June 21, 2025 • 38 mins
Bloomberg Daybreak Weekend with Tom Busby takes a look at some of the stories we'll be tracking in the coming week.
- In the US – a look ahead to U.S GDP and personal spending data and Nike earnings.
- In the UK – a look ahead to TheCityUK's annual conference.
- In Asia – a look ahead to Bloomberg’s China economic survey.
-----------------------------------------------------------------
Guests:
-Michael McKee, Bloomberg International Economics and Policy Correspondent, to preview next week's U.S GDP/personal spending data.
- Poonam Goyal, Senior U.S. E-Commerce and Retail Analyst at Bloomberg Intelligence, to preview Nike earnings.
-Leo Kehnscherper, Bloomberg European Asset Management Reporter, looks ahead to TheCityUK's annual conference.
-Julian Harris, UK Economics Editor, looks ahead to TheCityUK's annual conference.
- Eric Zhu, China Economist for Bloomberg Economics, discusses Bloomberg’s China Economic Survey.
-Karishma Vaswani, Bloomberg Opinion Columnist in Singapore, discusses her column: “US Rethink on Australia Subs Is China’s Win.”
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our day
Break anchors all around the world, and straight ahead on
the program A look Ahead, there's some key economic data
in the US, plus testimony to Congress from Federal Reserve
Chair Jerome Powell, and a look at earnings from retail
giant Nike. I'm Tom Busby in New York.
Speaker 2 (00:21):
I'm calling Hecker here in London, where we're asking if
financial services can deliver for the UK and what the
city needs to thrive.
Speaker 3 (00:29):
I'm dek Prisner looking at what it will take for
an economic recovery to take hold in China.
Speaker 4 (00:37):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven to three year, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London,
Sirius XM one twenty one, and around the world on
Bloomberg Radio, dot Com and the Bloomberg Business App.
Speaker 5 (01:01):
Good day to you.
Speaker 1 (01:01):
I'm Tom Busby, and we begin today's program with some
key economic data in the US personal consumer Expenditure Price
Index from May on Friday and also we hear from
FED shaired Jerome Palace, he testifies to Congress about monetary policy.
For more on what to expect and how it could
impact FED policy. Moving forward, we're joined by Michael McKee,
(01:21):
Bloomberg International Economics and Policy correspondent. Well, Michael, let's get
the PCEE out of the way, then we'll talk about Powell.
This is the preferred measure of inflation for the Fed.
So what are you expecting to see for the month
of May.
Speaker 6 (01:33):
Well, all right, kind of a survey shows that people
on Wall Street tend to think that we're going to
see prices go up a little bit to the PCE
Price Index headline to two point three from two point one,
and core two six from two to five, which would
fit with kind of the pattern of what's been expected
that we'll see an increase because of tariffs. But it
(01:54):
isn't clear that that's necessarily going to happen because we
saw the milder CPI and PPI. There was some terraff
related increases in some sectors, but not as broad as
people thought, so it'd be interesting to see what comes
out of that. We also get the income and spending
numbers and income after a big rise in April is
going to be only a small rise two tenths of
(02:16):
a percent from a spending two tents of a percent
same as for April. So consumers hanging in but not
overly enthusiastic.
Speaker 1 (02:24):
And it looks like inflation is in check, at least
for now.
Speaker 6 (02:28):
It's in check. And the Fed is kind of where
it wants to be. We saw that from their summary
of economic projections last week. They don't need to cut
rates right now for any reason or raise rates for
right now for any reason, so they're happy just to
sit there.
Speaker 7 (02:47):
Well.
Speaker 1 (02:47):
Chairman pal though afterwards did say he's still looking at
two rate decreases this year. Right, two cuts, That's what
the dot plot shows.
Speaker 6 (02:56):
But I think if you watch the Fed closely, the
way it a lot of Fed watchers are interpreting this
is they don't have enough information to make a decision.
So based on what the economy is doing right now,
they could do two rate cuts.
Speaker 8 (03:12):
Now.
Speaker 6 (03:12):
By the time you get to the fall, or the
time they might start thinking about rad cuts, you can't
do too or maybe you need more because the economy
has collapsed. I think the basic message from Powell to reporters,
which I'm sure he will repeat to members of Congress,
is that there's not a lot of conviction among the
Fed people about their forecasts. They're thinking this is what
(03:34):
could happen, but not what will happen.
Speaker 1 (03:37):
Wow, Well, let's talk more about Powell. So he addresses
the House on Tuesday, Senate a banking committee or Senate
Banking Committee on Wednesday. What is it going to be
like for him? We've seen this theater by President Trump
again last week.
Speaker 6 (03:52):
You know, Trump has been doing this for a while,
but the last time he testified on Powell testified on
Capitol Hill that hadn't begun. This new rend. I will
insult youse. It'll be interesting to see if Republicans follow
up on that. They will probably give Powell a hard
time for not cutting rates because the president wants them to,
(04:12):
and they do what the President wants. But it'll be
interesting to see how political they get. They're in the
middle of the one big, beautiful bill, the big budget
and tax bill, and the issue with that is going
to be that Powell doesn't talk about fiscal policy, and
he will dodge that question as much as possible. Both
(04:33):
sides will try to get him to take a position
that they can then say, well, see he supports us,
and he will do his best not to comment on that,
which leaves monetary policy, and as we know, there's not
much going on in that right now.
Speaker 1 (04:45):
And even lawmakers have to understand. President Trump pushed off
these tariffs to July ninth, for now, could be pushed
off even further. Most of them the data that he needs,
and he always says, maintains every time this is all
data dependent. Everything I say, everything we do. It could
be months down the line, right absolutely.
Speaker 6 (05:05):
The Chairman was asked in his most recent press conference
and he said it could be September before we have
any real indication. We'll get the June data in July,
July data in August. That might give them a better
idea of which way the economy is going, which way
inflation's going, and which way the unemployment rate is going,
(05:27):
which will be their proxy for how the economy is doing.
Speaker 1 (05:30):
It puzzled me. Just on Friday, we heard from Fed
Governor Christopher Waller, who told CNBC that he doesn't expect
tariffs to boost inflation significantly, but he also hinted we
could see an interest rate cut at the July meeting,
which is the end of July twenty ninth and thirtieth, Right,
Does that puzzle you as much?
Speaker 6 (05:48):
It doesn't puzzle me coming from Chris, because he's been
sort of the dove on the board and the one
who is most certain about what he thinks will happen,
which is that we will get a one time rise
in prices because of tariffs, but it won't be continuing,
so it won't be an ongoing inflation problem. He was
asked about July, and I think that's always important to
(06:10):
put that in context, because he didn't volunteer the idea
of July. He was asked, is it possible, and he
said it's possible, but at least as far as he
was concerned. But he added he didn't think the rest
of the committee would go along. So I don't think
that's a realistic possibility because they'll have the June inflation data,
but that's it. They won't have anything beyond that, so
(06:33):
they'll still be flying pretty blind.
Speaker 1 (06:35):
Well, Well, may PCE is out this coming Friday. We
hear from the Chairman of the Federal Reserve on Tuesday
and Wednesday testifying to Congress, and our thanks to Michael McKee,
Bloomberg International Economics and Policy correspondent. We moved next to
corporate earnings with fourth quarter results from Nike, the world's
biggest sneaker in sportswear maker. Those results out after the
closing bell on Thursday. For more on what to expect
(06:58):
Nike's turnaround effort and how the Trump tariffs may already
be impacting the company, We're joined by Punam Goyle, senior
US e commerce and retail analysts at Bloomberg Intelligence. Well, Punham,
thank you for being here. So what are you expecting
to see in Nike's fourth quarter results? And have we
already begun seeing tariffs and the broader economic uncertainty affects
(07:19):
sales and its results?
Speaker 8 (07:22):
Thank you so for Nike, I think we have two
things going on, which is why you won't necessarily see
the impact of tariffs directly in the fiscal four Q
results that they're reporting. So two things are going on. One,
we're expecting a steep decline in sales. Sales are going
to be down in the mid teens across all regions
and down even more in China by twenty percent. So
(07:44):
how do you factor in what's happening with tariffs and
all of this, it's kind of going to get muddled.
