Daybreak Weekend: Netflix Earnings, ECB Preview, TSMC

Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.000 --> 0:00:13.440 This is Bloomberg day Break Weekend, our global look at 0:00:13.440 --> 0:00:15.680 the top stories in the coming week from our Daybreak 0:00:15.680 --> 0:00:18.320 anchors all around the world. Straight Ahead on the program, 0:00:18.320 --> 0:00:20.840 a look ahead to US retail sales and what the 0:00:20.960 --> 0:00:24.160 numbers might reveal about the health of the consumer. I'm 0:00:24.200 --> 0:00:25.560 Tom Busby in New York. 0:00:25.720 --> 0:00:28.280 I'm Karlin Hepge here in London, where the ECB looks 0:00:28.440 --> 0:00:31.480 likely to cut rates again face with a weak economic 0:00:31.600 --> 0:00:34.200 fact job in the continent's biggest economies. 0:00:34.360 --> 0:00:36.680 I'm Brian Curtisy in Hong Kong. We look ahead to 0:00:36.720 --> 0:00:41.120 whether China is all in on stimulus or wavering, and 0:00:41.280 --> 0:00:43.680 we preview TSMC's earnings. 0:00:44.000 --> 0:00:48.000 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:48.000 --> 0:00:50.519 E Love Them Free Ow New York, Bloombergen ninety nine 0:00:50.560 --> 0:00:54.279 to one, Washington, DC, Bloomberg ninety two to nine, Boston, 0:00:54.680 --> 0:00:58.680 DAB Digital Radio, London, Sirius XM one twenty one, and 0:00:58.760 --> 0:01:01.600 around the world on Bloomberg Radio dot Com and via 0:01:01.680 --> 0:01:03.040 the Bloomberg Business App. 0:01:08.560 --> 0:01:09.160 Good day to you. 0:01:09.240 --> 0:01:11.520 I'm Tom Busby, and we begin today's program with some 0:01:11.640 --> 0:01:15.120 key economic data out this week. US retail sales for 0:01:15.240 --> 0:01:18.759 September eight thirty am Wall Street Time on Thursday. So 0:01:18.800 --> 0:01:20.720 what will the numbers reveal about the health of the 0:01:20.720 --> 0:01:24.160 consumer and as we head toward the holiday season? Is 0:01:24.160 --> 0:01:26.800 stubbornly high inflation keeping a lid on spending for a 0:01:26.840 --> 0:01:30.160 lot of Americans. Well for more, we're joined by Michael McKee, 0:01:30.200 --> 0:01:35.559 Bloomberg International Economics and Policy correspondent. Well, Michael, retail sales 0:01:35.640 --> 0:01:37.600 rose just a tenth of a percent in August, but 0:01:38.200 --> 0:01:41.000 that was better than forecast. What are you expecting to 0:01:41.040 --> 0:01:42.080 see in September. 0:01:43.040 --> 0:01:45.720 Well, what e kindom is surveyed by Bloomberger expecting to 0:01:45.720 --> 0:01:48.960 see is more progress in that regard. The forecast is 0:01:49.000 --> 0:01:53.560 for a two tenths advanced month over month X autos 0:01:53.720 --> 0:01:56.680 just a tenth, but the control group, which is basically 0:01:56.720 --> 0:02:00.840 what goes into GDP up three tenths is last month, 0:02:00.880 --> 0:02:05.040 which would be a fairly strong performance. Americans still are shopping. 0:02:05.080 --> 0:02:10.800 We haven't seen a major impact on confidence in the 0:02:10.840 --> 0:02:13.240 fact that they can pay for these things. So at 0:02:13.240 --> 0:02:16.280 this point we're expecting to see some strong growth. 0:02:16.800 --> 0:02:19.240 Well, let's talk about why we have that strong growth. 0:02:19.280 --> 0:02:22.680 We have a very solid labor market, surprisingly strong numbers 0:02:22.960 --> 0:02:26.480 the last month. Higher incomes as well. We've seen gas 0:02:26.520 --> 0:02:31.400 prices low this past summer, still pretty low. Inflation has eased, 0:02:32.040 --> 0:02:34.000 and it won't have much of an impact on the 0:02:34.040 --> 0:02:36.600 sales data that we'll see this week. But lower interest 0:02:36.680 --> 0:02:37.640 rates right, all. 0:02:37.480 --> 0:02:41.040 That right definitely won't have an impact on the data 0:02:41.080 --> 0:02:44.600 we see this week. Credit Card rates have not come down. 0:02:45.120 --> 0:02:48.200 I don't think anybody be surprised by that. They're very sticky. 0:02:48.760 --> 0:02:51.040 They go off a lot faster than they come down, 0:02:51.480 --> 0:02:54.640 so Americans are still paying that. But what we're looking 0:02:54.680 --> 0:03:00.079 at is the higher wages people are getting is helping 0:03:00.120 --> 0:03:02.600 because people tend to spend what they make and make 0:03:02.600 --> 0:03:06.720 their spending decisions on what they make. They've had a 0:03:06.760 --> 0:03:08.960 lot of money in savings for a while, and the 0:03:08.960 --> 0:03:13.440 savings rate was revised higher, But it's the wages and 0:03:13.520 --> 0:03:17.280 salaries that sort of determine the momentum that we see 0:03:17.280 --> 0:03:20.200 in spending, and since they have been relatively strong, people 0:03:20.240 --> 0:03:22.320 are still feeling like they can afford it. 0:03:23.280 --> 0:03:26.080 Now as we move into the holiday season. Do you 0:03:26.160 --> 0:03:28.720 think there's indications this is going to continue on. 0:03:29.400 --> 0:03:32.200 It's beginning to look that way. The forecasts earlier this 0:03:32.280 --> 0:03:34.640 year were that we would see a fall off in 0:03:34.680 --> 0:03:38.000 the fourth quarter, and so far we haven't seen that. 0:03:38.600 --> 0:03:43.400 This is September numbers that were getting next on Thursday, 0:03:44.440 --> 0:03:48.040 and that's the third quarter, but it will set us 0:03:48.120 --> 0:03:49.720 up for the fourth quarter. We'll see what kind of 0:03:49.760 --> 0:03:52.680 momentum we have going into the fourth quarter, and so 0:03:52.840 --> 0:03:54.800 far there doesn't seem to be a reason to think 0:03:54.880 --> 0:03:58.480 people are pulling back. As you noted, gasoline prices are 0:03:58.560 --> 0:04:01.680 down even though oil pres are up. We're in the 0:04:01.720 --> 0:04:05.480 winter driving season the beginning of that and less demand 0:04:05.560 --> 0:04:09.240 out there for fuel, and we've got some surpluses that 0:04:09.520 --> 0:04:13.920 have built up in the USL Company's tanks out in Oklahoma. 0:04:14.840 --> 0:04:17.880 So as long as people feel like they've got the 0:04:17.920 --> 0:04:20.480 money and they don't have to put it to gasoline, 0:04:21.480 --> 0:04:23.320 they should continue to spend. 0:04:23.760 --> 0:04:26.599 Now, another surprise help is that dock workers strike. It 0:04:26.680 --> 0:04:28.720 lasted three days and then put on pause. 0:04:29.480 --> 0:04:31.560 That's a big help to the economy overall, because we 0:04:31.600 --> 0:04:33.560 would have had a lot of people who were out 0:04:33.560 --> 0:04:37.039 of work, and that would have slowed the economy and 0:04:37.240 --> 0:04:40.560 probably raised prices after a couple of weeks because we'd 0:04:40.560 --> 0:04:43.440 have shortages of things coming in we did see in 0:04:43.480 --> 0:04:47.239 the CPI last week that food prices food at home 0:04:47.600 --> 0:04:50.560 went up by four tenths, the most in eight months. 