October 31, 2025 • 38 mins
Bloomberg Daybreak Weekend with Host Nathan Hager take a look at some of the stories we'll be tracking in the coming week
- In the US – a look at how earnings are impacting global markets
- In the UK – we preview the Bank of England rate decision
- In Asia – looking ahead to the RBA Decision and Chinese economic data
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Episode Transcript
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Speaker 1 (00:02):
This is Bloomberg Daybreak Weekend, our global look ahead at
the top stories in the coming week from our Daybreak
anchors all around the world. Straight Ahead on the program.
As earning season continues, we take a look at the
impact on markets plus big tech earnings in focus. I'm
Nathan Hager in Washington.
Speaker 2 (00:18):
I'm Stephen Carlin London. We're looking ahead to the challenges
facing the Bank of England. That's next interest right decision.
Speaker 3 (00:24):
I'm Deck Chrisner looking at a challenging decision on rates
for the Reserve Bank of Australia.
Speaker 4 (00:30):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg eleventh,
three year on 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. I'm
Bloomberg Radio dot Com and the Bloomberg Business App.
Speaker 1 (00:54):
Good day to you. I'm Nathan Hager. We begin today's
program with a focus on the market. Or more than
halfway through third quarter earning season and with stock still
finding ways to set records, what's the outlook for the
week ahead and for the final two months of this year.
For that, we're joined by Amanda Agatti, chief investment officer
at PNC's asset management group. Amanda, it's great to have
(01:17):
you with us on this weekend show, and I know
you've been pretty positive on the earnings picture thus far.
How do things look to you now that we're at
the point that we sit at now, Well, it's.
Speaker 5 (01:28):
Always great to be with you. Thanks so much for
having me. We're feeling really positive about this stage of
Q three earning season. It was actually a pretty positive
setup even before earning season started, very strong, sort of
consistently positive revisions over the course of Q three, So
(01:48):
we set a pretty high bar coming into earning season itself,
and believe it or not, at this stage of earnings reporting,
we are handily exceeding it. So by my math, we're
expecting about seven point two percent earnings growth for the
S and P five hundred before earning season started, and
we're tracking well in excess of nine percent, So i'll
(02:10):
give it an a grade so far. There's still some
distance to go yet, but that's a pretty strong result
and I think it's been enough to support the market
certainly at these valuation levels.
Speaker 1 (02:20):
So now that we're through you know, some of the
biggest big cap names to report so far this season,
what are you looking at in terms of whether we
could see this momentum continue to build.
Speaker 5 (02:32):
Yeah, the most critical thing is what happens with revisions
for Q four and even for twenty twenty six. And
so because the results that have come in so far
have handily exceeded that high bar, it's actually pushing revisions
up for the balance of the year and setting the
stage for you know, well in excess of thirteen percent,
(02:54):
maybe fourteen percent, not to get too superstitious with you,
in terms of earnings growth for next So it's really
all about the trend. It's not so much here and
in the moment, it's sort of how is this setting
the stage for what's to come? And I think the
market is very focused on, you know, what happens over
the next four quarters and certainly what happens with with
(03:16):
the FED. So we're getting a good result here, but
the trend line is really what matters. Well.
Speaker 1 (03:20):
With the stock levels as high as they are right now, Amanda,
could we be due for a pullback?
Speaker 6 (03:28):
Oh?
Speaker 5 (03:28):
Well, I mean a pullback is always a possibility. It's
sort of normal natural functioning, market health and behavior. We
haven't had much of a pullback more recently since that
V shaped bounce we had in the springtime. So I
always say yes to that question. But that doesn't mean
that I feel particularly concerned or you know, bearish about
(03:51):
the backdrop. Right now, valuations are pushing it. I would
describe them as sort of pricing for near perfection when
the backdrop is clearly not quite perfect. There's still a
lot of purple haze of policy uncertainty there. So with
valuations at these levels, it just doesn't give the market
a ton of headroom when some noise comes into the backdrop.
(04:13):
So do I think things get a little choppy from here?
I think that's possible. But we've been in a period
of pretty low volatility, and so seeing a little bit
more volatility actually makes me feel better about the sustainability
of the rally going forward.
Speaker 1 (04:28):
Yeah, we've talked before about the purple haze of policy uncertainty.
We're just coming out of a very important meeting between
Presidents Trump and Shi Jinping of China where they got
that one year trade truce. Does that lift some of
the fog for you or do you see more potential
for uncertainty to come.
Speaker 5 (04:47):
Yeah, it's I mean, I think it helps on a
relative basis, We definitely as it relates to trade and tariffs.
In total, we definitely feel like the purple haze has
lifted a bit. It's more of a narrow band in
terms of best and worst case kind of scenarios, and
so that I think has really helped the market kind
of wrestle with that, try and assign some level of
(05:09):
a pe multiple and kind of move past some of
the worst case scenarios that we were worrying about and
anticipating in the first half of the year. But this
purple haze is not just about tariffs and trade, right.
We have a government shutdown looming pretty large here, right,
and so key questions around when, how if the shutdown
(05:30):
is going to come to an end that is creating
more I think near term purple haze for me, and
to some degree, I think it will start to weigh
on the market. It hasn't yet because the market typically
kind of ignores these things, But this one's going on
a bit longer than what I think anybody engaged in
this would like to see. So that's a little bit
(05:51):
of near term purple haze that we're watching carefully. And then,
of course, with the FED meeting earlier this week, palthrowing
some cold water on what happens in decent that's adding
a little purple haze monetary policy uncertainty too.
Speaker 1 (06:04):
That's Amanda A. Gotti, chief investment Officer at PNC Asset Management.
Now let's take a closer look at the big tech
earnings we saw this past week and what they could
tell us about markets going forward. For that, we're joined
by Ivan Findeseth, Senior Partner and Chief investment Officer at
Tigris Capital Partners. It's great to have you with us
on the weekend program. Ivan. After we've heard from five
(06:27):
of the mag seven names, I think we could probably
say was a mixed reaction. Was it a mixed result
for you?
Speaker 7 (06:34):
No, I think everything is going well. I think that
the pullback in meta platforms is definitely a buying opportunity.
They continue to invest in advancing AI and it will
continue to pay off as it has in the past.
So I still say we are in the first inning
of a huge AI world series. This bullish investment trend
(06:58):
has a lot more to go. And I'm going to
say every company is going to invest in AI, and
every company is going to be an AI company. It's
going to drive their business, whether it's supply chain management,
whether it's price optimization, whether it's finding new leads and
generating marketing initiatives. AI is going to be an engine
(07:20):
behind multiple aspects of every company.
Speaker 1 (07:23):
Just to play a little bit of a devil's advocate
on that, I wonder though, whether after we've seen some
of the market reaction to these results this past week,
whether we're going to see a sort of a split
as to how some of these biggest names see that
AI investment pay off.
Speaker 7 (07:40):
There's always going to be bumps in the road. And remember,
these companies are investing for the next three five plus years,
and the AI engines that we have now are going
to pale in comparison to what we have in the future.
Will still in the early stages, So there's going to
be new technologies emerging that will over take maybe some
(08:02):
of the previous technologies, and companies will continue to learn
as the large language models will continue to learn and
create these data factories that create the data that they
will learn from.
Speaker 1 (08:14):
Certainly, an arms race we've seen that in terms of
the reported spending tens of billions of dollars by just
about every company that's reported in this past week. Where
do you see things stacking up in terms of the race,
who's winning, who's placing, who's showing.
Speaker 7 (08:29):
Certainly Amazon is winning, Google is winning, Microsoft is winning,
and Meta is winning. And then the companies that use
their platforms will also start to win as well. Companies
that use, for example, the travel industry to use AI
for optimum pricing for airline tickets, for hotel rooms, for
(08:52):
cruise line tickets. So there's going to be a lot
of different ways to win and a lot of different
ways to use the technology.
Speaker 1 (09:00):
Certainly saw Amazon Web Services kind of hit things out
of the ballpark with their twenty percent year over year
growth number for Amazon Web Services, sort of staying in
the lead in terms of the cloud. Do you see
any market shifts in that cloud business around? You know,
some of those big players we've been talking about, like Amazon, Google,
(09:20):
and Microsoft.
