Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:09):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our Daybreak
anchors all around the world. Straight ahead on the program,
but look at some key inflation data in the US
how it may impact the Fed's next move. I'm Tom
Busby in New York.
Speaker 3 (00:23):
I'm Caroline Hedge here in London, where we are focused
on a UK asset slump and what may come next.
Speaker 4 (00:29):
I'm dead Chrisner looking at the outlook for China's byd
as well as the fallout from the blocking of the
US Steel Nipon Steel merger.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three year in New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London,
Sirius XM one twenty one, and around the world on
Bloomberg Radio, dot Com and the Bloomberg Business App.
Speaker 5 (01:02):
Good day to you.
Speaker 2 (01:03):
I'm Tom Busby, and we begin today's program with a
slew of economic data in the US consumer Price Index,
the producer price Index, retail sales all for the month
of December. How will all this data impact FED policy?
For more on how all this data may impact FED policy,
were joined by Edward Harrison. He's the author of Bloomberg's
Everything Risk newsletter.
Speaker 5 (01:25):
Well Edward.
Speaker 2 (01:25):
For the first FOMC policy meeting of the year. The
FED has a lot to consider, but let's start with
what we know already. The data we got this past Friday,
a very unexpectedly strong December jobs report, how many jobs added,
the unemployment rate moving down. What does all that mean?
Speaker 6 (01:43):
Yeah, Tom, good to talk to you. I think what
it means is is that there's a lot of uncertainty
about where inflation is headed. You know, the narrative in
twenty twenty four, for the large part of the year
had been that inflation was headed down inexorably towards two percent,
that's the Fed's target. But now we've stalled at this
(02:03):
level that is too high. For instance, the data that
come out this week in terms of the CPI, we're
expecting to see a number like three point three percent,
taking out voluable food and energy two point nine percent overall,
that's well north of where the FED wants it to be.
And so as a result, we're in an indefinite holding pattern.
(02:26):
The FED is not going to cut ridgs any further
from here.
Speaker 2 (02:29):
Well, so the FED is seeing all this inflation data
coming out. That is their big focus now the job
market less of a worry. We've seen it decrease a
little bit, but still very strong. What about retail sale
some other data we're going to get, Yeah, you know, I.
Speaker 6 (02:46):
Think it's it's an interesting question in terms of you know,
we get three days of data with PPI, CPI, retail sales.
I would say that of the three, it's the CPI
that the Fed's going to focus on, and that markets
are going to take a que off. Of retail sales
is you know, the number is actually going to be
is expected to be lower than it was in the
(03:09):
prior month, but when you take out autos and gas,
people are expecting it to go up. So it's kind
of hard to parse out, you know, what the market
reaction is going to be irrespective given the jobs report
that we saw last week. I think that the market's
probably going to expect those numbers to be relatively robust.
Speaker 2 (03:32):
Yeah, people are working, they're spending money, and we've seen
that with a national retail Federation looking at online you
know these are at or near record spending levels, so
people are feeling pretty.
Speaker 6 (03:45):
Good, definitely, And you know the jobs report, let me
just go back to that for a second. We tick
down last week to four point one percent from four
point two percent. That tells you not just that the
labor market is doing well, but that the anxiety that
a lot of people might have that bad things are
about to happen and they're not going to open up
their checkbooks is lessened. And so we should therefore expect
(04:08):
that retail sales, especially in this holiday season, to be
relatively robust. So that side of the coin, I don't
think it's going to be as much of a mover
for markets because they know that the US economy is
doing well. The real question is is inflation stalled to
this level or is it potentially even re accelerating beyond
(04:31):
this level to a higher into the three percent range.
Speaker 2 (04:36):
And that's the big focus now for the FED and
what would drive inflation. I mean, obviously we always have
the housing problem. It's not even an uneven market, it
is just a problem where people cannot afford some of
these homes. We have elevated rates now back up to
six point ninety nine percent according to the Mortgage Bankers' Association.
(04:57):
What other factors are driving inflation, So, you know.
