Daybreak Weekend: US CPI, ECB Decision, Apple Product Launch

Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.320 --> 0:00:14.360 This is Bloomberg Daybreak Weekend, our global look at the 0:00:14.440 --> 0:00:16.279 top stories of the coming week from our day Break 0:00:16.320 --> 0:00:19.720 anchors all around the world, and straight to handle the program, 0:00:20.040 --> 0:00:22.240 look at key data in the US how it's going 0:00:22.280 --> 0:00:25.400 to impact FED policy going forward. I'm John Tucker in 0:00:25.440 --> 0:00:25.880 New York. 0:00:26.160 --> 0:00:28.520 I'm Carolyn Hepker here in London, where we're looking ahead 0:00:28.520 --> 0:00:31.720 to the European Central Bank's upcoming rate setting meeting. 0:00:32.080 --> 0:00:34.760 I'm Derek Krisner looking at the rollout of the iPhone 0:00:34.800 --> 0:00:41.960 sixteen and what it means for Asia. 0:00:43.960 --> 0:00:47.960 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:48.000 --> 0:00:50.479 E Loove on three Own, New York, Bloomberg ninety nine 0:00:50.520 --> 0:00:53.920 to one, Washington, DC, Bloomberg one O six one, Boston, 0:00:53.960 --> 0:00:58.760 Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius 0:00:58.920 --> 0:01:02.160 XM one nineteen and around the world on Bloomberg Radio 0:01:02.240 --> 0:01:04.520 dot com and via the Bloomberg Business App. 0:01:08.480 --> 0:01:11.320 Hi Everyboddy. I'm John Tucker, and let's start today's program 0:01:11.400 --> 0:01:13.840 with the key data in the US. We're going to get, 0:01:13.880 --> 0:01:17.640 among other things, CPI data. Wednesday at eight thirty Wall 0:01:17.680 --> 0:01:20.039 Street time. I was the data going to pack the 0:01:20.080 --> 0:01:23.120 FED at its September meeting, and for more insight, we're 0:01:23.200 --> 0:01:29.160 joined by Stuart Paul, us economists with Bloomberg Economics. Doctor Paul. Anyway, 0:01:30.040 --> 0:01:33.240 I was all prepared to talk about inflation CPI. That's 0:01:33.400 --> 0:01:35.640 the back seat, maybe even the trunk of the car, 0:01:35.760 --> 0:01:38.440 and in the driver's seat, I'm going to gas his 0:01:38.800 --> 0:01:39.840 jobs data right. 0:01:40.440 --> 0:01:42.840 Right, So we have jobs data that just we have 0:01:42.959 --> 0:01:45.000 jobs data in hand that just came out on the 0:01:45.080 --> 0:01:48.000 sixth Then they surprised the consensus to the downside, showing 0:01:48.040 --> 0:01:51.240 just one hundred and forty two thousand jobs added. This 0:01:51.400 --> 0:01:55.200 is other than the inflation report, basically the last important 0:01:55.280 --> 0:01:57.960 data set that the FED is going to have in hand. 0:01:58.000 --> 0:02:00.240 And with the labor market to terror rating as much 0:02:00.280 --> 0:02:02.600 as it has, with the unemployment rate climbing to four 0:02:02.640 --> 0:02:06.080 point two percent, the FED is shifting its focus from 0:02:06.080 --> 0:02:08.160 inflation to the labor market. 0:02:08.240 --> 0:02:11.640 That's what one hundred and forty two thousand jobs created, 0:02:11.800 --> 0:02:16.280 nonfarm jobs. That doesn't sound too bad. We just reverting 0:02:16.680 --> 0:02:19.080 back to where we were pre pandemic. 