Speaker 7 (09:21):
They're going to continue to gain market share and customers
between the three of them. Remember, large companies that use
they use more than one platform because you need backup,
you need redundancy, and each platform is going to have
the strength and weaknesses that companies are going to need
where they want to have the fastest processors for some inferences,
(09:43):
and then you know secondary tertiary processing for other functions.
So it's not a zero sum name amongst the cloud
service providers. And then you got, of course the GPUs
that power all of this coming from in Nvidia, InVID
wins on every front. And when they talk about another
company catching up to by the time a company catches
(10:07):
up to Invidious Carr processor, they already have multiple new
processors in the pipeline. When other competitors catch up to
the Hopper, they got the Blackwell, they catch up to
the Blackwell, they got the Rubin, and when you know,
they catch up to the Ruben, the next one is
the finement. So in videos thinks multiple steps ahead, and
(10:28):
Invidious power is that they have the software that's used
to get the value and the processing power from their processors.
Their coud to software is a big driver of their
GPU processors.
Speaker 1 (10:42):
Yeah, let's talk a little bit more about video because
you've seen the CEO, Jensen Wang, making a lot of
deals this past week at the APEC summit in South Korea.
Investing into AI startups as well. What's your read on
some of the latest moves that Jensen Wong has been
making in terms of investment.
Speaker 7 (11:00):
Staying steps ahead of everybody. He's sinking into the future.
You want to be the on the forefront of every
front and be ahead of the curve, and he's doing that.
And there is a lot of money that will be
invested in various startups that help to train the problem,
you know, the AI process. So it makes sense in
(11:20):
Nvidia is a large investor in a lot of different
emerging technologies and then some may emerge and go on
to be industry leaders, some may not, but you know,
that's the kind of venture capital investing game. But then
they also benefit that they become in Nvidia customers as well.
Speaker 1 (11:40):
And you know, going into all of these earnings, there's
been the debate about whether these companies are spending and
whether investors are spending into an AI bubble. Now that
we've gotten through these earnings, where do you sit on
that debate.
Speaker 7 (11:55):
As far as it's a bubble, Yeah, it's not meaning
that a bubble that is a fad and the bubble
will burst and we'll no, it's not a bubble. Things
may get ahead of themselves from time to time, and
stock prices may run up and then pull back, but
it's not really a bubble. It's a powerful trend that
(12:15):
will continue to move forward. Just like you know, there
were some bubbles in the beginning of the Internet in
the nineties, but now you know that were there were
many other competitors to Amazon. There was etoys, at pets
dot com. But you know, look at where Amazon is today,
look at where Microsoft is today, look at where Google
is today, look at where Apple is today. So there
(12:37):
will be huge winners into the future as well.
Speaker 1 (12:41):
Appreciate this, Ivan, thanks again for being with us.
Speaker 7 (12:44):
Thank you.
Speaker 1 (12:45):
It's Ivan find Sethie's chief investment officer at Tigris Capital
Partners Andy. Coming up on Bloomberg Daybreak weekend. Bank of
England policymakers are meeting this week for their latest interest
rate decision. We'll get the details from our team in London.
I'm Nathan Hager and this is bloomber This is Bloomberg
(13:13):
Day Break weekend, our global look ahead at the top
stories for investors in the coming week. I'm Nathan Hager
in Washington. Up later in our program, we'll turn to Australia,
where core infleetion accelerated beyond expectations last quarter. But first
Bank of England policymakers are meeting in the coming days
for their latest interest rate decision. Investors are not expecting
(13:34):
the UK Central Bank to cut rates, but the recent
data have made the path ahead less clear.
Speaker 3 (13:40):
For more.
Speaker 1 (13:40):
Let's go to London and bring in Bloomberg day Break
Europe banker Stephen Carroll.
Speaker 2 (13:44):
Nathan the Bank of England is becoming something of an
outlier among its global peers. The ECB appears to have
finished its rate cutting cycle well. The Federal Reserve is
continuing on its easing path, but the bue's base rate
is still four percent, and that doesn't look likely to
change in the days. Although Goldman Sachs economists they're calling
for policymakers to reduce interest rates at their next meeting,
(14:05):
that's booking the market consensus that the central Bank will
keep rates on hold. On the data front, inflation held
steady at three point eight percent in September, which is
less than economists had forecast but still well above the
central Bank's target. November's budget could add to the uncertainty
over price pressures, something the Chancellor Rachel Reeves acknowledged in
recent days as she addressed a gathering of business leaders
(14:26):
in Saudi Arabia.
Speaker 8 (14:29):
Look for me and my government in the United Kingdom,
our number one priority is growing the economy, but we
need to do that on a sort of a foundation
of stability. And we do live in a more uncertain world.
We can see that all around us, which have our
newspapers and TV channels we watch. That's uncertainty, whether it
(14:51):
is higher tariffs, whether it is conflicts around the world.
And that's why building relationships with our allies is more
important than ever to build that security and resilience into
the system. That's why in the United Kingdom would put
real focus this last year on secure and trade deals.
Speaker 2 (15:12):
So that's the chance of Rachel Reeves there speaking to
some of the backdrop for this upcoming interest rate decision
from the Bank of England, how will policymakers balance the
data and the broader economic concerns. Our chief UK economist
Dan Hanson is worthy now to discuss. Dan. Let's start,
as Bose, with the concrete parts of this and the data.
What are the signals that we have from those numbers?
(15:33):
Of the Bank of England will be watching.
Speaker 9 (15:35):
Yes, so you mentioned it at the start there. I
think you've had you've had slightly weaker than expected inflation,
but the key point you said it is inflation is
still almost double the Bank of England's target, but there
has been you know, there was good news in that
September print. It was a little bit weaker than expected,
and it's always one of these things of should we
look at the level of inflation, which we probably should,
(15:56):
or should we look at what inflation did relative to
forecasts and that's to to be how markets respond, and
markets have responded quite dubvishly to that inflation print. You
take that alongside. We've had data on growth that's been
probably a touch weaker than the Bank expected, but they
haven't been placing a huge amount of weight on the
growth data. The pay data has been weaker than expected,
(16:18):
and that's important and that's something that at least in
August the Bank focused on when it cut interest rates.
Speaker 2 (16:26):
I mean, something that Andrew Bailey has brought up sort
of repeatedly over the past couple of years is that
it's one of those things that has made the UK
situation particularly I suppose challenging for the Bank of England
is that wages were rising at pace, which was adding
to the complication.
Speaker 9 (16:41):
Yeah, and exactly right. And what's happened since the peak
of wage growth is that wage growth has slowed, but
it has slowed quite slowly, and that has meant that
the bank has been cautious about how it fast it
will cut interest rates. I mean, if you think about
where we are at the moment, private sector pay growth
running a little under four and a half percent, we
need pay growth in the UK, or the Bank of
(17:03):
England i should say, needs to pay growth in the
UK of around three percent to hit its two percent
inflation target. So there's still some way to go. One
really positive thing on this front, at least if you're
an inflation targeting central bank, not if you're a household
is that indicators of pay growth are pointing downwards. Forward
looking indicators, so pay settlements and the like are pointing
(17:24):
to pay growth closer to that three percent mark. But
it's still early days, so twenty twenty six, not a
lot of people know what their pay rise is going
to be for twenty twenty six. Yet that information will
start coming through in the first quarter of next year,
and that's something the bank will be focused quite heavily on.
Speaker 2 (17:40):
Okay, So essentially is that why you don't think the
bank is going to cock rate at this meeting. The
market expectations have moved a little bit, but the general
consensus is no move this time around.
Speaker 9 (17:51):
Yeah, so we saw some We saw a little bit
of movement on the change in the Goldman call that
you mentioned, not a huge amount, but a little bit.
It seems to have come back. Now we've got maybe
four or five bases points price, so twenty twenty five
percent chance of a cut see, not very high. Our
view is that if you take there has been dubbish
(18:12):
news in the data, particularly in the price is data,
but the fundamental point is that inflation still nearly double
the target. You've mentioned the budget. That is a huge
element of uncertainty. We saw what happened last year with
the budget, and I just there is no reason given
where interest rates are. They're at four percent, but there's
(18:33):
probably not a huge amount of distance for the bank
to travel before they finish cutting interest rates. Skipping a
meeting is not really a big deal. Just to wait
for that, particularly that information about the budget, but also
for your own credibility. Is a central bank cutting rates
when inflation is three point eight percent is quite a
hard sell, even if there is a story to be
(18:54):
told about perhaps the labor market is loose, pay growth
is coming down, pay growth is still above the levels
that are consistent with the two percent target, Inflation is
still high. So you've got time on your side, and
so that's why I think they will hold at this
upcoming meeting.
