Daybreak Weekend: U.S Jobs Preview, ECB Look Ahead, China Trade

Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.039 --> 0:00:13.560 This is Bloomberg Daybreak Weekend, our global look at the 0:00:13.560 --> 0:00:16.240 top stories in the coming week from our Daybreak anchors 0:00:16.239 --> 0:00:18.480 all around the world, and straight ahead on the program, 0:00:18.520 --> 0:00:21.159 we'll look ahead to the May jobs report here in 0:00:21.200 --> 0:00:24.400 the US what it means for FED policy moving forward. 0:00:24.600 --> 0:00:27.560 I'm Tom Busby in New York. I'm Stephen Carolyn London. 0:00:27.560 --> 0:00:29.680 When we're looking ahead to an expected rate cut from 0:00:29.720 --> 0:00:32.960 the European Central Bank, what might be unexpected in the 0:00:33.000 --> 0:00:34.520 European Parliament elections. 0:00:34.800 --> 0:00:37.160 And I'm Brian Curtis in Hong Kong. We look ahead 0:00:37.200 --> 0:00:41.120 to China's PMIS and the computext type a event featuring 0:00:41.120 --> 0:00:43.240 a number of AI heavy hitters. 0:00:43.960 --> 0:00:47.960 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:48.000 --> 0:00:51.800 Eleve Them Free own New York, Bloomberg ninety nine to one, Washington, DC, 0:00:52.120 --> 0:00:56.200 Bloomberg one O six one, Boston, Bloomberg nine sixty, San Francisco, 0:00:56.400 --> 0:01:00.600 DAB Digital Radio, London, Sirius XM one nineteen and around 0:01:00.680 --> 0:01:03.320 the world on Bloomberg Radio dot com and via the 0:01:03.360 --> 0:01:04.520 Bloomberg Business App. 0:01:08.319 --> 0:01:10.520 Good day to you. I'm Tom Busby. We begin Today's 0:01:10.520 --> 0:01:13.559 program with the May Jobs report. This Friday, we get 0:01:13.600 --> 0:01:17.200 non farm payroll data eight thirty am. Wall Street Time 0:01:17.720 --> 0:01:20.160 the big question, what does this mean for the next 0:01:20.200 --> 0:01:21.440 FED meeting in June? 0:01:21.520 --> 0:01:21.959 And for more. 0:01:22.000 --> 0:01:27.640 We're joined by Michael McKee, Bloomberg International Economics and Policy correspondent, Michael, 0:01:28.200 --> 0:01:30.600 what are you expecting to see in that May report? 0:01:30.880 --> 0:01:33.200 Can I change your question? Does this mean for FED 0:01:33.240 --> 0:01:36.240 meetings down the road? It's not going to mean really 0:01:36.319 --> 0:01:39.840 much of anything for the June meeting because members of 0:01:39.880 --> 0:01:42.080 the Open Market Committee have already said we're not going 0:01:42.160 --> 0:01:45.720 to do anything. We need several more months. But if 0:01:45.720 --> 0:01:49.960 we see stronger than anticipated payroll growth as we have 0:01:50.120 --> 0:01:52.880 been getting, that's going to worry people on the FED 0:01:52.960 --> 0:01:56.480 because they are beginning to wonder if growth is going 0:01:56.520 --> 0:01:59.920 to come in stronger than anticipated and keep inflation pressures on. 0:02:00.440 --> 0:02:03.720 So they'll be watching the payroll numbers. They also have 0:02:03.800 --> 0:02:07.120 to watch it from the standpoint of are we going 0:02:07.120 --> 0:02:09.520 to see a real slow down? And people started to 0:02:09.560 --> 0:02:12.079 lose jobs? So there's a two way risk for them 0:02:12.080 --> 0:02:15.840 as we go into this. Right now, economists are generally 0:02:16.240 --> 0:02:19.079 splitting the baby in half, as it were, by saying 0:02:19.160 --> 0:02:22.600 we're going to have about one hundred eighty thousand or 0:02:22.639 --> 0:02:26.160 so jobs created, which is still stronger than the FED 0:02:26.240 --> 0:02:28.639 wants to see, but it's down from those way over 0:02:28.680 --> 0:02:31.240 two hundred thousand numbers we were getting. And they're not 0:02:31.280 --> 0:02:34.359 seeing any change in the unemployment rate. That's three point 0:02:34.400 --> 0:02:37.160 nine three point nine percent study. But the one seventy 0:02:37.160 --> 0:02:40.680 five that we saw added in April was lower, maybe 0:02:40.720 --> 0:02:42.680 not a lot lower than what we were expecting. So 0:02:43.360 --> 0:02:45.040 there could be a trend. If we see another one 0:02:45.080 --> 0:02:48.600 eighty or so, it would suggest that the Fed's medicine 0:02:48.639 --> 0:02:51.760 is working in that the economy is slowing down, labor 0:02:51.800 --> 0:02:54.800 demand is slowing down. What we haven't seen is any 0:02:54.880 --> 0:02:58.960 sign that companies feel they're overstaffed. At this point, jobless 0:02:59.000 --> 0:03:02.880 claims just continue to stay in roughly the same range. 0:03:03.240 --> 0:03:06.160 So you would think you would start to see more 0:03:06.240 --> 0:03:11.520 layoffs before there was a recession. That's historically what's happened, 0:03:11.760 --> 0:03:16.200 But at this point we're not seeing a huge number 0:03:16.560 --> 0:03:22.040 of signs. The Basebook came out last week basically said 0:03:22.080 --> 0:03:26.120 companies are slowing their hiring and they see less demand 0:03:26.160 --> 0:03:28.440 for labor, but they still see demand for labor as 0:03:28.480 --> 0:03:30.000 opposed to getting rid of people. 0:03:30.280 --> 0:03:33.200 Now are we seeing specific groups of people? We know 0:03:33.240 --> 0:03:36.440 summer is coming, so we know leisure and hospitality is 0:03:36.440 --> 0:03:39.680 going to move up. But if we're seeing growth there, 0:03:39.680 --> 0:03:41.560 we're probably going to see a pull back in some others. 0:03:41.600 --> 0:03:43.920 I mean, are we seeing less construction cranes in the 0:03:43.920 --> 0:03:44.760 city or Well. 0:03:44.800 --> 0:03:47.200 It's interesting because this all gets tied up into a 0:03:47.280 --> 0:03:50.840 number of different things. One is the change in the 0:03:50.880 --> 0:03:54.880 way people work. Is it going to be harder to 0:03:54.960 --> 0:03:58.720 hire summer help or are you looking for summer help 0:03:58.760 --> 0:04:03.320 who sits in a computer. Obviously the lifeguards and the 0:04:03.440 --> 0:04:06.640 kids putting you onto the amusement park rides are going 0:04:06.680 --> 0:04:09.040 to be needed, but they adjust for that and the 0:04:09.120 --> 0:04:11.080 data because they know this is the time of year 0:04:11.160 --> 0:04:14.280 when that happens. One thing we do see often around 0:04:14.360 --> 0:04:17.600 this time of year is some funny numbers with teachers 0:04:17.600 --> 0:04:19.680 and education because school comes to an end, but it 0:04:19.680 --> 0:04:22.359 comes to an end at different times across the country, 0:04:22.680 --> 0:04:25.720 and so those numbers can go up and down. And 0:04:25.760 --> 0:04:29.000 then there's this whole question of immigration. And you've heard 0:04:29.040 --> 0:04:33.320 the arguments that immigration is been supplying a lot of labor, 0:04:33.760 --> 0:04:37.039 whether legal or illegal, and that would weigh on what 0:04:37.080 --> 0:04:40.520 you mentioned about construction workers, because many construction workers are 0:04:41.040 --> 0:04:47.400 undocumented aliens, and so given the need for housing and 0:04:47.440 --> 0:04:51.320 the way housing starts have gone, you would expect a 0:04:51.440 --> 0:04:56.360 continued rise in construction hiring. And we have seen that. 0:04:56.560 --> 0:04:58.760 But everybody's seeing we're going to run out of workers 0:04:58.800 --> 0:05:00.960 at some point, but we haven't. So that may be 0:05:01.080 --> 0:05:02.400 the immigration impact at work. 0:05:02.400 --> 0:05:06.360 Maybe skilled workers will run out of but maybe not unskilled. Well, 0:05:06.400 --> 0:05:08.680 you do see, you know, pickup trucks are still selling. 