0:04:51.040 --> 0:04:54.719 And that's the kind of thing that would have been 0:04:54.760 --> 0:04:59.400 affected fruits and vegetables coming in other foods if the 0:04:59.400 --> 0:05:02.360 port strike continued, and we might have seen a sort 0:05:02.360 --> 0:05:06.160 of a negative jobs report because this week is coming 0:05:06.240 --> 0:05:10.640 up as the reference week for the October payrolls. And 0:05:10.680 --> 0:05:13.280 if you had all those dock workers on strike, along 0:05:13.320 --> 0:05:16.160 with the Boeing workers on strike and the people who 0:05:16.160 --> 0:05:18.920 are out of work because of the hurricanes, we could 0:05:18.920 --> 0:05:21.960 have had a negative print for October, which would probably 0:05:21.960 --> 0:05:23.719 not go over well with public opinion. 0:05:24.320 --> 0:05:26.719 Well and those hurricanes. At least we're going to see 0:05:26.720 --> 0:05:32.400 a big pickup in home building, construction, roads, schools. I mean, 0:05:32.400 --> 0:05:35.400 we're going to see hopefully, hopefully very soon. 0:05:35.839 --> 0:05:41.040 That's the paradox of these natural disasters. You can never 0:05:42.000 --> 0:05:45.400 make light of the suffering of the individual people who 0:05:45.800 --> 0:05:47.840 have gone through this, who've lost their homes and all 0:05:47.880 --> 0:05:51.880 the things that matter to them. But on a macro 0:05:52.120 --> 0:05:56.560 national basis, natural disasters like this are good for the 0:05:56.640 --> 0:06:00.680 economy because of all that spending on new stuff, and 0:06:01.400 --> 0:06:05.400 it adds to GDP, so we will see that effect. 0:06:06.160 --> 0:06:09.400 Seems like from Aleen, the stuff in the Carolinas may 0:06:09.440 --> 0:06:12.480 take longer to fix because a lot of roads are 0:06:12.720 --> 0:06:15.760 out and broken and that'll take a while to do. 0:06:16.160 --> 0:06:18.000 But in a year or two you would look at 0:06:18.000 --> 0:06:20.679 the GDP figures and you wouldn't see a real dip. 0:06:20.920 --> 0:06:24.360 Well, well, you know, let's talk more about housing broader, 0:06:24.440 --> 0:06:29.600 not just from Helene and Milton, but housing prices still 0:06:29.600 --> 0:06:31.880 making home ownership a little tough for a lot of people, 0:06:31.880 --> 0:06:34.800 and that has certainly got to impact retail sales and 0:06:34.880 --> 0:06:37.960 impact and you say, you know, inflation. 0:06:37.600 --> 0:06:40.560 Also, it's something to watch. We did see in the 0:06:40.600 --> 0:06:45.840 CPI report that owner's equivalent rent, which is the weird 0:06:45.880 --> 0:06:50.880 statistical way the government accounts for home prices. We're at 0:06:50.920 --> 0:06:53.600 the lowest in about seven or eight months, just up 0:06:53.680 --> 0:06:55.960 three tenths, and that's what the Fed has been waiting for. 0:06:56.040 --> 0:06:59.360 If that continues, that's good news. It will help prices 0:06:59.520 --> 0:07:02.680 level off. But prices have been going up and the 0:07:02.720 --> 0:07:05.559 big reason for that is that there's not enough homes 0:07:05.560 --> 0:07:09.000 for sale because interest rates are high still for mortgages 0:07:09.400 --> 0:07:10.520 and people don't want to move. 0:07:10.640 --> 0:07:14.400 Well, yeah, it's a cruel cycle, though September retail spending 0:07:14.600 --> 0:07:17.520 data out this Thursday are thanks to Michael McKee, Bloomberg 0:07:17.560 --> 0:07:22.000 International Economics and Policy correspondent. We move next to corporate 0:07:22.000 --> 0:07:25.720 earnings from the world's leading streaming TV service, Netflix, posting 0:07:25.760 --> 0:07:28.840 its third quarter results this Thursday. What will they reveal 0:07:28.880 --> 0:07:33.000 about subscriber growth, revenue from advertising, possible plans to hike 0:07:33.080 --> 0:07:37.160 subscription fees for more. We're joined by Geetha Raganathan, Bloomberg 0:07:37.200 --> 0:07:40.920 Intelligence Analysts on US media. Geitha, Well, two hundred and 0:07:40.920 --> 0:07:44.600 seventy eight million subscribers worldwide can't all be wrong. What 0:07:44.640 --> 0:07:47.320 do you expect to see from Netflix's earnings this week? 0:07:48.040 --> 0:07:49.800 Yeah, Tom, thank you so much for having me so. 0:07:49.920 --> 0:07:53.440 As always, you know, Netflix is still very much a 0:07:53.480 --> 0:07:58.640 subscriber story. Consensus current currently expects about four point three 0:07:58.800 --> 0:08:02.720 million new subscribers ADS for the third quarter, and that 0:08:02.880 --> 0:08:05.400 momentum is expected to kind of continue into the fourth 0:08:05.480 --> 0:08:10.040 quarter with them having lots of heavily anticipated content with 0:08:10.120 --> 0:08:12.120 about seven million gains. So if you kind of just 0:08:12.200 --> 0:08:16.760 look at the overall picture for Netflix, Tom, what we 0:08:16.840 --> 0:08:19.800 saw was we saw a tremendous slow down in subscriber 0:08:19.840 --> 0:08:23.440 growth in twenty twenty two, but twenty twenty three and 0:08:23.480 --> 0:08:26.880 twenty twenty four we're seeing them add close to almost 0:08:27.160 --> 0:08:31.120 sixty million subscribers, so thirty million subscribers in each of 0:08:31.160 --> 0:08:33.880 those years. So I think, really, as investors kind of 0:08:34.000 --> 0:08:36.920 start to think about the story, it's really about where 0:08:37.040 --> 0:08:40.640 is subscriber growth? What is a normal level of subscriber 0:08:40.720 --> 0:08:45.480 growth once you have taken into account these two initiatives 0:08:45.480 --> 0:08:49.440 that they introduced, which was the advertising based tier as 0:08:49.480 --> 0:08:52.040 well as the password sharing crackdown, And so I think 0:08:52.040 --> 0:08:53.760 that is going to be one of the biggest questions 0:08:54.080 --> 0:08:56.480 apart from, of course what you said, which was the 0:08:56.520 --> 0:08:59.880 price increases, we are really banking on a big price entrase. 0:09:00.480 --> 0:09:03.720 Now besides the paid sharing members, the new ones you 0:09:03.760 --> 0:09:08.000 know after that crackdown. Now, do you see more international growth? 0:09:08.040 --> 0:09:10.520 Are there new countries for Netflix to conquer? 0:09:11.400 --> 0:09:14.520 Yeah? So majority of the growth tom is in the 0:09:14.559 --> 0:09:18.160 international markets. You know, that makes up two thirds of 0:09:18.440 --> 0:09:21.200 you know, the subscriber base. Most of the growth, of course, 0:09:21.280 --> 0:09:23.959 is coming internationally. Not to say that the US market 0:09:24.000 --> 0:09:26.640 is not growing. It has actually grown really well after 0:09:26.640 --> 0:09:29.520 they introduced both the ads as well as the paid 0:09:29.520 --> 0:09:32.960 sharing initiative. But yes, as they kind of expand to 0:09:33.120 --> 0:09:37.640 more markets, we definitely expect you know, growth long growth 0:09:37.720 --> 0:09:41.040 runway in a lot of these international markets. Remember, penetration 0:09:41.200 --> 0:09:44.600 for Netflix in the US is very, very high, but 0:09:44.679 --> 0:09:47.400 it is pretty low in some other markets. So if 0:09:47.440 --> 0:09:51.439 you kind of look at Latin America again, penetation is high, 0:09:51.480 --> 0:09:54.000 but if you look at you know, Asia Pacific, it's 0:09:54.040 --> 0:09:56.640 only at about twenty one or twenty two percent. If 0:09:56.679 --> 0:09:58.760 you look at Europe again, it's pretty low. So there 0:09:58.880 --> 0:10:03.000 is substantial for growth. You know, it's just going to 0:10:03.160 --> 0:10:06.080 depend on what are all the different subscription tiers that 0:10:06.120 --> 0:10:09.080 they introduce there to kind of really rev up growth 0:10:09.120 --> 0:10:10.880 in some of those markets now. 0:10:10.920 --> 0:10:15.080 And other growth is advertising revenue, and I know you 0:10:15.080 --> 0:10:17.160 could talk about a couple of deals that they have 0:10:17.800 --> 0:10:20.920 with with major sports networks that's coming up won't be 0:10:20.960 --> 0:10:23.120 reflected in the numbers we're going to see just you know, 0:10:23.200 --> 0:10:26.400 this week, but looking ahead it could really explode. 