October 24, 2025 • 38 mins
Bloomberg Daybreak Weekend with Host Nathan Hager take a look at some of the stories we'll be tracking in the coming week.
- In the US – a look ahead to the next Fed meeting and earnings from U.S tech giants.
- In the UK – a look ahead to European defense earnings.
- In Asia – a look at top interviews from the APEC Finance Ministers' Meeting in South Korea.
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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, a
look ahead to next week's FED meeting and earnings from
some of tech's Magnificent seven companies.
Speaker 3 (00:24):
I'm Caroline Hebge in London, where we're looking ahead to
European defense earnings, including from Airbos and Leonardo.
Speaker 2 (00:30):
We'll look at top interviews from the APEC finance ministers
meeting in South Korea. I'm Nathan Hager in Washington.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three year, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Syria,
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 Nathan Hager. We begin today's
program with the Federal Reserve. The FED begins its two
day meeting to decide monetary policy on Tuesday. The October
decision comes Wednesday, followed of course by the news conference
from FED Chair Jay Powell. For more on what to expect,
we are joined now by Stuart paul Us, economists with
Bloomberg Economics, and Stuart, if the markets are to be believed,
(01:24):
everybody's expecting a cut, especially after the consumer price data
from Friday that we finally got, is that what you're expecting.
Speaker 4 (01:32):
That is what we're expecting. And I think that the
consumer price data that we got on Friday actually opens
the door even wider for an additional cut in December.
But I think that the FED is going to certainly
try to avoid surprising markets at this point and we'll
deliver that quarter point cut next week that everyone's been
(01:55):
holding their breath for.
Speaker 2 (01:56):
So if that's the case, would it be a surprise
if the FED did not signal a December cut, given
that we still don't know whether we're going to get
the data if this government shutdown keeps going on.
Speaker 4 (02:10):
I think policymakers will try to keep their options open,
and their explicit messaging will be something like every meeting
is live, We're not making any decisions in advance of
the meetings themselves. So I don't think that they're going
to be so bold as to offer some sort of
(02:31):
clarion call for a December cut. But I think that
the fact that the FED is comfortable with sequential cuts
right now, and it still views policy as at least
modestly restrictive, makes a December cut more likely than not.
Speaker 2 (02:48):
Also, so let's talk a little bit more about why
the consumer price data opens the door even further to
that December cut. We seem to be getting that indication
from the markets as well. What do you say in
the data that's got you open to that.
Speaker 4 (03:02):
There are really three or four items that stood out
to me in the Friday report. The first is that
tariff passed through remained modest. When we track the product
or spending level tariff that has been applied since April,
and the price growth that we have seen for those
spending categories since April, tariff passed through to the consumer
(03:26):
level is still rather modest. Second, core goods prices just
in the aggregate are still downshifting. There's been a deceleration
in prices in core goods, which should quell some fears
further for the FED. The third thing that I'd point
to is that core services, which typically matters most of
(03:48):
the FED core services prices are also tame, and there
was a major step down in rents, and rents and
owner's equivalents of rents are one of the spending categories
that are most highly levered two monetary policy decisions, which
shows that there might be some additional room for the
(04:08):
Fed to bring down rates given the fact that home
prices and home price appreciation has been slow, and so
rent growth has also slowed. I think that all of
those details from the September CPI report are going to
be viewed favorably by the FED when it meets next week.
Speaker 2 (04:26):
Are you thinking then that we could continue to see
pass through on the tariffs from this data, given that
we might not see further data. Even the White House
is warning that if the shutdown goes on, we're not
going to get potentially in October consumer price index.
Speaker 4 (04:45):
I think that even if we were to get an
October consumer price index, we would have to look at
it rather skeptically because the data collection process has been
interrupted by the shutdown. Instead, we have an alternative measure,
and we look at a broad swath of data that
allows us to get a more real time understanding of
(05:08):
price pressures, and right now it looks like tariff passed
through is relatively limited, and Nathan, one thing that I'd
point out is that firm's ability to pass through tariff
costs that they've incurred throughout the supply chain. Firm's ability
to pass through those tariff costs to consumers are being
limited by consumers income growth. Consumers cannot bid up the
(05:32):
price of goods and services in a cooling labor market.
And when that's the case, again, the FED just has
a little bit of space to cut. They don't have
to worry as much about the upside inflation risk created
by tariffs. Instead, they can rotate their attention even more
toward the maximum employment side of their dual mandate.
Speaker 2 (05:54):
Really appreciate this Stewart ahead of that FED decision on Wednesday,
our thanks to Stewart. Paulus Acomist with Bloomberg Economics. Next,
we move to corporate earnings from some of tech's Magnificent
seven companies. This week, we hear from five of them, Microsoft,
Meta Platforms and Alphabet on Wednesday, then on Thursday it's
Apple and Amazon. Busy times for mandeep saying senior tech
(06:17):
industry analysts for Bloomberg Intelligence, who joins us now, Mandeep,
thanks for being with us. We call them the mag seven.
But do these companies really rise together in tandem?
Speaker 5 (06:27):
Still they do, although I would say that, you know,
with Jenai really making a difference in terms of the
top line contributions, this will be a quarter where you
will see some divergence between the likes of Microsoft and Google,
which may get a much bigger lift in their cloud
(06:50):
revenues from AI versus let's say Amazon or Meta, where Amazon,
even though it has a very sizeable cloud business, may
not get the same kind of lift from AI that
the other two hyperscillers are getting. And also Meta, I
think because they don't have a cloud business, it will
(07:13):
be interesting to see if Meta ends up increasing their
CAPEX numbers for twenty twenty six.
Speaker 2 (07:19):
Let's talk a little bit more about that divergence then,
because it seems like, particularly for Microsoft, it's been off
to the races with their partnership with open Ai. Is
that what, Scott, you're thinking that that may be fueling
the divergence here?
Speaker 5 (07:33):
Yes, And also OpenAI has signed three big deals to
expand their data center capacity and that's not with Microsoft,
so it's signed you know, a big deal with Oracle,
with Broadcom, with Nvidia, and also another deal with AMD.
(07:54):
And you know, Microsoft still ends up benefiting because they
have a forty nine percent stake in open Ai, they
get a revenue share from open Ai. And also you know,
with open Ai doing so well in terms of you know,
they're deploying their models, it indirectly benefits Microsoft on the
(08:17):
Azure side, where we saw Microsoft Azure business growing thirty
nine percent last quarter and this quarter maybe another solid
quarter off around forty percent growth. So that's where the
tailwind is so strong for a company like Microsoft.
Speaker 2 (08:32):
And when it comes to Google parent Alphabet, I guess
we just got that confirmation that Google's got this partnership
with Anthropic. I don't know if we're going to see
that reflected in the earnings, but what does that mean
for them going forward?
Speaker 5 (08:45):
It's huge. I mean another company that's benefited from AI
workload spend is Google cloud segment, not their AD revenue,
but their cloud segment. And I think with this Entropic deal,
what they're signaling is they are ready to sell their
TPU chips outside of their own cloud. And this is
(09:08):
huge because Nvidia really dominated that space and now you
have got TPU chips that can actually compete with Nvidia
at the chip level, and to my mind, this expands
you know, the relevance of TPUs outside Google Cloud, and
it could have huge ramifications you know, twelve to twenty
(09:29):
four months out because it could be at a much
lower price point than in Nvidia chips. And that's where
you know, it gets very competitive if other companies start
to adopt TPU chips.
Speaker 2 (09:42):
On the other side of the coin, you mentioned Amazon
and meta platforms. Of course we're coming into these earnings
for Amazon after that big AWS outage last week. How
vulnerable is Amazon right now?
Speaker 5 (09:55):
I mean to me, the key metric here is cloud margins.
