May 23, 2025 • 38 mins
Bloomberg Daybreak Weekend with Tom Busby takes a look at some of the stories we'll be tracking in the coming week.
- In the US – a look ahead to GDP and personal spending data, and Nvidia earnings.
- In the UK – a look ahead to Poland's Presidential run off election.
- In Asia – a look ahead to the upcoming Bank of Korea decision.
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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,
we'll look ahead to some key economic data here in
the US and how that may impact FED policy. I'm
Tom Busby in New York.
Speaker 3 (00:24):
I'm Krolyn Hepke in London, where we're looking ahead to
Poland's presidential election and a populist challenger.
Speaker 4 (00:31):
I'm deg Christner with a preview of next week's rate
decision from the Bank of Korea.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven to three, Yeero, 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 you. I'm Tom Busby. We begin today's
program with some key economic data in the US, A
second read on US GDP for the first quarter that
comes out on Thursday, and the next day, a read
on inflation with a personal consumption Expenditures Price index the
PCE for April. Now for more on what to expect
and how it could impact FED policy, we're joined by
(01:24):
Stuart paul Us, economist with Bloomberg Economics. Stuart, thank you
for being here. Let's start with what you're expecting to
see in the second read. The second read on gross
domestic product for the first three months of this year,
because the first one was quite a shock, wasn't it.
Speaker 5 (01:39):
That's right. In the first quarter we saw GDP growth
decline at an annualized pace of zero point three percent.
That was a modest downside surprise. Now, a lot of
attention has been given to this decline in economic activity
in the first quarter, and a lot of spokespeople for
the administration are coming out and saying that we should
anticipate an upward revision to the GDP data. Personally, I
(02:01):
think that it's a bit optimistic, and I think that
maybe on a good day, an upward revision of let's say,
inventories within the GDP tabulation could be enough to lift
the estimate of first quarter growth, but just to about
zero percent, so still not a very good reading. A
lot of folks are really focused on this calculation, this
(02:22):
accounting for GDP, and they're basically saying, look, trade weighed
on first quarter growth because there was a surge in imports.
But those imports are either being held as inventories or
they were consumed, or they were used in fixed investment
or machinery or computers, et cetera. And so the drag
(02:43):
or the subtraction that we get from the trade component
should just be offsetting what's added by the domestic components.
But I think that when the administration officials and when
economic commentators focus on that accounting, they're missing the forest
for the trees. There was more growth in demand for
and utilization of stuff from abroad than there was in
(03:07):
stuff produced and used and created domestically, and I think
that that's really what's most important. And even if we
do see this upward revision as a consequence of better
estimates of inventory growth, for example, that just means that
inventories are likely to subtract from growth in the quarters ahead.
(03:28):
So undoubtedly the trade tensions and the higher trade barriers,
higher economic policy uncertainty is weighing on domestic activity.
Speaker 2 (03:40):
And as you said, this revision at best could just
be flat.
Speaker 5 (03:44):
I think so. I think that it's going to be
a pretty soft reading for first quarter growth. And looking ahead,
we see weakening PMIS, we see elevated economic policy uncertainty.
There is this sort of relief wave, especially showing up
in financial markets of the temporarily lowered trade barriers, but
(04:07):
everything is just on a ninety day delay, and that's
going to weigh on fixed investment plans and hiring plans.
Speaker 2 (04:15):
And there's also inflation we have to talk about, because
on Friday is April's PCE, the Fed's preferred measure of
consumer inflation. Earlier this month, the April Consumer Price Index
rose just slightly, but it still rose point two percent.
That was from March, a third month in a row.
So what are you expecting to see in the pc
will Will it be anything different?
Speaker 5 (04:35):
This is going to be one of those readings where
you really need to look under the hood and dissect
what's going on. As you said, the CPI reading was
about a touch over zero point two percent. The PCE reading,
especially the core PCE reading, which matters most for the
Federal Reserve, is likely to show just one zero point
one percent growth in prices. So the fed's preferred price
(04:58):
measure is just going to show zero point one percent
price growth during the month, and that might allow people
to breathe a sigh of relief, But what's really going
on in that core PCE price index is that core
goods prices are rising because there is some pass through
from tariffs, but services prices, especially excluding housing, retreated during
(05:19):
the month. So we estimate that core PCE services excluding
housing declined about zero point one percent during the month,
offsetting the effect of higher goods prices. And one of
the reasons why services prices fell is because the cost
of financial services in portfolio management services declined in the
(05:41):
past couple months, and that was due in large part
to the stock market retreat when trade barriers were going up. Now,
the rebound that we've seen more recently, especially in late
April and early May, is just going to mean that
those services prices are going to start catching up in
the months ahead, likely two to three months ahead, as
we get deeper into the spring, at a time when
(06:04):
firms are also starting to pass through higher costs of
tariffs and higher input costs. And so even if we
see a week reading for the headline and for the
core in the aggregate. When it comes to these inflation measures,
I think the details under the hood are going to
be foreshadowing a further deterioration of the economic landscape and
(06:25):
higher prices, especially in the month's ed well.
Speaker 2 (06:28):
A second read on first quarter GDP out this Thursday.
PCE for April out on Friday our thanks to Stuart
paul Us economists with Bloomberg Economics, we turned out to
earnings and this week we get first quarter results from
the last of Big Text, Magnificent seven, AI chip maker,
and Nvidia. The three and a quarter trillion dollars semiconductor
giant has been facing some of the same challenges a
(06:50):
lot of other firms are, like the impact of President
Trump's tariff wars, brief worries about a pullback an enterprise spending,
and an uncertain economy. It's also had to navigate severe
restrictions on exports to China and other nations. And for
more on that and what to expect from in video
this week, we're joined by Kunjohn Subani, Bloomberg Intelligence Senior
semiconductor analyst. Boy there is a lot to unpack about
(07:14):
what Nvidia has been through the last three months, so
we know that they've talked about a massive charge they're
taken because of those export restrictions. What are you expecting
to see in its results this coming Wednesday?
Speaker 6 (07:27):
Yeah, I mean this has been the most noisiest three
months coming into an earnings call for Nvidia over the
last two three years. But despite everything both negative and positive,
we think still again the results will still be similar
to what we have seen from them, which is a
strong beat and raise. We don't expect any weakness in
the reporting numbers or the guidance at all.
Speaker 2 (07:50):
No change then the trajectory, despite what we've seen the
last three months, the stock losing almost thirty percent of
its value and then coming back. I mean, what do
you attribute that to? Is it the new Blackwell chips
which we know did you know gangbusters in the fourth
quarter of last year.
Speaker 6 (08:08):
Yeah, it's going to be primarily driven by the strength
and Blackwell, and we can unpack a little bit the
negatives and how those are sort of not impacting the
fundamentals right now. So the couple of concerns right this year,
we are starting with the Blackwell. There were some hiccups
in the GB two hundred, which is their first full
rack level Blackwell.
Speaker 7 (08:29):
Chip or solution that they're shipping right now.
Speaker 6 (08:32):
Those concerns from our channel chicks seems to be mostly abated.
The shipments are sort of back on track.
Speaker 7 (08:39):
Everything is flowing in, you know.
Speaker 6 (08:41):
And the second big concern was the China restrictions, as
you pointed out, which for the whole year, the estimate
of that impact is supposed to be fifteen billion dollars. Now,
having said that, we think they have other avenues to
ship Blackwell to other customers as back on time again. Member,
They're also still shipping the Hopper series, the New Age
(09:02):
two hundred to other customers. And this product was supply
continents last year, which is not this year, so they
can ship a lot more of that if they wanted
to to meet the numbers. So they have different leavers
to pull right now to at least get to the
numbers that the street is guiding to.
