Daybreak Weekend: U.S Jobs, European Core Inflation, China PMIs

Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.440 --> 0:00:14.080 This is Bloomberg day Break Weekend, our global look at 0:00:14.080 --> 0:00:16.640 the top stories in the coming week from our Daybreak 0:00:16.640 --> 0:00:19.560 anchors all around the world. That's straight ahead on the program, 0:00:19.560 --> 0:00:21.800 a look at the March jobs report here in the 0:00:21.920 --> 0:00:25.160 US and what it means for FED policy. I'm Tom 0:00:25.200 --> 0:00:26.360 Busby in New York. 0:00:26.560 --> 0:00:29.040 I'm Caroline Hepcker here in London, where we're asking if 0:00:29.080 --> 0:00:32.720 the eupin Central Bank has won it's battle against inflation. 0:00:33.240 --> 0:00:35.680 I'm Brian Curtis in Hong Kong. I'll look ahead to 0:00:35.800 --> 0:00:39.400 China's PMIS and whether the PBOC wants to use the 0:00:39.520 --> 0:00:41.880 Chinese currency to juice the economy. 0:00:43.880 --> 0:00:47.159 That's all straight ahead on Bloomberg day Break Weekend on 0:00:47.320 --> 0:00:50.160 Bloomberg Ey Look the Free own New York, Bloomberg ninety 0:00:50.240 --> 0:00:53.800 nine to one, Washington, DC, Bloomberg one O six one, Boston, 0:00:53.880 --> 0:00:58.680 Bloomberg nine sixty, San Francisco DAB Digital Radio, London, Sirius 0:00:58.800 --> 0:01:02.040 XM one nineteen and around the world on Bloomberg Radio 0:01:02.160 --> 0:01:04.480 dot Com and via the Bloomberg Business App. 0:01:08.600 --> 0:01:10.880 Good day to you. I'm Tom Busby, and we begin 0:01:10.920 --> 0:01:13.840 today's program with the March Jobs report, we get those 0:01:13.920 --> 0:01:17.839 numbers this coming Friday. What does this mean for Fed 0:01:17.880 --> 0:01:20.919 policy going forward? Well for more, we're joined by Michael McKee, 0:01:20.920 --> 0:01:25.800 Bloomberg International Economics and Policy Correspondent. Now, Michael, we saw 0:01:25.959 --> 0:01:30.040 blowout gains in January, strong growth in February, even though 0:01:30.080 --> 0:01:32.880 the unemployment rate ticked a little higher three point nine percent. 0:01:33.319 --> 0:01:36.240 What are you expecting to see for March this Friday? 0:01:37.160 --> 0:01:40.360 Pretty much the same thing. Want to make it sound boring, 0:01:40.440 --> 0:01:43.120 but we have no indication that the labor market has 0:01:43.160 --> 0:01:47.480 fallen off. And right now, the forecast consensus from econdom 0:01:47.480 --> 0:01:50.040 was surveyed by Bloomberg is for about two hundred and 0:01:50.040 --> 0:01:53.640 fifteen two hundred and sixteen thousand. That would be down 0:01:53.720 --> 0:01:56.600 from the prior month. But we haven't really been sure 0:01:56.760 --> 0:02:00.440 about what the numbers would be in some time because 0:02:00.480 --> 0:02:03.560 they keep coming in stronger than anticipated. So if we 0:02:03.680 --> 0:02:07.080 see something similar to that again, it would be mixed 0:02:07.120 --> 0:02:09.400 news for the FED and that they want people to 0:02:09.400 --> 0:02:12.600 get jobs and it's good for the economy. But the 0:02:12.680 --> 0:02:15.679 question becomes is an inflationary right? 0:02:15.840 --> 0:02:16.000 Right? 0:02:16.080 --> 0:02:19.240 Yeah? So a surprise to the upside would be no surprise, 0:02:19.760 --> 0:02:23.239 but it could hurt things let's talk about another thing, 0:02:23.320 --> 0:02:26.880 that's average hourly earnings and what are we looking for there? 0:02:26.880 --> 0:02:29.000 And that will what will that tell us about inflation? 0:02:29.160 --> 0:02:34.440 And yeah, average hourly earnings has been the Fed's focus 0:02:34.560 --> 0:02:37.480 in these jobs numbers because they're looking at whether or 0:02:37.480 --> 0:02:40.680 not employers are still having to pay up to attract 0:02:40.720 --> 0:02:45.400 employees and then raise prices to cover that. Right now, 0:02:45.520 --> 0:02:49.280 we're looking for a jump in average hourly earnings and 0:02:49.520 --> 0:02:52.040 no change in a year over year basis four point 0:02:52.040 --> 0:02:56.680 three percent. That's good for workers, it's above inflation. Inflation 0:02:56.760 --> 0:02:59.679 adjusted wages have been rising over one percent for the 0:02:59.680 --> 0:03:04.160 past some months, so that's from the worker side good news. 0:03:04.200 --> 0:03:06.880 But it still concerns the FED in terms of is 0:03:06.919 --> 0:03:11.440 that what's pushing up service industry prices as particular, which 0:03:11.480 --> 0:03:14.360 has been a big contributor to the fact that they 0:03:14.400 --> 0:03:17.839 can't get inflation down to two percent yet now not yet. 0:03:18.160 --> 0:03:21.679 And another concern for the FED is the unemployment rate. 0:03:21.800 --> 0:03:24.679 Now we know it's three point nine percent for February, 0:03:24.760 --> 0:03:28.239 they're expecting three point eight, still below what they view 0:03:28.400 --> 0:03:30.440 as an appropriate level four point one. 0:03:30.520 --> 0:03:32.600 Right Well, the FED thought we would get to four 0:03:32.600 --> 0:03:35.160 point one this year. They thought we would get to 0:03:35.160 --> 0:03:38.160 four point one last year, and we did. The unemployment 0:03:38.240 --> 0:03:41.560 rate has continued to surprise the FED. One of the 0:03:41.640 --> 0:03:45.560 questions is going to come with the labor force participation rate. 0:03:46.040 --> 0:03:48.800 We have seen more people entering the labor force, which 0:03:48.840 --> 0:03:51.440 is one reason that unemployment rose from its low of 0:03:51.560 --> 0:03:54.360 three and a half to now this three point nine percent, 0:03:54.520 --> 0:03:57.280 and that could be a reason for us to go 0:03:57.400 --> 0:04:00.960 over four. Nobody thinks we're going to go significantly over four, 0:04:01.000 --> 0:04:03.160 but it's been a while since we've been there, so 0:04:03.560 --> 0:04:05.800 there's a feeling at some point we have to go 0:04:05.960 --> 0:04:09.680 back to around that level. Because the FED and most 0:04:09.760 --> 0:04:13.000 economists think we are below the natural rate of unemployment, 0:04:13.040 --> 0:04:17.520 we're still in a level at which we see inflationary 0:04:17.560 --> 0:04:20.760 pressures because there's not enough people to take all the jobs. 0:04:21.279 --> 0:04:25.120 Well, now, fifteen million jobs added since Biden took office. 0:04:25.760 --> 0:04:31.800 How is this momentum carrying the perception of his economy 0:04:31.920 --> 0:04:32.719 biden Omics. 0:04:32.839 --> 0:04:35.120 It's starting to get better. We've had some numbers on 0:04:35.200 --> 0:04:38.920 consumer sentiment. They've been up but down just a little bit. 0:04:38.960 --> 0:04:41.520 But people are feeling pretty good still about the labor force, 0:04:41.600 --> 0:04:44.000 and that's because they have jobs, and if they have jobs, 0:04:44.400 --> 0:04:47.039 they can go out and spend, and the economy is 0:04:47.160 --> 0:04:51.640 growing faster than had been anticipated this year. So it's 0:04:51.760 --> 0:04:54.200 a reason perhaps that we have seen some of the 0:04:54.240 --> 0:04:57.919 polls turn around for President Biden. But you need to 0:04:57.960 --> 0:05:00.320 keep it going. And that's the question is is this 0:05:00.440 --> 0:05:01.279 going to continue? 