So with both Microsoft and Google you will see cloud
margins expand. In the case of Amazon, we saw cloud
margins actually go down last quarter, and partly that has
to do with the fact that AI isn't that big
(10:16):
of a tailwind for Amazon still, and you know, they
may be taking a lower margin for AI workloads just
to make sure that they maintain their market share. Remember,
they are the largest incumbent cloud provider, so they have
to add more revenue to grow at a higher rate
than there are other two clouds and that's where they
(10:38):
may be taking a margin hit. So margins for cloud
segment of aws are really important at this quarter.
Speaker 2 (10:46):
And in terms of Meta platforms, I know they've been
spending a lot of time poaching AI workers from Apple.
Is that going to pay off for them?
Speaker 5 (10:56):
Well? Now we also read some news that they are
actually playing off up to six hundred people. So a
lot going on in Meta in terms of their AI efforts.
And I think the main concern here is if Meta
ends up raising their CAPEX by let's say another thirty
to forty percent for twenty twenty six, which means they
(11:18):
are spending almost one hundred billion dollars in capex next year,
how does that translate into ROI? So that ROI question
for Meta is really applicable because the only place where
Meta has seen a lift from AI is in more
targeted ads and in ad pricing, and because they don't
have a separate cloud business, I think the question around
(11:41):
ROI may get louder if they end up, you know,
guiding fred in excess one hundred billion dollars in capex
for twenty twenty six.
Speaker 2 (11:50):
And when it comes to Apple, of course, you've been
talking for so long about how they've been trying to
play catch up around artificial intelligence. What's the main driver
for them as we look at their earnings.
Speaker 5 (12:00):
I mean it has to be iPhone seventeen and what
kind of a refresh cycle it could trigger. I think
Apple has to do more than just the hardware side.
They need a much better LLLM strategy, whether that means
partnering with someone or you know, doing something on their own.
(12:21):
But time is really running out in terms of laying
out what their AI strategy will be, and that is
where there are still questions around Apple.
Speaker 2 (12:30):
Thanks for this, Mandy, really appreciate it. That's Man Deep Saying,
senior tech analyst for Bloomberg Intelligence and coming up on
Bloomberg day Break weekend, we look ahead to defense earnings
in Europe from the likes of air Bus and Leonardo.
I'm Nathan Hager, and this is Bloomberg. This is Bloomberg
(12:59):
day Break Weekend, our global look ahead, the top stories
for investors in the coming week. I'm Nathan Hager in Washington.
Up later in our program, we'll take a look at
some of the top interviews from the APEX Finance ministers
meeting in South Korea, but first European defense companies are
grappling with renewed Russian threats, the ongoing war in Ukraine,
and significant dependencies on American made weapons and systems. There's
(13:21):
also been a defense selloff in recent weeks following the
ceasefire in the Middle East and now uncertainty around President
Trump's stance toward Vladimir Putin, amid intensified diplomatic efforts to
bring peace between Russia and Ukraine. With some of Europe's
biggest defense names, including air Bus and Leonardo, reporting earnings
in the next few days, let's get more from Bloomberg
Daybreak europe banker Caroline Hepger in London, Nathan.
Speaker 3 (13:43):
The EU's Defense Readiness Plan sets an ambitious goal Europe
should be ready for a potential war with Russia by
twenty thirty, but its details are vague. The main underpinning
is a push for European defense autonomy. The aim is
for forty percent of procurement in the EA use flagship
defense programs to be conducted jointly instead of separately by
(14:04):
all the different member states, and this by the end
of twenty twenty seven. So in short, the idea is
buy more, buy together and by European even if US
weapons for now may actually be the quickest fix. Torsten
Ral is the co CEO of the Munich based defense
technology firm Helsingh. He says that the increase in investor
(14:27):
interest in his sector has led to a bubble in
the defense market. He's been speaking two Bloomberg's Tom McKenzie
at the Bloomberg London Tech Summits.
Speaker 6 (14:36):
I think there's definitely a bubble right now, and the
reason for it is in twenty twenty one, not a
single EUROPEANBC in particular wanted to touch defense. Now everyone has
moved into defense, and you know, including the crypto caravan
that's moved from crypto now into defense and is trying
to spend its money there. I think in some ways
it doesn't matter. It creates noise in the market obviously,
(14:57):
but there is a lot of money I think that's
not going to see a So that was.
Speaker 3 (15:01):
The co CEO of helsing putting market moves to one side.
How prepared is Europe? How is it coping with the
shifting sounds in US policy, growing hybrid threats and on
certain timelines for funding and defense procurement. What can we
expect from the earnings of Europe's largest defense company, Airbus
(15:21):
and the others including Leonardo, which are all to come
in the next few days. Well, joining me is Bloomberg's
Global Defense editor Jerry Doyle. Welcome to the radio studio.
Thank you for being with us. Jerry. This is a
really big topic. There is a fragile ceasepar between Israel
and Hamas right now. There is a push for peace
(15:42):
in Russia and Ukraine. Meanwhile, of course you've got the
Trump administration who are really zigzagging very frequently on policy.
You know, whether it comes to Gaza, or whether it's
about the Kremlin, or even potentially about Taiwan. Does that
change the outlook for the defense sector in your or
do the fundamentals basically stay the same.
Speaker 7 (16:04):
I think the fundamentals are basically the same. I mean,
you're absolutely right on Ukraine. For instance, there's going to
be a meeting, and then there's not going to be
a meeting, and then there is a meeting but nothing
comes of it. There's going to be a deal, there's
no deal. Because of that uncertainty, I think a lot
of people might perceive that there's also uncertainty in terms
(16:24):
of what Europe is looking for the defense spending and
investment in the sector. But again, if you talk to
European politicians and policymakers, there is a very strong commitment
to increasing defense spending, increasing investment in the defense sector
in Europe, and making sure that their country's militaries are
(16:44):
able to sort of stand on their own. Because the
one thing that seems fairly certain despite everything else that's
happening in Washington, there does seem to be a pullback
of the US from Europe in terms of being the
type of ally and partner that it has been in
the past.
Speaker 3 (17:01):
Yeah. Absolutely, And we've seen have only such a big
uptick in terms of drones in terms of jet incursions
into NATO airspace, particularly in Eastern Europe, and this idea
of kind of hybrid threats as well, all European nations
kind of be able to shore up their air defense
systems because eighty percent of it is basically American made.
Speaker 7 (17:19):
Yeah, I mean, the main problem for Europe on this
score is at the very high end, European defense companies
make sort of excellent short range air defense systems, radar
directed guns and short range missiles that can handle will
flying threats, cruise missiles, drones and things like that. And
they also have the mid range sort of very well
covered with very effective systems such as nasam's and iris T.
(17:42):
Where Europe struggles in terms of production is the very
highest end the types of systems they can intercept, hypersonics,
maneuvering glide vehicles, even you know ICBMs or other type
of long range ballithic missiles. Really the US US defense
companies are the the only ones who produced that type
(18:03):
of system and so for the time being, Europe is
reliant on those. But for the rest of its needs,
I think Europe with the right sort of directed spending
can get it done.
Speaker 3 (18:13):
Okay, that's interesting, and there's also expected to be a
lot of money that is going to be spent in
Europe and in NATO. How far do you think that
the push to reach the five percent defense spending target
for NATO countries in Europe is going to be able
to sort of sustain the defense industry or boost the
defense industry in Europe, which is obviously kind of a
(18:35):
huge question.
Speaker 7 (18:36):
Yeah. Again, I think the commitment is going to be
there because the underlying reality the thing that has gotten
European governments on board with the idea of spending more
on defense is the war in Ukraine and sort of
the threat of Russian aggression that does not show any
signs of abating even if the war in Ukraine ends.
I think that European governments are now very well aware
(18:59):
that that Russia does sort of pose a threat to Europe.
That maybe that perception didn't exist fifteen years ago or
twenty years ago, now it does. And because that reality
is not going to change, then the pressure to spend
is still going to be there.
Speaker 3 (19:14):
Yeah, but a lot of that is reflected in the valuations.
So there's a question of whether the huge one up
that we've seen in the stock market valuations of a
lot of these big firms in Europe, whether you know
you're going to have to deliver that in terms of
the spending.