Speaker 2 (19:10):
And you mentioned the budget there. Of course, the big
change that did impact particularly price pressures was the increase
in the payroll tax for employers, and that was something
that took us a bit of time to see coming
into data. Do we have the full effect of that now?
Is everyone sort of aware of what effect that increase
in employers' national insurance had?
Speaker 5 (19:27):
Now?
Speaker 9 (19:28):
I think we're nearly there with it all passing through.
I think by the end of this year it will
be in the data. Getting it teasing it out from
everything all the other noise that's been going on is
very very difficult, but I think you can see that, Yes,
there was an impact on employment, Yes there was an
impact on prices. Possibly an impact on wages less sure,
(19:52):
but I think it has it appears to have flown
through into the data. Now looking to the budget, what
the Bank will be what is not just I mean,
there are a lot of things that will be watching.
First of all, it will be the profile of the
fiscal consolidation that Reeves announces. What matters for the Bank
is where the consolidation lands, because the Bank only thinks
(20:14):
three years ahead, okay, and the fiscal forecast is five
years So if the Chancellor puts it all at the
back end of the forecast, it means nothing for the
Bank of England. Point two will be it's most likely
going to be tax risers. We know that, fine, then
it's whether it's indirect tax increases. So that played a
part in the inflation story this year as well. Vehicle
(20:35):
Act that would.
Speaker 2 (20:35):
Yeah, because something like VAT is being flows as a possibility,
of course, where it's still waiting and we're several weeks
away from the budget, and that the government's promise has
been that they wouldn't raise income tax, National Insurance or VAT,
the question of whether or not that position might be
shifting still very much in the debate, so we won't
dwell too much on it. But a VAT increase would
presumably be particularly bad news for inflation.
Speaker 9 (20:57):
Absolutely, so indirect taxes vat veh collect exercize duty, fuel duty,
all of those things would flow straight into the CPI
basket and make the Bank of England's job much harder.
I think Rachel Reeve's listening to her her rhetoric around
this budget. She's very conscious of the inflation story now
and I think probably in hindsight, wouldn't have gone through
(21:17):
with some of the policies she went through in October
last year in the budget last year because there has
been an inflationary impact thinking about them, not just the
national insurance increase, You're thinking about the minimum wage, You're
thinking about what happened with I say, with vehicle excise
duty and other components of the CPI basket as well.
So what I think you'll see is policies announced in
(21:39):
the budget at least that will be disinflationary. But the
Bank just wants The point for the Bank of England
is it just wants to know that they're disinflationary, and
that's a reason not to go ahead and cut interest
rates just now. But think about when to cut interest rates.
People are talking about December. For me, that still feels
a little bit too soon. I think it'll probably be
in the first half next year.
Speaker 2 (22:00):
Is there anything that the Bank of England can do
to help the Chancellor in her job as well? I
know that's not their job, but just you know, given
that the influence on borrowing cast is important and does
matter when it comes to the very constrained fiscal situation
the British government's in.
Speaker 9 (22:14):
Well, I mean, they could stop consettive tightening straight away
if they wanted to directly help the help the treasury,
but obviously it's an independent central banks. They're going to
do what they're they're going to do. I mean, the
key point for the for the fiscal forecast will be
the window. So the OBR, so the UK fiscal watchdog
(22:38):
takes a snapshot of the market curve into its forecast
and the key point will be what window has it
taken for its for its forecast and whether we've had
we've had a falling guilt yields recently good news for
the Chancellor, good news for the Chancellor. Exactly whether that
makes it into the OBR forecast, there's a lot of
uncertainty about that. So that's directly how the Bank of
(23:02):
England can impact or make Rachel Reeves's job easier, is
by cutting interest rates, being dubvish, pushing down on long
term borrowing costs, pushing down on short term borrowing costs
as well, because that affects the debt interest picture. Beyond that,
I think you know we heard there about from Rachel
Reeves about the government's priority is to grow the economy.
(23:25):
Of course a big fiscal consolidation, so the government raises taxes,
that makes it more likely the Bank of England cuts
interest rates. But that's very much a short term story,
and I think what Rachel Reeves is talking about is
the supply side, the long term trajectory of the economy.
Can the economy grow faster permanently? And they're the policies
that the government is focused on. A monetary policy can't
(23:47):
do much about that. That's very much about supply side
reform and also about the makeup of tax in the
UK as well.
Speaker 2 (23:55):
Coming back to this Bank of England decision, I mean,
how important is the votes black going to be when
it comes Are we expecting a divisors a monastary policy committee.
Speaker 9 (24:04):
Well, one thing that's going to be really interesting about
this is that. A speech a couple of weeks ago
by Hugh Pill noted that the minutes are going to
have a section for each policymaker to explain their thinking,
which is something we haven't had from the Bank of
England before. So we're going to hear from all nine
of them about exactly how they are thinking about it.
So up until now, fun for you. Oh yeah, I
(24:25):
mean I can't wait. I am. Up until now, we
look at as you've just said, we look at the
vote split and we try and tease out from that
how close each member was to voting for a cut
or not voting for a cut and exercising an awful
lot of judgment in the process. Now, or at this
(24:45):
upcoming meeting, you're going to hear a little bit more
about what each one of them is thinking, and I
think from that you will be able to ascertain how
close each member was to voting for a cut, you know,
for the hawkish, for the likes of Hugh Pill, Catherine Mann, Yeah,
we know that they're probably going to be miles away
from it. What's going to be much more interesting is
how close the likes of Andrew Bailey and Sarah Breeden,
(25:07):
who are the They're basically the marginal voters. They're the
swing voters, I should say, on the on the committee.
If they if they go for it the cut, then
it's there's going to be a cut. I don't our
baseline is they won't, but I'm just saying they're the
two people to watch. So if you're going to read
the minutes and take the time out of your day
to do it, they're the two to look at and
(25:27):
see how close they were to voting for a for.
Speaker 4 (25:30):
A rate cut.
Speaker 2 (25:31):
Okay, Dan Hansen, our chief UK economist, thank you very much,
and we'll have full coverage of that Bank of England
decision across our Bloomberg platforms. I'm Stephen Carolyn London. You
can catch us every weekday morning here for Bloomberg Daybreak Europe,
beginning at six am in London and one am on
Wall Streets.
Speaker 1 (25:45):
Nathan, thank you, Steven. And coming up on Bloomberg Daybreak weekend,
we'll look to new economic data out of China and
what they mean for global markets. I'm Nathan Hager, and
this is Bloomberg. I'm Nathan Hager with your global look
(26:07):
ahead at the top stories for investors in the coming week.
Now we go to Australia, where core inflation accelerated beyond
expectations last quarter, further complicating the path for further policy
easing for the Reserve Bank of Australia. The RBA is
set to issue a rate decision in the week ahead.
For more, we turned to Bloomberg Daybreak Asia podcast host
(26:27):
Doug Krisner Nathan.
Speaker 3 (26:29):
Before last week's reading on Australia's inflation, money markets had
been expecting the RBA to cut its policy rate. Well.
Then came the reading on core consumer prices again quarter
on quarter of one percent in Q three, and that
seems to validate the RBA's assessment that its efforts to
rein in core inflation have stalled. For a closer look,
(26:49):
I'm joined by Bloomberg's James McIntyre. He is our economist
for Asia in Sydney. James, thank you so much for
making time to chat with me. To what extent were
you surprised by that core consumer price reading.
Speaker 6 (27:02):
We were quite surprised, as was everyone. So we'd anticipated
inflation would be a little stronger than what the RBA
had factored into their last set of forecasts that they
made back in August. They're going to make a new
set of forecasts with this in November ahead of this meeting,
and that CPI data is going to result in them
very much changing where their inflation outlook is, at least
(27:23):
in the short term. The question is, though, what will
it mean for the medium term, and that's going to
be the kicker for policy down the track.
Speaker 3 (27:31):
So help me understand what was particularly hot in contributing
to this one percent gain. Are there areas that we
can talk about here and where prices were kind of
accelerating at a faster pace.