0:02:19.400 --> 0:02:21.880 Well, so you're right in a in a typical set 0:02:21.919 --> 0:02:26.079 of circumstances. The pace of hiring that would be consistent 0:02:26.160 --> 0:02:29.320 with a steady unemployment rate is about one hundred thousand 0:02:29.400 --> 0:02:31.359 jobs per month, So one hundred and forty two could 0:02:31.440 --> 0:02:35.160 sound pretty good by comparison, But with the surgeon immigration, 0:02:35.280 --> 0:02:39.200 with people considering holding off on retirement, with the unemployment 0:02:39.280 --> 0:02:41.440 rate rising, we need to find a way to reconcile 0:02:41.639 --> 0:02:44.880 what we're seeing from unemployment and with what we're seeing 0:02:45.240 --> 0:02:47.200 in terms of hiring. So one hundred and forty two 0:02:47.240 --> 0:02:49.920 thousand just isn't enough to do the trick anymore. We 0:02:49.960 --> 0:02:53.000 are seeing the labor market cooling. We see just about 0:02:53.000 --> 0:02:57.120 one point one job openings per unemployed worker. That's down 0:02:57.160 --> 0:03:00.960 from about one point two openings per unemployed work pre COVID. 0:03:00.960 --> 0:03:03.919 So the labor market is undoubtedly cooling despite what might 0:03:04.000 --> 0:03:06.240 seem to be a decent pace of hiring. 0:03:06.600 --> 0:03:10.800 The Federal Reserve has this dual mandate full employment and 0:03:10.880 --> 0:03:15.320 what stable prices, or however they phrase it. It's really difficult, 0:03:15.360 --> 0:03:17.760 I would imagine to kind of thread that needle. 0:03:18.200 --> 0:03:21.120 It certainly is. They are two different prongs of the 0:03:21.200 --> 0:03:24.120 dual mandate, as you said, maximum employment of price stability. 0:03:24.240 --> 0:03:28.560 Sometimes those two things can be in conflict, and right 0:03:28.600 --> 0:03:31.560 now the FED is at one of those moments in 0:03:31.600 --> 0:03:36.080 time where it has to balance their two priorities. Sure, 0:03:36.200 --> 0:03:40.120 it wants to really suffocate inflation and ensure that it's 0:03:40.120 --> 0:03:43.240 on a sustainable path to the two percent target, but 0:03:43.360 --> 0:03:46.120 the labor market is showing a bit of fragility. We 0:03:46.200 --> 0:03:49.600 are seeing the unemployment rate on an upward trend, and 0:03:49.680 --> 0:03:52.119 as we saw in the July data, the sum rule 0:03:52.120 --> 0:03:55.000 had been triggered, which typically poortends further rises in the 0:03:55.080 --> 0:03:55.840 unemployment rate. 0:03:56.120 --> 0:04:00.760 Although that's come into question by claudiasamer itself. That's like, 0:04:01.520 --> 0:04:05.680 you know, but still contends that there is now not 0:04:05.720 --> 0:04:09.560 necessarily recession in the offing. But the I think she 0:04:09.680 --> 0:04:12.040 put it a risk now of recession. 0:04:12.200 --> 0:04:15.040 That's right. Even with Claudia saying that there's a risk 0:04:15.080 --> 0:04:17.359 of recession, I would still think that she's a little 0:04:17.360 --> 0:04:20.520 bit more optimistic than we are here in Bloomberg Economics. 0:04:20.920 --> 0:04:22.400 Oh I, I'm. 0:04:22.240 --> 0:04:25.960 Sorry to say, but we think that the outlook is 0:04:26.000 --> 0:04:29.719 a bit more weak than Claudia herself seems to think, 0:04:30.040 --> 0:04:32.200 and we think that risks are far more notable than 0:04:32.240 --> 0:04:35.480 Claudia seems to think. Consumers have just been running down 0:04:35.560 --> 0:04:38.560 their savings they've been saving. They save that a two 0:04:38.560 --> 0:04:41.120 point nine percent pace, So that's two point nine percent 0:04:41.120 --> 0:04:44.440 of their disposable income went to savings. That's exceptionally low. 0:04:44.600 --> 0:04:46.560 Should we should point in Consumer spending is like the 0:04:46.560 --> 0:04:49.960 biggest thing in the economy right now. That's what powers 0:04:50.000 --> 0:04:50.839 the US economy. 0:04:50.920 --> 0:04:53.680 Definitely, that's what powers the US economy. And it's consumers 0:04:53.760 --> 0:04:55.919 willingness to spend that can propagate inflation. 