Speaker 6 (05:00):
It's a very good question as to where the FED
is on all of this going forward. Because it was
interesting that our colleague, Matthew Bosler, he spoke to people
at the FED and they talked about this I would
call rather obscure inflation measure that takes out imputed numbers.
(05:21):
And he has a quote, I think from Christopher Waller,
who's very well regarded in the FED. He said that
inflation in twenty twenty four has been largely driven by
increases in imputed prices such as housing services and non
market services, which are estimated, they're not observed directly, and
so he takes comfort from that the fact that when
(05:42):
you take those imputed prices out, actually inflation looks better.
So what it says to me is that the FED
is going to be fine with inflation at the level
that it is now. They could cut still if inflations
at these levels and you know, slightly below, it's if
inflation starts to trend higher, that's where we're gettingto problems
(06:06):
going forward.
Speaker 2 (06:07):
So right now, it sounds like you're saying we may
not need to see a reduction in interest rates right now.
Speaker 6 (06:13):
Yeah, I don't think that. I think we won't see
it for the near future. I think we're in hold
for a long time and we don't need to see it.
I mean, the unemployment rate tick down. We're getting almost
four percent increase in hourly wages, jobless claims are almost
(06:34):
as low as two hundred thousand initial claims a week.
Those are all very good numbers. It says that the
economy is doing well. And actually Jerome Powell, the FED chair,
told us as much in the last time that he
spoke to us.
Speaker 2 (06:47):
All right, so we may see July. I know after
Friday's blow out jobs report, people are talking now next
rate decrease will be.
Speaker 6 (06:55):
October, exactly. October is the new number. And don't be
surprised if, eventually, especially if we get any negative data
on inflation, that the market starts thinking maybe they pause
for the entirety of this year, and that's going to
be very negative for interest rates at the long end
(07:18):
of the curve, also for mortgage rates as well.
Speaker 7 (07:20):
Well.
Speaker 2 (07:21):
Our thanks to Edward Harrison is the author of Bloomberg's
Everything Risk newsletter. We move next to the new earning season,
kicking off later this week. Some of the nation's biggest
banks reporting their fourth quarter results, JP Mortgage, Chase, Goldman, Sachs,
City Group, Wells Fargo kicking things off on Wednesday, and
for more on what to expect from America's biggest lenders,
we're joined by Alison Williams, Bloomberg Intelligence, Senior Analyst, Global
(07:45):
Banks and Asset Managers. Allison, thanks for joining us. So
what are you expecting to see starting this Wednesday?
Speaker 8 (07:51):
So there's three areas of focus with the earnings this week.
You know, first just the regulatory outlooks. Second is the
airing impact of the macroeconomic outlook, and finally, what is
the outlook for the capital markets momentum? And while the
regulatory outlook is the most important structurally, we expect that
(08:12):
we're going to get the least amount of new or
helpful information on that front, while we expect the banks
to probably provide the most bullish information on the latter point,
the capital markets momentum. And so let's take each of
these in turn. To begin with, the big six banks
are up fifteen to twenty five percent in the past
(08:34):
few months, and that's largely fueled by sentiment. Estimates are up.
They're up about two to two and a half percent
for twenty twenty five. So some of it is the
better capital markets outlook as well as the economic and
monetary policy outlook, but it really is I think the
structural regulatory optimism that's boosting boosting these banks. From our standpoint,
(09:00):
we do expect relief in the form of lesser new
regulation in the coming years. We also expect relief from
a water down and perhaps pushed out BUZZL three rules,
as well as antitrust scrutiny lessening under Trump. But we
think that specific issues like Wells Fargo's as a cap
you know, this is something that we don't expect to
(09:23):
see a political benefit too. The bank is working through
its issues and it has to show specific progress against
sort of a set plan for the bank, and they
still have some work to do.
Speaker 2 (09:37):
So are you expecting these regulatory changes to start on
day one of the new administration?
