August 22, 2025 • 38 mins
Bloomberg Daybreak Weekend with Host Tom Busby take a look at some of the stories we'll be tracking in the coming week.
- In the US – a look ahead to personal spending data and earnings from Nvidia.
- In the UK – a look at the upcoming Medef Conference.
- In Asia – a look at the next Bank of Korea decision and the HK IPO market.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:11):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our day
Break anchors all around the world. Straight ahead on the program,
Federal Reserve Chair Jerome Powell opening the door to a
possible interest rate cut as early as next month. Plus
earnings from the AI chipmaker and Vidia amid worries about
its business in China. I'm Tom Busby in New York.
Speaker 3 (00:33):
I'm Stephen Carolyn London, who we are looking at the
difficult calculations looming for European governments as they prepare their
spending plans for next year.
Speaker 4 (00:41):
I'm Dek Krisner, looking ahead to this week's rate decision
from the Bank of Korea, as well as the state
of the IPO market in Hong Kong.
Speaker 1 (00:50):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven to three Yeho, New York, Bloomberg ninety nine to
one Washington, DC, Bloomberg ninety two nine in Boston, DAB
Digital Radio, London, Sirius XM one twenty one, and around
the world on Bloomberg Radio dot Com and The Bloomberg
Business app.
Speaker 5 (01:13):
Good day to you.
Speaker 2 (01:14):
I'm Tom Busby, and we begin today's program with some
revealing statements from Federal Reserve Chair Jerome Powell about possibly
changing the FED stance on rates. That's ahead of inflation
and personal incomes and spending data in the US. We're
joined by Stuart Paul, us economist with Bloomberg Economics. Well, Stuart,
I just want to hear your takeaways from Friday's rather
(01:34):
dubvish speech from Fedchair Jerome Powell, because it looks like
Wall Street's already pricing in a rate cut at the
September meeting.
Speaker 6 (01:41):
Well, the hot headline that we got from the speech
at Jackson Hole is that the balance of risks for
the Federal Reserve and for monetary policymakers are shifting, and
in particular the downside risks to employment are shifting materially
they're rising. So, if anything, the Federal Reserve chairman was
opening the door or at least acknowledging the cooling labor
(02:02):
market and opening the door to a rate cut in September.
But if anything, I think the tone of the speech
was actually a little bit hawkish, so he could be
getting something like a hawkish cut in September. He was
really trying to keep people from reading too much into
the idea that the resumption of rate cuts would mean
(02:23):
a cycle of cutting follows. For example, he noted that
the labor market is cooling, The pace of hiring is
materially slowing, but there is not a lot of slack
in the labor market. The pace of GDP growth is slowing,
but there's not a lot of slack in economic activity. Yes,
risks to inflation are still skewed to the upside. So
(02:46):
he was very cautious in his tone. He acknowledged that
it might be time to adjust the stance of monetary policy,
but he was not willing to go so far as
to say there would be multiple sequential cuts.
Speaker 2 (02:58):
Well, what he said about it is we're in a
curious kind of balance right now in the labor department.
So he is hedging his bets. And when you say
a hawkish cut, you just mean a quarter percentage point, right.
Speaker 6 (03:10):
A quarter point cut, and a clear signal at the
time they decide to move right, that additional sequential rate
cuts are not predetermined. When we get something like a
hawkish cut, it's really an incremental loosening of monetary policy
plus hawkish messaging, and that's what Powell was starting to
(03:31):
signal in his final Jackson Whole speech.
Speaker 2 (03:35):
We have had some dissension previously in the FED, some
members saying, hey, we're ready to cut any time. Has
that balance shifted now are there? Do you think it's
not just him, not just the one or two. Christopher
Waller and a few others are more saying this may
be the time.
Speaker 6 (03:52):
Heading into Chairman Powell's speech, other members of the FOMC,
the branch presidents, including Susan Collins from Boston, All Goals
from Chicago, Beth Hammock from Cleveland, they were very clear
that they had not yet made up their mind that
this is the time to cut rates. There was a
coalition in July, and it seems like there's still a
coalition now that is very cautious about moving to looser
(04:17):
monetary policy right now. But I do think that what
we saw from Chairman from Chairman Powell, who does speak
mostly to the central tendency of the committee, that central
tendency that media FOMC participant is probably getting a little
bit more comfortable with the idea of moving relatively soon.
But I think that This is what's most important, This
(04:38):
relatively hawkish tone that was included in the speech, even
with signaling that they're becoming more comfortable with one rate cut,
it would just be probably one rate cut, and I
think that there could be a negotiation come September that
it's time to lower by a lower the federal funds
rate target range by a quarter point. But they would
(05:00):
move slowly, they'll move deliberately, they'll move cautiously, and probably
not another time this year. From an economic perspective, Does
it really matter if they move in September or November
or December. No, it doesn't really matter from an economic perspective.
So I think that the Chairman can build a coalition
given the fact that there had previously been dissension. He
(05:22):
can build a coalition now that would be more amenable
to lowering the federal funds r a target range, as
long as they feel like they're not getting too far
out ahead of their skis and that they're not devoted
to sequential rate cuts.
Speaker 2 (05:37):
Well, one thing the Chairman has been consistent on is
that his decision, the decision of the Central Bank, will
be data dependent, and we're getting some important data this week.
July PCE the fence preferred measure of inflation and also
personal incomes and outlays. You know, just on Friday, the
Chairman said that the result of the Trump tariffs has
been now clearly visible, but the effects made relatively short lived.
(06:01):
So I mean, is he seeing inflation as maybe it
isn't so bad.
Speaker 6 (06:05):
For the month of July, We're estimating that core PCE
prices rose zero point three percent on the month. There
was actually relatively less pass through of tariff price pressures
in the month of July. We had seen some in April, May, June,
a little bit less in July. Where a lot of
the core inflation pressures are going to be coming from
(06:26):
is actually from financial services prices. This is a lot
of things like portfolio management fees, for example. And when
you see financial services prices rising, it's mostly just the
reflection of a rally in the equity market. It's a
rally in financial asset prices that are feeding through into
financial services prices. And so there's an extent to which
(06:47):
the Committee is going to be looking at this July
PCE inflation report and thinking, hmm, there are elevated, frothy
asset markets and so even if we decide to cut
rates in September, even if we decide to cut rates
this year, we should be very slow and deliberate in
doing so. We still have a reasonably close federal funds
(07:09):
rate target to what we consider to be neutral right now.
Monetary policy is only modestly restrictive, if it's restrictive at all,
So we should move very slowly.
Speaker 2 (07:20):
July PCE and personal spending both out just ahead of
Wall Street's opening bell this Friday. The next FED meeting
September sixteenth and seventeenth, a lot to look forward to
our thanks to Stuart paul Us, economist with Bloomberg Economics.
We move next to earnings from the last of text
Magnificent seven to report this period AI chip maker and Nvidia.
Those results from the world's only four trillion dollar company
(07:42):
are looming large over Wall Street because of all the
spending out artificial intelligence and questions about the company's business
in China. For more on what to expect and what
maybe next, we're joined by Kun John Sobani, Bloomberg Intelligence,
Senior Semiconductor analyst. Well, Kunjohn, thank you for here. In
video shares. They've taken a few hits in the past
week or so, and there are questions about tariffs and
(08:05):
what looks like a setback and its ability to sell
chips in China. So with all that, looking backwards, what
are you expecting to see in its second quarter results?
Speaker 5 (08:13):
From a results and guide perspective, we expect Nvidia, in
its typical fashion, to deliver again a strong beat and raise.
Our checks suggest strong Blackwell ramp ongoing and also strong
networking attached along with it, so that should boost both
compute and networking. The GB three hundred, which is their
(08:34):
next version of Blackwell GPUs, also is likely to be
running ahead of schedules, so that can also help with
a guidance beat. But from a stock reaction perspective, the
key focus again will be on narrative rather than purely numbers,
as we have seen over the last few quarters. First,
a key topic front and center is the magnitude and
(08:55):
the timing of resuming the China Hills. They have now
received license approval from the Trump Admin, but there are
still a lot of unclarity and moving parts regarding how
soon can they restart production and start shipping if those
customers are still there wanting the same h twenty parts
news has come out which hasn't made confunded yet, but
(09:16):
there seems to be that the Chinese government forcing the
customers not to buy in Nvidia chips. So there's a
lot of moving parts around that China angle, which will
be very important.