Speaker 6 (27:44):
A few, a few areas, some expected, some unexpected. On
the expected side, there's been some there'd been a pickup
in electricity prices a year ago and three months ago
there'd been some rebates from the government and those no
longer being there means that the we're facing the real
price now, So that's an expected tick up in inflation.
But there were some prizes that we've seen in other
(28:06):
places around the world, like New Zealand in terms of
holiday travel and accommodation, a little bit hotter prices there,
and a little bit within the core there's some signs
that rental inflation, which had been easy has bottomed, might
be turning around. So there's a few things there that
are temporary, some that are seasonal, and some that are worrying.
All in all an unhappy picture for the RBA.
Speaker 3 (28:29):
So do we need to look at the other side
of the coin and say that Australia's economy is doing
reasonably well, perhaps stronger than people had assumed.
Speaker 6 (28:38):
Well, when we look across the data, that's not how
That's not how I'm seeing it. Consumer spending is still
quite challenged and if anything, it's sort of adding up
along with a bit of extra slack in the labor market.
Growth was not too much stronger or not too flash hot.
All of those indicators are suggesting that the RBA does
(28:59):
still have some work to do on monetary policy. The
Central Bank does think that its current monetary policy setting
is too tight. The question is really going to be
about how gradual is this easing going to be? And
the inflation data means that it's going to be a
little longer.
Speaker 3 (29:14):
Are you hesitant to use a descriptor like stagflation? Is
that inappropriate?
Speaker 6 (29:20):
Look not yet? You know, you could look at it
in terms of unemployment rate is ticking up. It's only
at four point five, so it's still low and inflation
is a bit higher. But I think some of this
inflation is I hate to use the t word transitory
or temporary, but some of that's not really going to
be with us over the course of the year ahead
and especially two years out, which is where the RBA
(29:40):
is going to be thinking about when it's setting rates.
Speaker 3 (29:42):
So where does the RBA go from here?
Speaker 6 (29:44):
In your view, they don't go anywhere when it comes
to the November meeting, and that means that we're starting
to think about, well, what's going to happen in the
new year. The next meeting after that will be in
February in twenty twenty six, and what's interesting there is
that they will extend their projections, including their inflation forecast,
by another six months. So we've got a few more
(30:05):
months of economic data, some of this inflation washing through,
some signs that we really aren't getting the consumer spending
pick up in the economy that we're hoping for, and
another six months onto the projection period. In my view,
our base case is that's going to be enough to
get the RBA dragged into another gradual using next year,
and we see more cuts in twenty twenty six.
Speaker 3 (30:27):
So what you know about sentiment, whether it's from consumers
or on the part of businesses, what are those readings
look like right now?
Speaker 6 (30:35):
Yeah, So when it comes to a sentiment, what we've
been seeing is we had been seeing business conditions being okay,
not too flashot, but consumers still being pessimistic and taking
a step back in the October reading. Not getting a
rate cut in November as many might have been expecting
is probably going to mean that those consumers are going
to still remain quite depressed, especially when it comes to
(30:58):
looking at their consumer at their own per personal circumstances
over the months and the year ahead. So not a
great impetus there on the consumer side of the picture,
and that sluggish consumer spending pickup that's ultimately going to
be one of the factors that gets the RBA back
off the bench and cutting again next to you.
Speaker 3 (31:16):
But I'm wondering whether or not if consumer expectations for
inflation do remain stubborn, that that could further complicate matters
for the RBA.
Speaker 6 (31:25):
It could, but we're not seeing a labor market that's
allowing consumers to turn any of those expectations into wage
gains that are going to be problematic. If anything, we're
seeing wages growth continuing to ease back along with the
RBA's expectations or forecasts for that wage growth to ease back,
so we don't necessarily have a labor market and consumer
(31:46):
inflation expectation dynamic that's that's going to be particularly spicy
or problematic for prices and could could have caused some
problems for the RBA.
Speaker 3 (31:55):
So I know we recently had a meeting between Prime
Minister Albanizi and President Trump. I know you're an economist
and I'm not asking for political commentary, but are the
animal spirits a little bit more alive in Australia after
that meeting.
Speaker 6 (32:10):
Well, it's a positive. We're all looking for in these meetings,
these bilateral meetings and these deals, for something good to
come and a good outcome to come for our economy
visa the US, and that's definitely what We've got. Another
big investment co investment with the United States to unlock
critical materials that's an important geopolitical flash point for the
(32:31):
United States and for the world.
Speaker 3 (32:33):
James will leave it there. It's always a pleasure. Thank
you so very much. Bloomberg's James McIntyre. He is our
economist for Asia in Sydney. Let's turn next to the
Chinese economy and look ahead to the trade data in
the week ahead. Joining me now is David Chu from
Bloomberg Economics. David, thank you so much for making time
to chat with me. If you don't mind, I'd like
(32:53):
to move beyond the details of the meeting that we
just had recently between Presidents Trump and she I'd like
to better understand what's happening in the overall Chinese economy.
I mentioned the trade data that we're expecting in the
week ahead, and we know that the export economy in
China has been very supportive of overall growth. Talk to
(33:14):
me now about the markets other than the US where
Beijing has been building these trade relationships.
Speaker 10 (33:22):
The thing is that China's export to the US is
facing significant headwinds, and if you look at the data
and has been drawing. But on the other hand, if
you look at the China's export shipment to the other
trade partners such as the Southeast Asia and Europe, you
would see that these trade partners supported China's exports over
(33:45):
the past several months. If you look at what the
government did, you can see that China is trying to
build up a better trading relationship with these trading partners.
We think that China's ship with the other partners could
be strengthened, and yes, from China side, I think it's
(34:05):
just necessary. But on the other hand, to be honest,
the other trade partners may be cautious about the China's
export because people have been talking about that China is
deverting some exports to the trade partners, so things could
be complicated looking forward.
Speaker 3 (34:24):
One of the things that we've heard a lot about
when we study the manufacturing economy in China, and this
is not a new concept, that over capacity has been
a real issue and a real problem, and it's been
cited in by many trade partners as being one of
the ways in which China has been exporting deflation. Is
that still very much a concern for the government.
Speaker 10 (34:47):
Well, I think the overcapacity itself is a concern for
the government because China is facing a sluggish demand, especially
in the domestic consumption. So that the governm side that
they are going to do something to restrain the over capacity,
because such as decide that they are going to do
(35:10):
something anti evolution. But on the other hand, we have
to say that it could not be easy because if
you look at what happened back to about ten years ago,
that UH over capacity reduction in China actually led to
some great pressure in the in the drop market. So
(35:30):
that now is a it's a dilemma for the for
the government on the one hand, the one they do
want to cut the over capacity. On the other hand,
they have to take care of the labor market. So
that given all of this, I think the government had
to has to take a gradual pressure on this on
(35:51):
this front. So but this is UH. This may not
be a good news for the trading partners, you know,
because of the weak domestic consumption, China has to rely
on the export more than before, so that other trade
partners may feel that China is exporting more and more
(36:12):
lower price goods to them. But for China, I think
that is the choice of no toys.
Speaker 3 (36:20):
One of the things that we have seen a lot
of recently in the US has been aggressive spending on
artificial intelligence, and i'd like to get your take on
what you're seeing in terms of the AI spend in
China right now and the degree to which the government
is almost encouraging, fostering this type of spending.
Speaker 10 (36:38):
Yes, you're right, I mean the government is encouraging the
development in the AI side. If you look at what
happened over the past week, the China just had the
fifteen five year plan proposal disclosed, and the government emphasized
the development of high tank including AI. They think the
(37:00):
new industries led by AI and the other such as
semiconductors and other news sectors can be the new engine
for China's development in the longer future.
Speaker 3 (37:15):
David will leave it there, Thank you so very much.
David Chu there from Bloomberg Economics. Also in the week ahead,
we'll get the inflation data for South Korea. Now, these
numbers will be released as the Bank of Korea considers
adding to its gold reserves for the first time in
more than a decade. Last week, the BOK said it
would monitor markets to decide on the timing and size
(37:37):
of any gold purchases, and a decision would be based
on the evolution of its international reserves and the trajectory
of gold, as well as the direction of the Korean one.
We'll look out for that in the days ahead. I'm
Doug Krisner. You can catch us weekdays for the Daybreak
Asia podcast. It's available wherever you get your podcast. Nathan,
(37:57):
Thanks Doug.