0:10:26.559 --> 0:10:30.200 Absolutely. So they have kind of downplayed the role of advertising, 0:10:30.600 --> 0:10:32.880 you know, at least for the near term, but we 0:10:33.080 --> 0:10:36.520 know that they are doing so many things that is 0:10:36.600 --> 0:10:39.360 really going to kind of turbo charge that business. So 0:10:39.400 --> 0:10:42.240 one of the big things that the industry is kind 0:10:42.240 --> 0:10:46.040 of looking for, is that Netflix is entering the sports arena. 0:10:46.440 --> 0:10:49.920 They have two NFL games on Christmas Day. Now that 0:10:50.200 --> 0:10:53.160 is going to be big, not just in terms of viewership, 0:10:53.360 --> 0:10:55.560 but obviously they are going to those are That's a 0:10:55.640 --> 0:11:00.760 highly anticipated content when it comes to you know, advertising, 0:11:00.840 --> 0:11:03.800 So you know that is obviously creating a lot of buzz. 0:11:04.200 --> 0:11:07.839 Then you have the much anticipated Mike Tyson versus Jake 0:11:07.960 --> 0:11:10.720 Paul boxing event which is going to happen sometime in November. 0:11:11.200 --> 0:11:15.920 That should drive the subscriber editions, it should enhance Netflix's 0:11:15.960 --> 0:11:19.680 overall reach. So all of those, you know, they're basically 0:11:19.720 --> 0:11:22.480 prepping for advertising to take off in a big way. 0:11:22.480 --> 0:11:26.319 And then remember, starting in January, you have WWE content 0:11:26.360 --> 0:11:29.600 that is going to come to the platform globally for 0:11:29.640 --> 0:11:33.000 the very first time. So they're really investing heavily in 0:11:33.320 --> 0:11:37.720 sports content and sports adjacent content and that should be 0:11:37.920 --> 0:11:40.800 a big draw for the advertising community. 0:11:41.960 --> 0:11:45.480 Now, since Netflix last hiked prices it's a first standard 0:11:45.520 --> 0:11:48.479 tier January of twenty twenty two, a number of competitors 0:11:48.720 --> 0:11:51.760 have done the same. Do you think Netflix is poised 0:11:51.800 --> 0:11:53.960 to increase the cost of both of its tiers? The 0:11:54.000 --> 0:11:56.920 standard and the ad supported one more revenue coming in. 0:11:57.480 --> 0:11:59.679 So I think right now, if you kind of look 0:11:59.679 --> 0:12:02.000 at con census estimates and if you just look at 0:12:02.200 --> 0:12:05.640 sentiment in general, everybody is kind of banking on this 0:12:05.760 --> 0:12:09.960 price increase. They are definitely overdue for a price hike 0:12:10.160 --> 0:12:12.560 on the standard tier, that is the one that costs 0:12:12.559 --> 0:12:15.640 about fifteen and a half dollars in the US. They 0:12:15.720 --> 0:12:18.560 haven't raised prices for almost three years, as you just 0:12:18.600 --> 0:12:22.040 pointed out, Tom, and remember before that they had a 0:12:22.040 --> 0:12:25.160 steady cadence of price increases. It was coming every eighteen 0:12:25.200 --> 0:12:27.640 months or so. It was about a ten to eleven 0:12:27.679 --> 0:12:30.080 percent price increase. So we are definitely looking for a 0:12:30.080 --> 0:12:33.600 pretty big bump this time around. They have the content 0:12:33.920 --> 0:12:37.720 to support it. All of their competitors are raising prices, 0:12:37.960 --> 0:12:41.800 and we know that in general the competitive intensity across 0:12:41.840 --> 0:12:43.680 the board has come down quite a bit. 0:12:43.840 --> 0:12:47.079 Okay, third quarter earnings from Netflicks out this Thursday, are 0:12:47.160 --> 0:12:51.479 thanks to Geet the raganathin Bloomberg Intelligence Analysts on US media. 0:12:51.600 --> 0:12:53.839 Coming up on Bloomberg Day Break weekend, we'll look ahead 0:12:53.840 --> 0:12:56.920 to a meeting of European Central Bank policy makers and 0:12:56.960 --> 0:13:00.720 whether another rate cut may be in the cards, Tom Busby, 0:13:00.760 --> 0:13:14.840 and this is Bloomberg. This is Bloomberg Daybreak weekend, our 0:13:14.880 --> 0:13:17.120 global look ahead at the top stories for investors in 0:13:17.160 --> 0:13:20.319 the coming week. I'm Tom Busby in New York. Up 0:13:20.400 --> 0:13:22.960 later in our program look ahead to a cavalcade of 0:13:22.960 --> 0:13:25.800 economic data out of China and earnings from one of 0:13:25.840 --> 0:13:29.160 Asia's biggest chip makers. But first, the European Central Bank 0:13:29.200 --> 0:13:32.120 has already cut interest rates twice in this cycle, and 0:13:32.200 --> 0:13:36.360 markets are expecting another move lower when policymakers meet this week. 0:13:36.440 --> 0:13:40.120 As inflation slows and near's the ECB's target focus has 0:13:40.160 --> 0:13:43.800 shifted to the weakness in Europe's biggest economies. For more, 0:13:43.880 --> 0:13:46.199 Let's go to London and bring in Bloomberg Daybreak Europe 0:13:46.200 --> 0:13:48.439 Banker Caroline hepgar Tom. 0:13:48.480 --> 0:13:51.760 The European Central Bank has not delivered many surprises on 0:13:51.800 --> 0:13:54.960 its rates cutting journey. The first move in June was 0:13:55.000 --> 0:13:59.640 widely telegraphed, as was the second in September. Now, as 0:13:59.679 --> 0:14:02.480 we can out down to the next meeting, all signs 0:14:02.520 --> 0:14:06.880 point to another twenty five basis point move lower. September's 0:14:06.920 --> 0:14:10.120 Euro Area inflation print came in at one point eight percent. 0:14:10.200 --> 0:14:13.760 That's below the ECB's target, but that good news has 0:14:13.800 --> 0:14:17.880 come with much less positive information when it comes to 0:14:17.920 --> 0:14:21.640 the continued weakness in the major economies in Europe, in 0:14:21.680 --> 0:14:25.480 France and Germany. Now we've been discussing this with Eric 0:14:25.520 --> 0:14:28.800 why Tennis, who is the EMEA head of investment strategy 0:14:28.840 --> 0:14:32.360 at JP Morgan Private Bank, and we began by asking 0:14:32.440 --> 0:14:36.520 him why markets are not currently pricing a recession for 0:14:36.600 --> 0:14:37.480 Europe right now. 0:14:37.680 --> 0:14:43.200 There's definitely been an unfortunate loss of momentum. Economic surprises 0:14:43.280 --> 0:14:49.000 have been surprising to the downside. However, the overall trajectory 0:14:49.040 --> 0:14:52.480 of the economy I would categorize as remaining buoyant enough. 0:14:52.720 --> 0:14:55.560 What happens with the consumer is going to be key 0:14:55.640 --> 0:14:59.840 as we go forward. The ECB likely support with interest 0:15:00.080 --> 0:15:03.120 rates to the downside is also likely to help keep 0:15:03.160 --> 0:15:07.680 things afloat. Linkages to the US are also constructive. The 0:15:07.800 --> 0:15:12.680 US economy has been outperforming most expectations across the board, 0:15:12.800 --> 0:15:16.040 so the degree of linkages across the pond should also 0:15:16.080 --> 0:15:20.120 be at least relatively helpful to keeping Europe, you know, 0:15:20.160 --> 0:15:23.600 sort of carrying forward through, albeit with a lower level 0:15:23.640 --> 0:15:26.360 of growth relative to the US and and other key 0:15:26.480 --> 0:15:27.440 economic areas. 