February 28, 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 preview of the February jobs report and a look at earnings from Macys and Gap.
- In the UK – a preview of the 'Special European Council.'
- In Asia – a look ahead to economic data in Australia, and a discussion on China’s tech rally.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
This is Bloomberg Daybreak Weekend, our global look at the
top stories in the coming week from our Daybreak anchors
all around the world. Straight ahead on the program, and
look ahead to the latest on the US labor market
how that could impact FED policy. I'm Tom Busby in
New York.
Speaker 3 (00:25):
I'm Caroline Heatcer in London, where we're bringing you the
latest on Europe's defining moments.
Speaker 4 (00:30):
I'm deg Prisner looking at Australia's economy ahead of some
key data points in the week ahead.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three to zero, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Sirius
XM one twenty one, and around the world on Bloomberg Radio,
dot Com and the Bloomberg Business App.
Speaker 2 (01:02):
Good day to you. I'm Tom Busby, and we begin
today's program with the February jobs report. Here in the US,
we'll get non farm payroll numbers Friday, eight thirty am
Wall Street Time, and for more on this and how
it could possibly impact FED policy moving forward. We're joined
by Michael McKee, Bloomberg International Economics and Policy correspondent. Well, Michael,
(01:23):
let's start with what you expect to see in these
numbers for February.
Speaker 5 (01:27):
Well, we're going to get a lot more data before
Friday that will maybe lead economists to adjust some of
these numbers. But basically, what we've seen is what we'll
get is what they're saying. Last month, we had one
hundred and forty three thousand jobs. This month, they're looking
for about one hundred and fifty eight thousand, no change
in the unemployment rate, expected to stick at four percent.
(01:51):
Average hourly earnings will be a little bit lower on
a month over month basis, a little bit higher on
a year over year basis, just because of the number
of weeks in the month and that sort of thing.
The biggest thing is there is no confidence around any
of these numbers because we don't know what's the impact
of the new administration has actually been on all the numbers.
Speaker 6 (02:15):
Not just jobs, but everything else, everything else, well jobs,
Speaking of jobs in this administration, we're not going to
see all these massive layoffs till March.
Speaker 2 (02:26):
Numbers maybe April, maybe even later.
Speaker 5 (02:28):
Right, Yes, first thing is that they didn't really start
all the layoffs till February fourteenth, and that was the
last day of the survey period. And if you work
for just an hour during the two week survey period,
you're counted as employed. So that won't have an impact
unless there was some changes the administration made really early on,
(02:49):
but they would be small. We still aren't seeing it
in the jobless claims numbers. What we might see is
something in average hours, because we've seen these surveys that
show a bit of a decline in enthusiasm. So if
companies are being careful about putting people to work or
(03:12):
working any overtime, they might cut back a little bit
on that.
Speaker 2 (03:16):
Before we talk about some of the data that's coming
up next week, let's talk about what we learned about
this past week, because some very telling and again you
mentioned the Trump administration, the great unknowns ahead of the
Trump administration coming in like this. The merchandise trade deficit that.
Speaker 5 (03:33):
We got, Yeah, it was the biggest trade deficit ever,
one hundred and fifty three billion dollar deficit, largely because
companies were afraid of tariffs and they were importing a
lot of supplies ahead of time industrial supply imports went
up thirty three percent. People were stockpiling because they don't
(03:54):
know exactly what's coming, which leads us to Tuesday and
the administration's theoretical announcement of tariffs. Because we don't know
whether the President will pull back or not. I think
a lot of people are hoping he doesn't postpone them,
in the sense that at least if you get a number,
then you can start planning around it. And that's what
(04:17):
the FED would like to see, and I'm sure a
lot of companies would like to see to have an
idea of exactly what's going to happen. Otherwise you're going
to keep importing a lot of stuff.
Speaker 2 (04:27):
Yeah, yeah, yeah, you push it back, push it back,
and it will be stockpiled here in the US. Now,
we also got PCE numbers just on Friday, and what
does that tell us about inflation?
Speaker 5 (04:37):
Tells us we're still making some progress. They came in
as expected. It's pretty easy for economists to anticipate what
the numbers will be because a lot of it comes
out of the CPI and PPI reports, which we got
a couple of weeks ago. So there was still some
progress that is not a bad news story like the
CPI was, and so it keeps the Fed on track
(04:59):
to maybe at some point resumed lowering interest rates. But
all this again depends on the President and what he's
going to do. We saw a big decline in spending.
After an eight tenths increase in December, we saw spending
fall by two tenths of a percent, which is not
(05:19):
good news. And it also parallels those bad consumer sentiment
reports that we got. So the question for the Fed
or for Wall Street about the Fed is are they
going to cut rates anytime soon because inflation has behaved
and they can as they were, or because the economy
is slowing down and it's an emergency and we have
(05:41):
to cut interest rates.
Speaker 2 (05:42):
Well, a lot to look forward to the February jobs
report out this coming Friday. Our thanks to Michael McKee,
Bloomberg International Economics and Policy correspondent. We moved next to
some fourth quarter retail earnings in the US from Macy Easter,
the nation's largest apartment store operator, and the clothing chain Gap.
They're both out on Thursday. Now for more on what
to look for in those Q four results, their outlooks
(06:04):
for the year ahead, the impact of stubbornly high inflation,
the threat of more US tariffs. What all that tells
us about consumer spending? I know it's a lot, But
we're joined by Mary Ross Gilbert Bloomberg Intelligence, senior equity
analysts covering retail. Well, Mary, thank you for joining us.
Let's start with what you expect to see in those
earnings reports from Macy's and Gap, and this includes the
(06:25):
all important holiday quarter.
Speaker 7 (06:28):
Yes, tom, so when we look at Macy's, Macy's already
came out and gave us a little preview of what
they saw quarter to date, and at that time they said, Okay,
we're going to be at the lower end of their
seven eight billion in revenues for the quarter, so it
was going to be seven point eight to eight billion.
Analysts are right around that low end at seven point
(06:49):
eight billion, and based on consumer transaction data, we think
they come in near that estimate, maybe even slightly beat.
On the earnings per share side, analysts are at about
a buck fifty four. We think they likely beat that estimate,
as they have in the past eight quarters. But the
real focus here is going to be on the go
(07:12):
forward business for Macy's and also as you pointed out
there's going to be a little discussion on tariffs. They
don't have a huge exposure. Their private label business is
probably around fifteen percent of sales, and then the portion
that they source from China is less than that. They
haven't disclosed specifically, but we estimate they're probably somewhere around
(07:36):
under five percent of revenues in terms of exposure there.
But we will get a little update with GAP. We
think the company beats analyst estimates. So analysts are estimating
revenue to fall five point three percent. We think sales
may decline just one to two percent, and this is
based on Bloomberg second measure transaction data as I mentioned
(07:58):
earlier with Macy's, and also on the earnings per share side,
we see them beating analysts are looking for just thirty
seven cents a share. That company is really executing Old Navy,
which is just over half of the business, just to
debuted a new performance fabric for its activewear line called
Studio Smooth. So think Viory and Lulu Lemon and the
(08:19):
really buttery soft leggings that they have and they retail
for ninety eight dollars. Old Navies is just twenty eight
dollars and it's already selling very well, so I think
that very very strong execution. Their Gap has just been doing.
The Gap brand itself has been doing very well and
just debuted a new video campaign featuring Parker Posey and
(08:44):
talking about living Gap and gaps feel like Gap.
Speaker 2 (08:48):
Well well, and she's now on that hit HBO show,
a White Lotus, So good timing there. Gap exactly not
the same though at its two other brands, Banana Republic
and Athleta, still lagging.
Speaker 7 (09:02):
Actually no, I think I think you're seeing both of
those pick up. I'm more confident in Athleta in terms
of where they are. With Banana Republic, I think they're
doing fine according to the transaction data. I think those
also are probably tracking a little bit better than analyst estimates.
They're smaller because the two biggest pieces of the business
(09:25):
are really Old Navy and Gap. But we're really looking
for new leadership at Banana Republic to really set directions,
so it doesn't it doesn't seem as exciting to me
as it was before. But I think you know that
could change once they bring in new leadership. But they
do have a new speaking of White Lotus, Banana Republic
(09:47):
is going to do a collaboration, so it's going to
be you know, Banana Republic x White Lotus and that's
going to be dropping next Wednesday. I know that in
the store here and sen City. They just sent me
an invite to come attend that, so I think that
could be really exciting.
