June 27, 2025 • 39 mins
Bloomberg Daybreak Weekend with Tom Busby takes a look at some of the stories we'll be tracking in the coming week.
- In the US – a look ahead to the June jobs report and commodities outlook.
- In the UK – a look ahead to the annual summer economic conference in the Southern French city of Aix.
- In Asia – a look at relations between China and Iran.
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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 day Break Weekend, our global look at
the top stories in the coming week from our Daybreak
anchors all around the world, and straight ahead on the program,
But look ahead to the June Jobs Report, what it
means for the FED moving forward. I'm Tom Busby in
New York.
Speaker 3 (00:23):
I'm Stephen Carolin London. We're asking what's next for France
as it navigates a new economic and political reality.
Speaker 4 (00:30):
I'm Dek Krisner looking at the state of Chinese Iranian
relations as tension simmer in the Middle East.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three zero, 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 2 (01:02):
Good day to U. I'm Tom Buzby. We begin today's
program with the June Jobs Report. Non farm payroll numbers
out on Thursday eight thirty am Wall Street Time, just
ahead of the July fourth holiday. On Friday, for more
on those numbers and some key inflation and spending data
out this past week how it may impact the Fed's
moves going forward. We're joined by Stuart paul Us, economist
(01:24):
with Bloomberg Economics. Well, Stuart, let's start with this what
we saw on Friday. Real surprise, huh, that's right.
Speaker 5 (01:31):
On Friday, we got the May Personal Income and outlays report,
which really just had a very stagflationary contour to the
whole thing. Personal spending declined zero point one percent, Personal
income growth really surprised the downside, declining zero point four percent,
and we saw a bit more core inflation than we anticipated.
(01:51):
Core prices rose zero point two percent in the month
of May. By our estimates, it was about four basis
points more than we were estimating. But what we're really
seeing is tariff passed through, especially into non durable goods.
What's that doing That's causing consumers to retrench. They're pulling
back their spending, especially in discretionary services categories, things like travel,
(02:14):
things like food services. They're seeing higher prices, They're pulling
back their spending where they can. And on the income side,
while there is still reasonably strong labor income for now.
Transfer payments materially declined in the month of May, and
we think that that did play a role in forcing
(02:35):
spending lower. Consumers are feeling the pinch of lower income
in the month of May, and so they pulled back
in the discretionary categories. They're really just trying to satisfy
their needs right now and meet their demand for staples.
They're really just trying to spend on necessities.
Speaker 2 (02:52):
Lower income slightly higher prices. And we have not even
seen near the full effect of these Trump tariffs. We
may have seen those some impact of China. The tariffs
correct last week.
Speaker 5 (03:02):
Yeah, so in the month of May, consumer spending really
pulled back, in part because consumers are feeling the pinch
of higher prices, in part because of tariffs on China.
Higher prices rippled through, especially to the non durable goods
that come from China. But the tariff effect is not
just a consequence of what we're seeing on China. There
(03:23):
was a real pull forward of spending on autos earlier
this year in anticipation of tariffs, and now we're seeing
the payback. Spending on autos declined really swiftly in the
month of May, and a lot of that is just
because of the policy uncertainty that we've seen, the uncertainty
around tariffs throughout this year so far.
Speaker 2 (03:43):
That's a six percent drop in auto that's right. What
else did we see? Airfares, hotels, anything like that that
we saw prices go down.
Speaker 5 (03:51):
Airfares, soft hotels, softs. We saw most of most of
those data points in the CPI report earlier in the month.
And a big part of what's driving that is cancel
travel plans. A lot of travel from abroad that's been
pulled back again. This is downstream of the trade war
and folks not wanting to travel necessarily into the United
States and they're canceling some of their summer travel plans.
Speaker 2 (04:14):
Now, this consumer spending down by the most since the
start of the year. Do you see moving forward for
consumer spending? This is gonna it's not looking good.
Speaker 5 (04:24):
It's not looking great. So much of it hinges on
the labor market right now. As I mentioned, income's declined,
so consumer spending retrenched quite a bit.
Speaker 2 (04:32):
But where we.
Speaker 5 (04:33):
Do see one tiny little bright spot is in labor income.
Labor income increase zero point four percent of the month
of May. That's because wages accelerated and hiring continue to
pace during that month. Looking ahead, we do expect to
see a more material cooling of the labor market, and
as it cools, so should consumer spending. We already see
(04:54):
consumers trying to build up precautionary savings by rotating toward
focus on necessities and away from discretionary spending. We think
that if the cracks in the labor market widen further,
that spending is going to pull back even further.
Speaker 2 (05:09):
And we're going to get a good look at that
this Thursday's June jobs report. What are you expecting to
see headline numbers?
Speaker 5 (05:15):
We're expecting one hundred and twenty thousand jobs added, but
I will admit risk is skewed to the downside. We
can see a situation which there are just tens of
thousands of jobs added, not over one hundred thousand.
Speaker 2 (05:28):
Peokulde whisper is below one hundred k.
Speaker 5 (05:31):
Whisper right now is fluttering around one hundred thousand. We
haven't seen a whisper number that's the expectation for market
participants beyond just forecasters. We haven't seen a whisper number
fall below one hundred thousand since early twenty twenty one.
So right now folks are feeling this tendency to lower
their expectations for the pace of hiring. But there's a
(05:53):
little bit of a mental block in getting below one
hundred thousand. We think it could fall below one hundred thousand,
and it will at the end of the year, certainly.
But for the month of June we estimate one hundred
and twenty thousand jobs added. But that is not enough
hiring to keep pace with the increase in the labor force,
and so the unemployment rate is likely to rise to
(06:14):
four point three percent, and we're getting closer to the
four and a half percent unemployment that the median FOMC
member and the median monetary policy maker is expecting to
see at year end.
Speaker 2 (06:25):
Boy An important readout the June jobs report this Thursday,
eight thirty am Wall Street Time our thanks to Stuart
paul Us, economist with Bloomberg Economics. We move next to
oil prices tumbled early last week amid hostilities between Israel
and Iran, before stopping that slide in prices after a
tentative ceasefire was called and the straight of horror moves
remained open. The question now, where are crude prices headed
(06:49):
and why and for more. We're joined by Javier Blass
Bloomberg opinion columns covering energy and commodities. Well, Javier, thank
you so much for joining us. Where are crude prices now?
And with all the recent turmoil in the Middle East?
Do you think prices are where they should be?
Speaker 6 (07:05):
I think that prices are about right right now. WTI
around sixty five dollars a barrel, range US a bit
higher than that. So the price of oil right now
is somewhere between sixty five and seventy dollars a barrel.
The market is discounting that the turmoil in the Middle
East is on the rear mirror, that Iranian oil production
(07:26):
is going to continue, that there is no risk of
the Estrado hormus, which is that chalk point for about
twenty percent of the walls oil. It's not going to
be close. And I think that the market is also
suspecting that the Opeq oil Carteil is going to continue
increasing production through the summer. And if we were having
(07:47):
this conversation towards at the end of the summer period
kind of September early October, and I will not be
surprised if we see prices a lot lower.
Speaker 2 (07:58):
Are you saying there's a lot of oil.
Speaker 6 (08:01):
There is a glott of oil, and certainly that glood
is going to increase as OPEK is putting more barrels
into the market. And also the high prices that we
had recently at the height of the conflict between Israel
and Iran, where we saw prices around fifteen dollars higher,
and that also has a low US shale producers to
(08:25):
lock in those high prices to hatch. So that means
that probably we're going to see American oil production a
bit higher than we expected, and that's going to add
to that kind of glott on oil that we are seen.
And the way I have put it is that we
have enough oil, probably too much oil right now, and
(08:45):
by the end of the summer, the work the global
economy is going to be swimming in oil.
Speaker 2 (08:50):
Well, let's talk about Iranian oil right now. Because Israeli
American missile spider jets they did not target Iranian energy
assets at all.
Speaker 6 (08:58):
Now, there was a there was a small a couple
of targets by Israel Verry early in the conflict. I
think that it was a message to the Iranians careful,
we can't go after your energy sector if we want.
But I also believe that quietly the White House intervened
and told both sides oil is not should not be
(09:18):
attacked in this conflict. So ironically, what we have seen
is that the Iranian oil production probably is higher today
that it was in May. And despite all this talk
about maximum pressure and oil sanctions from the United States
in Iran, the truth is that Tehran is producing the
most oil in seven years right now.
Speaker 2 (09:37):
And that must be a big benefit for China, right
that is its main customer, and of course President Trump
was encouraging to Ran to keep selling to Beijing.
