May 18, 2024 • 38 mins
- In the US – a preview of home sales data and Nvidia earnings.
- In the UK – a look at the upcoming meeting of G7 finance ministers and central bankers in Italy.
- In Asia – a preview of the inauguration of Taiwan’s president.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Daybreak 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, a look at the struggling
US housing market. I'm Tom Busby in New York.
Speaker 2 (00:22):
I'm Stephen carlon London, where we're looking ahead to how
issues around trade and the war in Ukraine will feature
at the upcoming meeting of G seven finance ministers and
central bankers in Italy.
Speaker 3 (00:33):
I'm Brian Curtis in Hong Kong. We look ahead to
the inauguration of Taiwan President elect Lyiching Da and what
it means for Taiwan, US and China relations.
Speaker 4 (00:43):
That's all straight ahead on Bloomberg day Break Weekend on
Bloomberg Ey Look the Free Own New York, Bloomberg ninety
nine to one, Washington, d C, Bloomberg one O six one, Boston,
Bloomberg nine sixty, San Francisco, DAB, Digital Radio, London, Sirius
XM one nineteen and around the world on Bloomberg Radio
dot com and via the Bloomberg Business App.
Speaker 5 (01:08):
Good day to you.
Speaker 1 (01:09):
I'm Tom Busby, and we begin today's program with home
sales for the month of April, the heart of the
spring home buying season. We get existing home sales on Wednesday,
new home sales on Thursday. What will these reports tell
us about the health of the US housing market, about
housing affordability and the overall economy? For more, we're joined
by Drew Redding, Bloomberg Intelligence US home Building Analysts. Drew,
(01:33):
thanks for being here.
Speaker 6 (01:34):
Travl me.
Speaker 1 (01:35):
All right, so what do you expect to see this week?
Speaker 6 (01:38):
Well, I think some context is important here. We've been
describing the housing market as a tail to markets. Existing
home sales finally broke back about four million annalyzed run
rate two months ago, and we think we'll probably remain
above those levels. But what you have to keep in
mind is the data that we're seeing now still reflects
(01:58):
a period where rates were in that high six percent range.
Subsequently rates rose to over you know, seven and a
half percent, So we think that date is going to
trickle in into the next couple of months. We expect
some volatility on the existing home front side, you know,
over the next couple of months and through the summer.
But big picture, you know, it's It's difficult to get
(02:19):
too excited about a significant rebound in existing home sales
when you have mortgage rates that are still hovering around
seven percent. We just actually fell below that for the
first time since April. We're at about six point nine
right now, so you know that will add a little
momentum to the market. But big picture, we're not expecting
any type of significant, you know, rebound maybe until we
get to twenty twenty five and even into twenty twenty six.
(02:42):
Now you can trust that what we're seeing in the
new home market. Demand in the new home sign has
been a lot stronger, and that's because builders have been
successful in pulling the levers in terms of financing incentives,
closing costs, assistance, and things like that. So you know,
they've been able to make the monthly payment a little
more palatable than what you see on the resale side.
Speaker 1 (03:01):
Well, that's the problem, isn't it. Home affordability. You've got
rates near seven percent, You've got record high prices for
new and used homes. Plus you know there's just a
lack of homes on the market. I mean, how are
people affording this?
Speaker 6 (03:14):
It's one hundred percent all about afford affordability is, you know,
hovering near the worst levels on record. We were looking
at some data from redfind It actually shows the medium
monthly payment is about twenty nine hundred dollars, which is
fourteen percent above last month, and that's more than double
where we were prior to the pandemic. You've had prices
which increased more than fifty percent since the beginning of
(03:37):
twenty twenty, and you know, depending on the index that
you look at, we're either pretty close to those levels now,
if not higher. And there's been certainly been some momentum
of late with pricing, and part of that has to
do with what you mentioned. Inventory in the resale market,
we're still at about three months of supply, which is
historically low, and that's putting a floor on the prices.
(03:58):
There's there's demand out there and there's not a whole
lot of inventory that's pushing prices up.
Speaker 3 (04:02):
Now.
Speaker 6 (04:02):
We have seen inventory in some markets start to rise,
which is something we where to keep our eye on.
You look at markets in Florida, a couple of markets
in Texas like Austin, so that could have implications for
prices should inventories continue to rise. But but you're right
at this point, it's just difficult for the consumer to
afford a house, and that's really what's held the market back.
Speaker 1 (04:23):
Now, this has also impacted the troubles in housing the
broader economy not always bad or not all bad, but
like home builders, home renovation still going pretty strong, but
people aren't buying big ticket appliances. Home Depot confirming that
high margin items grills, power washers, refrigerators. You know, it's
(04:43):
really impacting a lot of other businesses.
Speaker 6 (04:46):
It's certainly been a challenging backdrop for the consumer. You
have to remember, you know, they're battling the cumulative impact
of inflation. So you know, even when you see inflation
coming down to three percent, it's still inflation and it's
been going on for years. So it's really the cumulative
impact that we're seeing. You're seeing credit card balances rise,
and you know, when you talk about some of the
(05:06):
names that we cover, like A Home Depot and A Lows,
they're really seeing it on the discretionary side and on
the big ticket products in particular. You know, they've got
a little bit of a unique situation in that, you know,
some of the products they sell are what they call
one time purchases. So if you think about, you know,
the early days of the pandemic, people loaded up on
(05:26):
you know, grill's patio furniture, lawn mowers and things like that,
and that's just something that you don't need to replace
as frequently. So they've been contending with that. But at
the same time, something they mentioned this quarter that was
pretty interesting is that they're seeing weakness in projects that
are typically debt financed, which goes back to that mortgage
rate or the interest rate dynamic, and that it's just
(05:48):
a lot more expensive to get these projects done. So
we're seeing you know, kitchens and bath projects being deferred,
or we're seeing projects, you know, kind of being toned
down in size. We've heard that from home DEEPO, We've
heard that some from a handful of the building product
manufacturers as well.
Speaker 1 (06:05):
Yeah you need a new roof, you've got to get
a new roof, but maybe not a new kitchen. Looking ahead,
do you see or can you see any green shoots
later in the year or into twenty twenty five or
does it all depend on maybe what the FED does
with interest rates.
Speaker 6 (06:20):
Yeah, well, look, I think that I think Holsing Broadley
is going to continue to EBB and flow with what
happens with interest rates. That being said, I mean, if
you could call this a bright picture, I mean, existing
home sales are the lowest level they's been in you know,
two decades, so we think we've probably reached are very
close to trough levels. So we do think that if
(06:40):
rates start to pull back a little bit and you
get to that mid six percent range, you know, you
could start to see some growth towards the back end
of this year and as we get into twenty twenty five.
So the way we look at it now is there's
not a whole lot of downside risk with where the
economy stands now, with where employment stands now. You know,
obviously if those things deteriorate further, that's a concern, you know,
(07:02):
But looking ahead, we think you could start to build
a little bit momentum looking into next year. And on
the remodeling side, we think that a lot of these projects,
as we mentioned, are being deferred, So we think there's
a lot of pent up demand that starts to get
unleashed in twenty twenty five and twenty twenty six. As
rates pull back, people are able to tap that record
amount of home equity they have, and we think that
(07:23):
that'll ultimately support a rebound in big ticket spending.
Speaker 1 (07:27):
So if you're a painter or a drywall guide, just
told on tight Well our thanks to Drew Redding, Bloomberg
Intelligence US home building analyst. We move now to big
tech and chip maker and Video, which has been on
a roll, seeing its market value balloon thanks to demand
for its artificial intelligence chips, also its data center and
gaming offerings. What does it all mean for the company's
(07:47):
earnings out this Wednesday. Well for more, we're joined by
Kunjan Sobanni, Bloomberg Intelligence Senior semiconductor analyst, Konjohn Thanks for
joining us. Why don't you start right away? What do
you expect to see in vidious first quarter earnings?
Speaker 7 (08:02):
Well, just similar to what we have been seeing for
the past almost six plus quarters, We again expect a
solid beaten race coming into this earnings. Throughout the quarter,
we have seen multiple strong demand signals, namely its largest
cloud and hyperscaled customers all upsiding their hapexpend guidance for
(08:23):
AI for twenty twenty four and twenty five. Second, we
have seen strong demand from outside of the cloud players,
namely Sogn, Wild Government, entities, other enterprises, large enterprises like
the deal we saw about Elon purchasing about ten billion
dollars of AI capacity from Oracle, etc.
Speaker 6 (08:45):
So and all the same.
Speaker 7 (08:47):
Time, we have seen the h one hundred lean times
continue to shrink. What that means is supply continue to
keeps up for that product family. So the combination of
all of this gives us confidence again they will be
coming out with US Beta.
Speaker 1 (09:00):
DACE now in video appears to be far ahead of
a lot of US competitors on AI. And how important
is that for this earnings and for the company?