0:15:27.960 --> 0:15:30.160 So what markets are pricing in is sort of quarter 0:15:30.240 --> 0:15:32.640 steady pace of quarter points rate cuts from the European 0:15:32.680 --> 0:15:35.520 Central Bank. Does that tally with how you think that 0:15:35.560 --> 0:15:38.880 the response should go given the weakness in the European economy. 0:15:38.560 --> 0:15:41.440 Yeah, it basically does. The you know, the Europeans have 0:15:41.600 --> 0:15:45.400 the more singular focus on you know, price stability i e. 0:15:45.440 --> 0:15:49.400 Battling inflation. In the US they categorize it more so 0:15:49.480 --> 0:15:53.680 as both price stability i e. Battling inflation and additionally 0:15:54.080 --> 0:15:58.240 helping to ensure full employment. So by that methodology, it 0:15:58.320 --> 0:16:01.640 suggests that the Europeansentral Bank really should just be focusing 0:16:01.680 --> 0:16:05.440 on inflation and inflation alone. But I guess the reason 0:16:05.480 --> 0:16:07.640 I bring that up is even though it's not officially 0:16:07.680 --> 0:16:10.920 part of their mandate to help facilitate the labor markets 0:16:10.920 --> 0:16:14.239 and try to be cognizant of supporting the regional economy, 0:16:14.560 --> 0:16:17.720 I do think that they have that lens and do 0:16:17.840 --> 0:16:20.680 want to try to be helpful if inflation allows them to. 0:16:20.840 --> 0:16:23.880 And the subsiding of inflation in the region and on 0:16:23.880 --> 0:16:27.200 a global level is really helpful because it allows central 0:16:27.240 --> 0:16:31.000 banks to become more accommodative with softer interest rate policy, 0:16:31.040 --> 0:16:31.800 which should. 0:16:31.520 --> 0:16:35.680 Help how far behind the curve is the ECB? What 0:16:35.840 --> 0:16:38.400 is the neutral rate? Has that shifted to your mind? 0:16:38.840 --> 0:16:41.080 I actually think they're doing okay. We don't believe that 0:16:41.560 --> 0:16:44.400 they're behind the curve, and we think that a steady 0:16:44.400 --> 0:16:47.960 as she goes pace feels reasonable to us. There was 0:16:48.000 --> 0:16:50.280 certainly an argument that the FED was behind the curve 0:16:50.720 --> 0:16:54.240 looking over there in many forecasters' minds, and that's part 0:16:54.280 --> 0:16:57.160 of why they did that kind of quote jumbo sized 0:16:57.240 --> 0:17:01.720 cut of fifty basis points. Most recently, I would more 0:17:01.720 --> 0:17:05.520 so categorize that one as not necessarily being behind the curve, 0:17:05.600 --> 0:17:07.560 but a little bit of a twenty five plus twenty 0:17:07.560 --> 0:17:10.760 five catch up there. So now that they are kind 0:17:10.800 --> 0:17:15.360 of started with that larger initial sized cut, I think 0:17:15.400 --> 0:17:17.959 that you know, both major central banks probably can go 0:17:18.040 --> 0:17:20.480 with a bit of a steady as she goes regular 0:17:20.560 --> 0:17:21.640 type of cadence. 0:17:22.160 --> 0:17:25.320 Thinking about the start of earning season in Europe, I 0:17:25.400 --> 0:17:29.280 wonder where you'll be looking for signals around the European consumer, 0:17:29.359 --> 0:17:31.600 given you know what you've just been selling us about 0:17:31.600 --> 0:17:33.920 their centralgy to the European economic picture. 0:17:33.960 --> 0:17:38.119 Consumer always matters that it really matters in the US. 0:17:37.920 --> 0:17:40.520 It for sure matters here in this region as well. 0:17:40.920 --> 0:17:44.919 There has been some softness across the board in conjunction 0:17:45.080 --> 0:17:48.600 with what you know, the general trajectory of economic growth 0:17:48.720 --> 0:17:53.600 has been. Wages have been solid though, and ideally, you know, 0:17:53.840 --> 0:17:57.880 robust enough wages allow consumers to continue to do their 0:17:57.920 --> 0:18:01.800 thing and consume, which is going to be incredibly important 0:18:01.800 --> 0:18:04.520 for how this earning season goes. It is still a 0:18:04.600 --> 0:18:07.600 very nice story in terms of equity market performance on 0:18:08.160 --> 0:18:12.440 a mostly global level in twenty twenty four, so it's 0:18:12.480 --> 0:18:17.000 going to be very contingent upon earning's delivery or lack thereof, 0:18:17.480 --> 0:18:19.520 to see how we do in the remaining two and 0:18:19.520 --> 0:18:21.240 a half months or so of the year. 0:18:21.640 --> 0:18:24.199 That was Eric why Tennis in me ahead of investment 0:18:24.240 --> 0:18:27.880 strategy at JP Morgan Private Bank, speaking to me Andrew 0:18:27.920 --> 0:18:33.000 Bloomberg Stephen Cowell on Bloomberg Radio. So that's an investor 0:18:33.040 --> 0:18:36.800 perspective on the economics here in Europe. Let's hear now 0:18:36.840 --> 0:18:40.399 from Bloomberg Economics on this as we look ahead to 0:18:40.480 --> 0:18:43.400 the next European Central Bank decision just in the next 0:18:43.440 --> 0:18:46.879 few days. I've been speaking to our senior your area economist, 0:18:47.200 --> 0:18:50.520 David Powell. David, is there any doubt over whether the 0:18:50.560 --> 0:18:53.320 ECP will actually cut by twenty five basis points. 0:18:53.600 --> 0:18:56.840 The markets have completely pricedt and we think that's going 0:18:56.880 --> 0:19:00.560 to happen. And those expectations have been reinf forced by 0:19:00.600 --> 0:19:03.560 words from members of the Governing Council. Even some of 0:19:03.560 --> 0:19:06.240 the most hawkish members of the Governing Council in recent 0:19:06.320 --> 0:19:09.800 days have come out saying they support a cut in October. 0:19:10.800 --> 0:19:13.240 So it's pretty clear that that's going to come. 0:19:13.480 --> 0:19:13.760 Okay. 0:19:13.800 --> 0:19:15.760 So any potential surprises. 0:19:15.240 --> 0:19:19.000 Then well, I think what people are going to be 0:19:19.000 --> 0:19:22.959 focusing on is what's said at the press conference, in 0:19:23.040 --> 0:19:28.080 particular where the ECB sees the risks and their risk 0:19:28.160 --> 0:19:32.560 assessment to GDP growth and inflation. Up until now, they 0:19:32.560 --> 0:19:36.200 have seen the risks to inflation as balanced, listing both 0:19:36.280 --> 0:19:39.040 upside and downside risks. I think the biggest surprise might 0:19:39.080 --> 0:19:42.080 be something like if the ECB were to emphasize to 0:19:42.119 --> 0:19:45.800 a greater extent downside risks to inflation given the economic 0:19:45.840 --> 0:19:47.040 weakness in the Euro Area. 0:19:47.359 --> 0:19:49.439 Yeah, that has been the real concern, isn't it the 0:19:49.520 --> 0:19:52.359 slowdown in the economy in terms of the hints that 0:19:52.400 --> 0:19:55.800 we get about what happens further down the road in 0:19:55.880 --> 0:19:58.680 terms of right cuts in Europe. What might we hear 0:19:59.000 --> 0:20:02.040 as for the the US, people are dialing back the 0:20:02.119 --> 0:20:03.800 idea of big rate cuts from the Fed. 0:20:04.280 --> 0:20:06.280 Well, there is a big difference between the US and 0:20:06.320 --> 0:20:09.280 the EU Area, which is a story that has persisted 0:20:09.280 --> 0:20:12.399 throughout this period of monetary tightening and now monetary loosening, 0:20:12.400 --> 0:20:15.000 and that is the US economy is held up much 0:20:15.119 --> 0:20:19.879 better than the Euro Area economy, and so we haven't 0:20:19.880 --> 0:20:22.720 had those positive economic surprises in Europe that the US 0:20:22.760 --> 0:20:25.320 has had, which kind of has reduced those expectations for easing. 