0:05:08.760 --> 0:05:12.359 That's always a good sign of housing, construction, plumbing, drywall, 0:05:12.600 --> 0:05:15.479 those types of jobs. But let's talk about something that 0:05:15.520 --> 0:05:18.279 the Bureau of Labor Statistics came out with just last week, 0:05:18.279 --> 0:05:21.159 and that was about unemployment rates in cities. And I 0:05:21.200 --> 0:05:24.360 found this curious. It's at about three quarters of the 0:05:24.400 --> 0:05:29.120 biggest cities saw a spike in the unemployment rate. What 0:05:29.279 --> 0:05:31.920 is it about the cities that we're seeing that as 0:05:31.920 --> 0:05:33.480 opposed to the rest of the country. 0:05:33.760 --> 0:05:37.960 Well, the most generally accepted explanation for this is that 0:05:38.160 --> 0:05:41.320 work from home is still out there, and so what 0:05:41.360 --> 0:05:45.000 we're not seeing is people coming back to the service 0:05:45.040 --> 0:05:48.760 support jobs in the cities. If people are not of 0:05:48.760 --> 0:05:53.560 the offices, you don't need people selling them lunches, for example, 0:05:53.680 --> 0:05:57.400 and so that has caused a rise in the unemployment 0:05:57.480 --> 0:06:01.080 rate because those people aren't working from home. They're not 0:06:01.200 --> 0:06:04.719 working because people are not in the office to utilize 0:06:04.760 --> 0:06:06.200 the services they provide. 0:06:06.560 --> 0:06:09.280 Well, let's get people back to the office. Maybe that'll 0:06:09.440 --> 0:06:12.800 help jump start things. The Labor departments Non farm Payroll 0:06:12.880 --> 0:06:15.520 report for May out on Friday morning, and our thanks 0:06:15.560 --> 0:06:20.000 to Michael McKee, Bloomberg International Economics and Policy correspondent. All right, 0:06:20.040 --> 0:06:23.000 moving on now, this week, we expect to see earnings 0:06:23.000 --> 0:06:26.359 from GameStop, the world's largest retail gaming and trade in 0:06:26.400 --> 0:06:30.600 destination and recently once again the world's best known memestock. 0:06:31.120 --> 0:06:33.200 Now there's a lot to unpack about what's behind the 0:06:33.240 --> 0:06:36.719 recent rally and game stop shares and its latest equity offering, 0:06:36.760 --> 0:06:39.920 and for more. We're joined by Jess Minton, Bloomberg News 0:06:40.000 --> 0:06:45.239 Deputy team Leader and Senior reporter US Equities. Well, Jess, 0:06:45.400 --> 0:06:48.919 it's been three years since GameStop became the epitome for 0:06:49.000 --> 0:06:53.200 memestocks along with theatore chain AMC take us through what 0:06:53.400 --> 0:06:56.760 jump started investor interest in the company. Shares on a 0:06:56.880 --> 0:06:59.119 roller coaster ride in the last few weeks up twenty 0:06:59.120 --> 0:06:59.800 percent this year. 0:07:00.080 --> 0:07:02.680 What is going on right A head scratcher for a 0:07:02.680 --> 0:07:05.360 lot of traders when you think of the me Madia 0:07:05.440 --> 0:07:08.560 being revived, which really came in full force in the 0:07:08.600 --> 0:07:11.080 middle of May. So that started when we did see 0:07:11.080 --> 0:07:14.040 that pop a few weeks ago in game stock, especially 0:07:14.080 --> 0:07:17.280 when you were echoing what people remember from sort of 0:07:17.280 --> 0:07:20.280 the heydays of when everyone was in lockdown during COVID, 0:07:20.280 --> 0:07:23.040 maybe you got stimulus checks like the Stimmis and the 0:07:23.080 --> 0:07:24.960 ten des. That was kind of all the rage during 0:07:24.960 --> 0:07:27.200 the meme media in early twenty twenty one. I'm sure 0:07:27.200 --> 0:07:29.440 people don't forget about that. Or Diamond Hands was another 0:07:29.480 --> 0:07:32.840 big term. So obviously the HARKing back to when we 0:07:32.920 --> 0:07:35.520 did see a lot of those and also short squeezes 0:07:35.560 --> 0:07:36.960 that were going on with a lot of these names, 0:07:36.960 --> 0:07:42.760 so some of those fan favorites when you think of GameStop, AMC, BlackBerry, Nokia. 0:07:42.800 --> 0:07:45.200 But this was really enforced when it comes to GameStop 0:07:45.240 --> 0:07:47.720 this month, but also even with the pop we saw 0:07:47.720 --> 0:07:49.800 in the middle of the month, that's stock the prior 0:07:49.920 --> 0:07:53.040 three weeks leading into that was almost up close to 0:07:53.080 --> 0:07:55.160 about seventy percent, but was a little bit under the 0:07:55.240 --> 0:07:57.840 radar because other things were happening with other dynamics with 0:07:57.920 --> 0:08:00.320 Carvana and some other meme stocks. But it really came 0:08:00.320 --> 0:08:03.400 into full force because Roar and Kitty, whose name is 0:08:03.480 --> 0:08:07.280 Keith Gill. I'm sure people remember this from three years ago. 0:08:07.400 --> 0:08:10.320 He actually had been off x formerly known as Twitter 0:08:10.400 --> 0:08:12.600 for a while, but then he started posting something. It 0:08:12.720 --> 0:08:15.240 was a Sunday leading into that week in the middle 0:08:15.280 --> 0:08:17.640 of the month, and so that was a bit basically 0:08:17.680 --> 0:08:19.520 a signal and some of the tweets he was putting 0:08:19.520 --> 0:08:21.840 out that he's back, maybe he's starting to trade some 0:08:21.880 --> 0:08:25.160 of these names again. You still basically post on Wall 0:08:25.200 --> 0:08:28.360 Street bets, on Reddit, some other platforms like stock twits 0:08:28.360 --> 0:08:30.600 where retail traders were jumping back in. But the big 0:08:30.680 --> 0:08:32.679 question with this and the way some of the market 0:08:32.720 --> 0:08:35.360 dynamics and some things have changed, was based on like 0:08:35.400 --> 0:08:38.560 a regulatory perspective, because if you think back to with 0:08:38.679 --> 0:08:42.120 Robin Hood and some other brokerages where they couldn't execute 0:08:42.120 --> 0:08:44.120 a lot of the orders in twenty twenty one, and 0:08:44.160 --> 0:08:46.680 then it was at the end of January of that year, 0:08:46.720 --> 0:08:49.440 and it sparked a lot of outcry and Washington about 0:08:49.480 --> 0:08:51.800 regulations and people that weren't able to get out of 0:08:51.840 --> 0:08:54.480 certain trades because a lot of those brokerages were just 0:08:54.520 --> 0:08:57.200 so overwhelmed with the trades that what would happen this 0:08:57.280 --> 0:08:59.319 time around and if it would be different. And one 0:08:59.320 --> 0:09:01.559 thing that's really striking if you look at the percentage 0:09:01.559 --> 0:09:04.720 of float, if you're thinking about short interest on this stock, 0:09:05.280 --> 0:09:07.440 it's only sitting at about a quarter. To put that 0:09:07.480 --> 0:09:10.120 into perspective, for Game stock, at the height of twenty 0:09:10.200 --> 0:09:12.440 twenty one, it was over one hundred and forty percent. 0:09:12.800 --> 0:09:14.840 So that's showing you you're not seeing the type of 0:09:15.280 --> 0:09:17.520 same fervor there. And also a lot of this might 0:09:17.559 --> 0:09:21.160 not necessarily be retail traders this time around, you're having 0:09:21.320 --> 0:09:24.040 a big institutions on Wall Street that also we're getting 0:09:24.040 --> 0:09:25.800 on that. And to point out we have seen a 0:09:25.800 --> 0:09:27.800 lot of that trade fizzle the last couple of weeks, 0:09:27.840 --> 0:09:30.280 even though we did see that pop earlier this month, well. 0:09:30.080 --> 0:09:32.439 Things are different. And also Game stop, I mean they 0:09:32.520 --> 0:09:35.600 just sold about forty five million Roman shares. That is 0:09:35.600 --> 0:09:38.600 not a fluke. Now, that's real money you're talking. 