Speaker 7 (09:09):
I mean, it is important, and that's why you see
this level of positive sentiment around the stock and what
you've seen in the return. I mean, it still continues
to be the market leader and has a market share
in the mid nineties, which we expected to continue at
least for the foreseeable future. So that is definitely a
(09:34):
big part of the story right now.
Speaker 1 (09:36):
And to keep up with that demand, How is it growing?
Where is Nvidia expanding here in the US and worldwide?
Speaker 7 (09:45):
I mean it is global at this point if you
think about it. Look, it's the only sort of almost
the only game in the town, and the town being globally,
if you want to set up a high end AI
server to train model, there's only really one go to
full tax solution right now.
Speaker 6 (10:04):
We just in media.
Speaker 7 (10:05):
We do have AMD, which has entered the game, but
again the scale is significantly different.
Speaker 6 (10:11):
Here in Media's making is going to.
Speaker 7 (10:13):
Be generating about in the sort of between fifty to
eighty billion dollars from its data center it's here, and
on the contrast, AMD is projected to generate about four
billion from its cview business. So, I mean, look, the
demand is globally now when it comes to allocation. When
it comes to where its customers are residing, a big
portion majority is in US in the West, but it
(10:36):
is also trying to allocate as much as it can
to most of its consider outside of US.
Speaker 1 (10:42):
Well, that brings me to the next point, the growing
trade war between the US and China. There was a
ban on advanced chips selling them another technology to China,
implemented last year. We know that President Biden just last
week up the nite with a whole bunch of tariffs
on all kinds of Chinese products. How has that impacted
(11:03):
in video and the wider chip you know, semiconductor market
here in the US.
Speaker 7 (11:08):
Yeah, it has impacted Nvidia, I would say the most.
If you actually go back almost two years back, the
very first ban in this data center space came on
in media specific chips. So from that time when China
represented about mid twenties percentage of revenue of its data
(11:30):
center segment, all the way to now this year, we
expected to be somewhere between mid single digit to high
single digits. So that gives you a magnitude that it
has lost the potential that it could have been shipped
in absence of these bands and billions of dollars to China.
So that's the company that has most been impacted. And
I think a lot of restrictions and bands have heavily
(11:54):
focused on in media chips initially. What you're seeing now
is sort of those bands get ex span, their range
getting expand As again, regulation always runs behind technology, So
what you're seeing is now out those impacting in other
players like Intel, like Caulcom and AMD, etc.
Speaker 1 (12:12):
And Vidia's the big name, and in Vidia's first quarter
earnings out this Wednesday. Our thanks to Kunjan Sobanni, Bloomberg
Intelligence Senior semiconductor analyst, coming up on Bloomberg Day Break
weekend to look ahead to the upcoming meeting of G
seven finance ministers and central bankers in Italy. I'm Tom
Busby and this is Bloomberg. This is Bloomberg day Break weekend,
(12:43):
our global look ahead at the top stories for investors
in the coming week. I'm Tom Busby in New York.
Up later on our program, we look ahead to the
inauguration of Taiwan President elect Ley ching Da and what
it means for Taiwan, the US and China relations. But first,
G seven finance ministers meeting this week in the northern
Italian town of Stressa as representatives to reflect on the
(13:06):
fragmentation of global trade. For more, Let's go to London
and bring in Bloomberg Daybreak. Europe Banker Stephen Carroll.
Speaker 2 (13:13):
Tom, Italy's Finance Minister and Central Bank governor, will be
hosting this G seven meeting on the banks of Lake Majore.
It's a majestic setting to discuss some weighty topics, not
least the latest ratcheting up of trade tensions between the
United States and China, as well as Russia's war in
Ukraine and the Ukrainian Finance Minister will be attending with
(13:34):
issues around the use of frozen Russian assets on the agenda.
Both the United States and the European Union have struggled
to mobilize the help that Kiev needs to defend itself,
as AID has been caught up in other political debates
in the EU. There's also a discussion about how best
to bolster the European defense industry. Here's what European Investment
(13:54):
Bank President Nadia Calvino told Bloomberg that her institution is
doing about this.
Speaker 8 (14:00):
I think it's quite clear that we need to step
up our support to Europe's security and defense industry. We
need to reinforce our capacity in this area, and the
European Investment Bank is ready to play its role in
supporting Europe's defense industry.
Speaker 9 (14:16):
From this point of view.
Speaker 8 (14:17):
What we have done is put forward an action plan
which has been endorsed by our board last week and
this up and running since first of May, and which
will indeed allow us to finance dual use technologies and infrastructures,
removing a constraint that existed which required that more than
fifty percent of future revenues should come from the civil
(14:41):
use side for it to be.
Speaker 10 (14:42):
Financed right, and so now it's zero percent, but there
still is this mandate of dual use. So just for
to understand better how this actually works, because this doesn't
mean that you can, for example, invest in something that
produces a ammunition, which isn't what is in high sort
of need right now for Ukraine and in Europe.
Speaker 11 (14:58):
Correct.
Speaker 8 (14:58):
Well, we are an investment bank and the mandate from
European leaders was cleared that we should step up our
support to europe security and defense industry while safeguarding our
financing capacity.
Speaker 9 (15:09):
And this is what we have been doing. This is
what we are doing.
Speaker 8 (15:13):
The reaction of financial markets is confirming that we're on
the right track, and our Board of Directors endorsed our
strategy as recently as last week. And so now we
have this action plan which should allow us to speed
up with the investment of the six billion euros which
are already earmarked for this industry.
Speaker 10 (15:31):
Yeah, and so those also, I mean six billion is
also quite a small proportion of the entire fund. Are
you looking at potentially boosting that over the years, just
given the scale of the need that there is in
European defense.
Speaker 9 (15:41):
We have six billion euros.
Speaker 8 (15:42):
Actually the program was had eight billion euros ear marked,
we have only invested two billion euros. We're focusing right
now in speeding up the investment of these six billion
euros and also getting up and running a capital investment
of one hundred and seventy five million euros in startups,
innovative startups also in this area.
Speaker 10 (16:01):
And for those two billion, was it just because there
wasn't demand for the loans or is it because there
were all these rules around and you hope that that
capital can get to work well.
Speaker 8 (16:08):
Obviously, we are now expanding, enlarging the scope of projects
that we can finance. We are also speeding up these
divestments with a single stop shop with a dedicated team,
and we're going to be proactively reaching out.
Speaker 9 (16:23):
Actually, we have launched a call for.
Speaker 8 (16:24):
Projects, and so our expectation is that in the second
part of the year there will be more projects, more
demand as you named it, and that we will be
able to step up our support to europe security and
defense industry while safeguarding our financing capacity, which is the
mandate from MARS.
Speaker 10 (16:39):
When you say safeguarding your financing capacity is to do
with the credit rating, you think that could be jeopardized
by investing in these sorts of companies, what exactly is
the relationship there?
Speaker 8 (16:48):
Well, obviously rating agencies, but also investors are looking carefully
at many areas that have to do with our financing capacity.
So far, as I was saying, financial markets are responding
as we had anticipated, and our Board of Directors indoors
last week our action plan which will allow us to
step up our support.
Speaker 10 (17:07):
And in terms of the eb's rule and rebuilding Ukraine
and funding that, how do you imagine the ib's role
in that.
Speaker 9 (17:13):
Well, we're playing a very important role already.
Speaker 8 (17:15):
We're probably the key financing investor partner to the Ukrainian government.
Speaker 9 (17:20):
We're very close contact.
Speaker 8 (17:21):
Only some weeks ago I signed a memorandrov of understanding
with Prime Minister Smichael, and I hope that in June
we will be able to already sign some specific projects
and speed up our investments on the ground in large
infrastructures energy transport, also in municipal and local projects having
to do with restoring and renovating, rebuilding schools, hospital houses,
(17:46):
and also supporting the private sector. Many of these projects
are already ongoing and as of the signature of the
memorandum of understanding, I think we will be able to
do more while the war is unfortunately going on. I
hope we will be able to step up our support
with the rebuilding of the country once the war is over.
Speaker 2 (18:03):
That's the European Investment Bank President Nadia Calvino there speaking
to Bloomberg's Oliver Crook in recent days. Now, Oliver will
also be attending the G seven meeting in Straisa along
with finance ministers and central bankers. I've been speaking to
him about it and started by asking him how much
the latest announcement of increased US tariffs on Chinese goods
will be weighing on ministers' minds.
Speaker 10 (18:26):
I think it'll be weighing on their minds very very much,
in part because it's so fresh and it just sort
of dropped just you know, just before the meeting. And
then on the other side of the meeting, of course,
you're going to get the initial report from the EU
in terms of the ev probe that they're going into China.
