Daybreak Weekend: Disney Earnings, BOE Meeting, Xi in Europe

Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.560 --> 0:00:11.920 This is Bloomberg day Break Weekend, our global look at 0:00:11.920 --> 0:00:13.920 the top stories in the coming week from our day 0:00:13.920 --> 0:00:16.880 Break anchors all around the world. Straight Ahead on the program, 0:00:16.880 --> 0:00:18.840 a look at some of the big announcements we can 0:00:18.920 --> 0:00:22.000 expect from Apple's latest product event on May seventh, and 0:00:22.079 --> 0:00:24.959 to look at earnings from the world's biggest entertainment company. 0:00:25.120 --> 0:00:26.639 I'm Tom Busby in New York. 0:00:26.920 --> 0:00:29.880 I'm Stephen Carolyn London, where we're thinking about vote splits 0:00:29.920 --> 0:00:33.600 and inflation dynamics ahead of the Bank of England's upcoming meeting. 0:00:33.840 --> 0:00:36.080 I'm Brian Curtis in Hong Kong. We look ahead to 0:00:36.240 --> 0:00:39.680 Chinese President Shijinping's trip to Europe. What does he hope 0:00:39.720 --> 0:00:40.879 to get from the EU. 0:00:42.479 --> 0:00:46.440 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:46.479 --> 0:00:48.960 E Loove the three Own New York, Bloomberg ninety nine 0:00:49.000 --> 0:00:52.400 to one, Washington, DC, Bloomberg one O six one, Boston, 0:00:52.479 --> 0:00:57.280 Bloomberg nine sixty, San Francisco, DAB, Digital Radio, London, Sirius 0:00:57.400 --> 0:01:00.680 XM one nineteen and around the world on bloemberg Radio 0:01:00.760 --> 0:01:03.040 dot com and via the Bloomberg Business app. 0:01:06.800 --> 0:01:08.640 Good day to you. I'm Tom Busby and we begin 0:01:08.720 --> 0:01:12.399 today's program with tech giant Apple its latest product event 0:01:12.840 --> 0:01:15.760 this Tuesday, May seventh. For more on what we can expect, 0:01:16.040 --> 0:01:21.520 we're joined by Mark German, Bloomberg, Chief correspondent on Global Technology. So, Mark, 0:01:21.600 --> 0:01:24.000 thanks for being here. What do you expect to see 0:01:24.200 --> 0:01:25.679 on Tuesday? From Apple? 0:01:26.080 --> 0:01:28.200 Thank you for having me. So it's been about a 0:01:28.280 --> 0:01:31.000 year and a half since the last time Apple released 0:01:31.000 --> 0:01:35.400 new iPads, right that was October twenty twenty two, So 0:01:35.440 --> 0:01:38.080 they went the full calendar year of twenty twenty three 0:01:38.240 --> 0:01:40.800 without a new iPad. That was the first time since 0:01:40.840 --> 0:01:43.559 the iPad was unveiled by Steve Jobs in twenty ten, 0:01:43.840 --> 0:01:46.000 where the company went a full calendar year without a 0:01:46.000 --> 0:01:49.240 new model. On Tuesday, that's going to change. The company 0:01:49.280 --> 0:01:52.000 is going to be updating its two highest and iPads, 0:01:52.280 --> 0:01:55.080 the iPad Pro and the iPad Air. These are going 0:01:55.160 --> 0:01:57.840 to be quite significant updates. The iPad Air, for the 0:01:57.840 --> 0:02:00.840 first time, is going to get a larger screen size option. 0:02:01.040 --> 0:02:03.480 That's a twelve point nine inch model, much bigger than 0:02:03.480 --> 0:02:06.320 the current eleven inch model. And for the first time, 0:02:06.440 --> 0:02:09.480 the iPad Pro is going to get an OLED screen. 0:02:09.639 --> 0:02:13.600 That's a crisper, more efficient screen. Technology looks much better 0:02:13.639 --> 0:02:15.440 that they've been using on the iPhone and the Apple 0:02:15.480 --> 0:02:18.239 Watch for years. So that's finally coming to the company's iPads. 0:02:18.400 --> 0:02:19.040 Well, that's big. 0:02:19.520 --> 0:02:22.400 What kind of role will artificial intelligence hardware play in this? 0:02:22.919 --> 0:02:25.680 So the new iPad pro at least, is expected to 0:02:25.680 --> 0:02:28.560 have an updated processor that will set the stage for 0:02:28.760 --> 0:02:32.120 AI enhancements that the company will roll out at the 0:02:32.280 --> 0:02:34.720 end of this year. So the iPad won't come out 0:02:34.720 --> 0:02:37.320 the gate with these new AI features, but it'll have 0:02:37.720 --> 0:02:41.520 hardware insights to be able to support a new slate 0:02:41.560 --> 0:02:45.120 of artificial intelligence enhancements when those already towards the end 0:02:45.120 --> 0:02:47.120 of the year with their operating system update. 0:02:47.240 --> 0:02:50.120 Okay, so with the iPads, we're seeing a big change. 0:02:50.280 --> 0:02:53.400 We know that iPad small compared to the sales of 0:02:53.440 --> 0:02:56.680 the iPhone, but still a significant change for Apple. And 0:02:57.120 --> 0:02:59.560 let's talk about what it means to Apple for the 0:02:59.560 --> 0:03:03.600 iPad and is it a launching point for future iPhones? 0:03:03.639 --> 0:03:04.840 What works in the iPad? 0:03:05.200 --> 0:03:08.840 Well, five six years ago, the iPad was really peaking, 0:03:09.000 --> 0:03:11.640 and then it increased in sales again during the COVID 0:03:11.680 --> 0:03:14.320 pandemic when people were just sitting at home buying a 0:03:14.320 --> 0:03:17.240 bunch of stuff, thinking they need these things. But now 0:03:17.360 --> 0:03:20.040 what you're seeing are bigger sales for the Mac, and 0:03:20.160 --> 0:03:23.200 you're seeing more people buying iPhones instead of iPads because 0:03:23.200 --> 0:03:25.760 the iPhone screen sizes have become so big. And by 0:03:25.800 --> 0:03:27.840 the way, they're going to make the iPhone screen size 0:03:27.880 --> 0:03:31.359 even bigger in September with the iPhone sixteen Pro line. 0:03:31.680 --> 0:03:34.680 But the iPad certainly does have place for some people. 0:03:34.720 --> 0:03:38.080 The problem is is that Apple's veered from the original vision. 0:03:38.200 --> 0:03:40.880 The original vision of the iPad under Steve Jobs was 0:03:41.400 --> 0:03:43.720 all the features and goodness of the iPhone, with a 0:03:43.760 --> 0:03:47.400 larger screen, better for viewing photos, better for watching movies. 0:03:48.120 --> 0:03:50.280 And then you know, about a half decade ago, they 0:03:50.400 --> 0:03:52.800 did this odd thing where they tried to make it 0:03:52.880 --> 0:03:56.840 a quasi laptop replacement. They added support for track pads, 0:03:57.120 --> 0:04:00.080 they added support for more pro applications. They were at 0:04:00.120 --> 0:04:03.320 least their own keyboard, They have that Apple pencil stylusts 0:04:03.720 --> 0:04:06.640 and it's sort of this in between device, right It's 0:04:06.840 --> 0:04:10.080 past the point of being the simplistic future of the computer, 0:04:10.360 --> 0:04:15.240 and it's nowhere near a true laptop replacement. And that's problematic. 0:04:15.320 --> 0:04:17.599 Being somewhere in between. That's probably the place you don't 0:04:17.600 --> 0:04:19.800 want to be. And so what they really need to 0:04:19.800 --> 0:04:22.360 do with these new iPads is pick a direction. We're 0:04:22.400 --> 0:04:24.840 long gone from the idea of these things just being 0:04:24.839 --> 0:04:27.279 a bigger iPhone. We no longer want them to be 0:04:27.360 --> 0:04:29.720 these in between our devices. We want them to be 0:04:29.760 --> 0:04:34.640 true laptop replacements. And with the improved hardware, the better screens, 0:04:35.040 --> 0:04:39.280 the larger displays in the iPad, air, faster processors, a 0:04:39.320 --> 0:04:42.279 new version of the keyboard and trackpad case, I'm expecting 0:04:42.520 --> 0:04:44.360 it makes a lot of sense that these things are 0:04:44.360 --> 0:04:47.400 going to be better for people who want to replace 0:04:47.440 --> 0:04:48.200 their laptops. 0:04:48.560 --> 0:04:51.160 Is there also going to be a new iOS operating 0:04:51.200 --> 0:04:53.560 system that it's included in these new iPads. 