Speaker 2 (09:25):
Well, those chips that the Trump administration has given Nvidia
the access into China to sell, they're less powerful, certainly
not the Blackwell trips. These are older chips. So the
huaweis and the other companies there do they make a
similar product? I mean, is that the reason why if
this is confirmed about Beijing saying we don't want your chips.
Speaker 5 (09:47):
At this point, there is if you take the best
available GPU over in China, yes, you know, it is
comparable to the older Age twenties that NVIDIAs said selling.
But regardless of that, those GPUs don't have enough supply
capacity because they don't have access to the leading edge
fabs as Nvidia does. So you know, if there was
(10:09):
no pressure from the Chinese government, the customers would happily
and readily buy a lot more of the Age twenties.
So right now, it's a lot more geopolitics driving this
scenario or rather than just pure demand, supply and performance comparison.
Speaker 2 (10:23):
Well, Reuters reported last week that in Video may be
working on a new chip a little more powerful than
the Age twenty that is just for China. Has this
been confirmed.
Speaker 5 (10:34):
This has not been confirmed. And again this is a
lot of news has come out over the last few
weeks which everyone including US is waiting to speak to
the company as they report earnings to confirm a lot
of these things. And you know, I wouldn't be surprised
regarding the new chip. Every big generation Leap architecture generation Leap,
Nvidia has designed a new chip for China. So now
(10:56):
we are as it is shipping blackwell, it makes sense
that it is designing a lower powered black Belt version,
which is what the Reuter News was talking about, and
so that would not be very surprising to us. But
again you would have to go through this whole cycle
of getting licensing and sanctions because it will be definitely
more powerful than the Age twenty.
Speaker 2 (11:15):
Well, with all of this is a four trillion dollar company.
How important is China to Invidia's future revenue? I mean,
it looks like they're doing well without it, but we
all know it's the second largest economy on Earth. You know,
the spending is astronomical. How big is China to Invidia.
Speaker 5 (11:33):
Yeah, so there are two parts of it. One is
from a tamp perspective. It's definitely the sort of biggest
stamp outside of the US when it comes to what
Nvidia can sell to, and it is home to the
next largest hyperscalers and cloud providers. So it's definitely a
big market that you don't want to lose out, especially
(11:54):
if you're Nvidia for the long term. But however, in
the near term, right now, you know it can do
very well without it. It is doing very well without it.
We don't suspect that this China headwind will stop from
it growing into the numbers and as estimates. But right now,
given the size and the growth it has delivered, the
(12:15):
focus is how better can you do? So even if
it's just let's call it ten to twenty billion dollars
a year right now, which is a drop in the
bucket given how much revenue they are setting everywhere else,
because all the investors and Byside is trying to just
get to the highest number, and if they can beat
that to that, the narrative will be a lot more
important right now than the numbers well.
Speaker 2 (12:37):
In Vidious Q two earnings out after the market closes
this coming Wednesday. Are thanks to Kunjohn Sopani, Bloomberg Intelligence
Senior Semiconductor Analyst, and coming up on Bloomberg day Break weekend,
we'll look at the difficult calculations looming for European governments
as they prepare their spending plans for next year. I'm
Tom Busby, and this is Bloomber. This is Blueberg Day
(13:00):
Break Weekend, our global look ahead at the top stories
for investors in the coming week. I'm Tom Busby in
New York. Up later in our program, we'll look ahead
to a monetary policy decision from South Korea's Central Bank.
But first in Europe, the end of the traditional summer
holiday period will see politicians return to work in the
coming days. In many countries, their biggest challenge will be
(13:20):
drawing up budget plans that increase defense spending while also
tackling enormous debt piles amid week economic growth. In France,
the conversation will kick off at the annual summer conference
of the country's biggest business group MEDEF. For more, let's
go to London and bring in Bloomberg Daybreak. Europe banker
Stephen Carroll.
Speaker 3 (13:38):
Tom It's a cliche, but politicians do take summer holidays
in Europe, and that usually means that at this time
of year, the looming political challenges return with the bang.
In France, the season known as Laurentree for schools but
also for politics. This year's MEDEF conference is a chance
for employers to set out their positions ahead of a
fractious budget to base. The Prime Minister U faces the
(14:01):
daunting task of building support in Parliament for his budget plan,
which contains forty four billion euros of tax rises and
spending cuts. Without a majority, his government's future hangs in
the balance. Bairu will be trying to avoid the fate
of his predecessor, Michel Bagnier, whose government was toppled over
its budget last December. The situation is causing growing concern
(14:22):
amongst investors, not just in France, but also in several
other European countries. Many governments are grappling with similar budget
try issues, and they need to submit their spending plans
to the European Union by mid October. They're balancing the
need to increase defense spending, pay bigger social welfare and
pension bills for their aging populations and cover debts encouraged
(14:42):
during the COVID pandemic, all the while trying to avoid
painful tax rises or spending cuts. Here's what Jeffrey's economist
Madupe out of Bembo had to say about the situation
when she spoke to us on Bloomberg Radio.
Speaker 7 (14:55):
In previous kind of budget cycles last year, the opposition
knows that they can extract the game from the government,
and so they will do that. But I think the
question is how far it goes. Will it just be
a case of trying to maybe remove certain budget reductions
that have been penciled in, or will it be a
case of bringing down the government. And I think if
we get into that situation where it's a case of
(15:16):
bringing down the government, that's where I see. I mean,
it's a really big risk for France there because another
election then we're thinking about presidential elections, a lot of
uncertainty about who would come in presidential elections. I think
it really opens up a really big can of worms.
And that's why we are negative on France because I
think all of these sorts of scenarios that we're talking
about are very possible. They of course tell risks, but
(15:36):
they have a greater probability.
Speaker 3 (15:39):
As Jeffrey's economist and we dupey out of Bembo speaking
to me recently about the situation in France. Let's get
into the broader political and economic challenges ahead, then with
our senior geoeconomics analyst for Europe, Antonio burrough So and
are European economist Anna Andrade. Welcome to you both. Antonio,
I want to start with you and just to lay
the land of the political situation in France the heading
(16:00):
into these difficult negotiations. What is the situation looking like
for the government.
Speaker 8 (16:06):
Well, the picture is looking quite challenging, I would say,
because the problem, the main problem is that the government
lacks a majority in the National Assembly, that's the crucial
lower chamber in France. The government is essentially short of
seventy nine deputies, right, and I think that means two things.
The first is that it's very hard to get legislation
(16:27):
past in parliament, not just a budget. I mean, this
is a government that struggles to get things done in parliament.
And the second problem is that it basically leaves the
government exposed to potential no confidence motions in parliament, and
that you know, if a non confidence motion is supported
by the parliament, that leads to the collapse of the government,
which is what happened last year. Right, So, I think
(16:49):
that creates a very challenging situation for the government. Adding
to this is the fact that there is a lot
of political polarization in the country. Political parties are extremely polarized,
which makes reach compromise is also very difficult in parliament.
So as a whole, I would say it's fair to
characterize the political situation as quite difficult.
Speaker 3 (17:07):
And let's turn to the fiscal situation that France is facing.
How did it get to this position and how does
it compare to what we're seeing elsewhere in Europe?
Speaker 9 (17:17):
Sure so, I think the markets really woke up to
francis fiscal problems in twenty twenty four when Macron called
the snap election, but really the problems had been building
way before that. And if you look at the primary balance,
which provides a better reading on fiscal efforts because essentially
the excluding interest payments. While Greece, Italy and Portugal, all
(17:38):
the countries that have been most affected by the sovereign
depth crisis, were undertaking big consolidation efforts and targeting primary
balanced surpluses away from deficits. France was still running significant deficits.
Now it wasn't the only one. Spain was not necessarily
very committed to physical discipline as well. But the key
difference then as now was that growth was much faster there,
(17:59):
which helped reduced the dept to GDP ratio prior to
the pandemic, while in France it actually increased. And now
then we had the pandemic, which made everything worse. And
France in particularly has had a problem in braining and
spending over the past few years. Now that's due to
a mix of factors including slippadge by local authorities, growing
(18:21):
spending in pensions and disappointing tax revenues. And the government's
plan is quite ambitious. It's committed to that. I mean,
obviously the politics of it are quite difficult, as Antonio said,
but I would just flag that we also just don't
know where these savings beyond twenty twenty six are going
to come from, because in the medium term structural plans
(18:44):
that France sent to the Commission, and by the way,
this is not a friend's only problem. It's a problem
across all the governments. They send sort of the debt
deficity targets that they want to reach in five to
seven years, but they just haven't detailed the tax and
spending decisions that will underpin those targets. So the plans
are really not credible.