Speaker 5 (10:05):
Wow.
Speaker 2 (10:06):
Yeah, they're forward thinking by the gap.
Speaker 5 (10:08):
Huh.
Speaker 2 (10:09):
Well, let's go back to Macy's because Macy's and they
also have some other brands that have been doing very well,
right Blue Mercury, Bloomingdale's. But Macy's and it's addressed some
challenges it has had, closing stores over the last year,
investing more money and successful ones. So what's what's the
strategy there and is it working for Macy's.
Speaker 7 (10:28):
Yes, Tom, So you're absolutely right. This new strategy which
is where they're guess what, they're going back to their
basics and that is adding more service in their stores.
They've also really improved the store so when you go in,
they're a lot more open, there's no clutter there, and
they're bringing in more relevant brands. So a brand that
(10:49):
they brought in its the a VC Luffy and this
was a brand that was started in twenty seventeen by
Max Azria's daughter Joyce Asria, and it's wonderful, beautiful, stylish
clothes that really appeals to the millennial. They've Macy's had
it since twenty seventeen, but it was just in a few,
(11:11):
you know, in a limited amount of doors, and now
that's been expanded and I just saw it in our
store here in Century City, So that's brand new for
this store. But I think it's absolutely on trend and
relevant and should do really well. So they need to
do more of that. And so in these stores that
they are revitalizing, they did see a lift in positive
(11:32):
comp sales, but it's small, right, because they did fifty stores.
They're now adding another seventy five stores, including the one
next door to me, and I've already seen the improvement there.
But still when you look at Nordstrom, I mean the
traffic there is always busier, and I think, you know,
we'll see good numbers coming out of Nordstrom. So I
(11:52):
think they have a ways to go with the mainline Macy's.
But as you pointed out, Bloomingdale's and bloom Mercury are
really doing well. Those are comping positive and we think
they get a lift with the sax Nieman merger because
they're having issues with vendors and customer service, and that
could shift more luxury sales to Nordstrom and Bloomingdale's.
Speaker 2 (12:12):
Well, a lot to look forward to our thanks to
Mary Ross, Gilbert Bloomberg Intelligence senior equity analyst covering retail.
Coming up on Bloomberg day Break weekend, we'll look ahead
to a special European Council summit how that may impact
the war in Ukraine. I'm Tom Busby, and this is Bloomberg.
(12:41):
This is Bloomberg day Break Weekend, our global look ahead
at the top stories for investors in the coming week.
I'm Tom Busby in New York. Up later in our program,
we'll look ahead to the first reading of Australia's economy
following the RBA's first rate cut since November of twenty twenty.
But first, the path to peace in the war in
Ukraine took our radical turn this week as a meeting
(13:02):
between US President Donald Trump, Ukraine President Volodimir Zelensky, and
US Vice President JD Vance devolved into an argument right
in front of the White House Press. Here's what that
sounded like when they met in the Oval Office on Friday.
Speaker 8 (13:15):
We're trying to solve a problem. Don't tell us what
we're going to feel. I'm because you're in no position
to dictate that.
Speaker 9 (13:22):
Remember this, you're in no position to dictate what we're
going to feel. We're going to feel very good.
Speaker 8 (13:29):
Feel We're gonna feel very good and very strong influence.
You're right now, not in a very good position. You've
allowed you be in a very bad position to be
right about from.
Speaker 9 (13:40):
The very beginning of the war.
Speaker 8 (13:41):
Not in a good position. You don't have the cards
right now with us. You start having right now, you pay.
You're gambling with the lives from millions of people. You're
gambling with world War three. You're gambling with World War three.
And what you're doing is very disrespectful to the country.
(14:03):
This country. It's back to you far more than a
lot of people said they should have have.
Speaker 9 (14:09):
You said thank you once this entire meeting. No, in
this entire meeting, you said thank you.
Speaker 10 (14:14):
You went to Pennsylvania and campaigned for the opposition in October.
Offer some words of appreciation for the United States of
America and the president who's trying to save your country.
Speaker 11 (14:26):
Please, you're saying that if you will speak very loudly
about the war.
Speaker 9 (14:31):
He's not speaking loudly. He's not speaking loudly. Your country
is in big trouble. No, No, you've done a.
Speaker 8 (14:37):
Lot of talking. Your country is in big trouble. I
know you're not winning. You're not winning this.
Speaker 9 (14:43):
You have a damn good chance of coming out okay,
because of the President.
Speaker 11 (14:47):
We're staying Yawa country staying strong. From the very beginning
of the war, we've been alone, and we are thankful.
Speaker 9 (14:53):
I said, thanks.
Speaker 8 (14:56):
We gave you, through this stupid president, three hundred and
fifty billion dollars.
Speaker 9 (15:01):
We gave your military equipment.
Speaker 8 (15:03):
You and your men are brave, but they had to
use our military If you didn't have our military equipment,
If you didn't have our military equipment, this war would
have been over in two weeks.
Speaker 11 (15:14):
In three days, I heard it from Putin in three days.
This is how maybe less in two weeks.
Speaker 9 (15:20):
Of course, Yes, it's gonna be a very hard thing
to do business like this. I tell you this. They
thank you.
Speaker 11 (15:25):
I accept, except that they're accept the American except that.
Speaker 10 (15:29):
There are disagreements, and let's go litigate those disagreements rather
than trying to fight it out in the American media.
Speaker 9 (15:35):
When you're wrong.
Speaker 8 (15:37):
We know that you're wrong, but you see, I think
it's good for the American people to see what's going on.
I think it's very important. That's why I kept this
going so long. You have to be thankful. You don't
have the cards. You're buried there, your people had died.
You're running low on soldiers. Listen, you're running slow on soldiers.
It would be a damn good thing.
Speaker 9 (15:58):
And then you then you tell us I don't want
to cease fire. I don't want to cease fire. I
want to go and I wanted this.
Speaker 8 (16:04):
Look, if you could get a ceasefire right now, I
tell you you take it. So the bullets stopped flying,
and your ment stuff courting kills.
Speaker 9 (16:11):
Want to stop the war. But I'm saying, you don't
want to see you.
Speaker 8 (16:15):
I want to see guarantee because you'll get a ceasefire
faster than any Greelet's cow.
Speaker 9 (16:19):
Are people about fire? What they see? That wasn't with me.
That wasn't with me. That was with a guy named Biden,
who was not a smart person. That was your That
was with Obama. Excuse me.
Speaker 8 (16:32):
That was with Obama who gave you sheets, and I
gave you javelins. I gave you the javelins to take
out all those tanks. Obama gave you sheets. In fact,
the statement is Obama gave sheets, and Trump gave javelins.
You got to be more thankful, because let me tell you,
you don't have the cards. With us, you have the cards,
(16:53):
but without us, you don't have any cards.
Speaker 2 (16:56):
The sharp encounter between Presidents Trump and Zelensky plus Vice A.
Speaker 10 (17:00):
JD.
Speaker 2 (17:00):
Vans overshadowed what was supposed to be a moment of
unity between the leaders and put any possibility of a
peace deal between Russia and Ukraine in question. Now does
it fall to Europe to form a resolution for more
Let's go to London and bring in Bloomberg Daybreak Europe
anchor Caroline hepgar Tom.
Speaker 3 (17:18):
This week, Vladimir Putin's new Envoy for Foreign Economic Cooperation
took to X for the first time since twenty twelve.
Kiril Dimitriyev used the platform to declare the importance of
US Russia cooperation to address what he's described as world challenges.
His sudden re emergence on the site after years of
(17:39):
silence highlights the rapid rehabilitation of Russia by President Trump
and the new challenge now facing the international community. European leaders, meanwhile,
are holding a special European Council in the coming days,
taking place just two weeks before a planned quarterly summit.
They're going to discuss defense spending and Russia's war on
(18:02):
Ukraine in a world without the historically assured US security guarantee.