Speaker 7 (19:27):
Yeah, you will, and you know, some of that's going
to be easier than others. And I think to the
point earlier that there might be a lot of froth
in you know, defense investment, I think that's probably true
to some extent. It's sort of a chicken and egg
problem where there is all this spending, right so some
companies are going to you know, they might have made
(19:48):
just ordinary things before. I might see this money and say, oh,
instead of making widget, now we're making death widgets. Right,
So we're going to you know, partake in this huge
boost of spending. But there's also so a whole other
set of companies that from the get go have some
sort of interesting bit of defense related technology and now
they have a market for it, right, And so I
(20:09):
think it's weeding out that the first type of company
that it's just sort of trying to capitalize on the
increased defense spending without having anything really to offer in
terms of you know, innovation or new new sort of
angles or approach it to defense technology, getting those sort
of off the board, which you know eventually they sort
(20:31):
of will fall by the wayside and focus more on
the companies that are bringing something new to the table.
Speaker 3 (20:37):
Yeah, Death, which is I think that cuts through the
pr kind of industry jargon, doesn't it.
Speaker 7 (20:43):
It's a good band name too.
Speaker 3 (20:44):
Yeah. In terms of the individual companies also who are
very much involved in this, then we're going to hear
from in the next few days. I mean Airbus and
Leonardo and other companies are pushing for preparedness, so Airbus
obviously wants to fill the gaps in space and satellite capabilities.
In the last few days, we've also had this tie
up between air Bars and Leonardo and Tales an agreement
(21:06):
to merge their space business. So there's a lot that
is moving. And even when we started really thinking about
defense quite a few months ago, as this was all building,
the pressure was mounting, there was a big question about
whether you'd get a lot more joint cooperation. That seems
to be coming through in the industry now.
Speaker 7 (21:25):
I think so in Europe, there's this commitment to try
to do it domestically, to try to do it as
a continent. Space is also one of these areas that
Europe is very reliant on the US four at the moment,
especially on the military side, and you can see the
importance of having satellite imagery just in the Ukraine War
during the period earlier this year when the US cut
(21:46):
off Ukraine from satellite based intelligence for a while, Ukraine
immediately started yourself around the battlefield. So having those assets
and having ownership of them is very important to Europe
and European government. Airbus obviously has a lot of experience
in this area, and so I think there's a lot
of potential for joining the forces of some of the
(22:07):
technological giants to get into satellite. There could be a
lot to pay off for Europe. The problem then becomes
how do you get this stuff into orbit? And that
is something that Europe still lacks, is a high tempo,
fast cadence heavy launch system for the moment. If you
want to get a lot of stuff in orbit really fat,
you probably are going to have to buy it right
(22:28):
on SpaceX.
Speaker 3 (22:29):
Yes, exactly. So it's the competition. Who anywhere in the
world can actually keep up with Elon Musk's Space says absolutely.
We're thinking about the individual defense companies. But I suppose
the bigger question for Europe, and I want to ask
you because of your years of studying this industry, is
whether or not Europe can fight a war with Russia,
(22:52):
this whole idea around twenty thirty, whether that's too far away,
whether it's going to be a traditional war, whether we're
already in a war. I mean, there are a lot
of questions about Europe versus Vlajimi Putins Russia.
Speaker 7 (23:05):
Yeah, I think that qualitatively European allies collectively have a
big edge over Russia in almost every area, and you
can kind of see in the way the war in
Ukraine has gone for Russia that you know, they've had
trouble making any headway against a much smaller and more
(23:27):
poorly equipped adversary. How are they going to fare against
the combined militaries of Europe, which have trained together for decades,
which have top shelf equipment, which do have access to
all these high end systems that Ukraine doesn't have. It's
very difficult to picture that going well for Russia. I
think the big issue for Europe then is not the
(23:48):
amount of hardware or the quality of the hardware they have,
but it's about mustering more people. You have to expand
your militaries in order to operate rate all these new planes,
in order to operate all the new armor and artillery
systems that are being produced. You have to be able
to fight a sustain war, which is something Russia has
(24:10):
shown it's very good at, just by a sort of
continually conscripting wave after wave of people to fight in
the war in Ukraine. I think that's the biggest challenge
for Europe. When you say getting Europe ready to fight
a war for Russia. That's what it is. It's not
getting more hardware, it's not building better stuff, it's just
having the horses to be able to stay in the
sustained fight with a very large country.
Speaker 3 (24:32):
Jerry Dowla, thank you so much for your time. That
is Bloomberg's Global Defense editor, Jerry Doyle. We'll have full
coverage and analysis of European defense earnings, including from Airbos
and Leonardo with quarterly earnings to you on Wednesday, the
twenty ninth of October right here on Bloomberg Radio. I'm
Caroline Hepkeit in London. You can catch us every weekday
morning for Bloomberg Daybreak here at beginning at six am
(24:54):
in London. That's one. I am on Wall Street, Nathan.
Speaker 2 (24:57):
Thanks Caroline, and coming up on Bloomberg Daybreakkend, we'll look
at some key conversations this week with South Korea's Finance
Minister Ku Yung Chull and Australian Treasurer Jim Chalmers. I'm
Nathan Hager, and this is Bloomberg. This is Bloomberg Daybreak Weekend,
(25:22):
our global look ahead of the top stories for investors
in the coming week. I'm Nathan Hager in Washington this week.
Finance minister is from the Asia Pacific Economic Cooperation member
economies gathered in South Korea to discuss a broad range
of issues that includes the global economic outlook, fiscal policy,
and structural reform. This is the last ministerial level meeting
before the APEX summit in the coming week, and Bloomberg
(25:45):
had the chance to speak with several top officials, including
South Korea's Finance Minister Ku Jung Choll. He says the
ongoing trade talks between South Korea and the US are
focusing on the structure of a three hundred and fifty
billion dollar investment pledge rather than accurrent c swap. Ku
spoke exclusively with Bloomberg's Sharry On from the sidelines of
the APEX Finance Minister's meeting. They started on the progress
(26:08):
of negotiations.
Speaker 8 (26:09):
We understand that the US Investment Fund has been very
difficult to agree on the details, and you've told Secretary
Bestcent about the feasibility of having so much cash upfront.
Should we be expecting installments in payments?
Speaker 2 (26:25):
Then to hangoan.
Speaker 9 (26:30):
Peasant has understood that due to the current state of
Korea's foreign exchange market, we cannot pay upfront. He understands that. However,
regarding how to proceed on this with negotiations currently underway
with the US, I ask for your understanding that I
cannot yet provide specific details on the plan.
Speaker 8 (26:50):
Bank of Korea Governor Eitanong said that the maximum amount
that can be raised in dollars annually without market disruptions
is twenty billion dollars. Looking at the round those figures
right now.
Speaker 5 (27:02):
I tell you the miximum.
Speaker 9 (27:04):
Yes, the Bank of Korea currently estimates that the maximum
amount we can raise without significantly impacting the foreign exchange
market is twenty billion dollars.
Speaker 8 (27:14):
What does that mean for upfront payments though? Does that
mean front loading some and then paying annually.
Speaker 9 (27:23):
Regarding that aspect, we are keeping various possibilities open for
the foreign exchange market and are currently in negotiations with
the United States.
Speaker 8 (27:33):
Yes, that's one of the options that you've talked to
Secretary Bessent and to Washington about.
Speaker 9 (27:41):
I cannot confirm that at this time. However, Secretary Bessent
fully understands the difficulties in Korea's FX market and is
having internal discussions on how to respond to the situation.
Speaker 8 (27:55):
Because of the potential financial shocks to South Korea, there
was a lot of time talk about a potential currency
swap agreement. Is that still on the table?
Speaker 10 (28:05):
Swab on.
Speaker 9 (28:09):
Whether a currency swap is needed and to what extent
will depend entirely on how the deal is structured. It
may not be necessary at all, or it could be
arranged on a smaller scale. Therefore, the currency swap itself
is a necessary condition, not a sufficient one. So depending
on how this deal turns out, we plan to consult
(28:30):
with the US regarding the currency swap aspect as well.