0:09:38.720 --> 0:09:41.160 It's exactly so as the calendar flips to June and 0:09:41.280 --> 0:09:44.840 we get the earnings results from Game stop soon, that's 0:09:44.920 --> 0:09:48.079 the question because the shelf offering, and the big thing 0:09:48.080 --> 0:09:50.080 about this is if a company is trying to file 0:09:50.480 --> 0:09:54.200 to end up selling more shares, that would essentially dilute 0:09:54.200 --> 0:09:56.959 the value of the stock. So typically investors don't like 0:09:57.000 --> 0:10:00.000 to see something like that. So in the preliminary result 0:10:00.360 --> 0:10:03.120 that Game Stock put out on May seventeenth, a part 0:10:03.120 --> 0:10:06.120 of a separate filing was that shelf offering. So now 0:10:06.160 --> 0:10:08.480 investors want to know are we going to get more 0:10:08.520 --> 0:10:11.600 information and when exactly would they be putting out and 0:10:11.600 --> 0:10:14.200 trying to sell more stock. And then also part of 0:10:14.240 --> 0:10:17.200 that too, they had a profit warning about a loss 0:10:17.240 --> 0:10:19.040 that they could have and last year, because this is 0:10:19.040 --> 0:10:22.640 a company again that as people were transitioning to hard 0:10:22.640 --> 0:10:25.640 disks for playing video games to something digital, they really 0:10:25.640 --> 0:10:28.040 struggled in recent years, but last year they were able 0:10:28.040 --> 0:10:31.319 to have more, especially turning a profit for that year. 0:10:31.360 --> 0:10:33.160 But then it looks like they're still struggling in the 0:10:33.160 --> 0:10:34.920 first three months of this year. So they did have 0:10:34.920 --> 0:10:37.520 that profit warning, and then you have the shelf registration, 0:10:37.679 --> 0:10:39.720 So that's something that investors are going to be really 0:10:39.760 --> 0:10:42.600 focused on once we hear their earnings results. And obviously 0:10:42.640 --> 0:10:44.360 the company's conference call, Well, have. 0:10:44.360 --> 0:10:46.360 They said what they're going to do with that? It 0:10:46.400 --> 0:10:49.199 was nine hundred and thirty three million bucks, Yes, they got. 0:10:49.080 --> 0:10:51.320 From that, so part of it, and it's very kind 0:10:51.320 --> 0:10:54.720 of vague in the regulatory filing to the SEC. So 0:10:54.760 --> 0:10:57.280 a lot of it is in terms of general purposes. 0:10:57.280 --> 0:11:00.319 Some of it could be used for potential acquisitions, whether 0:11:00.360 --> 0:11:03.000 that happens or not. When a company's already struggling like that, 0:11:03.400 --> 0:11:05.760 most likely that's probably not where the money is going 0:11:05.800 --> 0:11:07.800 to be ended up. So it's something that when you 0:11:07.920 --> 0:11:10.640 had such a huge pop in that stock, so we 0:11:10.760 --> 0:11:13.880 have injured day trading on May fourteenth, it got as 0:11:13.960 --> 0:11:17.600 high as close to sixty five dollars. Also, if you 0:11:17.679 --> 0:11:20.560 think back to where it was in twenty twenty one, 0:11:21.000 --> 0:11:24.000 way off the highs of that, and it's now trading 0:11:24.120 --> 0:11:27.360 close to roughly around twenty dollars. So it came into 0:11:27.400 --> 0:11:29.800 May being close to around eleven dollars. So it's doubled 0:11:29.840 --> 0:11:32.640 in value this month so far. But it kind of 0:11:32.679 --> 0:11:35.120 remains to be seen how long that could really last. 0:11:35.240 --> 0:11:37.840 Yeah, who knows how long? Right, right, but you know, 0:11:38.360 --> 0:11:41.800 May twelfth, May thirteenth, it just skyrocketed up out of nowhere, 0:11:41.840 --> 0:11:45.400 so anything could happen. So we expect to see earnings. 0:11:45.440 --> 0:11:49.559 And do you think all these new investors, whether it's 0:11:49.600 --> 0:11:53.000 institutional investors or anyone, do you think they're gonna stay 0:11:53.000 --> 0:11:55.400 with the stock? Do you think does it have legs? 0:11:55.480 --> 0:11:58.160 That's the question I think. And is the meme rally 0:11:58.200 --> 0:11:59.320 over right? 0:11:59.400 --> 0:12:03.160 Because we have seen that fizzled out And also something else. 0:12:03.240 --> 0:12:06.280 Goldman Sachs has a basket of most shorted stocks and 0:12:06.320 --> 0:12:09.000 so typically a lot of the meme names are housed 0:12:09.040 --> 0:12:12.560 into that, and we've seen that quite underperformed the broader 0:12:12.679 --> 0:12:15.520 SMP five hundred over the last couple of weeks since 0:12:15.520 --> 0:12:18.840 we initially saw that pop, So you aren't seeing it. 0:12:18.880 --> 0:12:20.920 Almost seems as if when you're thinking about names like 0:12:20.920 --> 0:12:25.840 this and even beyond that, AMC, Nokia, BlackBerry, Carvana, some 0:12:25.920 --> 0:12:28.040 of these have seen pops too, but it's fizzled out 0:12:28.160 --> 0:12:30.679 more so, so it's hard to tell if this would 0:12:30.679 --> 0:12:32.559 really have legs. But it seems as if right now 0:12:33.240 --> 0:12:34.720 we're not going to see what we would have seen 0:12:34.840 --> 0:12:35.560 three years ago. 0:12:35.960 --> 0:12:36.480 Well, there's a. 0:12:36.480 --> 0:12:38.679 Lot to look forward to. Our thanks to Jess Menton, 0:12:38.760 --> 0:12:42.920 Bloomberg News deputy team leader and senior reporter US Equities. 0:12:43.320 --> 0:12:45.520 Coming up on Bloomberg Daybreak weekend, I look ahead to 0:12:45.559 --> 0:12:49.240 elections for the European Parliament and a monetary policy decision 0:12:49.440 --> 0:12:52.840 from the European Central Bank. I'm Tom Busby, and this 0:12:53.080 --> 0:13:06.600 is Bloomberg. This is Bloomberg day Break weekend, our global 0:13:06.640 --> 0:13:08.680 look ahead at the top stories for investors in the 0:13:08.679 --> 0:13:12.160 coming week. I'm Tom Busby in New York. Up later 0:13:12.200 --> 0:13:15.240 in our program, we look ahead to China's PMIS and 0:13:15.320 --> 0:13:18.720 the computext High Pay event featuring a number of AI 0:13:18.760 --> 0:13:22.080 heavy hitters. But first to Europe, where inflation is down 0:13:22.120 --> 0:13:24.520 and interest rate cuts are on the agenda. When the 0:13:24.559 --> 0:13:28.520 European Central Bank meets this Thursday. Meantime, voters head to 0:13:28.559 --> 0:13:31.280 the polls and elections for the European Parliament. For more, 0:13:31.400 --> 0:13:33.920 Let's go to London and bring in Bloomberg Daybreak europe 0:13:33.960 --> 0:13:35.320 Banker Steven Carrol. 0:13:36.040 --> 0:13:38.280 Tom, let me take you back to October of twenty 0:13:38.360 --> 0:13:40.920 twenty two, when inflation hit a peak of ten point 0:13:41.040 --> 0:13:44.600 six percent across the countries that use the Euro. Since then, 0:13:44.640 --> 0:13:47.120 the ECB raised rates to four and a half percent, 0:13:47.280 --> 0:13:50.640 where they've stayed since last September. Now in the coming days. 0:13:50.679 --> 0:13:54.600 As widely telegraphed by policymakers, we're expecting the first interest 0:13:54.679 --> 0:13:58.080 rate cut of twenty five basis points, and that's because 0:13:58.400 --> 0:14:02.600 inflation has come down. It also puts the ECB ahead 0:14:02.720 --> 0:14:05.920 of the FED, a move that's drawn much attention. What's 0:14:06.000 --> 0:14:09.800 less clear, though, is what happens after the June ECB meeting. 