Daybreak Weekend: US Election Preview, BOE Decision, Japanese Autos

This is Bloomberg day Break Weekend, our global look at 0:00:05.519 --> 0:00:07.520 the top stories in the coming week from our day 0:00:07.560 --> 0:00:09.879 Break anchors all around the world, and straight ahead on 0:00:09.920 --> 0:00:13.200 the program, a look at Tuesday's US presidential election and 0:00:13.240 --> 0:00:16.440 what could be at stake for the US economy. Also 0:00:16.480 --> 0:00:20.079 a preview of this week's Federal Preserve Policy meeting. I'm 0:00:20.120 --> 0:00:23.200 Tom Busby in New York. I'm Stephen Kyle in London. 0:00:23.239 --> 0:00:26.119 Work calculating the size of the Bank of England's but 0:00:26.400 --> 0:00:27.200 just headache. 0:00:27.400 --> 0:00:30.200 I'm Charlie Pellett, looking ahead to earnings from some of 0:00:30.320 --> 0:00:35.280 Japan's biggest automakers and the state of the gold trade. 0:00:37.200 --> 0:00:41.280 That's all straight ahead on Bloomberg Daybreak Weekend, The business 0:00:41.320 --> 0:00:45.280 news you need to wrap up your week. Available on Apple, Spotify, 0:00:45.440 --> 0:00:48.800 the Bloomberg Business Appen everywhere you get your podcasts. 0:00:54.080 --> 0:00:56.600 Good day to you. I'm Tom Busby. We begin today's 0:00:56.600 --> 0:01:01.000 program with this Tuesday's US presidential election and what each candidate, 0:01:01.080 --> 0:01:03.440 if he or she wins, is hoping to do for 0:01:03.480 --> 0:01:06.800 the economy. For more, we turned to Mark Niquette, Bloomberg 0:01:06.880 --> 0:01:10.240 Real Economy Team reporter. Mark. Thank you for joining us. Well, 0:01:10.280 --> 0:01:12.559 we're getting down to the wire. Right now, this election 0:01:12.600 --> 0:01:14.800 looks like a toss up, just a few key swing 0:01:14.840 --> 0:01:17.800 states likely to decide the outcome. I'm going to ask 0:01:17.840 --> 0:01:20.360 you where the economy is right now. One candidate calls 0:01:20.360 --> 0:01:23.240 it a disaster. I don't think that's true, but why 0:01:23.240 --> 0:01:24.640 don't you tell me where we are now? 0:01:25.080 --> 0:01:29.040 We kind of have a disconnect between an economy that 0:01:29.560 --> 0:01:33.320 economic indicators show is doing well and is strong, and 0:01:34.040 --> 0:01:38.800 public perception is measured by poles that the economy is 0:01:38.840 --> 0:01:39.880 headed in the wrong direction. 0:01:40.200 --> 0:01:43.880 We had a spate of economic reports this week that 0:01:44.720 --> 0:01:49.240 would be otherwise you'd think encouraging for Kamala Harris, showing 0:01:49.280 --> 0:01:54.880 that the economy is doing quite well. We had a 0:01:54.960 --> 0:01:59.680 GDP report yesterday that showed an annualized rate of two 0:01:59.680 --> 0:02:03.320 point eight percent in the third quarter, consumer spending was up. 0:02:04.200 --> 0:02:08.639 On Tuesday, we had a Consumer Confidence report showing that 0:02:09.120 --> 0:02:12.280 consumer confidence increased in October by the most since March 0:02:12.320 --> 0:02:16.200 twenty twenty one. And we had a PCE report, you know, 0:02:16.320 --> 0:02:21.000 so called core personal consumption Expenditures, that showed that overall 0:02:21.040 --> 0:02:24.720 inflation was down to two point one percent, the lowest 0:02:24.800 --> 0:02:29.160 since early twenty twenty one. But despite these good economic numbers, 0:02:30.000 --> 0:02:34.200 polling continues to show that voters think the economy is 0:02:34.240 --> 0:02:37.960 headed in the wrong direction. They're still stuck on you know, 0:02:38.080 --> 0:02:43.079 high prices and you know a sense that inflation rate 0:02:43.160 --> 0:02:46.840 that we've seen come down hasn't translated into their everyday 0:02:46.880 --> 0:02:49.600 purchases of gas and groceries. So that's sort of the 0:02:49.840 --> 0:02:52.640 backdrop for the presidential election where you know, we have 0:02:53.080 --> 0:02:56.600 a race where voters say the economy is their biggest issue, 0:02:56.919 --> 0:03:02.120 and polls, including our poll Morning Console, show that voters 0:03:02.480 --> 0:03:05.359 trust Trump Donald Trump more than Kamala Harris. 0:03:05.040 --> 0:03:05.720 On the economy. 0:03:05.800 --> 0:03:08.320 Well, because of that, let's talk then about what each 0:03:08.440 --> 0:03:12.080 candidate is promising to do. You're right, former President Trump, 0:03:12.160 --> 0:03:14.799 many believe he handled the economy better right now, though 0:03:14.800 --> 0:03:18.280 it seems to be banking on punishing import tariffs as 0:03:18.320 --> 0:03:21.800 his chief economic plan. Tariff certainly have their benefits, but 0:03:22.200 --> 0:03:24.040 is this really going to move the needle on inflation 0:03:24.200 --> 0:03:25.799 and household budgets. 0:03:26.040 --> 0:03:30.040 Well, if you talk to most mainstream economists, they'll tell 0:03:30.080 --> 0:03:33.600 you yes, that there's even forecasts out there that will 0:03:33.639 --> 0:03:37.400 calculate what impact the proposed tariffs that President Trump, former 0:03:37.440 --> 0:03:41.720 President Trump has promised on the campaign trail, What impact 0:03:41.720 --> 0:03:46.119 they would have on the increase in inflation and decrease 0:03:46.160 --> 0:03:50.440 in gross domestic product. The expectation from most economists is 0:03:50.480 --> 0:03:54.520 that when you put a tariff on at the size 0:03:54.560 --> 0:03:57.680 that President Trump is talking about, ten to twenty percent 0:03:57.800 --> 0:04:03.120 on all imports, on imports from China, that's just going 0:04:03.200 --> 0:04:06.880 to drive up prices because you know foreign countries, foreign 0:04:06.880 --> 0:04:09.920 countries don't pay the tariffs. Importers pay the tariffs, and 0:04:09.920 --> 0:04:14.120 they're passed along to consumers. So the rising prices will, 0:04:14.400 --> 0:04:18.080 some economists predict, will lead to even stay inflation. Now 0:04:18.120 --> 0:04:22.360 that the president's former president and his supporters would argue 0:04:22.360 --> 0:04:26.240 that the inflation didn't spike during his first term when 0:04:26.240 --> 0:04:30.479 he put in tariffs on China and aluminum and steel imports, 0:04:31.279 --> 0:04:34.680 and that you know, their projections are that the tariffs 0:04:34.680 --> 0:04:37.880 will actually help with reshoring of manufacturing and creating of 0:04:37.920 --> 0:04:42.400 manufacturing jobs in the US and actually increase economic growth. 0:04:43.120 --> 0:04:45.200 So we'll kind of have to wait and see if 0:04:45.360 --> 0:04:48.000 former President Trump wins and he does put these tariffs on, 0:04:48.360 --> 0:04:50.919 you know what impact they would have, because while his 0:04:51.000 --> 0:04:53.599 supporters say that, you know, there wasn't a spike in 0:04:53.600 --> 0:04:56.240 inflation during his first term because of the tar see 0:04:56.440 --> 0:05:00.520 put on. What he's talking about enacting if he elected 0:05:00.560 --> 0:05:06.680 to another term is substantially higher and broader. Essentially, his 0:05:06.800 --> 0:05:11.599 proposed tariffs would hit all three trillion of US imports annually. 