0:20:25.560 --> 0:20:28.560 So a December cut is probably you know, it's essentially 0:20:28.600 --> 0:20:30.680 a done deal the markets of price that it's pretty 0:20:30.760 --> 0:20:34.679 much universally expected. And the reason that that is so 0:20:34.840 --> 0:20:38.520 expected is the ECB will have another quarter than of 0:20:39.000 --> 0:20:42.160 data from the National accounts on wage growth, in particular 0:20:42.200 --> 0:20:45.760 compensation per employee, which is the most comprehensive measure of 0:20:45.840 --> 0:20:49.040 wage growth, and in all likelihood that will have decelerated again, 0:20:49.480 --> 0:20:55.000 giving the ECB further confidence that price pressures are ebbing 0:20:55.320 --> 0:20:59.480 and that they can cut without doubts of inflation remaining 0:20:59.520 --> 0:20:59.920 at tark. 0:21:00.320 --> 0:21:02.760 Yeah, and of course inflation is the central mandate for 0:21:02.880 --> 0:21:05.160 the European Central Bag, so how much can they really 0:21:05.240 --> 0:21:09.000 consider growth as a factor given that mandate. 0:21:09.359 --> 0:21:12.520 Well, inflation is essentially determined by supply and demand, and 0:21:12.560 --> 0:21:17.520 growth is aggregate demands. So growth is the primary determinant 0:21:17.720 --> 0:21:18.400 of inflation. 0:21:18.920 --> 0:21:21.000 So while there are. 0:21:21.000 --> 0:21:25.560 Times when the two objectives are not are not calling 0:21:25.600 --> 0:21:30.760 for the same thing, boosting the economy and keeping inflation 0:21:30.840 --> 0:21:33.720 at target. And the ECB, unlike the Foot Reserve, does 0:21:33.840 --> 0:21:37.600 have a mandate of just inflation. They can't ignore growth 0:21:37.720 --> 0:21:39.840 because at the end of the day, if the economy 0:21:39.880 --> 0:21:43.320 remains weak, if aggurate demand remains weak, inflation will be 0:21:43.320 --> 0:21:45.840 below target. And that's something that we really only just 0:21:45.920 --> 0:21:48.679 got over at the time of the pandemic. Don't forget 0:21:48.680 --> 0:21:52.440 before that inflation was below target for nearly a decade 0:21:52.720 --> 0:21:56.199 and Droggy tried a lot of things in order to 0:21:56.359 --> 0:21:59.440 return inflation to target. And one thing we know from 0:21:59.520 --> 0:22:03.119 the UAE is experienced even more clearly from the Japanese experience, 0:22:03.440 --> 0:22:06.240 is that when you have persistently low inflation for a 0:22:06.280 --> 0:22:09.280 long period of time, it becomes kind of embedded and 0:22:09.320 --> 0:22:11.320 that's a difficult situation to get out of. 0:22:11.480 --> 0:22:14.840 Oh yes, Japanification of Europe is a really big worry. 0:22:14.920 --> 0:22:17.679 Isn't it In terms of the economic picture. What is 0:22:17.720 --> 0:22:21.480 your assessment now of how weak Europe is in terms 0:22:21.480 --> 0:22:23.320 of France and Germany. I mean, we know there's been 0:22:23.359 --> 0:22:28.200 political uncertainty, there are enormous global pressures and geopolitical kind 0:22:28.200 --> 0:22:32.719 of tectonic plates that affect what's your concern around economic 0:22:32.800 --> 0:22:33.720 growth in Europe now? 0:22:34.000 --> 0:22:38.119 Well, the main source of weakness in Europe is Germany actually, 0:22:38.200 --> 0:22:41.800 and in particular Germany's industrial sector, which has never really 0:22:41.880 --> 0:22:46.159 kind of recovered in recent years and it's facing a 0:22:46.240 --> 0:22:50.240 number of problems. One is the economic slowdown in China, 0:22:50.320 --> 0:22:54.520 which is a huge destination for German exports. And also 0:22:54.560 --> 0:22:57.520 the Chinese are moving up on the value ladder in 0:22:57.600 --> 0:23:01.320 terms of their own production, so they're less fewer things 0:23:01.359 --> 0:23:04.040 from Germany, like cars, for example, that they're now making 0:23:04.080 --> 0:23:07.159 in China themselves. So there's a structural change going on 0:23:07.280 --> 0:23:11.520 there that's impacting Germany. So that's something that's going to 0:23:11.520 --> 0:23:14.600 persist for a while. But when you take Germany out 0:23:14.600 --> 0:23:17.000 of the picture of Isabelle Schnabel is, a member of 0:23:17.000 --> 0:23:20.000 thecb's executive board, recently did in a presentation that your 0:23:20.040 --> 0:23:23.800 area looks much healthier so other countries are doing better. 0:23:24.280 --> 0:23:28.200 In particular, Spain has had very strong growth, France has 0:23:28.200 --> 0:23:31.119 had growth that's much better than Germany, although that's probably 0:23:31.119 --> 0:23:35.159 been boosted by the Olympics, and that boost will fade. 0:23:36.119 --> 0:23:39.480 So the real worry right now is Germany, and that's 0:23:39.520 --> 0:23:41.280 not going to be easy to solve, given that some 0:23:41.320 --> 0:23:42.840 of these problems are structural. 0:23:44.000 --> 0:23:46.879 And yet, of course, very soon, if not now, focus 0:23:46.920 --> 0:23:49.880 on the US presidential election, and we know that European 0:23:49.920 --> 0:23:53.600 officials are worried about the possibility of a second Trump 0:23:53.640 --> 0:23:56.800 White House. What that might mean to the European economy 0:23:56.840 --> 0:23:59.919 is that also something that people are thinking about. Is 0:24:00.200 --> 0:24:03.159 very split in the very uncertain in terms of the 0:24:03.240 --> 0:24:07.040 US presidential race. But what US policy emerges will surely 0:24:07.119 --> 0:24:09.520 be important for growth in Europe. 0:24:09.720 --> 0:24:13.880 Yeah, the your area is a big exporter, in particular Germany, 0:24:14.080 --> 0:24:16.960 and what we've heard from the Trump campaign is talk 0:24:17.040 --> 0:24:20.200 of tariffs if Donald Trump were to be re elected. 0:24:20.800 --> 0:24:22.680 And when you export a lot of goods, you don't 0:24:22.760 --> 0:24:26.879 like tariffs because that essentially reduces for in demand for 0:24:27.480 --> 0:24:33.120 what you're producing. So undoubtedly that's creating some fears amongst 0:24:33.119 --> 0:24:35.600 policy makers in Europe, and we've heard those aired. Various 0:24:35.600 --> 0:24:39.480 policy makers from around the different areas, not only the 0:24:39.520 --> 0:24:42.760 Central Bank but also the European Commission except for have 0:24:43.320 --> 0:24:46.520 voiced concerns about what that might mean for the Your Area. 0:24:46.280 --> 0:24:50.800 Economy, even as there've also been worries about European protectionism 0:24:51.119 --> 0:24:54.760 versus China, and that is also kind of shaping up 0:24:54.760 --> 0:24:58.240 as quite a big battle line between Europe and China. 0:24:58.520 --> 0:25:00.359 Does that help in the short term hin doing the 0:25:00.359 --> 0:25:02.960 long term ev tarifs on China for example. 