The emergency summit will aim to take stock of US
EU relations after various leaders have held meetings at the
White House to get FaceTime with the US President. So
what will happen next in this extraordinary few weeks for
(18:23):
global politics, and who, if anyone, will succeed in winning
the favor of President Trump. I've been speaking to Bloomberg's
EMEA News director of Roslyn Matheson.
Speaker 12 (18:34):
If you're a leader in Europe at the moment, you
spend a lot of time saying very much out loud,
We're going to spend more on defense, that's very clear,
and we are starting to see some numbers come around then,
including in the UK of course obviously as well. But
what we're understanding in Europe is that the EU is
basically trying to find a way to unlock hundreds of
(18:54):
billions of euros in extra funding for defense, and that
could come in a bunch of different ways, including potentially
the joint issuance of bonds for example, repurposing existing funds,
as well shifting spending from other places. But that's going
to be part of the conversation when EU leaders meet,
is how practically they can all start to increase the
(19:17):
defense spending, both at a national level and also at
a European level, and how they can show that very clearly,
in particular to the US President Donald Trump, that they're
meeting their words with action. The question is will there'll
be agreement across the EU and the leaders meet about
a doing that and then b how to do it
and what's the best mechanism to do so, because of
(19:39):
course these all come with costs at home, and if
you're talking about potentially ramping up joint issuance about shifting spending,
that may come at the expense of other programs that
Europeans want, and so you could see some domestic comparatives
feed in their way. People say, well, hang on, my
voters don't want that to happen, and they could be
a backlash for me. So we're expecting there to be
(20:02):
a proper conversation about the mechanism to increase defense spending.
Are we going to see an actual agreement come from
this meeting? That's really up in the air.
Speaker 3 (20:11):
There is European leaders are speaking to president from making
visits to Washington, took us through their communication priorities with
the presidents.
Speaker 12 (20:22):
Well, we had Emmanuel mccron obviously from France there, and
we've also got the UK Prime Minister Kirstarma meeting with
Donald Trump. And the message from that is really that
the US cannot afford to go it alone when it
comes to things like Ukraine and Russia, that really Europe
does need to be very much in the conversation. So
(20:43):
it was the UK when it comes to things like
conversations around future security guarantees for Ukraine for example, when
it comes to conversations around mutual defense for example. So
there'd be a message about how yes, Europe and the
UK have gotten the message and they're going to increase
their own defense spending and their own security. But also
(21:04):
that when Donald Trump talks about resolving things like Ukraine
for example, that he really does need Europe in the conversation.
Speaker 3 (21:12):
What do you think the attitude of the newly elected
chancellor and waiting Fred Mertz might be as he looks
to form a government. And whilst President Trump has used
his strongest language yet in recent days about the EU
I either the European Union set up to screw the
(21:35):
US in his words, what do you think the attitude
of Germany is going to be to this obviously central
to policy making in Europe, will.
Speaker 12 (21:44):
Be very interesting because in fact Friedrich Merz is obviously
not chantilly yet and he has got to work out
how to form a government. But he's already met with
the French President Emanuel Macron. So he's getting his ear
to the door there at least in the conversations as
things are moving so quickly these days when it comes
to the political landscape and the geopolitical landscape, and so
(22:06):
he's obviously part of the conversation already, which is very important.
Frederick Motz actually might have a bit of a rapport
with Donald Trump. They are both conservative of though conservative
in different ways. And Donald Trump did congratulate Fredrick Matz
on his election win in Germany quite quickly, and you know,
welcoming a conversation with him sometime soon, and so there
(22:29):
might be a little bit of common ground just in
terms of how they talk to each other and really
having a rapport is probably the very first and most
important step these days in dealing with the US under
Donald Trump. So it's possible he might actually gel a
bit with Donald Trump. That said, Frederick Mots has also
been a fierce advocate for Ukraine and for the need
(22:51):
for Ukraine to be supported, and so there might be
some points of difference around that. And obviously, of course
if there are to be tariffs on European goods as well, it's.
Speaker 3 (23:00):
Not just about hot wars, about military wars, it's also
possibly about economic war, certainly about trade tariffs. How do
you think Europe is thinking about this? The tit for
tat idea that there could be retaliation from the EU
if President Trump does impose, as he has said he
(23:21):
wants to twenty five percent tariffs. It's very murky, actually,
the rhetoric versus the reality of tariffs out.
Speaker 12 (23:29):
Of the Trump White House currently, and we don't know
exactly what a twenty five percent tariff on the EU
would look like. We don't know whether that would be
all exports that are sent from the EU into the US,
or only certain sectors or certain products. It's very unclear
what exactly we're looking at. And that's why you can
see for now that while European leaders and the European
(23:53):
Union are saying they will very firmly retaliate if needed,
and they are drawing out plans indeed to do so,
and they have lists indeed to do so, that they're
holding their fire a little bit because it's very unclear
exactly what they're dealing with. We can see, for example,
with Canderine Mexico that tariffs are not being implemented immediately.
(24:15):
There's further talk potentially about them being pushed back again.
So if you come out too strongly there, you know,
do you risk Donald Trump's iron does he then pushed
her head quickly on tariffs that he didn't intend to
move so fast on, for example, And so it's really
about the game of trying to work out how to
manage the situation with Donald Trump in a theoretical sense
(24:36):
when tariff's not yet real but are possibly coming and
we don't know what those tariffs might look like, but
certainly we do know that European Commission has drawn up
list of goods for potential retaliation and have said very
clearly they're willing to use them if needed.
Speaker 3 (24:52):
My thanks to Bloomberg's EMEA News director Roslyn Matheson for
speaking to me and will continue to bring you full
coverage of the special European Council planned for Thursday, the
sixth of March. I'm Caline Hepge here in London. You
can catch us every weekday morning for Bloomberg Daybreak Europe,
beginning at six am in London. That's one am on
Wall Street.
Speaker 2 (25:11):
Tom, Thank you, Caroline. And coming up on Bloomberg day
Break Weekend, we'll look ahead to a slew of economic
data out of Australia next week. I'm Tom Busby and
this is Bloomberg. This is Bloomberg day Break Weekend, our
(25:34):
global look ahead at the top stories for investors in
the coming week. I'm Tom Busby in New York. A
ton of economic data coming out of Australia this week,
including the first reading of the country's economy following the
Reserve Bank of Australia's first rate cut since November of
twenty twenty. For more, let's get to the host of
the Daybreak Asia podcast, Doug Krisner.
Speaker 4 (25:55):
Tom, we're looking ahead to the report on Ozzie GDP,
along with numbers on Reek hell sales and trade. They're
all on tap for more on what we can expect.
I'm joined by Swati Pondi, Asia Eco GUV reporter for
Bloomberg News. Swati joins us from our radio studio in Sydney.
Thank you for making time for us. Can we begin
by taking a step back because it was only a
(26:16):
few weeks ago that the Reserve Bank of Australia cut
the policy rate for the first time in more than
four years. So a lot has been happening with the
Australian economy. Maybe it's a little complicated. Can you help
me understand where things stand at the moment.
Speaker 13 (26:30):
Yes, it's all happening in Australia, Doug. We had the
first rate cut in four years. The Reserve Bank of
Australia had been a laggard in this easing cycle and
finally it delivered a cut and that was largely driven
by inflation report which showed that price pressures are indeed cooling,
(26:53):
which was one of the RBA's biggest concerns last year
when it decided to keep rates unchanged, and then come January,
the data showed that prices are cooling in. Consumer sentiment
was weak. People weren't spending, and so the Reserve Bank
(27:14):
thought it's a good time to start easing cycle. But
it was really cautious as well. It sounded very hawkish
despite the rate cut and signaled to the market that
do not expect many more cuts. Maybe it's one and done,
or maybe one more.
Speaker 4 (27:34):
So I mentioned that we're going to get the retail
sales data. How are consumers in Australia behaving right now
in the major cities.
Speaker 13 (27:41):
Look, since pretty much all of twenty twenty four, consumers
were being very stingy. People weren't spending at all. People
were waiting for big discounting events like the November Black
Friday sales and events like that to actually spent. However,
(28:02):
the government gave everybody tax cuts which kicked in in
July twenty twenty four. We also got some subsidies on energy,
we got some subsidies on rents, and that basically gave
people a little bit more of spending power. And then
we also, like I said, inflation came down, so the
(28:23):
real purchasing power of people improved so towards the end
of last year, so kind of November, December January period,
we have seen people spending more and if you go
out in Sydney, it's buzzing. It's crazy buzzing pubs, restaurants,
shopping centers, everything. People are feeling a little bit more
(28:46):
confident and I'm sure the rate cut that we got
in February will further help that too.