0:05:12.400 --> 0:05:15.719 That would have a staggering, staggering, presumably a big impact 0:05:15.800 --> 0:05:16.400 on economy. 0:05:16.680 --> 0:05:19.119 Vice President Harris has promised to tackle the high cost 0:05:19.120 --> 0:05:22.680 of living by boosting new home construction, going after corporations 0:05:22.680 --> 0:05:25.640 accused of price gouging, and expanding a tax credit for 0:05:25.720 --> 0:05:27.800 those with young families. And to pay for all that, 0:05:27.880 --> 0:05:31.240 of course, taxes on the wealthy. What would that mean 0:05:31.520 --> 0:05:33.080 for inflation and for the economy. 0:05:33.400 --> 0:05:35.760 Well, that's going to be the big fight next year 0:05:35.880 --> 0:05:40.720 over taxes. We have the tax cuts that former President 0:05:40.760 --> 0:05:44.320 Trump enacted when he was in office in twenty seventeen 0:05:44.839 --> 0:05:47.599 that are expiring at the end of twenty twenty five. 0:05:48.000 --> 0:05:51.880 So the next president, whether it's Kamala Harris or Donald Trump, 0:05:52.080 --> 0:05:55.400 and the newly elected Congress will have to deal with 0:05:55.800 --> 0:05:59.280 taking action on those expiring tax cuts, either extending them 0:05:59.560 --> 0:06:03.880 as President Trump has talked about doing, or changing them 0:06:04.160 --> 0:06:07.680 as you mentioned, Kamala Harris has talked about. Vice President 0:06:07.680 --> 0:06:12.240 Harris has talked about She's suggesting that the tax cuts 0:06:12.560 --> 0:06:17.159 should be limited to those making four hundred thousand dollars 0:06:17.240 --> 0:06:21.159 in the less a year, So preserve the tax cuts 0:06:21.200 --> 0:06:26.839 for middle class, but allow increases for wealthier individuals, and 0:06:26.920 --> 0:06:30.440 increase the corporate rate to twenty eight percent as a 0:06:30.440 --> 0:06:32.880 way to, as she would say, you know, have the 0:06:33.520 --> 0:06:36.960 wealthy and corporations pay their fair share, but also to 0:06:37.040 --> 0:06:41.080 rai's revenue to pay for, as you mentioned, expanded childcare 0:06:41.320 --> 0:06:44.680 tax credit, tax credit for first time home buyers, and 0:06:44.720 --> 0:06:48.039 some other subsidies that she's proposed for small businesses. But 0:06:48.080 --> 0:06:50.840 that's all going to be up to Congress, and one 0:06:50.880 --> 0:06:53.040 of the things we'll be watching to see, you know, 0:06:53.080 --> 0:06:56.200 what kind of party control of Congress we see after 0:06:56.279 --> 0:06:59.479 the elections on Tuesday. You know, we have a potential 0:06:59.600 --> 0:07:04.200 for a president elected with full control party control of 0:07:04.240 --> 0:07:07.279 Congress or divided government, and that will go a long 0:07:07.279 --> 0:07:09.560 way determining what happens with the tax bill. 0:07:09.800 --> 0:07:11.680 Yeah, you bet well, a lot to look forward to 0:07:11.760 --> 0:07:15.360 election day Tuesday, November fifth. Our thanks to Mark Niquette, 0:07:15.360 --> 0:07:18.720 Bloomberg Real Economy Team reporter. But we turned now to 0:07:18.800 --> 0:07:22.160 the Federal Reserve as policymakers meet again this week on 0:07:22.280 --> 0:07:25.160 interest rates. For more and what to expect. We turned 0:07:25.160 --> 0:07:28.920 to Stuart paul Us, economists with Bloomberg Economics now Stewart. 0:07:28.960 --> 0:07:32.560 FED Chair Jerome Pala has always maintained that FOMC decisions 0:07:32.600 --> 0:07:36.080 are data driven. And wow, did we get some kind 0:07:36.120 --> 0:07:39.040 of data point this past Friday, just twelve thousand jobs 0:07:39.120 --> 0:07:42.040 added in October. Was this just shock to you? And 0:07:42.600 --> 0:07:44.000 what does it mean for the Fed? 0:07:44.440 --> 0:07:48.120 We had anticipated actually a slightly worse jobs report. We'd 0:07:48.200 --> 0:07:52.360 expected total employment to actually decline by about ten thousand jobs. 0:07:52.960 --> 0:07:56.720 Private employment did decline during the month. A big part 0:07:56.760 --> 0:07:59.960 of that is the effect of both hurricanes Milton and Hollene, 0:08:00.480 --> 0:08:03.480 and also the strike at Boeing. We did see about 0:08:03.520 --> 0:08:08.240 forty five thousand jobs lost in manufacturing, and we think 0:08:08.280 --> 0:08:10.320 that that's mostly a consequence of the strike at Boeing 0:08:10.400 --> 0:08:14.440 and knock on effects at parts suppliers. The household survey 0:08:14.920 --> 0:08:18.560 where we see the unemployment rate actually worse in just 0:08:18.680 --> 0:08:21.320 a little bit. Now, the headline on employment rate held 0:08:21.360 --> 0:08:24.280 steady at four point one percent, but that's mostly just 0:08:24.360 --> 0:08:26.560 a matter of rounding. It's literally just a matter of 0:08:26.640 --> 0:08:30.720 a few hundreds of a percentage point that is getting 0:08:30.800 --> 0:08:33.360 rounded away. And that's keeping the unemployment rate at four 0:08:33.400 --> 0:08:35.760 point one percent, But the actual numbers do look a 0:08:35.840 --> 0:08:38.640 little bit worse when you look under the surface. Undoubtedly, 0:08:38.760 --> 0:08:42.520 the labor market is cooling. We also saw earlier last 0:08:42.600 --> 0:08:45.400 week the total number of job openings declining during the 0:08:45.480 --> 0:08:48.880 month and the quits rate falling as workers realize and 0:08:48.960 --> 0:08:50.920 as they come to grips to the fact that it 0:08:51.160 --> 0:08:54.600 is more difficult to find new employment at higher wages. 0:08:54.920 --> 0:08:57.240 The Fed is absolutely going to be taking this cooling 0:08:57.320 --> 0:08:59.800 labor market into consideration what it meets next week to 0:09:00.080 --> 0:09:01.400 make its next rate cut decision. 0:09:01.559 --> 0:09:03.320 Now, on the other hand, we have seen some very 0:09:03.400 --> 0:09:08.000 encouraging economic data as well about GDP, consumer spending, consumer sentiment, 0:09:08.120 --> 0:09:08.720 and inflation. 0:09:08.920 --> 0:09:13.839 Right, that's right, So core PCE inflation, the Fed's preferred gauge, 0:09:13.960 --> 0:09:18.040 came in a bit hot in September, and yes, you're right. 0:09:18.160 --> 0:09:21.080 Through the third quarter we did see pretty strong growth 0:09:21.120 --> 0:09:23.760 two point eight percent annualized growth on the back of 0:09:24.360 --> 0:09:28.079 about three point seven percent annualized consumer spending growth. Now, 0:09:28.480 --> 0:09:31.200 when we drill down into the data, looks to us 0:09:31.520 --> 0:09:36.920 like it's mostly employment and employee compensation income, so wage 0:09:37.040 --> 0:09:41.760 income that's supporting that spending and just an exceptionally low 0:09:41.960 --> 0:09:46.080 saving rate that it just consumers undersaving to support their 0:09:46.120 --> 0:09:49.679 spending habit. As the labor market cools, we think that 0:09:49.840 --> 0:09:52.760 that undersaving is going to go away, consumers are going 0:09:52.840 --> 0:09:55.240 to get a little bit more cautious, and so a 0:09:55.320 --> 0:09:58.719 lot of those tailwinds that have been supporting spending we 0:09:58.920 --> 0:10:01.640 think are going to fase as the labor market cool. 0:10:01.760 --> 0:10:05.840 So yes, for now, things do look rather strong. They 0:10:05.880 --> 0:10:08.599 look strong through the GDP numbers. But I think that 0:10:08.840 --> 0:10:11.079 if you're thinking like the FED, and you're thinking about 0:10:11.200 --> 0:10:13.559 what it's going to look like down the line, it's 0:10:13.600 --> 0:10:15.560 time to get a little bit more cautious to think 0:10:15.640 --> 0:10:17.600 that some of those talwinds might be fading. 