But the real impact from tariffs is going to be
seen in their fiscal first quarter guidance for twenty twenty six.
Our tariffs impacting them is what we're looking to see.
We do know that they have instituted price increases across
(08:05):
items that are over one hundred dollars, so we're waiting
to hear from them how that's been received, what impact
they have from tariffs. There will be some impact, undoubtedly,
but we think Nike can weather that with these price increases.
Speaker 1 (08:19):
Now, Nike has had a lot of missteps past few years,
a botched director consumer sales rollout, a lot of management
changes or restructuring that led to hundreds of layoffs, and
boy have we seen a slump in sales and a
tumble in shares. Is its new CEO, Elliott Hill, who
came out of retirement last year, is he the guy
that really turned things around?
Speaker 8 (08:38):
He can definitely do it. In our mind, it's just
a matter of timing right now. You know, we had
expected originally the turnaround to take hold in fiscal twenty
twenty six, the back half of it, but with terriffs
and consumer uncertainty going into the back half of this
calendar year, I think it prolongs the turnaround a little.
That said, is he doing the right things to get
(08:59):
the turnaround going. Absolutely, He's focused on what matters in
retail most, and that is product. He is bringing back
innovation in a more meaningful way, not just a new
wave of colors. He is rationalizing inventory. Inventories were not
down as much as we'd like them to be given
the sales declines that we've seen, but we do expect
(09:20):
them to continue to decline through markdowns, and that will
take time. And as soon as that happens, I think
that's when you can begin to see the turnaround take
shape and.
Speaker 1 (09:31):
Sales start to go up. Now, Nike makes about half
its footwear, nearly a third of its apparel in Vietnam,
a good chunk of it in China. The US and
Vietnam aren't talks on a trade deal, but boy, we
have this looming deadline July ninth for higher tariffs to
kick back in. Do you know where it stands now
and what that could really mean to Nike.
Speaker 8 (09:50):
So if we go back to the April second tariffs,
that is a big headwind for Nike and really everyone
else in the apparel space in retail because they will
not be able to offset that level of tariffs with
cost efficiencies or with price increases.
Speaker 1 (10:05):
Which was forty six percent, right, that's what just high.
Speaker 8 (10:09):
Yeah, exactly, it's just too high. They can't do that.
But if they stay at ten percent, right, if there's
an extension or if there is an agreement to that
ten percent is what we're looking at. I think they
have the checks and balances in place to whether that
with the select price increases that they've already talked about.
Speaker 1 (10:25):
And also Vietnam, I would imagine, in the eyes of
the Trump administration a very favorable alternative to having all
that stuff made in China.
Speaker 8 (10:35):
That's well, they've already done that, yeah, I mean, I mean,
they've done that. If you look at their sourcing exposure,
a lot of what they make is already in Vietnam,
China is in the teams. So do they need China
for the US? You know, I would argue that a
lot of the inventory that they make in China could
be used for regions outside of the US. Nike does
have a global presence, so they don't need to ship
(10:56):
everything they make in China to the US, and Vietnam
and the other countries matter a lot more. If tariffs
do rise, notably in Vietnam, it is going to be
hard for any footwear retailer to offset that headwind because
Vietnam is where the shoes are made largely.
Speaker 1 (11:15):
Now does Nike have an image problem? It's sales have
dropped almost double digits in the last couple of years.
You talked about innovation, and they are always innovating products.
They have this new Airmax phenomena, sneaker low for hybrid,
they're three D printing. I mean, they are always innovating.
But is the brand suffering?
Speaker 8 (11:36):
So Nike is still the leading footwear brand globally. They
definitely have not lost their lead, and they still have
the mind share with consumers. We ran a survey last
fall and Nike was a clear standout, the number one
still brand when you're thinking about shopping for sneakers. But
what's happened in the last five years, especially through the pandemic,
(11:59):
is that Nike pulled out of wholesale in a meaningful way.
It's gone back in now, but when it pulled out,
a left open shelf space for newcomers or emerging brands
like Hoka on others, It's all come back full circle
and we're focused back on product. I think as long
as the product pipeline stays fresh and true and real,
(12:20):
not just another color wave, they can reignite.
Speaker 1 (12:24):
Demanded Nike fourth quarter earnings out after the closing bell
this coming Thursday are thanks to Punham Goyle, Senior US
e Commerce and retail analyst at Bloomberg Intelligence, and coming
up on Bloomberg day Break Weekend, we'll look at whether
financial services can deliver for the UK and what the
City of London needs to thrive. I'm Tom Busby and
this is Bloomberg. This is Bloomberg day Break Weekend, our
(12:53):
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 I'm a look ahead to Bloomberg's
China Economic Survey. But first in the coming days, the
great and good of the City of London descending on
Westminster for the City UK's annual conference and their aim
to chart a path for business leaders and politicians to
(13:14):
work together in the pursuit of economic growth. But can
the UK keep up and present itself as an attractive
investment destination against an uncertain backdrop. For more, let's go
to London and bring in Bloomberg Daybreak europanker Caroline hepgar.
Speaker 2 (13:27):
Tom twenty twenty five kicked off in less than ideal
style for the London market, with research suggesting the Stock
Exchange had lost twenty five percent of its companies over
the last decade. That was in January of this year.
Since then, several important businesses have shifted their focus away
from the city, including the money transfer firm Wise, which
(13:50):
announced this month plans to shift its main listing to
the US, citing extra liquidity and visibility. The latest blow
to London comes after months of US markets steadily picking
off London's prize listings. One by one. The former fifty
one hundred constituent, the construction firm CRH Ferguson Enterprises, and
(14:13):
also Flutter Entertainment have all relocated. The exodus is particularly
acute in Britain's tech sector. Artificial intelligence pioneer deep Mind
was acquired by Google in twenty fourteen. The chip designer
arm holding Solder SoftBank in twenty sixteen, which really set
the tone. Recently, UK regulators and lawmakers have tried to
(14:35):
make it easier for FinTechs to raise the money that
they need here, looking at dual class share structures, also
private share sales, and the Labour government's been pushing pension
funds to allocate more capital to private markets and to
the domestic economy. London's prospects, though, are something that my
(14:55):
colleague Francine Lackwitt has been discussing with Blackstone CEO Steve
schwat Wortzman. He sees the city and the country's potential.
Speaker 7 (15:04):
You know, we started here with no one. We now
have six hundred and fifty people here in our office
in London. We're building a very significant new headquarters in
Berkley Square that's probably going to be the nicest office
building that's been built really since the wonderful Bloomberg headquarters
here in London. So that's worked out. We're in a
(15:28):
lot of different business lines and we're very positive view
of the future here in Europe. We think we're going
to be able to invest five hundred billion dollars over
the next decade in Europe. We see it as a
major opportunity for us. They're starting to change their approach here,
(15:54):
which we think could result in higher growth rates. This
has worked out amazingly well for us.
Speaker 2 (16:03):
That was Bloomberg's Francin and Laquaz speaking to Blackstone CEO
Steve Schwartzman. So cal London make good on its prospects.
It's something I've been discussing with Bloomberg's European asset management
reporter Leo Kenshpper and our UK economics editor Julian Harris. Leo,
thank you so much for being with me. So firstly
(16:24):
to you, could you talk us through the landscape. Then
companies have obviously been leaving London. Are we at a
tipping point? Why are they going? There's been this issue
rumbling on for a long time. This year seems quite acute.
Speaker 9 (16:38):
Yes, thank you, Caroline. So if we're just focusing on
the stock market, it's really fair to say that London's
equity market is really seeing a deep and structural malaise
and it has been going on for years actually, but
just over the past few weeks. If you remember, Wis,
the money transfer firm, the one big London listed fintech
(17:02):
star said it will move its primary listing to the
US and just the week before we had reports that Chian,
the you know, the Chinese fast fashion company, which you know,
was expected to have a valuation in the tens of billions,
is now looking to list in Hong Kong instead of London.