Speaker 2 (09:20):
And even though they've said there could be a charge
of up to five and a half billion dollars just
from the export restrictions, you still think it's going to
be a clear beat.
Speaker 6 (09:31):
Well that the charge is sort of a known quantity,
So I'm taking into consideration the account that it's a
one time charge not impacting you know, non gap numbers,
which is.
Speaker 7 (09:39):
What most of the investors really focus on.
Speaker 6 (09:41):
So when you look beyond the charge, having already baked
that into the numbers, the new sort of baked in
numbers don't seem to at risk. Also, you know, these
headfins are likely to become tailwinds in the second half.
The company is working has announced that it's working on
a new China variant chip. In the past, they have
(10:02):
been slapped with these sanctions almost three to four times
now and every time they've come out, designed the new
chip which is restriction compliant, and started shipping to China
very soon, really offsetting the loss of revenue. So we
think they will still gain back some of these fifteen
billion dollars in the second half when they start shipping
the new China variant.
Speaker 2 (10:23):
Now, speaking of new chips, we just wrapped up the
videos GtC twenty twenty five conference. What is the latest
on the Blackwell Ultra also the Ruben and the Ruben Ultra.
Speaker 6 (10:35):
Yeah, I mean, look, they've laid out a really impressive
roadmap for almost a three year roadmap for their next
coming chips, which you just highlighted more recent than the
Black GtC was the computext conference, which is actually happening
or have started this week in Asia, where they made
(10:56):
even newer announcements about new prout line. One of the
key ones I want to highlight is that they're opening
up their Envy Link scale up connectivity system to the
rest of the semi connector world, which is which is
a big thing. And just to give some context, one
of the biggest concerns or risk or pushback from Nvidia's
(11:17):
customers is that it's a proprietary closed system where you
have to use Nvidia GPUs and connect them with the
Nvidia's proprietary and we link to connect all of these
GPUs together into a cluster. What they have done now
is basically opened that for the world where you know,
you can use someone else's CPU to work with Nvidia GPUs.
You can use your own A six and still get
(11:39):
this technology the switching gear from Nvidia, use their technology
to customize your rack.
Speaker 7 (11:45):
What this does is a couple of things.
Speaker 6 (11:47):
One removes these risks and concerned about proprietary ship and
vendor lock in. Two, it opens up a brand new
HAAM for in media where they are still part of
the ecosystem. Even if the Voska scenario, which is a
six taking OVERGPU, comes through, they still get some wallet
share out of the hyperscalers and the other customers, and
(12:07):
they're not completely removed from the stack.
Speaker 2 (12:10):
In Nvidia earnings out this Wednesday, just after Wall Street's
closing bell our thanks to Kunjan Sabani, Bloomberg Intelligence Senior
Semiconductor analyst, and coming up on Bloomberg day Break weekend,
we'll look ahead to Poland's presidential runoff election. I'm Tom Busby,
and this is Bloomberg. This is Bloomberg day Break weekend,
(12:39):
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 and look ahead to South
Korea's Central Bank meeting. But first, a presidential election in
Poland will determine whether that country can restore political stability
and remain a reliable partner in the European Union. That's
after nearly a decade of device right wing populism. For more,
(13:02):
let's get to London and bring in Bloomberg day Break
euro banker Caroline Hepger.
Speaker 3 (13:06):
Tom the Nationalist Law and Justice Party governed Poland for
eight years under Prime Minister Donald Tusk, and his Pro
EU coalition unexpectedly swept into power towards the end of
twenty twenty three. Now, Tusk is hoping that centrist ally
and Warsaw Mayor Rafael Tchaskovsky from his Civic Coalition will
win the presidential poll and help to secure his policy agenda.
(13:31):
Tchaskovsky edged out Law and Justice rival Carol Navroki in
the first round vote, with the two men now set
to take part in a runoff vote on the first
of June. It's a ballot that will be keenly watched
across the EU as more of the bloc's members see
growing populist support. In a moment, we'll discuss what is
(13:51):
at stake for the Polish presidential election, but first listen
to this snippet of Europe's top diplomat Kaya Kallas puts
the issue for Europe clearly. Given the conflicts in the
Middle East.
Speaker 8 (14:04):
The situation in Gaza is catastrophic. The aid that Israel
has allowed in is of course welcomed, but it's the
drop in the ocean. Aid must flow immediately without obstruction
and at scale, because this is what is needed. I've
(14:25):
made these points also with my talks with Israelis also
I've had talks with UN and the regional leaders as well.
Pressure is necessary to change the situation. It is clear
from today's discussion that there is a strong majority in
favor of review of Article two of our association agreement
(14:47):
with Israel. So we will launch this exercise and in
the meantime it is up to Israel to unblock the
humanitarian aid. Saving lives must be our top priority.
Speaker 3 (15:00):
So that was the EU's top diplomat, Kayakala, speaking to
the press after the recent EU Foreign Affairs Council meeting.
So which direction will Poland head in next and how
will its choice affect its neighbors and the EU as
an institution joining me to discuss is Bloomberg's Brussels deputy
bureau chief Eva Klukowska and our Poland based reporter Voutech Moskva.
(15:26):
Welcome to both of you, and thank you for being
with me. Voutech, Can I start with you? Firstly? You
get the sense that this is a crossroad moment for Poland.
Can you talk us through what's at stake?
Speaker 9 (15:38):
This is a big test for liberal Europe. And for
liberal Poland at steak two different versions of what Poland
can be and should be within Europe. One vision of
the Prime Minister took and his candidate is for increased cooperation,
especially on defense. The other vision is or a halt
(16:00):
to further integration and for Poland's security to lie solely
in the hands of NATO and the US.
Speaker 3 (16:08):
The first round in the election was actually incredibly close,
So what do you think we're expecting this time round.
Speaker 9 (16:15):
It's going to be quite difficult for the Warsaw mayor
Ravol Saskowsky too to pull this out, it seems because
the way that the vote has split up. In the
first round, the far right candidates got more than twenty
percent of the vote, and these are candidates which are
generally against the EU.
Speaker 7 (16:35):
They are more likely to back.
Speaker 9 (16:37):
The conservative candidate Karol Navrotsky in the second round. On
the other hand, the Warsiw mayor is looking to gather
more moderate and left of center voters.
Speaker 3 (16:48):
Ever, so that's the picture within the country and the voting.
But what is Poland's position actually in the EU currently?
Because Prime Minister Donald Tusk, He's had obviously an illustrious
history and career with the in the EU. He's now
leading Poland, but you know, we don't know who's going
to be partnered with in terms of the president. Has
that contributed Do you think Tusk's history within the EU
(17:12):
to the country's influence within Europe.
Speaker 10 (17:15):
Let's step back for a moment. Posk was at the
helm of the European Council for five years between twenty
fourteen and nineteen, and that is one of the most
important roles in the EU. It involves turing meetings of
national leaders and basically setting the political tone for the
block's agenda. So Posk understands very well the inner workings
(17:36):
of Brussels, the political nuances and the balance of power.
Worth noting that he belongs to the European People's Party,
the biggest political group in the EU. That's also the
political family of the European Commissioned President or soula vonderlyon
German Chancellor Friedrich Mertz, as well as the leaders of Sweden, Greece,
(17:58):
Finland and Austria, to name just a few. Poland is
among the biggest countries in the EU, which matters a
lot in the EU voting system. In an actual the
bigger the population, the more weight a nation has in
votes on EU laws, and the more it matters for
other countries when it comes to building political alliances. If
(18:21):
you combine all those factors, Poland with Tusk at the
helm of the government, is definitely.