So trade is really going to be front and center
for both the finance ministers and the central bankers, who
are both present there. For the central bankers, obviously this
is also a big question in terms of inflation because
(18:47):
if we're dealing with just one off things, that's one thing.
If we're talking about basically the beginning of another kind
of trade war and tit for tat, this could have
huge implications for inflation to what degrees. So they'll be
exchanging notes, you know, it's the ec be the FED
will be there much. The FED is setting the tone
for global interest rates, and of course the question will
be will China retaliate. Biden has been quite targeted in
(19:08):
terms of this. These sounds like a lot of import
tariffs on the evs, you know, quadrupling, but really it's
only touching about eighteen billion dollars a trade because obviously
he's very conscious of not wanting to get those prices
going up, particularly in an election year.
Speaker 2 (19:21):
Yeah, indeed, that's a big concern for them too. Around
the G seven table though, Ali, how much divergence is
there on the approach, the approach to China and trades.
Speaker 10 (19:31):
So I think it's interesting if you look at just
the United States and Europe, you know what I mean.
I mean, you have them sort of singing a bit
from the same hymn sheet in terms of the sort
of general message, which is that China has engaged in
unfair trade practices. But ma Cole, for example, has really
kept the door open saying that he's not going to
be dragged in around the world by US foreign policy,
which is sort of an allusion to Taiwan and the
(19:52):
evidence of that. That's a message that's kind of resounded
with Hashijiping because he came to France. You know, he
came to Europe for the first time in five years.
He came to France, but he also came to Hungary,
which is another country that kind of takes us to
the within Europe question of China. You know, China has
had huge manufacturing production in Hungary. The you know, c
atl the battery manufacturer, has opened up a factory. Now
(20:14):
we understand byd is there the Europeans are looking at
this because Hungary is often a political outlier. Could this
drive a further wedge within Europe and could it get
really China a seat at the table politically within there?
And there's also a disagreement even between Schultz and macohone right,
Schultz was even saying that listen, we want to put
these ev tariffs up. Okay, but let's think about the
consequences here. Half of the EV's coming into Europe from
(20:35):
China are not Chinese, they are Europeans.
Speaker 4 (20:39):
Yeah.
Speaker 2 (20:40):
Indeed, I mean the Ukraine's finance minister is going to
be attending this meeting as well. What will he be
looking to hear from his counterparts?
Speaker 10 (20:49):
Well, I think a lot of it is going to
be a message of reassurance, right, and we saw that
with Blincoln when he was in Kiev saying that you know,
we're still here, We're still supporting Ukraine. And the reason
that there is you know, potentially some desire to doubt
that is because of how long that aid package took
to get to Ukraine. Remember that was stalled in the
House for six months. That sixty billion dollar package eventually
got there and that will mean you know, some military
(21:10):
relief and some financial relief for Ukraine, but it's cost
them very dearly on the battlefield. We've seen infrastructure behead there,
swatting very a lot fewer of the missiles out of
the skies. And the question for the G seven going
forward is how do you get the financing for Ukraine
on sustainable footing? And that will be one of the
direct and central conversations there.
Speaker 2 (21:28):
Yeah, because the U ass is proposed seizing the Russian
assets that were frozen by the G seven after the
invasion of Ukraine. Is that a proposal that has much support.
Speaker 10 (21:37):
So it doesn't have that much support in Europe solicited.
To be clear about what we're talking about here, What
the Europeans favor is they want to take the proceeds
from the Russian assets being sold that are kind of
accruing interests and making profits. They want to take those
and give that to Ukraine. But that's only about three
billion dollars a year. The United States is very keen
on taking the underlying assets. We're talking about three hundred
billion dollars of Russian central bank assets that are scattered
(22:00):
across the world that are currently being held. They want
to bring that directly to Ukraine. The Europeans have resistant
to that. What has been interesting is some of the
debates on how to maybe do it to make everyone happy.
The United States, for example, has suggested these so called
freedom bonds, you know, and putting American branding on it,
which basically is issuing bonds and using the underlying assets
as collateral, so you don't touch the underlying asset, but
(22:20):
you can still monetize it and get more of that
money to Ukraine.
Speaker 2 (22:24):
Now, central bankers, as you mentioned Oli, will be attending
this meeting as well. Of course, inflations still a big
question for these major global economies. Should we expect to
hear much about the broader issues around the path I
had for interest rights?
Speaker 10 (22:38):
I would think so. I mean, wherever there are central
bankers there is a rate debate, and if Bloomberg is
there will certainly be chasing it and we may be
speaking to a few of them. I can't tell you
who exactly because we haven't confirmed it, but there will
be certainly a conversation about what the stance is on
rate policy going forward. And of course, how does this
trade question now front and center? How does that read through?
I mean, the debate forming at the ECB is not
(22:59):
whether or not the going to be a cut, it's
what happens after the cut. What is the default sort
of stance for the ECB? Does it have a neutral
bias or an easing bias? And you have people on
either side of that. You have Panetta from Italy who's
saying that really we should have an easing bias, maybe
pushing that for it. In the Nogle from the Bundesbag
saying no, we need to stay neutral until we see
what happens.
Speaker 2 (23:18):
Yes, that's another debate that's going to be happening at
the G seven two. I mean more broadly, Oliver, is
the G seven a forum that's fit for purpose. We're
talking about some of very diverse issues being discussed at
this forum as well, but does it actually produce concrete decision?
Speaker 10 (23:35):
Well, let's think about what this forum is, right, the
G seven. For a very long time, this was the
G eight, right, and now it is the G seven,
And that happened ten years ago. And I was actually
just looking at a picture of the last G eight,
you know, meeting. It's sort of astounding. You see fonswau Land, Obama,
David Cameron smiling, Merkle is there and Putin is there.
Speaker 4 (23:53):
Right.
Speaker 10 (23:54):
And in the last sort of ten years, ever since
the sort of invasion of Crimea, we've seen a real bifurcation,
of fragmentation of global order. So there's the question of
the broader G twenty in the sort of breakoff of
the bricks, as you mentioned, you know, there's this you know,
G came to Europe and then Putin went to Beijing
saying that they're going to have a very good relationship
for generations to come. So there's a question of how
much influence the G seven has over others. But even
(24:16):
within the G seven there is all this talk about
sort of protectionistic policies of China, the G seven itself
within there is being protectionist itself. I mean the Inflation
Reduction Act. There's not a lot of talk going on
around it. But this hits Europe very very hard. And
you're not hearing so much about the American European relationship.
You know, post pandemic, it was all about friend shoring
and securing supply chains that way. But really even under Biden,
(24:38):
you're hearing a slightly more America first kind of policy
and Europe alone, and that is really hanging over this
G seven meeting.
Speaker 2 (24:45):
Thanks to our correspondent Oliver Crook, who will be bringing
us coverage on Bloomberg Radio and television of the G
seven finance ministers meeting in Italy in the coming days,
I'm Stephen Carol in London. You can count us every
weekday morning here for Bloomberg Daybreak Europe, beginning out six
am in London and what am on Wall Streets.
Speaker 1 (25:03):
Tom, thank you Steven, and coming up on Bloomberg day
Break weekend, we look ahead to the inauguration of Taiwan's
president elect. I'm Tom Busby and this is Bloomberg. I'm
(25:24):
Tom Busby in New York with your global look ahead
at the top stories for investors in the coming week.
Taiwan's president elect Lee Ching Da will be inaugurated in
the coming week. Let's go to Bloomberg Daybreak Asia host
Brian Curtis and Doug Krisner for more.
Speaker 3 (25:39):
Tom William Lai takes office at a critical time, with
tensions running high. In recent days, China said live faces
a choice between peace and confrontation. On Wednesday, Beijing said
that it would sanction five taiwan political commentators and roll
out a new law to punish separatists.
Speaker 12 (25:58):
In addition, Taiwan finds itself in the middle of worsening
relations between the US and China. Now on the economic side,
President Biden just slapped new tariffs on Chinese imports and
accused China of cheating on trade. Then there's the political front.
China's Foreign Ministry bristled it reports on the US and
Taiwan conducting naval drills last month.
Speaker 3 (26:20):
Additionally, the US will send a delegation of former officials
to the inauguration. The fact that their former officials may
placate China to a certain degree, but Beijing still won't
be happy as such, Doug and I thought it would
be a good time to take a closer look at
the trilateral relationship and see how it might change under
the presidency of Lei ching Dug. We asked John Liu,
(26:43):
Bloomberg Executive editor in Beijing, if Taiwan is at a crossroads.
Speaker 13 (26:48):
Taiwan is definitely the most dangerous flashpoint in this relationship
between the United States and China. Whether William Lae's ascendence
to the presidential office will be the spark that sets
off some sort of conflict, I think that looks relatively
unlikely at the moment. We are expecting him to stick
to the line from the previous administration of Tiing I.