0:05:01.560 --> 0:05:04.520 Yeah, November still a long way away. Well, let's talk 0:05:04.560 --> 0:05:06.800 about some of the jobs that we're seeing growth and 0:05:06.839 --> 0:05:09.560 some of the jobs where we're losing a little steam. 0:05:10.120 --> 0:05:13.880 Well, last month we lost to some manufacturing jobs which 0:05:14.520 --> 0:05:17.360 had been expected for some time and hadn't shown up 0:05:17.440 --> 0:05:22.080 yet because the ism numbers other measures of manufacturing have 0:05:22.160 --> 0:05:27.039 suggested a slow down. So we'll watch manufacturing payrolls. But 0:05:27.279 --> 0:05:29.440 most of the jobs are still being created in the 0:05:29.440 --> 0:05:33.280 health services industry and that's expected to continue for quite 0:05:33.279 --> 0:05:36.000 some time. As America ages, we need more people to 0:05:36.000 --> 0:05:39.920 help take care of them, so that a rise there 0:05:39.960 --> 0:05:42.640 is not a surprise. A rise in leisure and hospitality 0:05:43.080 --> 0:05:45.960 would not be a surprise. Those jobs turnover fairly quickly, 0:05:46.000 --> 0:05:48.919 and we've never really gotten back all the jobs at bars, 0:05:48.960 --> 0:05:53.080 restaurants and hotels that we lost during the pandemic. After that, 0:05:53.720 --> 0:05:56.360 you'd want to look at something like retail to see 0:05:56.400 --> 0:06:00.200 if companies are still feeling like Americans are going to 0:06:00.279 --> 0:06:05.040 shop enough to add workers. We've gotten through now January 0:06:05.080 --> 0:06:09.640 February where the extra help they hire for the holiday 0:06:09.720 --> 0:06:14.159 season gets let go. Are they still letting go people 0:06:14.240 --> 0:06:18.240 or are we going to see a rise in retail payrolls. 0:06:18.400 --> 0:06:20.520 That's going to be something to watch as well, and 0:06:20.560 --> 0:06:25.120 also another economic indicator construction jobs. Construction jobs have been 0:06:25.120 --> 0:06:28.560 interesting because the builders can't build houses fast enough. There's 0:06:28.600 --> 0:06:32.760 so much demand for new homes, and they have been 0:06:32.800 --> 0:06:36.440 able to find workers. Construction jobs have been rising, and 0:06:36.520 --> 0:06:42.440 so that's a consideration. Do we still see construction jobs rising. 0:06:42.920 --> 0:06:45.160 This kind of plays into the whole debate too about 0:06:45.279 --> 0:06:50.880 immigration in the presidential race, because a lot of undocumented 0:06:51.000 --> 0:06:56.320 immigrants are taking construction jobs, and without them, you wouldn't 0:06:56.320 --> 0:06:59.679 have the ability to build as many homes. So there's 0:06:59.680 --> 0:07:02.400 some good news bad news in that. Well our thanks 0:07:02.400 --> 0:07:07.479 to Michael McKee, Bloomberg's International economics and policy correspondent. Well 0:07:07.520 --> 0:07:10.400 we move now to the Walt Disney Company's annual meeting 0:07:10.440 --> 0:07:13.880 of shareholders. It'll be held on April third. It's usually 0:07:14.080 --> 0:07:17.760 an uneventful affair, but not this year. Activist investor, try 0:07:17.800 --> 0:07:21.560 On Fund Management founder Nelson Peltz going up against Disney 0:07:21.600 --> 0:07:24.800 CEO Bob Iiger looking for a seat on Disney's board. 0:07:24.800 --> 0:07:26.640 And for more on what's turned out to be a 0:07:26.680 --> 0:07:31.560 battle Royale, we're joined by Thomas Buckley, Bloomberg News entertainment reporter. 0:07:32.320 --> 0:07:35.559 So Thomas lay it out what is behind this fight 0:07:35.760 --> 0:07:37.920 for at least one board seat at Disney. 0:07:38.120 --> 0:07:40.320 Well, as you said, Tom, I think that in previous 0:07:40.400 --> 0:07:42.640 years it's been a pretty uneventful of third the Disney 0:07:42.680 --> 0:07:45.800 Annual General Meeting. I think that it couldn't be more eventful. 0:07:45.800 --> 0:07:49.160 In fact, this year, Nelson Pels's Trend Fund Management, the 0:07:49.160 --> 0:07:52.200 activist firm, has accumulated a stake in Disney work without 0:07:52.280 --> 0:07:55.400 three point five billion dollars and has been lobbying for 0:07:55.480 --> 0:07:58.440 board seats for the better half of almost two years now. 0:07:59.080 --> 0:08:01.600 And even a couple of weeks ago, it looked like, 0:08:01.960 --> 0:08:04.320 you know, Disney had turned in a very strong earnings 0:08:04.360 --> 0:08:07.640 report and it seems as though momentum on the Trian 0:08:07.800 --> 0:08:11.280 and Nelson Pelts side had really slowed. But since then 0:08:11.400 --> 0:08:14.360 we've seen a number of people step out in support 0:08:14.440 --> 0:08:17.480 of Pelts. Now that includes directors on the boards of 0:08:17.480 --> 0:08:20.280 companies where he's previously selled as a director, including Procter 0:08:20.360 --> 0:08:25.280 and Gamble, Montalize, Janis, Henderson and Moore. And now we 0:08:25.360 --> 0:08:29.360 have proxy advisers Iss and Egan Jones also supporting his 0:08:29.480 --> 0:08:32.920 candidacy for a board seat. So what seemed like in 0:08:33.000 --> 0:08:35.680 maybe an early victory for Disney is maybe now looking 0:08:35.679 --> 0:08:36.840 a bit more like a contest. 0:08:37.360 --> 0:08:40.520 Well, what is the problem that he has with Eiger 0:08:40.640 --> 0:08:43.120 and the direction of the Disney Company. What does he 0:08:43.200 --> 0:08:44.320 want to see changed? 0:08:44.720 --> 0:08:47.160 I think there are a number of issues that tryan 0:08:47.240 --> 0:08:49.520 light laid out in a one hundred and thirty three 0:08:49.960 --> 0:08:55.360 page white paper recently. Now he focuses on really the 0:08:55.480 --> 0:08:59.520 lack of oversight and accountability at the board level, which 0:08:59.559 --> 0:09:02.199 he claims has been the case for most of Disney's 0:09:02.240 --> 0:09:05.920 recent history. I think that Disney has taken steps to 0:09:06.240 --> 0:09:08.760 address a number of the complaints or you could say 0:09:08.840 --> 0:09:11.640 arguments laid out on the white paper. For example, it's 0:09:11.679 --> 0:09:15.640 appointed former Morgan Stanley's CEO James Gorman to its board 0:09:15.679 --> 0:09:18.800 and also former Sky CEO Jeremy Director Aid in a 0:09:18.840 --> 0:09:22.960 succession planning process. Obviously, will remember that the succession planning 0:09:22.960 --> 0:09:25.439 process as carried out by the board for the CEO 0:09:25.520 --> 0:09:29.800 that preceded Barbiger, so Bob Jpek, who lasted little less 0:09:29.800 --> 0:09:32.160 than three years and the role was not successful, which 0:09:32.200 --> 0:09:35.280 is why Barbigo had to return. Since his return in 0:09:35.280 --> 0:09:38.200 twenty twenty two, as contract has been extended all the 0:09:38.200 --> 0:09:41.240 way out of twenty twenty six. So I think that 0:09:41.679 --> 0:09:44.000 Nelson probably feels as though the board could be doing 0:09:44.000 --> 0:09:47.280 a better job, certainly in areas of succession planning and accountability. 