Speaker 6 (09:47):
Yes, President Trump, on one hunt has been talking about
maximum pressure and the sanctions are still there. But at best,
I think that one can argue that either Beijing has
found a way to bypass all the sanctions, or was
intern stand in a blind eye and it's not enforcing
the sanctions. I think it's a combination of both. But
(10:09):
I don't think that the White House wants to do
anything with Iranian oil esports. I believe that the talk
about maximum pressure is that talk but very little.
Speaker 2 (10:20):
Action, because and to cut off that oil or the
oil production would devastate that economy. Is the tactic maybe
to keep that economy moving along and ran as best
President Trump can.
Speaker 6 (10:33):
Yes, it would be bad for Iran if the esports
were to go again towards zero, as they went during
the first administration of President Trump. But I do believe
that this is nothing to do with trying to get
the Iranians into the negotiation table or anything like that.
China was able to continue buying Irani and production at
the beginning of the second administration of President Trump, and
(10:56):
the administration has done very little to really stop the
Chinese buy that oil.
Speaker 2 (11:00):
It looks like the framework of a trade deal between
the US and China just this past week, So I
guess this is all part of that keeping the peace
with China. Now, I want to talk to you about
West Texas Intermediate the US pumping out more oil than
ever before. It's the start of the summer driving season,
traditionally demands skyrocketing gas prices that were down down twenty
(11:21):
three cents on average from a year ago. What does
that tell you about domestic production here in the US?
Speaker 6 (11:27):
Well, domestic production continues to be very, very strong. The
last monthly data that we have comes from March, so
it's a bit dated, but I was an all time
high juice under twenty one million barrels a day that
compassed twenty years ago, the United States was producing about
seven and a half million barrels of crude and other liquids.
(11:49):
When you put all the petroleum that gets out of
the ground in the United States today is close to
twenty one million borrowers a day. That's what the shale
revolution has done to American oil production. And when I
was thinking about what were the capitals of the most
recent conflict involved in the fighting. You obviously have Tehran,
(12:10):
you have Jerusalem, Taalabeb, and you have Washington. But I
thought that there was a four capital or a four
important town in this conflict because you cannot really understand
geopolitically what happened in recent weeks if you don't include
Midland in West Texas, that town of about one hundred
and fifty thousand inhabitants, which is the capital of the
(12:31):
shale revolution, and a lot of what happened in the
Middle East has been shaped by American entrepreneurs in Midland,
which discovered the riches of shale.
Speaker 2 (12:43):
Our thanks to Javier Blast Bloomberg opinion columnists covering energy
and commodities, and coming up on Bloomberg day Break weekend,
we'll look at whether financial services can deliver for the
UK and what the city of London needs to thrive.
I'm Tom Busby, and this is Bloomberg. This is Bloomberg
(13:10):
day Break Weekend, our global look ahead at the top
stories for investors in the coming week. I'm Tom Busby
in New York. Up later in our program we'll look
at the state of China's relations with Iran amid the
simmering tensions in the Middle East. But first in the
coming days, top economists and political and business leaders will
descend on the southern French city of x for its
annual Summer Economic Conference. It comes as France marks one
(13:33):
year since the snap parliamentary elections that plunged the country
into political and economic turmoil. For more, let's go to
London and bring in Bloomberg day Break europanker Stephen Carroll.
Speaker 3 (13:45):
Tom, It's been quite a year in France. Last July,
President Emmanuel Macron's party suffered a crushing defeat in early
elections that fractured the National Assembly and left it without
any group holding a majority. That triggered months of political chaos.
The Prime Minister of Francois Bairu is holding together a
fragile minority government. He faces an uphill battle to pass
(14:06):
a budget later this year. As the one year mark
passes since the last elections, Emmanuel Macron could choose to
dissolve the parliament again, a step he hasn't ruled out.
At the same time, Marie Le Penn's far right National
Rally party has continued its ascendants despite her conviction for embezzlement,
which may rule her out of standing in the next
presidential race in twenty twenty seven. While all that is happening,
(14:29):
France is facing a slew of economic challenges, from increasing
defense spending to trade tariffs from US President Donald Trump.
The CEO of French cosmetics giant Lorel Nicola Ironimus told
Bloomberg recently how his firm is preparing.
Speaker 7 (14:43):
If I look at my US business right now, I
manufacture in the US around fifty percent of the unit
to sell in the US. And by the way, we
are a net exporter from a US because what some
people sometimes forget is that we have like eighteen US
brands and the brand Keels is manufacturing in the US
and exported to China and the rest of Europe. So
(15:04):
we're a net exported from the US, but overall half
of our units are manufactured there. You add around fifteen
percent which are Canada and Mexico so on. In all,
we have like thirty percent that comes from Europe. It's
mainly fragrances or luxury products which we have indeed built
a little bit of inventory on prior to the to
(15:26):
the tariff increases and which in the end we don't
really know whether they're going they're going to end up being.
Speaker 3 (15:33):
That's Larry L. Ceo, Nicola Eronymous. They're speaking to Bloomberg's
Francy and Lackweb. Now many of these issues are going
to be discussed the key economic conference that's happening in
the coming days. It's the wrong economic or economic encounters.
I think our best translated out in excellent province. For
more on this, let's go to Paris. We can speak
to our buer chief, Alan Katz, and Jean Albert from
Blueberg Economics is with us as well. Alan, First of all,
(15:56):
can we just put in context this event that's coming up.
It's a bit big set of economic conversations, lots of policymakers,
lots of politicians there as well, happening in Xent Provence.
It is a dating the calendar for French economists and
politicians and a pretty spectacular location that it happens as well.
Speaker 8 (16:16):
It is.
Speaker 9 (16:17):
But the main thing that's actually going to happen at Extra,
the main person that the people in x are trying
to deal with or understand is someone that you didn't
mention in your introduction, which is Donald Trump. The I
was really struck have to say this year that the
title of experance is a front so which best translates
(16:39):
by is confronting the clash of realities. So they don't
mention him by name, but they're really referring to Donald Trump.
When you look at you know, the opening session, it's
the urgent need for a rational debate on Thursday that
this this session. If you look at the closing session
on the first day h the title is the fiction
of a you know, a Western bloc. I mean really
like there's there's a bit of panic that has It's
(17:02):
not about France and not about France's problems that you've mentioned,
but really is about sort of this broader view that
Trump is upending the global order. And in France, the
people who are at this meeting, it's mostly in French,
not all French people, but mostly French, have to deal
with this again as well, and they have to understand
really what's going on and what's changing if they're going
to try to figure out a way to make it
(17:25):
work for France in the future.
Speaker 3 (17:28):
Yeah, and some I mean some pretty big names involved
as well. Mario Dragi, former ACV president, is going to
be their former Italian Prime minister of course as well,
and not the current prime minister, but the previous prime
minister of the three that we've had in the past
year in France. Michelle Bonney is also going to be attending.
Speaker 9 (17:45):
Yeah, I'm not quite sure if he's the best place
to to sort of chart a path out for France
since he wasn't able to last more than a few
months in the prime ministership. But there's also the current
Foreign Minister, the current Labor Minister will be there. She's
also Elizabeth Balloon, She's also a former prime minister. This
this this event always has heavy hitters, whether it's government
(18:08):
or Central Bank or CEOs among you know they're they're
a bunch of of CEO board members who are going
to be there, a bunch of of sorry of ECB
board members who are going to be there as well
as CEO is like tomar Buball, who is the CEO
of Axa, or Patrick Puene the CEO of Totel, the
big energy company. So from that perspective, like you do
(18:29):
get sort of the great and mighty of France coming together.
It's but as I said, like it's usually a pretty
relaxed environment and it's mostly chit chat, and as you said,
it's a spectacular, spectacular location and people are sort of
you get that sort of summer vibe from this thing.
And this year I really do feel like there's a
little it's a little more tense and people are really
trying to figure out what are they going to do
(18:51):
down there. Now, maybe you're right, maybe Balunia can provide
a with with the experience of that he went through
in the fall, can provide a way to sort of
reconcile France with the change order that's been brought about
by Trump's that's been brought about by trump selection. But
what we'll have to see on that.
Speaker 3 (19:06):
Yeah, I mean the heat and exoprovance not just later
all this time, but also perhaps metaphorical as well. Let's
bring in John Delba from Blouemberg Economics who joins us
as well. Jean, when we're trying to think about where
France's economy is going into this set of discussions and
action provance which you know well talk us through where
the French economy is now with all of the challenges
that are laid out before us.