0:10:17.800 --> 0:10:20.720 And the FED still has another meeting in mid December, right, 0:10:20.800 --> 0:10:24.240 So what's your gut feeling right now after in the 0:10:24.280 --> 0:10:27.600 wake of this Job's report, dismal report of. 0:10:27.679 --> 0:10:29.240 What the Fed is going to do, we think that 0:10:29.320 --> 0:10:31.840 the Fed is going to cut by twenty five basis points, 0:10:31.920 --> 0:10:36.800 So still another rate cut, still the removal of restrictive policy, 0:10:37.320 --> 0:10:40.360 not quite getting back to neutral, certainly not accommodative, but 0:10:40.800 --> 0:10:45.000 a twenty five basis point reduction for November Looking ahead 0:10:45.080 --> 0:10:48.240 to December, we still think another twenty five basis points 0:10:48.360 --> 0:10:51.520 is in play. But for a data dependent FED, who's 0:10:51.640 --> 0:10:54.760 probably going to then slow down its cadence of rate 0:10:54.840 --> 0:10:57.719 cuts in twenty twenty five, December is going to be 0:10:57.760 --> 0:11:00.320 more of a knife edge decision. We'll need to see 0:11:00.559 --> 0:11:03.360 just how much the labor market deterior rates between now 0:11:03.400 --> 0:11:03.679 and then. 0:11:04.040 --> 0:11:07.400 Mortgage rates, though, have moved the other way. Why is that? 0:11:07.800 --> 0:11:10.920 And I mean it's really got to affect housing and 0:11:11.200 --> 0:11:14.760 people's affordability, But why have we seen six weeks in 0:11:14.800 --> 0:11:17.440 a row mortgage rates edge a little bit higher. 0:11:17.760 --> 0:11:21.160 Mortgage rates tend to be benchmarked based on longer term 0:11:21.520 --> 0:11:25.320 treasury rates, So the Fed is cutting very very short 0:11:25.440 --> 0:11:28.880 term interest rates, and in fact, by running off its 0:11:29.000 --> 0:11:32.600 bond portfolio, it's putting upward pressure on long term rates, 0:11:33.080 --> 0:11:35.640 all at a time when we have on election coming 0:11:35.720 --> 0:11:40.960 up where the two candidates are spending heavy versus spending heavier. 0:11:41.080 --> 0:11:42.839 There is no austerity candidate, So I think that the 0:11:43.240 --> 0:11:47.040 bond market is looking at our fiscal situation as a country, 0:11:47.400 --> 0:11:50.480 and they're also feeling the effects of the runoff of 0:11:50.559 --> 0:11:54.079 the Fed's balance sheet, and we're getting some upward pressure 0:11:54.160 --> 0:11:58.080 on long term yields, and that's pushing up mortgage rates. Again. 0:11:58.200 --> 0:12:01.160 We think that higher long term rates, it's higher mortgage 0:12:01.240 --> 0:12:03.480 rates tends to put people in a little bit more 0:12:03.640 --> 0:12:06.520 bind So even as the Fed is cutting short term 0:12:06.600 --> 0:12:09.839 interest rates, folks are probably going to need to rain 0:12:09.960 --> 0:12:12.920 and spending just a bit more, especially as the labor 0:12:12.960 --> 0:12:13.560 market cools. 0:12:13.720 --> 0:12:13.920 Yeah. 0:12:14.040 --> 0:12:16.600 Oh, and it's cool well that two day FOMC meeting 0:12:16.679 --> 0:12:19.560 kicks off Wednesday, delay to day because of the elections 0:12:20.320 --> 0:12:23.400 decision expected two pm Wall Street time on Thursday, and 0:12:23.480 --> 0:12:27.160 our thanks to Stuart paul Us economists with Bloomberg Economics 0:12:27.600 --> 0:12:29.839 coming up on Bloomberg day Break weekend to look inside 0:12:29.880 --> 0:12:33.400 the inaugural budget of the UK's newly installed government what 0:12:33.679 --> 0:12:36.600 that means for the Bank of England. I'm Tom Busby 0:12:36.720 --> 0:12:47.240 and this is Bloomberg. This is Bloomberg day Break Weekend, 0:12:47.320 --> 0:12:49.760 our global look ahead at the top stories for investors 0:12:49.840 --> 0:12:52.400 in the coming week. I'm Tom Busby in New York. 0:12:52.679 --> 0:12:55.000 Up later in our program will look ahead to earnings 0:12:55.040 --> 0:12:57.760 from some of the world's biggest automakers. But first, the 0:12:57.960 --> 0:13:01.000 UK's new labor government has delivered its first ever budget, 0:13:01.320 --> 0:13:04.480 boasting one of the biggest tax increases in a generation 0:13:04.760 --> 0:13:08.319 and changes to the nation's much touted fiscal rules. What 0:13:08.440 --> 0:13:10.880 will the country's new economic direction mean for the Bank 0:13:10.920 --> 0:13:13.400 of England. For more, let's go to London and bring 0:13:13.480 --> 0:13:16.320 in Bloomberg daybreak, Eurobanker Stephen Carroll. 0:13:16.200 --> 0:13:19.480 Tom The UK's Chancellor of the Exchequer, Rachel Reeves, unveiled 0:13:19.520 --> 0:13:23.199 a forty billion pound package of tax rises and ramped 0:13:23.280 --> 0:13:26.360 up borrowing in a dramatic move to meet the Labor 0:13:26.440 --> 0:13:28.880 Party's pledge to rebuild the UK. 0:13:29.559 --> 0:13:29.679 Well. 0:13:29.720 --> 0:13:31.880 One person who'll be keeping a close eye on the 0:13:31.960 --> 0:13:35.160 developments announced by the chancellors the Government of the Bank 0:13:35.200 --> 0:13:37.800 of England Andrew Bailey. He and his fellow policymakers are 0:13:37.880 --> 0:13:39.959 due to make their next interest rate decision in the 0:13:40.000 --> 0:13:43.960 coming days, just shortly after the budget announcement. Although officials 0:13:44.040 --> 0:13:46.880 have already opted to lower borrowing costs this year, economist, 0:13:46.920 --> 0:13:49.360 they're warning that the pain of high rates could be 0:13:49.520 --> 0:13:53.240 prolonged following Reeves's announcement. It's all the government plans to 0:13:53.320 --> 0:13:55.840 lift borrowing by one hundred and forty two billion pounds 0:13:55.880 --> 0:13:58.839 over five years to help fund a massive program of 0:13:59.000 --> 0:14:02.320 investment and boost public services. Couples with appliged to deliver 0:14:02.360 --> 0:14:05.280 another large jump in the minimum wage, our potential threats 0:14:05.320 --> 0:14:08.280 to the BOSIM to keep inflighting low. We discussed how 0:14:08.360 --> 0:14:11.200 reads as plan my effect personal spending habits with our 0:14:11.280 --> 0:14:15.080 money distilled columnist John Steppek. Here's what he had to say. 0:14:15.520 --> 0:14:16.959 I don't get it wrong. I mean I think that 0:14:17.080 --> 0:14:19.560 it's been the direction of travel has been very clear 0:14:19.800 --> 0:14:22.320 on property for a long time. And I think if 0:14:22.400 --> 0:14:27.200 you're someone who still views residential property as a viable 0:14:27.320 --> 0:14:31.040 investment for an amateur in person or even as an 0:14:31.120 --> 0:14:34.480 investment asset, you maybe need to have a look at 0:14:34.480 --> 0:14:36.880 what's happened over the last ten years because the tax 0:14:36.960 --> 