Speaker 3 (19:04):
Well, let's discuss that further, Antonio. I mean, it was
unusual to see the French Prime Minister lay out the
first draft of his spending plans quite early in the summer.
There was lots of unpopular proposals, and it's like cutting
two public holidays for example. What chances are there really
being able to get a compromise on a budget for France.
Speaker 8 (19:25):
Well, just like last year were essentially the government collapsed
over the budget and then last minute emergency budget had
to be approved. I think it's going to be very
hard for the government to get the budget passed. In
a survey that was done in July by French poster Elab,
you could see that seventy two percent of respondents said that,
(19:46):
you know, they acknowledged that dead must be reduced, but
that the efforts been demanded by the budget by the
government are too great. Right, So it's not a popular budget.
Also same survey, sixty six percent of respondents say that
they want the position parties to file and no confidence
motion is the government right, So you can see it's
not a particularly popular budget and you know, the challenge
(20:09):
of the fact that you need to really engage in
physical consolidation to reduce the budget deficit is compounded by
the lack of parliamentary majority. But that doesn't mean that
the government cannot make some concessions. In fact, I don't
think the current the budget in this current form might
be able to be passed, but I think the government
can provides certain concessions to at least have a chance
to get it approved by opposition parties.
Speaker 3 (20:31):
And Antonio because we're thinking about this in the context
of this upcoming business conference, where of course employers and
business leaders are going to be very worried about what
it could mean for them fiscally. They've previously been asked
to give larger contributions in terms of payroll taxes towards
the French budget. I mean, how worried do employers and
perhaps citizens have to be about tax ris as being
(20:52):
part of an eventual budget package in France.
Speaker 8 (20:55):
Well, I think that depends on the final compromise that
the government, if they can get a compromise, that the
form of that that will take. So, as I said,
I think there is room for concessions and I think that's,
by the way, probably why the initial draft of the
budget looks so tough, because I think the strategy of
Prime Minister consul who is essentially to present a very
(21:18):
tough budget and then leave room to negotiate with opposition parties.
But obviously consolidation physical consolidation is never popular, so the
problem is that opposition parties do not want to be
associated with the consolidation efforts. That being said, if you
look in terms of potential compromises. So last year, the
previous government of Prime Minister Darnie tried to make concessions
(21:39):
to the far right National Rally Party of my Elepen
and then that backfire in the end, actually a no
confidence motion, as I said, was voted and the government
ended up collapsing. So I think the government is not
going to look at its right, rather, in my look
towards its left when you have the Socialist Party which
has rejected the budget in its current form. But I
think the strut might be to try to offer some
(22:02):
concessions on what the Socialists called physical gassis, which is
essentially increase taxes on the highest earners in the country.
So I think ultimately you might see some concessions that
might look like tax increases, even though the government would
try to keep those at a minimum because Macone and
by who are really fixated or not increasing taxes. But
(22:24):
that might be an area. But you might find some
concessions that might lead ultimately to the plole of the budget.
Speaker 3 (22:30):
And in terms of the broader economic outlook for France
and for the euro Area, I mean, what should we
be watching out for. I suppose the potential petfalls as
policymakers are considering what effect their decisions might have on
the economic trajectory for the country.
Speaker 9 (22:46):
Yeah, I mean growth in France in your area hasn't
been spectacular over the past few years, but I would
say that given all the shocks that the currency block
has been hit by, I think it has been holding
up fairly recently. Of course, you know there's a big
utrogenerity bit across your area. We have spaying grecent Portugal
really experiencing dicent growth runs, while Germany barely growing. France
(23:11):
is somewhere in the middle. And now when I think
about the outlook over the next few years, I think
it's going to be essentially shaped by three things. One
is fiscal and in that i'm including, you know, the
defense spending. The other is obviously US tariffs, and the
third one is the euro appreciation. Now, the ear area
(23:31):
had a strong start at the beginning of the year.
Essentially that was due to front floating ahead of the
US tariffs, and that should ensure that growth is above
one percent this year. But the base of growth, at
least in our forecast, we expect it to moderate over
the coming quarters to around point two point three percent,
which is really below trend, and for twenty twenty six
(23:53):
we expect zero point eight percent. Now, it could be worse,
and it could be worse generally for your area if
we hadn't had this sort of fiscal listening coming from Germany.
Germany is has engaged on spending splurge in infrastructure and defense,
which we expect to start fitting through next year. But
I would say that's sort of that fiscal loosening is
really a story that's contained to Germany because in other countries,
(24:16):
as Antoni just now said, The trend in France and
in Italy for instance, is one of fiscal tightening, so
the support from that will be modest. And then the
big question is how tariff's and uncertainty will play out.
Tariffs will affect all countries, obviously to different extents, and
we expect I mean, we've had a trade deal being
(24:38):
reached which sort of maybe provide some stability, but taken
together with uncertainty, we still expect that to drag on growth.
And we're actually expecting a point four percent heat to
the level of GDP at peak, so you know, there
will be some growth, but it will be modest and
sort of you know, brought down by taris and uncertainty overall.
Speaker 3 (24:58):
Okay, Antonio Burrows, our senior geo economics analyst for Europe,
and our European economist Anna Andrada, thank you to you
both for helping set us up for what is expected
to be a long debate over the French budget and
the European budget cycle to come. I'm Stephen Caroll in London.
You can catch us every weekday morning here for Bloomberg
Daybreak here at beginning at six am in London and
one am on Wall Street, Tom, Thank you, Steven, and
(25:21):
coming up on Bloomberg day Break Weekend, we'll look ahead
to a monetary policy decision from the Bank of Korea.
I'm Tom Busby and this is Bloomberg. This is Bloomberg
day Break Weekend, our global look ahead at the top
(25:43):
stories for investors in the coming week.
Speaker 2 (25:45):
I'm Tom Busby in New York. South Korea's Central Bank
faces a tough call on rates next week. Economists are
divided over whether the BOK will extend its easing cycle
or keep the current two point five percent rate unchanged.
For more, let's get to the host of the Daybreak
Asia podcast, Doug Krisner.
Speaker 8 (26:04):
Tom.
Speaker 4 (26:04):
South Korea's economy rebounded in the second quarter, although recently
the Governor of the Bank of Korea Ri Chang Yong
said it still faces high levels of uncertainty as a
result of US trade policy. Now, trade is just one
of many factors the BOK will have to consider in
the week ahead. For a closer look, I'm joined by
Bloomberg's Brian Fowler. He is senior Asia ecogov editor for
(26:28):
Bloomberg News, joining us in the Japanese capital of Tokyo.
Thank you so much. For making time to chat with me.
As I recall the BOK meeting in July when the
policy rate was held steady at two and a half percent.
At the time, Governory seemed to keep the door open
to a rate cut this month. Has anything changed between
then and now.
Speaker 10 (26:47):
Well, Doug, so he definitely kept the door open to
a cut. He said at the time that four of
the board members, that's four out of seven, were open
to a rate cut sometime in the next three months.
And that's a pretty clear signal that the BIAS is
towards further easing, and probably further easing pretty much in
the short term. He also cited concerns about household debt
(27:09):
and the housing market and soul and that tends to
raise the risk of financial imbalances and that's something he
wants to keep an eye on. And I think another
reason why the BOK began its pause in June and
July is that there were fading thoughts of the FED
easing policy and the BOK tends to want to move
(27:31):
in lockstep with the Fed in order to avoid putting
downward pressure on the wand the one was the weakest
major currency against the dollar of last year. And that
repped up inflationary pressure. So that's one thing they want
to keep an eye on.
Speaker 4 (27:45):
So when you look at the household debt story, I'm curious,
is that more likely to be concentrated in mortgage lending
or are there other forms of borrowing that may trouble
the Bank of Korea.