Speaker 1 (37:58):
Then that does it for this edition of Bloomberg Daybreak 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 Nathan Hager. Stay
with us. Top stories and global business headlines are coming
up right now.
This is Bloomberg Daybreak Weekend, our global look ahead at
the top stories in the coming week from our Daybreak
anchors all around the world. Straight Ahead on the program.
As earning season continues, we take a look at the
impact on markets plus big tech earnings in focus. I'm
Nathan Hager in Washington.
Speaker 2 (00:18):
I'm Stephen Carlin London. We're looking ahead to the challenges
facing the Bank of England. That's next interest right decision.
Speaker 3 (00:24):
I'm Deck Chrisner looking at a challenging decision on rates
for the Reserve Bank of Australia.
Speaker 4 (00:30):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg eleventh,
three year on 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. I'm
Bloomberg Radio dot Com and the Bloomberg Business App.
Speaker 1 (00:54):
Good day to you. I'm Nathan Hager. We begin today's
program with a focus on the market. Or more than
halfway through third quarter earning season and with stock still
finding ways to set records, what's the outlook for the
week ahead and for the final two months of this year.
For that, we're joined by Amanda Agatti, chief investment officer
at PNC's asset management group. Amanda, it's great to have
(01:17):
you with us on this weekend show, and I know
you've been pretty positive on the earnings picture thus far.
How do things look to you now that we're at
the point that we sit at now, Well, it's.
Speaker 5 (01:28):
Always great to be with you. Thanks so much for
having me. We're feeling really positive about this stage of
Q three earning season. It was actually a pretty positive
setup even before earning season started, very strong, sort of
consistently positive revisions over the course of Q three, So
(01:48):
we set a pretty high bar coming into earning season itself,
and believe it or not, at this stage of earnings reporting,
we are handily exceeding it. So by my math, we're
expecting about seven point two percent earnings growth for the
S and P five hundred before earning season started, and
we're tracking well in excess of nine percent, So i'll
(02:10):
give it an a grade so far. There's still some
distance to go yet, but that's a pretty strong result
and I think it's been enough to support the market
certainly at these valuation levels.
Speaker 1 (02:20):
So now that we're through you know, some of the
biggest big cap names to report so far this season,
what are you looking at in terms of whether we
could see this momentum continue to build.
Speaker 5 (02:32):
Yeah, the most critical thing is what happens with revisions
for Q four and even for twenty twenty six. And
so because the results that have come in so far
have handily exceeded that high bar, it's actually pushing revisions
up for the balance of the year and setting the
stage for you know, well in excess of thirteen percent,
(02:54):
maybe fourteen percent, not to get too superstitious with you,
in terms of earnings growth for next So it's really
all about the trend. It's not so much here and
in the moment, it's sort of how is this setting
the stage for what's to come? And I think the
market is very focused on, you know, what happens over
the next four quarters and certainly what happens with with
(03:16):
the FED. So we're getting a good result here, but
the trend line is really what matters. Well.
Speaker 1 (03:20):
With the stock levels as high as they are right now, Amanda,
could we be due for a pullback?
Speaker 6 (03:28):
Oh?
Speaker 5 (03:28):
Well, I mean a pullback is always a possibility. It's
sort of normal natural functioning, market health and behavior. We
haven't had much of a pullback more recently since that
V shaped bounce we had in the springtime. So I
always say yes to that question. But that doesn't mean
that I feel particularly concerned or you know, bearish about
(03:51):
the backdrop. Right now, valuations are pushing it. I would
describe them as sort of pricing for near perfection when
the backdrop is clearly not quite perfect. There's still a
lot of purple haze of policy uncertainty there. So with
valuations at these levels, it just doesn't give the market
a ton of headroom when some noise comes into the backdrop.
(04:13):
So do I think things get a little choppy from here?
I think that's possible. But we've been in a period
of pretty low volatility, and so seeing a little bit
more volatility actually makes me feel better about the sustainability
of the rally going forward.
Speaker 1 (04:28):
Yeah, we've talked before about the purple haze of policy uncertainty.
We're just coming out of a very important meeting between
Presidents Trump and Shi Jinping of China where they got
that one year trade truce. Does that lift some of
the fog for you or do you see more potential
for uncertainty to come.
Speaker 5 (04:47):
Yeah, it's I mean, I think it helps on a
relative basis, We definitely as it relates to trade and tariffs.
In total, we definitely feel like the purple haze has
lifted a bit. It's more of a narrow band in
terms of best and worst case kind of scenarios, and
so that I think has really helped the market kind
of wrestle with that, try and assign some level of
(05:09):
a pe multiple and kind of move past some of
the worst case scenarios that we were worrying about and
anticipating in the first half of the year. But this
purple haze is not just about tariffs and trade, right.
We have a government shutdown looming pretty large here, right,
and so key questions around when, how if the shutdown
(05:30):
is going to come to an end that is creating
more I think near term purple haze for me, and
to some degree, I think it will start to weigh
on the market. It hasn't yet because the market typically
kind of ignores these things, But this one's going on
a bit longer than what I think anybody engaged in
this would like to see. So that's a little bit
(05:51):
of near term purple haze that we're watching carefully. And then,
of course, with the FED meeting earlier this week, palthrowing
some cold water on what happens in decent that's adding
a little purple haze monetary policy uncertainty too.
Speaker 1 (06:04):
That's Amanda A. Gotti, chief investment Officer at PNC Asset Management.
Now let's take a closer look at the big tech
earnings we saw this past week and what they could
tell us about markets going forward. For that, we're joined
by Ivan Findeseth, Senior Partner and Chief investment Officer at
Tigris Capital Partners. It's great to have you with us
on the weekend program. Ivan. After we've heard from five
(06:27):
of the mag seven names, I think we could probably
say was a mixed reaction. Was it a mixed result
for you?
Speaker 7 (06:34):
No, I think everything is going well. I think that
the pullback in meta platforms is definitely a buying opportunity.
They continue to invest in advancing AI and it will
continue to pay off as it has in the past.
So I still say we are in the first inning
of a huge AI world series. This bullish investment trend
(06:58):
has a lot more to go. And I'm going to
say every company is going to invest in AI, and
every company is going to be an AI company. It's
going to drive their business, whether it's supply chain management,
whether it's price optimization, whether it's finding new leads and
generating marketing initiatives. AI is going to be an engine
(07:20):
behind multiple aspects of every company.
Speaker 1 (07:23):
Just to play a little bit of a devil's advocate
on that, I wonder though, whether after we've seen some
of the market reaction to these results this past week,
whether we're going to see a sort of a split
as to how some of these biggest names see that
AI investment pay off.
Speaker 7 (07:40):
There's always going to be bumps in the road. And remember,
these companies are investing for the next three five plus years,
and the AI engines that we have now are going
to pale in comparison to what we have in the future.
Will still in the early stages, So there's going to
be new technologies emerging that will over take maybe some
(08:02):
of the previous technologies, and companies will continue to learn
as the large language models will continue to learn and
create these data factories that create the data that they
will learn from.
Speaker 1 (08:14):
Certainly, an arms race we've seen that in terms of
the reported spending tens of billions of dollars by just
about every company that's reported in this past week. Where
do you see things stacking up in terms of the race,
who's winning, who's placing, who's showing.
Speaker 7 (08:29):
Certainly Amazon is winning, Google is winning, Microsoft is winning,
and Meta is winning. And then the companies that use
their platforms will also start to win as well. Companies
that use, for example, the travel industry to use AI
for optimum pricing for airline tickets, for hotel rooms, for
(08:52):
cruise line tickets. So there's going to be a lot
of different ways to win and a lot of different
ways to use the technology.
Speaker 1 (09:00):
Certainly saw Amazon Web Services kind of hit things out
of the ballpark with their twenty percent year over year
growth number for Amazon Web Services, sort of staying in
the lead in terms of the cloud. Do you see
any market shifts in that cloud business around? You know,
some of those big players we've been talking about, like Amazon, Google,
(09:20):
and Microsoft.
Speaker 7 (09:21):
They're going to continue to gain market share and customers
between the three of them. Remember, large companies that use
they use more than one platform because you need backup,
you need redundancy, and each platform is going to have
the strength and weaknesses that companies are going to need
where they want to have the fastest processors for some inferences,
(09:43):
and then you know secondary tertiary processing for other functions.