0:09:48.120 --> 0:09:50.520 Well, now you talked about the support that Pelt has, 0:09:50.640 --> 0:09:53.520 but let's talk about the support that Iiger has won 0:09:53.640 --> 0:09:57.320 from Glass Lewis, JP Morgan Chase CEO, Jamie Diamond, and 0:09:57.400 --> 0:10:01.559 big names like Loreen Powell, jobs Star Wars director George Lucas, 0:10:01.640 --> 0:10:04.800 a favorite of many people, and also the Disney family. 0:10:05.080 --> 0:10:09.160 How does that backing affect, you know, what's going to 0:10:09.200 --> 0:10:09.920 happen this week? 0:10:11.360 --> 0:10:14.400 Well, I think that's really interesting because fundamentally we're seeing 0:10:14.520 --> 0:10:19.280 both sides Marshal support. I think that, you know, I'm 0:10:19.360 --> 0:10:22.240 not sure how you would argue necessarily the credibility of 0:10:22.240 --> 0:10:25.479 Glass Lewis versus the credibility of Iss versus the credibility 0:10:25.520 --> 0:10:27.839 of Evon Jones. I mean, these people are very much 0:10:27.880 --> 0:10:32.200 in the same game of speaking to shareholders and speaking 0:10:32.200 --> 0:10:36.439 to the companies and seeking to really, I suppose, improve 0:10:36.559 --> 0:10:39.800 governance of the companies that they monitor. I think the 0:10:39.880 --> 0:10:43.440 fact that a number of these proxy advisors are split 0:10:43.640 --> 0:10:47.360 speaks volumes probably about the shareholder base being split. I 0:10:47.400 --> 0:10:52.280 think that the support from Jamie Diamond would probably sway 0:10:52.480 --> 0:10:56.439 a number of institutional shareholders. The support from the likes 0:10:56.440 --> 0:11:00.199 of George Lucas, as you said, it's Star Wars, we 0:11:00.280 --> 0:11:03.800 might sway a number of retail shareholders. But I think 0:11:03.880 --> 0:11:06.600 that's certainly the support for Trian from a number of 0:11:06.640 --> 0:11:10.840 directors where Nelson's also served on the board might sway 0:11:11.400 --> 0:11:15.280 some disgruntleeds soucial shareholders who maybe bought Disney at the top, 0:11:15.400 --> 0:11:18.560 you know, around twenty twenty one and feel as though 0:11:18.760 --> 0:11:21.920 a bit of adgitus is what's needed at the company. 0:11:22.760 --> 0:11:25.440 Well, try On Fund controls about three and a half 0:11:25.480 --> 0:11:29.640 billion dollars of Disney stock. How big a slice is 0:11:29.679 --> 0:11:33.480 that holding and how much sway does that give Pelton 0:11:33.559 --> 0:11:33.920 try On? 0:11:34.480 --> 0:11:36.920 Well, the holding has certainly grown over time. So when 0:11:37.600 --> 0:11:40.079 Nelson first disclosed stake in the business at the time 0:11:40.080 --> 0:11:43.160 of what Biker's return. In November twenty twenty two, the 0:11:43.240 --> 0:11:46.440 steak was worth anywhere between eight hundred and nine hundred 0:11:46.520 --> 0:11:50.400 million dollars. It has grown materially over time because it 0:11:50.440 --> 0:11:55.079 includes Nell shares pledged by the former chairman of Marvel Entertainment, 0:11:55.160 --> 0:11:59.320 Ike Palmetto, who was fired unceremoniously by Aiger last year. 0:11:59.640 --> 0:12:01.280 To give a bit of context, I mean that three 0:12:01.320 --> 0:12:04.240 point five billion dollar steak compares to a market cap 0:12:04.240 --> 0:12:07.400 of about two hundred and twenty one million dollars, so 0:12:07.840 --> 0:12:11.640 on that front is a pretty meaningful, sizable steak. I'm 0:12:12.200 --> 0:12:14.880 certainly a shareholder that if it were anybody other than 0:12:14.960 --> 0:12:17.400 Nelson or Tryan, I think that the boys would probably 0:12:17.400 --> 0:12:20.480 be very much engaging with behind the scenes. Given the 0:12:20.520 --> 0:12:23.520 size of the of the voting power, I think that 0:12:24.000 --> 0:12:28.400 it gives naturally Tryan quite a bit of credibility. I mean, 0:12:28.440 --> 0:12:31.280 it's it's a huge stake to have in any business, 0:12:31.760 --> 0:12:34.320 especially one in the world's largest sense company. 0:12:34.800 --> 0:12:37.760 Well that virtual shareholder meeting this coming Wednesday. In our 0:12:37.800 --> 0:12:41.920 thanks to Thomas Buckley, Bloomberg News entertainment reporter, for his 0:12:42.040 --> 0:12:45.160 insights coming up on Bloomberg day Break Weekend we'll talk 0:12:45.200 --> 0:12:47.880 about whether the European Central Bank has won its battle 0:12:48.240 --> 0:13:02.840 against inflation. I'm Tom Busby, and this is Bloomberg. This 0:13:02.960 --> 0:13:05.320 is Bloomberg day Break weekend, our global look ahead at 0:13:05.320 --> 0:13:07.800 the top stories for investors in the coming week. I'm 0:13:07.840 --> 0:13:10.720 Tom Busby in New York. Up later in our program, 0:13:10.760 --> 0:13:13.040 how close is the US Senate to passing a bill 0:13:13.040 --> 0:13:15.800 that would force TikTok's parent company to either sell the 0:13:15.840 --> 0:13:19.760 app or be banned in the US. But first, after 0:13:19.800 --> 0:13:23.000 the latest rounds of central bank rate decisions, investors are 0:13:23.040 --> 0:13:26.240 placing their bets on summer rate cuts. But one thing 0:13:26.320 --> 0:13:29.280 stands in a way. The data. One of the most 0:13:29.280 --> 0:13:33.760 important metrics is inflation in the EU. The higher for 0:13:33.880 --> 0:13:37.680 longer strategy was originally adopted by policymakers around the world 0:13:38.000 --> 0:13:41.000 in a bid to rain in soaring inflation levels. Is 0:13:41.040 --> 0:13:44.280 that fight over European core inflation data due next week 0:13:44.559 --> 0:13:47.600 may provide the biggest clue yet And for more, Let's 0:13:47.600 --> 0:13:50.079 go to London and bring in Bloomberg Daybreak europe anker 0:13:50.480 --> 0:13:52.199 Caroline Hepger Tom. 0:13:52.400 --> 0:13:56.040 So far in twenty twenty four, economists, CEOs and central 0:13:56.080 --> 0:13:59.640 bankers have all been consumed by one question when will 0:13:59.679 --> 0:14:01.000 interest rates come down? 0:14:01.400 --> 0:14:01.880 In Europe? 0:14:02.000 --> 0:14:04.840 Rates have reached their highest points since the global financial 0:14:04.880 --> 0:14:07.560 crisis in two thousand and eight, and yet the ECB 0:14:07.720 --> 0:14:10.280 has held interest rates steady at four and a half 0:14:10.320 --> 0:14:13.960 percent since September of last year. Even in the face 0:14:14.200 --> 0:14:17.360 of growing market pressure. There is a glimmer of hope, though. 