Speaker 10 (27:57):
Mortgage lending is absolutely the key fact there because that's
driven by the housing market in Sol when it's hot,
and that people tend to borrow money to speculate on
that market. And we've seen housing prices rise now in
Sel for twenty eight consecutive weeks. But on the other hand,
(28:19):
the pace of increase has slowed after the government took
some steps to cool demand, including putting some restrictions on
mortgage lending.
Speaker 4 (28:28):
So where do we find the inflation story right now
in South Korea? I know that the recent numbers on
consumer prices earlier in the month seemed to suggest a
bit of deceleration. And I just saw the recent print
on producer prices. They advanced at an annual rate in
July by a half of one percent. Is that considered hot?
Speaker 10 (28:47):
That consumer inflation is a little bit hot? Consumer prices
rose two point one percent in July. The BOK has
a target of two percent, and core inflation rose two
so it's right about at the Bok's target. I think
going forward, the BOKA wants to see if the tariffs
(29:07):
have an inflationary impact impact on prices and if that
feeds into the economy were broadly.
Speaker 4 (29:15):
So, the tariff story is obviously a key part of
the trade story, and when I think of South Korea,
I think of not only automobiles, semiconductors as well. How
have trade flows been, especially to the US in light
of these tariffs.
Speaker 10 (29:30):
We had some early trade data for August showing that
exports to the US have started to fall until now
we had actually we had a lot of front loading,
so exports held up relatively well. Also, companies like Samsung
electronics tech sector did pretty well because the Trump administration
(29:51):
puts some exclusions on consumer electronic goods and that's helped
put a floor under those exports. Also, of course, the
supply chain relationships with Apple of help, as Apple has
managed to win some exemptions going forward, though, as you mentioned,
I mean, the outlook is pretty cloudy. Trump has threatened
to put new tariffs on chips by the end of
(30:13):
this month, and that would be a huge threat to
South Korea's economy because it relies very heavily on trade,
and in particular on trade of semiconductors.
Speaker 4 (30:22):
So when you think of sentiment on both the business
side and the consumer side, what's it been like. How
are people feeling.
Speaker 10 (30:30):
I think they're feeling a little bit worried about how
things are going. The Bank of Korea's GDP forecast for
this year calls for zero point nine percent growth. That
would be the weakest performance since the pandemic, when the
economy contracted in twenty twenty. And I think people are
thinking this the shoe is is about to drop. It
(30:51):
hasn't really dropped thus far, and there's concern about how
things happen, how things in full from August on now.
Speaker 4 (30:58):
I know recently within the last several months, there's been
a little bit of turbulence on the political side in
South Korea. Have things calmed down right now to help
maybe support the idea that the Bok has a little
bit more flexibility to do its job and not to
be distracted by political developments.
Speaker 10 (31:17):
Definitely. The new administration got started obviously in early June,
and that's taken away a huge source of uncertainty. Lee
so far has done his best to first of all
put aside any sort of concerns about diplomatic spats with Japan,
and I think that's he's looking confident, and that's meaning
(31:40):
that the government can come through with fiscal stimulus if
it feels that it needs to.
Speaker 4 (31:45):
That is Brian Fowler. He is senior Asia ecogov editor
for Bloomberg News. Joining from our studios in Tokyo, let's
pivot to one of the most important equity markets in Asia.
Hong Kong Exchanges and Clearing posted record quarterly again of
forty one percent. Trading surged with average daily turnover nearly doubling,
(32:06):
and new listings rebounded, with IPO applications topping two hundred.
The exchange of CEO is Bonnie Chan, and she recently
told Bloomberg how she is optimistic about international investors returning
to Chinese assets and how that will keep momentum strong.
Here is part of chance conversation with Bloomberg zivonn Man.
Speaker 11 (32:26):
Another quarter of record profit. You have trading that's been
booming and now more than two hundred active applications on
the pipeline. What stood out to you for this quarter.
Speaker 12 (32:37):
You know what really stands out for me for this
quarter is the fact that it's writing on a pretty
sustained momentum. If you look at our results, this is
actually another set of record half yearly results. We deliver
a pretty strong a pretty strong set already for the
(32:58):
second half of twenty twenty four. And so for me,
my biggest takeaway is that actually, since I think September
twenty twenty four, gradually we're seeing a return of interest
from international investors and they want to again look for
opportunities to deploy more capital to this part of the world.
(33:22):
You see it, I think manifested in many ways in
our daily turnover, but also I think you know in
the way that all these investors around the world are
participating in our IPOs.
Speaker 11 (33:35):
The key question is it's sustainable. You mentioned about average
daily turnover, which you nearly double from a year ago.
Obviously with liquidity it has been quite ample. With these
sell bound flows. What could extend the streak?
Speaker 9 (33:46):
Right?
Speaker 12 (33:46):
International investors are really again focusing on China assets, and
I think as they try to come back to treasure hunt,
it is a very good thing that we have equally
a robust pipeline to match their appetite. I think that
is very very important. So you mentioned our pipeline. We're
currently over two hundred companies already having filed their applications,
(34:12):
and in fact, you know, on a daily basis, I'm
speaking to a lot more so I think, you know,
with the backdrop of you know, really the interest returning
in earnest as well as you know, all these very
exciting investment opportunities coming online, I do hope that the
momentum can carry on.
Speaker 11 (34:32):
How confident are you the Hong Kong can reclaim the
number one IPO venue this year?
Speaker 12 (34:38):
Yeah? People always ask me that question. I think it's
certainly good to be sort of all the way at
the top of the league table. I mean, at the moment,
we're in a very good position, and we do have
the pipeline to help us deliver and help us stay
stay up there. But you know, to me, the more
important thing really is to make sure that we able
(35:00):
to support the fundraising needs of these companies. And this year,
I keep talking about the IPO pipeline, I think we
also need to look at the follow on fundraising, which
in fact has raised more money than the IPO proceeds.
So yeah, today we have raised about sixteen billion US
(35:21):
dollars close to seventeen for you by way of IPOs,
but we have actually more than forty billion NEUS dollars
raised by companies already listed on our exchange. So to me,
so long as we continue to support the fundraising needs
of these companies, we continue to improve our listing framework.
Speaker 11 (35:41):
Are you still doing a lot of marketing or do
you think companies are starting to come to you now?
Speaker 10 (35:45):
I think both.
Speaker 12 (35:46):
I mean companies certainly, I think saw how well we've
done in the IPO space, and so I think on
the average I probably need two to three companies per
day or to you know, wanting to understand more what
we have to offer, and I want to expand the
universe a little bit. I think it's very encouraging that
(36:09):
in the past few months we have seen an increased
appetite of companies beyond just the mainland China wanting to
use Hong Kong as their or pick Hong Kong as
their listening venue.
Speaker 11 (36:22):
We've seen a bit of a quiet resurgence in the
Asian market and the IPO market. There seems to be
coming back to life right again as well, What does
the rebound in Shanghai and Shanxen mean for the pipeline here.
Speaker 12 (36:32):
I think that will be very, very encouraging because the
way I see it, we always say the capital markets
is there to serve the real economy. So the fact
that capital markets are doing well, you know, should suggest
that actually, you know, there's a lot of positive momentum
in the real economy as well. China is a big country.
(36:55):
It is producing a lot of very exciting investment opportunities.
I mean, you see our pipeline, right, it's really felled
with a lot of excitement and then certainly enough for
more than just Hong Kong to support. And I think
increasingly I'm seeing the you know, the few exchanges in China, right,
(37:18):
So Shanghai, Shinjin, Beijing and the Hong Kong market really
playing a very complimentary role. Now for Hong Kong, I
think one advantage we have is certainly the connection to
the rest of the world. And therefore, for a lot
of companies when they decide to pick which venue to list,
(37:40):
one thing which will gravitate them towards Hong Kong is
if they have overseas expansion plans, and we actually saw
that in a lot of companies which have been listed
in the past few months. They want to raise proceeds.
They want to therefore use the proceeds to expand overseas,
and I think that is one thing which Hong Kong
(38:02):
can actually serve the best.
Speaker 4 (38:05):
That was Bonni Chan, she is the CEO of Hong
Kong Exchanges and Clearing, speaking with Bloomberg TV host Yvonne
Mann and I'm Doug Chrisner. You can catch us weekdays
for the Daybreak Asia podcast. It's available wherever you get
your podcast.