Speaker 4 (28:52):
So from what I understand, the labor market is holding
up very well, right.
Speaker 13 (28:56):
That's true, So like the Usustralia's labor market is pretty
strong as well. Our unemployment rate is hovering in that
four to four point one territory, which is really low
by Australian standards, also very low by historical standards. That
is driven by really strong employment growth. It has surpassed
(29:18):
all expectations, and that is because government demand has been
really strong. Government has been spending left, right and center
and that has supported GDP as well as the labor market.
Speaker 4 (29:32):
So I mentioned we will also get figures on trade
in the coming week. Can we talk a little bit
about the potential impact on these US tariffs on Australia.
Is it likely that there will be any impact at all?
Speaker 13 (29:46):
Trade is an interesting topic right now, so quite topical
as well. And Australia is a small, open economy. One
fourth of Australia's GDP comes from trade and thirty per
cent of our exports go to China, so you can
see how vulnerable we are to anything that happens in
(30:08):
the trade side of things. We have had seven years
of trade surplus, so pretty much from twenty eighteen through
til the end of twenty twenty four, every single month
we have had trade surplus. Is that at risk? Not really,
because China's demand still seems really strong. We've had a
(30:32):
period where China puts some embargo on Australian products and
Australia was able to still sell to other markets. Now,
as far as Donald Trump's policies are concerned, Australia does
not export too much to the US. We import a lot,
(30:53):
which is good from Donald Trump's perspective.
Speaker 4 (30:55):
Yeah, but I'm wondering about something like steel and aluminum.
I know that a lot of the ores and minerals
are exported from Australia to China for processing, and if
Chinese demand in those areas were to contract a little bit,
couldn't that have a knock on effect in Australia.
Speaker 13 (31:13):
Yeah, so there is a risk from the cascading effects
or reciprocal effects, and you know, there are a lot
of permutations and combinations that people have been talking about.
The direct impact so far from people I have spoken to,
from economists, and also the responses we have seen from
(31:34):
trade bodies and stuff, seems like from a macro perspective,
Australia will be fine. Obviously, individual companies who are at
the receiving end of these tariffs will be affected, and
they have been lobbying as well, and Australia's Prime Minister
and Trade Minister have been lobbying too to get some
(31:54):
relief from the US. The last time that Donald Trump
was in office, Australia did win no reprieve, so we're
keeping our fingers crossed that happens again.
Speaker 4 (32:04):
I mentioned the GDP report that we're also expecting in
the week ahead. Give me a sense of what the
market is expecting in terms of overall economic growth.
Speaker 13 (32:13):
So, like I mentioned earlier, Australia's economy has been pretty
weak pretty much since the middle of twenty twenty three.
All of twenty twenty four was very tepid. We are
in the deepest per capita slump since nineteen ninety one
excluding the pandemic, which means people have been feeling like
they are going backwards even though the economy has been growing.
(32:35):
So we have not had a recession as such, but
individually people have gone back so that is unlikely to change.
That per capita recession probably is unlikely to change. But
this data that we are expecting is for the last
three months of twenty twenty four. It does look like
(32:56):
the economy did pick up and that was by consumer
spending people feeling more confident about their finances. Public demand
has been strong as well government spending. We have election
this year or two, so some of the spending is
driven by that. So together with consumer spending, trade and
(33:19):
public demand, it looks like the last three months of
twenty twenty four were good and so far the momentum
it's only been like two months of the year, it
looks good as well.
Speaker 4 (33:29):
Swati, thank you so much for helping us understand the
nuances of what's been happening these days in the Australian
economy as we look ahead to this week's ECO data.
Swati Pondi Asia Eco GUV reporter for Bloomberg News, joining
us from our studios in Sydney. Let's turn next to
China and the rally that we have seen lately in
tech talks. So far, these gains have far surpassed those
(33:52):
of their American counterparts. Bloomberg opinion columnist July Wren has
been writing about the Chinese alternative to the MagX. She's
in our Hong Kong radio studio. Truly, it's always a pleasure,
Thank you so much. How would you describe what's been
happening with Chinese tech right now?
Speaker 14 (34:09):
Well, deep Seak really has changed the perception of Chinese investors.
They do feel, I mean, going back, like we know
that the Hong Kong listed is mostly Chinese companies, right
they are deep value traps after the Beijing's regulator crackdown
some big tech and the whole property bubble bust, like
(34:30):
the Chinese shares are very cheap. But deep Sea basically
said that, you know, China is not just a manufacturing powerhouse,
it's also good with the software and digital stuff, right,
Like deep Sea does a generative AI and the people
didn't really expect that the Chin, a small unknown startup
even to the Chinese until a month ago could do
(34:53):
so well despite all the export controls, and that really
fired up. And then what we're seeing is that you know,
the tech stock, the software companies, they're doing very, very well,
and there is a sense that the China can be
a growth market.
Speaker 1 (35:05):
Again.
Speaker 4 (35:06):
In the latest column that you authored for Bloomberg Opinion,
you write that a Chinese alternative to the Magnificent Seven arrives.
And I'm wondering whether you're really focused on a lot
of these e commerce names that we hear so much about,
like Ali Baba Tencent.
Speaker 14 (35:20):
Yes. One thing though, is like a lot of it
is about the positioning, like global asset managers positioning. Coming
into this year, everyone is overweight on basically the big
seven tax stocks, right the so called the notion of
a US exceptionalism, and everyone agrees that the US store
market is overvalued because just simply because so much money
(35:43):
has been coming in and there is this genuine need
to diversify, and now the question is where do you
diversify to? Right, Like China, tex stock is one story.
Another story is European stocks. They have been doing quite
well as well, and there is expectation that the Donald
Trump however you like it politically or not, could propel
(36:04):
peace over Ukraine, which means that it could be good
for European economies, especially Germany.
Speaker 4 (36:10):
You know, Beijin seems to have kind of changed its
attitude where some of the big tech stories in China
are concerned. I'm thinking back to the meeting a few
weeks ago that chi Jinping had with some of the
leaders of these big companies, and I'm thinking of Jack
Ma in particular, as Chijin Ping changed his attitude when
it comes to big tech.
Speaker 14 (36:29):
He has to because, believe it or not, just because
China's economic outlook it's not so good. Right, like the
big tech, the big e commerce platforms political fortunes actually
are improving because they actually soak up a lot of employment.
Right like young people. The unemployment rate for young people
(36:51):
in China is very high. And if young people have
no jobs, they could become delivery workers unfortunately, or like
they could be uber Try in China that would be
d D. Or they could set up a small e
commercer shops selling stuff, or they could be influencers. And
I think Beijing does recognize that these big platforms, they
(37:14):
are job creators and they need to be nice to them.
Speaker 4 (37:16):
When you look at valuation, you're a financial analyst by training.
What do you see when you look at some of
these companies Chinese firms that trade in Hong.
Speaker 14 (37:24):
Kong, everything is relative. I mean Tesla trades at over
one hundred times forward earnings. Shell me and the Bid
they both do evs. They trade at the roughly forty
and twenty five times, and relatively speaking, everyone everyone else
is cheap compared to Tesla, right, And it's not just
that a lot of Chinese feel that the Ela Musk
(37:47):
has been very distracted lately and then that he's not
paying attention to Tesla's business, and that opens a window
for Chinese EV makers and in fact, like a lot
of EV makers, they are adding like a lot of
advanced technology.
Speaker 4 (38:02):
July, thank you so much. It's always a pleasure. Shuly Ran,
Bloomberg opinion columnist, Joining us from our studios in Hong Kong,
and I'm Doug Krisner. You can catch us weekdays for
the Daybreak as your podcast. It's available wherever you get
your podcast. Tom.
Speaker 2 (38:16):
Thank you Doug, and that does it for this edition
of Bloomberg day Break Weekend. Join us again Monday morning,
five am Wall Street Time for the latest on markets
overseas and the news you need to start your day.
