the partnership route, but right
now we have no signs to suggest there will be
a big upgrade or refresh cycle for their devices because
AI right now is still being used on the cloud.
People are not really using AI assistant that's installed on
(12:11):
the phone. Because these lms are called large anglid models
for a reason. They require a lot of compute and
memory that you can't have on device, and so that's
where Apple has to strike partnerships. They have to enhance
their hardware to run AI on device, and we are
talking about at least at twelve to twenty four month timeframes,
(12:34):
so you're not gonna see anything that investors will find exciting,
at least in this print.
Speaker 2 (12:40):
Well, a lot to look forward to. Meta and Microsoft
earnings out this Wednesday. Amazon and Apple on Thursday are
thanks to Mandeep Sing, Bloomberg Intelligence Senior Tech industry analyst.
And coming up on Bloomberg day Break weekend, we'll look
at whether President Trump's Scottish golf trip can yield any
political wins. I'm Tom Busby and this is Bloomberg. This
(13:10):
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. Up later in our program
and look at some key economic data coming out of
the world's second largest economy. But first, fresh from a
flurry of trade deal announcements, President Trump is in the
UK in Scotland. His trip will be a mixture of
(13:30):
business and pleasure. But in the coming days the President
has set to hold meetings with UK Prime Minister Kure
Starmer and John Swinney, First Minister of Scotland. Can the
duo sweet talk Trumpet to further trade concessions For more,
Let's go to London and bring in Bloomberg day Break
Europe anchor Caroline Hepgar.
Speaker 3 (13:48):
Tom President Donald Trump Count's Scottish ancestry as part of
his heritage. His mother, Mary Anne MacLeod, was one of
thousands of Scotts who left for the US and Canada
at the beginning of the last century in a bid
to escape economic hardship at home. But despite the family ties,
the US President's relationship with the country is a complicated one.
(14:09):
During his last visit to Scotland in twenty eighteen, the
President was booed during an afternoon golf game by demonstrators
at his resort in Turnbury, and the entire trip was
dogged by protests of thousands of people in Glasgow, Edinburgh
and Aberdeen. This time round, controversial White House policies could
make for a similar reception as Trump visits his two
(14:31):
Scottish golf properties. His plan for international trade is also
something the White House Press Secretary Caroline Leavitt expanded on recently.
Speaker 8 (14:40):
Look, I can tell you the trade team and the
President himself continue to be very engaged with countries around
the world when it comes to our trade agreements. But
the August first deadline is just really the start date
for when the United States of America will begin collecting
this revenue from all of the countries around the world
who the President has sent these letters to.
Speaker 5 (14:59):
You could see some more years.
Speaker 8 (15:00):
Before August first, John, you could have some more trade
announcements as well. I can tell you the President, Secretary
of Treasury, Secretary of Commerce, Ambassador Greer all continue to
be in constant communication with our trading partners.
Speaker 3 (15:12):
The White House is Caroline Levitt speaking to reporters there. Well,
do you know what I mean?
Speaker 7 (15:16):
Now?
Speaker 3 (15:16):
It's Bloomberg's Edinburgh based reporter James Laden and our White
House correspondent Skyla Woodhouse. Welcome to both of you. Thank
you for speaking to me. James, Maybe can I start
with you. Trump has long been i'll say, infatuated with Scotland.
The Scot's perhaps a bit less so with him. Just
talk us through the perceptions of President Donald Trump on
the ground.
Speaker 9 (15:36):
Now, Yeah, in your intro you did mention how there
were some demos against him when you was here last
I think those demos were more personality based, whereas I
think the demos that are being planned are both personality
and politics based. So there's a subtle difference there. One
(15:58):
thing I think that you need to sort of remind
yourselves about the Scottish psyche if you like, is that
someone who shall we say, is kind of fairy, brash
and a showman. That doesn't necessarily go down very well
here in Scotland. They tend to admire people who are
(16:18):
a bit more understated. And also Scotland does have a
reputation of cheering for the underdog over the years, and
certainly having a slightly larger big brother, shall we say,
to the South that's been dominating proceedings for several centuries.
That also probably explains why Scott's they prefer the underdog
(16:39):
rather than the top dog.
Speaker 3 (16:41):
H Okay Skyler. And President Trump's also coming to the
UK for full proper state visit in only a few
weeks time. Why do you think he's making this trip
to Scotland now?
Speaker 10 (16:53):
I mean the White House is saying, you know, this
is a moment for the President and Prime Minister Starmer
to refine the trade deal from just a few months ago.