0:14:17.400 --> 0:14:20.800 In a statement released following its last interest rate decision, 0:14:20.840 --> 0:14:25.560 the ECB said inflation projections have been revised down, in 0:14:25.560 --> 0:14:29.320 particular for twenty twenty four, which mainly reflects a lower 0:14:29.360 --> 0:14:33.360 contribution from energy prices. Now the central Bank has set 0:14:33.360 --> 0:14:37.080 itself a target of reducing inflation to two percent across 0:14:37.200 --> 0:14:41.040 all European countries combined, and officials might be closer than 0:14:41.080 --> 0:14:45.080 they think. According to Bloomberg's recent now cast of inflation, 0:14:45.240 --> 0:14:49.200 Eurozone inflation already sits at two percent. The gauge, compiled 0:14:49.200 --> 0:14:53.760 by Bloomberg Economics, incorporates thirty two variables ranging from unemployment 0:14:53.800 --> 0:14:56.880 to those energy costs are mentioned, and it has hit 0:14:57.120 --> 0:15:00.240 one point nine five percent after a drop in anual 0:15:00.360 --> 0:15:04.200 producer prices fed into the model. The figure is subject 0:15:04.240 --> 0:15:06.480 to change because of the nature of the now cast, 0:15:06.760 --> 0:15:10.200 but the drop speaks to a broader trend of falling 0:15:10.280 --> 0:15:13.840 European inflation. In fact, it's been on a downward trend 0:15:13.880 --> 0:15:17.080 for months as energy prices dip and the twenty country 0:15:17.080 --> 0:15:20.560 Eurozone economy stagnates for a second year in a row. 0:15:20.760 --> 0:15:24.200 So lower inflation should lead to lower interest rates, at 0:15:24.280 --> 0:15:27.560 least according to ECB President Christine Legarde, who said in 0:15:27.600 --> 0:15:30.600 a recent speech that the decisions of the Central Bank 0:15:30.680 --> 0:15:34.160 regarding rate cuts would be guided by economic data. 0:15:34.720 --> 0:15:41.360 Domestic price pressures will still be visible. We expect services inflation, 0:15:41.480 --> 0:15:44.880 for example, to remain elevated for most of this year, 0:15:45.320 --> 0:15:48.440 so there will be a period ahead where we need 0:15:48.480 --> 0:15:52.520 to confirm on an ongoing basis that the incoming data 0:15:53.040 --> 0:15:58.720 supports our inflation outlook. So this has two important implications 0:15:58.760 --> 0:16:03.640 for the policy path. Head two important implications. First, our 0:16:03.640 --> 0:16:09.640 decisions will have to remain data dependent and decided meeting 0:16:09.920 --> 0:16:14.040 by meeting, responding to new information as it comes in. 0:16:15.800 --> 0:16:19.880 This implies that even after the first rate cut, we 0:16:20.000 --> 0:16:26.360 cannot we cannot precommit to a particular rate path, however 0:16:26.520 --> 0:16:30.320 tempting that is, however much some of you would like 0:16:30.400 --> 0:16:34.800 to see it. If we are honest to our methodology 0:16:35.160 --> 0:16:38.680 and if we have discipline. In adhering to these principles, 0:16:39.120 --> 0:16:43.000 we cannot That was the first important implication. The second 0:16:43.080 --> 0:16:48.640 important implication is that our policy framework will remain important 0:16:49.520 --> 0:16:54.040 to process the incoming data and calibrate the appropriate policy 0:16:54.080 --> 0:16:59.600 stants inflation outlook, dynamics of underlying inflation, transmission of monetary policy. 0:17:00.120 --> 0:17:04.080 But at the same time, the relative weights assigned to 0:17:04.200 --> 0:17:08.760 the three criteria will have to be regularly examined. 0:17:09.760 --> 0:17:12.879 That was the ECB President Christine Lagarde speaking at the 0:17:12.920 --> 0:17:17.160 ECB and Its Watchers conference earlier this month. It's not 0:17:17.200 --> 0:17:21.080 all good news though. Underlying price pressures, particularly from salaries 0:17:21.440 --> 0:17:24.960 in the services sector, are still relatively high, a potential 0:17:25.000 --> 0:17:29.360 indicator that the trend towards slowing inflation could change. It's 0:17:29.359 --> 0:17:32.240 one of the reasons that the ECB continues to emphasize 0:17:32.240 --> 0:17:35.640 that rate cuts come only once they are sure that 0:17:35.680 --> 0:17:40.040 wage restraint is taking effect and that inflation and its 0:17:40.040 --> 0:17:43.359 slow down is actually here to stay. Because of this, 0:17:43.440 --> 0:17:47.240 European central bankers aren't declaring victory just yet. They have 0:17:47.320 --> 0:17:51.480 talked about most measures of underlying inflation having eased further, 0:17:51.520 --> 0:17:56.200 but domestic price pressures remaining high. Now one group hoping 0:17:56.240 --> 0:17:59.240 to see falling inflation next week, will be investors who 0:17:59.240 --> 0:18:02.640 are pricing in a ninety percent chance of an ECB 0:18:02.840 --> 0:18:06.000 rate cut by June. I was discussing this point with 0:18:06.160 --> 0:18:09.240 Black Crook's senior investment strategists Laura Cooper. 0:18:09.560 --> 0:18:12.400 So we'll be watching for whether that broadening, that upside 0:18:12.480 --> 0:18:15.639 kind of price pressures persist in March. But I don't 0:18:15.640 --> 0:18:19.040 think that's necessarily going to deviate the ECB away from 0:18:19.040 --> 0:18:20.960 a June rate cut. I think because at that point 0:18:21.040 --> 0:18:23.280 Christine Legard made it quite clear that they will have 0:18:23.359 --> 0:18:27.159 sufficient data to have more confidence than inflation is on 0:18:27.240 --> 0:18:30.280 that sustained trajectory back to two percent. So we're still 0:18:30.359 --> 0:18:33.640 leaning towards this rate cut in June and then at a 0:18:33.600 --> 0:18:35.879 very gradual pace through the end of the year because 0:18:35.960 --> 0:18:38.240 essentially they may not want to cut back to back 0:18:38.480 --> 0:18:41.959 because for fear of markets essentially extrapolating out that easing 0:18:42.040 --> 0:18:45.240 trend and markets could anticipate them getting back to neutral 0:18:45.359 --> 0:18:48.040 much sooner than what they actually want to kind of 0:18:48.040 --> 0:18:49.200 guide markets towards. 0:18:49.400 --> 0:18:52.639 That was Black Fox's Laura Cooper. Now, we are expecting 0:18:52.880 --> 0:18:55.800 data for inflation out of Europe in the next few 0:18:55.880 --> 0:18:59.200 days to examine what they could mean for the future 0:18:59.560 --> 0:19:03.919 path of great cards. Bloomberg's ECB reporter Alexander Webber has 0:19:03.960 --> 0:19:07.800 been speaking to me about what exactly we're expecting from 0:19:07.920 --> 0:19:08.920 those figures. 0:19:09.480 --> 0:19:12.399 We expect the number to come in roughly at a 0:19:12.440 --> 0:19:17.000 similar level as in February, meaning around two point six. 0:19:17.680 --> 0:19:21.320 There are some, including Bloomberg Economics, who forecast a slight 0:19:21.359 --> 0:19:24.080 decline to two point four. So all of that is 0:19:24.119 --> 0:19:28.760 in line with the expectation that inflation will continue to slow, 0:19:29.080 --> 0:19:31.280 but at a slower pace than what we've seen in 0:19:31.640 --> 0:19:32.560 recent months. 