Speaker 8 (19:27):
Sure, Hi, good morning. So yes, indeed, France is currently
facing a pretty sluggish gross momentum. We have pointed out
a zero point five percent GDP growth this year, which
folds down from zero point nine percent in twenty twenty
five twenty four sorry, and this is below the European
average of one point one percent for twenty twenty five.
So a pretty sluggish momentum and basically all its gross
(19:51):
drivers are contributing to that. We are observing a pretty
weak investment dynamic despite and currently easying in financing conditions,
and this is probably related to the increase in uncertainty
that we do face in France. Consumption is going poorly
as well. Gains in dispossible income are limited this year
(20:12):
and the saving rate remains pretty high currently. And finally,
and pretty obviously the contribution from net trade will be
negative tyre. So all of that contributes to a pretty
sluggish across from mentument France, which again contrasts with other
European countries at the moment. And if we look at it,
(20:35):
we France will face a lot of challenges. First and
foremost the political uncertainty, which remains pretty high and as
has even increased these days given the collapse of the
pensions reform stalks. So that's that's the main challenge. I
would say. The second one is obviously the current trade
uncertainty that we are we are facing all of France
(20:56):
is less exposed than its European peers. And finally, the
fiscal The fiscal topic is really important and some tough
negotiations will will have to take place in autumn to
pass the new budget.
Speaker 3 (21:12):
Yeah, very tricky couple of months ahead on that point, Jean,
We've just had the NATO summers where leaders agreed to
increase spending on defense. How is France placed to be
able to cope with that fiscally?
Speaker 8 (21:25):
So it's it's also a tricky situation for France. I mean,
the different spending in terms of GDP have already increased
a bit in France. They are now like above the
two percent NATO mark, so it's it's pretty positive, and
they are already expected to increase again, to increase further
to two point five percent of GDP in twenty thirty.
So yesterday we had President Macon saying that five percent
(21:46):
is a target or I mean can be a target.
We think it is unlikely. We think it will be
a huge challenge exactly because of the fiscal constraint we
mentioned before, So it would be very costly for France
reached that five percent mark, and we've made some estimate
that it would add a fifteen percentage point of debt
(22:06):
on the deput GDP ratio over thirty sorts, so it
would be a lot and we think it would not
be possible, and we have pencil like one three point
five percent mark, which will be tricky but still manageable
and feasible in the coming news.
Speaker 3 (22:22):
Okay, Alan, I wanted to go back to you as
well because I mentioned that we're coming up on this
point where Emmanuel Macron could call another election for the
National Assembly. He hasn't ruled it out, but give us
a sense of how stable the political situation is in
France at the moment.
Speaker 9 (22:39):
It's a little bit of a tricky question. I guess
it's stable probably in the short term, and unstable in
the longer term. I guess would probably be the best
way to put it. As you point out, Manuel Macron
could dissolve problem and call no elections as soon as
as next month. In July he said that he doesn't
plan to do that, doesn't expect to do it, as
(22:59):
you point out, hasn't ruled that out entirely. But it
seems unlikely because if you look at opinion polls, if
you called new elections now, you'd end up with roughly
the same sort of breakdown among political parties in Parliament.
So there's no real reason to do it. The other
reason why it's unlikely to happen in the very near
term is that Jean mentioned that, you know, these pension
(23:22):
talks have broken down, which they did, though by who
is pledged to Prime minister, by who is pledged to
come with something, some sort of something to try to
present to Parliament, is really unclear as yet what that
will be. But in any event, the far right National
Rally has said that it will not participate in a
no confidence vote until budget time, and that won't be
(23:47):
until the fall. So while the Socialists have filed a
no confidence motion against by who, there's no chance of
a passing without the far right because again mentioning done
before what actually pushed him out back in December, when
you had the far left, sort of the center left
and then the far right all joining together. That got
you up to a majority of parliamentarians who could push
(24:09):
them out. And that's not the case at least for
the next couple of months. So I would say short
term stability, but it doesn't mean that creates any sort
of long, longer term stability for the government or allows
the government to really do much because again, like in
this case, it's a fight over pensions, but as soon
as we get to the fall, it will be a
fight over the budget. It's going to be a major fight.
I mean, as Geen was mentioning, you know, the government's
(24:30):
pledge to reduce, the pledge to have about forty billion
euros in what they call savings. So that's a combination
of potential you know, revenue increases and spending cuts. It's
unclear what there's going to be where they're going to
come from, but that's a lot of money. So how
they're going to get there without you know, they're being
a major blow up and the government being forced out
is how they're going to get there without a major
(24:51):
blow up is very hard to see. Whether or not
that ends up pushing out the government is another question
because it depends on again on opinion polls and whether
parties seed in their interest to sort of make the
big buy who take on whatever budget cuts are going
to come and you know that's what the unpopularity that
goes with that, and leave that all in the current
government and save their sort of their fire for later
(25:12):
when they get to either municipal elections twenty twenty six
or as you mentioned, the presidential election in twenty twenty seven.
So it's again, as I said, just to boil it
all down, I would say short term stable for the
next couple of months. Longer term all bits are off.
Speaker 3 (25:25):
Yeah, keeping us very interested in our eyes closely focused
on what's happening in France over this summer as well
as some of those conversations are taking place for now,
Alan katz Our Paris Bureau Chief and Jehan Dadba from
Bloomberg Economics. Thank you very much for joining us. Will
be bringing you some of the key conversations from the
ex some Provenance Economic Conference across at Bloomberg platforms in
the coming days.
Speaker 2 (25:44):
I'm Stephen Caroll in London.
Speaker 3 (25:45):
You can catch us every weekday morning here for Bloomberg
day Break Europe, beginning at six am in London and
one am on Wall Streets.
Speaker 2 (25:52):
Tom Well, thank you, Stephen, and coming up on Bloomberg
day Break weekend to look at the state of Sino
Iranian relations as a Rants defense minister visits China. I'm
Tom Busby, and this is Bloomberg. This is Bloomberg Gay
(26:14):
Break Weekend, our global look ahead at the top stories
for investors in the coming week. I'm Tom Busby in
New York. RAN's defense minister arrived in China last week
for his first known overseas trip since that country's war
with Israel began. The visit highlighting just how critical Beijing
has become to Tran's strategic calculations. For more, let's get
(26:35):
to the host of the Daybreak Asia podcast, Doug Krisner.
Speaker 4 (26:38):
Tom Israel and Iran have spent the better part of
the past two weeks exchanging strikes, and in the process,
the US was drawn into this conflict. The situation highlights
the role of another power player though China. Joining me
now is Jenny marsh. Jenny is Greater China Eco GUV
team leader for Bloomberg News, and she joins us from
(26:58):
our studios in Hong Kong. It's always a pleasure to
benefit from your perspective. And as long as we're talking
about geopolitics, let's talk about what's going on between the US, Israel,
and Iran.
Speaker 2 (27:12):
Now.
Speaker 4 (27:12):
After the strikes, the recent strikes by the US government
on Iranian nuclear facilities, Beijing issued a strong condemnation and
basically called it a violation of the UN Charter and
of international law. I'm wondering whether or not China may
have played a role in this. Do you have a
sense of that.
Speaker 10 (27:31):
My sense is that China very much here will be
remembered for sitting on the sidelines. You know, Like they
issued this very strong statement condemning the US, and they
talked about how America was sort of blowing up, you know,
the international system for sort of maintaining order, i e.
The US led you know, UN framework for resolving conflicts,
(27:54):
and before the US strikes, you know, she and Putin
had got on the phone and sort of worked out
this four point plan for peace. But really for China,
they kind of left it at diplomacy, and I don't think,
you know, they were particularly effective in what they were messaging.
We know that Wang Yi spoke to both the Israeli
(28:15):
and the Iranian foreign ministers, so there was some sort
of attempt at sort of back channeling. But essentially, you know, Tehran,
you know, China was one of Tehran's sort of strongest partners,
and when it came to its darkest hour, China really
didn't do much apart from call for peace.
Speaker 4 (28:32):
Is it pretty much a selfish move that boils down
to crude oil? Is that really what this is about?
This relationship?