Speaker 8 (09:44):
We are not, And in fact our view is really
just that we're going to get less new regulation. So
it's not going to be anything that we see day
one or in the near term, and In fact, our
view is just that things like Basil three could get
out further, and that's really the benefit. Similarly, with antitrust scrutiny,
(10:06):
it's really just that we'll see less action, not necessarily
new or immediate action. And so turning to the economy
and monetary policy, we expect that charge offs tick up,
but in general, client trends are healthy, and we think
the outlook for both net interest income and charge offs
are supportive for profitability for twenty twenty five. Of course,
(10:29):
card will continue to lead on loan growth, and because
fourth quarter trends tend to be the seasonally strongest corner
for that business, we'll have lots of positive commentary there.
And so it's really those equity fees where we may
see a sequential increase. We also think that we may
see an increase in the M and A fees. That's
(10:49):
an area that we are bullish on for twenty twenty five,
not only because of the anti trust scrutiny, but we
do think that getting pass the election and in this
current interest rate cycle, that there is a little bit
more there is a little bit better sentiment among CEOs,
(11:10):
and that will help to fuel some activity.
Speaker 2 (11:12):
Let me then ask you about the Federal Reserve signaling
fewer rate cuts this year, and after this Friday's jobs report,
it looks like a lot of Wall Street is betting
on the next rate cut not until October. Now what
will that mean to growth and revenue at these lenders?
Speaker 8 (11:27):
So for the net interest income, we do expect to
see stabilization this quarter, and then given where the curve
has moved and expectations for the for the forward curve
has moved, we could get more positive views on that front.
In particular, we're looking to JP Morgan, who has sort
(11:48):
of returned to this positive cycle of be and raise.
Estimates have been rising into the earnings for that bank
following bullish guidance in December, but still there could be
some room, we think, for them to be and raise
again and interesting comm guidance is a focus for that bank,
But really for JP Morgan, what we're looking for is
(12:12):
to see continued leadership in their overall profitability. Just help
buy the execution at that bank as well as some
of their leadership positions.
Speaker 2 (12:21):
Our thanks to Alison Williams, Bloomberg Intelligence Senior Analyst, Global
Banks and Asset Managers. Coming up on Bloomberg day Break weekend,
we'll focus on a UK asset slump and what may
come next. I'm Tom Busby and this is Bloombergen. This
(12:46):
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
will break down what lies ahead after President Biden's decision
to block Nippon Steele's acquisition of US Deal. But first
back in twenty twenty two, the UK's guilt market was
plunged into crisis, sparked by the now infamous mini budget
(13:07):
of then UK Prime Minister Liz Trusts. Now two years on,
investors are concerned the country could be on course for
another collision with the markets. Can the government assuage their
concerns for more? Let's go to London and bring in
Bloomberg day Break. Europ banker Caroline.
Speaker 3 (13:23):
Hepgar Tom, we have seen a tumultuous week in UK
bond markets over the past few days. Long term UK
boring costs have soared and the pound has fallen, a
rare combination that can signal investors have lost faith in
the government's ability to keep a lid on the national
debt and control inflation. The current surge in debt costs
(13:45):
also threatens to wipe out Chancellor Rachel reeves slim at
nine point nine billion pound buffer against her budget rules
and to create instability ahead of an official fiscal update
on the tw twenty sixth of March. For investors, it
all makes for a precarious state of affairs. Averson why
(14:07):
a fund manager Energy Investment says that investors are concerned.
Speaker 9 (14:12):
I think what's looking different in the UK is that
they have very little policy room to move. We know
that borrowing is near record highs and we know that
taxation is near record highs, and so it's very much
a situation of the Labor Party needing to be a
bit creative in terms of where they get this extra
(14:33):
revenue from. And looking at valuations over the last day
or so, we are pricing in very similar levels to
what we saw in twenty twenty two and a trust backdrop,
and of course that was driven by unfunded tax cuts
and more fiscal recklessness. But now we're looking at potential austerity,
so we are looking at very different backdrops, but very
(14:56):
similar guilt pricing.