Speaker 2 (38:19):
Tom, 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 markets, overseas and the news you need to start
your day. I'm Tom Busby. Stay with us. Top stories
and global business headlines are coming up right now.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:11):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our day
Break anchors all around the world. Straight ahead on the program,
Federal Reserve Chair Jerome Powell opening the door to a
possible interest rate cut as early as next month. Plus
earnings from the AI chipmaker and Vidia amid worries about
its business in China. I'm Tom Busby in New York.
Speaker 3 (00:33):
I'm Stephen Carolyn London, who we are looking at the
difficult calculations looming for European governments as they prepare their
spending plans for next year.
Speaker 4 (00:41):
I'm Dek Krisner, looking ahead to this week's rate decision
from the Bank of Korea, as well as the state
of the IPO market in Hong Kong.
Speaker 1 (00:50):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven to three Yeho, New York, Bloomberg ninety nine to
one Washington, DC, Bloomberg ninety two nine in Boston, DAB
Digital Radio, London, Sirius XM one twenty one, and around
the world on Bloomberg Radio dot Com and The Bloomberg
Business app.
Speaker 5 (01:13):
Good day to you.
Speaker 2 (01:14):
I'm Tom Busby, and we begin today's program with some
revealing statements from Federal Reserve Chair Jerome Powell about possibly
changing the FED stance on rates. That's ahead of inflation
and personal incomes and spending data in the US. We're
joined by Stuart Paul, us economist with Bloomberg Economics. Well, Stuart,
I just want to hear your takeaways from Friday's rather
(01:34):
dubvish speech from Fedchair Jerome Powell, because it looks like
Wall Street's already pricing in a rate cut at the
September meeting.
Speaker 6 (01:41):
Well, the hot headline that we got from the speech
at Jackson Hole is that the balance of risks for
the Federal Reserve and for monetary policymakers are shifting, and
in particular the downside risks to employment are shifting materially
they're rising. So, if anything, the Federal Reserve chairman was
opening the door or at least acknowledging the cooling labor
(02:02):
market and opening the door to a rate cut in September.
But if anything, I think the tone of the speech
was actually a little bit hawkish, so he could be
getting something like a hawkish cut in September. He was
really trying to keep people from reading too much into
the idea that the resumption of rate cuts would mean
(02:23):
a cycle of cutting follows. For example, he noted that
the labor market is cooling, The pace of hiring is
materially slowing, but there is not a lot of slack
in the labor market. The pace of GDP growth is slowing,
but there's not a lot of slack in economic activity. Yes,
risks to inflation are still skewed to the upside. So
(02:46):
he was very cautious in his tone. He acknowledged that
it might be time to adjust the stance of monetary policy,
but he was not willing to go so far as
to say there would be multiple sequential cuts.
Speaker 2 (02:58):
Well, what he said about it is we're in a
curious kind of balance right now in the labor department.
So he is hedging his bets. And when you say
a hawkish cut, you just mean a quarter percentage point, right.
Speaker 6 (03:10):
A quarter point cut, and a clear signal at the
time they decide to move right, that additional sequential rate
cuts are not predetermined. When we get something like a
hawkish cut, it's really an incremental loosening of monetary policy
plus hawkish messaging, and that's what Powell was starting to
(03:31):
signal in his final Jackson Whole speech.
Speaker 2 (03:35):
We have had some dissension previously in the FED, some
members saying, hey, we're ready to cut any time. Has
that balance shifted now are there? Do you think it's
not just him, not just the one or two. Christopher
Waller and a few others are more saying this may
be the time.
Speaker 6 (03:52):
Heading into Chairman Powell's speech, other members of the FOMC,
the branch presidents, including Susan Collins from Boston, All Goals
from Chicago, Beth Hammock from Cleveland, they were very clear
that they had not yet made up their mind that
this is the time to cut rates. There was a
coalition in July, and it seems like there's still a
coalition now that is very cautious about moving to looser
(04:17):
monetary policy right now. But I do think that what
we saw from Chairman from Chairman Powell, who does speak
mostly to the central tendency of the committee, that central
tendency that media FOMC participant is probably getting a little
bit more comfortable with the idea of moving relatively soon.
But I think that This is what's most important, This
(04:38):
relatively hawkish tone that was included in the speech, even
with signaling that they're becoming more comfortable with one rate cut,
it would just be probably one rate cut, and I
think that there could be a negotiation come September that
it's time to lower by a lower the federal funds
rate target range by a quarter point. But they would
(05:00):
move slowly, they'll move deliberately, they'll move cautiously, and probably
not another time this year. From an economic perspective, Does
it really matter if they move in September or November
or December. No, it doesn't really matter from an economic perspective.
So I think that the Chairman can build a coalition
given the fact that there had previously been dissension. He
(05:22):
can build a coalition now that would be more amenable
to lowering the federal funds r a target range, as
long as they feel like they're not getting too far
out ahead of their skis and that they're not devoted
to sequential rate cuts.
Speaker 2 (05:37):
Well, one thing the Chairman has been consistent on is
that his decision, the decision of the Central Bank, will
be data dependent, and we're getting some important data this week.
July PCE the fence preferred measure of inflation and also
personal incomes and outlays. You know, just on Friday, the
Chairman said that the result of the Trump tariffs has
been now clearly visible, but the effects made relatively short lived.
(06:01):
So I mean, is he seeing inflation as maybe it
isn't so bad.
Speaker 6 (06:05):
For the month of July, We're estimating that core PCE
prices rose zero point three percent on the month. There
was actually relatively less pass through of tariff price pressures
in the month of July. We had seen some in April, May, June,
a little bit less in July. Where a lot of
the core inflation pressures are going to be coming from
(06:26):
is actually from financial services prices. This is a lot
of things like portfolio management fees, for example. And when
you see financial services prices rising, it's mostly just the
reflection of a rally in the equity market. It's a
rally in financial asset prices that are feeding through into
financial services prices. And so there's an extent to which
(06:47):
the Committee is going to be looking at this July
PCE inflation report and thinking, hmm, there are elevated, frothy
asset markets and so even if we decide to cut
rates in September, even if we decide to cut rates
this year, we should be very slow and deliberate in
doing so. We still have a reasonably close federal funds
(07:09):
rate target to what we consider to be neutral right now.
Monetary policy is only modestly restrictive, if it's restrictive at all,
So we should move very slowly.
Speaker 2 (07:20):
July PCE and personal spending both out just ahead of
Wall Street's opening bell this Friday. The next FED meeting
September sixteenth and seventeenth, a lot to look forward to
our thanks to Stuart paul Us, economist with Bloomberg Economics.
We move next to earnings from the last of text
Magnificent seven to report this period AI chip maker and Nvidia.
Those results from the world's only four trillion dollar company
(07:42):
are looming large over Wall Street because of all the
spending out artificial intelligence and questions about the company's business
in China. For more on what to expect and what
maybe next, we're joined by Kun John Sobani, Bloomberg Intelligence,
Senior Semiconductor analyst. Well, Kunjohn, thank you for here. In
video shares. They've taken a few hits in the past
week or so, and there are questions about tariffs and
(08:05):
what looks like a setback and its ability to sell
chips in China. So with all that, looking backwards, what
are you expecting to see in its second quarter results?
Speaker 5 (08:13):
From a results and guide perspective, we expect Nvidia, in
its typical fashion, to deliver again a strong beat and raise.
Our checks suggest strong Blackwell ramp ongoing and also strong
networking attached along with it, so that should boost both
compute and networking. The GB three hundred, which is their
(08:34):
next version of Blackwell GPUs, also is likely to be
running ahead of schedules, so that can also help with
a guidance beat. But from a stock reaction perspective, the
key focus again will be on narrative rather than purely numbers,
as we have seen over the last few quarters. First,
a key topic front and center is the magnitude and
(08:55):
the timing of resuming the China Hills. They have now
received license approval from the Trump Admin, but there are
still a lot of unclarity and moving parts regarding how
soon can they restart production and start shipping if those
customers are still there wanting the same h twenty parts
news has come out which hasn't made confunded yet, but
(09:16):
there seems to be that the Chinese government forcing the
customers not to buy in Nvidia chips. So there's a
lot of moving parts around that China angle, which will
be very important.