0:04:56.160 --> 0:04:57.680 But there's a credit card. 0:04:58.960 --> 0:05:01.000 That's right, there is a credit card, But I don't know. 0:05:01.000 --> 0:05:03.440 Are they running up debt? And like, does anybody care? 0:05:03.480 --> 0:05:03.960 If they are? 0:05:04.120 --> 0:05:08.160 They're running up debt. They're also seeing rising defaults, and 0:05:08.200 --> 0:05:11.200 so we could expect credit availability to become a little 0:05:11.200 --> 0:05:16.080 bit less available. And look, interest costs are also starting 0:05:16.080 --> 0:05:18.680 to weigh on consumers, especially consumers at the lower end 0:05:18.680 --> 0:05:19.600 of the income distribution. 0:05:20.000 --> 0:05:22.880 All right, So that brings up the question that everybody's 0:05:22.920 --> 0:05:26.120 asking the Federal Reserve. It's kind of baked in the 0:05:26.160 --> 0:05:29.840 cake that the next meeting this month they're going to 0:05:29.880 --> 0:05:33.560 cut rates. But the question is how much, by a 0:05:33.640 --> 0:05:35.280 quarter of a percent or half a percent. 0:05:35.839 --> 0:05:40.280 The odds slightly favor, just slightly favor a quarter percentage 0:05:40.279 --> 0:05:40.799 point cut. 0:05:40.839 --> 0:05:43.080 But why, I mean, why not just go all the way? 0:05:43.120 --> 0:05:45.440 We know, as you just said, things are slowing down. 0:05:46.279 --> 0:05:49.080 It seems to be that the fear among policymakers is 0:05:49.080 --> 0:05:52.280 that if they start with a half percentage point cut, 0:05:52.640 --> 0:05:54.359 markets are going to expect that they are going to 0:05:54.360 --> 0:05:57.440 be further half percentage point cuts coming down the line, 0:05:57.480 --> 0:06:02.520 particularly in October, November and then December. And if markets 0:06:02.560 --> 0:06:07.760 start baking in that expectation, financial conditions loosen. And it actually, 0:06:08.279 --> 0:06:12.480 perhaps counterintuitively means that by signaling that things are slowing 0:06:12.520 --> 0:06:16.520 down and cutting rates rapidly at the start of the cycle, 0:06:16.880 --> 0:06:20.360 they'll then have to maintain a more restrictive stance because 0:06:20.400 --> 0:06:24.599 financial conditions have loosened. So the more cautious approach might 0:06:24.760 --> 0:06:27.839 just be to try to not scare the markets by 0:06:28.279 --> 0:06:30.760 doing this quarter point cut first, and if they need 0:06:30.800 --> 0:06:32.720 to catch up later, they'll catch up later. 0:06:32.800 --> 0:06:36.160 Okay, so the CPI report coming on consumer pricing into that. 0:06:36.360 --> 0:06:39.400 Do I care about inflation anymore? For its like a 0:06:39.400 --> 0:06:44.000 couple of years. We're all afraid of inflation, including the FED. Look, 0:06:44.040 --> 0:06:45.120 I'm gonna just forget it. 0:06:45.279 --> 0:06:47.760 I'm an economist and I can't help but care about 0:06:47.800 --> 0:06:51.600 inflation forever and always. We are expecting the pace of 0:06:52.160 --> 0:06:55.320 headline and core inflation to remain about steady on a 0:06:55.360 --> 0:06:58.520 monthly basis zero point two percent for both the headline 0:06:58.560 --> 0:07:01.760 and core on a month on month BABS base effects 0:07:01.760 --> 0:07:05.400 will allow the annual pace of CPI inflation to fall 0:07:05.440 --> 0:07:08.359 to two point six percent from two point nine. But 0:07:08.960 --> 0:07:12.960 if you combine the line items from CPI with the 0:07:13.000 --> 0:07:16.080 line items from the Producer Price Index, also to be 0:07:16.120 --> 0:07:19.880 released next week, and you take into consideration the negative 0:07:19.920 --> 0:07:24.400 base effect in the PCE price Index, which is what 0:07:24.480 --> 0:07:27.400 matters most for the FED, the pace of disinflation is 0:07:27.400 --> 0:07:30.200 going to stall pretty notably. So that's one of the 0:07:30.240 --> 0:07:32.360 reasons why we expect the Fed to be a little 0:07:32.360 --> 0:07:35.600 bit cautious in that pace of cutting. Why odds just 0:07:35.640 --> 0:07:38.840 slightly favor that twenty five basis point cut in September 0:07:39.000 --> 0:07:40.240 rather than the fifty. 