0:14:41.160 benefits have been slashed. You know, this latest move jacking 0:14:41.240 --> 0:14:44.880 up the stamp duty again is just it's sort of 0:14:44.960 --> 0:14:47.360 signaling we don't want people you own second homes. And 0:14:47.440 --> 0:14:49.880 that's before you get to local council taxes in various 0:14:49.880 --> 0:14:53.560 desirable areas. I mean, the other rabbit obviously is not 0:14:54.440 --> 0:14:58.680 it's basically saying it didn't happen. We'll defrost the tax 0:14:58.760 --> 0:15:01.440 thresholds in twenty twenty, twenty twenty night. But of course 0:15:01.560 --> 0:15:03.200 she's got you know, five years did change on the 0:15:03.240 --> 0:15:05.440 mean to put that, Yes, it. 0:15:05.400 --> 0:15:08.120 Has Boombergs John step out there. So will government policy 0:15:08.240 --> 0:15:11.000 leave the Central Bank wary over the pace of further 0:15:11.120 --> 0:15:13.800 rate cuts? It's something I've been discussing with Boomberg's chief 0:15:14.120 --> 0:15:18.560 UK economist Dan Hansen. Give us some context. What has 0:15:18.640 --> 0:15:21.720 the budget for changed for Andrew Bailey and for BOI 0:15:21.840 --> 0:15:23.240 policymakers if. 0:15:23.120 --> 0:15:25.240 You go back to the middle of September, I think 0:15:25.280 --> 0:15:28.440 it was or not long after the September meeting, Andrew 0:15:28.480 --> 0:15:32.040 Bailey gave an interview saying that policymakers could be a 0:15:32.080 --> 0:15:35.400 little bit more aggressive in terms of their speed of 0:15:35.520 --> 0:15:39.440 rate cuts. I think the budget makes that quite unlikely 0:15:39.560 --> 0:15:41.280 now in terms of how quickly they ease I think 0:15:41.320 --> 0:15:43.800 there's sort of the baseline case, and a reasonable base 0:15:43.880 --> 0:15:47.080 case is that they they may they make a move 0:15:47.160 --> 0:15:51.360 down in November, but they stick to the mantra that 0:15:51.440 --> 0:15:54.360 things will be gradual, so they're not going to indicate 0:15:54.440 --> 0:15:56.760 I don't think that they will speed up the pace 0:15:56.800 --> 0:16:00.920 of rate cuts for that happen. The data is going 0:16:00.960 --> 0:16:03.920 to have to really surprise, and it surprised a bit 0:16:04.000 --> 0:16:07.480 to the downside, but it's not really surprising to the downside, 0:16:07.520 --> 0:16:09.680 and as you just mentioned there there's this enormous fiscal 0:16:09.720 --> 0:16:12.440 stimulus that needs to be factored into their thinking now 0:16:13.000 --> 0:16:16.200 and the national minimum wage hike as well, and that 0:16:16.520 --> 0:16:18.920 just is just one more reason to think that they're 0:16:18.920 --> 0:16:19.600 going to move slowly. 0:16:19.960 --> 0:16:22.600 Let's dig into the borrowing picture and what we learned 0:16:22.640 --> 0:16:26.720 after the budget from the independent government watchdog, the Office 0:16:26.760 --> 0:16:29.160 for a Budget Responsibility that kind of crunches the numbers 0:16:29.240 --> 0:16:32.400 around the announcements being made by the Chancellor and puts 0:16:32.480 --> 0:16:35.080 them in a look of a long term context. What 0:16:35.560 --> 0:16:38.360 did they say exactly about what that spending would mean 0:16:38.640 --> 0:16:41.440 for the inflation outlook and thus the out look? 0:16:41.680 --> 0:16:43.520 Yeah, yeah, so they said that there would be the 0:16:44.280 --> 0:16:46.360 way the policy package has been set up, there will 0:16:46.400 --> 0:16:49.880 be this relatively large near term boost to the economy. 0:16:51.000 --> 0:16:53.440 So growth next year could be point four point five 0:16:53.440 --> 0:16:56.480 percentage points higher as a result of the policy package, 0:16:56.480 --> 0:16:59.920 which is a significant news. Surely, Yes, it's very significant 0:17:00.040 --> 0:17:02.880 when you're you know, when you're forecasting growth of sort 0:17:02.880 --> 0:17:05.359 of one ish percent, if you you're going to add 0:17:05.480 --> 0:17:07.680 sort of point five percentage points to it, that's quite 0:17:07.760 --> 0:17:11.320 that's quite significant. So and the thing to remember about 0:17:11.320 --> 0:17:13.200 the Bank of England, which is slightly different to the 0:17:13.240 --> 0:17:15.240 Office of a bunch of Responsibility, is that the Bank 0:17:15.280 --> 0:17:18.480 of England thinks the economy's speed limit, so the speed 0:17:18.560 --> 0:17:23.280 at which it can grow without stoking inflation is low 0:17:23.920 --> 0:17:26.400 or lower than the Office of a bunch of Responsibility, 0:17:26.440 --> 0:17:28.920 I should say, So the Bank of England thinks the 0:17:28.960 --> 0:17:31.240 economy can grow one to one and a half percent 0:17:31.359 --> 0:17:34.600 somewhere in that range a year without inflation taking off. 0:17:35.080 --> 0:17:37.000 So if you add in, as I say, this stimulus 0:17:37.080 --> 0:17:40.239 next year that you know is good and with an 0:17:40.240 --> 0:17:43.640 economy operating pretty much sort of at full employment for capacity, 0:17:44.760 --> 0:17:46.639 there is going to be an inflationary impulse from it, 0:17:46.960 --> 0:17:50.440 maybe point two somewhere between point two point four on 0:17:51.040 --> 0:17:54.119 CPI inflation over the next eighteen months or so. So 0:17:54.160 --> 0:17:56.480 that's you know, it's a significant significant boost. 0:17:57.520 --> 0:17:59.919 So for the outlook for rate then what does that mean? 0:18:00.600 --> 0:18:02.399 So I think, as I say, I think they're going 0:18:02.480 --> 0:18:06.400 to cut interest rates at the at the upcoming meeting, 0:18:06.520 --> 0:18:09.720 I think that's that's sort of pretty much a given. 0:18:10.000 --> 0:18:12.760 But I think there was there was always a question 0:18:12.840 --> 0:18:15.520 about whether this meeting they would open the door to 0:18:15.960 --> 0:18:18.240 going a little bit faster. If things allowed them to, 0:18:18.520 --> 0:18:24.080 so essentially creating some conditionality in in what they how 0:18:24.119 --> 0:18:27.680 they'll sort of respond going forward. I think the chances 0:18:27.760 --> 0:18:31.000 of that now have dropped dramatically, and there was a 0:18:31.040 --> 0:18:33.800 lot of debate in the market, and a lot of 0:18:34.160 --> 0:18:36.080 clients I speak to are sort of there's there's a 0:18:36.119 --> 0:18:38.320 lot of debate about was a lot of debate about 0:18:38.320 --> 0:18:41.680 December whether they cut again in December, particularly with you 0:18:41.720 --> 0:18:43.760 know what's going on to the ECB, potentially the FED 0:18:44.160 --> 0:18:46.600 going twice before the end of the year. I think 0:18:46.640 --> 0:18:50.119 the budget has made that significantly less likely that they 0:18:50.200 --> 0:18:53.360 go again in December. I don't think you can preclude 0:18:53.359 --> 0:18:55.640 a speeding up next year if that, but it will 0:18:55.680 --> 0:18:57.800 really be about the data. I think if you're if 0:18:57.800 --> 0:19:02.520 you're sat in on Monetary Policy Committee over the next 0:19:02.840 --> 0:19:04.480 week or so and you're going to make your decision, 0:19:04.480 --> 0:19:08.960 which is announced on the seventh of November, you will 0:19:09.040 --> 0:19:11.720 feel that the implation pitch has become a little bit 0:19:11.760 --> 0:19:13.359 more cloudy as a result of the budget. So I 0:19:13.440 --> 0:19:17.600 think for this upcoming meeting, the cautious time will continue. 