0:19:33.160 --> 0:19:35.280 Does the CPI number tell us the whole story? Do 0:19:35.320 --> 0:19:37.040 you think about the inflation. 0:19:36.720 --> 0:19:40.479 Picture at the moment. There's a bigger focus also on 0:19:40.520 --> 0:19:43.400 the core number. Again that is still higher than the 0:19:43.440 --> 0:19:46.920 headline number, which has been driven lower by energy. At 0:19:46.960 --> 0:19:51.360 the core, the driving forces are really services, so that's 0:19:51.400 --> 0:19:54.600 where a lot of the focus is. We also expect 0:19:54.680 --> 0:19:58.040 a slight decline in the core inflation number to two 0:19:58.080 --> 0:20:02.760 point nine, so still reasonably above the two percent target 0:20:02.840 --> 0:20:03.879 that the ECB is signing. 0:20:05.320 --> 0:20:08.359 Have there been indicators and that in the slowdown in 0:20:08.359 --> 0:20:10.800 inflation is actually substantial on here to say, there are 0:20:10.840 --> 0:20:15.120 some concerns about potentially a spike higher once inflation does 0:20:15.160 --> 0:20:17.320 actually dip, that it then could rebound. 0:20:17.720 --> 0:20:20.560 That could be rebound in the second half of the year. 0:20:20.840 --> 0:20:24.920 So even if inflation hits two percent around the middle 0:20:24.960 --> 0:20:27.720 of the year, which is what some forecasters are saying, 0:20:28.280 --> 0:20:31.760 that doesn't mean the inflation fight is really over. So 0:20:31.880 --> 0:20:36.040 the ECB wants to see inflation stay sustainably at the 0:20:36.080 --> 0:20:41.199 two percent level, and that may not be really the 0:20:41.240 --> 0:20:46.679 case until next year. So that's partly because there's energy 0:20:46.720 --> 0:20:49.600 costs have been so volatile on a kind of government 0:20:49.640 --> 0:20:52.399 measures that are now being phased out. That all makes 0:20:52.400 --> 0:20:55.479 for a very bumpy path down to the two percent target. 0:20:56.000 --> 0:20:58.600 Okay, so bumpy path, but how much bearing Also, do 0:20:58.600 --> 0:21:01.159 you think that the individual figures next week you're going 0:21:01.200 --> 0:21:04.000 to actually have on the ECB's first rate decision. 0:21:04.520 --> 0:21:07.240 So we have a rate decision on April eleven. The 0:21:07.359 --> 0:21:10.960 officials have already pretty clearly guided us toward a cut 0:21:11.080 --> 0:21:14.880 in June, so nobody's really expecting any action in April. 0:21:15.160 --> 0:21:18.800 The inflation figure is probably not going to change all 0:21:18.800 --> 0:21:21.920 that much about it. What officials are really waiting for 0:21:22.080 --> 0:21:25.240 is wage data for the first quarter, and that doesn't 0:21:25.240 --> 0:21:30.040 come in until May even early June, and that's when 0:21:30.040 --> 0:21:32.800 we have the real certainty about what's going on in 0:21:32.840 --> 0:21:36.520 the economy and the crucial wage data that people are 0:21:36.560 --> 0:21:37.000 waiting for. 0:21:37.400 --> 0:21:37.560 Yeah. 0:21:37.560 --> 0:21:39.920 Absolutely. I mean, do you think the markets are pricing 0:21:39.960 --> 0:21:42.520 in interest rate cuts in the curve of rate cuts 0:21:42.560 --> 0:21:44.639 too aggressively for the rest of the year. What's of you? 0:21:45.600 --> 0:21:47.439 That is very difficult to say at the moment, so 0:21:47.600 --> 0:21:53.240 market surprising around for cuts. There's been very little clarity 0:21:53.400 --> 0:21:58.600 on what happens after June. Some officials have said that 0:21:59.000 --> 0:22:01.960 expectations are about reasonable where they are now. On the 0:22:02.000 --> 0:22:06.280 other hand, the environment is so uncertain that nobody wants 0:22:06.320 --> 0:22:09.600 to really be too concrete about the path for interest 0:22:09.680 --> 0:22:13.520 rates down. The views seem to be diverging quite a 0:22:13.520 --> 0:22:16.760 lot at the moment, and a lot will just depend 0:22:16.800 --> 0:22:19.119 on the data, how it comes in, whether there's going 0:22:19.200 --> 0:22:22.520 to be breaks on the way down, and then how 0:22:22.560 --> 0:22:25.119 things develop in the fall. That's when we're going to 0:22:25.119 --> 0:22:27.000 have more clarity. At the moment, there's really a high 0:22:27.080 --> 0:22:28.000 level of uncertainty. 0:22:28.440 --> 0:22:30.679 Yeah absolutely. I'm in the deposit rate for the ECB 0:22:31.560 --> 0:22:33.680 is at a higher four percent, so yes, the kind 0:22:33.680 --> 0:22:37.200 of clarity on how that comes down is quite uncertain. 0:22:37.400 --> 0:22:41.280 Just talk to us a bit about European services. Could 0:22:41.280 --> 0:22:45.760 this be a cause for inflation perhaps to remain sticky, 0:22:45.880 --> 0:22:48.920 is that the main worry that we've seen in terms 0:22:49.000 --> 0:22:55.120 of the inflation rate for the twenty area Eurozone. 0:22:55.440 --> 0:22:59.680 Yeah, service is absolutely key at the moment because it's 0:22:59.680 --> 0:23:03.240 solabor intensive, and that means wages are play playing a 0:23:03.280 --> 0:23:05.800 much bigger role than in other sectors of the economy. 0:23:06.400 --> 0:23:10.639 And the labor market is still very tight, especially in 0:23:10.720 --> 0:23:13.840 light of the economic weakness that we've seen. Even been 0:23:14.000 --> 0:23:17.159 a recession in Germany in or likelihood, but still the 0:23:17.240 --> 0:23:20.640 labor market has held up very well. And if an 0:23:20.680 --> 0:23:24.639 economic rebound really materializes now in the coming quarters, that 0:23:24.800 --> 0:23:27.200 means the labor market is pro not going to soften 0:23:27.200 --> 0:23:31.600 any further. So wages are really where it's at. Demands 0:23:31.640 --> 0:23:36.320 from labor unions are still very elevated, and we have 0:23:36.359 --> 0:23:41.000 to see whether they can realize these demands, what companies 0:23:41.080 --> 0:23:45.639 are saying, whether they give in and services are really 0:23:46.359 --> 0:23:47.080 the key. 0:23:47.600 --> 0:23:51.080 Yeah, absolutely, Alisond, How does you compare globally then, I 0:23:51.080 --> 0:23:54.360 mean e's Europe is actually approaching the two percent inflation target. 0:23:54.400 --> 0:23:56.800 It does seem to be that there's been a convergence 0:23:56.840 --> 0:24:00.679 in recent weeks around the view of the in the 0:24:00.680 --> 0:24:03.960 Bank of England, the ECB all cutting interest rates around 0:24:04.040 --> 0:24:07.200 the same time in June. Is that what you're seeing 0:24:07.200 --> 0:24:10.720 in the data? How likely is that to remain in place, 0:24:10.720 --> 0:24:12.080 that idea of convergence. 