0:14:10.040 --> 0:14:12.800 I've been discussing this with our senior Euro Area economist, 0:14:12.880 --> 0:14:15.760 David Powell, and started by asking him about the data 0:14:16.000 --> 0:14:17.840 that's in the backdrop to this rate decision. 0:14:18.280 --> 0:14:22.000 If we remember, going back to last year, after the 0:14:22.240 --> 0:14:26.240 huge rise and energy prices, inflation in the EU Area 0:14:26.760 --> 0:14:31.680 was reaching unprecedented levels and that has come down considerably. 0:14:31.760 --> 0:14:35.120 We're no longer that far from the target anymore on 0:14:35.200 --> 0:14:38.080 either the headline or the core. So basically what's happened 0:14:38.160 --> 0:14:41.520 is the ECB put interest rates into very restrictive territory 0:14:41.600 --> 0:14:44.840 result of high inflation, and that has come down. Now 0:14:45.000 --> 0:14:48.760 we've seen inflation, while still above target, come much closer 0:14:48.760 --> 0:14:52.080 to it, and basically the lower levels of inflation are 0:14:52.120 --> 0:14:56.120 allowing the ECB to remove some of the monetary tightening. 0:14:56.440 --> 0:14:58.680 Talk to us about the bumps we've seen in the 0:14:58.760 --> 0:15:01.680 data though, because it hasn't been a completely smooth downward 0:15:01.760 --> 0:15:04.880 trajectory for inflation. I mentioned the surprise in the German 0:15:05.240 --> 0:15:08.760 and the Spanish data as well. Are those causes for concern? 0:15:09.160 --> 0:15:12.880 Well, in the most recent releases that we've seen, those 0:15:13.280 --> 0:15:16.160 movements are small relative to what we were seeing kind 0:15:16.200 --> 0:15:18.400 of a year ago or something. So when you take 0:15:18.440 --> 0:15:20.800 a step back and you look at the big picture 0:15:20.840 --> 0:15:24.480 and you remember that back in October twenty twenty two, 0:15:24.680 --> 0:15:29.440 inflation the eye was nearly eleven percent and the reading 0:15:29.440 --> 0:15:32.000 which was for April was at two point four percent. 0:15:32.240 --> 0:15:35.840 So the big picture is a huge process of disinvation 0:15:35.960 --> 0:15:39.160 has gone on, even if right now we're seeing some 0:15:39.440 --> 0:15:42.760 kind of upward surprises to the upside, and we do 0:15:42.840 --> 0:15:45.720 expect even before the upside surprises that we had, we 0:15:45.760 --> 0:15:49.160 were already expecting your area inflation to tick up a 0:15:49.240 --> 0:15:52.520 little bit in May, largely due to a base effect 0:15:52.560 --> 0:15:54.800 from transportation prices in Germany. 0:15:55.080 --> 0:15:59.560 Let's talk about what happens after the upcoming meeting for 0:16:00.040 --> 0:16:02.920 the European Central Bank though, because the rat cut has 0:16:02.960 --> 0:16:07.400 been largely telegraphed by you know, so many policymakers, including 0:16:07.480 --> 0:16:10.840 Christine Legard, but there's a bit of difference of opinion 0:16:11.120 --> 0:16:14.080 about what the ECB does after the June meeting. 0:16:14.400 --> 0:16:14.800 That's right. 0:16:14.840 --> 0:16:17.160 The rat cut in June is basically a done deal. 0:16:17.280 --> 0:16:21.040 In fact, the governor of the French Central Bank used 0:16:21.080 --> 0:16:23.840 that exact phrase. He said it's a done deal recently 0:16:24.360 --> 0:16:27.560 in an interview while barring any surprises is what he said. 0:16:28.200 --> 0:16:30.800 And we've had that same message from La guard and 0:16:30.840 --> 0:16:33.920 even the most hawkish members of the governing Council, Bundesbank 0:16:33.960 --> 0:16:38.400 president Johakim Nagle and others. So that does seem to 0:16:38.400 --> 0:16:40.840 be a done deal. And the debates really moved on, 0:16:41.040 --> 0:16:43.360 and here the hawks are already coming out with their opposition. 0:16:43.400 --> 0:16:46.200 They're being very firm. We had Isabelle Schnabler, member the 0:16:46.240 --> 0:16:50.080 executive board is from Germany, say she was opposed to 0:16:50.120 --> 0:16:53.600 a July move. We've had the Bundesbank president Yoakim Nagle 0:16:53.640 --> 0:16:57.280 say the same thing, and others on that hawker's side 0:16:57.280 --> 0:16:59.640 of the spectrum. They basically want to quash any thought 0:16:59.640 --> 0:17:02.040 of a July move, and they're saying that we need 0:17:02.080 --> 0:17:05.120 to wait for this important quarterly data that we're getting 0:17:05.160 --> 0:17:07.800 in June, but we'll not get again until September, and 0:17:07.960 --> 0:17:12.439 that quarterly data is the most comprehensive measure of wage growth, 0:17:12.600 --> 0:17:15.679 which comes out in the national accounts, the GDP report, 0:17:16.280 --> 0:17:20.280 and that's available once every three months. Also, the ECB's 0:17:20.600 --> 0:17:23.919 staff economists on the update their forecast once every three months. 0:17:24.000 --> 0:17:26.160 So we'll have all that data in June, then they'll 0:17:26.160 --> 0:17:28.520 have all that data again in September. It is what 0:17:28.520 --> 0:17:30.760 the hawks are saying is July is just too early 0:17:30.920 --> 0:17:33.440 because we won't have enough information to make that decision 0:17:33.680 --> 0:17:34.560 for another move. 0:17:35.080 --> 0:17:38.320 Is there any risk for the ECB in cutting now 0:17:38.480 --> 0:17:40.640 ahead of the FAT. 0:17:40.640 --> 0:17:44.720 The risk that sometimes policymakers worry about is a sharp 0:17:45.520 --> 0:17:49.320 movement in the exchange rate as an interest differentials change, 0:17:49.480 --> 0:17:51.800 But we've not really seen that. We're not seeing any 0:17:51.800 --> 0:17:55.600 movements in the FX markets that are particularly worrisome to 0:17:56.359 --> 0:17:59.639 policy makers. You know, we look at euro dollar, the 0:17:59.640 --> 0:18:03.120 exchange in trade, it's not anywhere that's that's very far 0:18:03.160 --> 0:18:06.680 from it it's been in recent years, and the FED 0:18:06.760 --> 0:18:09.000 is probably not going to be too far behind. We 0:18:09.080 --> 0:18:12.040 have Bloomberg Economics expect the FED to start cutting in July, 0:18:12.160 --> 0:18:15.920 and that's not very far after the ECB. 0:18:16.240 --> 0:18:19.480 In June, when we think about the I suppose the 0:18:20.119 --> 0:18:22.919 rest of the year, or when we look beyond a 0:18:23.000 --> 0:18:27.639 second rate cut, how much could we expect central banks 0:18:27.640 --> 0:18:29.600 to start converging at that point? I suppose. What I'm 0:18:29.600 --> 0:18:32.560 really asking is is how long could divergence last? Looking 0:18:32.560 --> 0:18:34.600 at the data that we have available to us now. 0:18:34.520 --> 0:18:38.280 Well, the your area is very different, The state of 0:18:38.320 --> 0:18:40.159 the your economy is very different the state of the 0:18:40.240 --> 0:18:44.640 US economy. The US economy going into this inflationary surch 0:18:44.720 --> 0:18:47.440 has this huge amount of physical stimulus. It was really 0:18:47.520 --> 0:18:50.080 absent in Europe. We had some physical stimilus, but nothing 0:18:50.119 --> 0:18:52.720 on that scale, and that really pushed the US economy 0:18:52.720 --> 0:18:56.440 into overdrive. Unemployment was very low, and the economy has 0:18:56.480 --> 0:19:01.520 stayed very strong throughout this period of monetary tightening. The 0:19:01.560 --> 0:19:05.160 same cannot be said about the EU Area. So, for example, 0:19:05.880 --> 0:19:10.200 last year, I think the EUR area economy basically flat line, 0:19:10.200 --> 0:19:13.360 there was no expansion GDP, and in contrast to that, 0:19:13.560 --> 0:19:16.760 the US economy expanded by about three percent or so. 0:19:16.760 --> 0:19:20.439 So the Ewer area is weak and it's going to 0:19:20.520 --> 0:19:24.000 need monetary easing, whether the FED cuts or not. 0:19:24.640 --> 0:19:28.199 We're also looking ahead to the European parliamentary elections that 0:19:28.280 --> 0:19:31.320 are taking place in the coming days as well. Of course, 0:19:31.400 --> 0:19:33.400 economics is going to be a key issue there as 0:19:33.400 --> 0:19:36.240 well as it is in pretty much every election. Talk 0:19:36.320 --> 0:19:41.040 us through the economic situation that European consumers, European households 0:19:41.440 --> 0:19:44.920 are facing, because of course, the right cut, as expected, 0:19:45.119 --> 0:19:47.080 should come just as many are going to the polls. 