I'm Tom Busby. Stay with us. Top stories and global
business headlines are coming up right now
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
This is Bloomberg Daybreak Weekend, our global look at the
top stories in the coming week from our Daybreak anchors
all around the world. Straight ahead on the program, and
look ahead to the latest on the US labor market
how that could impact FED policy. I'm Tom Busby in
New York.
Speaker 3 (00:25):
I'm Caroline Heatcer in London, where we're bringing you the
latest on Europe's defining moments.
Speaker 4 (00:30):
I'm deg Prisner looking at Australia's economy ahead of some
key data points in the week ahead.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three to zero, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Sirius
XM one twenty one, and around the world on Bloomberg Radio,
dot Com and the Bloomberg Business App.
Speaker 2 (01:02):
Good day to you. I'm Tom Busby, and we begin
today's program with the February jobs report. Here in the US,
we'll get non farm payroll numbers Friday, eight thirty am
Wall Street Time, and for more on this and how
it could possibly impact FED policy moving forward. We're joined
by Michael McKee, Bloomberg International Economics and Policy correspondent. Well, Michael,
(01:23):
let's start with what you expect to see in these
numbers for February.
Speaker 5 (01:27):
Well, we're going to get a lot more data before
Friday that will maybe lead economists to adjust some of
these numbers. But basically, what we've seen is what we'll
get is what they're saying. Last month, we had one
hundred and forty three thousand jobs. This month, they're looking
for about one hundred and fifty eight thousand, no change
in the unemployment rate, expected to stick at four percent.
(01:51):
Average hourly earnings will be a little bit lower on
a month over month basis, a little bit higher on
a year over year basis, just because of the number
of weeks in the month and that sort of thing.
The biggest thing is there is no confidence around any
of these numbers because we don't know what's the impact
of the new administration has actually been on all the numbers.
Speaker 6 (02:15):
Not just jobs, but everything else, everything else, well jobs,
Speaking of jobs in this administration, we're not going to
see all these massive layoffs till March.
Speaker 2 (02:26):
Numbers maybe April, maybe even later.
Speaker 5 (02:28):
Right, Yes, first thing is that they didn't really start
all the layoffs till February fourteenth, and that was the
last day of the survey period. And if you work
for just an hour during the two week survey period,
you're counted as employed. So that won't have an impact
unless there was some changes the administration made really early on,
(02:49):
but they would be small. We still aren't seeing it
in the jobless claims numbers. What we might see is
something in average hours, because we've seen these surveys that
show a bit of a decline in enthusiasm. So if
companies are being careful about putting people to work or
(03:12):
working any overtime, they might cut back a little bit
on that.
Speaker 2 (03:16):
Before we talk about some of the data that's coming
up next week, let's talk about what we learned about
this past week, because some very telling and again you
mentioned the Trump administration, the great unknowns ahead of the
Trump administration coming in like this. The merchandise trade deficit that.
Speaker 5 (03:33):
We got, Yeah, it was the biggest trade deficit ever,
one hundred and fifty three billion dollar deficit, largely because
companies were afraid of tariffs and they were importing a
lot of supplies ahead of time industrial supply imports went
up thirty three percent. People were stockpiling because they don't
(03:54):
know exactly what's coming, which leads us to Tuesday and
the administration's theoretical announcement of tariffs. Because we don't know
whether the President will pull back or not. I think
a lot of people are hoping he doesn't postpone them,
in the sense that at least if you get a number,
then you can start planning around it. And that's what
(04:17):
the FED would like to see, and I'm sure a
lot of companies would like to see to have an
idea of exactly what's going to happen. Otherwise you're going
to keep importing a lot of stuff.
Speaker 2 (04:27):
Yeah, yeah, yeah, you push it back, push it back,
and it will be stockpiled here in the US. Now,
we also got PCE numbers just on Friday, and what
does that tell us about inflation?
Speaker 5 (04:37):
Tells us we're still making some progress. They came in
as expected. It's pretty easy for economists to anticipate what
the numbers will be because a lot of it comes
out of the CPI and PPI reports, which we got
a couple of weeks ago. So there was still some
progress that is not a bad news story like the
CPI was, and so it keeps the Fed on track
(04:59):
to maybe at some point resumed lowering interest rates. But
all this again depends on the President and what he's
going to do. We saw a big decline in spending.
After an eight tenths increase in December, we saw spending
fall by two tenths of a percent, which is not
(05:19):
good news. And it also parallels those bad consumer sentiment
reports that we got. So the question for the Fed
or for Wall Street about the Fed is are they
going to cut rates anytime soon because inflation has behaved
and they can as they were, or because the economy
is slowing down and it's an emergency and we have
(05:41):
to cut interest rates.
Speaker 2 (05:42):
Well, a lot to look forward to the February jobs
report out this coming Friday. Our thanks to Michael McKee,
Bloomberg International Economics and Policy correspondent. We moved next to
some fourth quarter retail earnings in the US from Macy Easter,
the nation's largest apartment store operator, and the clothing chain Gap.
They're both out on Thursday. Now for more on what
to look for in those Q four results, their outlooks
(06:04):
for the year ahead, the impact of stubbornly high inflation,
the threat of more US tariffs. What all that tells
us about consumer spending? I know it's a lot, But
we're joined by Mary Ross Gilbert Bloomberg Intelligence, senior equity
analysts covering retail. Well, Mary, thank you for joining us.
Let's start with what you expect to see in those
earnings reports from Macy's and Gap, and this includes the
(06:25):
all important holiday quarter.
Speaker 7 (06:28):
Yes, tom, so when we look at Macy's, Macy's already
came out and gave us a little preview of what
they saw quarter to date, and at that time they said, Okay,
we're going to be at the lower end of their
seven eight billion in revenues for the quarter, so it
was going to be seven point eight to eight billion.
Analysts are right around that low end at seven point
(06:49):
eight billion, and based on consumer transaction data, we think
they come in near that estimate, maybe even slightly beat.
On the earnings per share side, analysts are at about
a buck fifty four. We think they likely beat that estimate,
as they have in the past eight quarters. But the
real focus here is going to be on the go
(07:12):
forward business for Macy's and also as you pointed out
there's going to be a little discussion on tariffs. They
don't have a huge exposure. Their private label business is
probably around fifteen percent of sales, and then the portion
that they source from China is less than that. They
haven't disclosed specifically, but we estimate they're probably somewhere around
(07:36):
under five percent of revenues in terms of exposure there.
But we will get a little update with GAP. We
think the company beats analyst estimates. So analysts are estimating
revenue to fall five point three percent. We think sales
may decline just one to two percent, and this is
based on Bloomberg second measure transaction data as I mentioned
(07:58):
earlier with Macy's, and also on the earnings per share side,
we see them beating analysts are looking for just thirty
seven cents a share. That company is really executing Old Navy,
which is just over half of the business, just to
debuted a new performance fabric for its activewear line called
Studio Smooth. So think Viory and Lulu Lemon and the
(08:19):
really buttery soft leggings that they have and they retail
for ninety eight dollars. Old Navies is just twenty eight
dollars and it's already selling very well, so I think
that very very strong execution. Their Gap has just been doing.
The Gap brand itself has been doing very well and
just debuted a new video campaign featuring Parker Posey and
(08:44):
talking about living Gap and gaps feel like Gap.
Speaker 2 (08:48):
Well well, and she's now on that hit HBO show,
a White Lotus, So good timing there. Gap exactly not
the same though at its two other brands, Banana Republic
and Athleta, still lagging.
Speaker 7 (09:02):
Actually no, I think I think you're seeing both of
those pick up. I'm more confident in Athleta in terms
of where they are. With Banana Republic, I think they're
doing fine according to the transaction data. I think those
also are probably tracking a little bit better than analyst estimates.
They're smaller because the two biggest pieces of the business
(09:25):
are really Old Navy and Gap. But we're really looking
for new leadership at Banana Republic to really set directions,
so it doesn't it doesn't seem as exciting to me
as it was before. But I think you know that
could change once they bring in new leadership. But they
do have a new speaking of White Lotus, Banana Republic
(09:47):
is going to do a collaboration, so it's going to
be you know, Banana Republic x White Lotus and that's
going to be dropping next Wednesday. I know that in
the store here and sen City. They just sent me
an invite to come attend that, so I think that
could be really exciting.