Speaker 3 (18:26):
Influential, okay, influential. And so, how what do you think
of the standing of Tusk's chosen candidate, Tzaskovsky versus his
rival Karl Navrotki? Does he have allies? How they positioned
those two people?
Speaker 10 (18:43):
First of all, Shaskovsky already has some experience in the government.
He was a minister in the previous government of Donald Tusk.
Navrotsky is a relatively new candidate. Nobody really knows him.
His party belongs to the Group of European Conservatives and
Reformist which is the fourth biggest political family in the
(19:04):
European Parliament. It's also the group where Italian Prime Minister
Jeorgia Meloney belongs to. But make no mistake, even if
very few people know Navrotsky, now if he wins the elections,
he will become the president of one of the biggest
EU nations.
Speaker 3 (19:22):
Wow, so voytek In terms of then the campaigning and
the battleground, I imagine Poland's relationship with the EU has
come up a lot. What is the view within Poland?
Speaker 9 (19:34):
Yes, EO has been a big campaign topic. Has security.
Poland is bordering Ukraine, and the Ukraine conflict has already
kind of spread into Poland. Poland is home to more
than a million Ukrainian refugees. The main topic is whether
the European Union can provide a sort of security that's
(19:55):
needed at a time that US President Donald Trump said
he wants Europe to take the greater care for itself
instead of the US providing such guarantees. The other key
issue is whether Poland will be able to undo some
of the justice reforms that the previous populist government did
that have been blocked for the last two years. If
(20:17):
the government will not have this president as an ally,
that's not likely, so there may be Nebrotsky victory is
likely to lead to more tensions between Poland and the EU.
Speaker 3 (20:28):
In terms of the other campaigning issues, Voytek, can you
talk us through what the economic propositions on both sides are,
What the other topics are that have emerged in terms
of the campaigning.
Speaker 9 (20:41):
Poland has one of the fastest growing economies in Europe.
It's going around three percent a year. But interestingly, we
haven't really seen that much of a feel good factor
coming with the fast economic growth because inflation remains stubbornly
high around the five percent. And a lot of the
(21:02):
talk during this campaign has been about lowering costs for
the self employed, payroll costs, deregulation, increasing tax cuts. So
these are some of the themes that economically Poland is
looking and I think both of the candidates are generally
aligned behind lower taxes. It's a question of how they
(21:25):
plan to get there.
Speaker 3 (21:27):
So that's the domestic issue then perhaps or some of
the domestic issues. Ever, what's at stake for Brussels in
terms of this election? I mean, could the eventual winner
end up wielding, you know, significant power. How do you
think Brussels is thinking about this election? I mean I
mentioned the fact that populism is there within Europe but
(21:50):
has been rising. This will surely be another test of that.
Speaker 10 (21:54):
Let's try to put it a bit in a sort
of broader context. Whoever wins the elections in Poland will
have only a limited say on European politics. That's because
the role of the president under the Polish law is
largely symbolic, but as Voytek said, he has essay, he
(22:15):
has the power of a veto. So when it comes
to domestic legislation, some of the domestic legislation will be
based on what the Euty sites I decisions. Brussel's decision
will have to be translated into national laws, and if
we have a Eurosceptic candidate, he may of course block it.
There could be also implications for wider European security, given
(22:38):
that the president in Poland has essay on defense. Poland
emerged as a key supply route for Western arms and
aid to Ukraine after the Russian invasion, and Tusk approach
has been to six stronger ties with key European allies
and also try to stay on Trump's site by American
arms and nuclear power technology. Do that the current president
(23:02):
enjoyed a war relationship with Trump. So if Navrovsky wins,
or if just Conscu wins, their challenge will be to
maintain those times.
Speaker 3 (23:13):
Okay, So thinking about the US and President Trump, are
there any concerns about free and fair voting in the
upcoming election? I mean, you mentioned at the start democratic
standards and the concerns that the EU has had in
recent years with those standards in Poland. What about the
(23:34):
election in and of itself, No.
Speaker 9 (23:36):
There really hasn't been any There were a lot of
concerns about the elections when five years ago when Poland
held them during the COVID pandemic, But this time around
there is an independent election commission which is running and
counting the votes, so that is not concern at this time.
Speaker 3 (23:56):
Buytak just lastly thinking about you know what hey come
in the future and what's at risk perhaps in this election,
how are you thinking about it?
Speaker 9 (24:06):
If the government does not get its ally into the
presidential palace, it raises a question of whether the pro
European alliance that Donald Tusk currently controls will be able
to hold on to power in the next parliamentary elections
in twenty twenty seven. So the key thing for European
(24:26):
watchers is if Poland's pro eu tilt is to continue,
he needs his own person in the presidential palace, and
if he doesn't get that, that is there's a big
question mark over Poland beyond twenty twenty seven.
Speaker 3 (24:41):
My thanks to Bloomberg's Brussels deputy bureau chief Eva Krukowska
and to our Poland based reporter Voytek Moskva for joining
me and we will have full coverage of the results
of that Polish vote. I'm Karlin Hepkea here in London.
You can catch us every weekday morning for Bloomberg Daybreak
Europe beginning six am in London. That's one am on
(25:02):
Wall Street.
Speaker 2 (25:03):
Tom, thank you, Caroline. And coming up on Bloomberg day
Break weekend, we'll look ahead to South Korea's Central Bank
meeting and what it means from monetary policy moving forward.
I'm Tom Busby, and this is Bloomberg. This is Bloomberg
(25:27):
day Break Weekend, our global look ahead at the top
stories for investors in the coming week. I'm Tom Busby
in New York. South Korea Central Bank meets this week
amid growing economic strain. New US tariffs are rattling exporters
and the data is already showing some cracks. Can monetary
policy offer some support well? For a closer look, let's
get to the host of the Daybreak Asia podcast, Doug Krisner.
Speaker 7 (25:50):
Tom.
Speaker 4 (25:50):
The latest trade data for South Korea shows a sharp
drop in shipments to the US via collect sports were
down for a second straight month now. On the other hand,
there was the jump in sales of semiconductors. Still, the
broader outlook does remain a little shaky, and to help
unpack what it all means for the Bank of Korea,
I'm joined now by Hyosung Kuan, he covers career for
(26:12):
Bloomberg Economics from our bureau in Seoul. Thank you so
much for making time to chat with me, Heosong. Before
we get to what the BOK may do at its
next meeting, can you help me understand the current macro
situation in South Korea, especially given the fact that these
US tariffs are in place right now.
Speaker 11 (26:32):
First of all, thanks for having me, Douk sous Kristi.
Economy is under great strain now. Growth momentum has weakened
significantly due to political instabilities spoked by former President Unisoguil's
controversial martial attempt, which he wrote it. Consumer and business
confidence delaying consumption investment, and the vacuum of leadership made
(26:57):
it difficult for the government to respond to economic challenges.
On top of this, the batterge of Trump tartiffs hit
the economy. The South Korea's economy is highly dependent on exports,
and the US economy is one of the largest destinations
of South Korean exports. So higher tatiffs on Trump's administration
(27:21):
on South Korea's key exports such as automobile and automotive
pots and also steal and potential the imposition of tariffs
on semiconductors, but way on South Korea's exports and South
Korea's growth.
Speaker 4 (27:39):
I'm curious, Jo Sung, how has the Korean one, the
currency been holding up during this period of stress.