0:19:47.240 --> 0:19:52.439 Yeah, many consumers around the globe still feel that their 0:19:52.480 --> 0:19:56.880 budgets are being pinched by this surgeon inflation because say 0:19:57.200 --> 0:20:00.639 a basket of groceries that used to cost undred euros 0:20:00.640 --> 0:20:03.719 now cost one hundred and twenty euros, and we're not 0:20:03.760 --> 0:20:06.240 seeing prices go down, so that's going to remain the same. 0:20:06.280 --> 0:20:09.359 It still feels expensive to several years ago. What's happening 0:20:09.440 --> 0:20:11.800 is inflation comes out and prices are just no longer 0:20:11.920 --> 0:20:15.639 rising as quickly as they previously were, so people still 0:20:15.640 --> 0:20:18.879 feel that pinch. Real incomes in the EUR area have 0:20:19.080 --> 0:20:23.160 not caught up to pre pandemic levels, meaning the inflation 0:20:23.320 --> 0:20:27.800 has outpaced income growth. We're seeing high wage growth in 0:20:27.800 --> 0:20:30.639 the EU area now and probably over the course of 0:20:30.680 --> 0:20:33.119 the next couple of years, there will be a catchup 0:20:33.160 --> 0:20:35.879 in real incomes to pre pandemic levels, meaning that the 0:20:36.000 --> 0:20:39.840 growth and wages will make up for the purchasing power 0:20:39.920 --> 0:20:42.960 loss to inflation. Consumers will feel better about it at 0:20:42.960 --> 0:20:46.840 that stage. But around the Western World, where we have 0:20:46.920 --> 0:20:50.560 seen this inflationary surge, and other places in the world 0:20:50.600 --> 0:20:54.080 as well, consumers still feel that things are not great. 0:20:54.440 --> 0:20:58.560 That was Bloomberg's senior Euro Area economist David Powell. So 0:20:58.640 --> 0:21:01.000 let's talk more than about the poly. Some four hundred 0:21:01.040 --> 0:21:03.439 million voters across the European Union will be able to 0:21:03.480 --> 0:21:05.960 cast their ballots in the coming days to elect seven 0:21:06.040 --> 0:21:09.640 hundred and twenty members of the European Parliament. These elections 0:21:09.680 --> 0:21:12.080 will influence the policymaking course of the EU for the 0:21:12.119 --> 0:21:15.119 next five years and help determine who gets the top 0:21:15.240 --> 0:21:18.959 jobs of Presidents of the European Commission, European Council, and 0:21:19.080 --> 0:21:22.720 High Representative for Foreign Affairs. This at a time when 0:21:22.760 --> 0:21:26.520 the EU is facing economic and geopolitical challenges, with the 0:21:26.560 --> 0:21:30.600 ongoing war in Ukraine, trade tensions with China, and concerns 0:21:30.640 --> 0:21:35.000 over the bloc's competitiveness versus the United States. We've been 0:21:35.040 --> 0:21:37.520 speaking to many of the leading political figures in the 0:21:37.520 --> 0:21:40.719 European elections on Bloomberg Radio and television, and asking them 0:21:40.760 --> 0:21:43.359 about the key issues in this vote. Let's start by 0:21:43.440 --> 0:21:46.280 hearing from Nicola Schmidt, lead candidate for the Party of 0:21:46.320 --> 0:21:50.160 European Socialists, currently the second biggest grouping in the European Parliament. 0:21:50.720 --> 0:21:53.600 Well, the biggest issue in this election is the future 0:21:53.600 --> 0:21:59.040 of Europe. It's the decision about the future direction Europe 0:21:59.040 --> 0:22:01.560 will take. I think we are living now in a 0:22:01.680 --> 0:22:08.760 very different geopolitical, economic, global economic context, and this means 0:22:08.800 --> 0:22:12.159 that Europe has to be up to this new challenges. 0:22:12.720 --> 0:22:15.880 And this means also that we have to strengthen Europe 0:22:16.480 --> 0:22:20.960 in different areas, the economic, the technological, the green transformation, 0:22:21.160 --> 0:22:25.240 but also our defense. If this does not happen, really 0:22:25.400 --> 0:22:27.639 Europe could be on the loser's edge. 0:22:28.200 --> 0:22:30.960 The Liberal renew Europe group is the third largest and 0:22:31.000 --> 0:22:35.000 the outgoing parliament Hungarian MEP Kathleen che told us she's 0:22:35.040 --> 0:22:38.440 worried about the threat posed by disinformation in this election. 0:22:38.880 --> 0:22:40.639 I have to say, as a Hungarian we have been 0:22:40.680 --> 0:22:43.800 seeing signs of Russian disinformation every day ever since the 0:22:43.800 --> 0:22:46.119 war broke out. If I turn on the television, the 0:22:46.160 --> 0:22:49.520 state television in Hungary, all I hear is Russian propaganda. 0:22:49.640 --> 0:22:54.159 The Russian hackers were infiltrating or foreign ministry for years, 0:22:54.240 --> 0:22:56.560 the government knew about it and they did nothing. So 0:22:56.640 --> 0:22:59.840 Russian influences here in the heart of Europe alive, and 0:23:00.720 --> 0:23:03.399 we have to protect our democratic systems. We have to 0:23:03.440 --> 0:23:10.440 protect our citizens through establishing a strong anti distintformation framework 0:23:10.560 --> 0:23:12.080 and to protect our security. 0:23:12.359 --> 0:23:15.120 Her fear is about interference are shared by the Greens 0:23:15.200 --> 0:23:18.840 co lead candidate Terry Rinker from Germany. She's also concerned 0:23:18.880 --> 0:23:21.960 about a rise and support for far right parties, which 0:23:22.119 --> 0:23:26.480 she suggests could jeopardize some of her parties climate initiatives. 0:23:26.560 --> 0:23:29.080 What we are facing right now if there is, for example, 0:23:29.119 --> 0:23:31.840 as search of the far right, that the whole European 0:23:31.880 --> 0:23:34.280 project is basically going to be put in question. So 0:23:34.720 --> 0:23:38.080 that would have horrible consequences but for Europeans, but I 0:23:38.119 --> 0:23:41.520 think also across the world. And one of the key 0:23:41.560 --> 0:23:44.200 issues that we will be discussing is how we continue 0:23:44.200 --> 0:23:46.760 with the Green Deal. So will we go down the 0:23:46.800 --> 0:23:49.719 path of climate neutrality that Europe has taken cause on 0:23:50.200 --> 0:23:52.480 or will we have a back and forth and basically 0:23:52.520 --> 0:23:54.480 go back and with that not only not meet the 0:23:54.480 --> 0:23:57.719 climate targets, but also create a lot of economic and security. 0:23:58.040 --> 0:23:59.720 Now we haven't managed to speak yet to the center 0:23:59.760 --> 0:24:02.760 right European People's Party. That's the group that commissioned president 0:24:02.880 --> 0:24:05.920 erslavanderline belongs to. They were the biggest group in the 0:24:05.960 --> 0:24:09.760 last parliament. Their manifesto promises to focus on competitiveness, supporting 0:24:09.880 --> 0:24:13.399 Ukraine and what they're calling smart trade agreements with like 0:24:13.560 --> 0:24:17.080 minded partners. Now the EPP allied with the Socialists and 0:24:17.160 --> 0:24:19.600 renew in the last parliament to build their governing coalition. 