0:07:40.160 --> 0:07:43.080 All right, great explanation, I appreciate it. Thanks to Stuart 0:07:43.120 --> 0:07:47.120 paul Us, economist with Bloomberg Economics. Well, it is a 0:07:47.120 --> 0:07:50.480 big week in politics ahead. The first president to debate 0:07:50.920 --> 0:07:54.119 between Vice President Kamala Harris and former President Donald Trump, 0:07:54.160 --> 0:07:57.280 set for Tuesday at Bloomberg Television and Radio is going 0:07:57.320 --> 0:08:00.640 to have special coverage of this ABC News debate along 0:08:00.640 --> 0:08:04.720 with a global simulcast starting at eight pm Wall Street Time. 0:08:05.240 --> 0:08:07.320 And for more on what to expect, we are joined 0:08:07.320 --> 0:08:11.600 now by Laura Davison, Bloomberg Politics Editor. Nice to be 0:08:11.760 --> 0:08:14.520 with us, appreciate it. So this is going to be 0:08:14.520 --> 0:08:18.960 a reasonable exchange of differing ideas or a wild free 0:08:19.000 --> 0:08:19.400 for all. 0:08:19.880 --> 0:08:22.640 The idea is that it's a reasonable exchange, but if 0:08:22.680 --> 0:08:26.280 past is any precedent, it may be a little more raucous. 0:08:26.560 --> 0:08:30.000 There have been some measures put in place to sort 0:08:30.040 --> 0:08:32.960 of turn down the temperature on the debate. The first 0:08:33.080 --> 0:08:35.240 is that there will be no studio audience. It will 0:08:35.320 --> 0:08:38.120 just be the candidates and the moderators in the room, 0:08:38.240 --> 0:08:40.640 so they won't have any sort of input from you know, 0:08:40.760 --> 0:08:42.440 folks on the ground in terms. 0:08:42.280 --> 0:08:46.200 Of food, screaming, booing, and cheering, okay correct. 0:08:46.720 --> 0:08:48.880 The other thing, and this has been a real point 0:08:48.880 --> 0:08:52.520 of contention in recent weeks, is that candidates mics will 0:08:52.520 --> 0:08:55.679 only be live when they are speaking. When they are 0:08:55.679 --> 0:08:57.520 not speaking, when a candidate's being when a question is 0:08:57.520 --> 0:09:00.679 being addressed to another candidate that then will have their 0:09:00.720 --> 0:09:03.440 mic muted. So this is you know, intended to uh, 0:09:03.679 --> 0:09:05.560 you know, not have some of the you know, the 0:09:05.600 --> 0:09:08.600 cross talk and the talking over one another that we've seen, 0:09:08.679 --> 0:09:11.600 you know, particularly in twenty twenty and debate with with 0:09:11.640 --> 0:09:13.640 Biden and Trump, we saw it. 0:09:13.760 --> 0:09:15.800 Did one campaign or the other insist on this or 0:09:15.840 --> 0:09:18.120 they both agreed. I mean, they obviously both agreed to it, 0:09:18.160 --> 0:09:20.040 but was one more persistent about it. 0:09:20.640 --> 0:09:22.920 Well, there's a little twist here. So Originally, when Biden 0:09:23.000 --> 0:09:24.360 was still in the race, this is one of the 0:09:24.360 --> 0:09:26.280 things that his campaign put forward and said, look, we 0:09:26.320 --> 0:09:29.120 want these muted mics, and at the time Trump resisted it, 0:09:29.520 --> 0:09:31.320 but ultimately agreed to it. And that was the case 0:09:31.320 --> 0:09:34.360 in the in the June debate. Then when Harris