0:19:18.119 --> 0:19:20.920 I mean you wonder as well whether people in thread 0:19:20.960 --> 0:19:22.600 Needle Street we are holding their head in their hand 0:19:22.640 --> 0:19:24.360 think either have to rethink all of the work they've 0:19:24.400 --> 0:19:26.600 done before in terms of projections for the economy with 0:19:26.680 --> 0:19:28.639 everything that happened in the budget because it was a 0:19:28.680 --> 0:19:30.840 big package. We expected it to be because it had 0:19:30.920 --> 0:19:35.520 been the first under this current government in the UK. 0:19:36.240 --> 0:19:38.240 But I mean, is it kind of further down the 0:19:38.280 --> 0:19:40.560 line if we think past the upcoming meeting, is there 0:19:40.600 --> 0:19:42.600 a lot in there for the Bank of England to 0:19:42.640 --> 0:19:45.440 have to try and calculate the effects of down the line? 0:19:45.480 --> 0:19:48.160 You meant in the national minimum wage increase coming, that's 0:19:48.160 --> 0:19:51.280 of course a wage inflation issue. We've got the increased 0:19:51.560 --> 0:19:54.840 payroll taxes on employers for national insurance contributions as well. 0:19:55.200 --> 0:19:56.960 Down the line, are those things that are going to 0:19:57.040 --> 0:19:59.400 have that could shift the path for where the Bank 0:19:59.440 --> 0:19:59.879 of England go. 0:20:00.240 --> 0:20:00.440 Yeah? 0:20:00.480 --> 0:20:03.680 Absolutely, I mean I wouldn't you know, I said that 0:20:04.040 --> 0:20:06.280 I wouldn't like to be in thread Needle Street, as 0:20:06.320 --> 0:20:08.640 you just said, watching that budget and sort of making 0:20:08.680 --> 0:20:10.520 the decision about interest rates. I also wouldn't like to 0:20:10.520 --> 0:20:12.600 be in thread Needle Street putting the forecast together, which 0:20:12.640 --> 0:20:15.520 is what they're going to have to do at in quickly, 0:20:15.800 --> 0:20:20.560 pretty quick order to because it would be very It's 0:20:20.680 --> 0:20:23.399 very unlikely that the forecast that gets published won't have 0:20:23.600 --> 0:20:27.040 this this impact in it. So they're gonna the Bank's 0:20:27.040 --> 0:20:29.080 going to have to work pretty quickly to get get 0:20:29.119 --> 0:20:31.959 it all incorporated. I mean, I think I think they 0:20:31.960 --> 0:20:34.720 would have been surprised. Bottom line, to sort of go 0:20:34.880 --> 0:20:36.400 to your point, I think the would have been surprised 0:20:36.440 --> 0:20:37.920 by the site. They had known there was going to 0:20:37.960 --> 0:20:41.399 be some stimulus coming. I think the scale of it 0:20:41.480 --> 0:20:46.600 will have will have surprised them. So Yeah, and I say, 0:20:46.680 --> 0:20:48.600 going back to how that that will sort of be 0:20:48.680 --> 0:20:56.560 reflected in their communication, I think, you know, cautious, cautious guidance. 0:20:56.680 --> 0:20:58.600 But also it's quite possible that we don't get a 0:20:59.440 --> 0:21:01.720 all of the can voting for a cut again, you know, 0:21:01.760 --> 0:21:03.720 you get a un get another split vote. I think 0:21:03.840 --> 0:21:05.800 it just remind us of where we were a last 0:21:05.800 --> 0:21:08.439 time around. Yeah, in September, it was it was eight 0:21:08.480 --> 0:21:12.360 to one for a hold, and I think the way 0:21:12.400 --> 0:21:15.119 the data had been moving there was there was a 0:21:15.160 --> 0:21:17.800 real possibility that we got a nine nil in favor 0:21:17.840 --> 0:21:22.920 of a cut in in November. This is all prior 0:21:22.960 --> 0:21:27.440 to the budget and I think that that in itself 0:21:27.560 --> 0:21:30.000 may have sort of sent a signal that the idea 0:21:30.000 --> 0:21:32.360 of a December cut was on was on the cards 0:21:32.800 --> 0:21:36.000 or a possibility and something that was being seriously considered. 0:21:36.760 --> 0:21:39.960 Now I think you'll most likely get some at least one, 0:21:40.160 --> 0:21:42.560 possibly two of the more hawkish members of the committee saying, 0:21:43.080 --> 0:21:45.000 you know this is this has changed my thinking again, 0:21:45.359 --> 0:21:47.760 particularly with the I think with the national or national 0:21:47.800 --> 0:21:50.800 minimum wage increase, so you. 0:21:50.800 --> 0:21:51.840 Know, all of it, all of it. 0:21:52.040 --> 0:21:54.680 It's going to have a significant bearing on how the 0:21:54.760 --> 0:21:57.160 Bank communicates its latest decision. 0:21:57.359 --> 0:21:59.920 Yeah, it makes the job much more complex as well. 0:22:00.600 --> 0:22:03.280 Just size us where the BOE is in this, the 0:22:03.320 --> 0:22:05.560 global landscape of this as well, because obviously we had 0:22:05.760 --> 0:22:08.000 the big rate cut from the FED and the ECB's 0:22:08.040 --> 0:22:10.640 one preceeding kind of fairly steadily along the line as well. 0:22:11.400 --> 0:22:13.600 I mean, is it going to get into a sticky 0:22:13.680 --> 0:22:16.640 situation for the BOIE if they're not cutting next month, 0:22:16.680 --> 0:22:18.920 then everyone else is rolling forward and cuts, and of 0:22:18.960 --> 0:22:20.879 course if that's something that we can better on either. 0:22:21.480 --> 0:22:23.680 Yeah, I mean there's always that, isn't there the sort 0:22:23.720 --> 0:22:26.520 of the disconnect between global central banks. I mean, I 0:22:26.600 --> 0:22:30.920 think you know, you look at the US and we'll 0:22:30.960 --> 0:22:33.200 get jobs numbers and the like. But you know, the 0:22:33.320 --> 0:22:35.880 US economy has been holding up pretty well as well. 0:22:36.000 --> 0:22:39.000 I mean, the European economy does look weaker than it 0:22:39.240 --> 0:22:41.280 sort of, I think people thought sort of two or 0:22:41.320 --> 0:22:44.920 three months ago, and that's why the ECB is going sequentially. Yeah, 0:22:46.320 --> 0:22:48.400 I don't think it's a huge deal if the bank 0:22:48.520 --> 0:22:51.320 doesn't doesn't follow them one for one, you know, they 0:22:51.359 --> 0:22:53.600 did obviously on the way up, it was almost sort 0:22:53.640 --> 0:22:59.280 of matched all all of them did slightly different speeds, 0:22:59.320 --> 0:23:02.400 but pretty much the same. I think on the way down, 0:23:03.520 --> 0:23:06.640 I think the idea that the UK, the UK's inflation 0:23:06.720 --> 0:23:09.040 problem probably is a little bit stickier still holds. So 0:23:09.119 --> 0:23:11.280 I think the bank probably will be a bit more 0:23:11.320 --> 0:23:14.640 cautious about how quickly quickly they cut rates. You've got, 0:23:16.000 --> 0:23:19.159 as to say, in Europe you've got a definitely evidence 0:23:19.160 --> 0:23:21.879 of a weaker economy. In the US they have a 0:23:21.920 --> 0:23:24.880 slightly different mandate, which I always people place different weight 0:23:24.920 --> 0:23:26.680 on this place, quite a lot of weight on it. 0:23:26.920 --> 0:23:29.520 It just makes it easier if you see some signs 0:23:29.520 --> 0:23:31.520 of cracks in the labor market, you can just focus 0:23:31.560 --> 0:23:34.359 on that a little bit more. The bank is just 0:23:34.680 --> 0:23:38.480 in an inflation targeting central bank, that's its mandate. So 0:23:38.640 --> 0:23:41.840 I think it just is going to move more gradually, 0:23:43.600 --> 0:23:47.000 and for us that means at a quarterly pace over 0:23:47.080 --> 0:23:49.399 the course of over the course of twenty twenty five. 0:23:49.800 --> 0:23:52.080 And rates staying a little bit higher on the long 0:23:52.160 --> 0:23:53.919 term or the medium term. Is that a likelihood as 0:23:53.920 --> 0:23:54.800 well or possibility? 