0:24:19.840 --> 0:24:22.080 But ahead of this vote, there's been much focus about 0:24:22.080 --> 0:24:24.880 where else the EPP might look for support if they 0:24:24.920 --> 0:24:28.400 don't have enough seats after the election. One option would 0:24:28.440 --> 0:24:31.760 be the right wing European Conservatives and Reformists. They include 0:24:31.760 --> 0:24:35.600 the party of Italy's Prime Minister Georgia Maloney. Belgian MEP 0:24:35.800 --> 0:24:38.600 Johann van Overertfeldt is a member. We asked him whether 0:24:38.640 --> 0:24:41.480 he do business whether our slavanderline after the elections. 0:24:42.080 --> 0:24:43.960 Well, that will depend on what she comes up with 0:24:44.080 --> 0:24:47.480 in terms of her policy priorities, and we really want 0:24:47.480 --> 0:24:49.399 her to be a little bit more specific on that 0:24:49.760 --> 0:24:52.480 than what she has been telling us now. But as 0:24:52.520 --> 0:24:55.800 of course a distinct possibility that we might support her. Yes, 0:24:56.480 --> 0:24:59.040 it's not a done deal. Far from it, but it's 0:24:59.040 --> 0:24:59.880 a possibility. 0:25:00.240 --> 0:25:01.920 What would you expect in return. 0:25:01.800 --> 0:25:05.240 Good policies, that's the major thing, and especially with respect 0:25:05.240 --> 0:25:08.760 to Ukraine defense and a few other things like, for example, 0:25:08.880 --> 0:25:12.000 further adjustments in the Green Deal to better take into 0:25:12.000 --> 0:25:16.280 accounts for example, Europeans sorely lacking competitiveness. 0:25:16.680 --> 0:25:19.800 That was the MEP Johann van Overtfeld from Belgium. Now 0:25:19.800 --> 0:25:21.639 you'll find a full list of candidates in the European 0:25:21.640 --> 0:25:24.640 elections on the europe Elect's website. And we'll have full 0:25:24.680 --> 0:25:27.720 coverage of the ECB decision and the European Parliament elections 0:25:27.720 --> 0:25:30.920 on Bloomberg Daybreak Europe in the coming days, including special 0:25:30.960 --> 0:25:34.320 programming from Brussels. I'm Stephen, Carol and London. You can 0:25:34.359 --> 0:25:37.119 catch us every weekday morning here for Bloomberg Daybreak Europe, 0:25:37.119 --> 0:25:39.959 beginning at six am in London and one am on 0:25:40.040 --> 0:25:40.560 Wall Street. 0:25:40.760 --> 0:25:43.479 Tom, thank you, Steven, and coming up on Bloomberg day 0:25:43.480 --> 0:25:45.800 Break weekend and look ahead to the compu text type 0:25:45.800 --> 0:25:49.960 pay event featuring a number of AI heavy hitters. I'm 0:25:50.000 --> 0:26:04.639 Tom Busby and this is Bloomberg. I'm Tom Busby in 0:26:04.680 --> 0:26:06.440 New York with your global look ahead at the top 0:26:06.480 --> 0:26:09.240 stories for investors in the coming week. This week, we'll 0:26:09.240 --> 0:26:12.640 be getting a slew of trade data out of China, 0:26:12.680 --> 0:26:16.240 also the COMPUTECHS tech show in Taipei, which coincides with 0:26:16.320 --> 0:26:20.400 TSMC's May sales and revenue release. Let's get to Bloomberg 0:26:20.480 --> 0:26:23.800 Daybreak Asia host Brian Curtis to walk us through all 0:26:23.840 --> 0:26:24.880 these upcoming events. 0:26:25.160 --> 0:26:28.480 Tom we look ahead to more economic data in China, 0:26:28.520 --> 0:26:32.360 including the trade numbers from May. The PMI figures came 0:26:32.359 --> 0:26:34.919 in a little disappointing, and we'll have more on that 0:26:35.000 --> 0:26:38.520 in just a moment. Meantime, the IMF recently raised its 0:26:38.560 --> 0:26:42.080 forecast for overall growth in China in twenty twenty four 0:26:42.440 --> 0:26:45.399 to five percent. That's up from a previous prediction of 0:26:45.440 --> 0:26:48.520 four point six percent. The IMF said that that reflects 0:26:48.600 --> 0:26:51.439 a strong expansion at the start of this year and 0:26:51.520 --> 0:26:55.320 additional support from the government. In an exclusive interview with 0:26:55.320 --> 0:27:00.200 Bloomberg's Haslinda Ahman, first Deputy Managing director Gita Gobinov talked 0:27:00.200 --> 0:27:02.560 about the macro policy measures from Beijing. 0:27:02.880 --> 0:27:07.840 We've upgraded China's growth by zero point four percentage points 0:27:07.880 --> 0:27:10.080 for this year and for next, so we have growth 0:27:10.119 --> 0:27:12.640 now projected at five percent for this year and four 0:27:12.640 --> 0:27:15.800 point six percent for next year. There are two main 0:27:15.880 --> 0:27:19.320 drivers for that. The first is the better than expected 0:27:19.400 --> 0:27:23.520 first quarter GDP numbers that came out for twenty twenty four. 0:27:23.640 --> 0:27:27.240 That is lifting up our growth projection. And the second 0:27:27.400 --> 0:27:30.679 is we have incorporated some of the newer announcements that 0:27:30.720 --> 0:27:33.119 have been made on the policy front. So those are 0:27:33.119 --> 0:27:34.560 the two main reasons for the upgrade. 0:27:34.600 --> 0:27:37.680 But some say five percent is actually out of reach 0:27:37.720 --> 0:27:41.040 for China. They say private sector sentiment is still weak. 0:27:41.320 --> 0:27:45.080 The property sector is also in the Doldrum sixteen million 0:27:45.119 --> 0:27:48.959 home still unsold, and some point to Chinavanka under a 0:27:48.960 --> 0:27:52.159 lot of financial stress at some point, Gita, that is 0:27:52.359 --> 0:27:55.240 likely to weigh on confidence, way on sentiment, way on. 0:27:55.119 --> 0:27:56.880 Growth as well. What's your take on that. 0:27:57.440 --> 0:28:01.679 So China's economy is continuing to recover, so we certainly 0:28:02.080 --> 0:28:05.520 are seeing that consumption is recovering, but still it has 0:28:05.720 --> 0:28:08.439 some ways to go. The strength we're seeing in public 0:28:08.480 --> 0:28:13.600 investment remains. Private investments is still weak, mainly because of 0:28:13.720 --> 0:28:16.919 the weakness and the property sector. So we are seeing 0:28:18.000 --> 0:28:20.280 signs of recovery, but yes, we need to see more 0:28:20.320 --> 0:28:23.560 evidence of that. But despite that, we do expect that 0:28:23.720 --> 0:28:26.359 growth will be around five percent this year. 0:28:26.640 --> 0:28:27.760 What more needs to be done? 0:28:27.800 --> 0:28:31.200 So, firstly, I would like to recognize the policy steps 0:28:31.200 --> 0:28:34.800 that have been taken. I mean the recent announcement which 0:28:34.920 --> 0:28:41.000 involves upgrading equipment of firms but also consumer goods of households. 0:28:41.200 --> 0:28:45.120 That can help. But yes, in our view more will 0:28:45.120 --> 0:28:48.400 be needed, and so specifically on the property sector front, 0:28:48.440 --> 0:28:50.680 I think what would be very helpful is to deal 0:28:50.760 --> 0:28:54.000 with the problem of pre sold housing. So there are 0:28:54.080 --> 0:28:57.120 large number of houses that have been presold but have 0:28:57.240 --> 0:29:00.280 not been completed. Here we see a bigger role for 0:29:00.320 --> 0:29:02.600 the central government to come in to deal with that, 0:29:02.720 --> 0:29:06.600 to be able to complete those pre sold houses because 0:29:06.600 --> 0:29:08.840 when that happens, that's going to help house or confidence 0:29:08.960 --> 0:29:11.720 which is really essential at this time and also will 0:29:11.760 --> 0:29:15.960 help with the exit of non viable developers. Secondly, in 0:29:16.080 --> 0:29:20.120 terms of providing support, while overall we think that there 0:29:20.120 --> 0:29:22.520 should be a fiscal neutral stance, I think it's is 0:29:22.560 --> 0:29:25.560 important that the spending goes in the direction of helping 0:29:25.720 --> 0:29:28.360 low income households because they are the ones who are 0:29:28.400 --> 0:29:30.840 able to consume more of that additional income and that 0:29:30.880 --> 0:29:33.280 will also provide a boost to the economy. 