Speaker 5 (10:05):
Wow.
Speaker 2 (10:06):
Yeah, they're forward thinking by the gap.
Speaker 5 (10:08):
Huh.
Speaker 2 (10:09):
Well, let's go back to Macy's because Macy's and they
also have some other brands that have been doing very well,
right Blue Mercury, Bloomingdale's. But Macy's and it's addressed some
challenges it has had, closing stores over the last year,
investing more money and successful ones. So what's what's the
strategy there and is it working for Macy's.
Speaker 7 (10:28):
Yes, Tom, So you're absolutely right. This new strategy which
is where they're guess what, they're going back to their
basics and that is adding more service in their stores.
They've also really improved the store so when you go in,
they're a lot more open, there's no clutter there, and
they're bringing in more relevant brands. So a brand that
(10:49):
they brought in its the a VC Luffy and this
was a brand that was started in twenty seventeen by
Max Azria's daughter Joyce Asria, and it's wonderful, beautiful, stylish
clothes that really appeals to the millennial. They've Macy's had
it since twenty seventeen, but it was just in a few,
(11:11):
you know, in a limited amount of doors, and now
that's been expanded and I just saw it in our
store here in Century City, So that's brand new for
this store. But I think it's absolutely on trend and
relevant and should do really well. So they need to
do more of that. And so in these stores that
they are revitalizing, they did see a lift in positive
(11:32):
comp sales, but it's small, right, because they did fifty stores.
They're now adding another seventy five stores, including the one
next door to me, and I've already seen the improvement there.
But still when you look at Nordstrom, I mean the
traffic there is always busier, and I think, you know,
we'll see good numbers coming out of Nordstrom. So I
(11:52):
think they have a ways to go with the mainline Macy's.
But as you pointed out, Bloomingdale's and bloom Mercury are
really doing well. Those are comping positive and we think
they get a lift with the sax Nieman merger because
they're having issues with vendors and customer service, and that
could shift more luxury sales to Nordstrom and Bloomingdale's.
Speaker 2 (12:12):
Well, a lot to look forward to our thanks to
Mary Ross, Gilbert Bloomberg Intelligence senior equity analyst covering retail.
Coming up on Bloomberg day Break weekend, we'll look ahead
to a special European Council summit how that may impact
the war in Ukraine. I'm Tom Busby, and this is Bloomberg.
(12:41):
This is Bloomberg day Break Weekend, our global look ahead
at the top stories for investors in the coming week.
I'm Tom Busby in New York. Up later in our program,
we'll look ahead to the first reading of Australia's economy
following the RBA's first rate cut since November of twenty twenty.
But first, the path to peace in the war in
Ukraine took our radical turn this week as a meeting
(13:02):
between US President Donald Trump, Ukraine President Volodimir Zelensky, and
US Vice President JD Vance devolved into an argument right
in front of the White House Press. Here's what that
sounded like when they met in the Oval Office on Friday.
Speaker 8 (13:15):
We're trying to solve a problem. Don't tell us what
we're going to feel. I'm because you're in no position
to dictate that.
Speaker 9 (13:22):
Remember this, you're in no position to dictate what we're
going to feel. We're going to feel very good.
Speaker 8 (13:29):
Feel We're gonna feel very good and very strong influence.
You're right now, not in a very good position. You've
allowed you be in a very bad position to be
right about from.
Speaker 9 (13:40):
The very beginning of the war.
Speaker 8 (13:41):
Not in a good position. You don't have the cards
right now with us. You start having right now, you pay.
You're gambling with the lives from millions of people. You're
gambling with world War three. You're gambling with World War three.
And what you're doing is very disrespectful to the country.
(14:03):
This country. It's back to you far more than a
lot of people said they should have have.
Speaker 9 (14:09):
You said thank you once this entire meeting. No, in
this entire meeting, you said thank you.
Speaker 10 (14:14):
You went to Pennsylvania and campaigned for the opposition in October.
Offer some words of appreciation for the United States of
America and the president who's trying to save your country.
Speaker 11 (14:26):
Please, you're saying that if you will speak very loudly
about the war.
Speaker 9 (14:31):
He's not speaking loudly. He's not speaking loudly. Your country
is in big trouble. No, No, you've done a.
Speaker 8 (14:37):
Lot of talking. Your country is in big trouble. I
know you're not winning. You're not winning this.
Speaker 9 (14:43):
You have a damn good chance of coming out okay,
because of the President.
Speaker 11 (14:47):
We're staying Yawa country staying strong. From the very beginning
of the war, we've been alone, and we are thankful.
Speaker 9 (14:53):
I said, thanks.
Speaker 8 (14:56):
We gave you, through this stupid president, three hundred and
fifty billion dollars.
Speaker 9 (15:01):
We gave your military equipment.
Speaker 8 (15:03):
You and your men are brave, but they had to
use our military If you didn't have our military equipment,
If you didn't have our military equipment, this war would
have been over in two weeks.
Speaker 11 (15:14):
In three days, I heard it from Putin in three days.
This is how maybe less in two weeks.
Speaker 9 (15:20):
Of course, Yes, it's gonna be a very hard thing
to do business like this. I tell you this. They
thank you.
Speaker 11 (15:25):
I accept, except that they're accept the American except that.
Speaker 10 (15:29):
There are disagreements, and let's go litigate those disagreements rather
than trying to fight it out in the American media.
Speaker 9 (15:35):
When you're wrong.
Speaker 8 (15:37):
We know that you're wrong, but you see, I think
it's good for the American people to see what's going on.
I think it's very important. That's why I kept this
going so long. You have to be thankful. You don't
have the cards. You're buried there, your people had died.
You're running low on soldiers. Listen, you're running slow on soldiers.
It would be a damn good thing.
Speaker 9 (15:58):
And then you then you tell us I don't want
to cease fire. I don't want to cease fire. I
want to go and I wanted this.
Speaker 8 (16:04):
Look, if you could get a ceasefire right now, I
tell you you take it. So the bullets stopped flying,
and your ment stuff courting kills.
Speaker 9 (16:11):
Want to stop the war. But I'm saying, you don't
want to see you.
Speaker 8 (16:15):
I want to see guarantee because you'll get a ceasefire
faster than any Greelet's cow.
Speaker 9 (16:19):
Are people about fire? What they see? That wasn't with me.
That wasn't with me. That was with a guy named Biden,
who was not a smart person. That was your That
was with Obama. Excuse me.
Speaker 8 (16:32):
That was with Obama who gave you sheets, and I
gave you javelins. I gave you the javelins to take
out all those tanks. Obama gave you sheets. In fact,
the statement is Obama gave sheets, and Trump gave javelins.
You got to be more thankful, because let me tell you,
you don't have the cards. With us, you have the cards,
(16:53):
but without us, you don't have any cards.
Speaker 2 (16:56):
The sharp encounter between Presidents Trump and Zelensky plus Vice A.
Speaker 10 (17:00):
JD.
Speaker 2 (17:00):
Vans overshadowed what was supposed to be a moment of
unity between the leaders and put any possibility of a
peace deal between Russia and Ukraine in question. Now does
it fall to Europe to form a resolution for more
Let's go to London and bring in Bloomberg Daybreak Europe
anchor Caroline hepgar Tom.
Speaker 3 (17:18):
This week, Vladimir Putin's new Envoy for Foreign Economic Cooperation
took to X for the first time since twenty twelve.
Kiril Dimitriyev used the platform to declare the importance of
US Russia cooperation to address what he's described as world challenges.
His sudden re emergence on the site after years of
(17:39):
silence highlights the rapid rehabilitation of Russia by President Trump
and the new challenge now facing the international community. European leaders, meanwhile,
are holding a special European Council in the coming days,
taking place just two weeks before a planned quarterly summit.
They're going to discuss defense spending and Russia's war on
(18:02):
Ukraine in a world without the historically assured US security guarantee.
The emergency summit will aim to take stock of US
EU relations after various leaders have held meetings at the
White House to get FaceTime with the US President. So
what will happen next in this extraordinary few weeks for
(18:23):
global politics, and who, if anyone, will succeed in winning
the favor of President Trump. I've been speaking to Bloomberg's
EMEA News director of Roslyn Matheson.