Speaker 10 (28:39):
I think this relationship is about the US, and I
think one of the reasons I say that is, yes,
China is one of the places that will buy sanctioned
Iranian oil. It's a very very slim percentage of China's
oil supplies, about ten percent, and they can easily source
this oil from other places. And I think, you know,
there's a couple of practic reasons why these sort of
(29:02):
it's mainly sort of these teapot refineries in northern China
that take this oil. It's much cheaper. But also I
think the Chinese government tolerates it because they are vehemently
opposed to the US sanctions regime, and so they they
let this go as a way of sort of defying
the US sanctions regime, which is something they and Russia
and Iran are all united in opposing. But I think
(29:25):
the broader relationship with Iran has been about sort of
finding partners that it will join hands with Beijing and
challenge the US of world order. And I think you
can see that through you know, she has ushered Iran
into the Bricks Group of Emerging Markets, which is this
block that it's expanding with India and South Africa and
Brazil as sort of a kind of a rival framework
(29:48):
to the G twenty. It also welcomed Iran in the
last couple of years into the Shanghai Cooperation Organization, which
is another sort of grouping that it's expanding, which has
more of a security flavor. But when it comes to
sort of trade with Iran, I mean, the trade is very,
very isn't significant, you know, it doesn't sell much to Iran. Actually,
(30:09):
trade with Iran actually fell off in the first four
months of this year. It was down about twenty percent.
And the broader Middle Eastern region from a bottom VeryE perspective,
is more important to Beijing. So I think really this
was sort of, you know, a partnership of convenience, and
for China it was always about finding partners that will
stand hands, join hands with it to stand against the US.
Speaker 4 (30:32):
So to that point, maybe China is not solely reliant
on Irani and crude oil. I get the fact that
they're only going to import let's say ten percent, but
the Strait of Horn Mouz, I would imagine is perhaps
more critical. And if there were a way for Beijing
to become influential and dialing down a lot of this
(30:53):
tension just so that the conflict didn't extend into the strait,
is that part of the thinking here as well.
Speaker 10 (31:00):
Yeah, so I think the straight up homes is definitely
a different story in a much much, sort of more
alarming concern for China. About forty five percent of its
oil shipments that comes through that straight and China is
the country that is most dependent on the oil coming
through that waterway globally, so yeah, massive exposure there. That
(31:23):
being said, China has been stockpiling on oil, So if
the war was a crisis that closed the straight for
you know, a short period of time, it wouldn't feel
the immediate impact. But in the long term, absolutely doesn't
want this conflict despiral and I think that was the
message from the four point plan that she put forward.
He talked about like not wanting this to expand, and
(31:44):
when they're condemning the US, they were saying, you know,
the US is fanning the flames of war and would
be to blame essentially if this did become a broader conflict.
I think the problem for China is like, how can
it affect or what is it willing to do to
stop it from coming a broader conflict, And the answer
is not very much. You know, China doesn't like to
(32:04):
get its hands dirty in foreign conflicts. It definitely doesn't
go anywhere near the US play because these sort of
far away wars and military operations, and even with Russia,
which it has a much stronger trade relationship and sort
of interdependency with Russia has now overtaken Saudi as the
top supplier of crude oil to China. Even when Peutin
(32:24):
went to war in Ukraine, she was very careful not
to do anything that would invite US sanctions. So yes,
he stepped up economic support and diplomatic support. And then
there was some controversy about sort of you know, the
dual use items that have been shipped but never any
to direct you know, military support that would cross these
(32:45):
red lines in America and Europe layed out very clearly,
you know, And I think China is a country you
have to remember that has no formal allies by design,
you know, and its self interest will always be it's
sort of north star of what it does when these
conflicts breakout.
Speaker 4 (33:01):
What is the degree of anti American feeling right now
in China? Not just because of what we're describing here
in terms of Israel Iran, but I'm thinking of whether
it's Taiwan, whether it's the US China trade war. Give
me a sense of the degree to which people in
China are feeling very anti American.
Speaker 10 (33:22):
I think that is a really interesting question, and it
hasn't been as prominent as you might have thought. Sort
of broadly towards American people. The Minecraft movie came out
in China and did pretty well, and we've seen other
sort of examples of sort of American soft power being powerful.
Even though the US and China are locked in this
trade war. I almost wonder if the Chinese people sort
(33:45):
of are able to separate Trump and you know, the
aberration or you know that is Trump from the average
American people. There was people talking about, you know, how
foolish run have been to sort of trust the US, saying,
you know, the US came in to negotiate, then it's
ally hit Iran, and then the US hit Iran. You know,
the Iranians were falls for ever trusting America. So there
(34:08):
was a lot of that kind of sentiment. But I
think actually the Chinese people sort of it is not
this sort of like rise of nationalism. And I think
that is partly because the Chinese government has learned from
the first time. Around the first trade war, you had
this wolf warrior policy that really stoked up a lot
of bad feeling. Then you had sort of people like
huci Jin, the old the former editor in chief of
(34:28):
the Global Times, who were allowed to sort of really
run wild on social media. You know when Nancy Pelosi
was flying into Taiwan, he was posting things about, you know,
perhaps shooting down you know, the jet as she came in,
which obviously just was a step too far. And I
think this time the nationalist voices on social media and
(34:49):
state media have been tampered down because the government doesn't
want it to get out of control to a point
where they are not the ones managing the narrative.
Speaker 4 (34:57):
Jenny, thank you so much. It's always a pleasure. Jenny
Marsh Greater China ECOGOV team leader for Bloomberg News. We
move next to global trade flows have been surprisingly resilient
in spite of those US tariffs and the uncertainties that
they have brought. That's the take from adt Rashkina, the
CEO of DHL Global Forwarding in Greater China. She spoke
(35:18):
recently with Bloomberg Steven Engel at the World Economic Forum
summit in Tianjin, China.
Speaker 11 (35:24):
Obviously there's been some turmoil in the world. There's obviously
an uncertainty around the tariffs and the global reciprocal tariffs
in the United States. There is rising conflict in the
Middle East. How is that directly impacting what you're seeing
as far as package deliveries and essentially demand.
Speaker 12 (35:42):
So let's just start off by saying that global trade
has been pretty resilient. If we look at China's expert
growth in the first five months, it's going about seven percent.
So whilst having said that, with the tensions and tariffs scenarios,
organizations are deploying different strategs. Some are front loading and
(36:02):
looking at taking inventory forward so they have it when
demand peaks. Others are looking at alternative sourcing and manufacturing
networks where they can in the short run, and yet
others have a wait and see approach. So let's wait
it out and see what happens with the tarotts and
the rest of the situation.
Speaker 11 (36:19):
On that front loading, do you see a tangible increase
while we're in a ninety day pause which is running
out already, but our shipment's definitely spiking because we don't
have the certainty following.
Speaker 12 (36:32):
Mid August, that's right, So it was despiked in order
to hit the ninety day window. So we're not sure
what's going to happen after that period of time that
we do believe that some stage was to meet that window.
Speaker 11 (36:46):
What are you seeing on the Deminimus exemption that the
Trump administration is essentially done away with that eight hundred
dollars shipment exemption. Have we seen a complete drop off?
Speaker 12 (36:59):
Yes, e commas I actually would have been the one
that has had a little bit more of uncertainty of
not knowing how to deal with the technology on the
other side when it gets to the customs right So
it's been on both sides for the customs regulation to
figure out how they're going to handle it once the
shipment arrives, but also for the organizations moving to know
(37:19):
how to deal with the situation. So everyone's working on
solutions right now to address the demon of it.
Speaker 11 (37:25):
How much of a sales drop are we looking at
between China and the United States.
Speaker 12 (37:30):
Honestly, it really depends on the sector that it is.
E commerce has had the biggest head but if you
look at the tech like Apple's, Dells, HPS, organizations like that,
they're still flowing in the same form as they've gotten
exceptions from the tariffs.
Speaker 11 (37:46):
You mentioned about diversification, how are you seeing corporates, individuals
or mostly corporates. I would say probably diversify from the
shipping to or from the United States away from the
morea the lead.
Speaker 12 (38:00):
Tariff China, so we you know, it depends again on
the sector or industry that organizations are in. So those
impacted by tariffs look for alternative sourcing locations and you
see a bit of shift into South East Asia. You
see a bit moving to Middle East Africa, Latin America.
So it has been a varied amount of setups. There
(38:23):
are those that still believe that China is the most
cost effective model networks for them, and usually the shifts
of a production into Southeast Asia is to move to
the US and for the rest of the world in
intra Asia and within China, consumption generally stays in China.
Speaker 4 (38:39):
That's a d d rush Keina, the CEO of DHL
Global Forwarding in Greater China, speaking with Bloomberg Steven Engel
and I'm Doug Kristner. You can catch us weekdays for
the Daybreak Asia podcast. It's available wherever you get your podcast. Tom.