So that's two really prominent reason examples here, and there's
(17:24):
a couple of underlying problems to that. First of all,
it's weak demand by UK investors. You know, the one
example that fund managers always bring up with me and
also asset management executives is, you know, in the US,
everyone talks about the stocks they hold in their for
one case savings plans, and in the UK that's just
not the case. And it's that's also true for Europe
(17:46):
by the way. And then the other issue is that
pension funds also don't really invest in UK stocks because
they prefer fixed income and government bonds, and this is
driven by accounting regulation. There was in used in the
two thousands and essentially forced pension funds to move out
of equities. And the trend was then also reinforced by
(18:08):
you know, millions of workers retiring, millions of workers who
would get defined benefit pensions, and as a result, pension
funds moved into even more government bonds to make sure
they have these guaranteed cash flows to match these liabilities
to pensioners. And yeah, so these are some of the
structural problems facing the UK stock market. And this has
(18:31):
led to the perception that listed companies in the UK
faced low valuations, low liquidity and also a high takeover risk.
And this has led to this visual cycle that you know,
fewer companies want to list, valuations fall further, and investor
interest has drilled up pretty much.
Speaker 8 (18:49):
Well.
Speaker 2 (18:49):
The Labor government is trying to take steps, and so
did the previous Conservative government. Also they've taken a number
of steps to try to turn this kind of tanker
around owned and return the London Stock Exchange and London
as a kind of financial center back to the top,
I suppose. And also I'll just give you a quote
(19:10):
from David Schrimmer, who is the chief executive of the
London Stock Exchange Group, who says that if you take
a look at the companies that have gone from the
UK to list in New York over the last ten years,
it's about twenty companies. Of those four are trading up,
nine are delisted, and the rest are trading down. So
he gave that quote to a newspaper in the UK.
I mean it's not really necessarily a silver bullet for
(19:31):
businesses to list in the US, is it not necessarily?
Speaker 9 (19:34):
There's certainly data that show that basically your valuation doesn't
necessarily go up when you list there. I think it's
still fair to say that the US office with London
increasingly doesn't you know, it's high liquidity, it's growth oriented investors,
investors who want to take more risk, better analyst coverage
(19:55):
and better valuations as a result on the whole, and
of course are around executive pay, which is definitely higher
in the US and of course helps you attract more
and better leaders.
Speaker 2 (20:07):
Yes, talent is also a big issue, isn't it, Julian.
Let me bring you into this conversation. It is a
huge issue, isn't it. The government wants economic growth. They
have targeted the financial services sector as one area that
could deliver that, although they've talked about a lot of
sectors doing that. It is hugely important for Britain to
get business investment, to get companies listing.
Speaker 9 (20:30):
What do you think it really is?
Speaker 6 (20:32):
Yeah?
Speaker 10 (20:32):
I think Reeves has done well to target the city. Obviously,
she has a former city lobbyist on her team, which
is not always the greatest political look, but it doesn't
necessarily make it a bad thing. Like we have a
bit of a political habit in this country of really
liking our industries that are smaller or less productive and
(20:56):
politically giving a lot of weight to areas fishing, for example,
whereas you know the areas that do well like finance
in the city. Of course, life sciences, like the arts,
like high level tech, these are often not sometimes can
(21:16):
be politically neglected, or can even be politically very unpopular.
So I think in a way Reeves has do. I
think she's caught the moment well. I think the financial
crisis is far enough in the past that she has
been able to give this sort of positive focus on
the city, and indeed it's one of the only areas
where she's been well received in the last year. When
(21:39):
she went to Mansion House, it went down fairly well,
whereas her other meetings with businesses have not gone well
given the twenty six billion pound tax hike that she
imposed on them, and that seems to have had its
own economic effect. Obviously, the economy started the year very
well and in April it went backwards and the effect
(22:03):
and that tax hit seems to have had a big
effect on jobs. Of course what's happening with Trump and
as tariffs has not helped either. But all of that
just shows how important it is that labor does target
the areas that could drive growth and could improve productivity,
and that the city is certainly one of those, at
(22:25):
least in theory.
Speaker 2 (22:27):
And that's why the City UK event in some sense
is very important because it is financial services across the
UK gathered together in Westminster, so the heart of politics,
which I think is quite interesting Leo, in terms of
how the UK is faring. Then as an investment destination,
always a place to, you know, list a business versus
(22:47):
neighbors in Europe. Does the freedom from the EU come
with any perks?
Speaker 9 (22:53):
Yeah, that's a very good question. I mean, by and large,
the soorbering answer is that executives in the cities will
see it as a net negative.
Speaker 8 (23:01):
You know.
Speaker 9 (23:02):
Just over the last few weeks we had the government
laying out new immigration rules you know that will make
make it take ten years for immigrants to to receive
preferential status independent leave to remain and it used to
be five years previously. And of course, this uncertainty really
piles on onto high, highly skilled workers and makes it
harder for finance firms to attract talent. One example I
(23:26):
would like to point out here is the insurance industry.
You know, it's a it's a quarter of the city's
economic output, but of course arguably less glamorous then say
investment banking, and it makes it even harder for them
to attract talent in the city. That's what they what
they keep telling me. And if you're looking for perks,
(23:47):
I think or Brexit dividends as the government would call it,
I would point out Keystama's early trade deal with the
with the Trump administration. I mean it was the first
deal sort of sealed by Trump following April second, and
I think that can be fairly it can be you
can be touted as a as a whim in terms
(24:09):
of how.
Speaker 2 (24:10):
The government is trying to fix what is still a
slow moving UK economy. Julian, what are the factors here
at play? What's the thinking at this point?
Speaker 10 (24:20):
Yeah, that deal is I mean, it's it's positive that
exist that it exists. I think this is what Andrew
Bailey says, and he's right, But there is always a
danger in overstating it. It is still an extremely thin deal.
There's still a huge amount of uncertainty over steel, which
was supposed to be the main point in doing the
(24:41):
deal in the first place. So I mean there's a
vast amount in general for the government to fix around
the economy, of which I think they're aware. Our productivity
is still absolutely abysmal.
Speaker 2 (24:54):
Leo ken Scherper and Julian Harris, thank you so much
for both being with me. I'll be reporting low from
the City UK conference in London in the next few days.
In the meantime, though, I'm callin Hepkin. You can catch
us every weekday morning for Bloomberg Daybreak you at beginning
at six am in London. That's one am on Wall Street.
Speaker 1 (25:12):
Tom, thank you, Caroline, and coming up on Bloomberg day
Break weekend to look at how things are looking in
the world's second largest economy. I'm Tom Busby, and this
is Bloomberg. This is Bloomberg day Break Weekend, our global
(25:35):
look ahead at the top stories for investors in the
coming week. I'm Tom Busby in New York. This week
we get a fresh perspective on how things are looking
in the world's second largest economy, China. For more, let's
get to the host of the Daybreak Asia podcast, Doug
Krisner Tom.
Speaker 3 (25:51):
In the coming days, Bloomberg will be releasing it's China
Economic Survey now. To be fair, a great deal is
already understood. The Chinese economy is struck. Yes, there have
been some upside surprises in recent official data. I'm thinking
here of the latest retail sales reading. But the property
market is still a massive problem and the story on
(26:12):
defallation has been persistently worrisome. Joining me now for a
look at what's happening on the mainland is Bloomberg's Eric Zeu.
Eric is an economist covering China and Hong Kong for
Bloomberg Economics. It's been a while. Thank you for making
time to chat with me. What's so curious to me
is that the government has been painfully aware of all
of the issues plaguing the economy. Steps have been taken
(26:35):
to provide support, but still something is holding a recovery back.
Do you have a sense of what that may be, Eric, Yeah.
Speaker 5 (26:42):
Thank you for having me so.
Speaker 4 (26:44):
Yeah.
Speaker 5 (26:44):
I think there's a lung stand the issue, and many
people are still struggling, you know, trying to understand why,
you know, despise some stimulus effort from the government. But
they called me still looks struggling. I think fundamentally, I
think even from observation on the ground, I think many
you know, business, many households, it's still the crucial thing
(27:07):
is missing that they they don't have a strong sentiment
or you know, consumer confidence or business confidence, whatever you call.
I think it's still quite you know, it's not there yet.
I mean they think now the government is definitely you know,
pivoting to more growth support. But from what government is
doing or saying, it doesn't sound like that, you know,
(27:30):
they're making whatever it takes. Okay, the students is coming,
but it's it's not really that massively changes things. I
mean it's it's it's more like they're putting a flaw
on the recurrier. We want like five percent growth. We
just don't want to slide. But it's it's we're not
going to you know, make whatever it takes to lift
(27:52):
growth to like a five point five or six percent.