Speaker 8 (28:33):
Tia Sabby.
Speaker 9 (28:36):
Even if we have a currency swap, it will be
difficult to just blindly provide money to the US without
considering the commercial rationality or viability of the project being selected.
Speaker 8 (28:46):
I'm understanding then that this option is still alive. If
that's the case, when it comes to perhaps the structure,
could it be something similar as to the Argentina style,
going through the treasury instead of directly from the Fed
to While I saw this on.
Speaker 9 (29:02):
The regarding the currency swap, we're not doing it because
we lack short term foreign reserves like Argentina. It's a
situation where Korea needs foreign currency to make long term
investments as requested by the US, so the US must
provide the lack of foreign currency. Therefore, it doesn't align
with the conventional short term currency swap structure. So regarding
(29:25):
that aspect, if we were to engage in a currency
swap arrangement with the US, there are further points that
require discussions.
Speaker 8 (29:33):
The South Korea one of fourteen hundred per dollar, is
that the new normal? Do you think that reflects fundamentals
to them?
Speaker 9 (29:45):
We believe much of the recent depreciation reflects market concern
that the tariff negotiations haven't been finalized. So we are
currently pursuing negotiations with the US with inter range that
doesn't significantly impact Korea's foreign exchange market. Fortunately, US Treasury
Secretary Besant is fully aware of the situation in Korea's
(30:05):
foreign exchange market. Therefore, once the issue is resolved, that
uncertainty will likely fade.
Speaker 8 (30:10):
We have seen clearly the impact on South Korean automakers
because the tariffs continue to be, of course, much higher
than for Japan for Europe, who already the US has
lifted those levees. What can the government do at this
point to support the sector?
Speaker 9 (30:27):
Ronan in the short term, the government is providing all
possible policy support to automakers and auto parts companies facing
difficulties due to these higher tariffs compared to the EU
and Japan. We believe that if these negotiations yield some breakthrough,
those issues could also be resolved.
Speaker 8 (30:47):
In these ongoing trade negotiations. Is the fact that South
Korea would lose its advantage over say, Japan, before the
trade deal, because Korea have a free trade agreement with
the US, it had an advantage of around two point
five percent. Is that being discussed at this point?
Speaker 9 (31:11):
I conveyed that point to President Trump and explained to
Bessant and Lun. I explained that since Korea is an
FTA partner, tariffs on Korea are already sufficiently low, but
tariffs on other countries aren't sufficiently low, making it unfair.
Even so, it seems the US isn't very willing to
(31:32):
understand that aspect. In any case, we plan to continue
explaining and persuading them.
Speaker 8 (31:38):
Because of the exuberance around the artificial intelligence, we are
seeing South korea stock market on a tear. Are you
concerned that this could be a market bubble?
Speaker 9 (31:53):
The current stock market reflects expectations for the Korean economy,
such as enhancing shareholder value in the Korean capital market,
expanding dividends or resolving unfair practices, expectations for the modernization
of the Korean stockform. On top of these expectations, we
are actively supporting the core technology economy to ensure a
(32:14):
robust Korean economy that can be a global investment destination.
Speaker 2 (32:18):
That was South Korea Finance Minister Ku Yun Choll speaking
with Bloomberg's s Sherry on staying at the APEX Finance
Minister's meeting. We also got the chance to hear from
Australian Treasurer Jim Chalmers. He spoke to Bloomberg's Hustlin to
Ahmed after his country and the US signed a landmark
deal to boost America's access to rare earth send other
critical minerals as part of a push to kerb alliance
(32:39):
on China's supply chains. They started by talking about what
the agreement means for the Australian economy.
Speaker 10 (32:45):
Will you given any insurances that perhaps this won't just
be America.
Speaker 11 (32:51):
Fast Prime Minister Albanezi had an outstanding meeting with President Trump.
Were very very pleased with how the mating went and
the critical minerals framework is really one of the most
important bits of progress that we saw in those discussions.
And what that's all about is about helping to ensure
Australia becomes a world leader in the export of rare
(33:14):
earths and critical minerals. It's all about making sure that
we strengthen our trade ties with the US, that we
strengthen supply chains, and that we make sure that this
remarkable opportunity that Australia has with rare earths and critical
minerals is properly maximized.
Speaker 10 (33:31):
So who long decide which projects are viable? Is the
government choosing the winners here?
Speaker 11 (33:38):
Well, this industry already we think there are about thirteen
billion dollars Australian of projects in the pipeline, a really
extraordinary opportunity for Australia, a golden opportunity. And what the
American administration and the Australian government have agreed is that
each of us will invest a billion dollars over the
(33:59):
next six months. You rightly said in your introduction in
some of these really important projects. We believe Australia can
be and will be a world leader and the supply
of rare earths and critical minerals. The agreement and the
framework that was agreed with President Trump is an important
part of that effort. It's a golden opportunity for Australia
and we intend to maximize it.
Speaker 10 (34:20):
The thing is, there is reason to think that could
be competition between an American and Australian company and just
wondering how will it be decided when it comes to that.
For instance, if you have liners and AMPI materials at odds,
how will you decide?
Speaker 11 (34:37):
Well, it's not beyond us for the commercial arrangements to
reflect the scale of this opportunity and our obligations to
each other under this framework. Obviously, rare earths and critical
minerals have a number of important applications, including in defense
and technology and in the industries that the US administration
are very keen to work closely with Australia on to
(35:00):
be a reliable supplier around the world. But this agreement
with the US is about strengthening trade ties with the
Trump administration and the US. More broadly, it's about making
sure that those supply chains are robust and reliable. We
will have markets all around the world for these critical
minerals and that's a good thing. But the American relationship
(35:20):
is very important to us, and today we strengthened it.
Speaker 10 (35:24):
When you think about these rare deal on the projects
which are coming up, we know that Gina Reinhardt, for instance,
has a finger in a lot of these pies, and
some are raising the concern that perhaps taxpayers money would
end up at one end of town, which is the
richer end of town. I mean, how do you respond
to such concerns?
Speaker 11 (35:46):
Oh, this critical minerals opportunity for Australia is a big
opportunity for our workers, our local communities, for our businesses
and our investors. And there's more than one investor or
owner of critical minerals resources in Australia. But whether it's mining, refining,
adding value processing, working with our international partners, we shouldn't
(36:08):
see this as anything other than a massive opportunity for Australia.
It's why we put so much effort into engaging, whether
it be with the US administration, whether it be here
in APEC, with the twenty one economies of our region.
We recognize that Australia has got a lot to offer
the world. We've got important relationships right around the region,
(36:28):
and we intend to supply other economies with our critical
minerals and rare earths in a way where the benefits
in Australia are broadly shared, including amongst our world leading
mining workforce.
Speaker 10 (36:43):
Do you think China overplayed its hand in imposing the
cards on our supplies.
Speaker 11 (36:50):
I wouldn't engage in that sort of commentary. We engage
with the Chinese administration in good faith and in Australia's
national interest. We engage with all of our trading partners
in that fashion. I'll leave the analysis to others. Our
interest here is making sure that we play an important
role in strengthening supply chains in this industry, whether it's
(37:13):
in the United States or elsewhere. But our relationship with
China is important to us in economic terms as well.
We've put a lot of effort into stabilizing that relationship.
The Chinese economy is not without its fair share of challenges,
but we are confident that it will continue to be
an important source of growth in our own economy in Australia,
(37:33):
and we believe it's possible to engage with the Americans
in the way that we have been and to continue
to stabilize and invest in that very important China relationship.
Speaker 1 (37:43):
At the same time, that was.