(27:11):
He has said that publicly he plans to be a
continuity president of anything. I think the speech that he
will be giving at his inauguration will be tuned to
try and both show him and his party is defending Taiwan,
but also not to cause any upsetness in Beijing or Washington.
Speaker 3 (27:29):
Bloomberg Executive editor in Beijing, John Liu, Now for discussion
on this. We're joined by Bloomberg's Type A bureau chief
Samson Ellis and deputy Bureau chief Cindy Wong. So, Sam,
let me go to you first. Is John Wright there
that Lai is likely to be pragmatic and push for continuity.
Speaker 11 (27:48):
Those are certainly the indications we have right now. Obviously
we're speaking before he has taken power, But over the
past year he has strenuously emphasized that he will to
size previous line of being willing to talk to China,
but only on the basis of equality, that the two
sides sit down and speak to each other as equals.
(28:10):
That's obviously a condition that China is very unlikely to
be able to accept. Plus he's also said that there
will be no formal action for him to in some
way formalize Taiwan's independent So I think that's his way
of signaling to the United States and to Beijing and
to the time Inese public and the world at large
that there isn't going to be some kind of declaration
(28:33):
of independence during his presidency to try and put people
at ease that he's not going to be a troublemaker
throughout his term.
Speaker 12 (28:40):
Cindy, from what I understand, William Lai took about forty
percent of the popular vote. When you look at a
number like that, you may conclude that the mandate that
William Lai has is not that strong. Am I right
about that?
Speaker 6 (28:53):
Yeah?
Speaker 14 (28:53):
Exactly. He only got forty percent of the vote in
the general election, and that made him the first Taiwan
president since year two thousand that didn't win an outright
majority vote, So that's relatively weak man day. And also
the Taiwanese voters just gave the majority of the legislature
to the opposition KMT, hoping that there would be some
(29:17):
check and balance in the government. So I think with
that challenges that that means lies any policies or reforms
is going to face the legislative hurdles. So going forward
the next four years is going to be a very
daunting tax ahead for him, Cindy.
Speaker 3 (29:35):
One would think that lie, given his past and sort
of leaning toward Taiwan independence, that he would be even
less popular with China than signing one was.
Speaker 14 (29:46):
Yeah, definitely. So just to give you a little bit
of contest. The ruling Democratic Progressive Party or the DPP
champion that strong sense of Taiwan identity distinct from China,
and Lai used to being for his pro independent stance.
He used to describe himself as a pragmatic worker of
Taiwan independence. Although during the presidential campaign he has been
(30:09):
very measured. He didn't talked about independence at all. Instead,
he said Taiwan is already a de facto state and
there's no need to declare independence. Still, the past comments
and past records made him very unpopular with China. China
revealed lie with deep suspicion and deep distrust, and China
has already labeled him as an instigator of war or
(30:33):
a separatist. So it is believed that going forward for
the next four years, since China has already cut off
all the communication with Taiwan since President's Hi took office
in twenty sixteen, and for the next four years, it's
unlikely that it would possibly resume any communication with Taiwan
(30:53):
given their dis deep distrust of life. So one important
thing to watch from lives inaugurate speed each would be
if he has any comments or new narrative about the
cross relations going forward, or if he is able to
propose any kind of framework that could break the deadlock
between China and Taiwan and resume the communication between the
(31:15):
two sides.
Speaker 12 (31:16):
Again, Sam, the current President Sin Wing has been in
office for eight years now, two terms term limited. During
a big chunk of that period, since about twenty nineteen,
I think that we have seen a much harder line
from Beijing when it comes to Hong Kong, and I'm
curious about possible ripple effects. Has a harder line on
(31:36):
Hong Kong impacted the politics of Taiwan in any way.
Speaker 11 (31:40):
Well, it certainly did in twenty nineteen and twenty twenty,
the last election, when Taiwan a resounding re election. You know,
at that point we were at the height of the
authorities cracked down against protesters in Hong Kong, and that
definitely engendered a sense of sympathy from voters in Taiwan
and a you know, no desire to move towards a
(32:04):
friendlier stance with Beijing. But then there's the long term
repercussions of that. Certainly that you know, China's offer for
Taiwan essentially as you know, the same as to Hong
Kong one country, two systems, except that you're part of
China and will let you keep your democratic system and
your way of life largely untouched. But the big lesson
(32:26):
from Hong Kong obviously is that they promised to keep
that for fifty years and then they didn't. They just
swooped in and they have radically changed how things are
run in Hong Kong, and that really has served as
a lesson for Taiwan as a whole.
Speaker 3 (32:39):
And Taiwan people have spoken very clearly that that is
not something that they can accept. But on the other hand, Samson,
and this is something we've talked about before. We often
hear that, you know, despite what you hear from pundits
about all of this geopolitical fear and threats, Taiwan people
are actually pretty relaxed. They've they've been dealing with this
(33:00):
for more than seventy years. Is that likely to continue
to think over the next four years underline?
Speaker 11 (33:06):
For sure. I mean, one of the remarkable things about
being in Taiwan, living in Taiwan is seeing how much
more nervous people outside of Taiwan are than people inside Taiwan.
Will often, you know, get very worried phone calls from
Hong Kong or Singapore or London on New York people
worried of you know, is the invasion about to happen?
(33:26):
How worried are you? And in Taiwan life goes on
as normal, you know, people, as you say, they're very
used to these threats or these tensions with China. As
for how things will play out over the coming four years,
that that's going to be very interesting to see. Sources
do indicate to us that there's a good chance that
China slowly starts to ratchet up the tension. As you
(33:49):
pointed out at the beginning of this conversation, they appear
to already be doing that with new sanctions against certain
individuals in Taiwan. So these are the so called gray
zone tactics that China deploys, like a range of measures
that fall below the threshold of outright warfare that are
(34:11):
designed to influence and coerce Taiwan to do Beijing's bidding.
The thinking is that we're likely to see a big
increase in these kinds of tactics over the coming four
years in an effort to stop Taiwan and voted in
particular from wanting to give the DPP another four year term.
Speaker 12 (34:32):
Cindy, It's remarkable when you look at the degree of
concentration of semiconductor manufacturing in Taiwan. This is obviously a
TSMC story, but we know one of the things that
the US has been doing, to a lesser extent Europe
addressing this perhaps over concentration and trying to diversify away
from Taiwan. Is there concern about that when you look
(34:55):
at the economics of the island.
Speaker 14 (34:57):
Yeah, there is certainly some concerns and bait within Taiwan
about whether we should let TSMC to continue to broad
its ship plants overseas. And that's also a question that
we asked the incoming President Lighting the last August when
we had a chance to sit down with him, and
then Light said at that time that he won't stop
(35:19):
TSMC from building more chip plants in the US or
in other countries because he thinks Taiwan has a responsibility
to the world and the fact that TSMC is diversifying
its ship plans and building chip plants overseas, it's to
show that Taiwan's economic advantage and the power of Taiwan.
Speaker 3 (35:39):
That said Cindy. We spoke with Sean Darby from the
Zuho Securities and he said that the global trend of
on shoring will actually mean that semiconductor output in Taiwan
will slow. Now it'll still be TSMC to a certain
degree and other companies, but jobs in Taiwan may suffer.
Speaker 5 (35:59):
The irony is that the competitive part of Taiwan's semiconductors
is to some extent being hollowed out through this, you know,
sort of on shoring in the developed world, and in
that respect, you're not going to get the same level
of output growth that you would have had in pre
proceeding cycles. You know, sometime in two or three years
(36:19):
from now, in fairness that time, one is going to
sort of see below trend growth from twenty twenty five
twenty six purely because they don't have that same facilities
in situ.
Speaker 3 (36:30):
And Cindy, will that be a problem for a Taiwan
that some of these jobs will move offshore.
Speaker 14 (36:35):
I think that's definitely something people will keep and close
eye on from incoming present. Lyes in inaugura speech, it
is believed that he will certainly talk about his plans
to boost Taiwan's economy, and also he has already previously
avowed to continue strengthening Taiwan's chip sectors. We know that
(36:57):
before his inauguration, he's already set up meeting with representatives
from the chip industry is trying to understand what would
be the best policies for the industry and for the
country as well. So we're sure that from his inaugural
speech next Monday, we're going to hear more details about
his plan to beef up Taiwan's economy and how to
(37:19):
strengthen the chip industry going forward.
Speaker 12 (37:21):
Sam and Cindy, thank you so much for joining us
and helping us set up the inauguration of Taiwan's new president,
Light ching Da that will be happening in the week ahead.
Samson Ellis is Bloomberg's Taipei bureau chief and Cindy Wong
is deputy bureau chief. In our Taipay newsroom, I'm Dereg
Krisner along with Brian Curtis in Hong Kong. You can
(37:42):
catch us weekdays here for Bloomberg Day Break Asia beginning
at eight am in Hong Kong eight pm on Wall Street. Tom.