So it's not exactly like what the market or you know,
men people are expecting. I think they are they are
more like a managing some you know, crisis crisis managing mode, right,
So they don't want to have a crisis. They want
to prevent a sharp slow down. But it's okay. You know,
(28:15):
with five percent growth, economy is still holding up as
long it's not a crisis.
Speaker 3 (28:20):
Do you have a sense of the degree to which
the trade war with the US has really been impacting centiment.
You talked about the weak sentiment among consumers, but I'm
going to imagine that businesses have been adversely impacted by
the trade war.
Speaker 5 (28:34):
I think it's probably not as broad as many you know,
offshore was sinc. I think definitely it's affecting some business,
but I think it's more about export or rinked business,
especially those more exposed to US markets. But I think
for many business which may not directly be exposed to
trade war, I think they still feel the same issue
(28:57):
even without trade war. You know, they comet can be
still struggling, you know, the housing sector, you know, the
we consume a sentiment. I don't think the trade war has,
you know, have a big influence on that. I think
it's more about the domestic structure issues and they are
not expecting the government to quickly changing that. So I
(29:18):
don't think even a terrible truth or you know, some
trade framework with the US would help a lot of that.
Of course, it's going to ease some pressure on the
external front, right, the exports might be you know, slump
less than without trade war, but I think still the
domestic issues dominate for many businesses who are not directly
(29:41):
exposed to trade war.
Speaker 3 (29:42):
You mentioned the property market a moment ago, and I
remember the recent data on home prices, both new and
used home prices. It seems like the price declinents have
been accelerating a little bit, and I would imagine that
that's very concerning to Beijing.
Speaker 5 (29:58):
We don't read too much on the official housing prices
because I think it's sometimes different from what we observe
on the market, but we don't really have very good
data set, you know, to measuring the actual price movement.
But in any case, we think you know, the maze
housing sector data, you know, sales investment prices. It does
(30:19):
seem like suggesting that the stronger support since the last
quarter of last year, it begin to you know, winning
off right, So it's it does raise some concern that
the government needs to do more, you know, to keep
the recovering momentum going. I mean, there's still some side progress.
(30:40):
If you look at the jobs in home sales this year,
it's definitely you know, smaller than last year, right, So
it shows some progress on the policy support, but it's
not strong enough. I mean, given its momentum is showing
some signs of weakening. April and May, I think the
government needs to you know, prop up with even a
(31:01):
quicker delivery of the existing measures or come up with
some new supporting measures to keep the momentum going.
Speaker 3 (31:08):
When you look at the flow of foreign capital, how
is that moving? Is it really trying to leave China
right now or is capital coming into the economy.
Speaker 5 (31:17):
I think ironically actually this year that the young currency.
I think at the beginning of the year, most people
are expecting, you know, a depression of the UN this year,
deal too, you know, the US Chinnel conflicts, probably a
trade war is happening. But actually I think if you
look at the movements so far this year, that the
(31:37):
anti currency is actually appreciating against you. I think it's
more related to some you know, see America, so people
lost some confidence on the US dollar, etcetera. But I
think overall. Now, given the currency is actually stronger than
many expected, I think this actually is helping, you know,
the capital pressure because it's actually to export that we
(32:00):
think recent data show that actually many experts that they're
willing to settle you know, the US dollar because they're worried.
Maybe I'm be well appreciate even further. So I think
to some balance, these actually ease some pressure on the
China side. I think about captol Offlow.
Speaker 3 (32:19):
We've been very aware for some time about the weakness
in the labor market, especially for young people on the mainland,
and I'm wondering how that's beginning to affect them as
they look at the economy, the lack of opportunity, How
is this translating, and how is it kind of moving
through the economy their feelings about the outlook.
Speaker 5 (32:38):
I think that's for me and for many economists, I
think that's actually a quite a big issue because it's
definitely actually affecting you know, the young people's demand for
many things, including housing, you know, including because they have
less desire for even marriage, for even having a baby.
(33:00):
So actually it's affecting lots of demand in the future. Right,
So probably the contraction in the agriate demand will be
more than we had expected, given you know, the lower
desire for young people about the future. So that's probably
posing some a big threat on the long term economic outlook.
They might have some new demand you think, you think
(33:22):
about la bubu, those kind of things. That's because young
people probably shifting you know, the traditional demand to some
new the so called emotion consumption. Right, they care more
about how these things can satisfy that emotion, but they
care less about a new family, you know, new children.
They don't want those. So I think this you have
(33:44):
to rethink about what's the future structure of the Call
me what's the long term prospect because we have definitely
have we have some part of demand will be contracting
very quickly, although there could be some new demand being created,
but I don't think that's that's going to offset the
contraction of the traditional demand part.
Speaker 3 (34:05):
Eric will leave it there. It's always a pleasure. Thank
you so much for your time and insights into the
Chinese economy. He is Eric Ju. He covers China for
Bloomberg Economics, and we move now from economics to geopolitics.
In a recent piece for Bloomberg Opinion, columnist Karishma Vaswani
focused on the Trump administration's review of the Aucas Pact.
(34:25):
This is a security arrangement between the US, the UK
and Australia, and the review is rattling one of Washington's
closest alliances. I had the chance to catch up with
Karrishma earlier this week.
Speaker 11 (34:38):
At the heart of this arrangement was an agreement signed
by President Biden in twenty twenty one that would help
Australia develop a fleet of nuclear powered submarines over a
thirty year period, and it would involve both the US
and the UK. America would provide superior technology, the UK
(34:58):
would help ast build these nuclear submarines. But ostensibly it
was also a way to counter China's growing influence in
the Indo Pacific, and at the time when it was announced,
China was very upset. It saw it as another example
of the American supremacy, the desire to maintain that in
the Indo Pacific, and as an attempt by the United
(35:21):
States to contain China's influence and military and naval power,
which has been, as we've talked about on your program before, growing,
you know, rapidly over the last few years. But now,
given that the White House has come out and said
that they're putting this agreement under review, they're going to
(35:41):
look at whether OCUS is aligned with the President's America
First agenda. I'm quoting from the Defense Department there, And
you know, that's really sort of making a lot of
allies and partners in the Indo Pacific nervous, not least
the Australians themselves, who are really counting on this commitment
(36:03):
from the United States.
Speaker 3 (36:04):
So how do you think this is being viewed in Beijing?
Speaker 8 (36:08):
Oh?
Speaker 11 (36:08):
I think that this makes China very happy because for
the you know, on the one hand, there are now
real concerns over whether ORCUS will go ahead in its
original form. My views that it will. I think that
the United States would, even given the Trump administration's transactional nature.
I do not think that the White House would allow
(36:29):
this security agreement to fall by the wayside.
Speaker 4 (36:32):
It would be.
Speaker 11 (36:33):
Problematic and possibly embarrassing. But I think that there will
be compromises and concessions made on the part of the
Australians who will feel compelled to do some of the
things that the United States may be asking for behind
closed doors. And what that does is play into Beijing's
narrative that America first means other countries alone. And you know,
(36:56):
China has consistently positioned itself as the global, sensible, rational
leader in the Indo Pacific given what appears to be
sort of an erratic, you know behavior, the erratic nature
of how Donald Trump does business on the global stage.
And I think that these kinds of agreements and the
(37:17):
reviews of these agreements just add credits to that narrative.
And even if they're not saying it publicly, because you know,
the Australians have been very quick to sort of defend
the review and dismiss it as just business as usual.
I've spoken to diplomats who've said to me, well, it's
not a great look. And it does mean that countries
(37:38):
like Australia are going to have to think and are
already thinking about what this means in terms of future alliances.
So you're going to start to see you know, Japan, Australia,
South Korea coming together, maybe India as well, to sort
of find a way through working without the superpowers that is.
Speaker 3 (37:57):
Bloomberg Opinion columnist Karishma of Oswan. You can read her
work on the Bloomberg terminal by typing OPI n than
the Green go Key, or online at Bloomberg dot com
slash Opinion. I'm Doug Christner. You can catch us weekdays
for the Daybreak Asia podcast. It's available wherever you get
your podcast. Tom.