0:23:55.200 --> 0:23:55.400 Yeah? 0:23:55.480 --> 0:23:56.000 Yeah, I think so. 0:23:56.160 --> 0:23:58.680 I mean, there's this huge debate, isn't there globally about 0:23:58.680 --> 0:24:01.240 where rates will eventually set, you know, the neutral rate 0:24:01.320 --> 0:24:04.359 as people call it, the rate that doesn't speed up 0:24:04.520 --> 0:24:06.840 or slow down the economy, the sort of equilibrium interest 0:24:06.920 --> 0:24:11.800 rate in the economy. It's undoubtedly higher than it was 0:24:12.040 --> 0:24:15.000 sort of prior to the pandemic. Is it as high 0:24:15.000 --> 0:24:16.800 as it was prior to the financial crisis? 0:24:18.040 --> 0:24:18.560 Probably not. 0:24:18.880 --> 0:24:21.480 But I think the weight of evidence, given that economies 0:24:21.520 --> 0:24:23.960 have been in the face of the tightening, that we 0:24:24.040 --> 0:24:27.920 saw economies held up pretty well given what was thrown 0:24:27.960 --> 0:24:31.000 at them. You know, the evidence is it is, you know, 0:24:31.080 --> 0:24:34.560 in our view, somewhere probably between three and four percent, 0:24:35.080 --> 0:24:37.200 So somewhere in that range. Knowing exactly where it is 0:24:37.320 --> 0:24:38.800 is very difficult, But if you just sort of split 0:24:38.840 --> 0:24:42.920 the difference around three and a half, you know, maybe 0:24:42.960 --> 0:24:45.720 they're our forecast, they go all the way down to three. 0:24:46.240 --> 0:24:49.639 So but it's it's very uncertain. I think the bigger 0:24:49.680 --> 0:24:52.960 picture is that it is not We're definitely not going 0:24:53.000 --> 0:24:56.320 back to where we were sort of in during the pandemic, 0:24:56.480 --> 0:24:58.879 but even prior to the pandemic of you know, basically 0:24:59.000 --> 0:24:59.880 zero interest rates. 0:25:00.240 --> 0:25:03.119 Okay, Don Hanson, ARCHIFUK Economists, thank you so much for 0:25:03.240 --> 0:25:05.000 joining us, And of course we'll have full coverage of 0:25:05.160 --> 0:25:08.359 that bankving in decision when it comes on Thursday. Across 0:25:08.480 --> 0:25:11.400 our Bloomberg platforms. I'm Stephen Carolyn London. You can catch 0:25:11.480 --> 0:25:14.399 us every weekday morning here for Bloomberg Daybreak Europe, beginning 0:25:14.440 --> 0:25:17.879 at six am in London at one am on Wall Streets. 0:25:18.000 --> 0:25:21.119 Tom, thank you, Steven, And coming up on Bloomberg day 0:25:21.160 --> 0:25:25.320 Break Weekend, an earnings preview from some of Asia's biggest automakers. 0:25:25.880 --> 0:25:39.960 I'm Tom Busby, and this is Bloomberg. This is Bloomberg 0:25:40.000 --> 0:25:42.080 day Break Weekend, our global look ahead at the top 0:25:42.160 --> 0:25:45.119 stories for investors in the coming week. I'm Tom Busby 0:25:45.240 --> 0:25:48.560 in New York. Japan, known for its massive auto industry, 0:25:48.560 --> 0:25:52.119 which accounts for twenty two percent of that nation's sotal exports, 0:25:52.200 --> 0:25:55.040 and this week we'll get a number of key earnings 0:25:55.119 --> 0:25:58.199 reports from that sector. For more, we turned to Bloomberg's 0:25:58.240 --> 0:26:01.840 Charlie Pellett news anchoring the day Break Asia podcast this week. 0:26:02.240 --> 0:26:05.800 Tom will get earnings from some of Japan's largest automakers 0:26:05.880 --> 0:26:10.760 next week, including the likes of Nissan, Honda, and Toyota, 0:26:11.200 --> 0:26:14.120 and joining US now for a closer look. Tatsuo Yoshida, 0:26:14.480 --> 0:26:19.200 senior autos analysts for Bloomberg Intelligence in Tokyo, set the 0:26:19.280 --> 0:26:22.119 landscape for us. What is the backdrop heading into these 0:26:22.200 --> 0:26:23.080 earnings reports. 0:26:24.080 --> 0:26:28.080 Actually, macro environment is pretty much mixed, and then also 0:26:28.240 --> 0:26:33.720 regional autoboon wheel market is also mixed. The macrowise material 0:26:33.840 --> 0:26:37.639 prices is easier than before, and then yen is now 0:26:38.160 --> 0:26:42.800 coming back to the weak as side. This is obviously positive. However, 0:26:43.320 --> 0:26:48.399 inflation is persistent, such as wages and then logistics costs 0:26:48.720 --> 0:26:53.520 those are higher than before. Commenting on the digital automobile market, 0:26:54.200 --> 0:26:59.280 Japan is recovering from the impact of the output cuts 0:26:59.520 --> 0:27:05.240 due to the certification scandal, and then US market, the 0:27:05.359 --> 0:27:09.800 market is kind of stagnant, but stone Japanese makers are 0:27:09.840 --> 0:27:14.359 still have a room for growth. And then China OBOL 0:27:14.440 --> 0:27:18.320 market is gaining momentum due to the government support, but 0:27:18.880 --> 0:27:24.040 Japanese automakers are struggling, mainly because of the lack of 0:27:24.520 --> 0:27:29.840 haartpure new energy vehicles, which is basically battery electric vehicles 0:27:30.000 --> 0:27:31.760 and plugging hybrid vehicles. 0:27:31.960 --> 0:27:35.280 All right, So company by company, let us begin with Toyota, 0:27:35.359 --> 0:27:38.240 the world's top carmaker. What are we looking at there? 0:27:39.200 --> 0:27:46.080 The company Also situations are mixed Toyota and then together 0:27:46.200 --> 0:27:50.600 with Honda, those two companies are ahead of their guidance tour. 0:27:50.800 --> 0:27:55.359 For example, they are des in Japan is stagnant because 0:27:55.400 --> 0:28:00.480 of the certification scandal, but UH sales and uh us 0:28:00.960 --> 0:28:05.399 and then Cells in India or other part of the 0:28:05.480 --> 0:28:09.960 Southeast Asia countries, those their selves are very strong. 0:28:10.720 --> 0:28:13.520 And Nissan motor Water analysts expecting. 0:28:13.160 --> 0:28:19.160 There Uh Nissan, I think uh, they're behind the guidance 0:28:19.760 --> 0:28:23.600 and then market is a little bit costious about the company. 0:28:24.320 --> 0:28:30.320 And despite the weakening and laterly UH, there still remains 0:28:30.359 --> 0:28:32.720 a possibility of the guidance downgrade. 0:28:33.119 --> 0:28:36.919 How does the global shift to electrification play into these 0:28:37.000 --> 0:28:37.840 coming reports? 0:28:38.640 --> 0:28:46.200 Actually, the electrification is diverse, not just battery electric vehicle 0:28:47.200 --> 0:28:53.200 but also the hybrids. Clublan hybrids also a big part 0:28:53.240 --> 0:28:58.400 of the electrification. Japanese a little bit behind, but the 0:28:58.520 --> 0:29:03.440 electric vehicle advancement. However, they are lutra strong in hybrid 0:29:03.520 --> 0:29:07.800 earthtic vehicles, and then I think hybrid earthic vehicle sales 0:29:07.880 --> 0:29:11.600 at Honda and then Toyota are strong and then driving 0:29:11.680 --> 0:29:16.760 their earnings. Actually Tourda Honda, they're gaining a lot of 0:29:16.880 --> 0:29:18.640 profit from their hybrid vehicles. 