0:04:53.839 --> 0:04:56.600 Well, the version of iOS that's coming with these new 0:04:56.600 --> 0:04:59.599 iPads going to be a version of iPad OS seventeen, 0:05:00.120 --> 0:05:02.600 which came out last year. That's the current operating system. 0:05:03.000 --> 0:05:05.919 The next operating system for the iPad that's going to 0:05:05.960 --> 0:05:10.719 be iPad OS eighteen that won't be announced until June 0:05:11.000 --> 0:05:14.120 June tenth actually at their developers conference. That will be 0:05:14.160 --> 0:05:17.880 the update that includes all those new artificial intelligence features, 0:05:18.120 --> 0:05:21.480 but that won't be released until sometime around September this year. 0:05:21.440 --> 0:05:24.200 And September also when we should see the iPhone sixteen. 0:05:24.240 --> 0:05:28.440 You said iPhone sixteen launch should be in September as well, 0:05:28.440 --> 0:05:31.480 and those will be the larger displays as well as 0:05:31.480 --> 0:05:33.480 a new button on the higher end models that you 0:05:33.520 --> 0:05:37.520 can control the camera zoom, moving between video and photos 0:05:38.000 --> 0:05:41.080 from the side of the phone itself versus within the software. 0:05:41.279 --> 0:05:43.400 Now, let's talk about the iPhone for a minute, because 0:05:43.480 --> 0:05:47.200 that sounds great. But you've reported the need to maybe 0:05:47.200 --> 0:05:51.040 have a more affordable, mass market phone to compete against 0:05:51.080 --> 0:05:54.880 all these rivals in China and really grow the base 0:05:54.960 --> 0:05:57.760 of the iPhone. How close is that to a reality. 0:05:57.960 --> 0:06:00.279 Well, I personally don't think that's going to have in 0:06:00.360 --> 0:06:03.560 under Apple's current management. You know, they're so strong in 0:06:03.600 --> 0:06:08.520 their principles. There's no belief internally from at least a 0:06:08.600 --> 0:06:11.160 management team that they should release a cheaper phone. This 0:06:11.200 --> 0:06:14.520 is something they've considered over the years. Personally, I think 0:06:14.560 --> 0:06:16.880 this would be a way to gain market share and 0:06:17.000 --> 0:06:19.640 push back against the issues they're having in China. It 0:06:19.680 --> 0:06:23.520 would help them grow in India, potentially build a business 0:06:23.600 --> 0:06:27.120 in Eastern Europe other developing markets such as those in 0:06:27.360 --> 0:06:32.040 Africa and Southeast Asia, Vietnam, Thailand, Malaysia. But I don't 0:06:32.040 --> 0:06:34.400 think they're going to do it at least anytime soon. 0:06:34.600 --> 0:06:37.640 There certainly isn't one in development right now. The idea 0:06:37.680 --> 0:06:40.560 would be, you go to gain market share, make probably 0:06:40.560 --> 0:06:42.920 no profit on the phone itself, make up for that 0:06:43.000 --> 0:06:46.800 on apps and other services subscriptions, and then as the 0:06:46.880 --> 0:06:50.440 middle class expands in those developing markets, you're able to 0:06:50.480 --> 0:06:53.280 pitch those people who are already in the Apple ecosystem 0:06:53.400 --> 0:06:57.440 on more expensive price your iPhones, where Apple could ultimately 0:06:57.440 --> 0:06:58.159 make its profit. 0:06:58.480 --> 0:07:02.120 Oh but this Tuesday, May Apple's latest product launch all 0:07:02.160 --> 0:07:05.680 about new iPads and our thanks to Mark German, Bloomberg 0:07:05.760 --> 0:07:09.359 Chief correspondent on Global Technology. Well, we move now to 0:07:09.400 --> 0:07:13.040 the entertainment and media company Walt Disney, with Disney reporting 0:07:13.120 --> 0:07:16.000 second quarter earnings this coming Tuesday, and for more on 0:07:16.080 --> 0:07:20.320 what to expect, we're joined by Geetha. Raganathin Bloomberg Intelligence 0:07:20.320 --> 0:07:23.600 Analysts on US media. So gather, what are you expecting 0:07:23.640 --> 0:07:25.520 to see in Tuesday's earnings? 0:07:25.840 --> 0:07:29.000 Thank you so much, Tom So. Disney actually is just 0:07:29.160 --> 0:07:33.480 fresh after winning a very very contentious proxy battle. If 0:07:33.480 --> 0:07:36.240 you remember that whole showdown that they had with Nelson Bells. 0:07:37.080 --> 0:07:39.760 They've gotten through that and now they are really ready 0:07:39.800 --> 0:07:43.560 to focus on execution. So there's a whole range of 0:07:43.640 --> 0:07:46.760 initiatives that they've been working really hard on, which is 0:07:46.800 --> 0:07:51.480 cost cutting, increasing financial visibility, and also really working hard 0:07:51.480 --> 0:07:54.400 on kind of reintegrating their content engines. And we look 0:07:54.440 --> 0:07:58.000 at this as catalysts. There's already been a change in sentiment, 0:07:58.040 --> 0:07:59.600 and we're going to continue to see that change in 0:07:59.640 --> 0:08:04.200 sentiment playouts as they report their fiscal second quarter earnings. 0:08:04.760 --> 0:08:06.600 There's a lot of things to kind of look to. 0:08:06.680 --> 0:08:08.520 I think the two major things are, of course going 0:08:08.520 --> 0:08:11.520 to be the parks business, where you know they've kind 0:08:11.560 --> 0:08:15.520 of guided to low teen's growth in operating income, as 0:08:15.560 --> 0:08:18.720 well as the streaming business, where we are almost tom 0:08:19.160 --> 0:08:22.040 on the brink of profitability, and that should really get 0:08:22.040 --> 0:08:23.120 investors excited. 0:08:23.280 --> 0:08:25.920 Well, that's a big change. How has the return of 0:08:25.960 --> 0:08:29.760 Bob Iger really helped Disney in this direction, whether streamlining 0:08:29.800 --> 0:08:32.880 operations more cost effective or just taking charge. 0:08:33.160 --> 0:08:35.600 Yeah, I mean he's been instrumental Tom and kind of 0:08:36.240 --> 0:08:39.320 really writing the ship, if you will here. So obviously 0:08:39.320 --> 0:08:43.079 when he came back, things were pretty messy, especially with 0:08:43.200 --> 0:08:47.080 regards to kind of the whole content pipeline and just 0:08:47.360 --> 0:08:50.560 you know, the whole series of missteps with their content, 0:08:50.559 --> 0:08:52.079 whether it was on the film side or even on 0:08:52.120 --> 0:08:54.840 the TV series side. Obviously, those things take a little 0:08:54.840 --> 0:08:56.679 bit of time, but I think what he has really 0:08:56.679 --> 0:09:00.600 managed to do quickly is to articulate a strategy strategy 0:09:00.640 --> 0:09:03.600 with you know, the streaming business, front and center cost 0:09:03.600 --> 0:09:06.080 cutting initiatives. You know, they first started out with about 0:09:06.080 --> 0:09:08.079 five and a half billion in cost savings per year. 0:09:08.160 --> 0:09:09.679 They've kind of ben up that to seven and a 0:09:09.679 --> 0:09:13.240 half billion, and then just overall kind of making sure 0:09:13.280 --> 0:09:15.400 that the business is on a really strong footing. So 0:09:15.440 --> 0:09:17.719 if you kind of look at Disney, yes, we tend 0:09:17.800 --> 0:09:19.920 to focus a lot on on you know, the TV 0:09:20.040 --> 0:09:23.720 networks ESPN, and you know, maybe some movies and then 0:09:23.720 --> 0:09:26.840 the studio, but if you actually look at the business profiles, 0:09:26.960 --> 0:09:31.160 seventy percent sixty five to seventy percent off Disney's profit 0:09:31.320 --> 0:09:34.760 comes from its theme park business. And so what you 0:09:34.840 --> 0:09:37.239 know Bob has done, obviously is they've kind of articulated 0:09:37.240 --> 0:09:41.240 a plan now to really reinvest in that business. It's 0:09:41.320 --> 0:09:43.160 it's sixty billion dollars that they're going to spend over 0:09:43.160 --> 0:09:45.600 the next ten years, and then with regards to the 0:09:45.640 --> 0:09:48.480 rest of the segments, kind