Speaker 1 (38:17):
Thank you Doug. And that does it for this edition
of Bloomberg day Break Weekend. Join us again Monday morning
at five am Wall Street Time for the latest on
markets overseas and the news you need to start your day.
I'm Tom Buzzby. Stay with us. Top stories and global
business headlines are coming up right now
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our day
Break anchors all around the world, and straight ahead on
the program A look Ahead, there's some key economic data
in the US, plus testimony to Congress from Federal Reserve
Chair Jerome Powell, and a look at earnings from retail
giant Nike. I'm Tom Busby in New York.
Speaker 2 (00:21):
I'm calling Hecker here in London, where we're asking if
financial services can deliver for the UK and what the
city needs to thrive.
Speaker 3 (00:29):
I'm dek Prisner looking at what it will take for
an economic recovery to take hold in China.
Speaker 4 (00:37):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven to three year, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London,
Sirius XM one twenty one, and around the world on
Bloomberg Radio, dot Com and the Bloomberg Business App.
Speaker 5 (01:01):
Good day to you.
Speaker 1 (01:01):
I'm Tom Busby, and we begin today's program with some
key economic data in the US personal consumer Expenditure Price
Index from May on Friday and also we hear from
FED shaired Jerome Palace, he testifies to Congress about monetary policy.
For more on what to expect and how it could
impact FED policy. Moving forward, we're joined by Michael McKee,
(01:21):
Bloomberg International Economics and Policy correspondent. Well, Michael, let's get
the PCEE out of the way, then we'll talk about Powell.
This is the preferred measure of inflation for the Fed.
So what are you expecting to see for the month
of May.
Speaker 6 (01:33):
Well, all right, kind of a survey shows that people
on Wall Street tend to think that we're going to
see prices go up a little bit to the PCE
Price Index headline to two point three from two point one,
and core two six from two to five, which would
fit with kind of the pattern of what's been expected
that we'll see an increase because of tariffs. But it
(01:54):
isn't clear that that's necessarily going to happen because we
saw the milder CPI and PPI. There was some terraff
related increases in some sectors, but not as broad as
people thought, so it'd be interesting to see what comes
out of that. We also get the income and spending
numbers and income after a big rise in April is
going to be only a small rise two tenths of
(02:16):
a percent from a spending two tents of a percent
same as for April. So consumers hanging in but not
overly enthusiastic.
Speaker 1 (02:24):
And it looks like inflation is in check, at least
for now.
Speaker 6 (02:28):
It's in check. And the Fed is kind of where
it wants to be. We saw that from their summary
of economic projections last week. They don't need to cut
rates right now for any reason or raise rates for
right now for any reason, so they're happy just to
sit there.
Speaker 7 (02:47):
Well.
Speaker 1 (02:47):
Chairman pal though afterwards did say he's still looking at
two rate decreases this year. Right, two cuts, That's what
the dot plot shows.
Speaker 6 (02:56):
But I think if you watch the Fed closely, the
way it a lot of Fed watchers are interpreting this
is they don't have enough information to make a decision.
So based on what the economy is doing right now,
they could do two rate cuts.
Speaker 8 (03:12):
Now.
Speaker 6 (03:12):
By the time you get to the fall, or the
time they might start thinking about rad cuts, you can't
do too or maybe you need more because the economy
has collapsed. I think the basic message from Powell to reporters,
which I'm sure he will repeat to members of Congress,
is that there's not a lot of conviction among the
Fed people about their forecasts. They're thinking this is what
(03:34):
could happen, but not what will happen.
Speaker 1 (03:37):
Wow, Well, let's talk more about Powell. So he addresses
the House on Tuesday, Senate a banking committee or Senate
Banking Committee on Wednesday. What is it going to be
like for him? We've seen this theater by President Trump
again last week.
Speaker 6 (03:52):
You know, Trump has been doing this for a while,
but the last time he testified on Powell testified on
Capitol Hill that hadn't begun. This new rend. I will
insult youse. It'll be interesting to see if Republicans follow
up on that. They will probably give Powell a hard
time for not cutting rates because the president wants them to,
(04:12):
and they do what the President wants. But it'll be
interesting to see how political they get. They're in the
middle of the one big, beautiful bill, the big budget
and tax bill, and the issue with that is going
to be that Powell doesn't talk about fiscal policy, and
he will dodge that question as much as possible. Both
(04:33):
sides will try to get him to take a position
that they can then say, well, see he supports us,
and he will do his best not to comment on that,
which leaves monetary policy, and as we know, there's not
much going on in that right now.
Speaker 1 (04:45):
And even lawmakers have to understand. President Trump pushed off
these tariffs to July ninth, for now, could be pushed
off even further. Most of them the data that he needs,
and he always says, maintains every time this is all
data dependent. Everything I say, everything we do. It could
be months down the line, right absolutely.
Speaker 6 (05:05):
The Chairman was asked in his most recent press conference
and he said it could be September before we have
any real indication. We'll get the June data in July,
July data in August. That might give them a better
idea of which way the economy is going, which way
inflation's going, and which way the unemployment rate is going,
(05:27):
which will be their proxy for how the economy is doing.
Speaker 1 (05:30):
It puzzled me. Just on Friday, we heard from Fed
Governor Christopher Waller, who told CNBC that he doesn't expect
tariffs to boost inflation significantly, but he also hinted we
could see an interest rate cut at the July meeting,
which is the end of July twenty ninth and thirtieth, Right,
Does that puzzle you as much?
Speaker 6 (05:48):
It doesn't puzzle me coming from Chris, because he's been
sort of the dove on the board and the one
who is most certain about what he thinks will happen,
which is that we will get a one time rise
in prices because of tariffs, but it won't be continuing,
so it won't be an ongoing inflation problem. He was
asked about July, and I think that's always important to
(06:10):
put that in context, because he didn't volunteer the idea
of July. He was asked, is it possible, and he
said it's possible, but at least as far as he
was concerned. But he added he didn't think the rest
of the committee would go along. So I don't think
that's a realistic possibility because they'll have the June inflation data,
but that's it. They won't have anything beyond that, so
(06:33):
they'll still be flying pretty blind.
Speaker 1 (06:35):
Well, Well, may PCE is out this coming Friday. We
hear from the Chairman of the Federal Reserve on Tuesday
and Wednesday testifying to Congress, and our thanks to Michael McKee,
Bloomberg International Economics and Policy correspondent. We moved next to
corporate earnings with fourth quarter results from Nike, the world's
biggest sneaker in sportswear maker. Those results out after the
closing bell on Thursday. For more on what to expect
(06:58):
Nike's turnaround effort and how the Trump tariffs may already
be impacting the company, We're joined by Punam Goyle, senior
US e commerce and retail analysts at Bloomberg Intelligence. Well, Punham,
thank you for being here. So what are you expecting
to see in Nike's fourth quarter results? And have we
already begun seeing tariffs and the broader economic uncertainty affects
(07:19):
sales and its results?
Speaker 8 (07:22):
Thank you so for Nike, I think we have two
things going on, which is why you won't necessarily see
the impact of tariffs directly in the fiscal four Q
results that they're reporting. So two things are going on. One,
we're expecting a steep decline in sales. Sales are going
to be down in the mid teens across all regions
and down even more in China by twenty percent. So
(07:44):
how do you factor in what's happening with tariffs and
all of this, it's kind of going to get muddled.
But the real impact from tariffs is going to be
seen in their fiscal first quarter guidance for twenty twenty six.
Our tariffs impacting them is what we're looking to see.
We do know that they have instituted price increases across
(08:05):
items that are over one hundred dollars, so we're waiting
to hear from them how that's been received, what impact
they have from tariffs. There will be some impact, undoubtedly,
but we think Nike can weather that with these price increases.
Speaker 1 (08:19):
Now, Nike has had a lot of missteps past few years,
a botched director consumer sales rollout, a lot of management
changes or restructuring that led to hundreds of layoffs, and
boy have we seen a slump in sales and a
tumble in shares. Is its new CEO, Elliott Hill, who
came out of retirement last year, is he the guy
that really turned things around?