You know, we'll hopefully we'll get an update on what's
maybe some more of the fine print details of that
trade agreement are. And there's obviously a lot happening in
the world right now there's you know, Ukraine and Russia
(17:13):
that has been you know, front and center for President Trump,
and you know, so we're you know, looking to see
if we could see any sort of maybe new agreement
between the two countries there or just sort of what
the strategy you know, might look like. So there's a
lot of talk around national security right now.
Speaker 5 (17:29):
You know.
Speaker 10 (17:30):
So it's kind of a mix of you know, the
presidents who we all know loves to golf and you
know frequently he'll be in Florida, you know, golfing and
things like that. But you know, we're expecting to see
probably a more refined trade deal than what we saw earlier.
Speaker 3 (17:47):
Yeah, absolutely, entire it's hugely important, I mean, both the
kised arma of the UK as a whole and Scotland
in particular as well. Is there going to be any
expectation actually of any progress in terms of trade discussions?
Speaker 2 (17:58):
Do you think?
Speaker 10 (18:00):
I think one thing that's particularly interesting with the trade
agreements that we've just been seeing across the board, Obviously,
this is something that President Trump is very passionate about
and is definitely dominating his second term and as president.
You know, so I think it'll be interesting to watch
what the fine print looks like. We've we're approaching that
(18:24):
August first deadline with a plethora of countries and we're
starting to see you know, the rates coming in you know,
a different level. So I think it'll be interesting to
see what maybe has changed from the you know, the
deal that was presented a few months ago to now
and to compare and contrast what has changed or what
(18:45):
has not changed.
Speaker 3 (18:47):
James, what do you think the Scottish First Minister John
Swinney is likely to cover maybe try to press with
the US President.
Speaker 9 (18:54):
Well, I guess so the biggest thing here is whiskey.
Personally not a fan, but I mean it's it's the
biggest export that we have up here, and any potential
reducing the tariffs on whiskey I think would go a
long way up here. But at the end of the day,
the personal sign the document is going to be starmer,
(19:16):
So there's a slight set of dichotomy there. Otherwise, I
mean Swinny he is involved a little bit in the
long running staga about whether Turnbury, one of Trump's golf sites,
will ever host the Open again, so there will be
some chat on that, I dare say, But at the
end of the day, the decision comes down to the
(19:39):
rural ancient golf club in Saint Andrew's RNA. But there
will be pressure from Swinny and also from Starma to
try to make this happen. But then to make it
happen you kind of need to have much better communications.
You must have much better roads and rail systems, and
to get that you're going to have to get the
tax player to stump up for it very properly, and
that will be a big.
Speaker 3 (20:00):
Problem in terms of travel. It's obviously quite a privileged
position for the UK to be in and Scotland in
some ways to be hosting, you know, a visit, even
an informal visit from the US president, given how much
is riding on this and President Trump's actually got some
cousins who still live on the kind of ancestral island
where his mother came from. How important do you think
(20:22):
the relationship is at the moment, Skyler, between the US
and the UK as we see these really quite fraught
negotiations with many countries rushing to try to make the
August first deadline.
Speaker 10 (20:33):
I think one thing the traupid administration, you know, they
do a lot of things differently, But ultimately I do
think there is an understanding that the relationship with the
UK is a very important one that obviously has a
very long standing history, you know, so I do think
the administration is looking to sort of continue to keep
(20:54):
that relationship intact and whatever way that might be. I mean,
but it's still very interesting that of the trade deals,
the UK was one of the first to see a
deal and an agreement and there was the Oval event
where Starmar I believed, phoned in, you know, so you know,
they're definitely trying to show a united front between the
(21:14):
two countries, which on the global stage could be very
telling that you know, we have the US and the
UK sort of you know, aligned, even if there are
differences you know, on some things. But now do you
think administration is you know looking to sort of you know,
make sure that that relationship continues to remain stable.
Speaker 3 (21:33):
Yeah, in terms of what you expect then also from
the State visit in September and how important that is.
We've had out the for example, the car and truck
manufacturing figures for the UK. That's a very important market
for Britain, the US sending vehicles there. It's actually just
below the relationship with the EU, but it's still very
important and actually we've seen a big kind of cratering
(21:55):
in terms of the numbers of vehicles that are being
exported and in fact just rolling off the lines here
in the UK. How important is this kind of other
sector issues between the US and the UK And do
you think anything might change, let's say, in the September
State visit. How is that being seen in the US?