0:25:03.400 --> 0:25:06.520 Well, as I mentioned, the German industrial sector is having 0:25:06.520 --> 0:25:08.480 a lot of problems right now, and one of those 0:25:08.520 --> 0:25:11.960 problems is China. One is kind of cyclical, there's a 0:25:11.960 --> 0:25:14.480 cyclical slow down there, but the other is structural, and 0:25:14.480 --> 0:25:17.840 that changes to the Chinese economy and what they're producing. 0:25:18.000 --> 0:25:21.800 In Europe wants to shield the economy from the short 0:25:21.880 --> 0:25:24.960 term impact of those changes, and tariffs are a good 0:25:24.960 --> 0:25:27.080 way to do that, at least in the short term, 0:25:27.280 --> 0:25:30.320 but in the long term they've rarely been helpful as 0:25:30.359 --> 0:25:33.000 a kind of as a strategy to boost the economy. 0:25:33.440 --> 0:25:36.520 My thanks to our senior Euro Area economist David Power 0:25:36.560 --> 0:25:39.480 for joining me ahead of the ECB rate decision in October. 0:25:39.560 --> 0:25:42.080 I'm Caroline Hepge here in London. You can catch us 0:25:42.080 --> 0:25:44.679 every weekday morning for Bloombag Daybreak. Youre at beginning at 0:25:44.720 --> 0:25:47.399 six am in London. That's one am on Wall Street. 0:25:47.440 --> 0:25:47.720 Tom. 0:25:48.200 --> 0:25:50.960 Thank you, Caroline, and coming up on Bloomberg day Break 0:25:50.960 --> 0:25:53.200 weekend and look ahead to earnings from one of Asia's 0:25:53.240 --> 0:25:58.399 largest chip makers, TSMC. I'm Tom Busby and this is Bloomberg. 0:26:09.840 --> 0:26:12.200 This is Bloomberg day Break weekend, our global look ahead 0:26:12.200 --> 0:26:14.400 at the top stories for investors in the coming week. 0:26:14.640 --> 0:26:17.560 I'm Tom Busby in New York. A slew of economic 0:26:17.640 --> 0:26:21.159 data coming out of China this week, including important trade data. 0:26:21.440 --> 0:26:24.520 Let's get to Bloomberg Daybreak Asia co host Brian Curtis 0:26:24.560 --> 0:26:24.960 for more. 0:26:25.400 --> 0:26:28.560 Tom. China appears to be at a key inflection point 0:26:28.600 --> 0:26:31.600 on coaxing the economy out of the doldrums and back 0:26:31.640 --> 0:26:34.560 onto a solid growth path. Coming back from the recent 0:26:34.640 --> 0:26:38.280 week long holiday, doubt was creeping in to whether or 0:26:38.280 --> 0:26:41.960 not this is truly a whatever it takes moment for policymakers. 0:26:42.280 --> 0:26:45.480 Amid those doubts, we've seen a lot of market volatility. 0:26:45.880 --> 0:26:49.119 Now the coming week brings more data on, among other things, 0:26:49.200 --> 0:26:53.520 inflation and trade. China is still suffering from weak consumer 0:26:53.600 --> 0:26:57.560 spending and an ongoing property crisis. Until we start to 0:26:57.560 --> 0:27:00.159 see a pickup in data, it may be hard to 0:27:00.200 --> 0:27:04.800 convince investors that times have truly changed. Let's get to 0:27:04.880 --> 0:27:10.120 James Mager Bloomberg, Senior reporter for the Chinese Economy and Government. So, James, 0:27:10.240 --> 0:27:12.119 nice to have you with us here for this segment. 0:27:12.440 --> 0:27:17.600 It's probably too soon to see any tangible evidence of 0:27:17.640 --> 0:27:21.439 a revitalization in the economy from the official data, but 0:27:21.560 --> 0:27:23.640 we do have some other ways to look at this, 0:27:24.119 --> 0:27:27.800 perhaps confidence from consumers, some of the high frequency and 0:27:27.960 --> 0:27:30.600 anecdotal data that you could be gathering. What are you see? 0:27:30.680 --> 0:27:32.120 I think the first thing that we want to look 0:27:32.160 --> 0:27:34.720 at is we just came out of a week long 0:27:34.760 --> 0:27:38.280 holiday in China, and you know, people traveled more than 0:27:38.280 --> 0:27:41.440 they did last year. I think number of trips was 0:27:41.480 --> 0:27:44.600 out ten percent, but the actual amount of people spent 0:27:44.680 --> 0:27:47.840 on those trips was down two percent compared to prior 0:27:47.880 --> 0:27:50.480 to the pandemic in twenty nineteen, and so I think 0:27:50.480 --> 0:27:52.960 what you're seeing there this year in the Chraine economy, 0:27:53.160 --> 0:27:55.920 people are willing to go out, they are traveling around 0:27:55.920 --> 0:27:58.840 the country. They are you know, some people are going overseas, 0:27:58.920 --> 0:28:00.800 but when they do that, then not willing to spend 0:28:00.800 --> 0:28:03.520 as much. And you're also seeing that in the housing market, 0:28:03.560 --> 0:28:05.800 people aren't willing to buy houses, that walling to make 0:28:05.800 --> 0:28:08.560 those kind of investments. So you know there is activity, 0:28:08.880 --> 0:28:11.359 but people are holding onto the purse stream very tightly 0:28:11.560 --> 0:28:14.360 because they're not confident that things are going to get better, 0:28:14.400 --> 0:28:16.480 and so they're not confident to spend. 0:28:16.960 --> 0:28:20.479 I've heard anecdotally that people have noticed the big gains 0:28:20.560 --> 0:28:24.840 in the stock market and that that could actually convince 0:28:24.880 --> 0:28:26.879 them to spend a little more. But it seems like 0:28:26.920 --> 0:28:29.800 what you're saying is yeah, maybe down the road, but 0:28:30.000 --> 0:28:31.240 still caustious at the moment. 0:28:31.480 --> 0:28:35.439 I think some investors are happy about the stock market 0:28:35.680 --> 0:28:39.000 increases we've seen since the PBOC announced that big stimulus 0:28:39.000 --> 0:28:41.560 package at the end of September, but a lot of 0:28:41.720 --> 0:28:44.400 other stock investors that I've spoken to are still staying, well, 0:28:44.440 --> 0:28:46.520 it's great that stocks are rising, but I'm still underwater. 0:28:46.840 --> 0:28:49.920 You know, my portfolio is worth half what it was 0:28:50.480 --> 0:28:53.640 five years ago, So even if you see a big 0:28:53.680 --> 0:28:57.200 spike in prices now, it's going to take another sort 0:28:57.240 --> 0:29:00.320 of similar size gain for me to even get back 0:29:00.360 --> 0:29:03.640 to being may all again, let alone making any kind 0:29:03.640 --> 0:29:06.960 of profit. So you know, if we see this continue 0:29:07.040 --> 0:29:09.640 over time, that may lead to a wealth effect and 0:29:09.640 --> 0:29:11.920 that may make people more confident, but I think at 0:29:11.920 --> 0:29:14.080 the moment people are still looking at it cautiously. 0:29:14.440 --> 0:29:16.720 Yeah, in order for some momentum, you have to keep 0:29:16.760 --> 0:29:19.760 coming up with innovative ideas. And we saw a couple 0:29:20.360 --> 0:29:23.960 announced by the pbocs, such as the swap facilities where 0:29:23.960 --> 0:29:28.320 institutions can exchange holdings for cash and can potentially buy 0:29:28.360 --> 0:29:30.240 back shares. And I know we don't have a lot 0:29:30.240 --> 0:29:33.200 of details on that, but that is an idea that 0:29:33.280 --> 0:29:35.680 came forward that I think did catch a few people 0:29:35.680 --> 0:29:38.719 by surprise. And then recently we also had Premier Lee 0:29:38.760 --> 0:29:43.840 Chung asking experts for innovative ideas. That seems a little unusual. 0:29:44.640 --> 0:29:47.400 I'm curious, you know, what they're expecting there. 