Speaker 2 (38:54):
Thank you, Doug, and that does it for this edition
of Bloomberg day Break Weekend. Join us again Monday morning
at five am Wall Street Time for the latest on
the market's overseas and the news you need to start
your day. I'm Tom Buzzby. Stay with US. Top stories
and global business headlines are coming up right now
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:10):
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, and straight ahead on the program,
But look ahead to the June Jobs Report, what it
means for the FED moving forward. I'm Tom Busby in
New York.
Speaker 3 (00:23):
I'm Stephen Carolin London. We're asking what's next for France
as it navigates a new economic and political reality.
Speaker 4 (00:30):
I'm Dek Krisner looking at the state of Chinese Iranian
relations as tension simmer in the Middle East.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three zero, 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 2 (01:02):
Good day to U. I'm Tom Buzby. We begin today's
program with the June Jobs Report. Non farm payroll numbers
out on Thursday eight thirty am Wall Street Time, just
ahead of the July fourth holiday. On Friday, for more
on those numbers and some key inflation and spending data
out this past week how it may impact the Fed's
moves going forward. We're joined by Stuart paul Us, economist
(01:24):
with Bloomberg Economics. Well, Stuart, let's start with this what
we saw on Friday. Real surprise, huh, that's right.
Speaker 5 (01:31):
On Friday, we got the May Personal Income and outlays report,
which really just had a very stagflationary contour to the
whole thing. Personal spending declined zero point one percent, Personal
income growth really surprised the downside, declining zero point four percent,
and we saw a bit more core inflation than we anticipated.
(01:51):
Core prices rose zero point two percent in the month
of May. By our estimates, it was about four basis
points more than we were estimating. But what we're really
seeing is tariff passed through, especially into non durable goods.
What's that doing That's causing consumers to retrench. They're pulling
back their spending, especially in discretionary services categories, things like travel,
(02:14):
things like food services. They're seeing higher prices, They're pulling
back their spending where they can. And on the income side,
while there is still reasonably strong labor income for now.
Transfer payments materially declined in the month of May, and
we think that that did play a role in forcing
(02:35):
spending lower. Consumers are feeling the pinch of lower income
in the month of May, and so they pulled back
in the discretionary categories. They're really just trying to satisfy
their needs right now and meet their demand for staples.
They're really just trying to spend on necessities.
Speaker 2 (02:52):
Lower income slightly higher prices. And we have not even
seen near the full effect of these Trump tariffs. We
may have seen those some impact of China. The tariffs
correct last week.
Speaker 5 (03:02):
Yeah, so in the month of May, consumer spending really
pulled back, in part because consumers are feeling the pinch
of higher prices, in part because of tariffs on China.
Higher prices rippled through, especially to the non durable goods
that come from China. But the tariff effect is not
just a consequence of what we're seeing on China. There
(03:23):
was a real pull forward of spending on autos earlier
this year in anticipation of tariffs, and now we're seeing
the payback. Spending on autos declined really swiftly in the
month of May, and a lot of that is just
because of the policy uncertainty that we've seen, the uncertainty
around tariffs throughout this year so far.
Speaker 2 (03:43):
That's a six percent drop in auto that's right. What
else did we see? Airfares, hotels, anything like that that
we saw prices go down.
Speaker 5 (03:51):
Airfares, soft hotels, softs. We saw most of most of
those data points in the CPI report earlier in the month.
And a big part of what's driving that is cancel
travel plans. A lot of travel from abroad that's been
pulled back again. This is downstream of the trade war
and folks not wanting to travel necessarily into the United
States and they're canceling some of their summer travel plans.
Speaker 2 (04:14):
Now, this consumer spending down by the most since the
start of the year. Do you see moving forward for
consumer spending? This is gonna it's not looking good.
Speaker 5 (04:24):
It's not looking great. So much of it hinges on
the labor market right now. As I mentioned, income's declined,
so consumer spending retrenched quite a bit.
Speaker 2 (04:32):
But where we.
Speaker 5 (04:33):
Do see one tiny little bright spot is in labor income.
Labor income increase zero point four percent of the month
of May. That's because wages accelerated and hiring continue to
pace during that month. Looking ahead, we do expect to
see a more material cooling of the labor market, and
as it cools, so should consumer spending. We already see
(04:54):
consumers trying to build up precautionary savings by rotating toward
focus on necessities and away from discretionary spending. We think
that if the cracks in the labor market widen further,
that spending is going to pull back even further.
Speaker 2 (05:09):
And we're going to get a good look at that
this Thursday's June jobs report. What are you expecting to
see headline numbers?
Speaker 5 (05:15):
We're expecting one hundred and twenty thousand jobs added, but
I will admit risk is skewed to the downside. We
can see a situation which there are just tens of
thousands of jobs added, not over one hundred thousand.
Speaker 2 (05:28):
Peokulde whisper is below one hundred k.
Speaker 5 (05:31):
Whisper right now is fluttering around one hundred thousand. We
haven't seen a whisper number that's the expectation for market
participants beyond just forecasters. We haven't seen a whisper number
fall below one hundred thousand since early twenty twenty one.
So right now folks are feeling this tendency to lower
their expectations for the pace of hiring. But there's a
(05:53):
little bit of a mental block in getting below one
hundred thousand. We think it could fall below one hundred thousand,
and it will at the end of the year, certainly.
But for the month of June we estimate one hundred
and twenty thousand jobs added. But that is not enough
hiring to keep pace with the increase in the labor force,
and so the unemployment rate is likely to rise to
(06:14):
four point three percent, and we're getting closer to the
four and a half percent unemployment that the median FOMC
member and the median monetary policy maker is expecting to
see at year end.
Speaker 2 (06:25):
Boy An important readout the June jobs report this Thursday,
eight thirty am Wall Street Time our thanks to Stuart
paul Us, economist with Bloomberg Economics. We move next to
oil prices tumbled early last week amid hostilities between Israel
and Iran, before stopping that slide in prices after a
tentative ceasefire was called and the straight of horror moves
remained open. The question now, where are crude prices headed
(06:49):
and why and for more. We're joined by Javier Blass
Bloomberg opinion columns covering energy and commodities. Well, Javier, thank
you so much for joining us. Where are crude prices now?
And with all the recent turmoil in the Middle East?
Do you think prices are where they should be?
Speaker 6 (07:05):
I think that prices are about right right now. WTI
around sixty five dollars a barrel, range US a bit
higher than that. So the price of oil right now
is somewhere between sixty five and seventy dollars a barrel.
The market is discounting that the turmoil in the Middle
East is on the rear mirror, that Iranian oil production
(07:26):
is going to continue, that there is no risk of
the Estrado hormus, which is that chalk point for about
twenty percent of the walls oil. It's not going to
be close. And I think that the market is also
suspecting that the Opeq oil Carteil is going to continue
increasing production through the summer. And if we were having
(07:47):
this conversation towards at the end of the summer period
kind of September early October, and I will not be
surprised if we see prices a lot lower.
Speaker 2 (07:58):
Are you saying there's a lot of oil.
Speaker 6 (08:01):
There is a glott of oil, and certainly that glood
is going to increase as OPEK is putting more barrels
into the market. And also the high prices that we
had recently at the height of the conflict between Israel
and Iran, where we saw prices around fifteen dollars higher,
and that also has a low US shale producers to
(08:25):
lock in those high prices to hatch. So that means
that probably we're going to see American oil production a
bit higher than we expected, and that's going to add
to that kind of glott on oil that we are seen.
And the way I have put it is that we
have enough oil, probably too much oil right now, and
(08:45):
by the end of the summer, the work the global
economy is going to be swimming in oil.
Speaker 2 (08:50):
Well, let's talk about Iranian oil right now. Because Israeli
American missile spider jets they did not target Iranian energy
assets at all.
Speaker 6 (08:58):
Now, there was a there was a small a couple
of targets by Israel Verry early in the conflict. I
think that it was a message to the Iranians careful,
we can't go after your energy sector if we want.
But I also believe that quietly the White House intervened
and told both sides oil is not should not be
(09:18):
attacked in this conflict. So ironically, what we have seen
is that the Iranian oil production probably is higher today
that it was in May. And despite all this talk
about maximum pressure and oil sanctions from the United States
in Iran, the truth is that Tehran is producing the
most oil in seven years right now.
Speaker 2 (09:37):
And that must be a big benefit for China, right
that is its main customer, and of course President Trump
was encouraging to Ran to keep selling to Beijing.