Speaker 3 (14:57):
That was averson why from and G Investments speaking to
me and Stephen Caroll on Bloomberg Radio. The government has
offered reassurances, the Chief Secretary to the Treasury, Darren Jones,
pointing out that UK guilt markets continued to function in
an orderly way, and Bloomberg reporting that Rachel Reeves will
(15:18):
prioritize public spending cuts over any tax increases if it
indeed comes to that. But the fate of the UK's
debt market is something I've been discussing in more detail
with Bloomberg's chief UK economist Dan Hanson ahead of fresh
inflation data coming in the next few days.
Speaker 7 (15:38):
There's been an awful lot going on, hasn't there. And
I think really the driver of all well, there are two.
There are two drivers really. One is global inflation concerns,
and you know, in deep integrated global markets, the UK
is a small player, so what happens in the US
matters for the UK, So you know we import a
(15:59):
lot of what goes on in US markets, particularly in
the guilt market. So that's the first thing. The second
thing I think is that there is this ongoing concerns
I think is the right word about the UK's fiscal
position coming out of the budget on October the thirtieth
last year, and the uncertainty about what chance with these
(16:22):
jacker Rachel Reeves will will do about it with a
in the what is being called the spring forecast, which
is on March twenty sixth Reeves has been quite adamant,
at least up till now, that there will only be
one fiscal event per year, and that or one event
where spending in taxes are changed, I should say. And
(16:43):
the hope was, at least Labour's hope or the government's hope,
was that they wouldn't have to make any changes to
fiscal policy at the upcoming statement. As things stands, it
looks like they will have to make some changes. So
there's been at an awful lot going on, but it
keeps us busy. So I think the key thing and
(17:05):
the most interesting thing, at least for us, has been
the shift in borrowing the expectations around borrowing costs in
the UK.
Speaker 3 (17:13):
Yeah, and so this is the guilt market is also
though to pick you up on that point around inflation,
we do get inflation data out in the days ahead,
how are we thinking about that? The stickiness of inflation
here in the UK and therefore what the Bank of
England has to do.
Speaker 7 (17:29):
Yeah, So I mean I think I don't think it's
going to tell us anything we didn't already know. I
think it's you know, if you if you sort of
put the numbers together, we're looking for a modest rise
from two point six to two point seven. I could
see it coming in at two point six as well.
I mean, if you're going into the if you really
want to get into the minuture of the numbers, it's
(17:50):
there's a There are a lot of volatile categories that
can affect the CPI in December, one of which is
the price of air travel. A lot depends on when
the ONS collects the data, so there there's a bit
of uncertainty around the number. But the big picture, as
you've you've rightly said there, is that it will continue
to signal sticky inflation. Two point six prints or a
(18:11):
two point seven print would be above the Bank of
England's expectation that it had in its November forecast. So
bringing it all together, it's going to continue, I think,
to just sort of support the view that the UK
has this special inflation problem but has got a persistent
or sticky inflation problem, and if you look at the
outlook for this year, it's unlikely that inflation is going
(18:34):
to drop much below where we are now. It's probably
going to oscillate somewhere between where we are now and
three or perhaps a touch above it. So we're going
to be in that range which clearly isn't two percent.
Speaker 3 (18:45):
And therefore interest rates in the UK may remain higher
for longer, and therefore the pressure on the government and
government finances would remain in terms of what the Chancellor
needs to do, needs to set what would convince investors?
What do you think markets want to hear right now?
Speaker 7 (19:07):
Well, I think the answer I mean this problem is
going back to the answer to my first question. There
there's a global element to it which is very hard
to fight. It's very hard to do something about that.
But there is a UK specific bit of it as well,
and that is that stems predominantly from concerns about fiscal policy.
(19:27):
So the remedy has to be around fiscal policy. And
the question is how do you reign in borrowing And
there are two obviously two ways of doing that. One
is you raise taxes, the other is you cut spending.
And it sounds like the noise is coming from the government.