Speaker 1 (37:49):
Thank you, Doug, and thank you Brian. 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.
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Daybreak 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, a look at the struggling
US housing market. I'm Tom Busby in New York.
Speaker 2 (00:22):
I'm Stephen carlon London, where we're looking ahead to how
issues around trade and the war in Ukraine will feature
at the upcoming meeting of G seven finance ministers and
central bankers in Italy.
Speaker 3 (00:33):
I'm Brian Curtis in Hong Kong. We look ahead to
the inauguration of Taiwan President elect Lyiching Da and what
it means for Taiwan, US and China relations.
Speaker 4 (00:43):
That's all straight ahead on Bloomberg day Break Weekend on
Bloomberg Ey Look the Free Own New York, Bloomberg ninety
nine to one, Washington, d C, Bloomberg one O six one, Boston,
Bloomberg nine sixty, San Francisco, DAB, Digital Radio, London, Sirius
XM one nineteen and around the world on Bloomberg Radio
dot com and via the Bloomberg Business App.
Speaker 5 (01:08):
Good day to you.
Speaker 1 (01:09):
I'm Tom Busby, and we begin today's program with home
sales for the month of April, the heart of the
spring home buying season. We get existing home sales on Wednesday,
new home sales on Thursday. What will these reports tell
us about the health of the US housing market, about
housing affordability and the overall economy? For more, we're joined
by Drew Redding, Bloomberg Intelligence US home Building Analysts. Drew,
(01:33):
thanks for being here.
Speaker 6 (01:34):
Travl me.
Speaker 1 (01:35):
All right, so what do you expect to see this week?
Speaker 6 (01:38):
Well, I think some context is important here. We've been
describing the housing market as a tail to markets. Existing
home sales finally broke back about four million annalyzed run
rate two months ago, and we think we'll probably remain
above those levels. But what you have to keep in
mind is the data that we're seeing now still reflects
(01:58):
a period where rates were in that high six percent range.
Subsequently rates rose to over you know, seven and a
half percent, So we think that date is going to
trickle in into the next couple of months. We expect
some volatility on the existing home front side, you know,
over the next couple of months and through the summer.
But big picture, you know, it's It's difficult to get
(02:19):
too excited about a significant rebound in existing home sales
when you have mortgage rates that are still hovering around
seven percent. We just actually fell below that for the
first time since April. We're at about six point nine
right now, so you know that will add a little
momentum to the market. But big picture, we're not expecting
any type of significant, you know, rebound maybe until we
get to twenty twenty five and even into twenty twenty six.
(02:42):
Now you can trust that what we're seeing in the
new home market. Demand in the new home sign has
been a lot stronger, and that's because builders have been
successful in pulling the levers in terms of financing incentives,
closing costs, assistance, and things like that. So you know,
they've been able to make the monthly payment a little
more palatable than what you see on the resale side.
Speaker 1 (03:01):
Well, that's the problem, isn't it. Home affordability. You've got
rates near seven percent, You've got record high prices for
new and used homes. Plus you know there's just a
lack of homes on the market. I mean, how are
people affording this?
Speaker 6 (03:14):
It's one hundred percent all about afford affordability is, you know,
hovering near the worst levels on record. We were looking
at some data from redfind It actually shows the medium
monthly payment is about twenty nine hundred dollars, which is
fourteen percent above last month, and that's more than double
where we were prior to the pandemic. You've had prices
which increased more than fifty percent since the beginning of
(03:37):
twenty twenty, and you know, depending on the index that
you look at, we're either pretty close to those levels now,
if not higher. And there's been certainly been some momentum
of late with pricing, and part of that has to
do with what you mentioned. Inventory in the resale market,
we're still at about three months of supply, which is
historically low, and that's putting a floor on the prices.
(03:58):
There's there's demand out there and there's not a whole
lot of inventory that's pushing prices up.
Speaker 3 (04:02):
Now.
Speaker 6 (04:02):
We have seen inventory in some markets start to rise,
which is something we where to keep our eye on.
You look at markets in Florida, a couple of markets
in Texas like Austin, so that could have implications for
prices should inventories continue to rise. But but you're right
at this point, it's just difficult for the consumer to
afford a house, and that's really what's held the market back.
Speaker 1 (04:23):
Now, this has also impacted the troubles in housing the
broader economy not always bad or not all bad, but
like home builders, home renovation still going pretty strong, but
people aren't buying big ticket appliances. Home Depot confirming that
high margin items grills, power washers, refrigerators. You know, it's
(04:43):
really impacting a lot of other businesses.
Speaker 6 (04:46):
It's certainly been a challenging backdrop for the consumer. You
have to remember, you know, they're battling the cumulative impact
of inflation. So you know, even when you see inflation
coming down to three percent, it's still inflation and it's
been going on for years. So it's really the cumulative
impact that we're seeing. You're seeing credit card balances rise,
and you know, when you talk about some of the
(05:06):
names that we cover, like A Home Depot and A Lows,
they're really seeing it on the discretionary side and on
the big ticket products in particular. You know, they've got
a little bit of a unique situation in that, you know,
some of the products they sell are what they call
one time purchases. So if you think about, you know,
the early days of the pandemic, people loaded up on
(05:26):
you know, grill's patio furniture, lawn mowers and things like that,
and that's just something that you don't need to replace
as frequently. So they've been contending with that. But at
the same time, something they mentioned this quarter that was
pretty interesting is that they're seeing weakness in projects that
are typically debt financed, which goes back to that mortgage
rate or the interest rate dynamic, and that it's just
(05:48):
a lot more expensive to get these projects done. So
we're seeing you know, kitchens and bath projects being deferred,
or we're seeing projects, you know, kind of being toned
down in size. We've heard that from home DEEPO, We've
heard that some from a handful of the building product
manufacturers as well.
Speaker 1 (06:05):
Yeah you need a new roof, you've got to get
a new roof, but maybe not a new kitchen. Looking ahead,
do you see or can you see any green shoots
later in the year or into twenty twenty five or
does it all depend on maybe what the FED does
with interest rates.
Speaker 6 (06:20):
Yeah, well, look, I think that I think Holsing Broadley
is going to continue to EBB and flow with what
happens with interest rates. That being said, I mean, if
you could call this a bright picture, I mean, existing
home sales are the lowest level they's been in you know,
two decades, so we think we've probably reached are very
close to trough levels. So we do think that if
(06:40):
rates start to pull back a little bit and you
get to that mid six percent range, you know, you
could start to see some growth towards the back end
of this year and as we get into twenty twenty five.
So the way we look at it now is there's
not a whole lot of downside risk with where the
economy stands now, with where employment stands now. You know,
obviously if those things deteriorate further, that's a concern, you know,
(07:02):
But looking ahead, we think you could start to build
a little bit momentum looking into next year. And on
the remodeling side, we think that a lot of these projects,
as we mentioned, are being deferred, So we think there's
a lot of pent up demand that starts to get
unleashed in twenty twenty five and twenty twenty six. As
rates pull back, people are able to tap that record
amount of home equity they have, and we think that
(07:23):
that'll ultimately support a rebound in big ticket spending.
Speaker 1 (07:27):
So if you're a painter or a drywall guide, just
told on tight Well our thanks to Drew Redding, Bloomberg
Intelligence US home building analyst. We move now to big
tech and chip maker and Video, which has been on
a roll, seeing its market value balloon thanks to demand
for its artificial intelligence chips, also its data center and
gaming offerings. What does it all mean for the company's
(07:47):
earnings out this Wednesday. Well for more, we're joined by
Kunjan Sobanni, Bloomberg Intelligence Senior semiconductor analyst, Konjohn Thanks for
joining us. Why don't you start right away? What do
you expect to see in vidious first quarter earnings?
Speaker 7 (08:02):
Well, just similar to what we have been seeing for
the past almost six plus quarters, We again expect a
solid beaten race coming into this earnings. Throughout the quarter,
we have seen multiple strong demand signals, namely its largest
cloud and hyperscaled customers all upsiding their hapexpend guidance for
(08:23):
AI for twenty twenty four and twenty five. Second, we
have seen strong demand from outside of the cloud players,
namely Sogn, Wild Government, entities, other enterprises, large enterprises like
the deal we saw about Elon purchasing about ten billion
dollars of AI capacity from Oracle, etc.
Speaker 6 (08:45):
So and all the same.
Speaker 7 (08:47):
Time, we have seen the h one hundred lean times
continue to shrink. What that means is supply continue to
keeps up for that product family. So the combination of
all of this gives us confidence again they will be
coming out with US Beta.
Speaker 1 (09:00):
DACE now in video appears to be far ahead of
a lot of US competitors on AI. And how important
is that for this earnings and for the company?