So it's not a zero sum name amongst the cloud
service providers. And then you got, of course the GPUs
that power all of this coming from in Nvidia, InVID
wins on every front. And when they talk about another
company catching up to by the time a company catches
(10:07):
up to Invidious Carr processor, they already have multiple new
processors in the pipeline. When other competitors catch up to
the Hopper, they got the Blackwell, they catch up to
the Blackwell, they got the Rubin, and when you know,
they catch up to the Ruben, the next one is
the finement. So in videos thinks multiple steps ahead, and
(10:28):
Invidious power is that they have the software that's used
to get the value and the processing power from their processors.
Their coud to software is a big driver of their
GPU processors.
Speaker 1 (10:42):
Yeah, let's talk a little bit more about video because
you've seen the CEO, Jensen Wang, making a lot of
deals this past week at the APEC summit in South Korea.
Investing into AI startups as well. What's your read on
some of the latest moves that Jensen Wong has been
making in terms of investment.
Speaker 7 (11:00):
Staying steps ahead of everybody. He's sinking into the future.
You want to be the on the forefront of every
front and be ahead of the curve, and he's doing that.
And there is a lot of money that will be
invested in various startups that help to train the problem,
you know, the AI process. So it makes sense in
(11:20):
Nvidia is a large investor in a lot of different
emerging technologies and then some may emerge and go on
to be industry leaders, some may not, but you know,
that's the kind of venture capital investing game. But then
they also benefit that they become in Nvidia customers as well.
Speaker 1 (11:40):
And you know, going into all of these earnings, there's
been the debate about whether these companies are spending and
whether investors are spending into an AI bubble. Now that
we've gotten through these earnings, where do you sit on
that debate.
Speaker 7 (11:55):
As far as it's a bubble, Yeah, it's not meaning
that a bubble that is a fad and the bubble
will burst and we'll no, it's not a bubble. Things
may get ahead of themselves from time to time, and
stock prices may run up and then pull back, but
it's not really a bubble. It's a powerful trend that
(12:15):
will continue to move forward. Just like you know, there
were some bubbles in the beginning of the Internet in
the nineties, but now you know that were there were
many other competitors to Amazon. There was etoys, at pets
dot com. But you know, look at where Amazon is today,
look at where Microsoft is today, look at where Google
is today, look at where Apple is today. So there
(12:37):
will be huge winners into the future as well.
Speaker 1 (12:41):
Appreciate this, Ivan, thanks again for being with us.
Speaker 7 (12:44):
Thank you.
Speaker 1 (12:45):
It's Ivan find Sethie's chief investment officer at Tigris Capital
Partners Andy. Coming up on Bloomberg Daybreak weekend. Bank of
England policymakers are meeting this week for their latest interest
rate decision. We'll get the details from our team in London.
I'm Nathan Hager and this is bloomber This is Bloomberg
(13:13):
Day Break weekend, our global look ahead at the top
stories for investors in the coming week. I'm Nathan Hager
in Washington. Up later in our program, we'll turn to Australia,
where core infleetion accelerated beyond expectations last quarter. But first
Bank of England policymakers are meeting in the coming days
for their latest interest rate decision. Investors are not expecting
(13:34):
the UK Central Bank to cut rates, but the recent
data have made the path ahead less clear.
Speaker 3 (13:40):
For more.
Speaker 1 (13:40):
Let's go to London and bring in Bloomberg day Break
Europe banker Stephen Carroll.
Speaker 2 (13:44):
Nathan the Bank of England is becoming something of an
outlier among its global peers. The ECB appears to have
finished its rate cutting cycle well. The Federal Reserve is
continuing on its easing path, but the bue's base rate
is still four percent, and that doesn't look likely to
change in the days. Although Goldman Sachs economists they're calling
for policymakers to reduce interest rates at their next meeting,
(14:05):
that's booking the market consensus that the central Bank will
keep rates on hold. On the data front, inflation held
steady at three point eight percent in September, which is
less than economists had forecast but still well above the
central Bank's target. November's budget could add to the uncertainty
over price pressures, something the Chancellor Rachel Reeves acknowledged in
recent days as she addressed a gathering of business leaders
(14:26):
in Saudi Arabia.
Speaker 8 (14:29):
Look for me and my government in the United Kingdom,
our number one priority is growing the economy, but we
need to do that on a sort of a foundation
of stability. And we do live in a more uncertain world.
We can see that all around us, which have our
newspapers and TV channels we watch. That's uncertainty, whether it
(14:51):
is higher tariffs, whether it is conflicts around the world.
And that's why building relationships with our allies is more
important than ever to build that security and resilience into
the system. That's why in the United Kingdom would put
real focus this last year on secure and trade deals.
Speaker 2 (15:12):
So that's the chance of Rachel Reeves there speaking to
some of the backdrop for this upcoming interest rate decision
from the Bank of England, how will policymakers balance the
data and the broader economic concerns. Our chief UK economist
Dan Hanson is worthy now to discuss. Dan. Let's start,
as Bose, with the concrete parts of this and the data.
What are the signals that we have from those numbers?
(15:33):
Of the Bank of England will be watching.
Speaker 9 (15:35):
Yes, so you mentioned it at the start there. I
think you've had you've had slightly weaker than expected inflation,
but the key point you said it is inflation is
still almost double the Bank of England's target, but there
has been you know, there was good news in that
September print. It was a little bit weaker than expected,
and it's always one of these things of should we
look at the level of inflation, which we probably should,
(15:56):
or should we look at what inflation did relative to
forecasts and that's to to be how markets respond, and
markets have responded quite dubvishly to that inflation print. You
take that alongside. We've had data on growth that's been
probably a touch weaker than the Bank expected, but they
haven't been placing a huge amount of weight on the
growth data. The pay data has been weaker than expected,
(16:18):
and that's important and that's something that at least in
August the Bank focused on when it cut interest rates.
Speaker 2 (16:26):
I mean, something that Andrew Bailey has brought up sort
of repeatedly over the past couple of years is that
it's one of those things that has made the UK
situation particularly I suppose challenging for the Bank of England
is that wages were rising at pace, which was adding
to the complication.
Speaker 9 (16:41):
Yeah, and exactly right. And what's happened since the peak
of wage growth is that wage growth has slowed, but
it has slowed quite slowly, and that has meant that
the bank has been cautious about how it fast it
will cut interest rates. I mean, if you think about
where we are at the moment, private sector pay growth
running a little under four and a half percent, we
need pay growth in the UK, or the Bank of
(17:03):
England i should say, needs to pay growth in the
UK of around three percent to hit its two percent
inflation target. So there's still some way to go. One
really positive thing on this front, at least if you're
an inflation targeting central bank, not if you're a household
is that indicators of pay growth are pointing downwards. Forward
looking indicators, so pay settlements and the like are pointing
(17:24):
to pay growth closer to that three percent mark. But
it's still early days, so twenty twenty six, not a
lot of people know what their pay rise is going
to be for twenty twenty six. Yet that information will
start coming through in the first quarter of next year,
and that's something the bank will be focused quite heavily on.
Speaker 2 (17:40):
Okay, So essentially is that why you don't think the
bank is going to cock rate at this meeting. The
market expectations have moved a little bit, but the general
consensus is no move this time around.
Speaker 9 (17:51):
Yeah, so we saw some We saw a little bit
of movement on the change in the Goldman call that
you mentioned, not a huge amount, but a little bit.
It seems to have come back. Now we've got maybe
four or five bases points price, so twenty twenty five
percent chance of a cut see, not very high. Our
view is that if you take there has been dubbish
(18:12):
news in the data, particularly in the price is data,
but the fundamental point is that inflation still nearly double
the target. You've mentioned the budget. That is a huge
element of uncertainty. We saw what happened last year with
the budget, and I just there is no reason given
where interest rates are. They're at four percent, but there's
(18:33):
probably not a huge amount of distance for the bank
to travel before they finish cutting interest rates. Skipping a
meeting is not really a big deal. Just to wait
for that, particularly that information about the budget, but also
for your own credibility. Is a central bank cutting rates
when inflation is three point eight percent is quite a
hard sell, even if there is a story to be
(18:54):
told about perhaps the labor market is loose, pay growth
is coming down, pay growth is still above the levels
that are consistent with the two percent target, Inflation is
still high. So you've got time on your side, and
so that's why I think they will hold at this
upcoming meeting.