Speaker 6 (09:47):
Yes, President Trump, on one hunt has been talking about
maximum pressure and the sanctions are still there. But at best,
I think that one can argue that either Beijing has
found a way to bypass all the sanctions, or was
intern stand in a blind eye and it's not enforcing
the sanctions. I think it's a combination of both. But
(10:09):
I don't think that the White House wants to do
anything with Iranian oil esports. I believe that the talk
about maximum pressure is that talk but very little.
Speaker 2 (10:20):
Action, because and to cut off that oil or the
oil production would devastate that economy. Is the tactic maybe
to keep that economy moving along and ran as best
President Trump can.
Speaker 6 (10:33):
Yes, it would be bad for Iran if the esports
were to go again towards zero, as they went during
the first administration of President Trump. But I do believe
that this is nothing to do with trying to get
the Iranians into the negotiation table or anything like that.
China was able to continue buying Irani and production at
the beginning of the second administration of President Trump, and
(10:56):
the administration has done very little to really stop the
Chinese buy that oil.
Speaker 2 (11:00):
It looks like the framework of a trade deal between
the US and China just this past week, So I
guess this is all part of that keeping the peace
with China. Now, I want to talk to you about
West Texas Intermediate the US pumping out more oil than
ever before. It's the start of the summer driving season,
traditionally demands skyrocketing gas prices that were down down twenty
(11:21):
three cents on average from a year ago. What does
that tell you about domestic production here in the US?
Speaker 6 (11:27):
Well, domestic production continues to be very, very strong. The
last monthly data that we have comes from March, so
it's a bit dated, but I was an all time
high juice under twenty one million barrels a day that
compassed twenty years ago, the United States was producing about
seven and a half million barrels of crude and other liquids.
(11:49):
When you put all the petroleum that gets out of
the ground in the United States today is close to
twenty one million borrowers a day. That's what the shale
revolution has done to American oil production. And when I
was thinking about what were the capitals of the most
recent conflict involved in the fighting. You obviously have Tehran,
(12:10):
you have Jerusalem, Taalabeb, and you have Washington. But I
thought that there was a four capital or a four
important town in this conflict because you cannot really understand
geopolitically what happened in recent weeks if you don't include
Midland in West Texas, that town of about one hundred
and fifty thousand inhabitants, which is the capital of the
(12:31):
shale revolution, and a lot of what happened in the
Middle East has been shaped by American entrepreneurs in Midland,
which discovered the riches of shale.
Speaker 2 (12:43):
Our thanks to Javier Blast Bloomberg opinion columnists covering energy
and commodities, and coming up on Bloomberg day Break weekend,
we'll look at whether financial services can deliver for the
UK and what the city of London needs to thrive.
I'm Tom Busby, and this is Bloomberg. This is Bloomberg
(13:10):
day Break Weekend, our global look ahead at the top
stories for investors in the coming week. I'm Tom Busby
in New York. Up later in our program we'll look
at the state of China's relations with Iran amid the
simmering tensions in the Middle East. But first in the
coming days, top economists and political and business leaders will
descend on the southern French city of x for its
annual Summer Economic Conference. It comes as France marks one
(13:33):
year since the snap parliamentary elections that plunged the country
into political and economic turmoil. For more, let's go to
London and bring in Bloomberg day Break europanker Stephen Carroll.
Speaker 3 (13:45):
Tom, It's been quite a year in France. Last July,
President Emmanuel Macron's party suffered a crushing defeat in early
elections that fractured the National Assembly and left it without
any group holding a majority. That triggered months of political chaos.
The Prime Minister of Francois Bairu is holding together a
fragile minority government. He faces an uphill battle to pass
(14:06):
a budget later this year. As the one year mark
passes since the last elections, Emmanuel Macron could choose to
dissolve the parliament again, a step he hasn't ruled out.
At the same time, Marie Le Penn's far right National
Rally party has continued its ascendants despite her conviction for embezzlement,
which may rule her out of standing in the next
presidential race in twenty twenty seven. While all that is happening,
(14:29):
France is facing a slew of economic challenges, from increasing
defense spending to trade tariffs from US President Donald Trump.
The CEO of French cosmetics giant Lorel Nicola Ironimus told
Bloomberg recently how his firm is preparing.
Speaker 7 (14:43):
If I look at my US business right now, I
manufacture in the US around fifty percent of the unit
to sell in the US. And by the way, we
are a net exporter from a US because what some
people sometimes forget is that we have like eighteen US
brands and the brand Keels is manufacturing in the US
and exported to China and the rest of Europe. So
(15:04):
we're a net exported from the US, but overall half
of our units are manufactured there. You add around fifteen
percent which are Canada and Mexico so on. In all,
we have like thirty percent that comes from Europe. It's
mainly fragrances or luxury products which we have indeed built
a little bit of inventory on prior to the to
(15:26):
the tariff increases and which in the end we don't
really know whether they're going they're going to end up being.
Speaker 3 (15:33):
That's Larry L. Ceo, Nicola Eronymous. They're speaking to Bloomberg's
Francy and Lackweb. Now many of these issues are going
to be discussed the key economic conference that's happening in
the coming days. It's the wrong economic or economic encounters.
I think our best translated out in excellent province. For
more on this, let's go to Paris. We can speak
to our buer chief, Alan Katz, and Jean Albert from
Blueberg Economics is with us as well. Alan, First of all,
(15:56):
can we just put in context this event that's coming up.
It's a bit big set of economic conversations, lots of policymakers,
lots of politicians there as well, happening in Xent Provence.
It is a dating the calendar for French economists and
politicians and a pretty spectacular location that it happens as well.
Speaker 8 (16:16):
It is.
Speaker 9 (16:17):
But the main thing that's actually going to happen at Extra,
the main person that the people in x are trying
to deal with or understand is someone that you didn't
mention in your introduction, which is Donald Trump. The I
was really struck have to say this year that the
title of experance is a front so which best translates
(16:39):
by is confronting the clash of realities. So they don't
mention him by name, but they're really referring to Donald Trump.
When you look at you know, the opening session, it's
the urgent need for a rational debate on Thursday that
this this session. If you look at the closing session
on the first day h the title is the fiction
of a you know, a Western bloc. I mean really
like there's there's a bit of panic that has It's
(17:02):
not about France and not about France's problems that you've mentioned,
but really is about sort of this broader view that
Trump is upending the global order. And in France, the
people who are at this meeting, it's mostly in French,
not all French people, but mostly French, have to deal
with this again as well, and they have to understand
really what's going on and what's changing if they're going
to try to figure out a way to make it
(17:25):
work for France in the future.
Speaker 3 (17:28):
Yeah, and some I mean some pretty big names involved
as well. Mario Dragi, former ACV president, is going to
be their former Italian Prime minister of course as well,
and not the current prime minister, but the previous prime
minister of the three that we've had in the past
year in France. Michelle Bonney is also going to be attending.
Speaker 9 (17:45):
Yeah, I'm not quite sure if he's the best place
to to sort of chart a path out for France
since he wasn't able to last more than a few
months in the prime ministership. But there's also the current
Foreign Minister, the current Labor Minister will be there. She's
also Elizabeth Balloon, She's also a former prime minister. This
this this event always has heavy hitters, whether it's government
(18:08):
or Central Bank or CEOs among you know they're they're
a bunch of of CEO board members who are going
to be there, a bunch of of sorry of ECB
board members who are going to be there as well
as CEO is like tomar Buball, who is the CEO
of Axa, or Patrick Puene the CEO of Totel, the
big energy company. So from that perspective, like you do
(18:29):
get sort of the great and mighty of France coming together.
It's but as I said, like it's usually a pretty
relaxed environment and it's mostly chit chat, and as you said,
it's a spectacular, spectacular location and people are sort of
you get that sort of summer vibe from this thing.
And this year I really do feel like there's a
little it's a little more tense and people are really
trying to figure out what are they going to do
(18:51):
down there. Now, maybe you're right, maybe Balunia can provide
a with with the experience of that he went through
in the fall, can provide a way to sort of
reconcile France with the change order that's been brought about
by Trump's that's been brought about by trump selection. But
what we'll have to see on that.
Speaker 3 (19:06):
Yeah, I mean the heat and exoprovance not just later
all this time, but also perhaps metaphorical as well. Let's
bring in John Delba from Blouemberg Economics who joins us
as well. Jean, when we're trying to think about where
France's economy is going into this set of discussions and
action provance which you know well talk us through where
the French economy is now with all of the challenges
that are laid out before us.
Speaker 8 (19:27):
Sure, Hi, good morning. So yes, indeed, France is currently
facing a pretty sluggish gross momentum. We have pointed out
a zero point five percent GDP growth this year, which
folds down from zero point nine percent in twenty twenty
five twenty four sorry, and this is below the European
average of one point one percent for twenty twenty five.