0:24:12.800 --> 0:24:14.880 Yeah, it does seem like that at the moment. There 0:24:14.960 --> 0:24:18.080 was for a while there was the worry that, especially 0:24:18.119 --> 0:24:21.639 in the US where the economy is just stronger, that 0:24:21.680 --> 0:24:24.160 the FED may not be able to cut as soon. 0:24:24.400 --> 0:24:28.320 And then the question is always what does that mean 0:24:28.359 --> 0:24:31.200 for the ECB. Does the ECB dare to go first 0:24:31.400 --> 0:24:34.199 or do they want to avoid that kind of divergence, 0:24:34.240 --> 0:24:37.280 which of course has some impact on the exchange rate 0:24:37.359 --> 0:24:41.040 and so on. But at the moment it does seem 0:24:41.560 --> 0:24:44.359 also when you listen to what Fed officials are saying 0:24:44.440 --> 0:24:48.680 Jerom Powell still guiding for a cut this year, then 0:24:49.240 --> 0:24:53.720 it does seem like convergence is still the most likely scenario. 0:24:54.119 --> 0:24:58.560 That was Alexander Webber, Bloomberg's ECB reported, they're speaking to 0:24:58.600 --> 0:25:01.760 me around the inflation to expecting from Europe and what 0:25:01.800 --> 0:25:03.760 it might mean for the eacy beat. My thanks to 0:25:03.840 --> 0:25:06.399 him for joining me. I'm Caroline Hepge here in London. 0:25:06.560 --> 0:25:09.920 You can catch us every weekday morning for Blueberg Daybreak Europe, 0:25:10.000 --> 0:25:12.960 beginning at six am in London. That's one am on 0:25:13.119 --> 0:25:13.719 Wall Street. 0:25:14.160 --> 0:25:17.120 Tom Well, thank you, Caroline, and coming up on Bloomberg 0:25:17.160 --> 0:25:19.920 day Break weekend to look at the social media app TikTok. 0:25:20.359 --> 0:25:22.760 Will the app be allowed to stay in the US 0:25:23.480 --> 0:25:27.520 or get banned? I'm Tom Busby and this is Bloomberg. 0:25:42.840 --> 0:25:44.880 I'm Tom Busby in New York with your global look 0:25:44.880 --> 0:25:47.240 ahead at the top stories for investors in the coming week. 0:25:47.480 --> 0:25:50.200 After passing in the House, the US Senate now working 0:25:50.240 --> 0:25:53.120 on a bill that would force TikTok's Chinese parent company 0:25:53.160 --> 0:25:55.760 to either sell the app or be banned in the 0:25:55.880 --> 0:25:59.200 US on national security concerns. For more, let's get to 0:25:59.200 --> 0:26:02.520 Bloomberg day Break Asia co host Doug Krisner Tom. 0:26:02.560 --> 0:26:05.280 The Senate will return from recess in a week. Before 0:26:05.280 --> 0:26:08.000 the break, the chair of the Commerce Committee, Maria Cantwell, 0:26:08.040 --> 0:26:11.720 said she's considering a public hearing on the TikTok bill. 0:26:12.240 --> 0:26:14.679 You may know that it passed the House back in March, 0:26:14.800 --> 0:26:17.000 and the President has said he's willing to sign it. 0:26:17.560 --> 0:26:20.080 For a closer look at what maybe next. I'm joined 0:26:20.119 --> 0:26:23.679 in the San Francisco studio by Bloomberg's Asia Counts. She 0:26:23.760 --> 0:26:26.639 covers social media. She's also a member of the Technology 0:26:26.680 --> 0:26:29.440 America's West Team. Thanks for stopping by. I'm glad we 0:26:29.480 --> 0:26:32.200 could do this. One of the things that I've read 0:26:32.320 --> 0:26:35.639 is that this bill has already run into several roadblocks 0:26:35.680 --> 0:26:37.919 in the Senate, and it doesn't seem as though there 0:26:37.960 --> 0:26:40.879 is a great deal of consensus on how to approach 0:26:41.119 --> 0:26:44.560 whatever issues are at stake here. Is there any agreement 0:26:44.600 --> 0:26:46.880 though that you're aware of? Is their commonality? 0:26:47.200 --> 0:26:49.600 I think that Congress can agree that there needs to 0:26:49.640 --> 0:26:52.920 be some sort of data privacy legislation. Again, like you said, 0:26:52.960 --> 0:26:55.760 they disagree on what exactly that would look like. But 0:26:55.920 --> 0:26:59.280 we've really seen Congress come together around this TikTok stuff 0:26:59.280 --> 0:27:01.639 and mobilize a way that they haven't been able to 0:27:01.680 --> 0:27:03.000 do for a host of other issues. 0:27:03.640 --> 0:27:07.080 One of the arguments against an outright ban has to 0:27:07.080 --> 0:27:09.639 do with the violation of the First Amendment. Are you 0:27:09.760 --> 0:27:12.720 hearing that that has any kind of traction as a 0:27:12.760 --> 0:27:15.280 rebuttal to this move to ban TikTok? 0:27:15.800 --> 0:27:17.800 I mean, it seems like all the rebuttals that may 0:27:17.800 --> 0:27:20.560 have come and TikTok has used an argument themselves haven't 0:27:20.640 --> 0:27:22.520 really seemed to gain ground, but that is one that 0:27:22.840 --> 0:27:25.879 TikTok has used, that these users, these one hundred and 0:27:25.880 --> 0:27:28.359 seventy million Americans, should have the right to be able 0:27:28.400 --> 0:27:30.360 to share their voices and their stories and to hear 0:27:30.400 --> 0:27:32.200 other people's voices and stories as well. 0:27:32.359 --> 0:27:34.679 One of the fascinating things about this story is the 0:27:34.680 --> 0:27:37.480 way in which TikTok was able to rally the users 0:27:37.520 --> 0:27:41.520 together to turn them into effectively lobbyists reaching out to 0:27:41.600 --> 0:27:45.359 members of Congress pushing back on this legislation, and in 0:27:45.400 --> 0:27:48.760 a weird way, it feels as though they made the 0:27:48.760 --> 0:27:53.520 point themselves, showing illustrating the extent to which this platform 0:27:53.680 --> 0:27:57.000 is so prevalent and has so much influence. 0:27:57.560 --> 0:27:58.000 I agree. 0:27:58.040 --> 0:28:00.480 I think in some ways that actually backfired on TikTok 0:28:00.520 --> 0:28:03.200 because of that exact reason. You were able to see 0:28:03.200 --> 0:28:06.760 them influence and sort of mobilize one hundred and seventy 0:28:06.800 --> 0:28:09.679 million people, and that was sort of an example of 0:28:09.720 --> 0:28:11.720 how the app could be used. You imagine it being 0:28:11.800 --> 0:28:13.920 used in a more malicious way of how the app 0:28:13.960 --> 0:28:14.760 could be weabinized. 0:28:14.920 --> 0:28:16.720 This is not the first time, as we know that 0:28:16.840 --> 0:28:19.520 the move has taken place in Washington to try to 0:28:19.560 --> 0:28:22.600 ban this app. During the Trump administration, it seemed like 0:28:22.640 --> 0:28:25.880 the administration got pretty close. And one of the things 0:28:25.960 --> 0:28:31.359 that ended up happening was the firm Oracle Corporation, was 0:28:31.600 --> 0:28:34.679 given the ability to house a lot of the data 0:28:35.280 --> 0:28:37.840 on service here in the United States as a way 0:28:37.880 --> 0:28:42.040 of addressing the concern about this level of national security 0:28:42.080 --> 0:28:47.239 and potential breach of that type of sensitive information. That 0:28:47.400 --> 0:28:49.840 doesn't seem to have gone far enough. But what do 0:28:49.880 --> 0:28:52.000 we know about what Oracle is doing to try to 0:28:52.080 --> 0:28:54.920 keep a hand or a handle on this data in 0:28:55.000 --> 0:28:55.640 a safe way. 0:28:55.960 --> 0:28:58.080 Yeah, it's really interesting because the concern was that the 0:28:58.160 --> 0:29:02.560 Chinese government at any time could compel TikTok to release 0:29:03.840 --> 0:29:06.560 national security related data so that they could release data 0:29:06.560 --> 0:29:09.160 on American users. And so the solution was what you're 0:29:09.160 --> 0:29:12.920 talking about, which is Project Texas, where Orco is storing 0:29:13.080 --> 0:29:17.680 all the data of American users on American soil. How 0:29:17.680 --> 0:29:20.760 effective that is it's hard to tell. I think the 0:29:20.920 --> 0:29:25.280 arguments about Project Texas really insulating TikTok from China have 0:29:25.400 --> 0:29:29.200 not convinced Congress. They still have felt like Chinese employees 0:29:29.520 --> 0:29:31.720 at by dance or the Chinese government can have access, 0:29:31.760 --> 0:29:34.160 so it hasn't really moved the needle from their perspective, 0:29:34.160 --> 0:29:36.440 but it's gone further than most tech companies. 