Speaker 10 (22:15):
Yeah, I know, it's a good point to mention the
sectors because that's something we're watching very closely in the
mix of all of the trade deals. But when you
boil it down to the sectors, whether it's autos pharmaceuticals,
that's a space you know where we're you know, trying
to see if there's any movement there because we still
haven't really seen a lot of details in the pharma space,
(22:36):
but it has been something the President talks about pretty frequently.
So we're definitely watching that space. But I think in
the US in terms of perception, you know, one thing,
you know, what we've been seeing a lot right now
is there's just a lot of back and forth, and
you know, with this administration, they definitely keep us on
our toes. But you know, they move forward with one
(22:56):
thing and then there can be a shift the policy
a little bit, whether it's more or less, and that
is something we're you know, I think folks are really
paying attention to you because it does shake up what
exactly is going on if you say one thing and
then you know it changes. But the President continues to
(23:17):
say that, you know, if you accept you know, American
products and we can you know, enter that market. You know, well,
we want tearif you or tear affe less. So you
know that's what Trump has been negotiating with around that.
Speaker 3 (23:30):
Yeah, absolutely, James. A thought then from the perspective in Edinburgh.
I mean, I know that you know quite a bit
about golf and all the golf courses that are up
in Scotland. I mean, how important do you think that
the trip is for the US person to spend time
in Scotland? As Skylar is sort of pointing out, the
US person is known for being changeable and maybe that
(23:53):
offers a kind of opening in terms of influence.
Speaker 9 (23:56):
Yeah, it does a bit. It's easier for him certainly
to come to Scotland rather than England. He can't hide
so much if you like in England if he wanted to,
and he does have these two golf properties up here
which are very high profile. They're also very good courses.
But and then he is having that that's an idea
(24:19):
about Look, I'm here in my homeland of Scotland. I
mean leaving aside the fact that it would take you
what eight hours to get from his site in Aberdeen
to where his mother was born on Lewis. It's kind
of a long long way away. But he will play
up this idea about him, you know, coming home sort
of thing, which you have to say is taken with
(24:40):
a very large salt from many of the local populace
on that. But that's an idea about him coming to
where he thinks his roots are. That probably makes it
easier for him to feel in a way that he
is negotiating or talking with Starmer on something of a
level playing field, you know what I mean. Yes, he's
(25:03):
a visitor, but he also gets the Scottish thing.
Speaker 3 (25:07):
James, thank you so much for being with me today Brimberg,
James Lordon and to skylar Woodhouse on your first trip
to Scotland and here in the UK. Thank you very
much for your time. I'm Caroline hepget here in London.
You can catch us every weekday morning for Bloomberg day Break.
You at the beginning at six am in London.
Speaker 7 (25:22):
That's one.
Speaker 3 (25:22):
I am on Wall Street, Tom.
Speaker 2 (25:24):
Thank you Caroline, and coming up on Bloomberg day Break
weekend to look ahead to some fresh economic data out
of China. I'm Tom Busby and this is Bloomberg. This
is Bloomberg day Break weekend, our global look ahead at
(25:45):
the top stories for investors in the coming week. I'm
Tom Busby in New York. Market watchers turn to fresh
economic data this week for a temperature check on the
world's second largest economy. For more, let's get to the
host of the Daybreak Asia podcast, Doug Crisler.
Speaker 4 (26:01):
Tom. The outlook for the Chinese economy is showing promise,
and recently Bloomberg Economics raised its full year growth forecast
for China to an annual rate of four point eight percent. Now,
to be fair, hurdles do remain and there is still
the need for policy support. In the week ahead, we'll
get a clearer understanding of where things stand with the
release of several PMI readings. They'll help capture sentiment among
(26:25):
Chinese manufacturers and services providers alike to help us look ahead.
I am joined by David Chu. He is China economist
for Bloomberg Economics. David joins us from our studios in
Hong Kong. David, thank you so much for taking time
to chat with me. Can you begin by giving me
kind of your view on what we may learn this
week from the PMI data for China.
Speaker 6 (26:47):
Ah.
Speaker 11 (26:47):
Yes, What we can say is that we expected the
manufacturing PMI to soften the BIDA from last months because
we saw some leading indicators and African indicators pointing to
the slow, marginal slowed down in the manufacturing activities. I
(27:09):
think one of the reasons is that the ft loading export,
it's somehow it has slowed a bit after the peak
in the in June, so I think that is the reason.