Speaker 8 (08:38):
He can definitely do it. In our mind, it's just
a matter of timing right now. You know, we had
expected originally the turnaround to take hold in fiscal twenty
twenty six, the back half of it, but with terriffs
and consumer uncertainty going into the back half of this
calendar year, I think it prolongs the turnaround a little.
That said, is he doing the right things to get
(08:59):
the turnaround going. Absolutely, He's focused on what matters in
retail most, and that is product. He is bringing back
innovation in a more meaningful way, not just a new
wave of colors. He is rationalizing inventory. Inventories were not
down as much as we'd like them to be given
the sales declines that we've seen, but we do expect
(09:20):
them to continue to decline through markdowns, and that will
take time. And as soon as that happens, I think
that's when you can begin to see the turnaround take
shape and.
Speaker 1 (09:31):
Sales start to go up. Now, Nike makes about half
its footwear, nearly a third of its apparel in Vietnam,
a good chunk of it in China. The US and
Vietnam aren't talks on a trade deal, but boy, we
have this looming deadline July ninth for higher tariffs to
kick back in. Do you know where it stands now
and what that could really mean to Nike.
Speaker 8 (09:50):
So if we go back to the April second tariffs,
that is a big headwind for Nike and really everyone
else in the apparel space in retail because they will
not be able to offset that level of tariffs with
cost efficiencies or with price increases.
Speaker 1 (10:05):
Which was forty six percent, right, that's what just high.
Speaker 8 (10:09):
Yeah, exactly, it's just too high. They can't do that.
But if they stay at ten percent, right, if there's
an extension or if there is an agreement to that
ten percent is what we're looking at. I think they
have the checks and balances in place to whether that
with the select price increases that they've already talked about.
Speaker 1 (10:25):
And also Vietnam, I would imagine, in the eyes of
the Trump administration a very favorable alternative to having all
that stuff made in China.
Speaker 8 (10:35):
That's well, they've already done that, yeah, I mean, I mean,
they've done that. If you look at their sourcing exposure,
a lot of what they make is already in Vietnam,
China is in the teams. So do they need China
for the US? You know, I would argue that a
lot of the inventory that they make in China could
be used for regions outside of the US. Nike does
have a global presence, so they don't need to ship
(10:56):
everything they make in China to the US, and Vietnam
and the other countries matter a lot more. If tariffs
do rise, notably in Vietnam, it is going to be
hard for any footwear retailer to offset that headwind because
Vietnam is where the shoes are made largely.
Speaker 1 (11:15):
Now does Nike have an image problem? It's sales have
dropped almost double digits in the last couple of years.
You talked about innovation, and they are always innovating products.
They have this new Airmax phenomena, sneaker low for hybrid,
they're three D printing. I mean, they are always innovating.
But is the brand suffering?
Speaker 8 (11:36):
So Nike is still the leading footwear brand globally. They
definitely have not lost their lead, and they still have
the mind share with consumers. We ran a survey last
fall and Nike was a clear standout, the number one
still brand when you're thinking about shopping for sneakers. But
what's happened in the last five years, especially through the pandemic,
(11:59):
is that Nike pulled out of wholesale in a meaningful way.
It's gone back in now, but when it pulled out,
a left open shelf space for newcomers or emerging brands
like Hoka on others, It's all come back full circle
and we're focused back on product. I think as long
as the product pipeline stays fresh and true and real,
(12:20):
not just another color wave, they can reignite.
Speaker 1 (12:24):
Demanded Nike fourth quarter earnings out after the closing bell
this coming Thursday are thanks to Punham Goyle, Senior US
e Commerce and retail analyst at Bloomberg Intelligence, and coming
up on Bloomberg day Break Weekend, we'll look at whether
financial services can deliver for the UK and what the
City of London needs to thrive. I'm Tom Busby and
this is Bloomberg. This is Bloomberg day Break Weekend, our
(12:53):
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 I'm a look ahead to Bloomberg's
China Economic Survey. But first in the coming days, the
great and good of the City of London descending on
Westminster for the City UK's annual conference and their aim
to chart a path for business leaders and politicians to
(13:14):
work together in the pursuit of economic growth. But can
the UK keep up and present itself as an attractive
investment destination against an uncertain backdrop. For more, let's go
to London and bring in Bloomberg Daybreak europanker Caroline hepgar.
Speaker 2 (13:27):
Tom twenty twenty five kicked off in less than ideal
style for the London market, with research suggesting the Stock
Exchange had lost twenty five percent of its companies over
the last decade. That was in January of this year.
Since then, several important businesses have shifted their focus away
from the city, including the money transfer firm Wise, which
(13:50):
announced this month plans to shift its main listing to
the US, citing extra liquidity and visibility. The latest blow
to London comes after months of US markets steadily picking
off London's prize listings. One by one. The former fifty
one hundred constituent, the construction firm CRH Ferguson Enterprises, and
(14:13):
also Flutter Entertainment have all relocated. The exodus is particularly
acute in Britain's tech sector. Artificial intelligence pioneer deep Mind
was acquired by Google in twenty fourteen. The chip designer
arm holding Solder SoftBank in twenty sixteen, which really set
the tone. Recently, UK regulators and lawmakers have tried to
(14:35):
make it easier for FinTechs to raise the money that
they need here, looking at dual class share structures, also
private share sales, and the Labour government's been pushing pension
funds to allocate more capital to private markets and to
the domestic economy. London's prospects, though, are something that my
(14:55):
colleague Francine Lackwitt has been discussing with Blackstone CEO Steve
schwat Wortzman. He sees the city and the country's potential.
Speaker 7 (15:04):
You know, we started here with no one. We now
have six hundred and fifty people here in our office
in London. We're building a very significant new headquarters in
Berkley Square that's probably going to be the nicest office
building that's been built really since the wonderful Bloomberg headquarters
here in London. So that's worked out. We're in a
(15:28):
lot of different business lines and we're very positive view
of the future here in Europe. We think we're going
to be able to invest five hundred billion dollars over
the next decade in Europe. We see it as a
major opportunity for us. They're starting to change their approach here,
(15:54):
which we think could result in higher growth rates. This
has worked out amazingly well for us.
Speaker 2 (16:03):
That was Bloomberg's Francin and Laquaz speaking to Blackstone CEO
Steve Schwartzman. So cal London make good on its prospects.
It's something I've been discussing with Bloomberg's European asset management
reporter Leo Kenshpper and our UK economics editor Julian Harris. Leo,
thank you so much for being with me. So firstly
(16:24):
to you, could you talk us through the landscape. Then
companies have obviously been leaving London. Are we at a
tipping point? Why are they going? There's been this issue
rumbling on for a long time. This year seems quite acute.
Speaker 9 (16:38):
Yes, thank you, Caroline. So if we're just focusing on
the stock market, it's really fair to say that London's
equity market is really seeing a deep and structural malaise
and it has been going on for years actually, but
just over the past few weeks. If you remember, Wis,
the money transfer firm, the one big London listed fintech
(17:02):
star said it will move its primary listing to the
US and just the week before we had reports that Chian,
the you know, the Chinese fast fashion company, which you know,
was expected to have a valuation in the tens of billions,
is now looking to list in Hong Kong instead of London.
So that's two really prominent reason examples here, and there's
(17:24):
a couple of underlying problems to that. First of all,
it's weak demand by UK investors. You know, the one
example that fund managers always bring up with me and
also asset management executives is, you know, in the US,
everyone talks about the stocks they hold in their for
one case savings plans, and in the UK that's just
not the case. And it's that's also true for Europe
(17:46):
by the way. And then the other issue is that
pension funds also don't really invest in UK stocks because
they prefer fixed income and government bonds, and this is
driven by accounting regulation. There was in used in the
two thousands and essentially forced pension funds to move out
of equities. And the trend was then also reinforced by
(18:08):
you know, millions of workers retiring, millions of workers who
would get defined benefit pensions, and as a result, pension
funds moved into even more government bonds to make sure
they have these guaranteed cash flows to match these liabilities
to pensioners. And yeah, so these are some of the
structural problems facing the UK stock market. And this has
(18:31):
led to the perception that listed companies in the UK
faced low valuations, low liquidity and also a high takeover risk.
And this has led to this visual cycle that you know,
fewer companies want to list, valuations fall further, and investor
interest has drilled up pretty much.
Speaker 8 (18:49):
Well.