Speaker 2 (19:10):
And you mentioned the budget there. Of course, the big
change that did impact particularly price pressures was the increase
in the payroll tax for employers, and that was something
that took us a bit of time to see coming
into data. Do we have the full effect of that now?
Is everyone sort of aware of what effect that increase
in employers' national insurance had?
Speaker 5 (19:27):
Now?
Speaker 9 (19:28):
I think we're nearly there with it all passing through.
I think by the end of this year it will
be in the data. Getting it teasing it out from
everything all the other noise that's been going on is
very very difficult, but I think you can see that, Yes,
there was an impact on employment, Yes there was an
impact on prices. Possibly an impact on wages less sure,
(19:52):
but I think it has it appears to have flown
through into the data. Now looking to the budget, what
the Bank will be what is not just I mean,
there are a lot of things that will be watching.
First of all, it will be the profile of the
fiscal consolidation that Reeves announces. What matters for the Bank
is where the consolidation lands, because the Bank only thinks
(20:14):
three years ahead, okay, and the fiscal forecast is five
years So if the Chancellor puts it all at the
back end of the forecast, it means nothing for the
Bank of England. Point two will be it's most likely
going to be tax risers. We know that, fine, then
it's whether it's indirect tax increases. So that played a
part in the inflation story this year as well. Vehicle
(20:35):
Act that would.
Speaker 2 (20:35):
Yeah, because something like VAT is being flows as a possibility,
of course, where it's still waiting and we're several weeks
away from the budget, and that the government's promise has
been that they wouldn't raise income tax, National Insurance or VAT,
the question of whether or not that position might be
shifting still very much in the debate, so we won't
dwell too much on it. But a VAT increase would
presumably be particularly bad news for inflation.
Speaker 9 (20:57):
Absolutely, so indirect taxes vat veh collect exercize duty, fuel duty,
all of those things would flow straight into the CPI
basket and make the Bank of England's job much harder.
I think Rachel Reeve's listening to her her rhetoric around
this budget. She's very conscious of the inflation story now
and I think probably in hindsight, wouldn't have gone through
(21:17):
with some of the policies she went through in October
last year in the budget last year because there has
been an inflationary impact thinking about them, not just the
national insurance increase, You're thinking about the minimum wage, You're
thinking about what happened with I say, with vehicle excise
duty and other components of the CPI basket as well.
So what I think you'll see is policies announced in
(21:39):
the budget at least that will be disinflationary. But the
Bank just wants The point for the Bank of England
is it just wants to know that they're disinflationary, and
that's a reason not to go ahead and cut interest
rates just now. But think about when to cut interest rates.
People are talking about December. For me, that still feels
a little bit too soon. I think it'll probably be
in the first half next year.
Speaker 2 (22:00):
Is there anything that the Bank of England can do
to help the Chancellor in her job as well? I
know that's not their job, but just you know, given
that the influence on borrowing cast is important and does
matter when it comes to the very constrained fiscal situation
the British government's in.
Speaker 9 (22:14):
Well, I mean, they could stop consettive tightening straight away
if they wanted to directly help the help the treasury,
but obviously it's an independent central banks. They're going to
do what they're they're going to do. I mean, the
key point for the for the fiscal forecast will be
the window. So the OBR, so the UK fiscal watchdog
(22:38):
takes a snapshot of the market curve into its forecast
and the key point will be what window has it
taken for its for its forecast and whether we've had
we've had a falling guilt yields recently good news for
the Chancellor, good news for the Chancellor. Exactly whether that
makes it into the OBR forecast, there's a lot of
uncertainty about that. So that's directly how the Bank of
(23:02):
England can impact or make Rachel Reeves's job easier, is
by cutting interest rates, being dubvish, pushing down on long
term borrowing costs, pushing down on short term borrowing costs
as well, because that affects the debt interest picture. Beyond that,
I think you know we heard there about from Rachel
Reeves about the government's priority is to grow the economy.
(23:25):
Of course a big fiscal consolidation, so the government raises taxes,
that makes it more likely the Bank of England cuts
interest rates. But that's very much a short term story,
and I think what Rachel Reeves is talking about is
the supply side, the long term trajectory of the economy.
Can the economy grow faster permanently? And they're the policies
that the government is focused on. A monetary policy can't
(23:47):
do much about that. That's very much about supply side
reform and also about the makeup of tax in the
UK as well.
Speaker 2 (23:55):
Coming back to this Bank of England decision, I mean,
how important is the votes black going to be when
it comes Are we expecting a divisors a monastary policy committee.
Speaker 9 (24:04):
Well, one thing that's going to be really interesting about
this is that. A speech a couple of weeks ago
by Hugh Pill noted that the minutes are going to
have a section for each policymaker to explain their thinking,
which is something we haven't had from the Bank of
England before. So we're going to hear from all nine
of them about exactly how they are thinking about it.
So up until now, fun for you. Oh yeah, I
(24:25):
mean I can't wait. I am. Up until now, we
look at as you've just said, we look at the
vote split and we try and tease out from that
how close each member was to voting for a cut
or not voting for a cut and exercising an awful
lot of judgment in the process. Now, or at this
(24:45):
upcoming meeting, you're going to hear a little bit more
about what each one of them is thinking, and I
think from that you will be able to ascertain how
close each member was to voting for a cut, you know,
for the hawkish, for the likes of Hugh Pill, Catherine Mann, Yeah,
we know that they're probably going to be miles away
from it. What's going to be much more interesting is
how close the likes of Andrew Bailey and Sarah Breeden,
(25:07):
who are the They're basically the marginal voters. They're the
swing voters, I should say, on the on the committee.
If they if they go for it the cut, then
it's there's going to be a cut. I don't our
baseline is they won't, but I'm just saying they're the
two people to watch. So if you're going to read
the minutes and take the time out of your day
to do it, they're the two to look at and
(25:27):
see how close they were to voting for a for.
Speaker 4 (25:30):
A rate cut.
Speaker 2 (25:31):
Okay, Dan Hansen, our chief UK economist, thank you very much,
and we'll have full coverage of that Bank of England
decision across our Bloomberg platforms. I'm Stephen Carolyn London. You
can catch us every weekday morning here for Bloomberg Daybreak Europe,
beginning at six am in London and one am on
Wall Streets.
Speaker 1 (25:45):
Nathan, thank you, Steven. And coming up on Bloomberg Daybreak weekend,
we'll look to new economic data out of China and
what they mean for global markets. I'm Nathan Hager, and
this is Bloomberg. I'm Nathan Hager with your global look
(26:07):
ahead at the top stories for investors in the coming week.
Now we go to Australia, where core inflation accelerated beyond
expectations last quarter, further complicating the path for further policy
easing for the Reserve Bank of Australia. The RBA is
set to issue a rate decision in the week ahead.
For more, we turned to Bloomberg Daybreak Asia podcast host
(26:27):
Doug Krisner Nathan.
Speaker 3 (26:29):
Before last week's reading on Australia's inflation, money markets had
been expecting the RBA to cut its policy rate. Well.
Then came the reading on core consumer prices again quarter
on quarter of one percent in Q three, and that
seems to validate the RBA's assessment that its efforts to
rein in core inflation have stalled. For a closer look,
(26:49):
I'm joined by Bloomberg's James McIntyre. He is our economist
for Asia in Sydney. James, thank you so much for
making time to chat with me. To what extent were
you surprised by that core consumer price reading.
Speaker 6 (27:02):
We were quite surprised, as was everyone. So we'd anticipated
inflation would be a little stronger than what the RBA
had factored into their last set of forecasts that they
made back in August. They're going to make a new
set of forecasts with this in November ahead of this meeting,
and that CPI data is going to result in them
very much changing where their inflation outlook is, at least
(27:23):
in the short term. The question is, though, what will
it mean for the medium term, and that's going to
be the kicker for policy down the track.
Speaker 3 (27:31):
So help me understand what was particularly hot in contributing
to this one percent gain. Are there areas that we
can talk about here and where prices were kind of
accelerating at a faster pace.
Speaker 6 (27:44):
A few, a few areas, some expected, some unexpected. On
the expected side, there's been some there'd been a pickup
in electricity prices a year ago and three months ago
there'd been some rebates from the government and those no
longer being there means that the we're facing the real
price now, So that's an expected tick up in inflation.