0:29:36.080 --> 0:29:37.920 When you look at the pushback. One of the things 0:29:38.000 --> 0:29:40.800 I think was very interesting, and Vice president Kamala Harris 0:29:40.840 --> 0:29:43.960 made this point very recently about the degree to which 0:29:44.160 --> 0:29:47.840 this platform is responsible for supporting small businesses. There are 0:29:47.880 --> 0:29:51.200 a number of users of TikTok that have really grown 0:29:51.640 --> 0:29:55.320 businesses by virtue of this app, and there's a real, 0:29:55.520 --> 0:29:57.400 I guess, a case to be made that you don't 0:29:57.440 --> 0:30:00.600 want to stifle that type of innovation, right. I mean 0:30:01.040 --> 0:30:03.400 that in and of itself doesn't like seem to be 0:30:03.440 --> 0:30:05.800 a very strong case, and I think it's something that 0:30:05.840 --> 0:30:09.040 people will consider, particularly in the context of this public hering. 0:30:09.120 --> 0:30:11.320 Right, it's a real consequence of the app going away. 0:30:11.360 --> 0:30:14.560 I think about retail or beauty. There are all kinds 0:30:14.560 --> 0:30:16.640 of products that go viral on TikTok, and then you 0:30:16.680 --> 0:30:19.280 can sustain a small business off of that. So I 0:30:19.280 --> 0:30:21.160 think it's a very real argument to be made. Again, 0:30:21.200 --> 0:30:23.200 I'm not sure how much the way that argument will have, 0:30:23.920 --> 0:30:27.440 but it is real. And aside from that, there are thousands, 0:30:27.480 --> 0:30:30.320 if not millions of creators, individual people that are creating 0:30:30.360 --> 0:30:31.960 content and able to make a living off of it. 0:30:32.160 --> 0:30:33.320 I've talked to some of them myself. 0:30:33.720 --> 0:30:36.160 When you consider the fact that the algorithm is really, 0:30:36.320 --> 0:30:38.560 you know, the golden key here. Okay, it's one thing 0:30:38.600 --> 0:30:43.280 to talk about housing data, it's another thing about really 0:30:43.320 --> 0:30:46.880 gaining access to this algorithm. It's been so effective at 0:30:46.880 --> 0:30:49.760 helping to drive users into the content that they would 0:30:49.800 --> 0:30:52.440 be most interested in. There's probably not a way where 0:30:52.480 --> 0:30:55.520 Beijing would allow something like that to fall in American hands? 0:30:55.560 --> 0:30:56.560 Am I right? Or I'm wrong? 0:30:56.720 --> 0:30:58.640 I mean, I wouldn't want to allow that, right. I 0:30:58.680 --> 0:31:01.800 mean the explosive growth of TikTok is because of the algorithm. 0:31:01.840 --> 0:31:03.680 You go on and it kind of knows you better 0:31:03.720 --> 0:31:06.120 than you know yourself in some ways, and you finds 0:31:06.120 --> 0:31:09.000 out your interests and it's incredibly effective at that. So 0:31:09.040 --> 0:31:10.880 I would not want that to fall into someone else's hands. 0:31:10.960 --> 0:31:13.920 It's important to remember too, that this is not the 0:31:13.960 --> 0:31:17.120 first move to ban TikTok in a country. India two 0:31:17.200 --> 0:31:20.320 years ago was very successful. They moved very quickly, and 0:31:20.360 --> 0:31:22.960 it wasn't just TikTok that was banned. I think fifty 0:31:23.000 --> 0:31:26.920 eight different apps created by Chinese firms were also banned 0:31:27.120 --> 0:31:31.000 from the India market. That said, at that point, TikTok 0:31:31.080 --> 0:31:33.840 really hadn't developed that much traction in India to become 0:31:33.840 --> 0:31:37.240 a threat to Bye Dance. Totally different story in the US, right. 0:31:37.480 --> 0:31:40.320 Yeah, absolutely. I mean all these tech companies sort of 0:31:40.320 --> 0:31:42.320 behind the scenes have been lobbying for TikTok to be 0:31:42.320 --> 0:31:45.840 banned because it would benefit them. You think about Facebook, Instagram, Snapchat, YouTube, 0:31:45.840 --> 0:31:49.280 they all benefit if TikTok gets banned. And then there 0:31:49.320 --> 0:31:52.560 is this sort of tension of like Facebook is banned 0:31:52.560 --> 0:31:54.400 in China and it's been banned for almost a decade, 0:31:54.480 --> 0:31:56.040 so you kind of see this back and forth between 0:31:56.040 --> 0:31:56.760 different countries. 0:31:57.040 --> 0:31:59.000 Asha, thank you so much for making time to chat 0:31:59.040 --> 0:32:01.840 with us at Bloomberg. Say Asia counts should covers social 0:32:01.880 --> 0:32:04.840 media and as a member of the Technology America's team. Now, 0:32:04.960 --> 0:32:07.440 let's pivot to China. We moved to Hong Kong next 0:32:07.840 --> 0:32:09.880 and co host Brian Curtis. 0:32:09.520 --> 0:32:13.240 Doug China's PMIS may show further improvement in one key 0:32:13.320 --> 0:32:16.400 area of the economy. We'll get the numbers for March 0:32:16.480 --> 0:32:19.560 in the coming week. The official PMI is projected to 0:32:19.560 --> 0:32:22.920 come in at fifty point one, back in expansion after 0:32:23.000 --> 0:32:26.640 last month's reading of forty nine point one, but clearly 0:32:26.680 --> 0:32:29.520 more work is needed to get the Chinese economy buzzing. 0:32:30.040 --> 0:32:33.280 Some investors had worried that China might be poised to 0:32:33.320 --> 0:32:37.440 allow the Chinese currency to weaken to add support, but 0:32:37.480 --> 0:32:40.920 then traders were confused by some back and forth movements 0:32:41.160 --> 0:32:45.320 in the pboc's reference rate fixes. Joining us now for 0:32:45.400 --> 0:32:48.160 some clarity on this is Tanya Chen, a specialist on 0:32:48.280 --> 0:32:52.360 FX and rates for Bloomberg News. So Tanya, policymakers first 0:32:52.520 --> 0:32:56.840 triggered a yuan selloff partially by weakening that rate, before 0:32:56.880 --> 0:33:00.160 then causing a rebound via some stronger settings in the 0:33:00.240 --> 0:33:01.160 next couple of days. 0:33:01.640 --> 0:33:04.560 What do we know the yuon fix, which obviously is 0:33:04.600 --> 0:33:07.880 the clearest signal that the PBOC can send in terms 0:33:07.920 --> 0:33:11.640 of what it's trying to signal around the currency. The 0:33:11.680 --> 0:33:16.200 rebuttal last week showed that perhaps the initial tolerance for 0:33:16.280 --> 0:33:20.960 letting the