Another reason is that we think the cloud of the
trade wall is still there so that people are not
so confident to expand capacity, so that the overall manufacturing
(27:34):
activity should slow down after acceleration in June.
Speaker 4 (27:41):
So when it comes to the services economies in China,
how is domestic demand right now?
Speaker 11 (27:46):
Well for July because it is a summer holiday season,
so that we think the service side will be supportive
to the to the non manufacturing PMI as well. But
on the other hand, we think the the construction is
still steady compared with June. So overall speakning, we think
the non manufacturing activity should accelerate a bit from June.
Speaker 4 (28:11):
Give me your sense of the extent to which the
property market, as negative as it has been, is still
a major drag on the economy. Is that beginning to
change even slightly?
Speaker 11 (28:22):
Not yet. Based on the sales data, we think the
activity in the housing sector is still drag and it
may be even worse than the last month based on
the new home sales data so far. So looking forward,
we don't see any scene that you know, for the
(28:43):
housing sector to rebund soon, even though we have seen
some stimulus by the government over the past several months,
but still it's soft.
Speaker 4 (28:52):
If you had to point to a bright spot for
the Chinese economy right now, what would be.
Speaker 11 (28:58):
I think the production side is all is resilient, although
if you look at the PMI it is still underwater.
But if you look at the production side of the
China economy over the past several quarters, it's still resilient.
But on the other hand, is what drives the economy
(29:18):
or what is the key for the economy is the
consumption side, So that now we emphasize the importance of
consumption one more so that what we are looking at
now is the consumption, not the strong part, which is
good production.
Speaker 4 (29:35):
When I think of the production side, though, I think
of the tendency for there's still to be a little
bit of over capacity in the system. Is that being
taken out slowly and steadily.
Speaker 11 (29:46):
Yes, there has been more and more talks about the
removal of the overcapacity, but we have to say that
over capacity means it is more than demand, so that
I think the government needs to do more in the
consumption side of the boost demand, so that to reduce
(30:06):
the difference or the overcapacity on the one hand, I
mean the relative over capacity compared with the demand site,
but as well we think the government is doing something
to we call it anti involution, so that to reduce
some of the capacity in some way and also let
(30:26):
people have more time to spending so that they can
spend more money.
Speaker 4 (30:33):
We know that the overall economy has been in deflation,
particularly at the wholesale level where you're looking at factory
gate inflation, to what extent do you believe authorities in
China are very concerned about this right now, the stubbornness
of the deflationary story, and I realize that maybe on
the consumer level it's more disinflationary rather than deflationary, but
(30:55):
still there seems to be this overall pull that has
to do with declining prices.
Speaker 11 (31:01):
Yes, I think the government is concerned about the definition
a lot because the PPI is quite correlated with the
profitability of the manufacturing sector. So that you may know
that many of the China's biggest manufacturers, they are ISOs,
(31:21):
they stayed owned enterprises, so that the if they're making
a lot of financial losses, that the government must be
worried about that. I think that is one of the
reasons why the government UH is considering taking some effort
to remove some of the over capacities, based on our
(31:43):
experience in the twenty eighteen round the carting over capacity.
This would raise the PPI effectively, so that to raise
the profitability. But the still the problem is that that
this inflation in the consumption side will probably be still there,
(32:07):
based also based on the experience from twenty eighteen.
Speaker 4 (32:12):
David, thank you so very much. For making time to
chat with us. That is David Chu, China economist for
Bloomberg Economics, joining from our studios in Hong Kong, shifting
gears to tech now and the Chinese consumer. I spoke
with Stephanie Leung, the chief investment officer at Stashaway. We
discussed how developments in artificial intelligence are shaping her investment strategy.
(32:34):
Here's part of that conversation.
Speaker 12 (32:36):
If you look at the latest economic data, it doesn't
look like that the China consumer is doing a v
shape recovery.
Speaker 5 (32:45):
And I think that's because of a few reasons.
Speaker 12 (32:47):
Number one is that, of course, if you look at
kind of where the where a lot of Chinese consumer
hold the wealth is still in the real estate sector
and say sex sector is still in a very very
long row to recovery. And I mean without that, actually
most Chinese consumers are kind of tightening their belts, right,
They're not really spending that much. However, if you look
(33:10):
into kind of I think some of the pockets where
people are spending, and those tends to be kind of
lower ticket items.
Speaker 5 (33:18):
By that, I mean, for example.
Speaker 12 (33:19):
Uh just kind of uh tea drinks for example, or
uh these uh I guess play, I guess.