Speaker 2 (37:44):
Jim Chalmers, Australia's treasure speaking with Bloomberg's Suslinda Amen at
the APEX Finance ministers meeting in South Korea. And that
does it for this edition of Bloomberg Daybreak Weekend. Join
us again Monday morning at five am Wall Street Time
for the latest don markets, overseas and the news you
need to start your day. I'm Nathan Hager. 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, a
look ahead to next week's FED meeting and earnings from
some of tech's Magnificent seven companies.
Speaker 3 (00:24):
I'm Caroline Hebge in London, where we're looking ahead to
European defense earnings, including from Airbos and Leonardo.
Speaker 2 (00:30):
We'll look at top interviews from the APEC finance ministers
meeting in South Korea. I'm Nathan Hager in Washington.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three year, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Syria,
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 Nathan Hager. We begin today's
program with the Federal Reserve. The FED begins its two
day meeting to decide monetary policy on Tuesday. The October
decision comes Wednesday, followed of course by the news conference
from FED Chair Jay Powell. For more on what to expect,
we are joined now by Stuart paul Us, economists with
Bloomberg Economics, and Stuart, if the markets are to be believed,
(01:24):
everybody's expecting a cut, especially after the consumer price data
from Friday that we finally got, is that what you're expecting.
Speaker 4 (01:32):
That is what we're expecting. And I think that the
consumer price data that we got on Friday actually opens
the door even wider for an additional cut in December.
But I think that the FED is going to certainly
try to avoid surprising markets at this point and we'll
deliver that quarter point cut next week that everyone's been
(01:55):
holding their breath for.
Speaker 2 (01:56):
So if that's the case, would it be a surprise
if the FED did not signal a December cut, given
that we still don't know whether we're going to get
the data if this government shutdown keeps going on.
Speaker 4 (02:10):
I think policymakers will try to keep their options open,
and their explicit messaging will be something like every meeting
is live, We're not making any decisions in advance of
the meetings themselves. So I don't think that they're going
to be so bold as to offer some sort of
(02:31):
clarion call for a December cut. But I think that
the fact that the FED is comfortable with sequential cuts
right now, and it still views policy as at least
modestly restrictive, makes a December cut more likely than not.
Speaker 2 (02:48):
Also, so let's talk a little bit more about why
the consumer price data opens the door even further to
that December cut. We seem to be getting that indication
from the markets as well. What do you say in
the data that's got you open to that.
Speaker 4 (03:02):
There are really three or four items that stood out
to me in the Friday report. The first is that
tariff passed through remained modest. When we track the product
or spending level tariff that has been applied since April,
and the price growth that we have seen for those
spending categories since April, tariff passed through to the consumer
(03:26):
level is still rather modest. Second, core goods prices just
in the aggregate are still downshifting. There's been a deceleration
in prices in core goods, which should quell some fears
further for the FED. The third thing that I'd point
to is that core services, which typically matters most of
(03:48):
the FED core services prices are also tame, and there
was a major step down in rents, and rents and
owner's equivalents of rents are one of the spending categories
that are most highly levered two monetary policy decisions, which
shows that there might be some additional room for the
(04:08):
Fed to bring down rates given the fact that home
prices and home price appreciation has been slow, and so
rent growth has also slowed. I think that all of
those details from the September CPI report are going to
be viewed favorably by the FED when it meets next week.
Speaker 2 (04:26):
Are you thinking then that we could continue to see
pass through on the tariffs from this data, given that
we might not see further data. Even the White House
is warning that if the shutdown goes on, we're not
going to get potentially in October consumer price index.
Speaker 4 (04:45):
I think that even if we were to get an
October consumer price index, we would have to look at
it rather skeptically because the data collection process has been
interrupted by the shutdown. Instead, we have an alternative measure,
and we look at a broad swath of data that
allows us to get a more real time understanding of
(05:08):
price pressures, and right now it looks like tariff passed
through is relatively limited, and Nathan, one thing that I'd
point out is that firm's ability to pass through tariff
costs that they've incurred throughout the supply chain. Firm's ability
to pass through those tariff costs to consumers are being
limited by consumers income growth. Consumers cannot bid up the
(05:32):
price of goods and services in a cooling labor market.
And when that's the case, again, the FED just has
a little bit of space to cut. They don't have
to worry as much about the upside inflation risk created
by tariffs. Instead, they can rotate their attention even more
toward the maximum employment side of their dual mandate.
Speaker 2 (05:54):
Really appreciate this Stewart ahead of that FED decision on Wednesday,
our thanks to Stewart. Paulus Acomist with Bloomberg Economics. Next,
we move to corporate earnings from some of tech's Magnificent
seven companies. This week, we hear from five of them, Microsoft,
Meta Platforms and Alphabet on Wednesday, then on Thursday it's
Apple and Amazon. Busy times for mandeep saying senior tech
(06:17):
industry analysts for Bloomberg Intelligence, who joins us now, Mandeep,
thanks for being with us. We call them the mag seven.
But do these companies really rise together in tandem?
Speaker 5 (06:27):
Still they do, although I would say that, you know,
with Jenai really making a difference in terms of the
top line contributions, this will be a quarter where you
will see some divergence between the likes of Microsoft and Google,
which may get a much bigger lift in their cloud
(06:50):
revenues from AI versus let's say Amazon or Meta, where Amazon,
even though it has a very sizeable cloud business, may
not get the same kind of lift from AI that
the other two hyperscillers are getting. And also Meta, I
think because they don't have a cloud business, it will
(07:13):
be interesting to see if Meta ends up increasing their
CAPEX numbers for twenty twenty six.
Speaker 2 (07:19):
Let's talk a little bit more about that divergence then,
because it seems like, particularly for Microsoft, it's been off
to the races with their partnership with open Ai. Is
that what, Scott, you're thinking that that may be fueling
the divergence here?
Speaker 5 (07:33):
Yes, And also OpenAI has signed three big deals to
expand their data center capacity and that's not with Microsoft,
so it's signed you know, a big deal with Oracle,
with Broadcom, with Nvidia, and also another deal with AMD.
(07:54):
And you know, Microsoft still ends up benefiting because they
have a forty nine percent stake in open Ai, they
get a revenue share from open Ai. And also you know,
with open Ai doing so well in terms of you know,
they're deploying their models, it indirectly benefits Microsoft on the
(08:17):
Azure side, where we saw Microsoft Azure business growing thirty
nine percent last quarter and this quarter maybe another solid
quarter off around forty percent growth. So that's where the
tailwind is so strong for a company like Microsoft.
Speaker 2 (08:32):
And when it comes to Google parent Alphabet, I guess
we just got that confirmation that Google's got this partnership
with Anthropic. I don't know if we're going to see
that reflected in the earnings, but what does that mean
for them going forward?
Speaker 5 (08:45):
It's huge. I mean another company that's benefited from AI
workload spend is Google cloud segment, not their AD revenue,
but their cloud segment. And I think with this Entropic deal,
what they're signaling is they are ready to sell their
TPU chips outside of their own cloud. And this is
(09:08):
huge because Nvidia really dominated that space and now you
have got TPU chips that can actually compete with Nvidia
at the chip level, and to my mind, this expands
you know, the relevance of TPUs outside Google Cloud, and
it could have huge ramifications you know, twelve to twenty
(09:29):
four months out because it could be at a much
lower price point than in Nvidia chips. And that's where
you know, it gets very competitive if other companies start
to adopt TPU chips.
Speaker 2 (09:42):
On the other side of the coin, you mentioned Amazon
and meta platforms. Of course we're coming into these earnings
for Amazon after that big AWS outage last week. How
vulnerable is Amazon right now?
Speaker 5 (09:55):
I mean to me, the key metric here is cloud margins.
So with both Microsoft and Google you will see cloud
margins expand. In the case of Amazon, we saw cloud
margins actually go down last quarter, and partly that has
to do with the fact that AI isn't that big
(10:16):
of a tailwind for Amazon still, and you know, they
may be taking a lower margin for AI workloads just
to make sure that they maintain their market share. Remember,
they are the largest incumbent cloud provider, so they have
to add more revenue to grow at a higher rate
than there are other two clouds and that's where they
(10:38):
may be taking a margin hit. So margins for cloud
segment of aws are really important at this quarter.