Speaker 2 (18:49):
The Labor government is trying to take steps, and so
did the previous Conservative government. Also they've taken a number
of steps to try to turn this kind of tanker
around owned and return the London Stock Exchange and London
as a kind of financial center back to the top,
I suppose. And also I'll just give you a quote
(19:10):
from David Schrimmer, who is the chief executive of the
London Stock Exchange Group, who says that if you take
a look at the companies that have gone from the
UK to list in New York over the last ten years,
it's about twenty companies. Of those four are trading up,
nine are delisted, and the rest are trading down. So
he gave that quote to a newspaper in the UK.
I mean it's not really necessarily a silver bullet for
(19:31):
businesses to list in the US, is it not necessarily?
Speaker 9 (19:34):
There's certainly data that show that basically your valuation doesn't
necessarily go up when you list there. I think it's
still fair to say that the US office with London
increasingly doesn't you know, it's high liquidity, it's growth oriented investors,
investors who want to take more risk, better analyst coverage
(19:55):
and better valuations as a result on the whole, and
of course are around executive pay, which is definitely higher
in the US and of course helps you attract more
and better leaders.
Speaker 2 (20:07):
Yes, talent is also a big issue, isn't it, Julian.
Let me bring you into this conversation. It is a
huge issue, isn't it. The government wants economic growth. They
have targeted the financial services sector as one area that
could deliver that, although they've talked about a lot of
sectors doing that. It is hugely important for Britain to
get business investment, to get companies listing.
Speaker 9 (20:30):
What do you think it really is?
Speaker 6 (20:32):
Yeah?
Speaker 10 (20:32):
I think Reeves has done well to target the city. Obviously,
she has a former city lobbyist on her team, which
is not always the greatest political look, but it doesn't
necessarily make it a bad thing. Like we have a
bit of a political habit in this country of really
liking our industries that are smaller or less productive and
(20:56):
politically giving a lot of weight to areas fishing, for example,
whereas you know the areas that do well like finance
in the city. Of course, life sciences, like the arts,
like high level tech, these are often not sometimes can
(21:16):
be politically neglected, or can even be politically very unpopular.
So I think in a way Reeves has do. I
think she's caught the moment well. I think the financial
crisis is far enough in the past that she has
been able to give this sort of positive focus on
the city, and indeed it's one of the only areas
where she's been well received in the last year. When
(21:39):
she went to Mansion House, it went down fairly well,
whereas her other meetings with businesses have not gone well
given the twenty six billion pound tax hike that she
imposed on them, and that seems to have had its
own economic effect. Obviously, the economy started the year very
well and in April it went backwards and the effect
(22:03):
and that tax hit seems to have had a big
effect on jobs. Of course what's happening with Trump and
as tariffs has not helped either. But all of that
just shows how important it is that labor does target
the areas that could drive growth and could improve productivity,
and that the city is certainly one of those, at
(22:25):
least in theory.
Speaker 2 (22:27):
And that's why the City UK event in some sense
is very important because it is financial services across the
UK gathered together in Westminster, so the heart of politics,
which I think is quite interesting Leo, in terms of
how the UK is faring. Then as an investment destination,
always a place to, you know, list a business versus
(22:47):
neighbors in Europe. Does the freedom from the EU come
with any perks?
Speaker 9 (22:53):
Yeah, that's a very good question. I mean, by and large,
the soorbering answer is that executives in the cities will
see it as a net negative.
Speaker 8 (23:01):
You know.
Speaker 9 (23:02):
Just over the last few weeks we had the government
laying out new immigration rules you know that will make
make it take ten years for immigrants to to receive
preferential status independent leave to remain and it used to
be five years previously. And of course, this uncertainty really
piles on onto high, highly skilled workers and makes it
harder for finance firms to attract talent. One example I
(23:26):
would like to point out here is the insurance industry.
You know, it's a it's a quarter of the city's
economic output, but of course arguably less glamorous then say
investment banking, and it makes it even harder for them
to attract talent in the city. That's what they what
they keep telling me. And if you're looking for perks,
(23:47):
I think or Brexit dividends as the government would call it,
I would point out Keystama's early trade deal with the
with the Trump administration. I mean it was the first
deal sort of sealed by Trump following April second, and
I think that can be fairly it can be you
can be touted as a as a whim in terms
(24:09):
of how.
Speaker 2 (24:10):
The government is trying to fix what is still a
slow moving UK economy. Julian, what are the factors here
at play? What's the thinking at this point?
Speaker 10 (24:20):
Yeah, that deal is I mean, it's it's positive that
exist that it exists. I think this is what Andrew
Bailey says, and he's right, But there is always a
danger in overstating it. It is still an extremely thin deal.
There's still a huge amount of uncertainty over steel, which
was supposed to be the main point in doing the
(24:41):
deal in the first place. So I mean there's a
vast amount in general for the government to fix around
the economy, of which I think they're aware. Our productivity
is still absolutely abysmal.
Speaker 2 (24:54):
Leo ken Scherper and Julian Harris, thank you so much
for both being with me. I'll be reporting low from
the City UK conference in London in the next few days.
In the meantime, though, I'm callin Hepkin. You can catch
us every weekday morning for Bloomberg Daybreak you at beginning
at six am in London. That's one am on Wall Street.
Speaker 1 (25:12):
Tom, thank you, Caroline, and coming up on Bloomberg day
Break weekend to look at how things are looking in
the world's second largest economy. I'm Tom Busby, and this
is Bloomberg. This is Bloomberg day Break Weekend, our global
(25:35):
look ahead at the top stories for investors in the
coming week. I'm Tom Busby in New York. This week
we get a fresh perspective on how things are looking
in the world's second largest economy, China. For more, let's
get to the host of the Daybreak Asia podcast, Doug
Krisner Tom.
Speaker 3 (25:51):
In the coming days, Bloomberg will be releasing it's China
Economic Survey now. To be fair, a great deal is
already understood. The Chinese economy is struck. Yes, there have
been some upside surprises in recent official data. I'm thinking
here of the latest retail sales reading. But the property
market is still a massive problem and the story on
(26:12):
defallation has been persistently worrisome. Joining me now for a
look at what's happening on the mainland is Bloomberg's Eric Zeu.
Eric is an economist covering China and Hong Kong for
Bloomberg Economics. It's been a while. Thank you for making
time to chat with me. What's so curious to me
is that the government has been painfully aware of all
of the issues plaguing the economy. Steps have been taken
(26:35):
to provide support, but still something is holding a recovery back.
Do you have a sense of what that may be, Eric, Yeah.
Speaker 5 (26:42):
Thank you for having me so.
Speaker 4 (26:44):
Yeah.
Speaker 5 (26:44):
I think there's a lung stand the issue, and many
people are still struggling, you know, trying to understand why,
you know, despise some stimulus effort from the government. But
they called me still looks struggling. I think fundamentally, I
think even from observation on the ground, I think many
you know, business, many households, it's still the crucial thing
(27:07):
is missing that they they don't have a strong sentiment
or you know, consumer confidence or business confidence, whatever you call.
I think it's still quite you know, it's not there yet.
I mean they think now the government is definitely you know,
pivoting to more growth support. But from what government is
doing or saying, it doesn't sound like that, you know,
(27:30):
they're making whatever it takes. Okay, the students is coming,
but it's it's not really that massively changes things. I
mean it's it's it's more like they're putting a flaw
on the recurrier. We want like five percent growth. We
just don't want to slide. But it's it's we're not
going to you know, make whatever it takes to lift
(27:52):
growth to like a five point five or six percent.
So it's not exactly like what the market or you know,
men people are expecting. I think they are they are
more like a managing some you know, crisis crisis managing mode, right,
So they don't want to have a crisis. They want
to prevent a sharp slow down. But it's okay. You know,
(28:15):
with five percent growth, economy is still holding up as
long it's not a crisis.
Speaker 3 (28:20):
Do you have a sense of the degree to which
the trade war with the US has really been impacting centiment.
You talked about the weak sentiment among consumers, but I'm
going to imagine that businesses have been adversely impacted by
the trade war.