Speaker 5 (33:28):
Uh, these are like sort of figures.
Speaker 9 (33:31):
Uh.
Speaker 5 (33:31):
For example, one of one.
Speaker 12 (33:33):
Of the companies La Boobooh has has Labou, which is
very very popular kind of figure in China, and the
I mean people are are crazy about these. I mean
these are kind of lower ticket items that that that
gets very very popular in China. So I think these
are themes that you can still play within the Chinese
Chinese consumer sector.
Speaker 5 (33:52):
However, when you look at kind of.
Speaker 12 (33:54):
The bigger ticket items for example auto for example, uh,
I mean even luxury, and these are kind of still
in sort of the role to recovery.
Speaker 4 (34:03):
I would say, I'm going to play to one of
your strengths technology and particularly artificial intelligence. How do you
understand the risk of some of these AI back chat
bots posing some sort of risk to a business, even
for bay Do in China, which has around seventy percent
of the search market. Is AI a way for this
(34:24):
to be reimagined? Do you think and maybe does it
represent a near term risk?
Speaker 2 (34:29):
Yeah?
Speaker 12 (34:30):
I think, I mean you bring a very very good
point right in the sense that, of course, if you
think about the Internet era, search was of a very
profitable business and Google by do pretty much have like
a dominance or monopoly in these businesses. However, if we
enter the AI era, if you think about just what
people go to search engines to do, they're basically asking questions,
(34:53):
and you can ask these questions much more directly and
get much better answers by going to the LM chat
bots to ask the same questions, and they will give
you a much more comprehensive answer rather than just the
templu links that that Google would provide. And I think
that actually creates a sort of a dilemma for companies
(35:13):
like Google in a sense that I mean they know
that that's the direction that things are going. However, of
course they have existing sort of earnings to try to protect,
so they need to. I mean, they are trying to
actually strike a balance between like kind of not cannibalizing
the existing business, but meanwhile making efforts to make sure
that they don't get this kind of extinct in the
(35:35):
new AI era. So, for example, AI, if you go
to Google Search right now, you see that they will
provide a AI generated search summary, and that's sort of
some of the efforts to help the company that migrates.
Speaker 4 (35:49):
So if you're looking at opportunities in AI and China.
Are you more focused on the software side or are
you looking at the hardware story and maybe semiconductors. How
do you play it?
Speaker 1 (36:00):
I think.
Speaker 12 (36:02):
If you look at the semiconductor or hardware side, it's
very very focused in a few kind of companies that
have the technology. So by that, I mean, for example,
n video, Nvidia has the chips that are kind of
ways ahead. And if you look at all the recent
kind of announcements from big big tech companies like for example,
Metas big announcement of the data centers, I mean they
(36:24):
are still predominantly using uh in video technology.
Speaker 11 (36:27):
UH.
Speaker 5 (36:28):
If you look at kind of in China.
Speaker 12 (36:30):
Of course, recently uh President Trump lifted the restriction to
export H twenty chips to China, and I mean Nvidia
is receiving a lot of orders and I mean the
citing supply shortages.
Speaker 5 (36:43):
So still Nvidia is the kind of the.
Speaker 12 (36:45):
Dominant player in the infrastructure layer. Of course, like companies
like Huawei are catching up, but I think they are
still kind of somewhat behind on the application side. I
think that's where it gets more interesting, right, because it's
not it's not that kind of dominated by one.
Speaker 5 (37:04):
Or two players.
Speaker 12 (37:05):
I think in the application side you can see a
lot of very creative uses of the underlying technology in
terms of driving usage, driving revenue, or cutting costs. And
here I think you can see that in the US
there are different companies in different verticals kind of it
GUS making big strides and also in China right if
(37:26):
you look at kind of the software companies, I think
they are one of the first to benefit from these
AI coding agents, for example, and these actually benefit a
lot more companies than just the infrastructure.
Speaker 4 (37:37):
Later that was definitely young the CIO at Stashaway, I'm
Doug Chrisner. Catch us weekdays for the Daybreak as your podcast.
It's available wherever you get your podcast. Tom.
Speaker 2 (37:48):
Thank you Doug. And that does it for this edition
of Bloomberg day Break Weekend. Join us again Monday morning,
five am Wall Street Time for the latest on markets
overseas and the news you need to start your day.
I'm Tom Buzzby.
Speaker 5 (38:00):
Stay with us.
Speaker 2 (38:01):
Top stories and global business headlines are coming up right now.
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