0:29:19.080 --> 0:29:24.040 A quick question about tariffs, either declared or potential involving 0:29:24.240 --> 0:29:28.200 Chinese made evs. Do Japanese automakers expect to see any 0:29:28.240 --> 0:29:32.040 potential gains because of tariffs imposed on Chinese vehicles. 0:29:32.520 --> 0:29:37.760 Actually, Chinese and Japanese are not competing head on outside 0:29:37.800 --> 0:29:43.520 of China, so the paddish thing, of course, that may 0:29:43.960 --> 0:29:47.600 benefit the Japanese a little bit, but not significantly. 0:29:48.360 --> 0:29:51.280 And as we get these earnings reports, is there any 0:29:51.360 --> 0:29:55.800 one of the three Nissan, Honda, or Toyota that might 0:29:55.960 --> 0:29:57.960 stand out as an industry bell weather. 0:29:59.080 --> 0:30:03.520 I would expect them may upgrade there through a profit guidance. 0:30:03.960 --> 0:30:08.040 Tatsuo, We thank you, Tatsuo Yoshida, senior Auto's analyst for 0:30:08.200 --> 0:30:13.120 Bloomberg Intelligence, joining us from Tokyo. We move next to 0:30:13.240 --> 0:30:17.280 the hottest commodity on the street, Gold, the precious metal, 0:30:17.360 --> 0:30:20.160 is trading at records, extending a surge that has sent 0:30:20.280 --> 0:30:23.680 gold up over a third this year and joining us 0:30:23.720 --> 0:30:28.240 now George milling Stanley, chief gold strategist at State Street 0:30:28.320 --> 0:30:32.200 Global Advisors, he's in our Hong Kong studios. So, George, 0:30:32.440 --> 0:30:35.320 with gold at a record, what is it that. 0:30:35.440 --> 0:30:36.000 Got us here? 0:30:36.600 --> 0:30:38.400 I think there are really three things that got us 0:30:38.480 --> 0:30:40.920 up here. The first is that central banks have been 0:30:41.400 --> 0:30:44.720 very significant buyers of gold now primarily central banks in 0:30:44.760 --> 0:30:48.000 the emerging markets, buying gold because they didn't have enough 0:30:48.080 --> 0:30:51.400 in their official reserves. And that's been a process that's 0:30:51.440 --> 0:30:53.800 been going on for fourteen straight years, not going to 0:30:53.840 --> 0:30:56.680 go away anytime soon. The second thing, we've seen a 0:30:56.720 --> 0:31:00.640 big revival in investment demand in China. I think Chinese 0:31:00.680 --> 0:31:03.840 investors responding to problems in the stock market related to 0:31:03.960 --> 0:31:07.080 real estate and turning to the traditional alternative, which has 0:31:07.120 --> 0:31:09.880 been gold for a very long period of time. And then, 0:31:09.960 --> 0:31:13.080 for different reasons, we've seen a revival in Western world investment, 0:31:13.160 --> 0:31:18.120 Western Europe and North America, concerned about macroeconomic issues and 0:31:18.240 --> 0:31:21.840 also concerned about geopolitical issues. I think that combination is 0:31:21.880 --> 0:31:24.479 what's driven gold up to a whole succession of all 0:31:24.560 --> 0:31:25.480 time highs this year. 0:31:25.800 --> 0:31:30.920 Well, does the current price of gold then justify current valuations? 0:31:32.520 --> 0:31:34.840 I think it does. I mean, you know, if you 0:31:34.920 --> 0:31:38.160 think about it, the kind of macroeconomic scenario that we're in, 0:31:38.560 --> 0:31:42.840 with inflation still being sticky, especially on the Fed's preferred measure, 0:31:44.040 --> 0:31:46.520 and with the Fed having started to cut interest rates 0:31:46.560 --> 0:31:49.880 and clearly embarking on a sustained period of rate cutting 0:31:49.920 --> 0:31:53.040 that's going to run through next year if everybody is 0:31:53.080 --> 0:31:55.840 to believe it to be believed that I think is 0:31:56.000 --> 0:31:59.440 likely to lead to dollar weakness and then consequently gold strength. 0:31:59.760 --> 0:32:03.720 And the geopolitical background a conflict in Europe with the 0:32:03.760 --> 0:32:06.040 potential to turn nuclear at the push of a button, 0:32:06.600 --> 0:32:09.320 and the Middle Eastern conflict having now spread way beyond 0:32:09.400 --> 0:32:12.600 Israel's borders where it was confined at the beginning, and 0:32:12.720 --> 0:32:16.200 now including open warfare with Iran and Lebanon, and the 0:32:16.240 --> 0:32:19.080 potential for that to get even worse. I think all 0:32:19.160 --> 0:32:22.240 of those things together historically have been very helpful for gold, 0:32:22.960 --> 0:32:25.680 and right now they're continuing to be very very supportive, 0:32:25.680 --> 0:32:27.680 which is why we keep hitting this succession of all 0:32:27.760 --> 0:32:28.320 time highs. 0:32:28.640 --> 0:32:30.920 Well, let me throw in one more piece of uncertainty, 0:32:31.000 --> 0:32:34.360 and that is the American presidential election. Potentially what might 0:32:34.440 --> 0:32:35.720 that mean for the price of gold. 0:32:36.360 --> 0:32:40.320 I'm guessing that whoever becomes the president, we're going to 0:32:40.400 --> 0:32:45.760 see continued spending, whether it's spending on domestic programs from 0:32:45.800 --> 0:32:49.040 the Democrats, or whether it's spending to finance, whether it's 0:32:49.200 --> 0:32:52.360 it's tax cuts. We're going to see bigger deficits whoever 0:32:52.440 --> 0:32:54.800 becomes the president, and that I think is going to 0:32:54.920 --> 0:32:58.640 lead to further dollar depreciation and quite possibly a renewal 0:32:58.720 --> 0:33:01.320 of inflation, which could be really very very damaging. At 0:33:01.360 --> 0:33:04.719 this point, as long as we avoid the dreaded trifecta, 0:33:04.760 --> 0:33:07.840 as long as we avoid one party getting the presidency, 0:33:08.200 --> 0:33:11.160 the House, and the Senate, which I think has always 0:33:11.240 --> 0:33:14.400 led to extremism in the past, I think that as 0:33:14.440 --> 0:33:16.800 long as we get the checks and balances that the 0:33:16.960 --> 0:33:20.640 US system is designed to incorporate, then I don't think 0:33:20.680 --> 0:33:23.080 that there is anything likely to be bearish for gold 0:33:23.120 --> 0:33:25.520 in there at all. My sense is that you know, 0:33:25.960 --> 0:33:30.160 with likely increase spending, likely increased deficits, I've been hearing 0:33:30.200 --> 0:33:33.640 for twenty years that our deficit is unsustainable and we 0:33:33.800 --> 0:33:36.440 keep sustaining it somehow or other. I think that all 0:33:36.520 --> 0:33:39.560 of those things are going to lead to dollar depreciation, 0:33:40.000 --> 0:33:43.000 and that should lead in turn to a stronger goal price. 