Speaker 2 (10:46):
And in terms of Meta platforms, I know they've been
spending a lot of time poaching AI workers from Apple.
Is that going to pay off for them?
Speaker 5 (10:56):
Well? Now we also read some news that they are
actually playing off up to six hundred people. So a
lot going on in Meta in terms of their AI efforts.
And I think the main concern here is if Meta
ends up raising their CAPEX by let's say another thirty
to forty percent for twenty twenty six, which means they
(11:18):
are spending almost one hundred billion dollars in capex next year,
how does that translate into ROI? So that ROI question
for Meta is really applicable because the only place where
Meta has seen a lift from AI is in more
targeted ads and in ad pricing, and because they don't
have a separate cloud business, I think the question around
(11:41):
ROI may get louder if they end up, you know,
guiding fred in excess one hundred billion dollars in capex
for twenty twenty six.
Speaker 2 (11:50):
And when it comes to Apple, of course, you've been
talking for so long about how they've been trying to
play catch up around artificial intelligence. What's the main driver
for them as we look at their earnings.
Speaker 5 (12:00):
I mean it has to be iPhone seventeen and what
kind of a refresh cycle it could trigger. I think
Apple has to do more than just the hardware side.
They need a much better LLLM strategy, whether that means
partnering with someone or you know, doing something on their own.
(12:21):
But time is really running out in terms of laying
out what their AI strategy will be, and that is
where there are still questions around Apple.
Speaker 2 (12:30):
Thanks for this, Mandy, really appreciate it. That's Man Deep Saying,
senior tech analyst for Bloomberg Intelligence and coming up on
Bloomberg day Break weekend, we look ahead to defense earnings
in Europe from the likes of air Bus and Leonardo.
I'm Nathan Hager, and this is Bloomberg. This is Bloomberg
(12:59):
day Break Weekend, our global look ahead, the top stories
for investors in the coming week. I'm Nathan Hager in Washington.
Up later in our program, we'll take a look at
some of the top interviews from the APEX Finance ministers
meeting in South Korea, but first European defense companies are
grappling with renewed Russian threats, the ongoing war in Ukraine,
and significant dependencies on American made weapons and systems. There's
(13:21):
also been a defense selloff in recent weeks following the
ceasefire in the Middle East and now uncertainty around President
Trump's stance toward Vladimir Putin, amid intensified diplomatic efforts to
bring peace between Russia and Ukraine. With some of Europe's
biggest defense names, including air Bus and Leonardo, reporting earnings
in the next few days, let's get more from Bloomberg
Daybreak europe banker Caroline Hepger in London, Nathan.
Speaker 3 (13:43):
The EU's Defense Readiness Plan sets an ambitious goal Europe
should be ready for a potential war with Russia by
twenty thirty, but its details are vague. The main underpinning
is a push for European defense autonomy. The aim is
for forty percent of procurement in the EA use flagship
defense programs to be conducted jointly instead of separately by
(14:04):
all the different member states, and this by the end
of twenty twenty seven. So in short, the idea is
buy more, buy together and by European even if US
weapons for now may actually be the quickest fix. Torsten
Ral is the co CEO of the Munich based defense
technology firm Helsingh. He says that the increase in investor
(14:27):
interest in his sector has led to a bubble in
the defense market. He's been speaking two Bloomberg's Tom McKenzie
at the Bloomberg London Tech Summits.
Speaker 6 (14:36):
I think there's definitely a bubble right now, and the
reason for it is in twenty twenty one, not a
single EUROPEANBC in particular wanted to touch defense. Now everyone has
moved into defense, and you know, including the crypto caravan
that's moved from crypto now into defense and is trying
to spend its money there. I think in some ways
it doesn't matter. It creates noise in the market obviously,
(14:57):
but there is a lot of money I think that's
not going to see a So that was.
Speaker 3 (15:01):
The co CEO of helsing putting market moves to one side.
How prepared is Europe? How is it coping with the
shifting sounds in US policy, growing hybrid threats and on
certain timelines for funding and defense procurement. What can we
expect from the earnings of Europe's largest defense company, Airbus
(15:21):
and the others including Leonardo, which are all to come
in the next few days. Well, joining me is Bloomberg's
Global Defense editor Jerry Doyle. Welcome to the radio studio.
Thank you for being with us. Jerry. This is a
really big topic. There is a fragile ceasepar between Israel
and Hamas right now. There is a push for peace
(15:42):
in Russia and Ukraine. Meanwhile, of course you've got the
Trump administration who are really zigzagging very frequently on policy.
You know, whether it comes to Gaza, or whether it's
about the Kremlin, or even potentially about Taiwan. Does that
change the outlook for the defense sector in your or
do the fundamentals basically stay the same.
Speaker 7 (16:04):
I think the fundamentals are basically the same. I mean,
you're absolutely right on Ukraine. For instance, there's going to
be a meeting, and then there's not going to be
a meeting, and then there is a meeting but nothing
comes of it. There's going to be a deal, there's
no deal. Because of that uncertainty, I think a lot
of people might perceive that there's also uncertainty in terms
(16:24):
of what Europe is looking for the defense spending and
investment in the sector. But again, if you talk to
European politicians and policymakers, there is a very strong commitment
to increasing defense spending, increasing investment in the defense sector
in Europe, and making sure that their country's militaries are
(16:44):
able to sort of stand on their own. Because the
one thing that seems fairly certain despite everything else that's
happening in Washington, there does seem to be a pullback
of the US from Europe in terms of being the
type of ally and partner that it has been in
the past.
Speaker 3 (17:01):
Yeah. Absolutely, And we've seen have only such a big
uptick in terms of drones in terms of jet incursions
into NATO airspace, particularly in Eastern Europe, and this idea
of kind of hybrid threats as well, all European nations
kind of be able to shore up their air defense
systems because eighty percent of it is basically American made.
Speaker 7 (17:19):
Yeah, I mean, the main problem for Europe on this
score is at the very high end, European defense companies
make sort of excellent short range air defense systems, radar
directed guns and short range missiles that can handle will
flying threats, cruise missiles, drones and things like that. And
they also have the mid range sort of very well
covered with very effective systems such as nasam's and iris T.
(17:42):
Where Europe struggles in terms of production is the very
highest end the types of systems they can intercept, hypersonics,
maneuvering glide vehicles, even you know ICBMs or other type
of long range ballithic missiles. Really the US US defense
companies are the the only ones who produced that type
(18:03):
of system and so for the time being, Europe is
reliant on those. But for the rest of its needs,
I think Europe with the right sort of directed spending
can get it done.
Speaker 3 (18:13):
Okay, that's interesting, and there's also expected to be a
lot of money that is going to be spent in
Europe and in NATO. How far do you think that
the push to reach the five percent defense spending target
for NATO countries in Europe is going to be able
to sort of sustain the defense industry or boost the
defense industry in Europe, which is obviously kind of a
(18:35):
huge question.
Speaker 7 (18:36):
Yeah. Again, I think the commitment is going to be
there because the underlying reality the thing that has gotten
European governments on board with the idea of spending more
on defense is the war in Ukraine and sort of
the threat of Russian aggression that does not show any
signs of abating even if the war in Ukraine ends.
I think that European governments are now very well aware
(18:59):
that that Russia does sort of pose a threat to Europe.
That maybe that perception didn't exist fifteen years ago or
twenty years ago, now it does. And because that reality
is not going to change, then the pressure to spend
is still going to be there.
Speaker 3 (19:14):
Yeah, but a lot of that is reflected in the valuations.
So there's a question of whether the huge one up
that we've seen in the stock market valuations of a
lot of these big firms in Europe, whether you know
you're going to have to deliver that in terms of
the spending.