At least, it sounds like that cutting spending is going
to be the way the government goes to bring things
(19:48):
back sort of steady the ship, if you like to
put it, because at least when you think about the
budget and the backlash to the rise in taxes that
we had, it seems very unlikely to me that they
will raise is tax further because of the backlash to
the rise in payroll tax that we had, and also
because of the manifesto or commitments that were made during
(20:08):
the election that income tax, employee, national insurance not employer
national insurance, employee national insurance, corporation tax, value added tax,
none of those things will rise, and they account for
upwards of seventy percent of the tax take, so it's
very difficult to see how they would go near the
tax space. Again, it feels like they'll go for spending cuts.
Speaker 3 (20:29):
What are the risks of stagflation for the UK?
Speaker 7 (20:34):
I think they are in the near term. We're sort
of back where we were sort of in this sort
of twenty twenty two to twenty twenty three period. Obviously,
the inflation picture is completely different. We had sort of
eleven percent inflation in the UK we're at I know
we're above target, but it's very different at two point
six compared to eleven point one, which was the peak.
That's the first point. But on the other side of
(20:55):
the sort of stagflation story, the jobs market does look
like it's loose now and by well, it's looser certainly
than it was in twenty twenty two, twenty twenty three,
and it is loosening, you know. The Bank of England
said that it's December meeting that the labor market is
in balance sort of. Any further loosening from here means
there's spare capacity in the labor market, unemployment is rising.
(21:17):
That presents a really difficult trade off for the bank
because you've got this inflation picture, you've got this potentially
weakening labor market, and the bank is charged with targeting inflation.
It doesn't have a dual mandate like the FED, so
it can't lean on one side of another site or
the second part of the mandate if you like. So
I think it's going to be a difficult period for
the bank.
Speaker 3 (21:38):
My thanks to Bloomberg's Dan Hanson, our chief UK economist. Well,
while Rachel Reeves and the government grapple with their response.
The Chancellor may not have much time as business leaders
grow increasingly frustrated. Neil Carburry, the CEO of the Recruitment
and Employment Confederation, says that patience is running thin in
(22:01):
the wake of October's budget changes.
Speaker 5 (22:04):
Well, look, the fiscal position is really difficult and it
looks really difficult going out year after year from here.
The ability of the UKI to do long term economic
policy making is what's an issue here. I think this
government coming to power has tried to move more in
that direction. As you say, there's a long run to
judge it, but I think we need to see more
(22:26):
of the tough choices fronted up in the open rather
than rather than pushed into the background.
Speaker 10 (22:32):
We mentioned that your survey is scrutinized by the Bank
of England. How much of a head window interest rates
at this point? What are you hearing from your members
about traders expectations that the BOE is not going to
go nearly as far as some had expected at least
three six months ago.
Speaker 5 (22:47):
Well, we watched this really closely because a bit of
a foible of the way the temporary labor market works
is you know, if I place someone as an agency
as a temporary worker, I paid them this week, but
I get paid in a month or three months time.
So effectively I'm acting as a short term bank for clients.
And clearly therefore temporary labor supply is a lot more
(23:09):
expensive now than it was five years ago. We definitely
think that the capacity of the temporary labor market to
supply and to meet the needs where companies maybe sitting
back a bit and going permanent, not confident about creating
permanent jobs, is being affected by cost of capital, and
(23:32):
we think that's happening on investment decisions inside client businesses
as well.
Speaker 3 (23:36):
What do you really think that the government has to
say this week to people like you, to your the
businesses that you speak to.
Speaker 5 (23:44):
I think then has to be a real opening up
on the next year to eighteen months. What are you
asking your business and how are we moderating that Because
if you look at things like the employment Rights Bill
that's coming up time and again as a potential threat
in our world in the labor market, and yet it's
unformed at the moment. We need government to give commitments
to things like protecting the gig economy in flex flexible
(24:09):
labor in the zero hour's contract rules, because right now
a lot of firms just say, well, I'm not hiring
permanently because they don't have the confidence, and I'm now
not hiring temporary because I don't know what happens in
that world after the bill NOL.
Speaker 10 (24:20):
How does it break down in terms of SECTI by sector,
industry by industry. You're pointing to the challenges and the
softness now, the weakness in the labor market. Where is
that most acutely felt.