became 0:09:34.400 --> 0:09:37.520 the candidate, her campaign said, no, actually we don't want 0:09:37.600 --> 0:09:39.600 muted mics. We think that this is actually an advantage 0:09:39.640 --> 0:09:42.559 to us to be able to to interject or also, 0:09:42.640 --> 0:09:44.360 you know for Trump, he'll have like sort of less 0:09:44.360 --> 0:09:47.000 guardrails on him, less discipline, and he'll be able to 0:09:47.000 --> 0:09:49.720 sort of interject. So the Harris campaign really pushed to 0:09:49.720 --> 0:09:53.160 have the mics unmuted. Ultimately they acquiesced on that, and 0:09:53.440 --> 0:09:55.600 ABC came out and said, look, there will be muted mics, 0:09:56.040 --> 0:09:57.520 you know, if we need to at some point, if 0:09:57.600 --> 0:09:58.840 you know, things get out of hand and it's just 0:09:58.880 --> 0:10:01.640 completely uncleared the audio, what is happening, We may unmute 0:10:01.640 --> 0:10:05.920 the mics, but uh, for we can expect that, you know, 0:10:05.960 --> 0:10:07.520 we won't be able to hear a candidate if they're 0:10:07.520 --> 0:10:09.440 not you know, it's not their turn to answer. 0:10:09.240 --> 0:10:11.960 A question we already heard from Donald Trump. He he 0:10:12.280 --> 0:10:17.199 contends that Vice President Harris has already gotten the questions. 0:10:17.360 --> 0:10:20.040 I mean, there's absolutely no evidence of that. Right. It 0:10:20.120 --> 0:10:24.360 sounds like he's already uh, giving excuses for why he 0:10:24.440 --> 0:10:27.199 may not do as well as some hope he does. 0:10:27.760 --> 0:10:30.440 Yes, and this is a game that he plays before 0:10:30.480 --> 0:10:32.760 a lot of appearances of kind of you know, beefing 0:10:32.840 --> 0:10:34.360 up his opponent and sort of you know, kind of 0:10:34.360 --> 0:10:37.160 downplaying his own potential performance. You know, he did this 0:10:37.200 --> 0:10:39.280 before the June debate. You know, it was talking all 0:10:39.320 --> 0:10:41.960 about how what a great debater Biden is, and of 0:10:41.960 --> 0:10:43.800 course that didn't you know, end up being the case, 0:10:43.840 --> 0:10:45.480 and that you know, Trump really came out ahead out 0:10:45.520 --> 0:10:47.920 of that debate. But he's been talking for weeks about 0:10:47.920 --> 0:10:49.760 how you know, he sees ABC News as you know, 0:10:49.840 --> 0:10:53.040 quote fake news, unfair. So he's a little bit trying 0:10:53.080 --> 0:10:55.160 to sort of, you know, kind of give himself an 0:10:55.160 --> 0:10:57.120 out if the debate doesn't go super well for him, 0:10:57.120 --> 0:10:59.440 that he can say, look, I told you so, ABC wasn't. 0:10:59.320 --> 0:11:01.160 Going to be fair to Is this going to be 0:11:01.240 --> 0:11:01.960 the only debate? 0:11:02.320 --> 0:11:05.040 It's very likely it may be. You know, there has 0:11:05.040 --> 0:11:07.240 been discussion about another debate. You know, Trump has said 0:11:07.240 --> 0:11:09.800 he wants to do one on Fox News, Harris says, 0:11:09.840 --> 0:11:12.439 he said, you won't do that. We do have a 0:11:12.600 --> 0:11:15.640 debate for the vice presidential candidate scheduled, but this may 0:11:15.640 --> 0:11:17.720 be the only time that we see Harris and Trump 0:11:17.760 --> 0:11:19.520 on the stage together battling it out. 0:11:19.960 --> 0:11:22.959 Do debates matter? I mean, I guess they, I should 0:11:23.040 --> 0:11:26.160 say they. Leading up to this, Joe Biden obviously had 0:11:26.200 --> 0:11:30.200 a poor debate, really bad debate performance, and dropped out. 0:11:30.320 --> 0:11:32.920 Thus we have now Kamala Harris. But what is the 0:11:33.000 --> 0:11:37.800 