Speaker 7 (19:27):
Yeah, you will, and you know, some of that's going
to be easier than others. And I think to the
point earlier that there might be a lot of froth
in you know, defense investment, I think that's probably true
to some extent. It's sort of a chicken and egg
problem where there is all this spending, right so some
companies are going to you know, they might have made
(19:48):
just ordinary things before. I might see this money and say, oh,
instead of making widget, now we're making death widgets. Right,
So we're going to you know, partake in this huge
boost of spending. But there's also so a whole other
set of companies that from the get go have some
sort of interesting bit of defense related technology and now
they have a market for it, right, And so I
(20:09):
think it's weeding out that the first type of company
that it's just sort of trying to capitalize on the
increased defense spending without having anything really to offer in
terms of you know, innovation or new new sort of
angles or approach it to defense technology, getting those sort
of off the board, which you know eventually they sort
(20:31):
of will fall by the wayside and focus more on
the companies that are bringing something new to the table.
Speaker 3 (20:37):
Yeah, Death, which is I think that cuts through the
pr kind of industry jargon, doesn't it.
Speaker 7 (20:43):
It's a good band name too.
Speaker 3 (20:44):
Yeah. In terms of the individual companies also who are
very much involved in this, then we're going to hear
from in the next few days. I mean Airbus and
Leonardo and other companies are pushing for preparedness, so Airbus
obviously wants to fill the gaps in space and satellite capabilities.
In the last few days, we've also had this tie
up between air Bars and Leonardo and Tales an agreement
(21:06):
to merge their space business. So there's a lot that
is moving. And even when we started really thinking about
defense quite a few months ago, as this was all building,
the pressure was mounting, there was a big question about
whether you'd get a lot more joint cooperation. That seems
to be coming through in the industry now.
Speaker 7 (21:25):
I think so in Europe, there's this commitment to try
to do it domestically, to try to do it as
a continent. Space is also one of these areas that
Europe is very reliant on the US four at the moment,
especially on the military side, and you can see the
importance of having satellite imagery just in the Ukraine War
during the period earlier this year when the US cut
(21:46):
off Ukraine from satellite based intelligence for a while, Ukraine
immediately started yourself around the battlefield. So having those assets
and having ownership of them is very important to Europe
and European government. Airbus obviously has a lot of experience
in this area, and so I think there's a lot
of potential for joining the forces of some of the
(22:07):
technological giants to get into satellite. There could be a
lot to pay off for Europe. The problem then becomes
how do you get this stuff into orbit? And that
is something that Europe still lacks, is a high tempo,
fast cadence heavy launch system for the moment. If you
want to get a lot of stuff in orbit really fat,
you probably are going to have to buy it right
(22:28):
on SpaceX.
Speaker 3 (22:29):
Yes, exactly. So it's the competition. Who anywhere in the
world can actually keep up with Elon Musk's Space says absolutely.
We're thinking about the individual defense companies. But I suppose
the bigger question for Europe, and I want to ask
you because of your years of studying this industry, is
whether or not Europe can fight a war with Russia,
(22:52):
this whole idea around twenty thirty, whether that's too far away,
whether it's going to be a traditional war, whether we're
already in a war. I mean, there are a lot
of questions about Europe versus Vlajimi Putins Russia.
Speaker 7 (23:05):
Yeah, I think that qualitatively European allies collectively have a
big edge over Russia in almost every area, and you
can kind of see in the way the war in
Ukraine has gone for Russia that you know, they've had
trouble making any headway against a much smaller and more
(23:27):
poorly equipped adversary. How are they going to fare against
the combined militaries of Europe, which have trained together for decades,
which have top shelf equipment, which do have access to
all these high end systems that Ukraine doesn't have. It's
very difficult to picture that going well for Russia. I
think the big issue for Europe then is not the
(23:48):
amount of hardware or the quality of the hardware they have,
but it's about mustering more people. You have to expand
your militaries in order to operate rate all these new planes,
in order to operate all the new armor and artillery
systems that are being produced. You have to be able
to fight a sustain war, which is something Russia has
(24:10):
shown it's very good at, just by a sort of
continually conscripting wave after wave of people to fight in
the war in Ukraine. I think that's the biggest challenge
for Europe. When you say getting Europe ready to fight
a war for Russia. That's what it is. It's not
getting more hardware, it's not building better stuff, it's just
having the horses to be able to stay in the
sustained fight with a very large country.
Speaker 3 (24:32):
Jerry Dowla, thank you so much for your time. That
is Bloomberg's Global Defense editor, Jerry Doyle. We'll have full
coverage and analysis of European defense earnings, including from Airbos
and Leonardo with quarterly earnings to you on Wednesday, the
twenty ninth of October right here on Bloomberg Radio. I'm
Caroline Hepkeit in London. You can catch us every weekday
morning for Bloomberg Daybreak here at beginning at six am
(24:54):
in London. That's one. I am on Wall Street, Nathan.
Speaker 2 (24:57):
Thanks Caroline, and coming up on Bloomberg Daybreakkend, we'll look
at some key conversations this week with South Korea's Finance
Minister Ku Yung Chull and Australian Treasurer Jim Chalmers. I'm
Nathan Hager, and this is Bloomberg. This is Bloomberg Daybreak Weekend,
(25:22):
our global look ahead of the top stories for investors
in the coming week. I'm Nathan Hager in Washington this week.
Finance minister is from the Asia Pacific Economic Cooperation member
economies gathered in South Korea to discuss a broad range
of issues that includes the global economic outlook, fiscal policy,
and structural reform. This is the last ministerial level meeting
before the APEX summit in the coming week, and Bloomberg
(25:45):
had the chance to speak with several top officials, including
South Korea's Finance Minister Ku Jung Choll. He says the
ongoing trade talks between South Korea and the US are
focusing on the structure of a three hundred and fifty
billion dollar investment pledge rather than accurrent c swap. Ku
spoke exclusively with Bloomberg's Sharry On from the sidelines of
the APEX Finance Minister's meeting. They started on the progress
(26:08):
of negotiations.
Speaker 8 (26:09):
We understand that the US Investment Fund has been very
difficult to agree on the details, and you've told Secretary
Bestcent about the feasibility of having so much cash upfront.
Should we be expecting installments in payments?
Speaker 2 (26:25):
Then to hangoan.
Speaker 9 (26:30):
Peasant has understood that due to the current state of
Korea's foreign exchange market, we cannot pay upfront. He understands that. However,
regarding how to proceed on this with negotiations currently underway
with the US, I ask for your understanding that I
cannot yet provide specific details on the plan.
Speaker 8 (26:50):
Bank of Korea Governor Eitanong said that the maximum amount
that can be raised in dollars annually without market disruptions
is twenty billion dollars. Looking at the round those figures
right now.
Speaker 5 (27:02):
I tell you the miximum.
Speaker 9 (27:04):
Yes, the Bank of Korea currently estimates that the maximum
amount we can raise without significantly impacting the foreign exchange
market is twenty billion dollars.
Speaker 8 (27:14):
What does that mean for upfront payments though? Does that
mean front loading some and then paying annually.
Speaker 9 (27:23):
Regarding that aspect, we are keeping various possibilities open for
the foreign exchange market and are currently in negotiations with
the United States.
Speaker 8 (27:33):
Yes, that's one of the options that you've talked to
Secretary Bessent and to Washington about.
Speaker 9 (27:41):
I cannot confirm that at this time. However, Secretary Bessent
fully understands the difficulties in Korea's FX market and is
having internal discussions on how to respond to the situation.
Speaker 8 (27:55):
Because of the potential financial shocks to South Korea, there
was a lot of time talk about a potential currency
swap agreement. Is that still on the table?
Speaker 10 (28:05):
Swab on.
Speaker 9 (28:09):
Whether a currency swap is needed and to what extent
will depend entirely on how the deal is structured. It
may not be necessary at all, or it could be
arranged on a smaller scale. Therefore, the currency swap itself
is a necessary condition, not a sufficient one. So depending
on how this deal turns out, we plan to consult
(28:30):
with the US regarding the currency swap aspect as well.
Speaker 8 (28:33):
Tia Sabby.