Speaker 5 (24:31):
So we've seen a really tough long period for construction.
Actually the trend in construction, while still negative, is slightly
better now than last year. It's usually quite a good
sign in terms of leading indicator.
Speaker 10 (24:41):
On shortage of construction work.
Speaker 5 (24:43):
Indeed, and then the only areas where we're seeing vacancies
growing at the moment are in marginally in hospitality and
then particularly in what we'd call blue collar light industrial logistics.
And if you think about that that sector, that's how
real area of shortage.
Speaker 3 (25:01):
That was Neil Carbury from the Recruitment and Employment Confederation
speaking to me on Bloomberg Radio. The UK has been
among the hardest hit by the route in global bond
markets will continue to follow investor concerns and the speeches
planned by the Chancellor in the coming weeks. I'm Caroline
Hepkee here in London. You can catch us every weekday
morning for Bloomberg day Break. You up beginning at six
(25:23):
am in London. That's one am on Wall Street.
Speaker 2 (25:26):
Tom, Thanks Caroline, and coming up on Bloomberg day Break weekend,
we'll look at one lies ahead after President Biden's decision
to block Napon Steele's acquisition of US deal. I'm Tom
Busby and this is Bloombergie. This is Bloomberg day Break Weekend,
(25:50):
our global look ahead at the top stories for investors
in the coming week. I'm Tom Busby in New York.
With President elect Trump set to take office in a
little more than a week and tariff the top of mind,
what's the outlook for China's biggest automaker. Let's get to
Doug Krisner, host of the Daybreak Asia podcast, for more.
Speaker 4 (26:09):
Tom twenty twenty five maybe the year the Chinese carmaker
BYD becomes the dominant player in the global market for
electric vehicles. Already, BYD has nearly overtaken Tesla to become
the world's largest seller of evs. For a closer look, now,
I'm joined by Danny Lee, who covers the Asia EV
space for Bloomberg News. Danny joins us from our studios
(26:31):
in Hong Kong. It's always great to have the chance
to visit with you. You're so plugged in, so to speak,
in the EV environment in Asia. We can talk about
the BYD story in a moment, but can we begin
with kind of getting the big picture on the EV
market in China? How competitive are things right now?
Speaker 11 (26:48):
The landscape is really quite cutthroats, and we've seen that
play out over the last couple of years with price
cuts being dished out across the marketplace. Every car maker
has been forced into a position because of the best
selling car maker, BYD. But there is a real sense
(27:09):
that if you're not cutting prices, you are going to
sink very very quickly. And given the fight for what
little market share there is because of the dominance of BYD,
everyone's fighting for a smaller amount of vehicles that buyers
are going to drive, and ultimately those who lose out
are going out of business. And we've seen a few
(27:31):
failures in twenty twenty four as a result of this
squeeze on the market because we see more drivers gravitating
towards the more popular EV brands out there, whether it
be a BYD to a Zeker to a Gili, these
are all moves being done to try and consolidate positions
in the marketplace. And we see the more successful EV
(27:54):
brands coming to the fore now and ones that are
coming to the fore in China are actually to have
an impact outside of China, and that's where the worry
extends to because of the success of the Chinese V
space overall.
Speaker 4 (28:08):
So when you talk about consolidation, is that really a
euphemism for saying there are fewer participants in the market
right now, fewer companies manufacturing, or are we actually seeing
kind of merger merger and acquisition activity.
Speaker 11 (28:22):
We are largely seeing more of A consolidations through the failures.
Where we do see though, the effective M and A
activity is where the biggest losers have ultimately been the
foreign auto brands, where we've seen Volkswagen lose more and
more share. We've seen General Motors also sync quite significantly
(28:43):
over recent quarters, and even Stellantis, who has pulled back
on the China market of late but then decided to
do a deal. Just like Volkswagen, They're all looking for
deals with Chinese EV partners, particularly ones who have a
limited track record in terms of of a history, but
because of what cars they can produce, with the technology
(29:04):
and the offering that is so attractive to Chinese consumers,
we've seen a lot of m and A worth billions,
and so this is where we've seen this consolidation or
gravitation towards foreign automakers trying to partner up because if
you can't beat them, you join them, and so this
is where they feel their money is best put to work.