0:29:32.880 --> 0:29:37.120 Geter gopinatt there from the IMF. Meantime, China's factory activity 0:29:37.240 --> 0:29:41.880 contracted in May, missing estimates for expansion. The official PMI 0:29:41.960 --> 0:29:45.440 fel to forty nine point five compared to fifty point 0:29:45.520 --> 0:29:49.160 four last month and the forecast of fifty point five. 0:29:49.440 --> 0:29:52.440 It's a warning sign that GDP may struggle to reach 0:29:52.480 --> 0:29:56.120 the government's target of growth of around five percent this year. 0:29:56.480 --> 0:29:58.880 Wendy Chan at GAM Investments. 0:29:58.480 --> 0:30:01.320 Its definitely come as a the slight disappointment for the 0:30:01.360 --> 0:30:04.160 market as what people are expecting to see another month 0:30:04.280 --> 0:30:07.480 of expansion just to keep the seam of the past 0:30:07.480 --> 0:30:10.040 two months and supported by a kind of healthy order 0:30:10.080 --> 0:30:13.320 book on the manufacturing side. But however, we probably need 0:30:13.360 --> 0:30:17.160 to focus on what does it mean for the regulator 0:30:17.240 --> 0:30:20.640 to counter react on that, because the PMI is definitely 0:30:20.680 --> 0:30:24.320 impact on the pace of physical and the monetary policy 0:30:24.320 --> 0:30:27.600 to follow, such as the intensity of the monitor easing 0:30:27.640 --> 0:30:30.120 as well as the government bound issuers, which to be 0:30:30.160 --> 0:30:32.640 FRED has been behind the schedule a little bit. 0:30:32.480 --> 0:30:35.160 And China is hoping that tech investment can help it 0:30:35.560 --> 0:30:38.520 with growth in the general economy. It's doubling down on 0:30:38.560 --> 0:30:42.280 its efforts to stimulate the domestic chip industry. The Big 0:30:42.320 --> 0:30:45.880 Fund three was just formulated at forty seven point five 0:30:45.960 --> 0:30:50.320 billion dollars of funding since time. Co founder Being Shoe says, 0:30:50.680 --> 0:30:53.520 the Chinese chip makers are catching up fast on AI. 0:30:54.000 --> 0:30:56.560 He spoke with Bloomberg's David and Glaze at the UBS 0:30:56.600 --> 0:30:57.600 conference in Hong Kong. 0:30:57.720 --> 0:31:01.520 The one that having a leadership in Yeah technology will 0:31:01.640 --> 0:31:05.000 be attracting a lot of customers to work with them. 0:31:05.200 --> 0:31:08.320 So I see that already in the US a lot 0:31:08.320 --> 0:31:12.520 of customers working closely with leaders like open Ai, like Anthropic, 0:31:12.680 --> 0:31:15.920 and I believe that in the Asian markets there will 0:31:15.960 --> 0:31:18.360 also be leaders as well, So we try to be 0:31:18.480 --> 0:31:22.320 that leader. But of course there are shortage of resources 0:31:22.400 --> 0:31:25.640 here in Asia. I think in general it's like the 0:31:25.680 --> 0:31:28.680 ten times of gap of the compute resources that we 0:31:28.800 --> 0:31:32.600 have here compared to the US leaders. But I think 0:31:32.960 --> 0:31:36.200 Asian market is never lack of talents and never lack 0:31:36.240 --> 0:31:38.600 of data. So in terms of talents and data, I 0:31:38.640 --> 0:31:42.240 think eventually we will be able to, you know, make 0:31:42.280 --> 0:31:45.360 sure that we squeeze the last bit of the compute 0:31:45.360 --> 0:31:47.600 out then right, Yeah, try to be there. 0:31:47.720 --> 0:31:50.560 That brings up the topic of and you mentioned you 0:31:50.600 --> 0:31:52.720 work with in Nvidia. You invested a lot, of course 0:31:52.760 --> 0:31:55.160 in buying in Vidia inventory. You know, of course, of 0:31:55.240 --> 0:31:58.400 these restrictions that the US has placed on China's access 0:31:58.400 --> 0:32:00.880 to some of these technologies. The problem for the secretory 0:32:00.920 --> 0:32:03.000 is that the problem for you, how are you working 0:32:03.000 --> 0:32:05.600 around that, for example? And you think that in any 0:32:05.640 --> 0:32:09.520 way constraints China's ability to meet it on aim chet. 0:32:10.000 --> 0:32:14.040 That does impose a challenge to everybody, not just the 0:32:14.080 --> 0:32:17.560 companies in China, but also companies in the US. In China, 0:32:17.640 --> 0:32:20.720 we also do a lot of fundamental innovation. We also 0:32:20.760 --> 0:32:22.600 publish a lot of papers. We do a lot of 0:32:22.680 --> 0:32:25.400 open source. See the open source models that we released 0:32:25.440 --> 0:32:32.400 recently our open source version of multimodality model called the INTENVL. 0:32:32.960 --> 0:32:36.760 Actually it beats activity for a week, and we recently 0:32:36.840 --> 0:32:39.720 re open source another one, a large Luguay model that 0:32:39.760 --> 0:32:45.040 does really good maths and it beats almost all the models. 0:32:45.640 --> 0:32:48.440 We try to share what we discover in the JAI 0:32:49.040 --> 0:32:52.720 in the EGI in general. There are also domestic chips 0:32:52.880 --> 0:32:56.320 coming up that's catching up with the international leader the 0:32:56.400 --> 0:32:59.440 chip leaders really quickly. And we're also working with this 0:32:59.600 --> 0:33:02.960 do net domestic chips to expanding the compue that we have. 0:33:03.440 --> 0:33:07.600 How far behind do you think the domestic chip sector 0:33:07.720 --> 0:33:09.200 is compared. 0:33:08.840 --> 0:33:09.200 To the West. 0:33:09.240 --> 0:33:12.040 All it's hot to sell because I believe that in 0:33:12.120 --> 0:33:15.480 the lauralm there will be a smaller gap. Okay, short 0:33:15.560 --> 0:33:19.240 term right now, I think somebody says one year, sometimes 0:33:19.280 --> 0:33:20.840 somebody says three years. 0:33:20.920 --> 0:33:24.240 Since time co founder Bing Shu, and a lot of 0:33:24.240 --> 0:33:27.880 this will play out across the Taiwan straight At Computex Taipei, 0:33:28.160 --> 0:33:31.400 it gets underway with advanced semiconductors very much at the 0:33:31.440 --> 0:33:34.000 heart of the event. We'll have a number of top 0:33:34.040 --> 0:33:38.960 executives there and CEOs and companies like TSMC and Qualcomm 0:33:38.960 --> 0:33:42.920 and AMD among others, all in attendance. Joining us now 0:33:42.920 --> 0:33:46.520 for some discussion about the invisible threads that run through 0:33:46.760 --> 0:33:51.200 all of this is Lad Savov, Bloomberg Tech expert, San Francisco, 0:33:51.320 --> 0:33:55.800 forty nine ers fanboy, and my favorite Bulgarian on the planet. Lad, 0:33:55.840 --> 0:33:59.040 thanks very much for being with us here for this discussion. First, 0:33:59.320 --> 0:34:01.960 to some of the point it's made thereby being a hue, 0:34:02.600 --> 0:34:06.240 is China catching up on advanced chip making and AI. 0:34:06.760 --> 0:34:09.239 Well, that's trigger to say. I would put it that 0:34:09.280 --> 0:34:12.680 he is being very optimistic about the situation, One of 0:34:12.760 --> 0:34:15.040 the things that you have to look at is Nvidia 0:34:15.160 --> 0:34:19.520 and its leadership in AI accelerators is largely