Speaker 9 (28:36):
Even if we have a currency swap, it will be
difficult to just blindly provide money to the US without
considering the commercial rationality or viability of the project being selected.
Speaker 8 (28:46):
I'm understanding then that this option is still alive. If
that's the case, when it comes to perhaps the structure,
could it be something similar as to the Argentina style,
going through the treasury instead of directly from the Fed
to While I saw this on.
Speaker 9 (29:02):
The regarding the currency swap, we're not doing it because
we lack short term foreign reserves like Argentina. It's a
situation where Korea needs foreign currency to make long term
investments as requested by the US, so the US must
provide the lack of foreign currency. Therefore, it doesn't align
with the conventional short term currency swap structure. So regarding
(29:25):
that aspect, if we were to engage in a currency
swap arrangement with the US, there are further points that
require discussions.
Speaker 8 (29:33):
The South Korea one of fourteen hundred per dollar, is
that the new normal? Do you think that reflects fundamentals
to them?
Speaker 9 (29:45):
We believe much of the recent depreciation reflects market concern
that the tariff negotiations haven't been finalized. So we are
currently pursuing negotiations with the US with inter range that
doesn't significantly impact Korea's foreign exchange market. Fortunately, US Treasury
Secretary Besant is fully aware of the situation in Korea's
(30:05):
foreign exchange market. Therefore, once the issue is resolved, that
uncertainty will likely fade.
Speaker 8 (30:10):
We have seen clearly the impact on South Korean automakers
because the tariffs continue to be, of course, much higher
than for Japan for Europe, who already the US has
lifted those levees. What can the government do at this
point to support the sector?
Speaker 9 (30:27):
Ronan in the short term, the government is providing all
possible policy support to automakers and auto parts companies facing
difficulties due to these higher tariffs compared to the EU
and Japan. We believe that if these negotiations yield some breakthrough,
those issues could also be resolved.
Speaker 8 (30:47):
In these ongoing trade negotiations. Is the fact that South
Korea would lose its advantage over say, Japan, before the
trade deal, because Korea have a free trade agreement with
the US, it had an advantage of around two point
five percent. Is that being discussed at this point?
Speaker 9 (31:11):
I conveyed that point to President Trump and explained to
Bessant and Lun. I explained that since Korea is an
FTA partner, tariffs on Korea are already sufficiently low, but
tariffs on other countries aren't sufficiently low, making it unfair.
Even so, it seems the US isn't very willing to
(31:32):
understand that aspect. In any case, we plan to continue
explaining and persuading them.
Speaker 8 (31:38):
Because of the exuberance around the artificial intelligence, we are
seeing South korea stock market on a tear. Are you
concerned that this could be a market bubble?
Speaker 9 (31:53):
The current stock market reflects expectations for the Korean economy,
such as enhancing shareholder value in the Korean capital market,
expanding dividends or resolving unfair practices, expectations for the modernization
of the Korean stockform. On top of these expectations, we
are actively supporting the core technology economy to ensure a
(32:14):
robust Korean economy that can be a global investment destination.
Speaker 2 (32:18):
That was South Korea Finance Minister Ku Yun Choll speaking
with Bloomberg's s Sherry on staying at the APEX Finance
Minister's meeting. We also got the chance to hear from
Australian Treasurer Jim Chalmers. He spoke to Bloomberg's Hustlin to
Ahmed after his country and the US signed a landmark
deal to boost America's access to rare earth send other
critical minerals as part of a push to kerb alliance
(32:39):
on China's supply chains. They started by talking about what
the agreement means for the Australian economy.
Speaker 10 (32:45):
Will you given any insurances that perhaps this won't just
be America.
Speaker 11 (32:51):
Fast Prime Minister Albanezi had an outstanding meeting with President Trump.
Were very very pleased with how the mating went and
the critical minerals framework is really one of the most
important bits of progress that we saw in those discussions.
And what that's all about is about helping to ensure
Australia becomes a world leader in the export of rare
(33:14):
earths and critical minerals. It's all about making sure that
we strengthen our trade ties with the US, that we
strengthen supply chains, and that we make sure that this
remarkable opportunity that Australia has with rare earths and critical
minerals is properly maximized.
Speaker 10 (33:31):
So who long decide which projects are viable? Is the
government choosing the winners here?
Speaker 11 (33:38):
Well, this industry already we think there are about thirteen
billion dollars Australian of projects in the pipeline, a really
extraordinary opportunity for Australia, a golden opportunity. And what the
American administration and the Australian government have agreed is that
each of us will invest a billion dollars over the
(33:59):
next six months. You rightly said in your introduction in
some of these really important projects. We believe Australia can
be and will be a world leader and the supply
of rare earths and critical minerals. The agreement and the
framework that was agreed with President Trump is an important
part of that effort. It's a golden opportunity for Australia
and we intend to maximize it.
Speaker 10 (34:20):
The thing is, there is reason to think that could
be competition between an American and Australian company and just
wondering how will it be decided when it comes to that.
For instance, if you have liners and AMPI materials at odds,
how will you decide?
Speaker 11 (34:37):
Well, it's not beyond us for the commercial arrangements to
reflect the scale of this opportunity and our obligations to
each other under this framework. Obviously, rare earths and critical
minerals have a number of important applications, including in defense
and technology and in the industries that the US administration
are very keen to work closely with Australia on to
(35:00):
be a reliable supplier around the world. But this agreement
with the US is about strengthening trade ties with the
Trump administration and the US. More broadly, it's about making
sure that those supply chains are robust and reliable. We
will have markets all around the world for these critical
minerals and that's a good thing. But the American relationship
(35:20):
is very important to us, and today we strengthened it.
Speaker 10 (35:24):
When you think about these rare deal on the projects
which are coming up, we know that Gina Reinhardt, for instance,
has a finger in a lot of these pies, and
some are raising the concern that perhaps taxpayers money would
end up at one end of town, which is the
richer end of town. I mean, how do you respond
to such concerns?
Speaker 11 (35:46):
Oh, this critical minerals opportunity for Australia is a big
opportunity for our workers, our local communities, for our businesses
and our investors. And there's more than one investor or
owner of critical minerals resources in Australia. But whether it's mining, refining,
adding value processing, working with our international partners, we shouldn't
(36:08):
see this as anything other than a massive opportunity for Australia.
It's why we put so much effort into engaging, whether
it be with the US administration, whether it be here
in APEC, with the twenty one economies of our region.
We recognize that Australia has got a lot to offer
the world. We've got important relationships right around the region,
(36:28):
and we intend to supply other economies with our critical
minerals and rare earths in a way where the benefits
in Australia are broadly shared, including amongst our world leading
mining workforce.
Speaker 10 (36:43):
Do you think China overplayed its hand in imposing the
cards on our supplies.
Speaker 11 (36:50):
I wouldn't engage in that sort of commentary. We engage
with the Chinese administration in good faith and in Australia's
national interest. We engage with all of our trading partners
in that fashion. I'll leave the analysis to others. Our
interest here is making sure that we play an important
role in strengthening supply chains in this industry, whether it's
(37:13):
in the United States or elsewhere. But our relationship with
China is important to us in economic terms as well.
We've put a lot of effort into stabilizing that relationship.
The Chinese economy is not without its fair share of challenges,
but we are confident that it will continue to be
an important source of growth in our own economy in Australia,
(37:33):
and we believe it's possible to engage with the Americans
in the way that we have been and to continue
to stabilize and invest in that very important China relationship.
Speaker 1 (37:43):
At the same time, that was.
Speaker 2 (37:44):
Jim Chalmers, Australia's treasure speaking with Bloomberg's Suslinda Amen at
the APEX Finance ministers meeting in South Korea. And that
does it for this edition of Bloomberg Daybreak Weekend. Join
us again Monday morning at five am Wall Street Time
for the latest don markets, overseas and the news you
need to start your day. I'm Nathan Hager. Stay with us.
Top stories and global business headlines are coming up right now.
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