Speaker 4 (29:24):
So, Danny, what is the role of the government here.
I know that there are a few trade in programs
which have been vital to building out the market. Is
that just the way that business is done? You accept
the fact that the government's going to continue to support
these manufacturers.
Speaker 11 (29:38):
The view is from the industry that they do want
to see some government support for the consumer to encourage
cars to be bought electric cars specifically, and given the
investment being made by these Chinese automakers billions has been
spent over a multi year period, there is just an
(29:59):
anxiety that if consumers start to wane on EV purchases,
which would be hard to think given the we are
seeing monthly sales of EV's compared to overall sales hitting
over fifty percent. Now that they're just you know, if
any slippage does come that there would be that would
(30:20):
have a negative effect on the overall sector. But you know,
China seeds the overall benefits of supporting sales to ensure
that there is healthy competition and a strong marketplace, because
ultimately that extends to the carmakers in China benefiting and
they can translate that success globally.
Speaker 4 (30:38):
I was looking at your Year ahead for the EV
space in China, you can see it on the Bloomberg terminal,
and one line that struck me is that BYD essentially
remains the brand to beat. What makes BYD so special.
Speaker 11 (30:51):
Well BYD has always been able to use its financial
my year after year now to continue Hinley be ahead
and to set the agenda, particularly when it comes to prices.
But because its car lineup is so affordable and they
have so many models and variants, we are talking in
(31:12):
excess of one hundred and seventy hundred and eighty even
more now intentially up to two hundred. So whatever the
price point, the choice, the kind of power you want
or capability or vehicle BYD is covered at every price
range possible, frankly, and for many vehicle types. Now that
it also includes a supercart and a pickup truck, so
(31:35):
it has anything for everyone. And it's that kind of
proliferation which means it can be all things to all consumers.
And that's where other car making brands are having to
catch up.
Speaker 4 (31:47):
So we've been talking really about the domestic market in China,
and I'm curious for the entire EV industry in China
how critical it is that these companies begin to develop
markets offshore in foreign jurisdictions.
Speaker 11 (32:00):
Well, for EV companies and for auto companies buy and large,
there has been a push to drive sales in any
way possible, you know, because of the way in which
the domestic Chinese sector has been so cutthroat. You know
that by selling abroad you can attract bigger margins, significantly
bigger margins in some cases. And so we have seen
(32:24):
many Chinese carmakers go abroad as far as Brazil to Mexico.
Southeast Asia has been a big, a big kind of
melting pot of activity. So it is important that you diversify,
and BID has understood that in a way in which
it has rapidly expanded to well over one hundred countries
(32:45):
by this point in the past three years or so.
And so it's important to have some balance, so you're
not reliant on the Chinese domestic market overall, because maybe
one day those subsites will have to be weaned off,
and you know, sales can't keep growing forever, although there
is a good kind of momentum for the next several
(33:06):
years to come.
Speaker 4 (33:07):
Jenny, thank you so much for spending the time to
enlighten us on the Chinese EV space. And you can
read Danny's piece on the Bloomberg terminal Chinese EV Makers
twenty twenty five goals belye tough year ahead. He's Danny Lee.
He covers the Asia EV space for Bloomberg News. And
now we turn to a spat in US Japanese relations,
President Biden blocking Nipon Steele's deal to acquire its American
(33:31):
rival US deal. Now, Nepon says, at this point it's
not considering alternative plans to the takeover, and yes, both
companies have filed lawsuits to rescue their merger. So should
we assume this deal is dead? Well, let's take a
close to look at the state of affairs in the saga.
I'm joined now by GERRODRIDI. He is Bloomberg opinion columnists
joining us from our studios in Tokyo. Thanks for making
(33:53):
time to check with us. Let's begin with your understanding
of Biden's rationale for blocking the transaction. First of all,
do you understand it? Does it make sense?