of again make sure that 0:09:48.520 --> 0:09:51.200 you know content, Content, of course, is kind of the 0:09:51.240 --> 0:09:53.800 lifeblood here at Disney, so just kind of make sure 0:09:53.840 --> 0:09:55.920 that they have a strong content pipeline which will then 0:09:55.960 --> 0:09:57.160 feed into everything else. 0:09:57.760 --> 0:10:00.640 Well, that's seventy percent of revenue at the and those 0:10:00.679 --> 0:10:03.840 theme parks never seem to be without tons of people, 0:10:03.880 --> 0:10:05.480 So that's good news. But let's go back to what 0:10:05.480 --> 0:10:09.280 you said about the streaming services and being close to 0:10:09.360 --> 0:10:12.440 being profitable. I know that Disney just made a deal 0:10:12.480 --> 0:10:16.040 with Kroger, the nation's biggest supermarket chain for Disney plus 0:10:16.280 --> 0:10:17.360 what can you tell us about that? 0:10:17.640 --> 0:10:20.360 Yeah, so, I mean they are doing all these deals, 0:10:20.360 --> 0:10:23.280 and again the main objective here, Tom, is to make 0:10:23.320 --> 0:10:26.760 sure that you know, subscriber momentum is maintained. But as 0:10:26.800 --> 0:10:29.960 you know, streaming is no longer just about subscribers. It 0:10:30.040 --> 0:10:34.320 is also about being profitable. We know Netflix has kind 0:10:34.320 --> 0:10:38.640 of really established the narrative here, turning out about you know, 0:10:38.720 --> 0:10:41.959 eight nine ten billion dollars in profit. Disney is going 0:10:42.000 --> 0:10:44.720 to be next. So they have lost tons of money, 0:10:44.720 --> 0:10:46.839 almost close about eight billion dollars or so on their 0:10:46.840 --> 0:10:50.920 streaming business since launch. But the good news, and this 0:10:51.040 --> 0:10:53.600 is something that investors are excited about, is that this 0:10:53.720 --> 0:10:56.520 is really just on the cusp of turning profitable. It 0:10:56.520 --> 0:10:59.040 could very well have been in the quarter that they're 0:10:59.080 --> 0:11:00.960 about to report, or if not, it'll be in the 0:11:01.000 --> 0:11:04.000 next quarter. And the idea here is that it is 0:11:04.040 --> 0:11:06.920 going to keep getting more and more profitable. And we 0:11:07.000 --> 0:11:09.480 have a lot of catalysts on the horizon. So, yes, 0:11:09.520 --> 0:11:11.880 you have subscriber growth, but I think more important than 0:11:11.920 --> 0:11:15.240 that is, you know, price increases, which they are definitely 0:11:15.280 --> 0:11:18.479 going to implement going forward, and that will be bolstered 0:11:18.520 --> 0:11:22.120 by a really good content pipeline. They are also cracking 0:11:22.200 --> 0:11:26.040 down on passwords sharing alain Netflix, and then of course 0:11:26.040 --> 0:11:28.680 they have the ad tier, and then with the integration 0:11:28.760 --> 0:11:32.200 of Hulu, you know, you have multiple positive elements that 0:11:32.240 --> 0:11:35.679 are really kind of going to get this virtuous cycle going. 0:11:36.320 --> 0:11:38.400 Do you think there's going to be any update on 0:11:38.480 --> 0:11:41.840 the sports streaming partnership with Fox and Warner Brothers that 0:11:41.920 --> 0:11:43.200 was talked about a few months ago. 0:11:43.600 --> 0:11:46.360 Yeah, that is actually supposed to come out sometime in 0:11:46.400 --> 0:11:49.200 the fall. There have been you know, a couple of 0:11:49.200 --> 0:11:53.560 regulatory issues surrounding that, you know, yeah, probably. I mean 0:11:53.640 --> 0:11:56.120 I think they are definitely going to be asked how 0:11:56.160 --> 0:11:58.680 far along they are in terms of the infrastructure and 0:11:58.720 --> 0:12:00.800 the setup, and you know, if they're ready to kind 0:12:00.840 --> 0:12:04.280 of show a test version of that, which I'm sure 0:12:04.280 --> 0:12:07.040 they are, given that upfronts is coming up pretty soon. 0:12:07.280 --> 0:12:07.439 Now. 0:12:07.480 --> 0:12:09.040 One last thing I want to ask you about is 0:12:09.040 --> 0:12:12.719 the studio division still suffering like all of Hollywood from 0:12:12.720 --> 0:12:16.280 those twin strikes last year. What can we look forward to? 0:12:16.920 --> 0:12:19.839 I mean, they really had a pretty bad year last year, 0:12:19.960 --> 0:12:21.960 but the good news is they're really kind of back 0:12:22.000 --> 0:12:24.880 on track in terms of executing on creative. They're improving 0:12:24.920 --> 0:12:27.720 their studio output. So as you look forward to twenty 0:12:27.760 --> 0:12:29.920 twenty four, you know, we do have kind of this 0:12:30.000 --> 0:12:33.760 refreshed content slate. We're looking at Inside Out two and Deadpool, 0:12:33.960 --> 0:12:36.320 both of which promised to be really big summer movies. 0:12:36.640 --> 0:12:39.120 But where we're really excited about is twenty twenty five. 0:12:39.360 --> 0:12:42.200 You have a whole array of you know, what we 0:12:42.280 --> 0:12:45.640 think would all be blockbuster movies, whether it's Captain America's Norwide. 0:12:45.760 --> 0:12:47.480 So Disney is really getting its mojo back. 0:12:47.640 --> 0:12:49.679 Yeah, a lot of twos a lot of threes after 0:12:49.679 --> 0:12:52.760 those movie titles. But give the people what they want. 0:12:52.960 --> 0:12:53.120 Well. 0:12:53.160 --> 0:12:56.320 Disney second quarter earnings out after the close this Tuesday, 0:12:56.360 --> 0:12:59.200 May seventh, and our thanks to get the raganaffin Bloomberg 0:12:59.240 --> 0:13:03.000 Intelligence Animals on US Media. Coming up on Bloomberg day 0:13:03.000 --> 0:13:05.600 Break weekend to look at the Bank of England's upcoming 0:13:05.640 --> 0:13:19.760 policy meeting. I'm Tom Busby and this is Bloomberg. This 0:13:19.920 --> 0:13:22.240 is Bloomberg day Break weekend, our global look at the 0:13:22.240 --> 0:13:25.120 top stories for investors in the coming week. I'm Tom 0:13:25.160 --> 0:13:28.240 Busby in New York. Up later in our program, Chinese 0:13:28.240 --> 0:13:31.920 President Shijin Ping visits Europe. Will it help repair relations 0:13:32.160 --> 0:13:35.880 between China and the continent. But first in the UK, 0:13:36.160 --> 0:13:39.920 recent hotter than expected inflation figures coupled with a strong 0:13:40.040 --> 0:13:42.480 labor market may have put the breaks on hopes that 0:13:42.520 --> 0:13:45.280 the Bank of England is poised to begin cutting interest 0:13:45.360 --> 0:13:48.679 rates in the coming days. Threadneedle Streets decision makers will 0:13:48.760 --> 0:13:52.400 vote once again. So will they stick with elevated borrowing 0:13:52.440 --> 0:13:55.120 costs or take the plunge for more. Let's go to 0:13:55.160 --> 0:13:58.439 London and bring in Bloomberg day Break Europe anchor Stephen. 