Speaker 11 (27:45):
As you put it, Korean one was under severe download
pressure since actually September last year, when there was a
in the US the possibility of Trump is growing. Then
(28:05):
South Korea's one started to get down with the pressure,
and then after that the depreciation pressure spiked after the
Units of Yo declared the martial law last December. But
recently Korean one is gaining slightly as there's a global
(28:29):
sentiment that US dollar is weakening, possibly due to the
you know, the ongoing current stokes with the US and
its trading partners.
Speaker 4 (28:41):
During that period of weakness, and the currency did inflation
pick up in a meaningful way to the extent that
the Bank of Korea may have become a little concerned.
Speaker 11 (28:51):
Inflation was a relatively stable Actually, as you mentioned that
the weaker Korean one would have a inflation the pressure
through higher import costs. Right, But as I mentioned before
that South Korea's domestic demand is very weak. You know
that big domestic demand pressure probably mitigated the increase in
(29:18):
the inflation pressure by import costs. But still I think
inflation is slightly higher than well compared to its economic conditions,
I mean big domestic demand.
Speaker 4 (29:33):
So given weak domestic demand, does that necessarily mean that
household debt hasn't been growing as quickly that consumers have
become a lot more conservative.
Speaker 11 (29:42):
So even if the domestic amount was weak, the household
that was increasing recently because that was driven by the
expectation that housing prices in the sole metropolitan area, especially
in Kangnam area, could rise. So it was driven by
(30:04):
the speculation of housing price increases even with the wik
domestic demand.
Speaker 4 (30:10):
That's very interesting because I recall in the past the
Bank of Korea has been very concerned about the extent
to which the property market in South Korea has been
very robust, almost too hot for comfort. Is that still
the case outside of.
Speaker 11 (30:26):
Soul, Outside sold the demand for housing is weakening or weak,
But demand for housing in Seoul is still very strong.
So it is a kind of two spit economy that's
all metroportsan area and other areas.
Speaker 4 (30:44):
I think a lot when I think of South Korea
about the trade relationship with China, not just the US,
so the China side of the trade story. How has
that been impacting South Korean exports to China.
Speaker 11 (30:56):
Well, recently we saw from data that expert to China
is also declining. Possibly. First of all, China's economy is
also slowing down. And secondly, the export to China was
mainly due to the export to the US after assembling
(31:18):
intermediate parts in China, right, So that means that US
China's trade tention would also affect South Korea's export to
China indirect way. And thirdly, the competitiveness of China is
also increased, meaning that China's demand for South Korea as
the intermediate pot probably declined.
Speaker 4 (31:41):
When I recall that South Korea is very much allied
with the United States, and they were one of the
first countries I think, along with Japan, to come to
the negotiating table shortly after the tariffs were imposed by
the Trump administration. It was a hopeful sign I think
for many economists that cover South Korea that there would
be some type of resolution in the short term. Is
(32:03):
that still very much the expectations that will see some
type of trade agreement between Washington and Seoul soon?
Speaker 11 (32:11):
I think that's that's unlikely because even as you mentioned
that the delegations of South Korea went to Washington to
have trade talks earlier than other trading partners of the US.
Actually the delegates at that time, the finest minister Chessamo,
said that their objective was to pay ways for you know,
(32:37):
that trade deal or trade negotiations with the US after
the new administration established after their presidence election on June three,
which means that they you know, try to have a
trade talks with the US, but they actually didn't want
(32:57):
to rush into any trade. So that's still the case.
So I think it is very unlikely we South Korea
will have a trade to deal with the US in
the near time.
Speaker 4 (33:11):
Yosung, we've touched on some of the macroeconomic elements which
helps us kind of set the stage for this decision
that the Bank of Korea confronts. What do you believe
policymakers will do at their next meeting.
Speaker 11 (33:23):
The Bank of Korea will cut interest rate twenty five
basis point in May, resuming a very contious easing cycle. So,
as I told you before, the growth momentum has weakened significantly,
but inflation remained relatively stable around Bank of Korea's two
(33:47):
percent target, So the Bank of Korea will move to
boost economy.
Speaker 4 (33:55):
Yo Song, thank you so much for helping us unpack
what we may get from the Bank of Korea in
the coming week. Hyosung Kwang covers Korea for Bloomberg Economics
in Seoul and for a broader look at the economic
landscape in Asia. I spoke earlier with Joe Little. He
is the global chief strategist at HSBC Asset Management. He
joined me from our studios in Hong Kong. Can you
(34:18):
take me inside the HSBC Asset Management morning meeting? How
much consensus is there right now? I know there are
so many different points of view. It's a very mercurial
world that we're living in right now. Is there much
in the way of consensus in your shop?
Speaker 7 (34:34):
Yeah?
Speaker 12 (34:34):
I mean that's a great question, and you're quite right,
because we're living in unusual times, ultra high policy uncertainty,
many different dimensions to the investment market equation at this
point in time. So we tend to run an approach
to think about investment markets based around scenarios, and normally
(34:55):
we like to have three scenarios in mind. Juggling most
scenarios and that becomes quite quite quite difficult mental mental exercise,
and it means then you've got less time to really
kind of develop and think about what the data flow
and investment market action might look like under different scenarios.
The central theme that we've had is what I call
(35:16):
spinning around. So lots of policy uncertainty, high volatility in markets,
a big challenge to US exceptionalism, rotation into other global
stock markets, policy support in Europe and China, and a
situation then where the rest of the world equities e
the equities can outperform the US, but clearly with the tariffs,
(35:36):
with the Dodge fiscal agenda to a degree, as well
some of the themes around immigration policy in the US.
There's a there's a left hand scenario which we've been
also highly attuned to, particularly colleagues in the in the
fixed income area, highly attuned to this idea of you know,
big challenges around the growth inflation mix. Recession worries elevated still,
(36:03):
and that has a slightly different set of prognoses in
terms of how investment markets then behave. And on the
right hand side, you know, investors in our equity area,
more growth focused investors still want to think about technology
and the importance of AI, which increasingly is the most positive,
(36:23):
most bullish scenario in the chessboard. And again that would
have a slightly different set of consequences for markets as
we think through the scenarios. So we like to think
in terms of that framework, and most of our discussions
are focused on a central scenario of spinning around lots
of volatility, but a way forward for markets over the
(36:45):
course of the next twelve to eighty months, or a
more adverse negative scenario. Worries about recession risk being a
big feature of a lot of our conversations, and of
course a track in the data very closely to monitor
that risk.
Speaker 4 (36:57):
Is there some counter intuitive into tuition that you have
right now that you would be willing to share something
that you believe the market may be overlooking, that you
think will develop in a way that represents opportunity.
Speaker 12 (37:11):
So there are some very interesting positive fixed income stories,
and there's a lot to focus on in the Asia
region as well, India, fixed income, China stock markets. I
think a lot of these themes tend to be a
little bit overlooked by global investors because the story around
US markets, US exceptionalism, which has been that dominant meme
over the last decade, has sucked all of the interest
(37:33):
and oxygen out of these other themes. As that breaks,
as the fault lines appear in US exceptionalism, then it
gives oxygen to some of these other stories. So big
opportunity for rotation, a big opportunity to look at themes
in Europe and Asia over the next twelve to eighteen months.
But extending a time horizon rather than just focusing on
the very near term is probably the best advice at
(37:56):
this juncture.
Speaker 4 (37:57):
That is Joe Little, chief Global Strategist at HPC Asset Management,
and I'm Doug Chrisner. You can catch us weekdays for
the Daybreak Asia podcast. It's available wherever you get your
podcast Tom.
Speaker 2 (38:10):
Thanks Doug, and that does it for this edition of
Bloomberg day Break Weekend. Join us again Monday morning at
five am Wall Street Time for the latest on markets overseas.