Speaker 7 (09:09):
I mean, it is important, and that's why you see
this level of positive sentiment around the stock and what
you've seen in the return. I mean, it still continues
to be the market leader and has a market share
in the mid nineties, which we expected to continue at
least for the foreseeable future. So that is definitely a
(09:34):
big part of the story right now.
Speaker 1 (09:36):
And to keep up with that demand, How is it growing?
Where is Nvidia expanding here in the US and worldwide?
Speaker 7 (09:45):
I mean it is global at this point if you
think about it. Look, it's the only sort of almost
the only game in the town, and the town being globally,
if you want to set up a high end AI
server to train model, there's only really one go to
full tax solution right now.
Speaker 6 (10:04):
We just in media.
Speaker 7 (10:05):
We do have AMD, which has entered the game, but
again the scale is significantly different.
Speaker 6 (10:11):
Here in Media's making is going to.
Speaker 7 (10:13):
Be generating about in the sort of between fifty to
eighty billion dollars from its data center it's here, and
on the contrast, AMD is projected to generate about four
billion from its cview business. So, I mean, look, the
demand is globally now when it comes to allocation. When
it comes to where its customers are residing, a big
portion majority is in US in the West, but it
(10:36):
is also trying to allocate as much as it can
to most of its consider outside of US.
Speaker 1 (10:42):
Well, that brings me to the next point, the growing
trade war between the US and China. There was a
ban on advanced chips selling them another technology to China,
implemented last year. We know that President Biden just last
week up the nite with a whole bunch of tariffs
on all kinds of Chinese products. How has that impacted
(11:03):
in video and the wider chip you know, semiconductor market
here in the US.
Speaker 7 (11:08):
Yeah, it has impacted Nvidia, I would say the most.
If you actually go back almost two years back, the
very first ban in this data center space came on
in media specific chips. So from that time when China
represented about mid twenties percentage of revenue of its data
(11:30):
center segment, all the way to now this year, we
expected to be somewhere between mid single digit to high
single digits. So that gives you a magnitude that it
has lost the potential that it could have been shipped
in absence of these bands and billions of dollars to China.
So that's the company that has most been impacted. And
I think a lot of restrictions and bands have heavily
(11:54):
focused on in media chips initially. What you're seeing now
is sort of those bands get ex span, their range
getting expand As again, regulation always runs behind technology, So
what you're seeing is now out those impacting in other
players like Intel, like Caulcom and AMD, etc.
Speaker 1 (12:12):
And Vidia's the big name, and in Vidia's first quarter
earnings out this Wednesday. Our thanks to Kunjan Sobanni, Bloomberg
Intelligence Senior semiconductor analyst, coming up on Bloomberg Day Break
weekend to look ahead to the upcoming meeting of G
seven finance ministers and central bankers in Italy. I'm Tom
Busby and this is Bloomberg. This is Bloomberg day Break weekend,
(12:43):
our global look ahead at the top stories for investors
in the coming week. I'm Tom Busby in New York.
Up later on our program, we look ahead to the
inauguration of Taiwan President elect Ley ching Da and what
it means for Taiwan, the US and China relations. But first,
G seven finance ministers meeting this week in the northern
Italian town of Stressa as representatives to reflect on the
(13:06):
fragmentation of global trade. For more, Let's go to London
and bring in Bloomberg Daybreak. Europe Banker Stephen Carroll.
Speaker 2 (13:13):
Tom, Italy's Finance Minister and Central Bank governor, will be
hosting this G seven meeting on the banks of Lake Majore.
It's a majestic setting to discuss some weighty topics, not
least the latest ratcheting up of trade tensions between the
United States and China, as well as Russia's war in
Ukraine and the Ukrainian Finance Minister will be attending with
(13:34):
issues around the use of frozen Russian assets on the agenda.
Both the United States and the European Union have struggled
to mobilize the help that Kiev needs to defend itself,
as AID has been caught up in other political debates
in the EU. There's also a discussion about how best
to bolster the European defense industry. Here's what European Investment
(13:54):
Bank President Nadia Calvino told Bloomberg that her institution is
doing about this.
Speaker 8 (14:00):
I think it's quite clear that we need to step
up our support to Europe's security and defense industry. We
need to reinforce our capacity in this area, and the
European Investment Bank is ready to play its role in
supporting Europe's defense industry.
Speaker 9 (14:16):
From this point of view.
Speaker 8 (14:17):
What we have done is put forward an action plan
which has been endorsed by our board last week and
this up and running since first of May, and which
will indeed allow us to finance dual use technologies and infrastructures,
removing a constraint that existed which required that more than
fifty percent of future revenues should come from the civil
(14:41):
use side for it to be.
Speaker 10 (14:42):
Financed right, and so now it's zero percent, but there
still is this mandate of dual use. So just for
to understand better how this actually works, because this doesn't
mean that you can, for example, invest in something that
produces a ammunition, which isn't what is in high sort
of need right now for Ukraine and in Europe.
Speaker 11 (14:58):
Correct.
Speaker 8 (14:58):
Well, we are an investment bank and the mandate from
European leaders was cleared that we should step up our
support to europe security and defense industry while safeguarding our
financing capacity.
Speaker 9 (15:09):
And this is what we have been doing. This is
what we are doing.
Speaker 8 (15:13):
The reaction of financial markets is confirming that we're on
the right track, and our Board of Directors endorsed our
strategy as recently as last week. And so now we
have this action plan which should allow us to speed
up with the investment of the six billion euros which
are already earmarked for this industry.
Speaker 10 (15:31):
Yeah, and so those also, I mean six billion is
also quite a small proportion of the entire fund. Are
you looking at potentially boosting that over the years, just
given the scale of the need that there is in
European defense.
Speaker 9 (15:41):
We have six billion euros.
Speaker 8 (15:42):
Actually the program was had eight billion euros ear marked,
we have only invested two billion euros. We're focusing right
now in speeding up the investment of these six billion
euros and also getting up and running a capital investment
of one hundred and seventy five million euros in startups,
innovative startups also in this area.
Speaker 10 (16:01):
And for those two billion, was it just because there
wasn't demand for the loans or is it because there
were all these rules around and you hope that that
capital can get to work well.
Speaker 8 (16:08):
Obviously, we are now expanding, enlarging the scope of projects
that we can finance. We are also speeding up these
divestments with a single stop shop with a dedicated team,
and we're going to be proactively reaching out.
Speaker 9 (16:23):
Actually, we have launched a call for.
Speaker 8 (16:24):
Projects, and so our expectation is that in the second
part of the year there will be more projects, more
demand as you named it, and that we will be
able to step up our support to europe security and
defense industry while safeguarding our financing capacity, which is the
mandate from MARS.
Speaker 10 (16:39):
When you say safeguarding your financing capacity is to do
with the credit rating, you think that could be jeopardized
by investing in these sorts of companies, what exactly is
the relationship there?
Speaker 8 (16:48):
Well, obviously rating agencies, but also investors are looking carefully
at many areas that have to do with our financing capacity.
So far, as I was saying, financial markets are responding
as we had anticipated, and our Board of Directors indoors
last week our action plan which will allow us to
step up our support.
Speaker 10 (17:07):
And in terms of the eb's rule and rebuilding Ukraine
and funding that, how do you imagine the ib's role
in that.
Speaker 9 (17:13):
Well, we're playing a very important role already.
Speaker 8 (17:15):
We're probably the key financing investor partner to the Ukrainian government.
Speaker 9 (17:20):
We're very close contact.
Speaker 8 (17:21):
Only some weeks ago I signed a memorandrov of understanding
with Prime Minister Smichael, and I hope that in June
we will be able to already sign some specific projects
and speed up our investments on the ground in large
infrastructures energy transport, also in municipal and local projects having
to do with restoring and renovating, rebuilding schools, hospital houses,
(17:46):
and also supporting the private sector. Many of these projects
are already ongoing and as of the signature of the
memorandum of understanding, I think we will be able to
do more while the war is unfortunately going on. I
hope we will be able to step up our support
with the rebuilding of the country once the war is over.
Speaker 2 (18:03):
That's the European Investment Bank President Nadia Calvino there speaking
to Bloomberg's Oliver Crook in recent days. Now, Oliver will
also be attending the G seven meeting in Straisa along
with finance ministers and central bankers. I've been speaking to
him about it and started by asking him how much
the latest announcement of increased US tariffs on Chinese goods
will be weighing on ministers' minds.
Speaker 10 (18:26):
I think it'll be weighing on their minds very very much,
in part because it's so fresh and it just sort
of dropped just you know, just before the meeting. And
then on the other side of the meeting, of course,
you're going to get the initial report from the EU
in terms of the ev probe that they're going into China.
So trade is really going to be front and center
for both the finance ministers and the central bankers, who
are both present there. For the central bankers, obviously this
is also a big question in terms of inflation because
(18:47):
if we're dealing with just one off things, that's one thing.