So a pretty sluggish momentum and basically all its gross
(19:51):
drivers are contributing to that. We are observing a pretty
weak investment dynamic despite and currently easying in financing conditions,
and this is probably related to the increase in uncertainty
that we do face in France. Consumption is going poorly
as well. Gains in dispossible income are limited this year
(20:12):
and the saving rate remains pretty high currently. And finally,
and pretty obviously the contribution from net trade will be
negative tyre. So all of that contributes to a pretty
sluggish across from mentument France, which again contrasts with other
European countries at the moment. And if we look at it,
(20:35):
we France will face a lot of challenges. First and
foremost the political uncertainty, which remains pretty high and as
has even increased these days given the collapse of the
pensions reform stalks. So that's that's the main challenge. I
would say. The second one is obviously the current trade
uncertainty that we are we are facing all of France
(20:56):
is less exposed than its European peers. And finally, the
fiscal The fiscal topic is really important and some tough
negotiations will will have to take place in autumn to
pass the new budget.
Speaker 3 (21:12):
Yeah, very tricky couple of months ahead on that point, Jean,
We've just had the NATO summers where leaders agreed to
increase spending on defense. How is France placed to be
able to cope with that fiscally?
Speaker 8 (21:25):
So it's it's also a tricky situation for France. I mean,
the different spending in terms of GDP have already increased
a bit in France. They are now like above the
two percent NATO mark, so it's it's pretty positive, and
they are already expected to increase again, to increase further
to two point five percent of GDP in twenty thirty.
So yesterday we had President Macon saying that five percent
(21:46):
is a target or I mean can be a target.
We think it is unlikely. We think it will be
a huge challenge exactly because of the fiscal constraint we
mentioned before, So it would be very costly for France
reached that five percent mark, and we've made some estimate
that it would add a fifteen percentage point of debt
(22:06):
on the deput GDP ratio over thirty sorts, so it
would be a lot and we think it would not
be possible, and we have pencil like one three point
five percent mark, which will be tricky but still manageable
and feasible in the coming news.
Speaker 3 (22:22):
Okay, Alan, I wanted to go back to you as
well because I mentioned that we're coming up on this
point where Emmanuel Macron could call another election for the
National Assembly. He hasn't ruled it out, but give us
a sense of how stable the political situation is in
France at the moment.
Speaker 9 (22:39):
It's a little bit of a tricky question. I guess
it's stable probably in the short term, and unstable in
the longer term. I guess would probably be the best
way to put it. As you point out, Manuel Macron
could dissolve problem and call no elections as soon as
as next month. In July he said that he doesn't
plan to do that, doesn't expect to do it, as
(22:59):
you point out, hasn't ruled that out entirely. But it
seems unlikely because if you look at opinion polls, if
you called new elections now, you'd end up with roughly
the same sort of breakdown among political parties in Parliament.
So there's no real reason to do it. The other
reason why it's unlikely to happen in the very near
term is that Jean mentioned that, you know, these pension
(23:22):
talks have broken down, which they did, though by who
is pledged to Prime minister, by who is pledged to
come with something, some sort of something to try to
present to Parliament, is really unclear as yet what that
will be. But in any event, the far right National
Rally has said that it will not participate in a
no confidence vote until budget time, and that won't be
(23:47):
until the fall. So while the Socialists have filed a
no confidence motion against by who, there's no chance of
a passing without the far right because again mentioning done
before what actually pushed him out back in December, when
you had the far left, sort of the center left
and then the far right all joining together. That got
you up to a majority of parliamentarians who could push
(24:09):
them out. And that's not the case at least for
the next couple of months. So I would say short
term stability, but it doesn't mean that creates any sort
of long, longer term stability for the government or allows
the government to really do much because again, like in
this case, it's a fight over pensions, but as soon
as we get to the fall, it will be a
fight over the budget. It's going to be a major fight.
I mean, as Geen was mentioning, you know, the government's
(24:30):
pledge to reduce, the pledge to have about forty billion
euros in what they call savings. So that's a combination
of potential you know, revenue increases and spending cuts. It's
unclear what there's going to be where they're going to
come from, but that's a lot of money. So how
they're going to get there without you know, they're being
a major blow up and the government being forced out
is how they're going to get there without a major
(24:51):
blow up is very hard to see. Whether or not
that ends up pushing out the government is another question
because it depends on again on opinion polls and whether
parties seed in their interest to sort of make the
big buy who take on whatever budget cuts are going
to come and you know that's what the unpopularity that
goes with that, and leave that all in the current
government and save their sort of their fire for later
(25:12):
when they get to either municipal elections twenty twenty six
or as you mentioned, the presidential election in twenty twenty seven.
So it's again, as I said, just to boil it
all down, I would say short term stable for the
next couple of months. Longer term all bits are off.
Speaker 3 (25:25):
Yeah, keeping us very interested in our eyes closely focused
on what's happening in France over this summer as well
as some of those conversations are taking place for now,
Alan katz Our Paris Bureau Chief and Jehan Dadba from
Bloomberg Economics. Thank you very much for joining us. Will
be bringing you some of the key conversations from the
ex some Provenance Economic Conference across at Bloomberg platforms in
the coming days.
Speaker 2 (25:44):
I'm Stephen Caroll in London.
Speaker 3 (25:45):
You can catch us every weekday morning here for Bloomberg
day Break Europe, beginning at six am in London and
one am on Wall Streets.
Speaker 2 (25:52):
Tom Well, thank you, Stephen, and coming up on Bloomberg
day Break weekend to look at the state of Sino
Iranian relations as a Rants defense minister visits China. I'm
Tom Busby, and this is Bloomberg. This is Bloomberg Gay
(26:14):
Break Weekend, our global look ahead at the top stories
for investors in the coming week. I'm Tom Busby in
New York. RAN's defense minister arrived in China last week
for his first known overseas trip since that country's war
with Israel began. The visit highlighting just how critical Beijing
has become to Tran's strategic calculations. For more, let's get
(26:35):
to the host of the Daybreak Asia podcast, Doug Krisner.
Speaker 4 (26:38):
Tom Israel and Iran have spent the better part of
the past two weeks exchanging strikes, and in the process,
the US was drawn into this conflict. The situation highlights
the role of another power player though China. Joining me
now is Jenny marsh. Jenny is Greater China Eco GUV
team leader for Bloomberg News, and she joins us from
(26:58):
our studios in Hong Kong. It's always a pleasure to
benefit from your perspective. And as long as we're talking
about geopolitics, let's talk about what's going on between the US, Israel,
and Iran.
Speaker 2 (27:12):
Now.
Speaker 4 (27:12):
After the strikes, the recent strikes by the US government
on Iranian nuclear facilities, Beijing issued a strong condemnation and
basically called it a violation of the UN Charter and
of international law. I'm wondering whether or not China may
have played a role in this. Do you have a
sense of that.
Speaker 10 (27:31):
My sense is that China very much here will be
remembered for sitting on the sidelines. You know, Like they
issued this very strong statement condemning the US, and they
talked about how America was sort of blowing up, you know,
the international system for sort of maintaining order, i e.
The US led you know, UN framework for resolving conflicts,
(27:54):
and before the US strikes, you know, she and Putin
had got on the phone and sort of worked out
this four point plan for peace. But really for China,
they kind of left it at diplomacy, and I don't think,
you know, they were particularly effective in what they were messaging.
We know that Wang Yi spoke to both the Israeli
(28:15):
and the Iranian foreign ministers, so there was some sort
of attempt at sort of back channeling. But essentially, you know, Tehran,
you know, China was one of Tehran's sort of strongest partners,
and when it came to its darkest hour, China really
didn't do much apart from call for peace.
Speaker 4 (28:32):
Is it pretty much a selfish move that boils down
to crude oil? Is that really what this is about?
This relationship?