history of debates the candidate's performance and whether it amounts 0:11:37.800 --> 0:11:40.160 to people voting for them or against them. 0:11:40.320 --> 0:11:44.439 So in recent history, the thinking has been that debates 0:11:44.480 --> 0:11:46.720 don't matter that much. It may help you give you 0:11:46.720 --> 0:11:49.240 a little post debate bump of a point or two, 0:11:49.320 --> 0:11:51.840 but that you know, things may revert back to the 0:11:51.880 --> 0:11:54.640 mean after you know, a week or so. Obviously, you 0:11:54.640 --> 0:11:56.280 don't have to look any further than Joe Biden and 0:11:56.280 --> 0:11:58.360 ask him if debates matter. If you know, a debate 0:11:58.520 --> 0:12:00.560 this cycle, you know clearly up ended the race and 0:12:00.600 --> 0:12:03.199 you know, essentially forced a candidate to drop out and 0:12:03.280 --> 0:12:05.880 a new candidate to take his place. So there's a 0:12:05.920 --> 0:12:08.280 lot of a lot of interest in this debate. For 0:12:08.320 --> 0:12:10.679 obvious reason, this will probably be the largest audience you 0:12:10.760 --> 0:12:13.800 know that the candidates will have, you know, before people 0:12:13.800 --> 0:12:16.320 go to the polls. Another thing that's important too is 0:12:16.360 --> 0:12:18.640 you know, compared to you know, ten or twenty years ago, 0:12:18.920 --> 0:12:21.240 people are voting a lot earlier than they used to. 0:12:21.320 --> 0:12:23.719 You know, a lot of states have early ballots that 0:12:23.760 --> 0:12:25.920 will start to go out. Early voting will start happening 0:12:26.280 --> 0:12:28.240 in a lot of places, So you know, people may 0:12:28.280 --> 0:12:29.880 see this debate and you know, within a week or 0:12:29.880 --> 0:12:31.880 two be able to vote. So things that happen in 0:12:31.920 --> 0:12:35.240 October or early November don't matter as much because you know, 0:12:35.600 --> 0:12:37.439 millions of people will have already had an opportunity to 0:12:37.480 --> 0:12:38.120 cast their ballot. 0:12:38.679 --> 0:12:42.680 We can't wait our thanks to Laura Davidson, Bloomberg Politics 0:12:42.760 --> 0:12:45.720 Senator ed or reminder you could listen to special coverage 0:12:45.760 --> 0:12:48.720 of this presidential debay Tuesday on Bloomberg TV and Radio, 0:12:49.120 --> 0:12:51.559 along with a global simulcast. This all starts at a 0:12:51.600 --> 0:12:54.200 eight pm Wall Street time. Just a head on Bloomberg 0:12:54.240 --> 0:12:57.240 Daybreak weekend, I'll look ahead to the European Central banks 0:12:57.320 --> 0:13:01.760 upcoming rates set ida. I'm John Tucker. This is Bloomberg. 0:13:13.559 --> 0:13:16.200 This is Bloomberg day Break Weekend or global look ahead 0:13:16.200 --> 0:13:18.720 of the top stories for investors in the coming week. 0:13:18.880 --> 0:13:21.960 I'm John Tucker in New York. Up later in the program, 0:13:22.000 --> 0:13:25.360 I'll look ahead to a major product showcase from Apple 0:13:25.400 --> 0:13:28.160 where the iPhone sixteen is going to be center stage. 0:13:28.480 --> 0:13:31.720 But first in June, the European Central Bank cut rates 0:13:31.720 --> 0:13:35.240 for the first time in five years, making the move 0:13:35.280 --> 0:13:37.960 before its counterparts in the US of the UK, and 0:13:38.000 --> 0:13:41.800 now traders are betting on a further reduction as policymakers 0:13:41.840 --> 0:13:43.760 prepared to meet in the coming days and for more. 0:13:43.920 --> 0:13:46.760 Let's go to London and bring in Bloomberg Daybreak Europe 0:13:46.760 --> 0:13:49.120 anchor Caroline Hepger John. 0:13:49.280 --> 0:13:52.720 When the EU became the second major