And the news you need to start your day. I'm
Tom Busby.
Speaker 7 (38:21):
Stay with US.
Speaker 2 (38:22):
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,
we'll look ahead to some key economic data here in
the US and how that may impact FED policy. I'm
Tom Busby in New York.
Speaker 3 (00:24):
I'm Krolyn Hepke in London, where we're looking ahead to
Poland's presidential election and a populist challenger.
Speaker 4 (00:31):
I'm deg Christner with a preview of next week's rate
decision from the Bank of Korea.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven to three, Yeero, 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 you. I'm Tom Busby. We begin today's
program with some key economic data in the US, A
second read on US GDP for the first quarter that
comes out on Thursday, and the next day, a read
on inflation with a personal consumption Expenditures Price index the
PCE for April. Now for more on what to expect
and how it could impact FED policy, we're joined by
(01:24):
Stuart paul Us, economist with Bloomberg Economics. Stuart, thank you
for being here. Let's start with what you're expecting to
see in the second read. The second read on gross
domestic product for the first three months of this year,
because the first one was quite a shock, wasn't it.
Speaker 5 (01:39):
That's right. In the first quarter we saw GDP growth
decline at an annualized pace of zero point three percent.
That was a modest downside surprise. Now, a lot of
attention has been given to this decline in economic activity
in the first quarter, and a lot of spokespeople for
the administration are coming out and saying that we should
anticipate an upward revision to the GDP data. Personally, I
(02:01):
think that it's a bit optimistic, and I think that
maybe on a good day, an upward revision of let's say,
inventories within the GDP tabulation could be enough to lift
the estimate of first quarter growth, but just to about
zero percent, so still not a very good reading. A
lot of folks are really focused on this calculation, this
(02:22):
accounting for GDP, and they're basically saying, look, trade weighed
on first quarter growth because there was a surge in imports.
But those imports are either being held as inventories or
they were consumed, or they were used in fixed investment
or machinery or computers, et cetera. And so the drag
(02:43):
or the subtraction that we get from the trade component
should just be offsetting what's added by the domestic components.
But I think that when the administration officials and when
economic commentators focus on that accounting, they're missing the forest
for the trees. There was more growth in demand for
and utilization of stuff from abroad than there was in
(03:07):
stuff produced and used and created domestically, and I think
that that's really what's most important. And even if we
do see this upward revision as a consequence of better
estimates of inventory growth, for example, that just means that
inventories are likely to subtract from growth in the quarters ahead.
(03:28):
So undoubtedly the trade tensions and the higher trade barriers,
higher economic policy uncertainty is weighing on domestic activity.
Speaker 2 (03:40):
And as you said, this revision at best could just
be flat.
Speaker 5 (03:44):
I think so. I think that it's going to be
a pretty soft reading for first quarter growth. And looking ahead,
we see weakening PMIS, we see elevated economic policy uncertainty.
There is this sort of relief wave, especially showing up
in financial markets of the temporarily lowered trade barriers, but
(04:07):
everything is just on a ninety day delay, and that's
going to weigh on fixed investment plans and hiring plans.
Speaker 2 (04:15):
And there's also inflation we have to talk about, because
on Friday is April's PCE, the Fed's preferred measure of
consumer inflation. Earlier this month, the April Consumer Price Index
rose just slightly, but it still rose point two percent.
That was from March, a third month in a row.
So what are you expecting to see in the pc
will Will it be anything different?
Speaker 5 (04:35):
This is going to be one of those readings where
you really need to look under the hood and dissect
what's going on. As you said, the CPI reading was
about a touch over zero point two percent. The PCE reading,
especially the core PCE reading, which matters most for the
Federal Reserve, is likely to show just one zero point
one percent growth in prices. So the fed's preferred price
(04:58):
measure is just going to show zero point one percent
price growth during the month, and that might allow people
to breathe a sigh of relief, But what's really going
on in that core PCE price index is that core
goods prices are rising because there is some pass through
from tariffs, but services prices, especially excluding housing, retreated during
(05:19):
the month. So we estimate that core PCE services excluding
housing declined about zero point one percent during the month,
offsetting the effect of higher goods prices. And one of
the reasons why services prices fell is because the cost
of financial services in portfolio management services declined in the
(05:41):
past couple months, and that was due in large part
to the stock market retreat when trade barriers were going up. Now,
the rebound that we've seen more recently, especially in late
April and early May, is just going to mean that
those services prices are going to start catching up in
the months ahead, likely two to three months ahead, as
we get deeper into the spring, at a time when
(06:04):
firms are also starting to pass through higher costs of
tariffs and higher input costs. And so even if we
see a week reading for the headline and for the
core in the aggregate. When it comes to these inflation measures,
I think the details under the hood are going to
be foreshadowing a further deterioration of the economic landscape and
(06:25):
higher prices, especially in the month's ed well.
Speaker 2 (06:28):
A second read on first quarter GDP out this Thursday.
PCE for April out on Friday our thanks to Stuart
paul Us economists with Bloomberg Economics, we turned out to
earnings and this week we get first quarter results from
the last of Big Text, Magnificent seven, AI chip maker,
and Nvidia. The three and a quarter trillion dollars semiconductor
giant has been facing some of the same challenges a
(06:50):
lot of other firms are, like the impact of President
Trump's tariff wars, brief worries about a pullback an enterprise spending,
and an uncertain economy. It's also had to navigate severe
restrictions on exports to China and other nations. And for
more on that and what to expect from in video
this week, we're joined by Kunjohn Subani, Bloomberg Intelligence Senior
semiconductor analyst. Boy there is a lot to unpack about
(07:14):
what Nvidia has been through the last three months, so
we know that they've talked about a massive charge they're
taken because of those export restrictions. What are you expecting
to see in its results this coming Wednesday?
Speaker 6 (07:27):
Yeah, I mean this has been the most noisiest three
months coming into an earnings call for Nvidia over the
last two three years. But despite everything both negative and positive,
we think still again the results will still be similar
to what we have seen from them, which is a
strong beat and raise. We don't expect any weakness in
the reporting numbers or the guidance at all.
Speaker 2 (07:50):
No change then the trajectory, despite what we've seen the
last three months, the stock losing almost thirty percent of
its value and then coming back. I mean, what do
you attribute that to? Is it the new Blackwell chips
which we know did you know gangbusters in the fourth
quarter of last year.
Speaker 6 (08:08):
Yeah, it's going to be primarily driven by the strength
and Blackwell, and we can unpack a little bit the
negatives and how those are sort of not impacting the
fundamentals right now. So the couple of concerns right this year,
we are starting with the Blackwell. There were some hiccups
in the GB two hundred, which is their first full
rack level Blackwell.
Speaker 7 (08:29):
Chip or solution that they're shipping right now.
Speaker 6 (08:32):
Those concerns from our channel chicks seems to be mostly abated.
The shipments are sort of back on track.
Speaker 7 (08:39):
Everything is flowing in, you know.
Speaker 6 (08:41):
And the second big concern was the China restrictions, as
you pointed out, which for the whole year, the estimate
of that impact is supposed to be fifteen billion dollars. Now,
having said that, we think they have other avenues to
ship Blackwell to other customers as back on time again. Member,
They're also still shipping the Hopper series, the New Age
(09:02):
two hundred to other customers. And this product was supply
continents last year, which is not this year, so they
can ship a lot more of that if they wanted
to to meet the numbers. So they have different leavers
to pull right now to at least get to the
numbers that the street is guiding to.
Speaker 2 (09:20):
And even though they've said there could be a charge
of up to five and a half billion dollars just
from the export restrictions, you still think it's going to
be a clear beat.