uncontested whe 0:34:19.520 --> 0:34:22.280 are you looking at the US globally or within China, 0:34:22.360 --> 0:34:26.160 and those key AI accelerators are the exact thing that 0:34:26.239 --> 0:34:29.280 the US sanctions have kept out of China. Its nearest competitor, 0:34:29.320 --> 0:34:32.160 AMD also has its own offerings and they have also 0:34:32.200 --> 0:34:34.480 been captured by those sanctions. So when you talk about 0:34:34.520 --> 0:34:37.799 the companies that develop the AI models, the ones that 0:34:37.880 --> 0:34:40.440 need these data centers full of the fastest and the 0:34:40.440 --> 0:34:43.880 best possble accelerators in China, they don't have them because 0:34:43.960 --> 0:34:46.920 those are made by US companies. There are a couple 0:34:46.960 --> 0:34:49.920 of players, such as Burn Technology, who are developing their 0:34:49.960 --> 0:34:54.560 own alternatives. Domestically, Huawei has been made effectively China's chip 0:34:54.600 --> 0:34:57.440 making development champion, and it did have that big breakthrough 0:34:57.480 --> 0:35:00.080 with a smartphone processor. But both of them still have 0:35:00.120 --> 0:35:01.320 a lot to prove on this front. 0:35:01.600 --> 0:35:03.759 So we heard from being Shue there from since time. 0:35:03.800 --> 0:35:07.319 I'm curious because he referenced this, who will be the 0:35:07.400 --> 0:35:10.360 leaders of AI in Asia? In China? 0:35:10.520 --> 0:35:12.359 Well, this is a fun thing, and this is what 0:35:12.400 --> 0:35:13.959 makes computext such a compelling show. 0:35:14.080 --> 0:35:14.640 We don't know. 0:35:14.800 --> 0:35:17.520 It's still very very early on now. When you look 0:35:17.520 --> 0:35:19.640 at nvideo share price, you can say there's been a 0:35:19.680 --> 0:35:22.680 lot of impact because there's been a lot of buying already, 0:35:23.120 --> 0:35:26.160 but it is still very early. The likes of AMD 0:35:26.360 --> 0:35:28.719 can take the lead. Quot coom another one of these 0:35:28.719 --> 0:35:31.400 players is CEO will have one of the highlight keynotes 0:35:31.440 --> 0:35:35.080 of computext. It's making a big push into AI chips 0:35:35.080 --> 0:35:38.040 on devices not in the data centers. So there's all 0:35:38.040 --> 0:35:40.200 of this opportunity and it's still very early days. 0:35:40.320 --> 0:35:42.480 We just had this announcement of the Big Fund three 0:35:42.760 --> 0:35:48.000 and I'm curious exactly how that funding gets deployed in China. 0:35:47.920 --> 0:35:50.759 So am I Brian. We're going to find out it's 0:35:50.800 --> 0:35:52.719 forty eight billion dollars. It's not going to be just 0:35:52.760 --> 0:35:56.160 handed out overnight. It's going to require a bit of focus, 0:35:56.239 --> 0:35:59.319 I would argue, because one of the interesting things is 0:35:59.360 --> 0:36:01.440 when you look at the likes of TSMC, one of 0:36:01.480 --> 0:36:04.560 the big chip makers in Taiwan, Samsung likewise, they spent 0:36:04.719 --> 0:36:07.920 upwards of thirty billion dollars per year in capital expenditure. 0:36:08.239 --> 0:36:11.040 If China wants to have its own competitors, to those companies. 0:36:11.080 --> 0:36:14.400 It can't really just spend the money all across. It 0:36:14.440 --> 0:36:16.840 needs to focus. Maybe Huawei will be the focus of 0:36:16.880 --> 0:36:19.680 that investment, but it also needs to build out a 0:36:19.800 --> 0:36:22.239 wide ecosystem. One of the things that you hear from 0:36:22.360 --> 0:36:25.479 Taiwanese ministers and even the likes of a Vidia CEO 0:36:25.600 --> 0:36:30.360 Jensen Huang, is that there is a massive ecosystem around TSMC. 0:36:30.400 --> 0:36:32.920 It's not just TSMC as a single company. There are 0:36:33.120 --> 0:36:36.920 countless companies that create components, that put together servers and 0:36:36.960 --> 0:36:39.399 do older work that's required around the chip making. 0:36:39.800 --> 0:36:42.000 So when you look at TSMC, you can tell the 0:36:42.080 --> 0:36:45.080 huge impact it has had on the taiwan economy. And 0:36:45.120 --> 0:36:47.560 we talked about Nvidia and AMD, and when you look 0:36:47.560 --> 0:36:52.440 at how AI is impacting investment in the United States 0:36:52.480 --> 0:36:55.640 and even growth in the United States, you can understand 0:36:55.920 --> 0:36:58.280 that point that we made earlier that China is looking 0:36:58.400 --> 0:37:02.719 for high investment and per perhaps AI and semiconductors to 0:37:02.800 --> 0:37:06.520 help fuel the Chinese economy. Is that possible sometime in 0:37:06.560 --> 0:37:07.279 the next year or two. 0:37:07.520 --> 0:37:09.800 Well, as I mentioned, it's stay early days. I think 0:37:09.960 --> 0:37:13.719 the payoff on AI likewise early days. When you look 0:37:13.760 --> 0:37:16.560 at some of the polling Lenobo, for example, did a 0:37:16.600 --> 0:37:19.719 polling of CIOs around the world and many of them 0:37:20.000 --> 0:37:22.719 expect a year at least, maybe even two before they 0:37:22.800 --> 0:37:26.480 start monetizing their investments in AI. And ask globally, when 0:37:26.520 --> 0:37:28.880 you look at China with its economic challenges, with the 0:37:28.960 --> 0:37:31.759 US anction and everything else, I think the length of 0:37:31.800 --> 0:37:34.080 time that is going to take to monetize these AA 0:37:34.160 --> 0:37:35.720 services might be even longer. 0:37:35.760 --> 0:37:38.200 You're going to be at computex right, yes, sir. What 0:37:38.360 --> 0:37:40.640 will be most interesting to you? What will you really 0:37:40.640 --> 0:37:41.399 be looking for? 0:37:41.640 --> 0:37:44.440 Well, the big announcement at computext is the thing that 0:37:44.480 --> 0:37:47.320 Microsoft and quot coom have already given us in advance. 0:37:47.360 --> 0:37:50.960 It's these co pilot plus PCs, the quote unquote aipcs. 0:37:51.040 --> 0:37:53.120 The thing I really want to find out is how 0:37:53.160 --> 0:37:56.280 they justify that label. I still see it as marketing 0:37:56.280 --> 0:37:59.560 and branding more than actual end user changes. But if 0:37:59.560 --> 0:38:02.440 there is a tangible advantage to ODIs AI that Microsoft 0:38:02.480 --> 0:38:05.480 is stuffing into PCs, we can see a real optick 0:38:05.600 --> 0:38:07.960 in the PC industry. The pandemic and a lack of 0:38:08.040 --> 0:38:11.239 innovation have really kind of plateaued the PC industry for 0:38:11.320 --> 0:38:14.359 many years now, and Microsoft, Quocom and a whole bunch 0:38:14.360 --> 0:38:16.680 of other companies are betting on Ai being the driver 0:38:16.880 --> 0:38:18.800 to get people to buy new devices. 0:38:18.960 --> 0:38:21.800 Lad, thanks so much for joining us. Flat Salvov, Bloomberg 0:38:21.880 --> 0:38:25.480 tech expert with us on the program. I'm Brian Curtis 0:38:25.480 --> 0:38:28.080 along with Doug Chrisner. You can catch us every weekday 0:38:28.120 --> 0:38:31.240 here for Bloomberg day Break Asia, beginning at eight am 0:38:31.239 --> 0:38:34.040 in Hong Kong and eight pm on Wall Street. 0:38:34.360 --> 0:38:37.160 Tom, thank you, Brian, and that does it for this 0:38:37.320 --> 0:38:40.200 edition of Bloomberg day Break Weekend. Join us again Monday 0:38:40.200 --> 0:38:42.360 morning at five am Wall Street time for the latest 0:38:42.360 --> 0:38:44.959 on markets overseas and the news you need to start 0:38:45.000 --> 0:38:48.360 your day. I'm Tom Busby. Stay with us. Top stories 0:38:48.360 --> 0:38:51.920 and global business headlines are coming up right now