0:13:58.160 --> 0:14:01.400 Carroll, Tom stop me if you've heard this one before, 0:14:01.480 --> 0:14:04.080 but since the start of the year, traders have scaled 0:14:04.200 --> 0:14:08.280 back their expectation for interest rate cuts. Okay, that's been 0:14:08.280 --> 0:14:10.920 the situation facing many central banks around the world. In 0:14:10.960 --> 0:14:14.120 the UK, it's a mildly hawkish run of data that's 0:14:14.200 --> 0:14:17.040 giving some pause for thought on top of what's been 0:14:17.040 --> 0:14:20.720 happening with central bankers elsewhere. CPI inflation came in at 0:14:20.760 --> 0:14:23.560 three point two percent in March in the UK, down 0:14:23.600 --> 0:14:27.000 from three point four percent in February. That was slightly 0:14:27.040 --> 0:14:30.600 ahead of the Bank of England's forecast, though, but BOE 0:14:30.680 --> 0:14:34.280 Governor Andrew Bailey didn't seem phased and assured markets that 0:14:34.320 --> 0:14:37.240 things were still on track. We've been getting the market 0:14:37.320 --> 0:14:39.720 view of the rate path ahead for the UK with 0:14:39.840 --> 0:14:43.280 Hugh Ginberg, global market strategist at JP Morgan Chase Bank. 0:14:43.720 --> 0:14:45.800 I think, really what the market is grappling with here 0:14:46.240 --> 0:14:49.200 is does the UK look more like the Eurozone or 0:14:49.240 --> 0:14:51.440 more like the US? Because I go back twelve months 0:14:51.480 --> 0:14:54.240 ago and the answer to that was categorically that the 0:14:54.360 --> 0:14:56.960 UK looked a lot more like the US economy, where 0:14:56.960 --> 0:14:59.320 you had the tightness of the labor market, you had 0:14:59.440 --> 0:15:03.560 much strong inflation pressure, whereas today I think, arguably it's 0:15:03.600 --> 0:15:06.800 a lot more Eurozone like where yes, inflation is still higher, 0:15:07.160 --> 0:15:10.040 but inflation is coming down. It's going to come down 0:15:10.080 --> 0:15:12.680 significantly further over the next couple of months as that 0:15:13.080 --> 0:15:16.520 energy household price cap reset kicks in, and so I 0:15:16.560 --> 0:15:18.560 do think the bank will be able to follow the 0:15:18.600 --> 0:15:21.160 path more like the ECB than the Fed. I personally 0:15:21.240 --> 0:15:24.320 think they start the rate cutting process in August. But 0:15:24.400 --> 0:15:28.480 again we're talking about relatively modest adjustments to interest rates, 0:15:28.480 --> 0:15:31.200 and so for bond investors, the main message here is 0:15:31.200 --> 0:15:34.200 that you're playing for really clipping the coupon in government 0:15:34.240 --> 0:15:39.160 bond deals today, with the potential for capital appreciation if 0:15:39.200 --> 0:15:42.480 the economy slows much more quickly. But I don't see 0:15:42.520 --> 0:15:45.360 a kind of straight line lower for bond yields until 0:15:45.400 --> 0:15:47.480 we get much weaker economic data than what we have 0:15:47.600 --> 0:15:48.080 at the moment. 0:15:48.520 --> 0:15:50.720 Do you think that Andrew Bailey is in a position 0:15:50.760 --> 0:15:53.720 to be able to give clear signals given the sort 0:15:53.720 --> 0:15:55.200 of uncertainty that exists elsewhere. 0:15:55.680 --> 0:15:58.280 No, But then let me, if I may flip your 0:15:58.360 --> 0:15:59.840 question the other way around and say, well, should he 0:15:59.840 --> 0:16:03.000 be giving clear signals? No, he shouldn't because all central 0:16:03.000 --> 0:16:06.600 bankers are struggling to read the inflation data, just as 0:16:06.680 --> 0:16:08.960 markets are trying to predict over the next one to 0:16:08.960 --> 0:16:11.560 two months. Are we going to get point threes or 0:16:11.600 --> 0:16:14.040 point four's? It is nigh on impossible in this current 0:16:14.080 --> 0:16:16.840 economic environment, and so I think the right approach for 0:16:16.920 --> 0:16:20.320 central bankers today is to take stock of the incoming 0:16:20.400 --> 0:16:23.120 data that they've seen, but try to keep that medium 0:16:23.200 --> 0:16:26.280 term view because they're trying to set policy here over 0:16:26.320 --> 0:16:29.080 the next twelve, twenty four to thirty six months. They 0:16:29.120 --> 0:16:31.800 shouldn't be swung around by just what the last one 0:16:31.880 --> 0:16:33.840 or two weeks of data has been telling them. The 0:16:33.880 --> 0:16:36.280 blanky reviewer missed opportunity, yes or no. 0:16:37.000 --> 0:16:39.680 Ah, good politician Lizzy. 0:16:40.080 --> 0:16:40.960 Could they have gone further? 0:16:41.040 --> 0:16:41.280 Yes? 0:16:41.720 --> 0:16:43.720 I think that it could. I mean there is some 0:16:44.160 --> 0:16:47.480 useful points there in terms of trying to communicate more clearly. 0:16:47.520 --> 0:16:50.320 I think everyone would welcome more guidance from the Bank 0:16:50.360 --> 0:16:53.640 of England in terms of how they're seeing the economy. 0:16:54.080 --> 0:16:56.440 But do you want a dot plot in the UK, 0:16:56.520 --> 0:16:57.680 for example, I would argue no. 0:16:58.120 --> 0:17:00.840 So that was Hugh Gimberg Global Markets Strated US at 0:17:00.920 --> 0:17:04.639 JP Morgan Chase. It's worthwhile, too thinking about how the 0:17:04.680 --> 0:17:08.240 Bank of England behaves versus its peers. Members of the 0:17:08.240 --> 0:17:11.000 Monetary Policy Committee have an advantage in that this meeting 0:17:11.080 --> 0:17:14.359 is coming just a week after the FEDS, when Jerome 0:17:14.440 --> 0:17:17.720 Powell signaled that they were further away from cutting rates 0:17:17.760 --> 0:17:20.879 than before. The European Central Bank has signaled strongly that 0:17:20.920 --> 0:17:23.479 it's planning to cut rates at its June meeting as 0:17:23.520 --> 0:17:26.240 it grows more confident that inflation is continuing to slow. 0:17:26.640 --> 0:17:30.000 So how will the BOE fit into what's happening elsewhere. 0:17:30.119 --> 0:17:32.240 I've been discussing the outlook for the upcoming meeting with 0:17:32.240 --> 0:17:35.960 Bloomberg's chief UK economist Dan Hansen. I started by asking 0:17:36.040 --> 0:17:39.280 him what's changed for the BOE since its last meeting 0:17:39.320 --> 0:17:40.800 on the twenty first of March. 0:17:41.160 --> 0:17:42.840 I don't think a huge amount has changed, to be 0:17:42.880 --> 0:17:45.399 honest with you. We've had a few upside data surprises, 0:17:45.640 --> 0:17:47.480 but they were very, very small, and if you look 0:17:47.520 --> 0:17:50.040 at see the most important thing, what happened to inflation 0:17:50.080 --> 0:17:52.000 over the first quarter. It came in at three point 0:17:52.040 --> 0:17:54.280 five percent. The Bank of England's forecast in February, the 0:17:54.320 --> 0:17:56.440 last time it put a forecast together, was three point 0:17:56.480 --> 0:17:59.840 six percent, so a little bit below, but for me, actually, 0:17:59.840 --> 0:18:02.680 what's been most interesting is what policy makers have been saying, 0:18:02.680 --> 0:18:05.240 which is what you alluded to there, And we've had 0:18:05.640 --> 0:18:10.080 remarks from certainly Bailey, Andrew Bailey and Dave Ramsden that 0:18:10.200 --> 0:18:12.600 are very much sort of moving in I would say, 0:18:12.640 --> 0:18:15.000 the dubvish direction. There's a little bit of uncertainty. I 0:18:15.000 --> 0:18:17.240 think about what Hugh pill did or didn't say in 0:18:17.280 --> 0:18:19.840 his speech, but I think the thing for us that 0:18:19.880 --> 0:18:21.760 we took away at least is that there he said 0:18:21.760 --> 0:18:24.679 that there's been little news in the data, which is 0:18:24.800 --> 0:18:27.760 obviously clearly very important. So I think to answer your 0:18:27.800 --> 0:18:30.480 question directly, whatever you believe sort of following the March meeting, 0:18:31.000 --> 0:18:34.199 the Bank would do at least looking domestically, and we'll 0:18:34.200 --> 0:18:36.840 probably get onto the Fed in a second. There is 0:18:36.880 --> 0:18:39.560 a much reason to change. You're thinking about the when 0:18:39.600 --> 0:18:40.520 the first cut will come? 0:18:41.000 --> 0:18:43.199 Okay, well, let's deal with the fetish and we'll come 0:18:43.240 --> 0:18:45.760 back to the split on the committee in a moment. 0:18:46.240 --> 0:18:49.439 How much does the signals that we got from Jerome 0:18:49.520 --> 0:18:52.760 Powell that Ratcot's look further away than they did before. 0:18:52.800 --> 0:18:54.840 How much does that affect the BOE. 0:18:54.880 --> 0:18:58.199 So markets think it affects the BOE quite significantly. If 0:18:58.200 --> 0:19:00.159 you look at the way BOE pricing has moved, if 0:19:00.200 --> 0:19:02.560 you look at the way FED pricing has moved, they've 0:19:02.640 --> 0:19:05.840 essentially moved in locksteps. So what's interesting is I think 0:19:05.880 --> 0:19:10.160 the comments that Bailey made about that that the UK's 0:19:10.200 --> 0:19:13.399 inflation problem is more like a European inflation problem, so 0:19:13.440 --> 0:19:16.879 the problem facing ECB than it is like the US's 0:19:17.160 --> 0:19:20.320 demand led inflation problem, and I sort of am inclined 0:19:20.359 --> 0:19:22.440 to agree with that. Particularly this year, I think there's 0:19:22.480 --> 0:19:25.840 going to be this quite big divergence between the UK 0:19:26.040 --> 0:19:29.199 and US inflation story, mainly driven by energy, but that 0:19:29.320 --> 0:19:31.880 sort of spills through into the rest of the CPI basket. 0:19:32.040 --> 0:19:35.439 So I don't think the FED going later is an 0:19:35.440 --> 0:19:37.479 impediment to the BOE. I think it can go before 0:19:37.560 --> 0:19:39.840 the FED. And actually, one thing that the BOE has 0:19:39.840 --> 0:19:42.199 got to be really quite careful about is that it 0:19:42.240 --> 0:19:46.359 doesn't allow what's happened recently. So they're tightening of financial 0:19:46.359 --> 0:19:49.320 conditions to spill into the UK economy and we've seen 0:19:49.320 --> 0:19:51.480 that affect some metrics in the economy already. If we 0:19:51.520 --> 0:19:54.880 think about house prices and the like, and mortgage rates. 0:19:55.640 --> 0:19:57.080 You know, the bo needs to be wary of that. 0:19:57.080 --> 0:19:59.680 Everyone talks about the exchange rate impact of going earlier 0:19:59.680 --> 0:20:01.840 than the f but actually what you also need to 0:20:01.840 --> 0:20:05.359 be worried about is allowing tie to financial conditions to 0:20:05.359 --> 0:20:08.439 affect your domestic economy when your domestic economy is already 0:20:08.520 --> 0:20:08.920 very weak. 0:20:10.080 --> 0:20:14.119 What is your expectation there in terms of the inflation trajectory, 0:20:14.240 --> 0:20:16.480 I mean, when when does the two percent target look 0:20:16.640 --> 0:20:17.359 likely to be his? 0:20:17.840 --> 0:20:19.879 I think in the next few months. I mean it 0:20:19.960 --> 0:20:22.920 might not quite get there in April. I think May 0:20:23.160 --> 0:20:25.960 or June are pretty good bets for when we'll get 0:20:25.960 --> 0:20:28.720 to two or even below two in fact. So I 0:20:28.720 --> 0:20:31.320 mean what one really important consideration I think when you 0:20:31.359 --> 0:20:33.520 think about that, is that the bank will have the 0:20:33.600 --> 0:20:36.760 May CPI print before the June meeting, and I think 0:20:36.800 --> 0:20:38.760 that will It'll be very hard if you have a 0:20:39.040 --> 0:20:40.720 too or even particularly if you have a sub two 0:20:40.720 --> 0:20:44.560 percent CPI inflation print in your hand not to do something. 0:20:44.880 --> 0:20:46.960 So I think that for us is sort of the 0:20:47.000 --> 0:20:49.439 next few months of data after this, after we get 0:20:49.480 --> 0:20:51.520 past this meeting. The data between the May and the 0:20:51.600 --> 0:20:53.520 GEME meeting are basically key, and I think that will 0:20:53.520 --> 0:20:55.040 set the tone for the rest of the year. In 0:20:55.160 --> 0:20:57.240 terms of what the bank thinks it can or can't deliver. 0:20:57.520 --> 0:21:00.200 We talk a lot about the FAD's influence over those 0:21:00.200 --> 0:21:03.920 central banks. What about the European Central Bank? If the 0:21:04.080 --> 0:21:06.360 Bank of England has a similar inflation problem in large 0:21:06.400 --> 0:21:08.639 Bailey's eyes to the ECB, does that mean actually the 0:21:08.680 --> 0:21:11.720 ECB decision, which is widely telegraphed for June, is likely 0:21:11.760 --> 0:21:13.240 to influence the BOW decision. 0:21:13.320 --> 0:21:15.720 Well, I think it will help that the ECB just 0:21:15.840 --> 0:21:19.080 chronologically goes first, so in June, their meeting is before 0:21:19.119 --> 0:21:20.560 the banks, so I think there will be a bit 0:21:20.600 --> 0:21:22.920 of cover there. As you say, Bailey has made that 0:21:23.160 --> 0:21:27.359 comparison to Europe more than to the US, and you 0:21:27.480 --> 0:21:30.399 take that alongside the fact that you will potentially have 0:21:30.440 --> 0:21:33.720 a very favorable CPI print in hand. I think the 0:21:33.760 --> 0:21:37.280 sort of cards are aligning for you know, we think 0:21:37.320 --> 0:21:39.960 it's June. A lot of other economists think it's August, 0:21:40.080 --> 0:21:42.600 but sometime in the summer for them to move. So 0:21:42.880 --> 0:21:44.480 I think, yeah, the ECB is sort of I think 0:21:44.480 --> 0:21:47.080 it's an important thing for the bank to have a 0:21:47.080 --> 0:21:50.160 bit of cover there. The ECB's gone, there's no sort 0:21:50.160 --> 0:21:51.760 of reason for the banks to sort of sit on 0:21:51.800 --> 0:21:52.320 its hands. 0:21:53.119 --> 0:21:55.040 What about the rest of the year. Then after the 0:21:55.440 --> 0:21:57.399 kind of first cut that we're looking at in that 0:21:57.440 --> 0:21:59.960 summer period, is it going to be kind of start 0:22:00.080 --> 0:22:02.360 start depending on the data, do you think, or on 0:22:02.359 --> 0:22:04.080 Once we get a first cutter we look like what 0:22:04.160 --> 0:22:05.600 we are on a steady trajectory. 0:22:05.840 --> 0:22:07.720 So I mean it goes back to my answer to 0:22:07.720 --> 0:22:10.600 the first question is that whatever you believed following even 0:22:10.640 --> 0:22:14.159 the February meeting, but certainly the March meeting, it feels 0:22:14.160 --> 0:22:16.720 like you should probably still believe something pretty close to 0:22:16.760 --> 0:22:19.600 that now. So we still have meeting by meeting at 0:22:19.680 --> 0:22:22.160 least for a time, and that's a lot more aggressive 0:22:22.160 --> 0:22:25.080 than market pricing. I think for market pricing to be 0:22:25.119 --> 0:22:27.600 born out, you would have to have quite some bumps 0:22:27.600 --> 0:22:29.760 in the road. But if you're sitting at two sub 0:22:29.800 --> 0:22:33.919 two percent headline CPI inflation and services inflation continues to fall, 0:22:34.359 --> 0:22:36.800 albeit slowly, and you have to sort of expect it 0:22:36.800 --> 0:22:38.280 to fall slowly. It's not going to drop like a 0:22:38.280 --> 0:22:41.359 stone like the headline rate has. I don't see any 0:22:41.400 --> 0:22:43.640 reason why they can't move, as I say, at least initially, 0:22:43.680 --> 0:22:45.600 meeting by meeting. I think they'll come a point and 0:22:45.600 --> 0:22:47.760 I think it's around about the four percent mark where 0:22:47.760 --> 0:22:50.639 they get a little bit concerned about where what we 0:22:50.680 --> 0:22:52.800 call the neutral rate is to the rate that neither 0:22:52.840 --> 0:22:55.080 speeds up or slows down the economy. But I think 0:22:55.119 --> 0:22:57.280 there is room between sort of where we are now 0:22:57.280 --> 0:23:00.560 and around four percent to potentially take out what they're 0:23:00.560 --> 0:23:04.280 calling restriction in the policy stance and sort of it 0:23:04.320 --> 0:23:05.960 basically eased the squeeze on the economy. 0:23:06.560 --> 0:23:08.880 What are the risks to the inflation outlook that you'll 0:23:08.880 --> 0:23:11.439 be watching. I mean, you mentioned energy. We had that 0:23:11.480 --> 0:23:13.720 spike and oil prices which are sort of receded now, 0:23:13.760 --> 0:23:15.440 so that seems to be a little bit out of 0:23:15.440 --> 0:23:17.040 the picture. But is it still energy the thing you'd 0:23:17.040 --> 0:23:17.600 worry about. 0:23:17.840 --> 0:23:20.160 Yeah, I mean I think I think it's energy. And 0:23:20.600 --> 0:23:23.760 to without wanting to sort of tout the speech too much, 0:23:25.280 --> 0:23:28.600 how Dave Ramsden sort of characterized the whole thing is 0:23:28.640 --> 0:23:31.040 that I just feel there's not enough weight being placed 0:23:31.080 --> 0:23:34.120 on the downside risk here. You know the way inflation 0:23:34.280 --> 0:23:36.160 surged in the UK, if you sort of go through 0:23:36.160 --> 0:23:41.320 the sort of mechanism headline inflation surged, people saw that 0:23:41.480 --> 0:23:43.680 they pushed up, they bid up their wages because the 0:23:43.760 --> 0:23:46.960 laid market was tight, and that is eventually fed through 0:23:46.960 --> 0:23:50.199 to services inflation, and high energy prices are pushed up 0:23:50.200 --> 0:23:53.640 services inflation as well. Now energy price inflation is where 0:23:53.840 --> 0:23:56.359 in fact we're in disinflation. The headline rate is falling. 0:23:56.800 --> 0:23:59.120 You have to put some weight on the idea that 0:23:59.119 --> 0:24:02.399 that mechanism goes into reverse and quite quickly. And I 0:24:02.400 --> 0:24:05.160 think Bailey and Ramsen, at least certainly in their comments 0:24:05.160 --> 0:24:06.800 are sort of alluding to this, that you have to 0:24:06.800 --> 0:24:08.439 look forward a little bit more and not just be 0:24:08.520 --> 0:24:11.720 completely data dependent. And I think that actually goes to 0:24:11.720 --> 0:24:14.800 the CRUXFID a little bit, where the bank's reaction function 0:24:14.960 --> 0:24:17.639 has shifted a bit, not just being completely on every 0:24:17.680 --> 0:24:21.440 CPI print and hanging on that, but looking forward to say, look, 0:24:21.520 --> 0:24:24.200 this thing can unwind quite quickly, So we probably need 0:24:24.240 --> 0:24:26.200 to take a little bit of insurance out to ensure 0:24:26.240 --> 0:24:28.560 that we're not caught on the downside on the way down, 0:24:28.800 --> 0:24:30.720 because we don't want to make the mistake of being 0:24:30.720 --> 0:24:33.560 too slow coming out of this, having arguably been too 0:24:33.560 --> 0:24:36.399 slow getting to it in the first place. So that 0:24:36.760 --> 0:24:38.320 for me is the risk at the moment, and that's 0:24:38.320 --> 0:24:40.679 why it's probably sort of when we see what they 0:24:40.680 --> 0:24:43.160 say on their main meeting. They'll probably say the risk 0:24:43.160 --> 0:24:45.359 of broady balance to the outlook, which is sort of 0:24:45.359 --> 0:24:49.359 a big shift again because they've been constantly emphasizing the upside. 0:24:49.280 --> 0:24:53.159 And just coming back to that vote split's idea. Whilst 0:24:53.400 --> 0:24:56.000 what will get you excited in terms of the vote risk. 0:24:57.960 --> 0:24:58.600 Any votes for it? 0:25:00.240 --> 0:25:00.320 No. 0:25:00.440 --> 0:25:04.320 I mean we've put our preview out and in that 0:25:04.359 --> 0:25:07.760 we say that we think Ramsdom will join THINGRA inviting 0:25:07.800 --> 0:25:11.359 for a cut. I think that or any more going 0:25:11.359 --> 0:25:13.840 for a cut would get people excited. I think if 0:25:13.880 --> 0:25:16.800 you had an eight to one again, which is what 0:25:16.800 --> 0:25:19.399 we had in March, and similar guidance, it wouldn't feel 0:25:19.400 --> 0:25:22.640 like we'd moved closer. It might feel at that point 0:25:22.680 --> 0:25:24.480 it had been pushed away a bit. So I think 0:25:24.520 --> 0:25:26.800 there needs if it's going to happen in the summer, 0:25:26.840 --> 0:25:28.560 it needs to feel like it's coming closer. In a 0:25:29.160 --> 0:25:31.480 more dubbish vote split or even a tweets the guidance 0:25:31.480 --> 0:25:32.800 would be the things to look for on that. 0:25:33.240 --> 0:25:37.359 Thanks to Bloomberg's Chief UK economist, Dan Hansen, I'm Stephen 0:25:37.400 --> 0:25:40.040 Carolyn London. You can catch us every weekday morning here 0:25:40.080 --> 0:25:41.160 for Bloomberg Daybreak. 0:25:41.160 --> 0:25:41.560 Europe. 0:25:41.640 --> 0:25:44.720 Beginning at six am in London and one am on 0:25:44.760 --> 0:25:45.400 Wall Streets. 0:25:45.440 --> 0:25:48.440 Tom beg you Steven and coming up on Bloomberg day 0:25:48.440 --> 0:25:51.119 Break weekend, Chinese President shi Jin Pining said for a 0:25:51.160 --> 0:25:54.760 trip to Europe, what could this mean for relations between 0:25:54.800 --> 0:25:58.320 Europe and China? I'm Tom Busby and this is Bloomberg. 0:26:08.520 --> 0:26:10.960 I'm Tom Busby, New York. But your global look ahead 0:26:11.000 --> 0:26:13.120 at the top stories for investors in the coming week. 0:26:13.480 --> 0:26:16.800 Relations between China and Europe have been Chile as of late, 0:26:16.840 --> 0:26:20.159 but with Chinese President shi Jinping set to visit Europe 0:26:20.160 --> 0:26:22.760 in the coming days, can we expect to see a 0:26:22.800 --> 0:26:26.520 thaw in that relationship. Let's get to Daybreak Asia hosts 0:26:26.520 --> 0:26:28.920 Brian Curtis and Doug Prisner. 0:26:28.880 --> 0:26:32.520 To Chinese President Shijinping heads to Europe in the coming week, 0:26:32.960 --> 0:26:36.080 is expected to deliver the message that China has more 0:26:36.080 --> 0:26:38.720 to offer Europe than the US cares to admit. 0:26:38.920 --> 0:26:42.240 She will be traveling to France, Serbia, and Hungary on 0:26:42.280 --> 0:26:45.280 a five day trip. Those nations are seeking investment from 0:26:45.400 --> 0:26:49.600 China even as tensions mount. Relations have cooled over a 0:26:49.720 --> 0:26:55.200 range of issues, including trade, allegations around spying and Beijing's 0:26:55.200 --> 0:26:56.439 support for Russia. 0:26:56.560 --> 0:26:59.640 Even with Ty's slipping of late, it appears that both 0:26:59.720 --> 0:27:03.400 sides will probably try to woo the other. Sources tell 0:27:03.480 --> 0:27:06.480 us that French President front Sois Macron will take she 0:27:06.720 --> 0:27:08.840 to a corner of the Pyrenees where he used to 0:27:08.880 --> 0:27:10.119 visit his grandmother as a. 0:27:10.200 --> 0:27:13.879 Child, and she will likely again make this point affordable 0:27:13.920 --> 0:27:17.720 clean energy from China will help Europe fight both inflation 0:27:17.880 --> 0:27:22.000 and climate change. Here's Dan ten Kate, Bloomberg Asia eco 0:27:22.080 --> 0:27:23.560 Gov executive. 0:27:23.080 --> 0:27:26.399 Editor from China's perspective. They're like, look, the world needs 0:27:26.400 --> 0:27:28.920 a bunch of evs, so there's no problem with us 0:27:29.000 --> 0:27:32.000 investing in these, and we can provide cheap cars for 0:27:32.040 --> 0:27:34.520 your people. So you know, the visit to Hungary is 0:27:34.560 --> 0:27:37.320 important in that because you have Chinese companies looking to 0:27:37.359 --> 0:27:41.120 set up factories there, and you know governments that are 0:27:41.160 --> 0:27:44.560 happy to kind of have this investment from China to 0:27:45.480 --> 0:27:49.080 gain jobs locally and to have cheaper electric vehicles in 0:27:49.119 --> 0:27:49.679 their market. 0:27:49.960 --> 0:27:53.240 Bloomberg's Dan ten Kate joining us now in our studio 0:27:53.320 --> 0:27:56.680 is far further discussion on this is Jenny Marsh, a 0:27:56.760 --> 0:27:59.560 team leader for Greater China eco Gov, and Rebecca Choan 0:27:59.600 --> 0:28:03.960 Wilkins Bloomberg Asia Government and Politics correspondents. So, as we 0:28:04.040 --> 0:28:06.760 heard there from Dan, it's going to be a little given. 0:28:06.920 --> 0:28:09.680 Take Jenny, let me go to you first. As Doug said, 0:28:09.760 --> 0:28:13.560 relations have gotten a little testier of late here than before. 0:28:13.680 --> 0:28:16.840 We have these EU probes on Chinese made evs and 0:28:16.960 --> 0:28:20.879 also medical devices procurement. So it might be tempting to 0:28:20.880 --> 0:28:23.520 say that this will be a tougher trip for she 0:28:24.160 --> 0:28:27.840 than usual, But after all, this is the president and 0:28:28.000 --> 0:28:30.199 he's not going to face a lot of press, and 0:28:30.240 --> 0:28:32.240 the meetings will be at a very high level. 0:28:32.480 --> 0:28:35.040 What are we expecting exactly? And you can add to 0:28:35.040 --> 0:28:37.480 that list that he's picked three countries in Europe which 0:28:37.520 --> 0:28:40.000 are already considered to be some of the more friendly ones. 0:28:40.440 --> 0:28:42.720 So you know, going to Serbia and Hungary, these are 0:28:42.720 --> 0:28:45.680 not two countries that should be critics of China's policy. 0:28:46.040 --> 0:28:48.520 Quite the opposite. They're sort of big fans of Beijing's 0:28:48.520 --> 0:28:51.640 investment into their countries, and he can use those countries 0:28:51.640 --> 0:28:54.320 as sort of showcase this is what engagement with China 0:28:54.360 --> 0:28:56.960 can offer to you. France is going to be sort 0:28:57.000 --> 0:28:59.720 of the most important stop, and in France is also 0:28:59.800 --> 0:29:02.800 going to have this trilat with as lovel One Delaion 0:29:02.880 --> 0:29:05.480 from the European Commission, and so I think, you know, 0:29:05.840 --> 0:29:08.200 that meeting, I think is Macron's way of saying that, yes, 0:29:08.400 --> 0:29:10.800 Si Jianping is coming, and we're throwing this big banquet 0:29:10.800 --> 0:29:13.280 for him and taking him sort of this very personal 0:29:13.360 --> 0:29:16.560 childhood retreat. But at the same time they're not going 0:29:16.600 --> 0:29:18.440 to shy away from some of the tougher questions. And 0:29:18.840 --> 0:29:20.680 you know, she sort of is the architect of this 0:29:20.760 --> 0:29:24.960 de risking narrative language which the US then adopted. So 0:29:25.880 --> 0:29:28.080 I think in that trilat in France on the first 0:29:28.160 --> 0:29:31.440 day with Macron and Vondalayan, you're going to expect the 0:29:31.480 --> 0:29:35.200 toughest probably conversations he'll have during that trip on China's 0:29:35.240 --> 0:29:39.920 industrial policy, on She Jianping's continued support for President Vladimir 0:29:39.960 --> 0:29:43.000 Putin despite you know, the war in Ukraine grinding on, 0:29:43.160 --> 0:29:46.920 and sort of you know, this propping up Russia's war machine, 0:29:46.960 --> 0:29:50.200 something which has been really pivotal in changing the shape 0:29:50.200 --> 0:29:53.440 of the China europe relationship in a way, I think 0:29:53.440 --> 0:29:56.120 that people in officials and Beijing didn't really grasp at 0:29:56.120 --> 0:29:58.560 the beginning how consequential that was going to be. So 0:29:59.160 --> 0:30:01.360 you know, I think, yes, he's going at a time 0:30:01.400 --> 0:30:05.400 when probably relations between Europe and China have never been 0:30:05.560 --> 0:30:08.640 or in decades haven't been quite so testy, and distrust 0:30:08.720 --> 0:30:11.520 is growing. But he's carefully curated this itinerary, I think, 0:30:11.920 --> 0:30:14.360 obviously to serve his interest best and sort of promote 0:30:14.360 --> 0:30:16.280 the narrative that he wants to tell on this trip. 0:30:16.320 --> 0:30:19.200 What about what she may be attempting to do in 0:30:19.320 --> 0:30:23.360 terms of US EU relations and whether or not there's 0:30:23.400 --> 0:30:26.080 an opportunity for him to maybe insert a bit of 0:30:26.080 --> 0:30:30.400 a wed chere, Rebecca and try to exploit some division. 0:30:30.440 --> 0:30:32.920 I mean, we know there's a tremendous amount of unity, 0:30:33.160 --> 0:30:36.480 but there are disagreements, and would she use this trip 0:30:36.520 --> 0:30:38.080 to try to capitalize on some of that? 0:30:38.320 --> 0:30:40.479 Yeah, I think that's right. And just to take a 0:30:40.520 --> 0:30:43.640 step back briefly, the broader context here is that Europe 0:30:43.640 --> 0:30:46.400 and the European Union in particular, has for a long 0:30:46.480 --> 0:30:50.120 time viewed itself as this sort of middle path. It 0:30:50.160 --> 0:30:54.480 has wanted to resist automatically siding with the US, not 0:30:54.760 --> 0:30:57.840 just because of its policy on China, but also because 0:30:58.120 --> 0:31:01.520 how the European Union historically has viewed the US itself. 0:31:01.840 --> 0:31:05.320 It has not wanted to just automatically throw its weight in, 0:31:06.200 --> 0:31:10.480 but the Biden administration has worked hard to get its 0:31:10.480 --> 0:31:13.640 allies and partners on side to try and build consensus 0:31:13.720 --> 0:31:17.320 when it comes to taking a firmer stance on China, 0:31:17.360 --> 0:31:21.040 including for example, picking up that de risking language, moving 0:31:21.120 --> 0:31:23.400 a little bit of showing at least a little bit 0:31:23.440 --> 0:31:26.480 of give and take with the European Union stance there. 0:31:27.320 --> 0:31:31.000 But we have seen this steady drumbeat of probes and 0:31:31.080 --> 0:31:36.120 investigations into Chinese industries via the EU, and that has 0:31:36.200 --> 0:31:39.960 essentially taken EU policy much closer to the US. 0:31:40.600 --> 0:31:43.800 Well. The inroad on cars too by China seems to 0:31:43.880 --> 0:31:46.479 have made a big difference. You know, you've got this 0:31:46.640 --> 0:31:50.880 probe that's underway and byd has a plant coming in Hungary. 0:31:51.240 --> 0:31:53.800 We understand that it will take about three years to 0:31:53.800 --> 0:31:57.960 be completed, and a lot can happen between now and then. 0:31:58.000 --> 0:32:00.800 I mean, you'll get the result of the probe in 0:32:01.480 --> 0:32:04.360 the EU, and you know that could be quite damaging. 0:32:04.880 --> 0:32:07.840 And this kind of three years out for a plan, 0:32:07.920 --> 0:32:10.840 it shows how difficult planning can be. Lot can change 0:32:10.880 --> 0:32:11.680 in three years. 0:32:11.480 --> 0:32:14.120 Rebecca, a lot can change. But we do, for example, 0:32:14.160 --> 0:32:18.560 also have another Chinese automaker Cherry taking over an old 0:32:18.680 --> 0:32:22.360 Nisan factory in Spain. We think potentially there could be 0:32:22.360 --> 0:32:26.560 announcements of more such car factory plans in Europe during 0:32:26.600 --> 0:32:30.720 this trip. So wild China is still waiting to see 0:32:30.760 --> 0:32:33.200 the results of that probe, a probe which was actually 0:32:33.240 --> 0:32:37.680 backed by France. It's worth mentioning, you know, China is 0:32:37.720 --> 0:32:40.680 still working very hard to try and at least prove 0:32:41.240 --> 0:32:44.640 that there are benefits, as Jenny points out, if you 0:32:44.720 --> 0:32:47.200 do engage and the fact of sort of going and 0:32:47.240 --> 0:32:52.520 opening factories in European countries, creating jobs, driving some economic growth, 0:32:52.720 --> 0:32:55.200 may try and sort of it may ease some of 0:32:55.240 --> 0:32:59.640 those tensions and some of those anxieties, but it certainly 0:32:59.720 --> 0:33:04.080 is hanging over I think many Beijing companies' heads at 0:33:04.160 --> 0:33:07.280 this moment. It's worth saying too, though, that Beijing has 0:33:07.400 --> 0:33:12.280 very actively engaged in the debate over capacity with the Europeans. So, 0:33:12.320 --> 0:33:16.600 for example, these long comments from Litiang and President cy 0:33:16.640 --> 0:33:20.440 Jimping when German Chancellor Schultz was in the country quite 0:33:20.440 --> 0:33:24.200 different from the more sort of standard and sort of 0:33:24.240 --> 0:33:28.120 briefer comments that we had when US officials have visited 0:33:28.120 --> 0:33:29.680 Beijing and discussed the same topic. 