currency slightly weaken in the yuon fix, Perhaps 0:33:21.080 --> 0:33:23.640 equity markets reaction was not what they had hoped for, 0:33:24.120 --> 0:33:27.160 and so some investors are actually saying the sentiment actually 0:33:27.200 --> 0:33:31.760 hasn't stabilized around the currency, and the PBOC was perceived 0:33:31.760 --> 0:33:34.800 by the investment community that perhaps the PBOC was allowing 0:33:34.800 --> 0:33:37.360 the currency to decline ahead of the FED which is 0:33:37.400 --> 0:33:40.360 expected to ease later this year, and that was seen 0:33:40.400 --> 0:33:44.240 as a positive. However, due to how the markets sold 0:33:44.280 --> 0:33:47.240 off on that, the PBOC quickly reined it back in 0:33:47.320 --> 0:33:52.400 the days following by issuing much stronger fixes, and from 0:33:52.440 --> 0:33:55.920 that we saw kind of the currency strengthen. But then 0:33:56.000 --> 0:33:58.560 and also state banks coming back into the market and 0:33:58.600 --> 0:34:01.000 trying to defend the currency. Or around this seven point 0:34:01.000 --> 0:34:02.040 two line. 0:34:01.760 --> 0:34:04.880 Do we have a general sense that the PBOC wants 0:34:04.920 --> 0:34:08.279 to loosen their grip a bit on the currency or 0:34:09.080 --> 0:34:09.800 just the reverse. 0:34:10.040 --> 0:34:12.600 I think there's a couple of factors that the PBC 0:34:12.680 --> 0:34:16.080 needs to consider. Obviously, the general sentiment around the economy 0:34:16.160 --> 0:34:19.359 right now is fairly gloomy given what we've seen around 0:34:19.360 --> 0:34:20.479 the macroeconomic data. 0:34:20.560 --> 0:34:22.560 Yes, we've seen a few green shoots appearing. 0:34:23.040 --> 0:34:27.800 However, the PBOC is trying to manage a very stable 0:34:27.880 --> 0:34:31.480 currency depreciation around the currency, but also around. 0:34:31.280 --> 0:34:32.800 Its main trading partners. 0:34:33.080 --> 0:34:35.320 And actually, if you were to look kind of across 0:34:35.360 --> 0:34:37.920 the sea where the Japanese yen is trading. You know 0:34:37.960 --> 0:34:40.279 that it's also fairly weak, even after the Bank of 0:34:40.360 --> 0:34:44.359 Japan had hiked rates earlier this month, and so there's 0:34:44.360 --> 0:34:46.279 a couple of factors that the PBC needs to take 0:34:46.280 --> 0:34:50.040 into account. And obviously the widening yield interest rate differential 0:34:50.120 --> 0:34:54.080 between the yuan and also the US rates is one 0:34:54.120 --> 0:34:57.600 to consider. Considering that the pboc's economy is so on 0:34:57.640 --> 0:35:00.600 the back foot that most of the market is expecting 0:35:00.680 --> 0:35:04.759 the central bank to either lower interest rates later this 0:35:04.880 --> 0:35:07.560 year or to at least loosen the economy some more. 0:35:07.719 --> 0:35:09.600 Is there any sort of line in the sand for 0:35:09.719 --> 0:35:11.080 authorities on the one so. 0:35:11.080 --> 0:35:13.879 After the PBOC came back and rained the currency by 0:35:13.920 --> 0:35:18.600 setting stronger fixes last week, the currency was trading roughly 0:35:18.760 --> 0:35:20.920 weaker than seven point two, which was a line that 0:35:20.960 --> 0:35:25.080 they had actually fixed and maintained for the last six 0:35:25.120 --> 0:35:27.760 months or so. By allowing the currency to tread slightly 0:35:27.800 --> 0:35:30.719 weaker than seven point two shows that perhaps there is 0:35:30.760 --> 0:35:34.799 some slight signal that they're allowing the currency to marginally depreciate. 0:35:35.000 --> 0:35:37.839 We know that the last major cap that the PBOC 0:35:37.920 --> 0:35:39.960 had enforced with seven point three, and that was a 0:35:40.000 --> 0:35:42.840 line that they held most of late last year and 0:35:42.920 --> 0:35:46.160 also last summer when you saw that the reference rate 0:35:46.200 --> 0:35:49.520 with from Estimus was over thirteen hundred pips, and that 0:35:49.680 --> 0:35:52.920 was quite a strong signal to the market that they 0:35:52.920 --> 0:35:56.320 were enforcing a specific line. However, if you take another 0:35:56.360 --> 0:35:59.600 step back and you look at just what the implied 0:36:00.080 --> 0:36:04.080 volatility markets are telling you about the general sentiment towards 0:36:04.080 --> 0:36:07.120 the currency right now, you're seeing that volatility is actually 0:36:07.120 --> 0:36:09.239 not as elevated as what we have seen when the 0:36:09.280 --> 0:36:12.440 currency was weakening around seven point three, nor is it 0:36:12.480 --> 0:36:14.160 as high as it was during the trade war in 0:36:14.160 --> 0:36:17.200 twenty eighteen or when it was devalued at twenty fifteen. 0:36:17.520 --> 0:36:19.200 So taking all of this and taking this. 0:36:19.160 --> 0:36:23.760 Step back, actually the kind of bearishness around the currency 0:36:23.840 --> 0:36:25.120 is still slightly maintained. 0:36:25.320 --> 0:36:27.640 What's odd about this is that it seems like the 0:36:27.640 --> 0:36:31.279 PBOC is fixing is meant to be and has been 0:36:31.360 --> 0:36:34.800 one of the more transparent parts of China's currency regime, 0:36:35.200 --> 0:36:36.880 and now a lot of that seems to be a 0:36:36.880 --> 0:36:37.839 little bit up in the air. 0:36:37.960 --> 0:36:41.200 That's right, and I think that's also indicative of how 0:36:41.239 --> 0:36:43.440 they've been issuing monetary. 0:36:42.960 --> 0:36:44.600 Policy as of late as well. 0:36:44.719 --> 0:36:47.920 So we had seen officials coming ahead of certain announcements 0:36:47.960 --> 0:36:50.920 such as cutting the reserve requirement ratio. The way that 0:36:50.920 --> 0:36:55.000 they're managing communication around the currency could potentially track with 0:36:55.120 --> 0:36:59.000 how they're also managing the monetary policy in that they're 0:36:59.040 --> 0:37:01.359 potentially trying to catch traders off guard, and that might 0:37:01.400 --> 0:37:03.759 be a more effective way of getting what they need 0:37:03.800 --> 0:37:05.000 to be done in the market. 0:37:05.280 --> 0:37:07.920 Tanya, thanks so much for joining us. Tanya Chen a 0:37:07.960 --> 0:37:11.480 specialist on FX and rates for Bloomberg News. I'm Brian 0:37:11.520 --> 0:37:14.239 Curtis in Hong Kong along with Doug Krisner. You can 0:37:14.280 --> 0:37:17.680 catch us every weekday here for Bloomberg Daybreak Asia, beginning 0:37:17.719 --> 0:37:20.480 at eight am in Hong Kong and eight pm on 0:37:20.520 --> 0:37:21.120 Wall Street. 0:37:21.160 --> 0:37:24.120 Tom thank you, Brian. That does it for this edition 0:37:24.120 --> 0:37:26.960 of Bloomberg day Break Weekend. Join us again Monday morning 0:37:26.960 --> 0:37:29.360 at five am Wall Street time for the latest on 0:37:29.480 --> 0:37:32.600 markets overseas and the news you need to start your day. 0:37:33.040 --> 0:37:35.840 I'm Tom Busby. Stay with us. Top stories and global 0:37:35.880 --> 0:37:43.520 business headlines are coming up right now.