Speaker 12 (18:34):
If you're a leader in Europe at the moment, you
spend a lot of time saying very much out loud,
We're going to spend more on defense, that's very clear,
and we are starting to see some numbers come around then,
including in the UK of course obviously as well. But
what we're understanding in Europe is that the EU is
basically trying to find a way to unlock hundreds of
(18:54):
billions of euros in extra funding for defense, and that
could come in a bunch of different ways, including potentially
the joint issuance of bonds for example, repurposing existing funds,
as well shifting spending from other places. But that's going
to be part of the conversation when EU leaders meet,
is how practically they can all start to increase the
(19:17):
defense spending, both at a national level and also at
a European level, and how they can show that very clearly,
in particular to the US President Donald Trump, that they're
meeting their words with action. The question is will there'll
be agreement across the EU and the leaders meet about
a doing that and then b how to do it
and what's the best mechanism to do so, because of
(19:39):
course these all come with costs at home, and if
you're talking about potentially ramping up joint issuance about shifting spending,
that may come at the expense of other programs that
Europeans want, and so you could see some domestic comparatives
feed in their way. People say, well, hang on, my
voters don't want that to happen, and they could be
a backlash for me. So we're expecting there to be
(20:02):
a proper conversation about the mechanism to increase defense spending.
Are we going to see an actual agreement come from
this meeting? That's really up in the air.
Speaker 3 (20:11):
There is European leaders are speaking to president from making
visits to Washington, took us through their communication priorities with
the presidents.
Speaker 12 (20:22):
Well, we had Emmanuel mccron obviously from France there, and
we've also got the UK Prime Minister Kirstarma meeting with
Donald Trump. And the message from that is really that
the US cannot afford to go it alone when it
comes to things like Ukraine and Russia, that really Europe
does need to be very much in the conversation. So
(20:43):
it was the UK when it comes to things like
conversations around future security guarantees for Ukraine for example, when
it comes to conversations around mutual defense for example. So
there'd be a message about how yes, Europe and the
UK have gotten the message and they're going to increase
their own defense spending and their own security. But also
(21:04):
that when Donald Trump talks about resolving things like Ukraine
for example, that he really does need Europe in the conversation.
Speaker 3 (21:12):
What do you think the attitude of the newly elected
chancellor and waiting Fred Mertz might be as he looks
to form a government. And whilst President Trump has used
his strongest language yet in recent days about the EU
I either the European Union set up to screw the
(21:35):
US in his words, what do you think the attitude
of Germany is going to be to this obviously central
to policy making in Europe, will.
Speaker 12 (21:44):
Be very interesting because in fact Friedrich Merz is obviously
not chantilly yet and he has got to work out
how to form a government. But he's already met with
the French President Emanuel Macron. So he's getting his ear
to the door there at least in the conversations as
things are moving so quickly these days when it comes
to the political landscape and the geopolitical landscape, and so
(22:06):
he's obviously part of the conversation already, which is very important.
Frederick Motz actually might have a bit of a rapport
with Donald Trump. They are both conservative of though conservative
in different ways. And Donald Trump did congratulate Fredrick Matz
on his election win in Germany quite quickly, and you know,
welcoming a conversation with him sometime soon, and so there
(22:29):
might be a little bit of common ground just in
terms of how they talk to each other and really
having a rapport is probably the very first and most
important step these days in dealing with the US under
Donald Trump. So it's possible he might actually gel a
bit with Donald Trump. That said, Frederick Mots has also
been a fierce advocate for Ukraine and for the need
(22:51):
for Ukraine to be supported, and so there might be
some points of difference around that. And obviously, of course
if there are to be tariffs on European goods as well, it's.
Speaker 3 (23:00):
Not just about hot wars, about military wars, it's also
possibly about economic war, certainly about trade tariffs. How do
you think Europe is thinking about this? The tit for
tat idea that there could be retaliation from the EU
if President Trump does impose, as he has said he
(23:21):
wants to twenty five percent tariffs. It's very murky, actually,
the rhetoric versus the reality of tariffs out.
Speaker 12 (23:29):
Of the Trump White House currently, and we don't know
exactly what a twenty five percent tariff on the EU
would look like. We don't know whether that would be
all exports that are sent from the EU into the US,
or only certain sectors or certain products. It's very unclear
what exactly we're looking at. And that's why you can
see for now that while European leaders and the European
(23:53):
Union are saying they will very firmly retaliate if needed,
and they are drawing out plans indeed to do so,
and they have lists indeed to do so, that they're
holding their fire a little bit because it's very unclear
exactly what they're dealing with. We can see, for example,
with Canderine Mexico that tariffs are not being implemented immediately.
(24:15):
There's further talk potentially about them being pushed back again.
So if you come out too strongly there, you know,
do you risk Donald Trump's iron does he then pushed
her head quickly on tariffs that he didn't intend to
move so fast on, for example, And so it's really
about the game of trying to work out how to
manage the situation with Donald Trump in a theoretical sense
(24:36):
when tariff's not yet real but are possibly coming and
we don't know what those tariffs might look like, but
certainly we do know that European Commission has drawn up
list of goods for potential retaliation and have said very
clearly they're willing to use them if needed.
Speaker 3 (24:52):
My thanks to Bloomberg's EMEA News director Roslyn Matheson for
speaking to me and will continue to bring you full
coverage of the special European Council planned for Thursday, the
sixth of March. I'm Caline Hepge here in London. You
can catch us every weekday morning for Bloomberg Daybreak Europe,
beginning at six am in London. That's one am on
Wall Street.
Speaker 2 (25:11):
Tom, Thank you, Caroline. And coming up on Bloomberg day
Break Weekend, we'll look ahead to a slew of economic
data out of Australia next week. I'm Tom Busby and
this is Bloomberg. This is Bloomberg day Break Weekend, our
(25:34):
global look ahead at the top stories for investors in
the coming week. I'm Tom Busby in New York. A
ton of economic data coming out of Australia this week,
including the first reading of the country's economy following the
Reserve Bank of Australia's first rate cut since November of
twenty twenty. For more, let's get to the host of
the Daybreak Asia podcast, Doug Krisner.
Speaker 4 (25:55):
Tom, we're looking ahead to the report on Ozzie GDP,
along with numbers on Reek hell sales and trade. They're
all on tap for more on what we can expect.
I'm joined by Swati Pondi, Asia Eco GUV reporter for
Bloomberg News. Swati joins us from our radio studio in Sydney.
Thank you for making time for us. Can we begin
by taking a step back because it was only a
(26:16):
few weeks ago that the Reserve Bank of Australia cut
the policy rate for the first time in more than
four years. So a lot has been happening with the
Australian economy. Maybe it's a little complicated. Can you help
me understand where things stand at the moment.
Speaker 13 (26:30):
Yes, it's all happening in Australia, Doug. We had the
first rate cut in four years. The Reserve Bank of
Australia had been a laggard in this easing cycle and
finally it delivered a cut and that was largely driven
by inflation report which showed that price pressures are indeed cooling,
(26:53):
which was one of the RBA's biggest concerns last year
when it decided to keep rates unchanged, and then come January,
the data showed that prices are cooling in. Consumer sentiment
was weak. People weren't spending, and so the Reserve Bank
(27:14):
thought it's a good time to start easing cycle. But
it was really cautious as well. It sounded very hawkish
despite the rate cut and signaled to the market that
do not expect many more cuts. Maybe it's one and done,
or maybe one more.
Speaker 4 (27:34):
So I mentioned that we're going to get the retail
sales data. How are consumers in Australia behaving right now
in the major cities.
Speaker 13 (27:41):
Look, since pretty much all of twenty twenty four, consumers
were being very stingy. People weren't spending at all. People
were waiting for big discounting events like the November Black
Friday sales and events like that to actually spent. However,
(28:02):
the government gave everybody tax cuts which kicked in in
July twenty twenty four. We also got some subsidies on energy,
we got some subsidies on rents, and that basically gave
people a little bit more of spending power. And then
we also, like I said, inflation came down, so the
(28:23):
real purchasing power of people improved so towards the end
of last year, so kind of November, December January period,
we have seen people spending more and if you go
out in Sydney, it's buzzing. It's crazy buzzing pubs, restaurants,
shopping centers, everything. People are feeling a little bit more
(28:46):
confident and I'm sure the rate cut that we got
in February will further help that too.