Speaker 5 (28:34):
I think it's probably not as broad as many you know,
offshore was sinc. I think definitely it's affecting some business,
but I think it's more about export or rinked business,
especially those more exposed to US markets. But I think
for many business which may not directly be exposed to
trade war, I think they still feel the same issue
(28:57):
even without trade war. You know, they comet can be
still struggling, you know, the housing sector, you know, the
we consume a sentiment. I don't think the trade war has,
you know, have a big influence on that. I think
it's more about the domestic structure issues and they are
not expecting the government to quickly changing that. So I
(29:18):
don't think even a terrible truth or you know, some
trade framework with the US would help a lot of that.
Of course, it's going to ease some pressure on the
external front, right, the exports might be you know, slump
less than without trade war, but I think still the
domestic issues dominate for many businesses who are not directly
(29:41):
exposed to trade war.
Speaker 3 (29:42):
You mentioned the property market a moment ago, and I
remember the recent data on home prices, both new and
used home prices. It seems like the price declinents have
been accelerating a little bit, and I would imagine that
that's very concerning to Beijing.
Speaker 5 (29:58):
We don't read too much on the official housing prices
because I think it's sometimes different from what we observe
on the market, but we don't really have very good
data set, you know, to measuring the actual price movement.
But in any case, we think you know, the maze
housing sector data, you know, sales investment prices. It does
(30:19):
seem like suggesting that the stronger support since the last
quarter of last year, it begin to you know, winning
off right, So it's it does raise some concern that
the government needs to do more, you know, to keep
the recovering momentum going. I mean, there's still some side progress.
(30:40):
If you look at the jobs in home sales this year,
it's definitely you know, smaller than last year, right, So
it shows some progress on the policy support, but it's
not strong enough. I mean, given its momentum is showing
some signs of weakening. April and May, I think the
government needs to you know, prop up with even a
(31:01):
quicker delivery of the existing measures or come up with
some new supporting measures to keep the momentum going.
Speaker 3 (31:08):
When you look at the flow of foreign capital, how
is that moving? Is it really trying to leave China
right now or is capital coming into the economy.
Speaker 5 (31:17):
I think ironically actually this year that the young currency.
I think at the beginning of the year, most people
are expecting, you know, a depression of the UN this year,
deal too, you know, the US Chinnel conflicts, probably a
trade war is happening. But actually I think if you
look at the movements so far this year, that the
(31:37):
anti currency is actually appreciating against you. I think it's
more related to some you know, see America, so people
lost some confidence on the US dollar, etcetera. But I
think overall. Now, given the currency is actually stronger than
many expected, I think this actually is helping, you know,
the capital pressure because it's actually to export that we
(32:00):
think recent data show that actually many experts that they're
willing to settle you know, the US dollar because they're worried.
Maybe I'm be well appreciate even further. So I think
to some balance, these actually ease some pressure on the
China side. I think about captol Offlow.
Speaker 3 (32:19):
We've been very aware for some time about the weakness
in the labor market, especially for young people on the mainland,
and I'm wondering how that's beginning to affect them as
they look at the economy, the lack of opportunity, How
is this translating, and how is it kind of moving
through the economy their feelings about the outlook.
Speaker 5 (32:38):
I think that's for me and for many economists, I
think that's actually a quite a big issue because it's
definitely actually affecting you know, the young people's demand for
many things, including housing, you know, including because they have
less desire for even marriage, for even having a baby.
(33:00):
So actually it's affecting lots of demand in the future. Right,
So probably the contraction in the agriate demand will be
more than we had expected, given you know, the lower
desire for young people about the future. So that's probably
posing some a big threat on the long term economic outlook.
They might have some new demand you think, you think
(33:22):
about la bubu, those kind of things. That's because young
people probably shifting you know, the traditional demand to some
new the so called emotion consumption. Right, they care more
about how these things can satisfy that emotion, but they
care less about a new family, you know, new children.
They don't want those. So I think this you have
(33:44):
to rethink about what's the future structure of the Call
me what's the long term prospect because we have definitely
have we have some part of demand will be contracting
very quickly, although there could be some new demand being created,
but I don't think that's that's going to offset the
contraction of the traditional demand part.
Speaker 3 (34:05):
Eric will leave it there. It's always a pleasure. Thank
you so much for your time and insights into the
Chinese economy. He is Eric Ju. He covers China for
Bloomberg Economics, and we move now from economics to geopolitics.
In a recent piece for Bloomberg Opinion, columnist Karishma Vaswani
focused on the Trump administration's review of the Aucas Pact.
(34:25):
This is a security arrangement between the US, the UK
and Australia, and the review is rattling one of Washington's
closest alliances. I had the chance to catch up with
Karrishma earlier this week.
Speaker 11 (34:38):
At the heart of this arrangement was an agreement signed
by President Biden in twenty twenty one that would help
Australia develop a fleet of nuclear powered submarines over a
thirty year period, and it would involve both the US
and the UK. America would provide superior technology, the UK
(34:58):
would help ast build these nuclear submarines. But ostensibly it
was also a way to counter China's growing influence in
the Indo Pacific, and at the time when it was announced,
China was very upset. It saw it as another example
of the American supremacy, the desire to maintain that in
the Indo Pacific, and as an attempt by the United
(35:21):
States to contain China's influence and military and naval power,
which has been, as we've talked about on your program before, growing,
you know, rapidly over the last few years. But now,
given that the White House has come out and said
that they're putting this agreement under review, they're going to
(35:41):
look at whether OCUS is aligned with the President's America
First agenda. I'm quoting from the Defense Department there, And
you know, that's really sort of making a lot of
allies and partners in the Indo Pacific nervous, not least
the Australians themselves, who are really counting on this commitment
(36:03):
from the United States.
Speaker 3 (36:04):
So how do you think this is being viewed in Beijing?
Speaker 8 (36:08):
Oh?
Speaker 11 (36:08):
I think that this makes China very happy because for
the you know, on the one hand, there are now
real concerns over whether ORCUS will go ahead in its
original form. My views that it will. I think that
the United States would, even given the Trump administration's transactional nature.
I do not think that the White House would allow
(36:29):
this security agreement to fall by the wayside.
Speaker 4 (36:32):
It would be.
Speaker 11 (36:33):
Problematic and possibly embarrassing. But I think that there will
be compromises and concessions made on the part of the
Australians who will feel compelled to do some of the
things that the United States may be asking for behind
closed doors. And what that does is play into Beijing's
narrative that America first means other countries alone. And you know,
(36:56):
China has consistently positioned itself as the global, sensible, rational
leader in the Indo Pacific given what appears to be
sort of an erratic, you know behavior, the erratic nature
of how Donald Trump does business on the global stage.
And I think that these kinds of agreements and the
(37:17):
reviews of these agreements just add credits to that narrative.
And even if they're not saying it publicly, because you know,
the Australians have been very quick to sort of defend
the review and dismiss it as just business as usual.
I've spoken to diplomats who've said to me, well, it's
not a great look. And it does mean that countries
(37:38):
like Australia are going to have to think and are
already thinking about what this means in terms of future alliances.
So you're going to start to see you know, Japan, Australia,
South Korea coming together, maybe India as well, to sort
of find a way through working without the superpowers that is.
Speaker 3 (37:57):
Bloomberg Opinion columnist Karishma of Oswan. You can read her
work on the Bloomberg terminal by typing OPI n than
the Green go Key, or online at Bloomberg dot com
slash Opinion. I'm Doug Christner. You can catch us weekdays
for the Daybreak Asia podcast. It's available wherever you get
your podcast. Tom.
Speaker 1 (38:17):
Thank you Doug. And that does it for this edition
of Bloomberg day Break Weekend. Join us again Monday morning
at five am Wall Street Time for the latest on
markets overseas and the news you need to start your day.
I'm Tom Buzzby. Stay with us. Top stories and global
business headlines are coming up right now
Popular Podcasts
Bookmarked by Reese's Book Club
Welcome to Bookmarked by Reese’s Book Club — the podcast where great stories, bold women, and irresistible conversations collide! Hosted by award-winning journalist Danielle Robay, each week new episodes balance thoughtful literary insight with the fervor of buzzy book trends, pop culture and more. Bookmarked brings together celebrities, tastemakers, influencers and authors from Reese's Book Club and beyond to share stories that transcend the page. Pull up a chair. You’re not just listening — you’re part of the conversation.
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com