0:29:47.400 --> 0:29:49.720 And I think with the swaps, the swap thing that 0:29:49.760 --> 0:29:52.640 the PBOC announced, it is innovative idea and we'll have 0:29:52.680 --> 0:29:54.680 to see whether companies actually take them up on that 0:29:54.760 --> 0:29:58.480 offer or not. For Premier Le Chang asking for suggestions, 0:29:58.640 --> 0:30:01.360 you know, there has been a lot of crackdowns on 0:30:01.480 --> 0:30:05.880 Chinese economists, you know, criticizing government policy, and there's been 0:30:05.920 --> 0:30:09.520 you know, there was reporting that one economists have arrested 0:30:09.560 --> 0:30:13.400 for making comments criticizing Hiji Pink's policies. And so coming 0:30:13.400 --> 0:30:15.040 out now and saying, hey, we'd like to get your 0:30:15.040 --> 0:30:17.480 ideas about how we can fix the economy. Some people 0:30:17.520 --> 0:30:20.080 may take that opportunity, but other people still I think 0:30:20.120 --> 0:30:22.720 we'll be very cautious about becoming, you know, making too 0:30:22.760 --> 0:30:24.160 many critical suggestions. 0:30:24.560 --> 0:30:26.920 Yeah, it brings back memories of the one hundred flowers 0:30:26.960 --> 0:30:30.360 campaign back in nineteen fifty six. People might be wary. 0:30:30.520 --> 0:30:33.000 Yeah, exactly, come out and tell us your ideas, and 0:30:33.040 --> 0:30:35.440 then the people who speak out too loudly then get 0:30:35.520 --> 0:30:39.000 their heads locked off. I guess figuratively, I just think people, 0:30:39.080 --> 0:30:40.840 you know, there are economists who're making a lot of 0:30:40.880 --> 0:30:43.880 suggestions about the government should do. The question then, is 0:30:43.880 --> 0:30:45.600 is the government really going to listen to them or not. 0:30:45.800 --> 0:30:47.560 Now, when we look at the data that's coming in 0:30:47.600 --> 0:30:50.120 the next week, I mentioned earlier that it's probably too 0:30:50.200 --> 0:30:53.920 soon to see a lot of tangible evidence here, but 0:30:54.160 --> 0:30:58.320 exports have actually been reasonably solid for this year. Has 0:30:58.360 --> 0:31:01.280 been one of the areas that hasn't been too bad 0:31:01.400 --> 0:31:04.280 in terms of the inflation numbers. Are we still kind 0:31:04.280 --> 0:31:07.600 of teetering on the line, particularly on the producer prices side, 0:31:07.640 --> 0:31:09.520 between inflation and deflation. 0:31:09.960 --> 0:31:12.720 Yeah, I mean on the data for September that we're expecting, 0:31:12.840 --> 0:31:16.200 it still shows that producer prices are inflation will be 0:31:16.200 --> 0:31:20.160 even deeper than it was in August. Consumer prices positive, 0:31:20.200 --> 0:31:23.120 but the only just and again that's probably being pushed 0:31:23.160 --> 0:31:25.920 up by high vegetable prices, so really not a sort 0:31:25.960 --> 0:31:29.960 of a sustainable increase in consumer inflation. And yeah, we will. 0:31:30.280 --> 0:31:33.040 The expectation is we will continue to see strong exports. Obviously, 0:31:33.040 --> 0:31:35.800 this is the pre Christmas season now, so lots of 0:31:35.800 --> 0:31:38.200 companies are trying to get Christmas goods and Christmas presents 0:31:38.240 --> 0:31:40.600 out the door and onto ships to the US or 0:31:40.640 --> 0:31:44.200 to Europe. So we should continue to see strong exports. 0:31:44.440 --> 0:31:47.680 But imports are looking very weak, as you know, continuing 0:31:47.720 --> 0:31:49.840 to look very week. The expectation is that they're actually 0:31:49.840 --> 0:31:52.280 going to fall, and actually fall in September, which I 0:31:52.360 --> 0:31:55.800 just go to underscore how bad Chinese domestic demand is. 0:31:55.920 --> 0:31:58.360 All right, James, thanks so much for joining us. Jims 0:31:58.360 --> 0:32:01.840 Mager Bloomberg Senior reporter for the Chinese Economy and government. 0:32:02.400 --> 0:32:05.200 Now let's turn to the chip sector with Doug Krisner 0:32:05.240 --> 0:32:07.720 and a preview on TSMC earnings. 0:32:08.000 --> 0:32:11.560 Thanks Brian. In the week ahead, TSMC will disclose its 0:32:11.600 --> 0:32:14.680 full results for the latest quarter. This is interesting because 0:32:14.720 --> 0:32:18.520 we already have the company's revenue figures. Quarterly sales were 0:32:18.520 --> 0:32:22.080 above forecast, a thirty nine percent increase from last year. 0:32:22.120 --> 0:32:24.880 I think the fair question now is how will those 0:32:24.920 --> 0:32:29.280 sales figures translate into profit. For a closer look, I'm 0:32:29.360 --> 0:32:34.040 joined by Katherine Thorbeck Bloomberg, a columnist covering tech in Asia. 0:32:34.240 --> 0:32:37.480 She joins us from our studios in Tokyo. Thank you 0:32:37.520 --> 0:32:40.080 so much for making time, Catherine. I think now that 0:32:40.160 --> 0:32:44.560 we can focus on what these sales figures really mean 0:32:45.200 --> 0:32:47.680 in terms of the way in which AI spending, the 0:32:47.760 --> 0:32:50.840 hardware spending, has been driving a lot of the positivity 0:32:51.240 --> 0:32:55.640 in TSMC. Is this assuaging worries maybe that people feared 0:32:55.640 --> 0:32:57.720 that AI spending would begin to wane a bit. 0:32:57.800 --> 0:33:02.520 You know, as you mentioned, TSMC's quarterly sales beat forecasts 0:33:02.560 --> 0:33:05.160 and beat even their own forecasts, and so you know, 0:33:05.200 --> 0:33:07.400 there has been some concern over this year over whether 0:33:07.440 --> 0:33:10.520 this is sustainable, whether the generative AI boom is sustainable, 0:33:10.560 --> 0:33:13.600 but TSMC's figures are showing that it's still going very 0:33:13.600 --> 0:33:15.720 strong and the demand for a hardware is still going 0:33:15.800 --> 0:33:18.480 very strong. You know, In the long run, we'll sort 0:33:18.520 --> 0:33:20.600 of have to see if the companies that are buying 0:33:20.640 --> 0:33:22.880 these AI chips will be able to make money off 0:33:22.920 --> 0:33:25.400 of all of their AI investments. But for now, I mean, 0:33:25.480 --> 0:33:28.920 TSMC seems to be really cashing in and really doing 0:33:28.920 --> 0:33:31.160 well and doesn't show any signs at the moment of 0:33:31.160 --> 0:33:31.720 slowing down. 0:33:31.840 --> 0:33:36.160 What about capacity, particularly with the facility on Taiwan, are 0:33:36.160 --> 0:33:38.120 they able to keep up with demand we own? 0:33:38.360 --> 0:33:39.920 So I think that's going to be a big question 0:33:39.960 --> 0:33:42.200 that we're going to see with the guidance that they 0:33:42.240 --> 0:33:43.720 give us, you know, whether they will be able to 0:33:43.800 --> 0:33:46.440 keep up with demand. And I think another question going 0:33:46.440 --> 0:33:48.040 off of that is when they will bring on the 0:33:48.080 --> 0:33:50.960 two nanometer chip mass production. So we'll get some of 0:33:50.960 --> 0:33:53.600 those answers on Thursday. So far, they've been sort of 0:33:53.640 --> 0:33:56.800 assuasion concerns about not being able to meet demand, but 0:33:57.240 --> 0:33:59.680 you know, as we spoke about earlier, demand has been 0:34:00.080 --> 0:34:01.480 very very high for their products. 