Speaker 2 (09:25):
Well, those chips that the Trump administration has given Nvidia
the access into China to sell, they're less powerful, certainly
not the Blackwell trips. These are older chips. So the
huaweis and the other companies there do they make a
similar product? I mean, is that the reason why if
this is confirmed about Beijing saying we don't want your chips.
Speaker 5 (09:47):
At this point, there is if you take the best
available GPU over in China, yes, you know, it is
comparable to the older Age twenties that NVIDIAs said selling.
But regardless of that, those GPUs don't have enough supply
capacity because they don't have access to the leading edge
fabs as Nvidia does. So you know, if there was
(10:09):
no pressure from the Chinese government, the customers would happily
and readily buy a lot more of the Age twenties.
So right now, it's a lot more geopolitics driving this
scenario or rather than just pure demand, supply and performance comparison.
Speaker 2 (10:23):
Well, Reuters reported last week that in Video may be
working on a new chip a little more powerful than
the Age twenty that is just for China. Has this
been confirmed.
Speaker 5 (10:34):
This has not been confirmed. And again this is a
lot of news has come out over the last few
weeks which everyone including US is waiting to speak to
the company as they report earnings to confirm a lot
of these things. And you know, I wouldn't be surprised
regarding the new chip. Every big generation Leap architecture generation Leap,
Nvidia has designed a new chip for China. So now
(10:56):
we are as it is shipping blackwell, it makes sense
that it is designing a lower powered black Belt version,
which is what the Reuter News was talking about, and
so that would not be very surprising to us. But
again you would have to go through this whole cycle
of getting licensing and sanctions because it will be definitely
more powerful than the Age twenty.
Speaker 2 (11:15):
Well, with all of this is a four trillion dollar company.
How important is China to Invidia's future revenue? I mean,
it looks like they're doing well without it, but we
all know it's the second largest economy on Earth. You know,
the spending is astronomical. How big is China to Invidia.
Speaker 5 (11:33):
Yeah, so there are two parts of it. One is
from a tamp perspective. It's definitely the sort of biggest
stamp outside of the US when it comes to what
Nvidia can sell to, and it is home to the
next largest hyperscalers and cloud providers. So it's definitely a
big market that you don't want to lose out, especially
(11:54):
if you're Nvidia for the long term. But however, in
the near term, right now, you know it can do
very well without it. It is doing very well without it.
We don't suspect that this China headwind will stop from
it growing into the numbers and as estimates. But right now,
given the size and the growth it has delivered, the
(12:15):
focus is how better can you do? So even if
it's just let's call it ten to twenty billion dollars
a year right now, which is a drop in the
bucket given how much revenue they are setting everywhere else,
because all the investors and Byside is trying to just
get to the highest number, and if they can beat
that to that, the narrative will be a lot more
important right now than the numbers well.
Speaker 2 (12:37):
In Vidious Q two earnings out after the market closes
this coming Wednesday. Are thanks to Kunjohn Sopani, Bloomberg Intelligence
Senior Semiconductor Analyst, and coming up on Bloomberg day Break weekend,
we'll look at the difficult calculations looming for European governments
as they prepare their spending plans for next year. I'm
Tom Busby, and this is Bloomber. This is Blueberg Day
(13:00):
Break Weekend, our global look ahead at the top stories
for investors in the coming week. I'm Tom Busby in
New York. Up later in our program, we'll look ahead
to a monetary policy decision from South Korea's Central Bank.
But first in Europe, the end of the traditional summer
holiday period will see politicians return to work in the
coming days. In many countries, their biggest challenge will be
(13:20):
drawing up budget plans that increase defense spending while also
tackling enormous debt piles amid week economic growth. In France,
the conversation will kick off at the annual summer conference
of the country's biggest business group MEDEF. For more, let's
go to London and bring in Bloomberg Daybreak. Europe banker
Stephen Carroll.
Speaker 3 (13:38):
Tom It's a cliche, but politicians do take summer holidays
in Europe, and that usually means that at this time
of year, the looming political challenges return with the bang.
In France, the season known as Laurentree for schools but
also for politics. This year's MEDEF conference is a chance
for employers to set out their positions ahead of a
fractious budget to base. The Prime Minister U faces the
(14:01):
daunting task of building support in Parliament for his budget plan,
which contains forty four billion euros of tax rises and
spending cuts. Without a majority, his government's future hangs in
the balance. Bairu will be trying to avoid the fate
of his predecessor, Michel Bagnier, whose government was toppled over
its budget last December. The situation is causing growing concern
(14:22):
amongst investors, not just in France, but also in several
other European countries. Many governments are grappling with similar budget
try issues, and they need to submit their spending plans
to the European Union by mid October. They're balancing the
need to increase defense spending, pay bigger social welfare and
pension bills for their aging populations and cover debts encouraged
(14:42):
during the COVID pandemic, all the while trying to avoid
painful tax rises or spending cuts. Here's what Jeffrey's economist
Madupe out of Bembo had to say about the situation
when she spoke to us on Bloomberg Radio.
Speaker 7 (14:55):
In previous kind of budget cycles last year, the opposition
knows that they can extract the game from the government,
and so they will do that. But I think the
question is how far it goes. Will it just be
a case of trying to maybe remove certain budget reductions
that have been penciled in, or will it be a
case of bringing down the government. And I think if
we get into that situation where it's a case of
(15:16):
bringing down the government, that's where I see. I mean,
it's a really big risk for France there because another
election then we're thinking about presidential elections, a lot of
uncertainty about who would come in presidential elections. I think
it really opens up a really big can of worms.
And that's why we are negative on France because I
think all of these sorts of scenarios that we're talking
about are very possible. They of course tell risks, but
(15:36):
they have a greater probability.
Speaker 3 (15:39):
As Jeffrey's economist and we dupey out of Bembo speaking
to me recently about the situation in France. Let's get
into the broader political and economic challenges ahead, then with
our senior geoeconomics analyst for Europe, Antonio burrough So and
are European economist Anna Andrade. Welcome to you both. Antonio,
I want to start with you and just to lay
the land of the political situation in France the heading
(16:00):
into these difficult negotiations. What is the situation looking like
for the government.
Speaker 8 (16:06):
Well, the picture is looking quite challenging, I would say,
because the problem, the main problem is that the government
lacks a majority in the National Assembly, that's the crucial
lower chamber in France. The government is essentially short of
seventy nine deputies, right, and I think that means two things.
The first is that it's very hard to get legislation
(16:27):
past in parliament, not just a budget. I mean, this
is a government that struggles to get things done in parliament.
And the second problem is that it basically leaves the
government exposed to potential no confidence motions in parliament, and
that you know, if a non confidence motion is supported
by the parliament, that leads to the collapse of the government,
which is what happened last year. Right, So, I think
(16:49):
that creates a very challenging situation for the government. Adding
to this is the fact that there is a lot
of political polarization in the country. Political parties are extremely polarized,
which makes reach compromise is also very difficult in parliament.
So as a whole, I would say it's fair to
characterize the political situation as quite difficult.
Speaker 3 (17:07):
And let's turn to the fiscal situation that France is facing.
How did it get to this position and how does
it compare to what we're seeing elsewhere in Europe?
Speaker 9 (17:17):
Sure so, I think the markets really woke up to
francis fiscal problems in twenty twenty four when Macron called
the snap election, but really the problems had been building
way before that. And if you look at the primary balance,
which provides a better reading on fiscal efforts because essentially
the excluding interest payments. While Greece, Italy and Portugal, all
(17:38):
the countries that have been most affected by the sovereign
depth crisis, were undertaking big consolidation efforts and targeting primary
balanced surpluses away from deficits. France was still running significant deficits.
Now it wasn't the only one. Spain was not necessarily
very committed to physical discipline as well. But the key
difference then as now was that growth was much faster there,
(17:59):
which helped reduced the dept to GDP ratio prior to
the pandemic, while in France it actually increased. And now
then we had the pandemic, which made everything worse. And
France in particularly has had a problem in braining and
spending over the past few years. Now that's due to
a mix of factors including slippadge by local authorities, growing
(18:21):
spending in pensions and disappointing tax revenues. And the government's
plan is quite ambitious. It's committed to that. I mean,
obviously the politics of it are quite difficult, as Antonio said,
but I would just flag that we also just don't
know where these savings beyond twenty twenty six are going
to come from, because in the medium term structural plans
(18:44):
that France sent to the Commission, and by the way,
this is not a friend's only problem. It's a problem
across all the governments. They send sort of the debt
deficity targets that they want to reach in five to
seven years, but they just haven't detailed the tax and
spending decisions that will underpin those targets. So the plans
are really not credible.