Speaker 6 (09:31):
Well that the charge is sort of a known quantity,
So I'm taking into consideration the account that it's a
one time charge not impacting you know, non gap numbers,
which is.
Speaker 7 (09:39):
What most of the investors really focus on.
Speaker 6 (09:41):
So when you look beyond the charge, having already baked
that into the numbers, the new sort of baked in
numbers don't seem to at risk. Also, you know, these
headfins are likely to become tailwinds in the second half.
The company is working has announced that it's working on
a new China variant chip. In the past, they have
(10:02):
been slapped with these sanctions almost three to four times
now and every time they've come out, designed the new
chip which is restriction compliant, and started shipping to China
very soon, really offsetting the loss of revenue. So we
think they will still gain back some of these fifteen
billion dollars in the second half when they start shipping
the new China variant.
Speaker 2 (10:23):
Now, speaking of new chips, we just wrapped up the
videos GtC twenty twenty five conference. What is the latest
on the Blackwell Ultra also the Ruben and the Ruben Ultra.
Speaker 6 (10:35):
Yeah, I mean, look, they've laid out a really impressive
roadmap for almost a three year roadmap for their next
coming chips, which you just highlighted more recent than the
Black GtC was the computext conference, which is actually happening
or have started this week in Asia, where they made
(10:56):
even newer announcements about new prout line. One of the
key ones I want to highlight is that they're opening
up their Envy Link scale up connectivity system to the
rest of the semi connector world, which is which is
a big thing. And just to give some context, one
of the biggest concerns or risk or pushback from Nvidia's
(11:17):
customers is that it's a proprietary closed system where you
have to use Nvidia GPUs and connect them with the
Nvidia's proprietary and we link to connect all of these
GPUs together into a cluster. What they have done now
is basically opened that for the world where you know,
you can use someone else's CPU to work with Nvidia GPUs.
You can use your own A six and still get
(11:39):
this technology the switching gear from Nvidia, use their technology
to customize your rack.
Speaker 7 (11:45):
What this does is a couple of things.
Speaker 6 (11:47):
One removes these risks and concerned about proprietary ship and
vendor lock in. Two, it opens up a brand new
HAAM for in media where they are still part of
the ecosystem. Even if the Voska scenario, which is a
six taking OVERGPU, comes through, they still get some wallet
share out of the hyperscalers and the other customers, and
(12:07):
they're not completely removed from the stack.
Speaker 2 (12:10):
In Nvidia earnings out this Wednesday, just after Wall Street's
closing bell our thanks to Kunjan Sabani, Bloomberg Intelligence Senior
Semiconductor analyst, and coming up on Bloomberg day Break weekend,
we'll look ahead to Poland's presidential runoff election. I'm Tom Busby,
and this is Bloomberg. This is Bloomberg day Break weekend,
(12:39):
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 and look ahead to South
Korea's Central Bank meeting. But first, a presidential election in
Poland will determine whether that country can restore political stability
and remain a reliable partner in the European Union. That's
after nearly a decade of device right wing populism. For more,
(13:02):
let's get to London and bring in Bloomberg day Break
euro banker Caroline Hepger.
Speaker 3 (13:06):
Tom the Nationalist Law and Justice Party governed Poland for
eight years under Prime Minister Donald Tusk, and his Pro
EU coalition unexpectedly swept into power towards the end of
twenty twenty three. Now, Tusk is hoping that centrist ally
and Warsaw Mayor Rafael Tchaskovsky from his Civic Coalition will
win the presidential poll and help to secure his policy agenda.
(13:31):
Tchaskovsky edged out Law and Justice rival Carol Navroki in
the first round vote, with the two men now set
to take part in a runoff vote on the first
of June. It's a ballot that will be keenly watched
across the EU as more of the bloc's members see
growing populist support. In a moment, we'll discuss what is
(13:51):
at stake for the Polish presidential election, but first listen
to this snippet of Europe's top diplomat Kaya Kallas puts
the issue for Europe clearly. Given the conflicts in the
Middle East.
Speaker 8 (14:04):
The situation in Gaza is catastrophic. The aid that Israel
has allowed in is of course welcomed, but it's the
drop in the ocean. Aid must flow immediately without obstruction
and at scale, because this is what is needed. I've
(14:25):
made these points also with my talks with Israelis also
I've had talks with UN and the regional leaders as well.
Pressure is necessary to change the situation. It is clear
from today's discussion that there is a strong majority in
favor of review of Article two of our association agreement
(14:47):
with Israel. So we will launch this exercise and in
the meantime it is up to Israel to unblock the
humanitarian aid. Saving lives must be our top priority.
Speaker 3 (15:00):
So that was the EU's top diplomat, Kayakala, speaking to
the press after the recent EU Foreign Affairs Council meeting.
So which direction will Poland head in next and how
will its choice affect its neighbors and the EU as
an institution joining me to discuss is Bloomberg's Brussels deputy
bureau chief Eva Klukowska and our Poland based reporter Voutech Moskva.
(15:26):
Welcome to both of you, and thank you for being
with me. Voutech, Can I start with you? Firstly? You
get the sense that this is a crossroad moment for Poland.
Can you talk us through what's at stake?
Speaker 9 (15:38):
This is a big test for liberal Europe. And for
liberal Poland at steak two different versions of what Poland
can be and should be within Europe. One vision of
the Prime Minister took and his candidate is for increased cooperation,
especially on defense. The other vision is or a halt
(16:00):
to further integration and for Poland's security to lie solely
in the hands of NATO and the US.
Speaker 3 (16:08):
The first round in the election was actually incredibly close,
So what do you think we're expecting this time round.
Speaker 9 (16:15):
It's going to be quite difficult for the Warsaw mayor
Ravol Saskowsky too to pull this out, it seems because
the way that the vote has split up. In the
first round, the far right candidates got more than twenty
percent of the vote, and these are candidates which are
generally against the EU.
Speaker 7 (16:35):
They are more likely to back.
Speaker 9 (16:37):
The conservative candidate Karol Navrotsky in the second round. On
the other hand, the Warsiw mayor is looking to gather
more moderate and left of center voters.
Speaker 3 (16:48):
Ever, so that's the picture within the country and the voting.
But what is Poland's position actually in the EU currently?
Because Prime Minister Donald Tusk, He's had obviously an illustrious
history and career with the in the EU. He's now
leading Poland, but you know, we don't know who's going
to be partnered with in terms of the president. Has
that contributed Do you think Tusk's history within the EU
(17:12):
to the country's influence within Europe.
Speaker 10 (17:15):
Let's step back for a moment. Posk was at the
helm of the European Council for five years between twenty
fourteen and nineteen, and that is one of the most
important roles in the EU. It involves turing meetings of
national leaders and basically setting the political tone for the
block's agenda. So Posk understands very well the inner workings
(17:36):
of Brussels, the political nuances and the balance of power.
Worth noting that he belongs to the European People's Party,
the biggest political group in the EU. That's also the
political family of the European Commissioned President or soula vonderlyon
German Chancellor Friedrich Mertz, as well as the leaders of Sweden, Greece,
(17:58):
Finland and Austria, to name just a few. Poland is
among the biggest countries in the EU, which matters a
lot in the EU voting system. In an actual the
bigger the population, the more weight a nation has in
votes on EU laws, and the more it matters for
other countries when it comes to building political alliances. If
(18:21):
you combine all those factors, Poland with Tusk at the
helm of the government, is definitely.
Speaker 3 (18:26):
Influential, okay, influential. And so, how what do you think
of the standing of Tusk's chosen candidate, Tzaskovsky versus his
rival Karl Navrotki? Does he have allies? How they positioned
those two people?