If we're talking about basically the beginning of another kind
of trade war and tit for tat, this could have
huge implications for inflation to what degrees. So they'll be
exchanging notes, you know, it's the ec be the FED
will be there much. The FED is setting the tone
for global interest rates, and of course the question will
be will China retaliate. Biden has been quite targeted in
(19:08):
terms of this. These sounds like a lot of import
tariffs on the evs, you know, quadrupling, but really it's
only touching about eighteen billion dollars a trade because obviously
he's very conscious of not wanting to get those prices
going up, particularly in an election year.
Speaker 2 (19:21):
Yeah, indeed, that's a big concern for them too. Around
the G seven table though, Ali, how much divergence is
there on the approach, the approach to China and trades.
Speaker 10 (19:31):
So I think it's interesting if you look at just
the United States and Europe, you know what I mean.
I mean, you have them sort of singing a bit
from the same hymn sheet in terms of the sort
of general message, which is that China has engaged in
unfair trade practices. But ma Cole, for example, has really
kept the door open saying that he's not going to
be dragged in around the world by US foreign policy,
which is sort of an allusion to Taiwan and the
(19:52):
evidence of that. That's a message that's kind of resounded
with Hashijiping because he came to France. You know, he
came to Europe for the first time in five years.
He came to France, but he also came to Hungary,
which is another country that kind of takes us to
the within Europe question of China. You know, China has
had huge manufacturing production in Hungary. The you know, c
atl the battery manufacturer, has opened up a factory. Now
(20:14):
we understand byd is there the Europeans are looking at
this because Hungary is often a political outlier. Could this
drive a further wedge within Europe and could it get
really China a seat at the table politically within there?
And there's also a disagreement even between Schultz and macohone right,
Schultz was even saying that listen, we want to put
these ev tariffs up. Okay, but let's think about the
consequences here. Half of the EV's coming into Europe from
(20:35):
China are not Chinese, they are Europeans.
Speaker 4 (20:39):
Yeah.
Speaker 2 (20:40):
Indeed, I mean the Ukraine's finance minister is going to
be attending this meeting as well. What will he be
looking to hear from his counterparts?
Speaker 10 (20:49):
Well, I think a lot of it is going to
be a message of reassurance, right, and we saw that
with Blincoln when he was in Kiev saying that you know,
we're still here, We're still supporting Ukraine. And the reason
that there is you know, potentially some desire to doubt
that is because of how long that aid package took
to get to Ukraine. Remember that was stalled in the
House for six months. That sixty billion dollar package eventually
got there and that will mean you know, some military
(21:10):
relief and some financial relief for Ukraine, but it's cost
them very dearly on the battlefield. We've seen infrastructure behead there,
swatting very a lot fewer of the missiles out of
the skies. And the question for the G seven going
forward is how do you get the financing for Ukraine
on sustainable footing? And that will be one of the
direct and central conversations there.
Speaker 2 (21:28):
Yeah, because the U ass is proposed seizing the Russian
assets that were frozen by the G seven after the
invasion of Ukraine. Is that a proposal that has much support.
Speaker 10 (21:37):
So it doesn't have that much support in Europe solicited.
To be clear about what we're talking about here, What
the Europeans favor is they want to take the proceeds
from the Russian assets being sold that are kind of
accruing interests and making profits. They want to take those
and give that to Ukraine. But that's only about three
billion dollars a year. The United States is very keen
on taking the underlying assets. We're talking about three hundred
billion dollars of Russian central bank assets that are scattered
(22:00):
across the world that are currently being held. They want
to bring that directly to Ukraine. The Europeans have resistant
to that. What has been interesting is some of the
debates on how to maybe do it to make everyone happy.
The United States, for example, has suggested these so called
freedom bonds, you know, and putting American branding on it,
which basically is issuing bonds and using the underlying assets
as collateral, so you don't touch the underlying asset, but
(22:20):
you can still monetize it and get more of that
money to Ukraine.
Speaker 2 (22:24):
Now, central bankers, as you mentioned Oli, will be attending
this meeting as well. Of course, inflations still a big
question for these major global economies. Should we expect to
hear much about the broader issues around the path I
had for interest rights?
Speaker 10 (22:38):
I would think so. I mean, wherever there are central
bankers there is a rate debate, and if Bloomberg is
there will certainly be chasing it and we may be
speaking to a few of them. I can't tell you
who exactly because we haven't confirmed it, but there will
be certainly a conversation about what the stance is on
rate policy going forward. And of course, how does this
trade question now front and center? How does that read through?
I mean, the debate forming at the ECB is not
(22:59):
whether or not the going to be a cut, it's
what happens after the cut. What is the default sort
of stance for the ECB? Does it have a neutral
bias or an easing bias? And you have people on
either side of that. You have Panetta from Italy who's
saying that really we should have an easing bias, maybe
pushing that for it. In the Nogle from the Bundesbag
saying no, we need to stay neutral until we see
what happens.
Speaker 2 (23:18):
Yes, that's another debate that's going to be happening at
the G seven two. I mean more broadly, Oliver, is
the G seven a forum that's fit for purpose. We're
talking about some of very diverse issues being discussed at
this forum as well, but does it actually produce concrete decision?
Speaker 10 (23:35):
Well, let's think about what this forum is, right, the
G seven. For a very long time, this was the
G eight, right, and now it is the G seven,
And that happened ten years ago. And I was actually
just looking at a picture of the last G eight,
you know, meeting. It's sort of astounding. You see fonswau Land, Obama,
David Cameron smiling, Merkle is there and Putin is there.
Speaker 4 (23:53):
Right.
Speaker 10 (23:54):
And in the last sort of ten years, ever since
the sort of invasion of Crimea, we've seen a real bifurcation,
of fragmentation of global order. So there's the question of
the broader G twenty in the sort of breakoff of
the bricks, as you mentioned, you know, there's this you know,
G came to Europe and then Putin went to Beijing
saying that they're going to have a very good relationship
for generations to come. So there's a question of how
much influence the G seven has over others. But even
(24:16):
within the G seven there is all this talk about
sort of protectionistic policies of China, the G seven itself
within there is being protectionist itself. I mean the Inflation
Reduction Act. There's not a lot of talk going on
around it. But this hits Europe very very hard. And
you're not hearing so much about the American European relationship.
You know, post pandemic, it was all about friend shoring
and securing supply chains that way. But really even under Biden,
(24:38):
you're hearing a slightly more America first kind of policy
and Europe alone, and that is really hanging over this
G seven meeting.
Speaker 2 (24:45):
Thanks to our correspondent Oliver Crook, who will be bringing
us coverage on Bloomberg Radio and television of the G
seven finance ministers meeting in Italy in the coming days,
I'm Stephen Carol in London. You can count us every
weekday morning here for Bloomberg Daybreak Europe, beginning out six
am in London and what am on Wall Streets.
Speaker 1 (25:03):
Tom, thank you Steven, and coming up on Bloomberg day
Break weekend, we look ahead to the inauguration of Taiwan's
president elect. I'm Tom Busby and this is Bloomberg. I'm
(25:24):
Tom Busby in New York with your global look ahead
at the top stories for investors in the coming week.
Taiwan's president elect Lee Ching Da will be inaugurated in
the coming week. Let's go to Bloomberg Daybreak Asia host
Brian Curtis and Doug Krisner for more.
Speaker 3 (25:39):
Tom William Lai takes office at a critical time, with
tensions running high. In recent days, China said live faces
a choice between peace and confrontation. On Wednesday, Beijing said
that it would sanction five taiwan political commentators and roll
out a new law to punish separatists.
Speaker 12 (25:58):
In addition, Taiwan finds itself in the middle of worsening
relations between the US and China. Now on the economic side,
President Biden just slapped new tariffs on Chinese imports and
accused China of cheating on trade. Then there's the political front.
China's Foreign Ministry bristled it reports on the US and
Taiwan conducting naval drills last month.
Speaker 3 (26:20):
Additionally, the US will send a delegation of former officials
to the inauguration. The fact that their former officials may
placate China to a certain degree, but Beijing still won't
be happy as such, Doug and I thought it would
be a good time to take a closer look at
the trilateral relationship and see how it might change under
the presidency of Lei ching Dug. We asked John Liu,
(26:43):
Bloomberg Executive editor in Beijing, if Taiwan is at a crossroads.
Speaker 13 (26:48):
Taiwan is definitely the most dangerous flashpoint in this relationship
between the United States and China. Whether William Lae's ascendence
to the presidential office will be the spark that sets
off some sort of conflict, I think that looks relatively
unlikely at the moment. We are expecting him to stick
to the line from the previous administration of Tiing I.
(27:11):
He has said that publicly he plans to be a
continuity president of anything. I think the speech that he
will be giving at his inauguration will be tuned to
try and both show him and his party is defending Taiwan,
but also not to cause any upsetness in Beijing or Washington.