Speaker 3 (19:04):
Well, let's discuss that further, Antonio. I mean, it was
unusual to see the French Prime Minister lay out the
first draft of his spending plans quite early in the summer.
There was lots of unpopular proposals, and it's like cutting
two public holidays for example. What chances are there really
being able to get a compromise on a budget for France.
Speaker 8 (19:25):
Well, just like last year were essentially the government collapsed
over the budget and then last minute emergency budget had
to be approved. I think it's going to be very
hard for the government to get the budget passed. In
a survey that was done in July by French poster Elab,
you could see that seventy two percent of respondents said that,
(19:46):
you know, they acknowledged that dead must be reduced, but
that the efforts been demanded by the budget by the
government are too great. Right, So it's not a popular budget.
Also same survey, sixty six percent of respondents say that
they want the position parties to file and no confidence
motion is the government right, So you can see it's
not a particularly popular budget and you know, the challenge
(20:09):
of the fact that you need to really engage in
physical consolidation to reduce the budget deficit is compounded by
the lack of parliamentary majority. But that doesn't mean that
the government cannot make some concessions. In fact, I don't
think the current the budget in this current form might
be able to be passed, but I think the government
can provides certain concessions to at least have a chance
to get it approved by opposition parties.
Speaker 3 (20:31):
And Antonio because we're thinking about this in the context
of this upcoming business conference, where of course employers and
business leaders are going to be very worried about what
it could mean for them fiscally. They've previously been asked
to give larger contributions in terms of payroll taxes towards
the French budget. I mean, how worried do employers and
perhaps citizens have to be about tax ris as being
(20:52):
part of an eventual budget package in France.
Speaker 8 (20:55):
Well, I think that depends on the final compromise that
the government, if they can get a compromise, that the
form of that that will take. So, as I said,
I think there is room for concessions and I think that's,
by the way, probably why the initial draft of the
budget looks so tough, because I think the strategy of
Prime Minister consul who is essentially to present a very
(21:18):
tough budget and then leave room to negotiate with opposition parties.
But obviously consolidation physical consolidation is never popular, so the
problem is that opposition parties do not want to be
associated with the consolidation efforts. That being said, if you
look in terms of potential compromises. So last year, the
previous government of Prime Minister Darnie tried to make concessions
(21:39):
to the far right National Rally Party of my Elepen
and then that backfire in the end, actually a no
confidence motion, as I said, was voted and the government
ended up collapsing. So I think the government is not
going to look at its right, rather, in my look
towards its left when you have the Socialist Party which
has rejected the budget in its current form. But I
think the strut might be to try to offer some
(22:02):
concessions on what the Socialists called physical gassis, which is
essentially increase taxes on the highest earners in the country.
So I think ultimately you might see some concessions that
might look like tax increases, even though the government would
try to keep those at a minimum because Macone and
by who are really fixated or not increasing taxes. But
(22:24):
that might be an area. But you might find some
concessions that might lead ultimately to the plole of the budget.
Speaker 3 (22:30):
And in terms of the broader economic outlook for France
and for the euro Area, I mean, what should we
be watching out for. I suppose the potential petfalls as
policymakers are considering what effect their decisions might have on
the economic trajectory for the country.
Speaker 9 (22:46):
Yeah, I mean growth in France in your area hasn't
been spectacular over the past few years, but I would
say that given all the shocks that the currency block
has been hit by, I think it has been holding
up fairly recently. Of course, you know there's a big
utrogenerity bit across your area. We have spaying grecent Portugal
really experiencing dicent growth runs, while Germany barely growing. France
(23:11):
is somewhere in the middle. And now when I think
about the outlook over the next few years, I think
it's going to be essentially shaped by three things. One
is fiscal and in that i'm including, you know, the
defense spending. The other is obviously US tariffs, and the
third one is the euro appreciation. Now, the ear area
(23:31):
had a strong start at the beginning of the year.
Essentially that was due to front floating ahead of the
US tariffs, and that should ensure that growth is above
one percent this year. But the base of growth, at
least in our forecast, we expect it to moderate over
the coming quarters to around point two point three percent,
which is really below trend, and for twenty twenty six
(23:53):
we expect zero point eight percent. Now, it could be worse,
and it could be worse generally for your area if
we hadn't had this sort of fiscal listening coming from Germany.
Germany is has engaged on spending splurge in infrastructure and defense,
which we expect to start fitting through next year. But
I would say that's sort of that fiscal loosening is
really a story that's contained to Germany because in other countries,
(24:16):
as Antoni just now said, The trend in France and
in Italy for instance, is one of fiscal tightening, so
the support from that will be modest. And then the
big question is how tariff's and uncertainty will play out.
Tariffs will affect all countries, obviously to different extents, and
we expect I mean, we've had a trade deal being
(24:38):
reached which sort of maybe provide some stability, but taken
together with uncertainty, we still expect that to drag on growth.
And we're actually expecting a point four percent heat to
the level of GDP at peak, so you know, there
will be some growth, but it will be modest and
sort of you know, brought down by taris and uncertainty overall.
Speaker 3 (24:58):
Okay, Antonio Burrows, our senior geo economics analyst for Europe,
and our European economist Anna Andrada, thank you to you
both for helping set us up for what is expected
to be a long debate over the French budget and
the European budget cycle to come. I'm Stephen Caroll in London.
You can catch us every weekday morning here for Bloomberg
Daybreak here at beginning at six am in London and
one am on Wall Street, Tom, Thank you, Steven, and
(25:21):
coming up on Bloomberg day Break Weekend, we'll look ahead
to a monetary policy decision from the Bank of Korea.
I'm Tom Busby and this is Bloomberg. This is Bloomberg
day Break Weekend, our global look ahead at the top
(25:43):
stories for investors in the coming week.
Speaker 2 (25:45):
I'm Tom Busby in New York. South Korea's Central Bank
faces a tough call on rates next week. Economists are
divided over whether the BOK will extend its easing cycle
or keep the current two point five percent rate unchanged.
For more, let's get to the host of the Daybreak
Asia podcast, Doug Krisner.
Speaker 8 (26:04):
Tom.
Speaker 4 (26:04):
South Korea's economy rebounded in the second quarter, although recently
the Governor of the Bank of Korea Ri Chang Yong
said it still faces high levels of uncertainty as a
result of US trade policy. Now, trade is just one
of many factors the BOK will have to consider in
the week ahead. For a closer look, I'm joined by
Bloomberg's Brian Fowler. He is senior Asia ecogov editor for
(26:28):
Bloomberg News, joining us in the Japanese capital of Tokyo.
Thank you so much. For making time to chat with me.
As I recall the BOK meeting in July when the
policy rate was held steady at two and a half percent.
At the time, Governory seemed to keep the door open
to a rate cut this month. Has anything changed between
then and now.
Speaker 10 (26:47):
Well, Doug, so he definitely kept the door open to
a cut. He said at the time that four of
the board members, that's four out of seven, were open
to a rate cut sometime in the next three months.
And that's a pretty clear signal that the BIAS is
towards further easing, and probably further easing pretty much in
the short term. He also cited concerns about household debt
(27:09):
and the housing market and soul and that tends to
raise the risk of financial imbalances and that's something he
wants to keep an eye on. And I think another
reason why the BOK began its pause in June and
July is that there were fading thoughts of the FED
easing policy and the BOK tends to want to move
(27:31):
in lockstep with the Fed in order to avoid putting
downward pressure on the wand the one was the weakest
major currency against the dollar of last year. And that
repped up inflationary pressure. So that's one thing they want
to keep an eye on.
Speaker 4 (27:45):
So when you look at the household debt story, I'm curious,
is that more likely to be concentrated in mortgage lending
or are there other forms of borrowing that may trouble
the Bank of Korea.
Speaker 10 (27:57):
Mortgage lending is absolutely the key fact there because that's
driven by the housing market in Sol when it's hot,
and that people tend to borrow money to speculate on
that market. And we've seen housing prices rise now in
Sel for twenty eight consecutive weeks. But on the other hand,
(28:19):
the pace of increase has slowed after the government took
some steps to cool demand, including putting some restrictions on
mortgage lending.
Speaker 4 (28:28):
So where do we find the inflation story right now
in South Korea? I know that the recent numbers on
consumer prices earlier in the month seemed to suggest a
bit of deceleration. And I just saw the recent print
on producer prices. They advanced at an annual rate in
July by a half of one percent. Is that considered hot?
Speaker 10 (28:47):
That consumer inflation is a little bit hot? Consumer prices
rose two point one percent in July. The BOK has
a target of two percent, and core inflation rose two
so it's right about at the Bok's target. I think
going forward, the BOKA wants to see if the tariffs
(29:07):
have an inflationary impact impact on prices and if that
feeds into the economy were broadly.
Speaker 4 (29:15):
So, the tariff story is obviously a key part of
the trade story, and when I think of South Korea,
I think of not only automobiles, semiconductors as well. How
have trade flows been, especially to the US in light
of these tariffs.
Speaker 10 (29:30):
We had some early trade data for August showing that
exports to the US have started to fall until now
we had actually we had a lot of front loading,
so exports held up relatively well. Also, companies like Samsung
electronics tech sector did pretty well because the Trump administration
(29:51):
puts some exclusions on consumer electronic goods and that's helped
put a floor under those exports. Also, of course, the
supply chain relationships with Apple of help, as Apple has
managed to win some exemptions going forward, though, as you mentioned,
I mean, the outlook is pretty cloudy. Trump has threatened
to put new tariffs on chips by the end of
(30:13):
this month, and that would be a huge threat to
South Korea's economy because it relies very heavily on trade,
and in particular on trade of semiconductors.
Speaker 4 (30:22):
So when you think of sentiment on both the business
side and the consumer side, what's it been like. How
are people feeling.
Speaker 10 (30:30):
I think they're feeling a little bit worried about how
things are going. The Bank of Korea's GDP forecast for
this year calls for zero point nine percent growth. That
would be the weakest performance since the pandemic, when the
economy contracted in twenty twenty. And I think people are
thinking this the shoe is is about to drop. It
(30:51):
hasn't really dropped thus far, and there's concern about how
things happen, how things in full from August on now.
Speaker 4 (30:58):
I know recently within the last several months, there's been
a little bit of turbulence on the political side in
South Korea. Have things calmed down right now to help
maybe support the idea that the Bok has a little
bit more flexibility to do its job and not to
be distracted by political developments.
Speaker 10 (31:17):
Definitely. The new administration got started obviously in early June,
and that's taken away a huge source of uncertainty. Lee
so far has done his best to first of all
put aside any sort of concerns about diplomatic spats with Japan,
and I think that's he's looking confident, and that's meaning
(31:40):
that the government can come through with fiscal stimulus if
it feels that it needs to.
Speaker 4 (31:45):
That is Brian Fowler. He is senior Asia ecogov editor
for Bloomberg News. Joining from our studios in Tokyo, let's
pivot to one of the most important equity markets in Asia.
Hong Kong Exchanges and Clearing posted record quarterly again of
forty one percent. Trading surged with average daily turnover nearly doubling,
(32:06):
and new listings rebounded, with IPO applications topping two hundred.
The exchange of CEO is Bonnie Chan, and she recently
told Bloomberg how she is optimistic about international investors returning
to Chinese assets and how that will keep momentum strong.
Here is part of chance conversation with Bloomberg zivonn Man.
Speaker 11 (32:26):
Another quarter of record profit. You have trading that's been
booming and now more than two hundred active applications on
the pipeline. What stood out to you for this quarter.
Speaker 12 (32:37):
You know what really stands out for me for this
quarter is the fact that it's writing on a pretty
sustained momentum. If you look at our results, this is
actually another set of record half yearly results. We deliver
a pretty strong a pretty strong set already for the
(32:58):
second half of twenty twenty four. And so for me,
my biggest takeaway is that actually, since I think September
twenty twenty four, gradually we're seeing a return of interest
from international investors and they want to again look for
opportunities to deploy more capital to this part of the world.
(33:22):
You see it, I think manifested in many ways in
our daily turnover, but also I think you know in
the way that all these investors around the world are
participating in our IPOs.
Speaker 11 (33:35):
The key question is it's sustainable. You mentioned about average
daily turnover, which you nearly double from a year ago.
Obviously with liquidity it has been quite ample. With these
sell bound flows. What could extend the streak?
Speaker 9 (33:46):
Right?
Speaker 12 (33:46):
International investors are really again focusing on China assets, and
I think as they try to come back to treasure hunt,
it is a very good thing that we have equally
a robust pipeline to match their appetite. I think that
is very very important. So you mentioned our pipeline. We're
currently over two hundred companies already having filed their applications,
(34:12):
and in fact, you know, on a daily basis, I'm
speaking to a lot more so I think, you know,
with the backdrop of you know, really the interest returning
in earnest as well as you know, all these very
exciting investment opportunities coming online, I do hope that the
momentum can carry on.
Speaker 11 (34:32):
How confident are you the Hong Kong can reclaim the
number one IPO venue this year?
Speaker 12 (34:38):
Yeah? People always ask me that question. I think it's
certainly good to be sort of all the way at
the top of the league table. I mean, at the moment,
we're in a very good position, and we do have
the pipeline to help us deliver and help us stay
stay up there. But you know, to me, the more
important thing really is to make sure that we able
(35:00):
to support the fundraising needs of these companies. And this year,
I keep talking about the IPO pipeline, I think we
also need to look at the follow on fundraising, which
in fact has raised more money than the IPO proceeds.
So yeah, today we have raised about sixteen billion US
(35:21):
dollars close to seventeen for you by way of IPOs,
but we have actually more than forty billion NEUS dollars
raised by companies already listed on our exchange. So to me,
so long as we continue to support the fundraising needs
of these companies, we continue to improve our listing framework.
Speaker 11 (35:41):
Are you still doing a lot of marketing or do
you think companies are starting to come to you now?
Speaker 10 (35:45):
I think both.
Speaker 12 (35:46):
I mean companies certainly, I think saw how well we've
done in the IPO space, and so I think on
the average I probably need two to three companies per
day or to you know, wanting to understand more what
we have to offer, and I want to expand the
universe a little bit. I think it's very encouraging that
(36:09):
in the past few months we have seen an increased
appetite of companies beyond just the mainland China wanting to
use Hong Kong as their or pick Hong Kong as
their listening venue.
Speaker 11 (36:22):
We've seen a bit of a quiet resurgence in the
Asian market and the IPO market. There seems to be
coming back to life right again as well, What does
the rebound in Shanghai and Shanxen mean for the pipeline here.
Speaker 12 (36:32):
I think that will be very, very encouraging because the
way I see it, we always say the capital markets
is there to serve the real economy. So the fact
that capital markets are doing well, you know, should suggest
that actually, you know, there's a lot of positive momentum
in the real economy as well. China is a big country.
(36:55):
It is producing a lot of very exciting investment opportunities.
I mean, you see our pipeline, right, it's really felled
with a lot of excitement and then certainly enough for
more than just Hong Kong to support. And I think
increasingly I'm seeing the you know, the few exchanges in China, right,
(37:18):
So Shanghai, Shinjin, Beijing and the Hong Kong market really
playing a very complimentary role. Now for Hong Kong, I
think one advantage we have is certainly the connection to
the rest of the world. And therefore, for a lot
of companies when they decide to pick which venue to list,
(37:40):
one thing which will gravitate them towards Hong Kong is
if they have overseas expansion plans, and we actually saw
that in a lot of companies which have been listed
in the past few months. They want to raise proceeds.
They want to therefore use the proceeds to expand overseas,
and I think that is one thing which Hong Kong
(38:02):
can actually serve the best.
Speaker 4 (38:05):
That was Bonni Chan, she is the CEO of Hong
Kong Exchanges and Clearing, speaking with Bloomberg TV host Yvonne
Mann and I'm Doug Chrisner. You can catch us weekdays
for the Daybreak Asia podcast. It's available wherever you get
your podcast.
Speaker 2 (38:19):
Tom, 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 markets, overseas and the news you need to start
your day. I'm Tom Busby. Stay with us. Top stories
and global business headlines are coming up right now.
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