0:33:43.560 --> 0:33:47.120 What happens if we don't quickly know the election outcome, 0:33:47.240 --> 0:33:49.320 how might that play into the price of gold. 0:33:50.040 --> 0:33:51.560 I think all that would do, and I think is 0:33:51.600 --> 0:33:53.640 a very real possibility of that, given the way some 0:33:53.760 --> 0:33:56.400 of the candidates are talking, I think that all that 0:33:56.520 --> 0:33:59.080 would do is simply add to the general feeling of 0:33:59.200 --> 0:34:03.320 geopolitical uncertainty, the uncertainty about the conflict in Ukraine and 0:34:03.400 --> 0:34:05.520 the conflict in the Middle East. And if we have, 0:34:06.360 --> 0:34:09.280 let's hope it's not an armed conflict in the United States. 0:34:09.520 --> 0:34:12.400 But if we have a contentious election, which I think 0:34:12.520 --> 0:34:15.120 is a very likely outcome, I think that's simply going 0:34:15.200 --> 0:34:17.919 to be even further positive for gold. I don't see 0:34:17.920 --> 0:34:20.040 any negatives out there right now. It's hard to see 0:34:20.280 --> 0:34:22.439 where the headwinds might be coming from from the gold 0:34:22.480 --> 0:34:22.960 point of view. 0:34:23.160 --> 0:34:25.440 Well, certainly, we've got a lot ahead on the calendar. 0:34:25.480 --> 0:34:28.920 In addition to the presidential election, there's also a Federal 0:34:29.120 --> 0:34:32.680 Reserve meeting. What assumptions are you and your colleagues making 0:34:32.719 --> 0:34:36.040 about the Federal Reserve and the pace of further rate cuts. 0:34:36.440 --> 0:34:40.040 I think that you know, Jerome Powell has said explicitly 0:34:40.200 --> 0:34:43.040 and many many times that he plans to be driven 0:34:43.120 --> 0:34:45.840 by the data, and that he's also trying not to 0:34:45.920 --> 0:34:49.680 be to put too much emphasis on any one month's 0:34:49.880 --> 0:34:53.399 particular set of economic statistics, because these are always open 0:34:53.480 --> 0:34:57.279 to revision. But if everything stays pretty much the same 0:34:57.320 --> 0:34:59.560 as we are right now, and he doesn't get any 0:34:59.600 --> 0:35:02.840 major surprises in the data, then it looks like the 0:35:02.960 --> 0:35:06.240 market consensus is right. The market consensus has now settled 0:35:06.280 --> 0:35:09.560 on two more twenty five basis point rate cuts, one 0:35:09.600 --> 0:35:12.200 at the November meeting, one at the December meeting, and 0:35:12.320 --> 0:35:16.640 then a sustained succession of small twenty five basis point 0:35:16.719 --> 0:35:19.920 rate cuts through the whole of twenty twenty five to 0:35:20.080 --> 0:35:22.880 bring Fed funds rate down to somewhere around about the 0:35:22.960 --> 0:35:26.279 three percent level, probably a little bit higher than the 0:35:26.480 --> 0:35:29.640 sustainable normal rate, the neutral rate, if you like, as 0:35:29.680 --> 0:35:32.640 some of the economists want to call it. But jer 0:35:32.680 --> 0:35:35.279 own power is indicated if the data keep coming in 0:35:35.360 --> 0:35:38.560 the way that they are. Strong economy, some signs of 0:35:38.640 --> 0:35:40.720 a little wobble here and there in the labor market, 0:35:41.440 --> 0:35:45.280 but nothing really dramatic. Then that will be the lightly outcome. 0:35:45.400 --> 0:35:47.840 Two more rate cuts this year, and then a succession 0:35:47.880 --> 0:35:50.759 of rate cuts next year, and then somewhere toward the 0:35:50.880 --> 0:35:53.719 end of twenty twenty five, the Fed will will take 0:35:53.760 --> 0:35:57.719 a little pause and have another macro view, if you 0:35:57.920 --> 0:36:00.719 like the view from thirty five thousand, fear to see 0:36:00.760 --> 0:36:04.719 exactly where the general economy is and where all the 0:36:04.800 --> 0:36:07.520 other indicators that they're looking at, especially the labor market. 0:36:08.000 --> 0:36:10.120 But Jerome Powell has made it very clear that he 0:36:10.280 --> 0:36:14.520 still wants to see an extended period of below trend growth, 0:36:14.840 --> 0:36:17.840 and he has seen nothing like that, and certainly in 0:36:17.880 --> 0:36:20.680 the last twelve months, and there are no real signs 0:36:20.920 --> 0:36:24.080 of anything like an extended period of below trend growth. 0:36:24.440 --> 0:36:27.040 That's what he wants to see, So he's not going 0:36:27.160 --> 0:36:29.200 to rush cutting interest rates at all. 0:36:29.680 --> 0:36:32.399 Quick question about demand. You are talking to us from 0:36:32.560 --> 0:36:35.759 Hong Kong. China and India are the world's two top 0:36:35.880 --> 0:36:40.280 gold consumers. Is the demand story for the precious metal 0:36:40.440 --> 0:36:41.920 the same in both countries. 0:36:42.640 --> 0:36:42.680 No. 0:36:42.880 --> 0:36:45.520 I think there are very very different dynamics in each country. 0:36:46.280 --> 0:36:49.719 We have seen We've seen pretty good jewelry demand in 0:36:49.880 --> 0:36:54.360 China that nothing outstanding. We've seen stellar investment demand, I 0:36:54.400 --> 0:36:57.600 think because the Chinese investor is frightened of his stock 0:36:57.680 --> 0:37:01.200 market right now. India's a very very different story. What 0:37:01.320 --> 0:37:05.840 we have in India is that demographics population growth is 0:37:05.920 --> 0:37:10.200 definitely on gold side, with strong population growth there unlike China, 0:37:11.200 --> 0:37:15.800 and the economic factors are also on gold side. The 0:37:15.920 --> 0:37:19.760 Indian economy has been growing, the IMF seems to believe 0:37:20.320 --> 0:37:22.680 from the most recent report. I think that India was 0:37:22.719 --> 0:37:25.920 really the one country that got top marks there and 0:37:26.000 --> 0:37:30.040 they're expecting seven percent economic growth this year and probably 0:37:30.120 --> 0:37:33.200 better than that next year. They're expecting the Indian economy 0:37:33.239 --> 0:37:36.600 to overtake the Chinese economy in size because the Chinese 0:37:36.640 --> 0:37:39.880 economy has turned into some decline with the growing of 0:37:39.920 --> 0:37:43.760 the population. Very much different dynamic from what's happening in India. 0:37:44.880 --> 0:37:47.799 And of course, you know, we are now well into 0:37:47.880 --> 0:37:51.560 the Indian wedding season, which will run through until next 0:37:51.680 --> 0:37:54.040 May or June, depending on where in India one lives, 0:37:54.440 --> 0:37:56.760 and that has always been very good for an uptick 0:37:56.840 --> 0:38:00.359 in gold jewelry demand there. But investment demand is also 0:38:00.480 --> 0:38:03.080 running strong in both countries, and I think it's very 0:38:03.120 --> 0:38:05.279 important to look at both of those dynamics. 0:38:05.600 --> 0:38:10.600 George milling Stanley, Chief gold Strategist at State Street Global Advisors. 0:38:11.080 --> 0:38:14.239 I'm Charlie Pelloton, New York in for Doug Chrismer this week. 0:38:14.600 --> 0:38:18.360 You can join Doug weekdays on the Daybreak Asia podcast. 0:38:18.840 --> 0:38:21.799 It's available wherever you get your podcasts. 0:38:22.200 --> 0:38:25.000 Tom, and that does it for this edition of Bloomberg 0:38:25.080 --> 0:38:27.719 Daybreak Weekend. Join us again Monday morning at five am 0:38:27.800 --> 0:38:30.640 Wall Street Time for the latest on markets overseas and 0:38:30.719 --> 0:38:33.680 the news you need to start your day. I'm Tom Buzzby. 0:38:33.920 --> 0:38:36.759 Stay with us. Top stories and global business headlines are 0:38:36.760 --> 0:38:37.839 coming up right now