0:34:01.560 --> 0:34:05.040 This is the main foundry making chips for in Nvidia 0:34:05.160 --> 0:34:08.239 and Apple. Do we know which company is more important 0:34:08.280 --> 0:34:09.000 to TSMC? 0:34:09.600 --> 0:34:11.720 So, I think that's a good question. I mean, Apple 0:34:12.000 --> 0:34:15.040 and Nvidia are the two biggest customers for TSMC, and 0:34:15.320 --> 0:34:17.480 Vidia is obviously sort of the AI darling at the 0:34:17.800 --> 0:34:20.399 heart of this generative AI boom. At the same time, 0:34:20.440 --> 0:34:24.440 TSMC is the sole manufacturer for the chips that go 0:34:24.480 --> 0:34:27.920 into the iPhone processors. There was some concern from some 0:34:28.000 --> 0:34:31.480 analysts about softer demand for the latest iPhones, the iPhone sixteens, 0:34:31.840 --> 0:34:34.359 and how that could impact TSMC. But I think, you know, 0:34:34.480 --> 0:34:37.560 they've gotten so many orders from other customers such as 0:34:37.640 --> 0:34:40.960 Nvidia and such as Intel, and I think that'll sort 0:34:40.960 --> 0:34:43.640 of really booy their earnings this quarter. 0:34:44.040 --> 0:34:46.400 One of the things that we've spoken a lot about 0:34:46.440 --> 0:34:48.960 on the show the fact that people have been worried 0:34:49.000 --> 0:34:53.040 for some time about the over concentration of semiconductor production 0:34:53.239 --> 0:34:57.360 on Taiwan, particularly when you look at the geopolitical tensions 0:34:57.400 --> 0:35:01.640 between the US, China and Taiwan on and we've also 0:35:01.800 --> 0:35:05.400 spoken about the need for the company really to demonstrate 0:35:05.960 --> 0:35:09.520 it's been able to diversify away from Taiwan a bit. 0:35:09.600 --> 0:35:09.759 Now. 0:35:09.760 --> 0:35:13.279 I know TSMC is trying to build facilities in the 0:35:13.400 --> 0:35:17.120 United States. They've also got some facilities underway from what 0:35:17.160 --> 0:35:19.960 I understand, in Japan. You're in Tokyo. Can you tell 0:35:19.960 --> 0:35:22.320 me a little bit about what is happening in Japan 0:35:22.440 --> 0:35:23.960 as it relates to TSMC. 0:35:24.280 --> 0:35:28.440 Sure. So, TSMC is building fabs in Qshu, in Kumamoto 0:35:28.560 --> 0:35:31.920 in the Southern Island in Japan, and from what I've heard, 0:35:31.960 --> 0:35:35.080 that's going very very well. You know, it's actually planning 0:35:35.080 --> 0:35:38.680 on opening on time. They're building out another one, and 0:35:38.719 --> 0:35:40.120 I think they even have plans to build out a 0:35:40.120 --> 0:35:41.920 third one that will really bring the sort of cutting 0:35:42.000 --> 0:35:46.040 edge chips manufacturing to Japan and outside of Taiwan. And 0:35:46.080 --> 0:35:47.960 you know, as you mentioned, I think that this sort 0:35:48.000 --> 0:35:51.360 of US China geopolitical tensions has been casting a shadow 0:35:51.400 --> 0:35:55.160 over TSMC, a sort of longer term shadow. And you know, 0:35:55.239 --> 0:36:01.360 the current presidential elections candidate Trump has sort of express 0:36:01.400 --> 0:36:05.920 some concerns about you know, continuous continual US support for Taiwan. 0:36:06.480 --> 0:36:07.640 You know, I think if you were to take a 0:36:07.680 --> 0:36:09.680 step back though, in my opinion and sort of the 0:36:09.680 --> 0:36:13.239 broader picture, and TSMC's founder Morris Chang has actually said 0:36:13.239 --> 0:36:16.600 this himself, I think if China does invade Taiwan. I 0:36:16.600 --> 0:36:19.360 think we'll have, you know, far bigger concerns than just 0:36:19.440 --> 0:36:22.440 tech stocks and and sort of chip production. But I 0:36:22.440 --> 0:36:24.759 do think that, you know, this has been sort of 0:36:24.760 --> 0:36:28.200 a theme for TSMC since it's been founded, and as 0:36:28.200 --> 0:36:31.120 you mentioned, they're also trying to build capacity in Arizona. 0:36:31.719 --> 0:36:34.440 There were some rumors early on that that was they 0:36:34.440 --> 0:36:36.680 were having a little bit of a struggle there, some 0:36:36.719 --> 0:36:41.000 sort of culture clashes and some labor disputes and getting 0:36:41.000 --> 0:36:44.040 that fab off the ground. They've sort of assuaged some 0:36:44.080 --> 0:36:46.520 of those concerns and said that you know, it does 0:36:46.520 --> 0:36:49.560 seem to be going smoothly. You know, we will see. 0:36:49.640 --> 0:36:53.000 I think bringing on shoring chip manufacturing into the US 0:36:53.120 --> 0:36:56.040 is a very very difficult task for so many reasons. 0:36:56.120 --> 0:36:59.360 I mean, getting the equipment and getting you know, skilled 0:36:59.400 --> 0:37:02.080 labor force, and you know, it's obviously been central to 0:37:02.080 --> 0:37:05.880 the Biden administration's sort of Chips Act and their efforts there. 0:37:06.480 --> 0:37:09.439 But that's it's a very very difficult, if not impossible job. 0:37:09.560 --> 0:37:10.759 So I think we're going to have to see how 0:37:10.760 --> 0:37:11.879 that plays out in the long run. 0:37:12.000 --> 0:37:15.880 We've talked a little bit now just about the expansion geographically, 0:37:15.920 --> 0:37:18.920 but I'm wondering in terms of CAPEX spending, whether or 0:37:18.960 --> 0:37:21.680 not TSMC really has to spend a lot more for 0:37:21.840 --> 0:37:25.120 the current operation in Taiwan in order to keep up 0:37:25.160 --> 0:37:29.760 with a level of sophistication being demanded by a company 0:37:29.960 --> 0:37:33.200 like in Nvidia and having to invest more in the 0:37:33.280 --> 0:37:37.400 sophisticated equipment that comes from the Dutch company ASML. Do 0:37:37.480 --> 0:37:38.640 we know anything about that. 0:37:38.960 --> 0:37:41.600 Yeah, So I think TSMC is really at an advantage 0:37:41.640 --> 0:37:44.799 because it is currently making the most advanced chips and 0:37:44.840 --> 0:37:47.680 then you know, able to get more CAPEX to be 0:37:47.680 --> 0:37:50.360 able to spend more on sort of research and development 0:37:50.400 --> 0:37:53.480 and building out capacity. And so I think compared to competitors, 0:37:53.520 --> 0:37:55.680 TSMC is sort of in the best position. I mean, 0:37:55.760 --> 0:37:57.839 they are already so far ahead of the game and 0:37:57.960 --> 0:38:00.440 you know, have a virtual monopoly on the most advanced 0:38:00.480 --> 0:38:02.840 chips out there, and I think that really sets them 0:38:02.920 --> 0:38:04.480 up in a good place going forward. 0:38:04.760 --> 0:38:06.879 Catherine, thank you so much for making time to chat 0:38:06.920 --> 0:38:09.840 with us about TSMC. As we look ahead to earnings 0:38:09.920 --> 0:38:12.440 in the week ahead, we already know how a revenue 0:38:12.440 --> 0:38:15.480 performed in the last quarter, a thirty nine percent increase 0:38:15.680 --> 0:38:19.760 from last year. Catherine Thorbeck is a Bloomberg columnist covering 0:38:19.840 --> 0:38:23.080 a tech in Asia. Joining us from our studios in Tokyo. 0:38:23.520 --> 0:38:26.120 I'm Doug Krisner. You can join Brian Curtis and myself 0:38:26.160 --> 0:38:30.360 weekdays here for Bloomberg Daybreak Asia, beginning at eight am 0:38:30.360 --> 0:38:33.160 in Hong Kong eight pm on Wall Street. 0:38:33.200 --> 0:38:36.400 Tom, Thank you Doug, and thank you Brian. And that 0:38:36.480 --> 0:38:38.760 does it for this edition of Bloomberg day Break Weekend. 0:38:39.080 --> 0:38:41.400 Join us again Monday morning at five am Wall Street 0:38:41.400 --> 0:38:43.840 time for the latest on markets overseas and the news 0:38:43.880 --> 0:38:46.920 you need to start your day. I'm Tom Busby. Stay 0:38:46.960 --> 0:38:49.759 with us. Top stories and global business headlines are coming 0:38:49.840 --> 0:38:50.840 up right now.