Speaker 10 (28:39):
I think this relationship is about the US, and I
think one of the reasons I say that is, yes,
China is one of the places that will buy sanctioned
Iranian oil. It's a very very slim percentage of China's
oil supplies, about ten percent, and they can easily source
this oil from other places. And I think, you know,
there's a couple of practic reasons why these sort of
(29:02):
it's mainly sort of these teapot refineries in northern China
that take this oil. It's much cheaper. But also I
think the Chinese government tolerates it because they are vehemently
opposed to the US sanctions regime, and so they they
let this go as a way of sort of defying
the US sanctions regime, which is something they and Russia
and Iran are all united in opposing. But I think
(29:25):
the broader relationship with Iran has been about sort of
finding partners that it will join hands with Beijing and
challenge the US of world order. And I think you
can see that through you know, she has ushered Iran
into the Bricks Group of Emerging Markets, which is this
block that it's expanding with India and South Africa and
Brazil as sort of a kind of a rival framework
(29:48):
to the G twenty. It also welcomed Iran in the
last couple of years into the Shanghai Cooperation Organization, which
is another sort of grouping that it's expanding, which has
more of a security flavor. But when it comes to
sort of trade with Iran, I mean, the trade is very,
very isn't significant, you know, it doesn't sell much to Iran. Actually,
(30:09):
trade with Iran actually fell off in the first four
months of this year. It was down about twenty percent.
And the broader Middle Eastern region from a bottom VeryE perspective,
is more important to Beijing. So I think really this
was sort of, you know, a partnership of convenience, and
for China it was always about finding partners that will
stand hands, join hands with it to stand against the US.
Speaker 4 (30:32):
So to that point, maybe China is not solely reliant
on Irani and crude oil. I get the fact that
they're only going to import let's say ten percent, but
the Strait of Horn Mouz, I would imagine is perhaps
more critical. And if there were a way for Beijing
to become influential and dialing down a lot of this
(30:53):
tension just so that the conflict didn't extend into the strait,
is that part of the thinking here as well.
Speaker 10 (31:00):
Yeah, so I think the straight up homes is definitely
a different story in a much much, sort of more
alarming concern for China. About forty five percent of its
oil shipments that comes through that straight and China is
the country that is most dependent on the oil coming
through that waterway globally, so yeah, massive exposure there. That
(31:23):
being said, China has been stockpiling on oil, So if
the war was a crisis that closed the straight for
you know, a short period of time, it wouldn't feel
the immediate impact. But in the long term, absolutely doesn't
want this conflict despiral and I think that was the
message from the four point plan that she put forward.
He talked about like not wanting this to expand, and
(31:44):
when they're condemning the US, they were saying, you know,
the US is fanning the flames of war and would
be to blame essentially if this did become a broader conflict.
I think the problem for China is like, how can
it affect or what is it willing to do to
stop it from coming a broader conflict, And the answer
is not very much. You know, China doesn't like to
(32:04):
get its hands dirty in foreign conflicts. It definitely doesn't
go anywhere near the US play because these sort of
far away wars and military operations, and even with Russia,
which it has a much stronger trade relationship and sort
of interdependency with Russia has now overtaken Saudi as the
top supplier of crude oil to China. Even when Peutin
(32:24):
went to war in Ukraine, she was very careful not
to do anything that would invite US sanctions. So yes,
he stepped up economic support and diplomatic support. And then
there was some controversy about sort of you know, the
dual use items that have been shipped but never any
to direct you know, military support that would cross these
(32:45):
red lines in America and Europe layed out very clearly,
you know, And I think China is a country you
have to remember that has no formal allies by design,
you know, and its self interest will always be it's
sort of north star of what it does when these
conflicts breakout.
Speaker 4 (33:01):
What is the degree of anti American feeling right now
in China? Not just because of what we're describing here
in terms of Israel Iran, but I'm thinking of whether
it's Taiwan, whether it's the US China trade war. Give
me a sense of the degree to which people in
China are feeling very anti American.
Speaker 10 (33:22):
I think that is a really interesting question, and it
hasn't been as prominent as you might have thought. Sort
of broadly towards American people. The Minecraft movie came out
in China and did pretty well, and we've seen other
sort of examples of sort of American soft power being powerful.
Even though the US and China are locked in this
trade war. I almost wonder if the Chinese people sort
(33:45):
of are able to separate Trump and you know, the
aberration or you know that is Trump from the average
American people. There was people talking about, you know, how
foolish run have been to sort of trust the US, saying,
you know, the US came in to negotiate, then it's
ally hit Iran, and then the US hit Iran. You know,
the Iranians were falls for ever trusting America. So there
(34:08):
was a lot of that kind of sentiment. But I
think actually the Chinese people sort of it is not
this sort of like rise of nationalism. And I think
that is partly because the Chinese government has learned from
the first time. Around the first trade war, you had
this wolf warrior policy that really stoked up a lot
of bad feeling. Then you had sort of people like
huci Jin, the old the former editor in chief of
(34:28):
the Global Times, who were allowed to sort of really
run wild on social media. You know when Nancy Pelosi
was flying into Taiwan, he was posting things about, you know,
perhaps shooting down you know, the jet as she came in,
which obviously just was a step too far. And I
think this time the nationalist voices on social media and
(34:49):
state media have been tampered down because the government doesn't
want it to get out of control to a point
where they are not the ones managing the narrative.
Speaker 4 (34:57):
Jenny, thank you so much. It's always a pleasure. Jenny
Marsh Greater China ECOGOV team leader for Bloomberg News. We
move next to global trade flows have been surprisingly resilient
in spite of those US tariffs and the uncertainties that
they have brought. That's the take from adt Rashkina, the
CEO of DHL Global Forwarding in Greater China. She spoke
(35:18):
recently with Bloomberg Steven Engel at the World Economic Forum
summit in Tianjin, China.
Speaker 11 (35:24):
Obviously there's been some turmoil in the world. There's obviously
an uncertainty around the tariffs and the global reciprocal tariffs
in the United States. There is rising conflict in the
Middle East. How is that directly impacting what you're seeing
as far as package deliveries and essentially demand.
Speaker 12 (35:42):
So let's just start off by saying that global trade
has been pretty resilient. If we look at China's expert
growth in the first five months, it's going about seven percent.
So whilst having said that, with the tensions and tariffs scenarios,
organizations are deploying different strategs. Some are front loading and
(36:02):
looking at taking inventory forward so they have it when
demand peaks. Others are looking at alternative sourcing and manufacturing
networks where they can in the short run, and yet
others have a wait and see approach. So let's wait
it out and see what happens with the tarotts and
the rest of the situation.
Speaker 11 (36:19):
On that front loading, do you see a tangible increase
while we're in a ninety day pause which is running
out already, but our shipment's definitely spiking because we don't
have the certainty following.
Speaker 12 (36:32):
Mid August, that's right, So it was despiked in order
to hit the ninety day window. So we're not sure
what's going to happen after that period of time that
we do believe that some stage was to meet that window.
Speaker 11 (36:46):
What are you seeing on the Deminimus exemption that the
Trump administration is essentially done away with that eight hundred
dollars shipment exemption. Have we seen a complete drop off?
Speaker 12 (36:59):
Yes, e commas I actually would have been the one
that has had a little bit more of uncertainty of
not knowing how to deal with the technology on the
other side when it gets to the customs right So
it's been on both sides for the customs regulation to
figure out how they're going to handle it once the
shipment arrives, but also for the organizations moving to know
(37:19):
how to deal with the situation. So everyone's working on
solutions right now to address the demon of it.
Speaker 11 (37:25):
How much of a sales drop are we looking at
between China and the United States.
Speaker 12 (37:30):
Honestly, it really depends on the sector that it is.
E commerce has had the biggest head but if you
look at the tech like Apple's, Dells, HPS, organizations like that,
they're still flowing in the same form as they've gotten
exceptions from the tariffs.
Speaker 11 (37:46):
You mentioned about diversification, how are you seeing corporates, individuals
or mostly corporates. I would say probably diversify from the
shipping to or from the United States away from the
morea the lead.
Speaker 12 (38:00):
Tariff China, so we you know, it depends again on
the sector or industry that organizations are in. So those
impacted by tariffs look for alternative sourcing locations and you
see a bit of shift into South East Asia. You
see a bit moving to Middle East Africa, Latin America.
So it has been a varied amount of setups. There
(38:23):
are those that still believe that China is the most
cost effective model networks for them, and usually the shifts
of a production into Southeast Asia is to move to
the US and for the rest of the world in
intra Asia and within China, consumption generally stays in China.
Speaker 4 (38:39):
That's a d d rush Keina, the CEO of DHL
Global Forwarding in Greater China, speaking with Bloomberg Steven Engel
and I'm Doug Kristner. You can catch us weekdays for
the Daybreak Asia podcast. It's available wherever you get your podcast. Tom.
Speaker 2 (38:54):
Thank you, Doug, and that does it for this edition
of Bloomberg day Break Weekend. Join us again Monday morning
at five am Wall Street Time for the latest on
the market's overseas and the news you need to start
your day. I'm Tom Buzzby. Stay with US. Top stories
and global business headlines are coming up right now
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