global economy to 0:13:52.760 --> 0:13:56.560 cut lending rates this summer. It cited progress made on 0:13:56.720 --> 0:14:00.400 tackling inflation now in the coming days, a FIT are 0:14:00.400 --> 0:14:03.959 widely expected to once again reduce boring costs when they 0:14:04.000 --> 0:14:08.640 meet in Frankfurt after June's landmark decision. But while the 0:14:08.679 --> 0:14:11.439 next two or three reductions in the deposit rate from 0:14:11.480 --> 0:14:14.280 the current level of three point seventy five percent are 0:14:14.440 --> 0:14:17.880 unlikely to cause major friction, things could get a lot 0:14:17.960 --> 0:14:21.720 more contentious ones interest rates fall to around the three 0:14:21.800 --> 0:14:25.920 percent mark if indeed they do. Sources tell Bloomberg that 0:14:25.960 --> 0:14:29.520 the rate cutting debate could soon run into differing views 0:14:29.760 --> 0:14:32.880 on both the price outlook and the point where monetary 0:14:32.880 --> 0:14:38.880 policy stops restraining economic growth. With European inflation plunging, markets 0:14:38.920 --> 0:14:42.040 and analysts reckon that boring costs might even be between 0:14:42.080 --> 0:14:43.920 two and three percent by the end of the year. 0:14:44.240 --> 0:14:47.400 It's food for thought, isn't it. For Europe's central bankers, 0:14:47.760 --> 0:14:50.960 who widely agree that there is room to cut rates 0:14:51.040 --> 0:14:55.360 further now, they'll also need to consider the impact on businesses, 0:14:55.400 --> 0:15:00.480 particularly those operating within financial services. Recently, the German government 0:15:00.480 --> 0:15:04.880 announced plans to dilute their stake in Commerce Bank after 0:15:04.960 --> 0:15:09.040 high interest rates boosted the bank's profitability. As Bloomberg's European 0:15:09.120 --> 0:15:14.960 Finance reporters Stephen Aaron's explains, fluctuating lending rates are directly 0:15:15.040 --> 0:15:17.800 correlated with the bank's fortunes. 0:15:18.880 --> 0:15:21.320 I mean, yes, the government would have to achieve a 0:15:21.360 --> 0:15:23.920 much higher price for it to break even, but you 0:15:23.960 --> 0:15:26.040 know it's whiter under the rege. Essentially, what they're looking 0:15:26.080 --> 0:15:28.400 at is the share price rally. It's been happening at 0:15:28.400 --> 0:15:31.400 Commerce Bank for the past four years really thanks to 0:15:31.840 --> 0:15:35.960 interest rates rings by the ECB and that share price. 0:15:36.200 --> 0:15:38.120 You know, it's just much higher than it used to be, 0:15:38.400 --> 0:15:41.080 and they're seeing an opportunity to take advantage of it 0:15:41.160 --> 0:15:43.000 and you know, make some money I suppose. 0:15:44.480 --> 0:15:47.560 Okay, so it's opportunistic perhaps given the recent history of 0:15:47.560 --> 0:15:49.760 Commerce Banks share price, even if over the longer term 0:15:49.840 --> 0:15:52.080 they don't make money here, What does it mean then, 0:15:52.280 --> 0:15:54.840 even for Commerce Bank itself. You know, when we speak 0:15:54.880 --> 0:15:56.880 to them about this, and Critty was reminding us we 0:15:56.880 --> 0:15:59.480 talked to the CFO about this very subject recently. They 0:15:59.560 --> 0:16:01.000 usually say, well, that's something you've got to talk to 0:16:01.040 --> 0:16:03.560 the government about obviously, and what does this mean for 0:16:03.600 --> 0:16:03.960 the bank. 0:16:06.160 --> 0:16:08.960 Well, I think if a big investor decides sort of 0:16:08.960 --> 0:16:11.000 to sell down a stake in a company such as 0:16:11.080 --> 0:16:14.440 Commerce Bank, it sends a signal, you know, we don't 0:16:14.480 --> 0:16:16.760 expect the share price to go up much much higher 0:16:16.760 --> 0:16:19.320 and for longer, and so other investors will probably think 0:16:19.360 --> 0:16:21.360 about him. What does it mean for us? We have 0:16:21.480 --> 0:16:24.720 reported previously that commers Bank is looking for fresh investors, 0:16:24.720 --> 0:16:27.760 and now that the biggest one is reducing at stake, 0:16:27.880 --> 0:16:30.480 I think that task is becoming even more urgent for them, 0:16:30.880 --> 0:16:34.400 and those will be the challenges facing commers Bank CEO 0:16:34.880 --> 0:16:37.440 Kenov and CFO Olive for the next months and even years. 0:16:38.160 --> 0:16:42.080 That was Bloomberg's European finance reporter Stephen Aaron speaking there. 0:16:42.800 --> 0:16:46.080 So will it be another rate cut in Frankfurt and 0:16:46.080 --> 0:16:50.040 how will the central bank navigate the uncertain path ahead 0:16:50.080 --> 0:16:53.720 and how they communicate all of that to the markets 0:16:53.720 --> 0:16:57.280 in Europe. I've been discussing that with Blueberg's europe Economy 0:16:57.320 --> 0:16:58.720 reporter Alex Weber. 0:16:59.200 --> 0:17:03.240 As you just said, see another cut next week is 0:17:03.240 --> 0:17:06.359 almost fully priced as investors have little doubt that it's 0:17:06.440 --> 0:17:09.600 going to happen. We've also heard from policymakers that they're 0:17:09.640 --> 0:17:12.840 really ready to consider another cut, so that was already 0:17:12.920 --> 0:17:18.360 a pretty strong signal market. The data on the economic 0:17:18.359 --> 0:17:20.960 front has developed more and less in line as the 0:17:21.000 --> 0:17:26.240 ECB expected, and the latest forecast was based on another 0:17:26.320 --> 0:17:29.720 cut in September. So these two things combined means that 0:17:29.720 --> 0:17:30.600 it's probably gonna. 0:17:30.400 --> 0:17:34.560 Happen, okay, And if policymakers do lower interest rates again, 0:17:34.600 --> 0:17:37.280 does the path then surely become a bit more complicated. 0:17:38.320 --> 0:17:42.600 So from what we heard is that another cut in 0:17:42.680 --> 0:17:48.280 December looks pretty likely, But then interest rates come closer 0:17:48.560 --> 0:17:53.399 to a level that economists call neutral, and that means 0:17:54.240 --> 0:17:57.320 that the discussion becomes a bit more complicated, because on 0:17:57.359 --> 0:18:01.480 the one hand, ECB officials need to decide whether they 0:18:01.560 --> 0:18:06.200 want to stop restraining the economy, whether the economy actually 0:18:06.200 --> 0:18:10.040 needs some help from interest rates, whether they need to 0:18:10.119 --> 0:18:13.360 be lower any further. And the other complication is that 0:18:13.440 --> 0:18:17.480 this so called neutral rate is pretty difficult to estimate 0:18:17.560 --> 0:18:20.719 and observe, so it's it's hard to base policy upon it. 0:18:21.160 --> 0:18:23.200 But on the other hand, it's pretty important, So there's 0:18:23.240 --> 0:18:26.040 going to be the discussion is just going to become 0:18:26.480 --> 0:18:28.080 a lot more complex as we. 0:18:28.920 --> 0:18:33.640 Yeah, as we move forwards. Yeah, absolutely does a right 0:18:33.720 --> 0:18:38.800 car suit Germany. I mean that has been one of 0:18:38.800 --> 0:18:41.560 the key issues in Europe, the kind of waning industrial power, 0:18:41.600 --> 0:18:43.200 the weaker economy in Germany. 0:18:44.320 --> 0:18:48.719 Yeah, some economists have observed recently that Germany is actually 0:18:48.800 --> 0:18:51.200 need of lower interest rates much more than the rest 0:18:51.240 --> 0:18:56.120 of the Eurozone. