Federal Reserve Decision, Jobs Report, New House Speaker, and More

This is Bloomberg day Break Weekend, our global look at 0:00:04.800 --> 0:00:06.920 the top stories in the coming week from our day 0:00:06.920 --> 0:00:09.560 Break anchors all around the world, and straight ahead on 0:00:09.560 --> 0:00:12.280 the program, a big week ahead on Wall Street, a 0:00:12.280 --> 0:00:16.320 FED decision and a jobs report. Also out earnings from Apple. 0:00:16.480 --> 0:00:18.000 I'm Tom Busby in New York. 0:00:18.160 --> 0:00:21.079 I'm Kaylee Lynes in Washington, where the House finally has 0:00:21.160 --> 0:00:24.079 a new speaker, Mike Johnson of Louisiana. 0:00:24.320 --> 0:00:27.360 I'm Stephen Carol in London, where the economic data is gloomy, 0:00:27.440 --> 0:00:29.760 but that could be welcome news for the Bank of 0:00:29.760 --> 0:00:30.920 England's upcoming meeting. 0:00:31.080 --> 0:00:35.040 I'm deg Prisner China. Evergrand faces a critical day in court. 0:00:35.440 --> 0:00:38.720 That's all straight ahead on Bloomberg day Break Weekend, the 0:00:38.760 --> 0:00:41.360 business news you need to wrap up your week in 0:00:41.520 --> 0:00:45.760 just one fifteen minute podcast available on Apple, Spotify, The 0:00:45.760 --> 0:00:49.040 Bloomberg Business Appen everywhere you get your podcasts. 0:00:52.320 --> 0:00:54.400 Good day to you. I'm Tom Busby. We begin today's 0:00:54.400 --> 0:00:56.880 program with a focus on the economy, and this week, 0:00:57.080 --> 0:00:59.560 not only do we get an interest rate decision by 0:00:59.600 --> 0:01:03.280 the Fed will reserve policymakers, but we'll cap the week 0:01:03.320 --> 0:01:05.200 with the jobs report for the month of October and 0:01:05.240 --> 0:01:08.360 to help us break it all down. We welcome Bloomberg 0:01:08.400 --> 0:01:12.480 International Economics and Policy correspondent Michael McKee. Welcome, Michael. 0:01:13.000 --> 0:01:14.120 Thanks great to be here. 0:01:14.680 --> 0:01:17.120 Now let's start with that two day meeting by the 0:01:17.120 --> 0:01:20.400 Federal Open Market Committee. After another pause in interest rate 0:01:20.480 --> 0:01:23.080 hikes at the fed's last meeting in September, what are 0:01:23.080 --> 0:01:24.520 we expecting to see this week? 0:01:24.720 --> 0:01:29.839 Another pause? The Fed has pretty much made it clear, 0:01:29.920 --> 0:01:34.679 and Jaypowell last week talking with Bloomberg's David Weston, kind 0:01:34.680 --> 0:01:37.520 of emphasized the idea that the FED can at this 0:01:37.680 --> 0:01:40.280 point wait and see what's going to happen. Because market 0:01:40.360 --> 0:01:43.080 rates have gone up so much in recent weeks that 0:01:43.240 --> 0:01:45.360 they're doing part of the job for the FED. And 0:01:45.400 --> 0:01:49.120 so if the Fed is worried about inflation going back 0:01:49.200 --> 0:01:52.640 up again, which they aren't particularly but you never know 0:01:53.000 --> 0:01:58.000 these days, then the market rates will help put pressure 0:01:58.480 --> 0:02:02.400 on the economy and inflation and slow things down more. 0:02:02.680 --> 0:02:05.880 And also, because you have the market rates this high 0:02:06.120 --> 0:02:08.520 and it slows down the economy, they don't want to 0:02:08.520 --> 0:02:12.280 pile on and make things worse and send us into recessions. 0:02:12.320 --> 0:02:14.680 So they're going to watch and wait. There is no 0:02:15.240 --> 0:02:19.040 new economic forecasts and no new dot plot, so it's 0:02:19.080 --> 0:02:21.840 really only the decision and then what the chairman says 0:02:21.840 --> 0:02:26.480 in his news conference afterwards. And nobody's really expecting either 0:02:27.080 --> 0:02:29.160 thing to make a lot of news because Pile's going 0:02:29.240 --> 0:02:31.760 to want to say, we're going to watch the data 0:02:31.840 --> 0:02:33.800 as they have. So then the focus will turn to 0:02:33.840 --> 0:02:37.040 the December meeting. But for right now, the Fed is 0:02:37.080 --> 0:02:41.200 probably going to be one of the lesser influences on 0:02:41.280 --> 0:02:44.880 the market's week, which is unusual. 0:02:45.320 --> 0:02:47.440 But there is a big influence on the markets coming 0:02:47.560 --> 0:02:49.720 up that very same day. That morning, Why don't you 0:02:49.720 --> 0:02:51.680 tell us what's going on with the treasury refunding. 0:02:51.919 --> 0:02:55.720 Yeah, the Fed figures into that a little bit. Every quarter, 0:02:55.840 --> 0:02:59.680 the Treasury announces how much it anticipates borrowing for the 0:02:59.680 --> 0:03:02.680 next three months, and of course, with the deficit where 0:03:02.680 --> 0:03:07.400 it is now, the Treasury is forecast to announce it 0:03:07.440 --> 0:03:11.480 will need to borrow a trillion dollars in three months. 0:03:12.000 --> 0:03:13.280 That's a lot. 0:03:13.639 --> 0:03:15.000 And so the. 0:03:17.000 --> 0:03:18.959 Estimate is that we're going to see a lot of 0:03:19.000 --> 0:03:21.720 volatility in the treasury market depending on how they lay 0:03:21.720 --> 0:03:26.640 this out. Which tenor what maturities three year, five years, 0:03:26.639 --> 0:03:28.480 seven year, ten year are they going to spread this 0:03:28.600 --> 0:03:31.280 out over how much of it will be in treasury bills, 0:03:31.280 --> 0:03:34.440 how much of it will be in bonds, And so 0:03:34.760 --> 0:03:38.080 the question for the market is who's going to buy 0:03:38.400 --> 0:03:41.560 all this and therefore then at what price? And the 0:03:41.600 --> 0:03:43.760 FED figures into it because of course they've been raising 0:03:43.800 --> 0:03:46.640 interest rates and that adds to the amount of interest 0:03:46.680 --> 0:03:49.760 the government has to pay, which adds to the deficit. 0:03:50.280 --> 0:03:54.240 And it also raises the question of how much are 0:03:55.040 --> 0:04:00.480 market participants going to have to pay to to buy 0:04:00.480 --> 0:04:04.560 these bonds because the Fed has raised rates and you're 0:04:04.600 --> 0:04:09.720 not going to buy treasuries at a lower price than 0:04:10.320 --> 0:04:13.680 what the Fed is already put out there. So it's 0:04:13.680 --> 0:04:16.560 going to be a very interesting dynamic on Wednesday morning. 0:04:16.600 --> 0:04:20.760 And basically the outlook seems to be look for volatility. 0:04:20.920 --> 0:04:25.800 And volatility not only in the treasury market, but in stocks. 0:04:25.839 --> 0:04:27.240 It's going to impact a lot. 0:04:27.880 --> 0:04:31.640 It could impact stocks as well, given where things settle out. 0:04:32.760 --> 0:04:35.400 And obviously we get close to the day, we'll see 0:04:35.640 --> 0:04:38.880 when issued prices are going to be. But it's beginning 0:04:38.920 --> 0:04:41.400 to look like this is going to be one of 0:04:41.440 --> 0:04:46.080 the bigger refunding announcements that we've had in decades. 0:04:46.240 --> 0:04:49.320 Will we get more good news this coming Friday from 0:04:49.360 --> 0:04:51.480 the October jobs report. That's a biggie. 0:04:52.000 --> 0:04:52.240 Yeah. 0:04:52.839 --> 0:04:55.599 It seems that the markets have given up on the 0:04:55.640 --> 0:04:59.920 idea that we're going to see a major change in payroll. 0:05:00.960 --> 0:05:04.839 The forecast is for one hundred and eighty five thousand 0:05:04.880 --> 0:05:08.080 at this point, which would be fairly strong, and it's 0:05:08.160 --> 0:05:11.240 higher than the forecast in previous months that turned out 0:05:11.240 --> 0:05:14.440 to be wrong because job growth was so strong, So 0:05:14.480 --> 0:05:16.159 the market seemed to thrown in the talent and said 0:05:16.160 --> 0:05:20.040 we'll probably get a pretty good number. The Fed has 0:05:20.240 --> 0:05:23.240 been looking for something around one hundred thousand, and one 0:05:23.320 --> 0:05:26.240 hundred and eighty five would not be anywhere close. No 0:05:26.400 --> 0:05:30.000 change in the unemployment rate is expected three point eight percent, 0:05:31.279 --> 0:05:34.200 which is also not what the Fed expected. They thought 0:05:34.520 --> 0:05:37.640 we would get easily into the middle of the foes 0:05:37.800 --> 0:05:41.960 the five range. They've since dialed that back down to 0:05:42.080 --> 0:05:44.720 four point one percent, but three point eight is not 0:05:44.880 --> 0:05:48.440 four point one. And at the same time, the forecasts 0:05:48.440 --> 0:05:51.520 are that we see average hourly earnings on an annual 0:05:51.560 --> 0:05:55.839 basis continue to drop a little bit. So it's like 0:05:55.880 --> 0:06:00.200 all good there now, Tom, you have just jinxed the 0:06:00.279 --> 0:06:04.080 US economy because no, we said things are all good 0:06:04.320 --> 0:06:08.080 there has to be something that is out there. 0:06:08.520 --> 0:06:10.359 Well, there is a lot to look forward to. Michael. 0:06:10.400 --> 0:06:13.240 Thank you, Our thanks to Bloomberg International Economics and Policy 0:06:13.240 --> 0:06:16.120 correspondent Michael McKee. We now go from the economy to 0:06:16.200 --> 0:06:19.320 the ongoing corporate earning season, which continues in earnest. More 0:06:19.360 --> 0:06:21.640 than one hundred sixty companies in the S and P 0:06:21.760 --> 0:06:24.000 five hundred reporting in the week ahead, and at the 0:06:24.000 --> 0:06:27.000 top of that list is Apple, the most valuable company 0:06:27.000 --> 0:06:29.960 on the planet, worth a staggering two point sixty three 0:06:30.080 --> 0:06:32.720 trillion dollars. And for more, we're going to bring in 0:06:32.839 --> 0:06:36.320 anarag Rana, he's senior tech analyst with Bloomberg Intelligence. Well, 0:06:36.360 --> 0:06:39.000 the Apple shares they've really took off this year, up 0:06:39.040 --> 0:06:41.520 thirty percent, to just put out the new iPhone fifteen 0:06:41.600 --> 0:06:44.880 line a month ago. It's got another new product launch 0:06:45.000 --> 0:06:50.000 on Tuesday. Earnings Thursday. About those earnings, what do you expect. 0:06:49.760 --> 0:06:52.599 You know, from a mathematical point of view, which is 0:06:52.720 --> 0:06:55.680 not the most exciting quartered in the for Apple, just 0:06:55.760 --> 0:06:59.000 because it's right before the holiday season, which is the 0:06:59.000 --> 0:07:01.760 biggest quarter for the U. But you know, we do 0:07:01.839 --> 0:07:05.120 have some early indications of or we hope to hear 0:07:05.160 --> 0:07:08.440 about the early indications of the brand new iPhone fifteen 0:07:08.520 --> 0:07:11.320 launch and how it's doing. So I think it's going 0:07:11.320 --> 0:07:13.120 to the conference call is going to be far more 0:07:13.120 --> 0:07:15.680 exciting in our view than the numbers itself. 0:07:15.840 --> 0:07:17.800 And as far as those numbers, what are you expecting 0:07:17.800 --> 0:07:18.200 to see? 0:07:18.240 --> 0:07:23.320 Relatively modest growth? Frankly, because this is an area in 0:07:23.360 --> 0:07:26.200 constant currency. There could be some headwinds because of fex 0:07:26.640 --> 0:07:28.720 but other than that, you know, you're going to look 0:07:28.760 --> 0:07:32.680 at nothing so exciting. Services revenue, which is you know, 0:07:32.720 --> 0:07:35.240 the one that is the higher growth area, could be 0:07:35.280 --> 0:07:39.600 around the eight to ten percent mark. iPhones pretty flat, 0:07:39.760 --> 0:07:43.520 nothing so exciting about that. So, I mean, overall, I'm 0:07:43.560 --> 0:07:49.160 not really baking in a big surprise, but the comments 0:07:49.200 --> 0:07:52.120 about the iPhone, and more importantly, how is it doing 0:07:52.160 --> 0:07:56.920 in China? Everything related to the China iPhone is going 0:07:56.960 --> 0:08:01.480 to dictate how Apple essentially grow and trades over the 0:08:01.480 --> 0:08:02.360 next twelve months. 0:08:02.440 --> 0:08:05.160 And now how is the iPhone, especially the lineup of 0:08:05.240 --> 0:08:07.960 the new fifteens, how is it doing in China and 0:08:08.040 --> 0:08:08.920 the rest of the world. 0:08:09.200 --> 0:08:10.880 I think this is the you know, we got some 0:08:11.040 --> 0:08:13.760 early indications that it's not doing so well in China, 0:08:13.800 --> 0:08:15.760 but that was just like the first fifteen days or 0:08:15.800 --> 0:08:19.880 seventeen days. There's some industry reports, you know, in our view, 0:08:19.960 --> 0:08:23.680 it should do better in China only because there is 0:08:23.720 --> 0:08:27.320 an easier comparison to last year. So the Apple story 0:08:27.560 --> 0:08:29.760 is a little bit more simpler in when it comes 0:08:29.800 --> 0:08:32.200 to the iPhone than most people think about it, because 0:08:33.000 --> 0:08:35.760 the way I look at it is there is a 0:08:35.800 --> 0:08:39.240 massive pace of iPhones around the World's let's call it 0:08:39.240 --> 0:08:41.280 eight hundred and you know, somewhere around eight hundred and 0:08:41.280 --> 0:08:46.040 forty million iPhones around the world. The average refresh cycle 0:08:46.280 --> 0:08:48.960 or average refreat rate for a human being is about 0:08:48.960 --> 0:08:51.840 four years. So at any given year, they're going to 0:08:51.880 --> 0:08:54.640 sell let's say, about two hundred and twenty million units. 0:08:55.200 --> 0:08:57.440 In good years, they will sell a little bit more. 0:08:57.480 --> 0:09:00.240 In bad years, they will sell a little less. Last 0:09:00.280 --> 0:09:03.120 year we saw a little bit less because of some 0:09:03.160 --> 0:09:06.720 supply chain problems we faced in China because of COVID 0:09:07.320 --> 0:09:10.679 you know breakout over there. So from that point of time, 0:09:10.760 --> 0:09:13.440 I mean that comparison becomes a little bit easier in 0:09:13.520 --> 0:09:16.280 fourth quarter, but then there is some you know, additional 0:09:16.360 --> 0:09:19.800 drama going on China with you know, launch of a 0:09:19.880 --> 0:09:24.199 new phone, potential nationalism, potential government restrictions. 0:09:24.240 --> 0:09:25.960 I mean, there is a there's there's. 0:09:26.080 --> 0:09:28.480 A lot of noise around that topic. So when Apple 0:09:28.520 --> 0:09:30.880 comes out and gives us a clear indication of what's 0:09:30.880 --> 0:09:34.320 happening in China, I think it's going to be either 0:09:34.360 --> 0:09:35.880 good for the stock or bad for the stock. 0:09:36.120 --> 0:09:39.280 Okay, and and a rag very quickly Tuesday, we're expecting 0:09:39.280 --> 0:09:41.600 a new product launch. What do you expect to see 0:09:41.760 --> 0:09:42.240 from Apple? 0:09:42.360 --> 0:09:43.920 That's a very I mean I would say in a 0:09:44.280 --> 0:09:47.440 very normal way, that is the next upgrade for the 0:09:47.520 --> 0:09:50.360 for the Max. And I think the real, you know, 0:09:50.400 --> 0:09:52.680 fun part over there is they have their own ship 0:09:53.120 --> 0:09:57.520 and because of the design chip by them, the MAX 0:09:57.679 --> 0:09:59.920 have done really well. I think they've been taking market 0:10:00.120 --> 0:10:04.200 Chioto be from the genetic PCs or the high end 0:10:04.240 --> 0:10:07.840 PCs for some time and the performance of these machines 0:10:07.880 --> 0:10:10.840 are truly remarkable. And I think I would attribute a 0:10:10.840 --> 0:10:13.480 lot to act with not just the design of these products, 0:10:13.760 --> 0:10:16.240 but the chip that they have built in house. 0:10:16.640 --> 0:10:16.880 Wow. 0:10:16.920 --> 0:10:18.880 Well, there's a lot going on, a lot to look 0:10:18.880 --> 0:10:22.559 forward to. Anna rag Rana, Senior tech analyst with Bloomberg Intelligence, 0:10:22.600 --> 0:10:25.280 Thank you so much for joining us today. Happy to 0:10:25.280 --> 0:10:28.120 be here, coming up on Bloomberg day Break weekend, Lawmakers 0:10:28.200 --> 0:10:31.320 finally elect a new Speaker of the House. We'll look 0:10:31.360 --> 0:10:34.840 at who Mike Johnson is and what challenges he faces 0:10:34.960 --> 0:10:48.800 going forward. I'm Tom Busby. This is Bloomberg. This is 0:10:48.800 --> 0:10:51.120 Bloomberg day Break weekend, our global look ahead at the 0:10:51.160 --> 0:10:53.880 top stories for investors in the coming week. I'm Tom 0:10:53.920 --> 0:10:56.680 Busby in New York. Up later on our program, we 0:10:56.800 --> 0:10:59.440 preview another key rate decision, this one from the Bank 0:10:59.480 --> 0:11:03.280 of England. But first, after weeks of infighting and jockeying 0:11:03.320 --> 0:11:07.160 for votes, lawmakers finally elected Republican Congressman Mike Johnson of 0:11:07.200 --> 0:11:11.679 Louisiana as the fifty sixth Speaker of the House. For more, 0:11:11.960 --> 0:11:15.760 let's bring in Bloomberg sound on. Co host Kaylee lines. 0:11:15.679 --> 0:11:19.240 That's right, Tom. After three full weeks of paralysis without 0:11:19.280 --> 0:11:22.400 a House Speaker, someone finally has the gavel in hand. 0:11:22.800 --> 0:11:26.640 Congressman Mike Johnson of Louisiana. Let's take it back to 0:11:26.679 --> 0:11:29.760 the House floor this past week when he secured that gavel. 0:11:29.920 --> 0:11:32.199 The total number of votes cast is four hundred and 0:11:32.240 --> 0:11:35.760 twenty nine love, which the Honorable Mike Johnson of the 0:11:35.800 --> 0:11:39.040 State of Louisiana has received two hundred and twenty votes. 0:11:43.880 --> 0:11:45.920 So there you have it. He was elected to the 0:11:45.920 --> 0:11:49.920 post with two hundred and twenty votes, accomplishing what Tom Emmer, 0:11:50.200 --> 0:11:54.079 Jim Jordan, and Steve Scalice could not before him, galvanizing 0:11:54.200 --> 0:11:57.560 enough support within the Republican Conference. But you couldn't be 0:11:57.600 --> 0:12:01.120 blamed if you're sitting there asking yourself who is Mike Johnson? 0:12:01.520 --> 0:12:02.679 So I thought it would be a good idea to 0:12:02.679 --> 0:12:05.200 get Mike Dorning, who helps lead our congressional coverage here 0:12:05.240 --> 0:12:09.120 at Bloomberg, to help us answer those questions and others. Mike, 0:12:09.160 --> 0:12:10.360 good to see you, as. 0:12:10.200 --> 0:12:11.480 Always, great to see you. 0:12:11.679 --> 0:12:13.640 So let's talk about who this guy is. He has 0:12:13.679 --> 0:12:18.080 been vaulted from essentially being a backbencher to second in 0:12:18.120 --> 0:12:20.720 line to the presidency. What do we need to know 0:12:21.240 --> 0:12:22.240 about Speaker Johnson? 0:12:22.400 --> 0:12:25.000 Well, probably the most important thing to know about him 0:12:25.120 --> 0:12:30.040 is he's someone who has very strong evangelical Christian beliefs 0:12:30.120 --> 0:12:33.760 and he's, even before he was an elective office, very 0:12:33.800 --> 0:12:37.320 involved in the legal agenda of the Christian right. He 0:12:37.440 --> 0:12:44.239 worked with the legal advocacy group that pursued conservative cultural causes, 0:12:45.040 --> 0:12:49.559 and that's been sort of the core of who he 0:12:49.720 --> 0:12:53.040 was even before he entered politics, and he's going to 0:12:53.080 --> 0:12:56.600 be the most conservative speaker in modern times on both 0:12:56.720 --> 0:13:02.480 social and economic issues. And he's a guy, importantly, who 0:13:02.600 --> 0:13:07.760 doesn't have a lot of experience yet in these big negotiations. 0:13:07.760 --> 0:13:10.280 He's just been, as you said, you know, a very 0:13:10.360 --> 0:13:14.080 junior member of leadership, was not involved in any of 0:13:14.080 --> 0:13:17.800 the big negotiations. So he'll be taking on a completely 0:13:17.920 --> 0:13:19.280 new set of tasks. 0:13:19.440 --> 0:13:21.319 Yeah, and I want to get to that lack of 0:13:21.400 --> 0:13:23.680 leadership experience in just a moment. But also when we 0:13:23.720 --> 0:13:26.240 think about the idea that this is a very staunch conservative, 0:13:26.280 --> 0:13:28.679 it's also important to note this is someone who's pretty 0:13:28.679 --> 0:13:31.480 closely aligned with former President Trump and was really one 0:13:31.559 --> 0:13:34.160 of the leaders of the effort within the House to 0:13:34.600 --> 0:13:38.040 overturn or not certify the results of the twenty twenty election. 0:13:38.200 --> 0:13:41.800 And I wonder, especially for those endangered moderates in his 0:13:41.920 --> 0:13:45.880 conference who are in districts that Biden won in twenty twenty, 0:13:46.320 --> 0:13:48.800 how much pushback is he likely to get from those 0:13:48.840 --> 0:13:51.880 individuals because of his position on Trump and the election, 0:13:52.000 --> 0:13:54.520 And that obviously ties into how hard it will be 0:13:54.559 --> 0:13:56.880 for him to keep the Republican Conference together. 0:13:57.559 --> 0:14:02.560 Well, they all voted for him, embraced him. His positions 0:14:03.120 --> 0:14:08.040 themselves won't play well in those districts because he's above all, 0:14:09.120 --> 0:14:13.760 very conservative on cultural issues like abortion, same sex marriage, 0:14:14.040 --> 0:14:20.520 even you know, he supported criminalization of gay sex quite 0:14:20.600 --> 0:14:24.920 late in his career, and he was one of the 0:14:25.040 --> 0:14:29.080 leaders of the election denialism in the House, and he 0:14:29.200 --> 0:14:33.200 has that record. I mean that said, we don't know 0:14:33.280 --> 0:14:39.760 how much Democrats will succeed in making him a caricature 0:14:39.920 --> 0:14:43.760 that you know, people can rally around in the same 0:14:43.800 --> 0:14:48.280 way that they did Nut Gingrich or Republicans did Nancy Pelosi. 0:14:48.960 --> 0:14:53.840 He has a personality and a style that's not as 0:14:53.960 --> 0:14:59.560 confrontational as Jim Jordan or Nut Gingrich or Donald Trump 0:14:59.640 --> 0:15:03.000 for that matter. So even though he has these very 0:15:03.320 --> 0:15:08.600 sort of out of the mainstream political positions, his persona, 0:15:08.760 --> 0:15:11.720 what you see on TV, what you hear in his voice, 0:15:12.400 --> 0:15:16.000 is not that sort of combative, confrontational style. 0:15:16.600 --> 0:15:19.280 Yeah. One member of the Republican conference told me this 0:15:19.360 --> 0:15:22.880 past week that it's just really hard to dislike Mike Johnson, 0:15:22.920 --> 0:15:25.160 and ultimately maybe that's why he was able to secure 0:15:25.200 --> 0:15:27.400 the votes when so many others could not. But to 0:15:27.440 --> 0:15:30.640 the point you were making earlier Mike about this idea 0:15:30.880 --> 0:15:35.520 that this is not someone who is in a position 0:15:36.280 --> 0:15:39.400 where he has had a lot of experience being a leader, 0:15:39.440 --> 0:15:42.160 being in the room with people like Mitch McConnell or 0:15:42.240 --> 0:15:45.560 Chuck Schumer or ultimately possibly even President Biden. If we're 0:15:45.600 --> 0:15:48.080 really getting down to having to hammer out a deal 0:15:48.120 --> 0:15:51.520 on spending to keep the government funded by November, by 0:15:52.040 --> 0:15:54.360 November seventeenth, which of course is the deadline when that 0:15:54.360 --> 0:15:57.800 funding is going to run out, how challenging is it 0:15:57.840 --> 0:15:59.600 going to be for Mike Johnson to kind of step 0:15:59.600 --> 0:16:02.760 into that, to step into these rooms, and it is a. 0:16:02.680 --> 0:16:06.240 Big challenge for anyone. I mean, he will have advisors 0:16:06.440 --> 0:16:09.720 around him, and he will have people like Steve Scalise, 0:16:09.880 --> 0:16:13.960 the Majority Leader, who has some experience in that. But 0:16:14.080 --> 0:16:18.239 it's very different than just being a member of Congress 0:16:18.320 --> 0:16:24.240 taking positions on legislation. He's got to as a negotiator 0:16:25.480 --> 0:16:28.600 both be facing some of some very seasoned people in 0:16:28.720 --> 0:16:33.840 Chuck Schumer and Mitch McConnell and Joe Biden, and having 0:16:33.880 --> 0:16:38.120 to suss out where he can take the Republican Conference, 0:16:38.640 --> 0:16:44.440 which is very conservative at the moment, and calculate the 0:16:44.520 --> 0:16:47.360 odds of how much damage it would do to the 0:16:47.400 --> 0:16:51.560 Republican Party to have a shutdown, have a face off, 0:16:51.680 --> 0:16:56.520 be unwilling to compromise. And those are very different strategic 0:16:57.560 --> 0:17:01.040 calculations than a backbench member of Congress has to make. 0:17:01.280 --> 0:17:04.719 Yeah, so what do we know about his plans to 0:17:04.760 --> 0:17:06.879 fund the government to try to figure out something that 0:17:06.920 --> 0:17:09.639 will appease his conference, but also that the Senate in 0:17:09.640 --> 0:17:11.119 the White House can sign onto. 0:17:11.840 --> 0:17:15.399 Well, he's indicated in a letter that he sent around 0:17:15.400 --> 0:17:19.040 to his colleagues shortly before he was elected Speaker that 0:17:19.160 --> 0:17:22.040 he would be willing to do another short term funding 0:17:22.119 --> 0:17:27.720 deal to stave off mid November shutdown and hopefully at 0:17:27.800 --> 0:17:30.800 least get into next year. That way, there's a little 0:17:30.840 --> 0:17:34.240 bit more time to come up with a legislation and 0:17:34.359 --> 0:17:39.359 negotiating position think things out. What's unclear though, is whether 0:17:39.440 --> 0:17:43.320 he would attach some of these conditions that just won't 0:17:43.359 --> 0:17:47.880 fly with Democrats, like big changes to asylum laws or 0:17:48.080 --> 0:17:53.000 you know, previously he voted against the temporary funding. The 0:17:53.040 --> 0:17:56.639 only temporary funding he was willing to support as a 0:17:56.880 --> 0:18:01.719 member of Congress was with a thirty percent cut in funding, 0:18:01.800 --> 0:18:05.560 which would be a draconian cut and you know, unlikely 0:18:05.680 --> 0:18:08.600 for Democrats. To agree to, especially for just you know, 0:18:08.680 --> 0:18:11.400 to get six more weeks of federal funding. 0:18:11.840 --> 0:18:14.679 What about the issue of funding for Israel or maybe 0:18:14.680 --> 0:18:16.840 more difficult, Ukraine. 0:18:17.359 --> 0:18:21.960 Now that's a He has in the past opposed funding 0:18:22.040 --> 0:18:28.520 for Ukraine, as have a significant portion of House Republicans. 0:18:29.520 --> 0:18:33.120 But he has said that he wouldn't necessarily oppose Ukraine 0:18:33.160 --> 0:18:36.960 funding and that is something that most Democrats support and 0:18:37.000 --> 0:18:40.480 a lot of Republican support. So there's broad support for 0:18:40.920 --> 0:18:44.920 Ukraine funding in the House, but there is division within 0:18:45.000 --> 0:18:48.080 the Republican Party on that, and we don't yet know 0:18:48.119 --> 0:18:51.399 how he'll navigate that. We do know that, you know, 0:18:51.440 --> 0:18:53.960 when he was voting for himself, he was voting against it. 0:18:54.600 --> 0:18:56.560 Yeah, and of course, as we talk about all these 0:18:56.840 --> 0:18:59.240 legislative efforts that he's going to have to undertake. We 0:18:59.280 --> 0:19:01.840 know that in politics, because it isn't just about what 0:19:01.880 --> 0:19:04.000 you do on the hill, it's also about going out 0:19:04.040 --> 0:19:06.800 and raising money to spend on campaigns so you can 0:19:06.840 --> 0:19:09.679 stay on the hill. So when Johnson would want you 0:19:09.680 --> 0:19:13.000 can keep the majority, that probably is more important. What 0:19:13.080 --> 0:19:16.320 do we know about his record as a fundraiser. 0:19:16.680 --> 0:19:19.080 Well, he hasn't done a lot of fundraising. He doesn't 0:19:19.080 --> 0:19:23.840 have a large mailing list of or email list these 0:19:23.920 --> 0:19:28.239 days of small dollar donors, and he hasn't raised a 0:19:28.280 --> 0:19:30.520 ton of big dollar money, although we do know the 0:19:30.560 --> 0:19:33.359 oil and gas industry has been a big supporter of his. 0:19:33.600 --> 0:19:37.280 Not surprisingly, he comes from Louisiana, which is big oil 0:19:37.359 --> 0:19:41.520 and gas country, and he's sort of previously pushed against 0:19:41.560 --> 0:19:44.960 any climate change action, which kind of fits the oil 0:19:45.000 --> 0:19:48.040 and gas industry's agenda. He's also raised a bit of 0:19:48.080 --> 0:19:51.959 money from defense contractors. He's on the Armed Services Committee 0:19:52.440 --> 0:19:57.080 and authorizing weapons systems is very important to defense contractors, 0:19:58.160 --> 0:20:03.280 though he doesn't have that much experience. Kevin McCarthy's top 0:20:03.320 --> 0:20:09.359 fundraiser has already indicated that he's going to work with 0:20:09.359 --> 0:20:12.720 with the new speaker. So yeah, that's someone who really 0:20:12.760 --> 0:20:14.960 knows how to do this. So on a staff level, 0:20:16.119 --> 0:20:19.640 they've got the connections, and once you're the speaker, it's 0:20:19.680 --> 0:20:21.800 going to be very easy to get a lot of 0:20:21.920 --> 0:20:23.879 big business groups to support you. 0:20:24.080 --> 0:20:27.000 Yeah, certainly has a lot of work cut out for him. 0:20:27.000 --> 0:20:30.320 Getting the gavel may have been the easy part for him, yes, 0:20:30.800 --> 0:20:32.879 and so the hard stuff still to come. Mike Dorning, 0:20:32.880 --> 0:20:35.880 who helps lead our congressional coverage here, at Bloomberg in Washington. 0:20:35.920 --> 0:20:38.080 Thank you very much, and Tom, we'll send. 0:20:37.880 --> 0:20:38.359 It back to you. 0:20:38.560 --> 0:20:41.679 Our thanks to Bloomberg sound on co host Kylee Lines. 0:20:41.720 --> 0:20:44.120 And coming up on Bloomberg day Break weekend, we take 0:20:44.160 --> 0:20:46.920 you to Europe. We reve you another key rate decision, 0:20:46.960 --> 0:20:49.120 this one from the Bank of England. I'm Tom Busby 0:20:49.240 --> 0:21:02.120 and this is Bloomberg. I'm Tom Busby in New York 0:21:02.160 --> 0:21:03.960 with your global look ahead at the top stories for 0:21:04.040 --> 0:21:06.800 investors in the coming week. The Bank of England in 0:21:06.920 --> 0:21:09.440 focus in the coming days as its rate centers meet. 0:21:09.520 --> 0:21:11.359 Much of the recent data for the UK has shown 0:21:11.400 --> 0:21:14.840 the economy weakening a bit, and policymakers have pointed to 0:21:14.880 --> 0:21:18.159 the fact that the effect of the past fourteen hikes 0:21:18.200 --> 0:21:21.200 still feeding through for more. Now let's go to London 0:21:21.200 --> 0:21:24.600 and bring in Bloomberg Daybreak Europe banker Stephen Carroll. Tom. 0:21:24.960 --> 0:21:28.119 The backdrop to this Bank of England meeting is looking 0:21:28.240 --> 0:21:32.080 decidedly gloomy. The UK economy is starting to creak under 0:21:32.119 --> 0:21:35.119 the strain of higher interest rates. The Bank of England 0:21:35.160 --> 0:21:38.360 paused its hiking cycle at its last meeting in September. 0:21:38.720 --> 0:21:42.560 Since then, flash pmis have shown a continuing contraction in 0:21:42.600 --> 0:21:47.399 the services and manufacturing sectors. Business optimism is in short supply, 0:21:47.760 --> 0:21:50.720 and the labor market is showing signs of weakness too. 0:21:51.240 --> 0:21:54.879 I've been discussing the prospects for this upcoming meeting with 0:21:55.000 --> 0:21:58.600 our senior UK economist, Dan Hansen. I started by asking 0:21:58.680 --> 0:22:00.840 him to put the recent data in contact for us. 0:22:01.200 --> 0:22:04.560 Is this a gradual slowdown or something a bit more dramatic. 0:22:04.920 --> 0:22:07.159 I think it's still probably a gradual slowdown, But I 0:22:07.160 --> 0:22:09.720 think context is important because we've been in a world 0:22:10.000 --> 0:22:13.720 in the UK where we've had zero growth a little 0:22:13.720 --> 0:22:15.560 bit of growth, so we've been sort of on the 0:22:15.680 --> 0:22:20.399 verge of GDP falling for a number of quarters now 0:22:20.480 --> 0:22:22.600 and it sort of hasn't. It wouldn't have taken much 0:22:22.640 --> 0:22:24.960 at any point to get a drop in GDP, and 0:22:25.800 --> 0:22:29.160 I think now we're in the world where GDP probably 0:22:29.240 --> 0:22:33.639 is more likely falling than it is rising. But in 0:22:33.680 --> 0:22:36.639 the broader context it is It's very modest the falls 0:22:36.680 --> 0:22:38.399 we're talking about, you know, a point one or a 0:22:38.480 --> 0:22:41.119 point two percent fall, So we're not a in a 0:22:41.160 --> 0:22:44.040 sort of headed for a deep recession world, we don't think, 0:22:44.160 --> 0:22:46.119 but we do think that it's more likely than not 0:22:46.200 --> 0:22:48.600 the economy is probably contracting at the moment, and I 0:22:48.640 --> 0:22:53.240 think the PMI number you point two is an important one. 0:22:53.480 --> 0:22:55.480 I also think if you look at the GDP data 0:22:55.560 --> 0:22:58.680 as well, actually it looks unlikely that the economy grew 0:22:58.720 --> 0:23:00.760 in the third quarter, So we could get a contraction 0:23:00.960 --> 0:23:02.560 in the third course, which is a little bit earlier 0:23:02.600 --> 0:23:05.159 than we've been expecting and actually a lot lower than 0:23:05.160 --> 0:23:07.320 what the Bank of England was expecting back in its 0:23:07.520 --> 0:23:10.200 August forecast, which is the last forecast it put together. 0:23:10.880 --> 0:23:12.800 So if we have if it looks like we're heading 0:23:12.840 --> 0:23:15.200 for a contraction in a third quarter, does that mean 0:23:15.280 --> 0:23:17.959 the likelihood of a recession is that much higher by 0:23:18.000 --> 0:23:18.640 the end of the year. 0:23:19.400 --> 0:23:21.320 I think yeah, I mean I think it does. I 0:23:21.320 --> 0:23:25.320 mean again, i'd just be very cautious about you know, 0:23:25.359 --> 0:23:29.000 the word recession. It see a word that people associate 0:23:29.040 --> 0:23:31.359 with very, very bad outcomes. I mean, I'm not what 0:23:31.400 --> 0:23:33.399 I'm saying here is that I think we're headed for 0:23:33.440 --> 0:23:38.720 a mild recession, particularly relative to historical standards, and it's 0:23:38.880 --> 0:23:40.720 you know, it's not I don't think it's going to 0:23:40.720 --> 0:23:43.120 feel that much different to what the economy. The way 0:23:43.160 --> 0:23:46.760 the economy has been performing over the past twelve months 0:23:46.840 --> 0:23:49.400 or so, where we've had to say zero growth, maybe 0:23:49.440 --> 0:23:52.040 a point one or a point two here or there. 0:23:52.119 --> 0:23:54.160 So it's it's a very mild recession we think we're 0:23:54.160 --> 0:23:57.280 heading for, but on the very narrow definition of two 0:23:57.400 --> 0:24:01.040 consecutive quarters of negative growth, we think it's more likely 0:24:01.080 --> 0:24:02.560 than not we're going to get that by the end 0:24:02.560 --> 0:24:03.040 of this year. 0:24:03.760 --> 0:24:07.000 Is this essentially what the Bank of England was aiming for? 0:24:07.040 --> 0:24:09.879 Are they then achieving their goals by by having the 0:24:09.960 --> 0:24:12.320 sort of landing for the economy? 0:24:12.760 --> 0:24:15.720 I mean, I think on this one you have to 0:24:16.080 --> 0:24:18.359 you have to think of the broader view, the broader 0:24:18.400 --> 0:24:22.160 context around the UK economy. So the economy's trend rate 0:24:22.240 --> 0:24:25.000 of growth is probably one one one and a bit 0:24:25.200 --> 0:24:27.920 a year, one percent a year, so that means a 0:24:28.040 --> 0:24:31.800 quarter you get zero point three ish a quarter, so 0:24:31.840 --> 0:24:36.040 it doesn't take much for what and that then that 0:24:36.080 --> 0:24:38.240 then means that the Bank of England needs to slow 0:24:38.280 --> 0:24:40.239 the economy so that it grows slower than that, so 0:24:40.280 --> 0:24:43.359 that the heat gets taken out of the economy. So 0:24:43.480 --> 0:24:46.240 I think, yes, this is what the Bank of England 0:24:46.280 --> 0:24:48.720 is aiming for. But in terms of the landing spot 0:24:48.760 --> 0:24:52.800 between slowing the economy below that point three percent level 0:24:52.920 --> 0:24:55.840 and going into recession. There's quite a small landing spot 0:24:55.920 --> 0:24:58.480 for that. So I think, you know they are this 0:24:58.600 --> 0:25:01.160 is what they're looking to do. This is the only 0:25:01.200 --> 0:25:04.400 way they have through interest rates to bring the economy 0:25:04.440 --> 0:25:07.600 back into balance and eventually inflation back to two percent. 0:25:08.240 --> 0:25:11.480 It's a question too about the lag in the interest 0:25:11.520 --> 0:25:14.359 rates we've had up until this point the illustrate rises. 0:25:14.880 --> 0:25:17.440 One of the members of the Monetary Party Committee, Swati Dengra, 0:25:17.560 --> 0:25:20.280 recently giving an interview in which she said only up 0:25:20.320 --> 0:25:23.119 to about a quarter of the impact of rate hikes 0:25:23.160 --> 0:25:26.080 had fed through into the economy so far. What's your 0:25:26.119 --> 0:25:29.600 analysis of the impact of the rate rises on the 0:25:29.600 --> 0:25:31.160 economy up until now. 0:25:32.440 --> 0:25:34.800 Yeah, So I'm that slightly worried me, to be honest, 0:25:34.840 --> 0:25:37.560 that she thought that, because that feels like, obviously there's 0:25:37.560 --> 0:25:39.880 an awful lot still to come and we're sort of 0:25:40.320 --> 0:25:43.200 on the verge of recession now. So if that's true, 0:25:43.280 --> 0:25:46.560 then you know, there's quite it's quite possible we get 0:25:46.600 --> 0:25:49.760 something a little bit deeper over the next twelve months 0:25:49.840 --> 0:25:52.160 or so in terms of the fall in GDP. I mean, 0:25:52.520 --> 0:25:54.680 we're a little bit more I guess you would call 0:25:54.680 --> 0:25:57.360 it optimistic if you like that more of it has 0:25:57.400 --> 0:25:59.440 come through, and I think our view challenge a little 0:25:59.480 --> 0:26:01.680 bit more with huge pills. He said about half has 0:26:01.720 --> 0:26:04.639 come through. He thinks he pills the chief economists at 0:26:04.640 --> 0:26:07.800 the Bank of England and we're we're sort of broadly 0:26:07.840 --> 0:26:11.560 in along those lines as well in terms of underpinning 0:26:11.600 --> 0:26:14.840 our forecast. That's how much has come through to date. 0:26:15.000 --> 0:26:17.040 So there's still fifty percent of it to come through, 0:26:17.119 --> 0:26:20.000 but it's more than the twenty five percent than DiGRA thinks. 0:26:20.920 --> 0:26:23.080 All of those things to be pointing to the Bank 0:26:23.119 --> 0:26:25.480 of England being at the end or very close to 0:26:25.520 --> 0:26:28.000 the end of its hiking cycle. 0:26:28.520 --> 0:26:29.600 Do you think we're there? 0:26:31.480 --> 0:26:33.439 Yeah, I think I think we are. I mean, if 0:26:33.520 --> 0:26:35.359 you if you think of the data in the run 0:26:35.440 --> 0:26:38.199 up to the September decision where if you remember they 0:26:38.280 --> 0:26:42.320 decided to pause. The data we've had since then is 0:26:42.400 --> 0:26:46.400 no more worrying and the bank is clearly very data dependent. 0:26:48.119 --> 0:26:50.720 And I think you know that we've spoken about the 0:26:50.760 --> 0:26:56.560 economy inflation to it's surprised relative to the consensus for you, 0:26:56.640 --> 0:26:58.560 but you have to remember it's come in below the 0:26:58.600 --> 0:27:03.119 Bank of England's forecast, it's August forecasts. And also Bailey, 0:27:03.400 --> 0:27:05.640 Andrew Bailey, the governor, came out and said that core 0:27:05.720 --> 0:27:07.920 inflation was a little bit weaker than they had been 0:27:07.960 --> 0:27:09.840 expecting as well, So that was a sort of a 0:27:09.920 --> 0:27:13.680 nuance as well there. And the other thing, the big 0:27:13.720 --> 0:27:15.720 thing I think that's happened is that there are finally 0:27:15.800 --> 0:27:18.359 some signs that pay growth is turning over. So that 0:27:18.480 --> 0:27:22.879 was the one metric that was continuing to rise and 0:27:23.000 --> 0:27:25.800 going into the September decision as well, which is the 0:27:25.800 --> 0:27:28.040 big reason why we thought they would hike and they 0:27:28.160 --> 0:27:31.520 decided not to. But actually that's just turned over as well. 0:27:31.560 --> 0:27:33.320 So I think if you look at the data as 0:27:33.320 --> 0:27:36.719 a whole, the whole, the whole, across the spectrum, I 0:27:36.720 --> 0:27:38.960 don't think there's good reason for them to hike in 0:27:38.960 --> 0:27:39.760 November at all. 0:27:40.040 --> 0:27:41.840 Yeah, because we had that update on the labor markets 0:27:41.880 --> 0:27:44.240 in the past few days and that sort of painted 0:27:44.240 --> 0:27:47.439 a picture of things cooling down a little bit but 0:27:47.600 --> 0:27:50.800 not perhaps indicating major job blasts, and that sort of 0:27:50.800 --> 0:27:53.439 speaks to what you were talking about earlier. This you know, 0:27:53.480 --> 0:27:56.919 the recession may common technical terms but won't feel that 0:27:57.080 --> 0:28:00.000 much different. What's the outlook for the labor and mind, 0:28:00.040 --> 0:28:00.679 I guess. 0:28:01.640 --> 0:28:03.639 Yeah, so I think I mean, up to now, the 0:28:03.720 --> 0:28:06.879 labor market outcome in the UK has been certainly on 0:28:06.880 --> 0:28:09.560 the unemployment side. And I know there are a lot 0:28:09.560 --> 0:28:12.679 of questions about the unemployment data now given what's happened 0:28:12.680 --> 0:28:17.440 with these experimental statistics, but the broad pitch, if you 0:28:17.440 --> 0:28:20.240 look at the UK unemployment rate relative to what's been happening, 0:28:20.320 --> 0:28:24.040 say in the US, in the Euro Area, unemployment has 0:28:24.119 --> 0:28:26.439 risen by more and the labor market appears to have 0:28:26.480 --> 0:28:29.960 loosened by more than in other countries. Though it's not 0:28:30.840 --> 0:28:33.439 you know, unemployment rate of four point two percent, it's 0:28:33.480 --> 0:28:36.600 still extremely low by historical standards, and it's important to 0:28:37.000 --> 0:28:39.960 make that point. The other good bit of news is that, 0:28:40.240 --> 0:28:42.520 you know, the labor market has been loosening on a 0:28:42.520 --> 0:28:44.560 lot of other metrics that are sort of, if you like, 0:28:44.680 --> 0:28:49.280 less damaging for the outlook. So vacancies have been falling. 0:28:49.360 --> 0:28:52.440 That's a sign that the economies, sorry, the labor market 0:28:52.480 --> 0:28:55.239 is loosening. So I think the bank will look at 0:28:55.240 --> 0:28:56.880 it and going back to sort of what we were 0:28:56.920 --> 0:29:00.480 talking about earlier and what they're sort of desired for 0:29:00.520 --> 0:29:03.320 all of this is that so far at least it 0:29:03.440 --> 0:29:06.320 hasn't probably been as damaging as they might have thought 0:29:06.400 --> 0:29:08.040 had they If had you told them a year ago 0:29:08.080 --> 0:29:10.240 they'd have to take rates to five point two five percent, 0:29:10.240 --> 0:29:13.560 they'd have been extremely worried about the outcome. Where we 0:29:13.600 --> 0:29:16.400 stand now, yes, we might be sort of on the 0:29:16.520 --> 0:29:20.320 verge of this technical mild technical recession, but actually the 0:29:20.360 --> 0:29:23.640 economy's held up pretty well given the amount of tightening 0:29:23.640 --> 0:29:24.600 that's been put in place. 0:29:25.160 --> 0:29:27.640 Quite about the prospect of rate cuts, then, how far 0:29:27.720 --> 0:29:29.200 away do they look at this point? 0:29:29.360 --> 0:29:33.200 Yeah, there's a balance here between obviously if the economy 0:29:33.240 --> 0:29:35.560 isn't doing as well, and I think that the fact 0:29:35.600 --> 0:29:37.840 that they pause in September suggests to me that they 0:29:37.840 --> 0:29:41.280 are going to be quite sensitive to this going into 0:29:41.640 --> 0:29:43.280 going into the end of the year and into twenty 0:29:43.360 --> 0:29:45.800 twenty four. Of course, you still have to weigh that 0:29:45.840 --> 0:29:47.240 against the inflation picture. 0:29:47.760 --> 0:29:50.960 That's our senior UK economist Dan Hansen, and will have 0:29:51.040 --> 0:29:53.920 full coverage of the Bank of England's rate decision on 0:29:54.080 --> 0:29:58.000 Bloomberg Radio this week. I'm Stephen Carroll in London. You 0:29:58.000 --> 0:30:00.320 can catch us every weekday morning here for Blue Imberg 0:30:00.360 --> 0:30:03.200 Daybreak here at beginning at six am in London on 0:30:03.200 --> 0:30:04.680 one am on Wall Streets. 0:30:04.880 --> 0:30:07.320 Tom, thank you, Steven, and coming up here on Bloomberg 0:30:07.400 --> 0:30:09.640 day Break weekend, we take you to Asia in what 0:30:09.760 --> 0:30:11.880 is shaping up to be a critical week for a 0:30:11.920 --> 0:30:16.320 big property developer. There, I'm Tom Busby, and this is Bloomberg. 0:30:27.080 --> 0:30:29.240 This is Bloomberg day Break Weekend, our global look at 0:30:29.280 --> 0:30:31.800 the top stories for investors in the coming week. I'm 0:30:31.840 --> 0:30:36.080 Tom Busby in New York. China's embattled property giant, Evergrand, 0:30:36.120 --> 0:30:39.560 the world's most indebted real estate developer, faces a critical 0:30:39.600 --> 0:30:42.640 court date in the week ahead. Bloomberg Daybreak Asia co 0:30:42.720 --> 0:30:44.400 host Doug Krisner has more. 0:30:44.600 --> 0:30:47.760 Tom, Evergrand has become the poster child of China's real 0:30:47.840 --> 0:30:51.760 estate debt crisis. This company has liabilities totally about three 0:30:51.800 --> 0:30:55.080 hundred and twenty seven billion dollars and in the week ahead, 0:30:55.160 --> 0:30:58.120 a court hearing has been set and this will determine 0:30:58.120 --> 0:31:01.320 the future of Evergrand. Let's take a closer look now 0:31:01.360 --> 0:31:05.600 with Bloomberg's Alice Huang, Bloomberg's China credit reporter. She's also 0:31:05.880 --> 0:31:09.640 the deputy team leader. Alice, Thanks for joining us. I 0:31:09.720 --> 0:31:11.960 think we have to begin with the fact that Evergrand 0:31:12.000 --> 0:31:16.240 has been struggling to finalize a restructuring plan. Where are 0:31:16.280 --> 0:31:17.840 we in that process right now? 0:31:18.320 --> 0:31:20.680 Thank you for having me. We can say that we're 0:31:20.720 --> 0:31:24.280 back to square one. Where Evergrand, like you mentioned, does 0:31:24.360 --> 0:31:28.200 not have a concrete restructuring proposal. So we've had a 0:31:28.280 --> 0:31:32.040 long back and forth, a long journey since Evergrand defaulted 0:31:32.760 --> 0:31:36.680 in twenty twenty one, and fast forward to two years later, 0:31:36.840 --> 0:31:40.440 the company still does not have a restructuring proposal at hand. Now, 0:31:40.480 --> 0:31:43.880 it did have one earlier this year after a lengthy 0:31:43.960 --> 0:31:48.000 negotiation with the creditors. Some of the major creditors have 0:31:48.120 --> 0:31:52.080 already agreed to this plan. However, the company surprised them 0:31:52.120 --> 0:31:55.800 in September when it canceled a creditor meeting last minute 0:31:55.880 --> 0:31:59.400 when creditors were supposed to vote on the plan, and 0:31:59.720 --> 0:32:02.440 it also said it would have to revisit the restructuring 0:32:02.480 --> 0:32:06.960 plan that previously already won these key creditors support. And 0:32:07.080 --> 0:32:10.120 another development we've seen is that its founder is now 0:32:10.200 --> 0:32:13.760 under police control. So all of these developments are bringing 0:32:13.800 --> 0:32:17.520 back the restructuring progress. Like I said, back to square one. 0:32:17.720 --> 0:32:20.320 So I mentioned the court hearing and the key issue 0:32:20.320 --> 0:32:22.600 for the judge in this case is to decide whether 0:32:22.640 --> 0:32:27.320 Evergrant should be liquidated. That seems pretty extreme. Is there 0:32:27.720 --> 0:32:31.520 any way at any point that this process could be 0:32:31.560 --> 0:32:32.640 avoided liquidation? 0:32:33.480 --> 0:32:37.680 Yeah, So the company has already managed to get delays 0:32:37.720 --> 0:32:41.520 from the judge from the Hong Kong Judge several times 0:32:41.600 --> 0:32:45.040 on the basis that, you know, it would have meaningful 0:32:45.080 --> 0:32:48.560 debt negotiation progress. So last time Evergrant was in court 0:32:48.840 --> 0:32:51.840 a plan to get the restructuring plan approved by creditors 0:32:52.440 --> 0:32:55.320 by the next hearing. And now that's you know, it's 0:32:55.400 --> 0:32:57.680 really behind that schedule, and like I said, we're back 0:32:57.720 --> 0:33:00.640 to the beginning where it doesn't even have a decided 0:33:00.680 --> 0:33:04.600 restructuring proposal. And you know, winding up hearings have become 0:33:04.680 --> 0:33:08.960 really popular among frustrated creditors of Chinese developers who have 0:33:09.000 --> 0:33:12.000 seen little restructuring progress as a way to try to 0:33:12.040 --> 0:33:15.400 recover losses or at least negotiate with the company. And 0:33:15.480 --> 0:33:18.480 if the judge gives the company winding up order, you know, 0:33:18.520 --> 0:33:21.680 a liquidator can come in season sale its assets to 0:33:21.720 --> 0:33:25.840 repay his creditors. The fact that it's looking like a 0:33:25.920 --> 0:33:29.880 theme possibility that Evergrind can ever get its restructuring negotiation 0:33:30.080 --> 0:33:33.120 done is giving the judge now ample reasons to try 0:33:33.120 --> 0:33:34.200 to wind up this company. 0:33:34.280 --> 0:33:36.640 I'm trying to imagine what kind of reaction there would 0:33:36.640 --> 0:33:40.040 be in markets to liquidation, especially when you consider the 0:33:40.080 --> 0:33:44.959 case of another very very troubled property developer, Country Garden. 0:33:45.000 --> 0:33:48.280 What are analysts saying about the impact of liquidation. 0:33:48.840 --> 0:33:51.040 Yeah, first of all, like I mentioned, directors and management 0:33:51.040 --> 0:33:54.040 will lose control. But in reality the asset seizing process 0:33:54.400 --> 0:33:57.160 will not be easy. And in terms of market reaction, 0:33:57.440 --> 0:33:59.360 we don't know about Evergraham per se, but we have 0:33:59.440 --> 0:34:03.479 seen other developers who have been liquidated and you know, 0:34:03.520 --> 0:34:07.720 their bonds were just wiped out because the fire sale 0:34:07.800 --> 0:34:11.240 will mean that creditors will probably have very little in return. 0:34:12.200 --> 0:34:14.799 So a lot of the bonds from developers who have 0:34:14.920 --> 0:34:17.880 been liquidated, their bonds are trading at like one cent 0:34:18.040 --> 0:34:21.399 on the dollar, so less than one percent of face 0:34:21.480 --> 0:34:24.799 value really, and it would be a challenge to both 0:34:24.880 --> 0:34:27.680 jurisdictions in Hong Kong and China to handle what would 0:34:27.719 --> 0:34:30.240 be the largest insolvency case in recent years. 0:34:30.320 --> 0:34:32.160 Alice, thank you so much for being with us. That 0:34:32.239 --> 0:34:35.920 is Bloomberg's Alice Long. She is our China Credit reporter 0:34:36.040 --> 0:34:39.160 and deputy team leader. I'm Doug Prisner, and you can 0:34:39.239 --> 0:34:42.760 join Brian Curtison myself weekdays here for Daybreak Asia beginning 0:34:42.800 --> 0:34:45.879 at six am in Hong Kong six pm on Wall 0:34:45.920 --> 0:34:47.160 Street tom. 0:34:46.880 --> 0:34:49.840 Our thanks to Bloomberg Daybreak Asia co host Doug Krisner. 0:34:49.960 --> 0:34:52.200 And that does it for this edition of Bloomberg day 0:34:52.200 --> 0:34:54.759 Break Weekend. Join us again Monday morning at five am 0:34:54.800 --> 0:34:57.920 Wall Street Time for the latest on markets overseas and 0:34:57.960 --> 0:35:01.000 the news you need to start your day. I'm Tom Buzzby. 0:35:01.239 --> 0:35:04.000 Stay with us. Top stories and global business headlines are 0:35:04.000 --> 0:35:05.239 coming up right now