0:33:29.840 --> 0:33:33.480 Well, it's interesting you make that point because recently German 0:33:33.560 --> 0:33:37.959 Chancellor Olof Schoalz was in China and addressing the issue 0:33:38.040 --> 0:33:42.240 of things like unfair competition, dumping, over capacity. Jenny, are 0:33:42.280 --> 0:33:46.440 these perspectives that are uniquely German because of the German 0:33:46.520 --> 0:33:49.680 manufacturing economy, or do they expand more broadly across the 0:33:49.720 --> 0:33:50.560 European Union. 0:33:50.960 --> 0:33:53.960 They expand more broadly across parts of the European Union 0:33:54.000 --> 0:33:56.600 and beyond as well. You know, Schultz's visit to Beijing 0:33:56.680 --> 0:34:00.000 came just a few weeks after Yellen had been in Beijing, 0:34:00.080 --> 0:34:04.040 also carrying the same message, and the US Treasury Secretary 0:34:04.120 --> 0:34:07.680 warned Chinese leaders at the time that the concerns that 0:34:07.720 --> 0:34:11.160 the US has on Chinese overcapacity are shared by lots 0:34:11.200 --> 0:34:13.560 of countries around the world. And so Schultz coming and 0:34:13.600 --> 0:34:16.880 sort of he really echoed her message, you know, almost 0:34:16.920 --> 0:34:19.239 to the word. Just a few weeks later, really sort 0:34:19.239 --> 0:34:21.600 of hammered that home. And that's sort of part of 0:34:21.600 --> 0:34:24.280 a broader sign too, you know that the European Union 0:34:24.400 --> 0:34:27.560 and the US they're China policies kind of now sort 0:34:27.600 --> 0:34:31.560 of coalescing into one joined up policy. Obviously, the big 0:34:31.560 --> 0:34:34.080 thing on the horizon is the US election, you know, 0:34:34.120 --> 0:34:36.640 and if we do see President Donald Trump coming back 0:34:36.680 --> 0:34:38.960 into the White House later this year, he could take 0:34:39.040 --> 0:34:41.640 China policy in a whole different direction. He become much 0:34:41.680 --> 0:34:45.759 more hawkish, you know, much more sort of unpredictable. And 0:34:45.800 --> 0:34:47.239 then I think the Europeans are going to have to 0:34:47.239 --> 0:34:49.759 sort of think if they still want to walk in 0:34:49.880 --> 0:34:53.280 lockstep with the US on their China policy. But for now, 0:34:53.680 --> 0:34:55.600 you know, the two sides are very much in sync 0:34:55.680 --> 0:34:58.319 into how they're presenting their concerns to the Chinese. And 0:34:58.360 --> 0:35:00.359 that must be worrying, I think for China. You know, 0:35:00.800 --> 0:35:04.400 two of these huge economic blocks both presenting the same concerns. 0:35:05.360 --> 0:35:07.560 Yeah, let's go back to Dan ten Kate. We talked 0:35:07.640 --> 0:35:10.480 with him briefly about how she might be appealing to 0:35:10.520 --> 0:35:14.920 the EU to pursue a more pragmatic policy toward Beijing. 0:35:15.360 --> 0:35:18.000 She views Macron as someone he can do business with, 0:35:18.880 --> 0:35:24.279 someone that is not inherently reflexively anti China, that can 0:35:24.320 --> 0:35:26.920 stand up to the US and kind of forge a 0:35:26.960 --> 0:35:30.839 middle path. And it's kind of key to China's long 0:35:30.880 --> 0:35:33.840 standing strategic aim, you know, to kind of drive a 0:35:33.880 --> 0:35:37.359 wedge essentially, and not be in lockstep with the US, 0:35:37.400 --> 0:35:40.840 particularly when it comes to export controls on key chips 0:35:40.880 --> 0:35:43.560 and other advanced technology that China would need to grow 0:35:43.600 --> 0:35:44.240 its economy. 0:35:44.320 --> 0:35:46.879 So, Jenny, what are some of the bargaining points that she. 0:35:47.040 --> 0:35:49.080 Will bring to the four It's going to be all 0:35:49.120 --> 0:35:52.200 about what China can offer France, you know particularly. I 0:35:52.239 --> 0:35:54.400 think this is where the Chinese like to sort of 0:35:54.880 --> 0:35:57.359 the like sort of work to the advantage they have, 0:35:57.440 --> 0:36:00.000 which is, you know, they can offer different countries different 0:36:00.160 --> 0:36:03.239 carrots within the European Unions. I think for France, you know, 0:36:03.280 --> 0:36:06.040 it's going to be sort of what their companies can 0:36:06.040 --> 0:36:09.880 bring in terms of job creation and investment. We know 0:36:09.960 --> 0:36:13.760 from sources that mccran is specifically going to be asking 0:36:13.800 --> 0:36:18.000 she for investment in the EV battery sector. So you know, 0:36:18.120 --> 0:36:20.160 if she can say he's going to steer some of 0:36:20.200 --> 0:36:24.680 their sort of world leading companies in that sector towards 0:36:24.800 --> 0:36:28.040 investing in France, you know, that's very appealing from macran. 0:36:28.040 --> 0:36:30.640 And I think if what they can then do is 0:36:30.680 --> 0:36:32.759 sort of work out these deals where it's much more 0:36:32.760 --> 0:36:35.400 of it of a JV and so rather than you know, 0:36:35.520 --> 0:36:38.600 importing Chinese cars into France. If some of these Chinese 0:36:38.640 --> 0:36:42.000 cars or goods can be made in France by French workers, 0:36:42.400 --> 0:36:45.080 then that helps to ease these tensions. But of course, 0:36:45.120 --> 0:36:47.120 you know there's kind of an irony here too, and 0:36:47.200 --> 0:36:49.719 that there's been some research showing as well that you know, 0:36:49.840 --> 0:36:53.440 these European companies now which are actually behind the Chinese 0:36:53.440 --> 0:36:55.799 in terms of this type of new tech, they're now 0:36:55.880 --> 0:36:59.279 looking for tech transfer. So when these Chinese companies do 0:36:59.480 --> 0:37:03.400 set up in European nations, there's also this idea, a 0:37:03.480 --> 0:37:06.200 risk on the Chinese side of sort of technology leak, 0:37:06.320 --> 0:37:08.759 where the Europeans are now wanting to learn from the 0:37:08.880 --> 0:37:11.600 Chinese companies which are ahead. And that's just something which 0:37:11.640 --> 0:37:14.040 is quite fascinating to think about for a second, because 0:37:14.320 --> 0:37:16.879 you know, just a few decades ago, the complete opposite 0:37:16.920 --> 0:37:20.359 was true, where it was you know, European companies in 0:37:20.440 --> 0:37:23.160 China and the Chinese trying to sort of learn from 0:37:23.160 --> 0:37:26.520 that tech and you know, seally even perhaps to get ahead. 0:37:26.640 --> 0:37:29.040 Now everything sort of swung on. The imbalance is so 0:37:29.160 --> 0:37:31.880 great in some ways that you have these European firms 0:37:32.280 --> 0:37:34.879 that potentially want to learn from the Chinese, and that's 0:37:34.880 --> 0:37:36.680 something I think that you know, she has to sort 0:37:36.680 --> 0:37:37.800 of work out how to balance. 0:37:38.080 --> 0:37:40.160 Thanks to the two of you for helping us set 0:37:40.239 --> 0:37:42.640 up the meeting this week between the heads of state 0:37:42.800 --> 0:37:47.960 in Hungary, Serbia, and France with Chinese President Chi Jinping, 0:37:48.160 --> 0:37:52.040 Jenny Marsh Bloomberg Team Leader for Greater China Eco Gov 0:37:52.360 --> 0:37:57.359 and Rebecca Chung Wilkins Bloomberg Asia Government and Politics Correspondent. 0:37:57.560 --> 0:38:00.000 I'm Brian Curtis, along with Doug Krisner. You can catch 0:38:00.239 --> 0:38:03.720 us every weekday here for Bloomberg day Break Asia, beginning 0:38:03.760 --> 0:38:06.520 at eight am in Hong Kong and eight pm on 0:38:06.600 --> 0:38:07.840 Wall Street. Tom. 0:38:08.280 --> 0:38:10.680 Thank you, Brian, Thank you Doug. And that does it 0:38:10.760 --> 0:38:13.360 for this edition of Bloomberg day Break Weekend. Join us 0:38:13.400 --> 0:38:15.640 again Monday morning at five am Wall Street time for 0:38:15.680 --> 0:38:18.319 the latest done markets overseas and the news you need 0:38:18.360 --> 0:38:21.279 to start your day. I'm Tom Buzzby. Stay with us. 0:38:21.520 --> 0:38:24.759 Top stories and global business headlines are coming up right now.