Speaker 3 (27:29):
Bloomberg Executive editor in Beijing, John Liu, Now for discussion
on this. We're joined by Bloomberg's Type A bureau chief
Samson Ellis and deputy Bureau chief Cindy Wong. So, Sam,
let me go to you first. Is John Wright there
that Lai is likely to be pragmatic and push for continuity.
Speaker 11 (27:48):
Those are certainly the indications we have right now. Obviously
we're speaking before he has taken power, But over the
past year he has strenuously emphasized that he will to
size previous line of being willing to talk to China,
but only on the basis of equality, that the two
sides sit down and speak to each other as equals.
(28:10):
That's obviously a condition that China is very unlikely to
be able to accept. Plus he's also said that there
will be no formal action for him to in some
way formalize Taiwan's independent So I think that's his way
of signaling to the United States and to Beijing and
to the time Inese public and the world at large
that there isn't going to be some kind of declaration
(28:33):
of independence during his presidency to try and put people
at ease that he's not going to be a troublemaker
throughout his term.
Speaker 12 (28:40):
Cindy, from what I understand, William Lai took about forty
percent of the popular vote. When you look at a
number like that, you may conclude that the mandate that
William Lai has is not that strong. Am I right
about that?
Speaker 6 (28:53):
Yeah?
Speaker 14 (28:53):
Exactly. He only got forty percent of the vote in
the general election, and that made him the first Taiwan
president since year two thousand that didn't win an outright
majority vote, So that's relatively weak man day. And also
the Taiwanese voters just gave the majority of the legislature
to the opposition KMT, hoping that there would be some
(29:17):
check and balance in the government. So I think with
that challenges that that means lies any policies or reforms
is going to face the legislative hurdles. So going forward
the next four years is going to be a very
daunting tax ahead for him, Cindy.
Speaker 3 (29:35):
One would think that lie, given his past and sort
of leaning toward Taiwan independence, that he would be even
less popular with China than signing one was.
Speaker 14 (29:46):
Yeah, definitely. So just to give you a little bit
of contest. The ruling Democratic Progressive Party or the DPP
champion that strong sense of Taiwan identity distinct from China,
and Lai used to being for his pro independent stance.
He used to describe himself as a pragmatic worker of
Taiwan independence. Although during the presidential campaign he has been
(30:09):
very measured. He didn't talked about independence at all. Instead,
he said Taiwan is already a de facto state and
there's no need to declare independence. Still, the past comments
and past records made him very unpopular with China. China
revealed lie with deep suspicion and deep distrust, and China
has already labeled him as an instigator of war or
(30:33):
a separatist. So it is believed that going forward for
the next four years, since China has already cut off
all the communication with Taiwan since President's Hi took office
in twenty sixteen, and for the next four years, it's
unlikely that it would possibly resume any communication with Taiwan
(30:53):
given their dis deep distrust of life. So one important
thing to watch from lives inaugurate speed each would be
if he has any comments or new narrative about the
cross relations going forward, or if he is able to
propose any kind of framework that could break the deadlock
between China and Taiwan and resume the communication between the
(31:15):
two sides.
Speaker 12 (31:16):
Again, Sam, the current President Sin Wing has been in
office for eight years now, two terms term limited. During
a big chunk of that period, since about twenty nineteen,
I think that we have seen a much harder line
from Beijing when it comes to Hong Kong, and I'm
curious about possible ripple effects. Has a harder line on
(31:36):
Hong Kong impacted the politics of Taiwan in any way.
Speaker 11 (31:40):
Well, it certainly did in twenty nineteen and twenty twenty,
the last election, when Taiwan a resounding re election. You know,
at that point we were at the height of the
authorities cracked down against protesters in Hong Kong, and that
definitely engendered a sense of sympathy from voters in Taiwan
and a you know, no desire to move towards a
(32:04):
friendlier stance with Beijing. But then there's the long term
repercussions of that. Certainly that you know, China's offer for
Taiwan essentially as you know, the same as to Hong
Kong one country, two systems, except that you're part of
China and will let you keep your democratic system and
your way of life largely untouched. But the big lesson
(32:26):
from Hong Kong obviously is that they promised to keep
that for fifty years and then they didn't. They just
swooped in and they have radically changed how things are
run in Hong Kong, and that really has served as
a lesson for Taiwan as a whole.
Speaker 3 (32:39):
And Taiwan people have spoken very clearly that that is
not something that they can accept. But on the other hand, Samson,
and this is something we've talked about before. We often
hear that, you know, despite what you hear from pundits
about all of this geopolitical fear and threats, Taiwan people
are actually pretty relaxed. They've they've been dealing with this
(33:00):
for more than seventy years. Is that likely to continue
to think over the next four years underline?
Speaker 11 (33:06):
For sure. I mean, one of the remarkable things about
being in Taiwan, living in Taiwan is seeing how much
more nervous people outside of Taiwan are than people inside Taiwan.
Will often, you know, get very worried phone calls from
Hong Kong or Singapore or London on New York people
worried of you know, is the invasion about to happen?
(33:26):
How worried are you? And in Taiwan life goes on
as normal, you know, people, as you say, they're very
used to these threats or these tensions with China. As
for how things will play out over the coming four years,
that that's going to be very interesting to see. Sources
do indicate to us that there's a good chance that
China slowly starts to ratchet up the tension. As you
(33:49):
pointed out at the beginning of this conversation, they appear
to already be doing that with new sanctions against certain
individuals in Taiwan. So these are the so called gray
zone tactics that China deploys, like a range of measures
that fall below the threshold of outright warfare that are
(34:11):
designed to influence and coerce Taiwan to do Beijing's bidding.
The thinking is that we're likely to see a big
increase in these kinds of tactics over the coming four
years in an effort to stop Taiwan and voted in
particular from wanting to give the DPP another four year term.
Speaker 12 (34:32):
Cindy, It's remarkable when you look at the degree of
concentration of semiconductor manufacturing in Taiwan. This is obviously a
TSMC story, but we know one of the things that
the US has been doing, to a lesser extent Europe
addressing this perhaps over concentration and trying to diversify away
from Taiwan. Is there concern about that when you look
(34:55):
at the economics of the island.
Speaker 14 (34:57):
Yeah, there is certainly some concerns and bait within Taiwan
about whether we should let TSMC to continue to broad
its ship plants overseas. And that's also a question that
we asked the incoming President Lighting the last August when
we had a chance to sit down with him, and
then Light said at that time that he won't stop
(35:19):
TSMC from building more chip plants in the US or
in other countries because he thinks Taiwan has a responsibility
to the world and the fact that TSMC is diversifying
its ship plans and building chip plants overseas, it's to
show that Taiwan's economic advantage and the power of Taiwan.
Speaker 3 (35:39):
That said Cindy. We spoke with Sean Darby from the
Zuho Securities and he said that the global trend of
on shoring will actually mean that semiconductor output in Taiwan
will slow. Now it'll still be TSMC to a certain
degree and other companies, but jobs in Taiwan may suffer.
Speaker 5 (35:59):
The irony is that the competitive part of Taiwan's semiconductors
is to some extent being hollowed out through this, you know,
sort of on shoring in the developed world, and in
that respect, you're not going to get the same level
of output growth that you would have had in pre
proceeding cycles. You know, sometime in two or three years
(36:19):
from now, in fairness that time, one is going to
sort of see below trend growth from twenty twenty five
twenty six purely because they don't have that same facilities
in situ.
Speaker 3 (36:30):
And Cindy, will that be a problem for a Taiwan
that some of these jobs will move offshore.
Speaker 14 (36:35):
I think that's definitely something people will keep and close
eye on from incoming present. Lyes in inaugura speech, it
is believed that he will certainly talk about his plans
to boost Taiwan's economy, and also he has already previously
avowed to continue strengthening Taiwan's chip sectors. We know that
(36:57):
before his inauguration, he's already set up meeting with representatives
from the chip industry is trying to understand what would
be the best policies for the industry and for the
country as well. So we're sure that from his inaugural
speech next Monday, we're going to hear more details about
his plan to beef up Taiwan's economy and how to
(37:19):
strengthen the chip industry going forward.
Speaker 12 (37:21):
Sam and Cindy, thank you so much for joining us
and helping us set up the inauguration of Taiwan's new president,
Light ching Da that will be happening in the week ahead.
Samson Ellis is Bloomberg's Taipei bureau chief and Cindy Wong
is deputy bureau chief. In our Taipay newsroom, I'm Dereg
Krisner along with Brian Curtis in Hong Kong. You can
(37:42):
catch us weekdays here for Bloomberg Day Break Asia beginning
at eight am in Hong Kong eight pm on Wall Street. Tom.
Speaker 1 (37:49):
Thank you, Doug, and thank you Brian. 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.
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