Speaker 10 (18:43):
First of all, Shaskovsky already has some experience in the government.
He was a minister in the previous government of Donald Tusk.
Navrotsky is a relatively new candidate. Nobody really knows him.
His party belongs to the Group of European Conservatives and
Reformist which is the fourth biggest political family in the
(19:04):
European Parliament. It's also the group where Italian Prime Minister
Jeorgia Meloney belongs to. But make no mistake, even if
very few people know Navrotsky, now if he wins the elections,
he will become the president of one of the biggest
EU nations.
Speaker 3 (19:22):
Wow, so voytek In terms of then the campaigning and
the battleground, I imagine Poland's relationship with the EU has
come up a lot. What is the view within Poland?
Speaker 9 (19:34):
Yes, EO has been a big campaign topic. Has security.
Poland is bordering Ukraine, and the Ukraine conflict has already
kind of spread into Poland. Poland is home to more
than a million Ukrainian refugees. The main topic is whether
the European Union can provide a sort of security that's
(19:55):
needed at a time that US President Donald Trump said
he wants Europe to take the greater care for itself
instead of the US providing such guarantees. The other key
issue is whether Poland will be able to undo some
of the justice reforms that the previous populist government did
that have been blocked for the last two years. If
(20:17):
the government will not have this president as an ally,
that's not likely, so there may be Nebrotsky victory is
likely to lead to more tensions between Poland and the EU.
Speaker 3 (20:28):
In terms of the other campaigning issues, Voytek, can you
talk us through what the economic propositions on both sides are,
What the other topics are that have emerged in terms
of the campaigning.
Speaker 9 (20:41):
Poland has one of the fastest growing economies in Europe.
It's going around three percent a year. But interestingly, we
haven't really seen that much of a feel good factor
coming with the fast economic growth because inflation remains stubbornly
high around the five percent. And a lot of the
(21:02):
talk during this campaign has been about lowering costs for
the self employed, payroll costs, deregulation, increasing tax cuts. So
these are some of the themes that economically Poland is
looking and I think both of the candidates are generally
aligned behind lower taxes. It's a question of how they
(21:25):
plan to get there.
Speaker 3 (21:27):
So that's the domestic issue then perhaps or some of
the domestic issues. Ever, what's at stake for Brussels in
terms of this election? I mean, could the eventual winner
end up wielding, you know, significant power. How do you
think Brussels is thinking about this election? I mean I
mentioned the fact that populism is there within Europe but
(21:50):
has been rising. This will surely be another test of that.
Speaker 10 (21:54):
Let's try to put it a bit in a sort
of broader context. Whoever wins the elections in Poland will
have only a limited say on European politics. That's because
the role of the president under the Polish law is
largely symbolic, but as Voytek said, he has essay, he
(22:15):
has the power of a veto. So when it comes
to domestic legislation, some of the domestic legislation will be
based on what the Euty sites I decisions. Brussel's decision
will have to be translated into national laws, and if
we have a Eurosceptic candidate, he may of course block it.
There could be also implications for wider European security, given
(22:38):
that the president in Poland has essay on defense. Poland
emerged as a key supply route for Western arms and
aid to Ukraine after the Russian invasion, and Tusk approach
has been to six stronger ties with key European allies
and also try to stay on Trump's site by American
arms and nuclear power technology. Do that the current president
(23:02):
enjoyed a war relationship with Trump. So if Navrovsky wins,
or if just Conscu wins, their challenge will be to
maintain those times.
Speaker 3 (23:13):
Okay, So thinking about the US and President Trump, are
there any concerns about free and fair voting in the
upcoming election? I mean, you mentioned at the start democratic
standards and the concerns that the EU has had in
recent years with those standards in Poland. What about the
(23:34):
election in and of itself, No.
Speaker 9 (23:36):
There really hasn't been any There were a lot of
concerns about the elections when five years ago when Poland
held them during the COVID pandemic, But this time around
there is an independent election commission which is running and
counting the votes, so that is not concern at this time.
Speaker 3 (23:56):
Buytak just lastly thinking about you know what hey come
in the future and what's at risk perhaps in this election,
how are you thinking about it?
Speaker 9 (24:06):
If the government does not get its ally into the
presidential palace, it raises a question of whether the pro
European alliance that Donald Tusk currently controls will be able
to hold on to power in the next parliamentary elections
in twenty twenty seven. So the key thing for European
(24:26):
watchers is if Poland's pro eu tilt is to continue,
he needs his own person in the presidential palace, and
if he doesn't get that, that is there's a big
question mark over Poland beyond twenty twenty seven.
Speaker 3 (24:41):
My thanks to Bloomberg's Brussels deputy bureau chief Eva Krukowska
and to our Poland based reporter Voytek Moskva for joining
me and we will have full coverage of the results
of that Polish vote. I'm Karlin Hepkea here in London.
You can catch us every weekday morning for Bloomberg Daybreak
Europe beginning six am in London. That's one am on
(25:02):
Wall Street.
Speaker 2 (25:03):
Tom, thank you, Caroline. And coming up on Bloomberg day
Break weekend, we'll look ahead to South Korea's Central Bank
meeting and what it means from monetary policy moving forward.
I'm Tom Busby, and this is Bloomberg. This is Bloomberg
(25:27):
day Break Weekend, our global look ahead at the top
stories for investors in the coming week. I'm Tom Busby
in New York. South Korea Central Bank meets this week
amid growing economic strain. New US tariffs are rattling exporters
and the data is already showing some cracks. Can monetary
policy offer some support well? For a closer look, let's
get to the host of the Daybreak Asia podcast, Doug Krisner.
Speaker 7 (25:50):
Tom.
Speaker 4 (25:50):
The latest trade data for South Korea shows a sharp
drop in shipments to the US via collect sports were
down for a second straight month now. On the other hand,
there was the jump in sales of semiconductors. Still, the
broader outlook does remain a little shaky, and to help
unpack what it all means for the Bank of Korea,
I'm joined now by Hyosung Kuan, he covers career for
(26:12):
Bloomberg Economics from our bureau in Seoul. Thank you so
much for making time to chat with me, Heosong. Before
we get to what the BOK may do at its
next meeting, can you help me understand the current macro
situation in South Korea, especially given the fact that these
US tariffs are in place right now.
Speaker 11 (26:32):
First of all, thanks for having me, Douk sous Kristi.
Economy is under great strain now. Growth momentum has weakened
significantly due to political instabilities spoked by former President Unisoguil's
controversial martial attempt, which he wrote it. Consumer and business
confidence delaying consumption investment, and the vacuum of leadership made
(26:57):
it difficult for the government to respond to economic challenges.
On top of this, the batterge of Trump tartiffs hit
the economy. The South Korea's economy is highly dependent on exports,
and the US economy is one of the largest destinations
of South Korean exports. So higher tatiffs on Trump's administration
(27:21):
on South Korea's key exports such as automobile and automotive
pots and also steal and potential the imposition of tariffs
on semiconductors, but way on South Korea's exports and South
Korea's growth.
Speaker 4 (27:39):
I'm curious, Jo Sung, how has the Korean one, the
currency been holding up during this period of stress.
Speaker 11 (27:45):
As you put it, Korean one was under severe download
pressure since actually September last year, when there was a
in the US the possibility of Trump is growing. Then
(28:05):
South Korea's one started to get down with the pressure,
and then after that the depreciation pressure spiked after the
Units of Yo declared the martial law last December. But
recently Korean one is gaining slightly as there's a global
(28:29):
sentiment that US dollar is weakening, possibly due to the
you know, the ongoing current stokes with the US and
its trading partners.