Speaker 4 (28:52):
So from what I understand, the labor market is holding
up very well, right.
Speaker 13 (28:56):
That's true, So like the Usustralia's labor market is pretty
strong as well. Our unemployment rate is hovering in that
four to four point one territory, which is really low
by Australian standards, also very low by historical standards. That
is driven by really strong employment growth. It has surpassed
(29:18):
all expectations, and that is because government demand has been
really strong. Government has been spending left, right and center
and that has supported GDP as well as the labor market.
Speaker 4 (29:32):
So I mentioned we will also get figures on trade
in the coming week. Can we talk a little bit
about the potential impact on these US tariffs on Australia.
Is it likely that there will be any impact at all?
Speaker 13 (29:46):
Trade is an interesting topic right now, so quite topical
as well. And Australia is a small, open economy. One
fourth of Australia's GDP comes from trade and thirty per
cent of our exports go to China, so you can
see how vulnerable we are to anything that happens in
(30:08):
the trade side of things. We have had seven years
of trade surplus, so pretty much from twenty eighteen through
til the end of twenty twenty four, every single month
we have had trade surplus. Is that at risk? Not really,
because China's demand still seems really strong. We've had a
(30:32):
period where China puts some embargo on Australian products and
Australia was able to still sell to other markets. Now,
as far as Donald Trump's policies are concerned, Australia does
not export too much to the US. We import a lot,
(30:53):
which is good from Donald Trump's perspective.
Speaker 4 (30:55):
Yeah, but I'm wondering about something like steel and aluminum.
I know that a lot of the ores and minerals
are exported from Australia to China for processing, and if
Chinese demand in those areas were to contract a little bit,
couldn't that have a knock on effect in Australia.
Speaker 13 (31:13):
Yeah, so there is a risk from the cascading effects
or reciprocal effects, and you know, there are a lot
of permutations and combinations that people have been talking about.
The direct impact so far from people I have spoken to,
from economists, and also the responses we have seen from
(31:34):
trade bodies and stuff, seems like from a macro perspective,
Australia will be fine. Obviously, individual companies who are at
the receiving end of these tariffs will be affected, and
they have been lobbying as well, and Australia's Prime Minister
and Trade Minister have been lobbying too to get some
(31:54):
relief from the US. The last time that Donald Trump
was in office, Australia did win no reprieve, so we're
keeping our fingers crossed that happens again.
Speaker 4 (32:04):
I mentioned the GDP report that we're also expecting in
the week ahead. Give me a sense of what the
market is expecting in terms of overall economic growth.
Speaker 13 (32:13):
So, like I mentioned earlier, Australia's economy has been pretty
weak pretty much since the middle of twenty twenty three.
All of twenty twenty four was very tepid. We are
in the deepest per capita slump since nineteen ninety one
excluding the pandemic, which means people have been feeling like
they are going backwards even though the economy has been growing.
(32:35):
So we have not had a recession as such, but
individually people have gone back so that is unlikely to change.
That per capita recession probably is unlikely to change. But
this data that we are expecting is for the last
three months of twenty twenty four. It does look like
(32:56):
the economy did pick up and that was by consumer
spending people feeling more confident about their finances. Public demand
has been strong as well government spending. We have election
this year or two, so some of the spending is
driven by that. So together with consumer spending, trade and
(33:19):
public demand, it looks like the last three months of
twenty twenty four were good and so far the momentum
it's only been like two months of the year, it
looks good as well.
Speaker 4 (33:29):
Swati, thank you so much for helping us understand the
nuances of what's been happening these days in the Australian
economy as we look ahead to this week's ECO data.
Swati Pondi Asia Eco GUV reporter for Bloomberg News, joining
us from our studios in Sydney. Let's turn next to
China and the rally that we have seen lately in
tech talks. So far, these gains have far surpassed those
(33:52):
of their American counterparts. Bloomberg opinion columnist July Wren has
been writing about the Chinese alternative to the MagX. She's
in our Hong Kong radio studio. Truly, it's always a pleasure,
Thank you so much. How would you describe what's been
happening with Chinese tech right now?
Speaker 14 (34:09):
Well, deep Seak really has changed the perception of Chinese investors.
They do feel, I mean, going back, like we know
that the Hong Kong listed is mostly Chinese companies, right
they are deep value traps after the Beijing's regulator crackdown
some big tech and the whole property bubble bust, like
(34:30):
the Chinese shares are very cheap. But deep Sea basically
said that, you know, China is not just a manufacturing powerhouse,
it's also good with the software and digital stuff, right,
Like deep Sea does a generative AI and the people
didn't really expect that the Chin, a small unknown startup
even to the Chinese until a month ago could do
(34:53):
so well despite all the export controls, and that really
fired up. And then what we're seeing is that you know,
the tech stock, the software companies, they're doing very, very well,
and there is a sense that the China can be
a growth market.
Speaker 1 (35:05):
Again.
Speaker 4 (35:06):
In the latest column that you authored for Bloomberg Opinion,
you write that a Chinese alternative to the Magnificent Seven arrives.
And I'm wondering whether you're really focused on a lot
of these e commerce names that we hear so much about,
like Ali Baba Tencent.
Speaker 14 (35:20):
Yes. One thing though, is like a lot of it
is about the positioning, like global asset managers positioning. Coming
into this year, everyone is overweight on basically the big
seven tax stocks, right the so called the notion of
a US exceptionalism, and everyone agrees that the US store
market is overvalued because just simply because so much money
(35:43):
has been coming in and there is this genuine need
to diversify, and now the question is where do you
diversify to? Right, Like China, tex stock is one story.
Another story is European stocks. They have been doing quite
well as well, and there is expectation that the Donald
Trump however you like it politically or not, could propel
(36:04):
peace over Ukraine, which means that it could be good
for European economies, especially Germany.
Speaker 4 (36:10):
You know, Beijin seems to have kind of changed its
attitude where some of the big tech stories in China
are concerned. I'm thinking back to the meeting a few
weeks ago that chi Jinping had with some of the
leaders of these big companies, and I'm thinking of Jack
Ma in particular, as Chijin Ping changed his attitude when
it comes to big tech.
Speaker 14 (36:29):
He has to because, believe it or not, just because
China's economic outlook it's not so good. Right, like the
big tech, the big e commerce platforms political fortunes actually
are improving because they actually soak up a lot of employment.
Right like young people. The unemployment rate for young people
(36:51):
in China is very high. And if young people have
no jobs, they could become delivery workers unfortunately, or like
they could be uber Try in China that would be
d D. Or they could set up a small e
commercer shops selling stuff, or they could be influencers. And
I think Beijing does recognize that these big platforms, they
(37:14):
are job creators and they need to be nice to them.
Speaker 4 (37:16):
When you look at valuation, you're a financial analyst by training.
What do you see when you look at some of
these companies Chinese firms that trade in Hong.
Speaker 14 (37:24):
Kong, everything is relative. I mean Tesla trades at over
one hundred times forward earnings. Shell me and the Bid
they both do evs. They trade at the roughly forty
and twenty five times, and relatively speaking, everyone everyone else
is cheap compared to Tesla, right, And it's not just
that a lot of Chinese feel that the Ela Musk
(37:47):
has been very distracted lately and then that he's not
paying attention to Tesla's business, and that opens a window
for Chinese EV makers and in fact, like a lot
of EV makers, they are adding like a lot of
advanced technology.
Speaker 4 (38:02):
July, thank you so much. It's always a pleasure. Shuly Ran,
Bloomberg opinion columnist, Joining us from our studios in Hong Kong,
and I'm Doug Krisner. You can catch us weekdays for
the Daybreak as your podcast. It's available wherever you get
your podcast. Tom.
Speaker 2 (38:16):
Thank you Doug, and that does it for this edition
of Bloomberg day Break Weekend. Join us again Monday morning,
five am Wall Street Time for the latest on markets
overseas and the news you need to start your day.
I'm Tom Busby. Stay with us. Top stories and global
business headlines are coming up right now
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