But there were some prizes that we've seen in other
(28:06):
places around the world, like New Zealand in terms of
holiday travel and accommodation, a little bit hotter prices there,
and a little bit within the core there's some signs
that rental inflation, which had been easy has bottomed, might
be turning around. So there's a few things there that
are temporary, some that are seasonal, and some that are worrying.
All in all an unhappy picture for the RBA.
Speaker 3 (28:29):
So do we need to look at the other side
of the coin and say that Australia's economy is doing
reasonably well, perhaps stronger than people had assumed.
Speaker 6 (28:38):
Well, when we look across the data, that's not how
That's not how I'm seeing it. Consumer spending is still
quite challenged and if anything, it's sort of adding up
along with a bit of extra slack in the labor market.
Growth was not too much stronger or not too flash hot.
All of those indicators are suggesting that the RBA does
(28:59):
still have some work to do on monetary policy. The
Central Bank does think that its current monetary policy setting
is too tight. The question is really going to be
about how gradual is this easing going to be? And
the inflation data means that it's going to be a
little longer.
Speaker 3 (29:14):
Are you hesitant to use a descriptor like stagflation? Is
that inappropriate?
Speaker 6 (29:20):
Look not yet? You know, you could look at it
in terms of unemployment rate is ticking up. It's only
at four point five, so it's still low and inflation
is a bit higher. But I think some of this
inflation is I hate to use the t word transitory
or temporary, but some of that's not really going to
be with us over the course of the year ahead
and especially two years out, which is where the RBA
(29:40):
is going to be thinking about when it's setting rates.
Speaker 3 (29:42):
So where does the RBA go from here?
Speaker 6 (29:44):
In your view, they don't go anywhere when it comes
to the November meeting, and that means that we're starting
to think about, well, what's going to happen in the
new year. The next meeting after that will be in
February in twenty twenty six, and what's interesting there is
that they will extend their projections, including their inflation forecast,
by another six months. So we've got a few more
(30:05):
months of economic data, some of this inflation washing through,
some signs that we really aren't getting the consumer spending
pick up in the economy that we're hoping for, and
another six months onto the projection period. In my view,
our base case is that's going to be enough to
get the RBA dragged into another gradual using next year,
and we see more cuts in twenty twenty six.
Speaker 3 (30:27):
So what you know about sentiment, whether it's from consumers
or on the part of businesses, what are those readings
look like right now?
Speaker 6 (30:35):
Yeah, So when it comes to a sentiment, what we've
been seeing is we had been seeing business conditions being okay,
not too flashot, but consumers still being pessimistic and taking
a step back in the October reading. Not getting a
rate cut in November as many might have been expecting
is probably going to mean that those consumers are going
to still remain quite depressed, especially when it comes to
(30:58):
looking at their consumer at their own per personal circumstances
over the months and the year ahead. So not a
great impetus there on the consumer side of the picture,
and that sluggish consumer spending pickup that's ultimately going to
be one of the factors that gets the RBA back
off the bench and cutting again next to you.
Speaker 3 (31:16):
But I'm wondering whether or not if consumer expectations for
inflation do remain stubborn, that that could further complicate matters
for the RBA.
Speaker 6 (31:25):
It could, but we're not seeing a labor market that's
allowing consumers to turn any of those expectations into wage
gains that are going to be problematic. If anything, we're
seeing wages growth continuing to ease back along with the
RBA's expectations or forecasts for that wage growth to ease back,
so we don't necessarily have a labor market and consumer
(31:46):
inflation expectation dynamic that's that's going to be particularly spicy
or problematic for prices and could could have caused some
problems for the RBA.
Speaker 3 (31:55):
So I know we recently had a meeting between Prime
Minister Albanizi and President Trump. I know you're an economist
and I'm not asking for political commentary, but are the
animal spirits a little bit more alive in Australia after
that meeting.
Speaker 6 (32:10):
Well, it's a positive. We're all looking for in these meetings,
these bilateral meetings and these deals, for something good to
come and a good outcome to come for our economy
visa the US, and that's definitely what We've got. Another
big investment co investment with the United States to unlock
critical materials that's an important geopolitical flash point for the
(32:31):
United States and for the world.
Speaker 3 (32:33):
James will leave it there. It's always a pleasure. Thank
you so very much. Bloomberg's James McIntyre. He is our
economist for Asia in Sydney. Let's turn next to the
Chinese economy and look ahead to the trade data in
the week ahead. Joining me now is David Chu from
Bloomberg Economics. David, thank you so much for making time
to chat with me. If you don't mind, I'd like
(32:53):
to move beyond the details of the meeting that we
just had recently between Presidents Trump and she I'd like
to better understand what's happening in the overall Chinese economy.
I mentioned the trade data that we're expecting in the
week ahead, and we know that the export economy in
China has been very supportive of overall growth. Talk to
(33:14):
me now about the markets other than the US where
Beijing has been building these trade relationships.
Speaker 10 (33:22):
The thing is that China's export to the US is
facing significant headwinds, and if you look at the data
and has been drawing. But on the other hand, if
you look at the China's export shipment to the other
trade partners such as the Southeast Asia and Europe, you
would see that these trade partners supported China's exports over
(33:45):
the past several months. If you look at what the
government did, you can see that China is trying to
build up a better trading relationship with these trading partners.
We think that China's ship with the other partners could
be strengthened, and yes, from China side, I think it's
(34:05):
just necessary. But on the other hand, to be honest,
the other trade partners may be cautious about the China's
export because people have been talking about that China is
deverting some exports to the trade partners, so things could
be complicated looking forward.
Speaker 3 (34:24):
One of the things that we've heard a lot about
when we study the manufacturing economy in China, and this
is not a new concept, that over capacity has been
a real issue and a real problem, and it's been
cited in by many trade partners as being one of
the ways in which China has been exporting deflation. Is
that still very much a concern for the government.
Speaker 10 (34:47):
Well, I think the overcapacity itself is a concern for
the government because China is facing a sluggish demand, especially
in the domestic consumption. So that the governm side that
they are going to do something to restrain the over capacity,
because such as decide that they are going to do
(35:10):
something anti evolution. But on the other hand, we have
to say that it could not be easy because if
you look at what happened back to about ten years ago,
that UH over capacity reduction in China actually led to
some great pressure in the in the drop market. So
(35:30):
that now is a it's a dilemma for the for
the government on the one hand, the one they do
want to cut the over capacity. On the other hand,
they have to take care of the labor market. So
that given all of this, I think the government had
to has to take a gradual pressure on this on
(35:51):
this front. So but this is UH. This may not
be a good news for the trading partners, you know,
because of the weak domestic consumption, China has to rely
on the export more than before, so that other trade
partners may feel that China is exporting more and more
(36:12):
lower price goods to them. But for China, I think
that is the choice of no toys.
Speaker 3 (36:20):
One of the things that we have seen a lot
of recently in the US has been aggressive spending on
artificial intelligence, and i'd like to get your take on
what you're seeing in terms of the AI spend in
China right now and the degree to which the government
is almost encouraging, fostering this type of spending.
Speaker 10 (36:38):
Yes, you're right, I mean the government is encouraging the
development in the AI side. If you look at what
happened over the past week, the China just had the
fifteen five year plan proposal disclosed, and the government emphasized
the development of high tank including AI. They think the
(37:00):
new industries led by AI and the other such as
semiconductors and other news sectors can be the new engine
for China's development in the longer future.
Speaker 3 (37:15):
David will leave it there, Thank you so very much.
David Chu there from Bloomberg Economics. Also in the week ahead,
we'll get the inflation data for South Korea. Now, these
numbers will be released as the Bank of Korea considers
adding to its gold reserves for the first time in
more than a decade. Last week, the BOK said it
would monitor markets to decide on the timing and size
(37:37):
of any gold purchases, and a decision would be based
on the evolution of its international reserves and the trajectory
of gold, as well as the direction of the Korean one.
We'll look out for that in the days ahead. I'm
Doug Krisner. You can catch us weekdays for the Daybreak
Asia podcast. It's available wherever you get your podcast. Nathan,
(37:57):
Thanks Doug.
Speaker 1 (37:58):
Then that does it for this edition of Bloomberg Daybreak 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 Nathan Hager. Stay
with us. Top stories and global business headlines are coming
up right now.
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