Speaker 12 (34:02):
The rationale absolutely does not make sense, and I think
that is the most difficult to understand part about this deal.
You know, we knew that Biden opposed the deal, We
knew that this decision was likely coming. But I think
what was shocking here was to see it put you know,
so starkly in writing that, you know, the wording of
(34:23):
Biden's executive order that he has credible evidence that Nippon
Steel might take action that threatens to impair the national
security of the US. You know, we're talking about a
Japanese company. Japan is you know, the US's I think
it's it's most important ally at this point in time,
and obviously you know it's a security the US's Japan
(34:44):
Security guardent tour. To say that a company based in
Japan presents a national security threat to the US just
doesn't make any sense at all.
Speaker 4 (34:53):
I find it particularly interesting because from what I read,
many people who advise President Biden were actually in in
favor of this deal, and they wanted him to kind
of give his blessing, to give his approval. At the
end of the day, we know he blocked it, And
I'm wondering whether some of this had to do with
the fact that Biden would like to be seen in
his legacy as a pro labor president. Do you think
(35:15):
that's plausible.
Speaker 12 (35:17):
That obviously seems to be, you know, the main factor,
and you know, to a certain extent, that's understandable from
Biden's point of view to say that there, you know,
there obviously are political considerations for him in this matter.
As you say, the reporting behind the scenes seems to
indicate that the people who are in charge of deciding
whether it represents a national security threat or not came
(35:38):
down on the side of that it wasn't. And indeed,
we're trying to persuade Biden to go back on this
deal because it obviously it is you know, as I
described it as a slap in the face of one
of the US's most important allies.
Speaker 4 (35:53):
So how is it being read in Japan right now?
What is the Japanese press saying about this?
Speaker 12 (35:59):
I think it is, as I say, the fact that
it was coming was expected. I don't think anyone really
expected this deal to go through. I think in Japan
as well, you know, as well as in you know, everywhere.
Really it is a little bit of a matter of well,
we'll wait and see. President Biden only has a couple
more weeks in office, and then we're going to have
somebody else in the White House. So I think there
(36:21):
is a little bit of an attitude of like, well,
let's let's see what happens for now. Obviously, President elect
Trump has also said that he has opposed the deal,
but it wouldn't be surprising, or it wouldn't be the
first time, shall we say, if he went back and
did the opposite of something that he had previously said.
So I think there is a little bit of a
let's wait and see what happens in a couple of weeks,
(36:41):
and then we'll decide what.
Speaker 4 (36:42):
Do you think failure of this deal. Let's assume for
a moment that it does not get done, what does
it mean for US Japan relations.
Speaker 12 (36:49):
I think it will have consequences, not just not just
necessarily the failure of this deal, but the way that
it is presented. There are already, you know, we are
in a bit of a different mode in you know,
not just in Japan, but in Asia in general at
the moment, especially with you know, Trump coming back to
(37:10):
the White House, potential you know, new leader in South
Korea in the next couple of months. And also we
have in Japan we have Prime Minister Ishibat, who is
he takes a different look at regional security in Japan's
place in Asia and Japan's place, you know, Visa VI
(37:32):
the US to many of his his predecessors, and I
think especially compared to his predecesor Kishita and obviously to
to shinzo Abe, I think this will be a black
mark on US Japan relations going forward, just the way
that it's described. I don't know if this deal in
(37:53):
and of itself will have you know, massive consequences.
Speaker 4 (37:57):
Good, it's always a pleasure. Thanks for making time to
chat with he is GIROD. Reedy, Bloomberg opinion columnist, joining
US from Tokyo. I'm Doug Krisner. You can catch us
weekdays for the Daybreak Asia podcast. It's available wherever you
get your podcast.
Speaker 2 (38:11):
Tom, Thanks Doug, and that does it for this edition
of Bloomberg day Break Weekend. Join us again Monday morning
at five am Wall Street Time for the latest on
markets overseas and the news you need to start your day.
I'm Tom Busby. Stay with us. Top stories and global
business headlines are coming up right now.