Speaker 4 (28:41):
During that period of weakness, and the currency did inflation
pick up in a meaningful way to the extent that
the Bank of Korea may have become a little concerned.
Speaker 11 (28:51):
Inflation was a relatively stable Actually, as you mentioned that
the weaker Korean one would have a inflation the pressure
through higher import costs. Right, But as I mentioned before
that South Korea's domestic demand is very weak. You know
that big domestic demand pressure probably mitigated the increase in
(29:18):
the inflation pressure by import costs. But still I think
inflation is slightly higher than well compared to its economic conditions,
I mean big domestic demand.
Speaker 4 (29:33):
So given weak domestic demand, does that necessarily mean that
household debt hasn't been growing as quickly that consumers have
become a lot more conservative.
Speaker 11 (29:42):
So even if the domestic amount was weak, the household
that was increasing recently because that was driven by the
expectation that housing prices in the sole metropolitan area, especially
in Kangnam area, could rise. So it was driven by
(30:04):
the speculation of housing price increases even with the wik
domestic demand.
Speaker 4 (30:10):
That's very interesting because I recall in the past the
Bank of Korea has been very concerned about the extent
to which the property market in South Korea has been
very robust, almost too hot for comfort. Is that still
the case outside of.
Speaker 11 (30:26):
Soul, Outside sold the demand for housing is weakening or weak,
But demand for housing in Seoul is still very strong.
So it is a kind of two spit economy that's
all metroportsan area and other areas.
Speaker 4 (30:44):
I think a lot when I think of South Korea
about the trade relationship with China, not just the US,
so the China side of the trade story. How has
that been impacting South Korean exports to China.
Speaker 11 (30:56):
Well, recently we saw from data that expert to China
is also declining. Possibly. First of all, China's economy is
also slowing down. And secondly, the export to China was
mainly due to the export to the US after assembling
(31:18):
intermediate parts in China, right, So that means that US
China's trade tention would also affect South Korea's export to
China indirect way. And thirdly, the competitiveness of China is
also increased, meaning that China's demand for South Korea as
the intermediate pot probably declined.
Speaker 4 (31:41):
When I recall that South Korea is very much allied
with the United States, and they were one of the
first countries I think, along with Japan, to come to
the negotiating table shortly after the tariffs were imposed by
the Trump administration. It was a hopeful sign I think
for many economists that cover South Korea that there would
be some type of resolution in the short term. Is
(32:03):
that still very much the expectations that will see some
type of trade agreement between Washington and Seoul soon?
Speaker 11 (32:11):
I think that's that's unlikely because even as you mentioned
that the delegations of South Korea went to Washington to
have trade talks earlier than other trading partners of the US.
Actually the delegates at that time, the finest minister Chessamo,
said that their objective was to pay ways for you know,
(32:37):
that trade deal or trade negotiations with the US after
the new administration established after their presidence election on June three,
which means that they you know, try to have a
trade talks with the US, but they actually didn't want
(32:57):
to rush into any trade. So that's still the case.
So I think it is very unlikely we South Korea
will have a trade to deal with the US in
the near time.
Speaker 4 (33:11):
Yosung, we've touched on some of the macroeconomic elements which
helps us kind of set the stage for this decision
that the Bank of Korea confronts. What do you believe
policymakers will do at their next meeting.
Speaker 11 (33:23):
The Bank of Korea will cut interest rate twenty five
basis point in May, resuming a very contious easing cycle. So,
as I told you before, the growth momentum has weakened significantly,
but inflation remained relatively stable around Bank of Korea's two
(33:47):
percent target, So the Bank of Korea will move to
boost economy.
Speaker 4 (33:55):
Yo Song, thank you so much for helping us unpack
what we may get from the Bank of Korea in
the coming week. Hyosung Kwang covers Korea for Bloomberg Economics
in Seoul and for a broader look at the economic
landscape in Asia. I spoke earlier with Joe Little. He
is the global chief strategist at HSBC Asset Management. He
joined me from our studios in Hong Kong. Can you
(34:18):
take me inside the HSBC Asset Management morning meeting? How
much consensus is there right now? I know there are
so many different points of view. It's a very mercurial
world that we're living in right now. Is there much
in the way of consensus in your shop?
Speaker 7 (34:34):
Yeah?
Speaker 12 (34:34):
I mean that's a great question, and you're quite right,
because we're living in unusual times, ultra high policy uncertainty,
many different dimensions to the investment market equation at this
point in time. So we tend to run an approach
to think about investment markets based around scenarios, and normally
(34:55):
we like to have three scenarios in mind. Juggling most
scenarios and that becomes quite quite quite difficult mental mental exercise,
and it means then you've got less time to really
kind of develop and think about what the data flow
and investment market action might look like under different scenarios.
The central theme that we've had is what I call
(35:16):
spinning around. So lots of policy uncertainty, high volatility in markets,
a big challenge to US exceptionalism, rotation into other global
stock markets, policy support in Europe and China, and a
situation then where the rest of the world equities e
the equities can outperform the US, but clearly with the tariffs,
(35:36):
with the Dodge fiscal agenda to a degree, as well
some of the themes around immigration policy in the US.
There's a there's a left hand scenario which we've been
also highly attuned to, particularly colleagues in the in the
fixed income area, highly attuned to this idea of you know,
big challenges around the growth inflation mix. Recession worries elevated still,
(36:03):
and that has a slightly different set of prognoses in
terms of how investment markets then behave. And on the
right hand side, you know, investors in our equity area,
more growth focused investors still want to think about technology
and the importance of AI, which increasingly is the most positive,
(36:23):
most bullish scenario in the chessboard. And again that would
have a slightly different set of consequences for markets as
we think through the scenarios. So we like to think
in terms of that framework, and most of our discussions
are focused on a central scenario of spinning around lots
of volatility, but a way forward for markets over the
(36:45):
course of the next twelve to eighty months, or a
more adverse negative scenario. Worries about recession risk being a
big feature of a lot of our conversations, and of
course a track in the data very closely to monitor
that risk.
Speaker 4 (36:57):
Is there some counter intuitive into tuition that you have
right now that you would be willing to share something
that you believe the market may be overlooking, that you
think will develop in a way that represents opportunity.
Speaker 12 (37:11):
So there are some very interesting positive fixed income stories,
and there's a lot to focus on in the Asia
region as well, India, fixed income, China stock markets. I
think a lot of these themes tend to be a
little bit overlooked by global investors because the story around
US markets, US exceptionalism, which has been that dominant meme
over the last decade, has sucked all of the interest
(37:33):
and oxygen out of these other themes. As that breaks,
as the fault lines appear in US exceptionalism, then it
gives oxygen to some of these other stories. So big
opportunity for rotation, a big opportunity to look at themes
in Europe and Asia over the next twelve to eighteen months.
But extending a time horizon rather than just focusing on
the very near term is probably the best advice at
(37:56):
this juncture.
Speaker 4 (37:57):
That is Joe Little, chief Global Strategist at HPC Asset Management,
and I'm Doug Chrisner. You can catch us weekdays for
the Daybreak Asia podcast. It's available wherever you get your
podcast Tom.
Speaker 2 (38:10):
Thanks Doug, and that does it for this edition of
Bloomberg day Break Weekend. Join us again Monday morning at
five am Wall Street Time for the latest on markets overseas.
And the news you need to start your day. I'm
Tom Busby.
Speaker 7 (38:21):
Stay with US.
Speaker 2 (38:22):
Top stories and global business headlines are coming up right now.
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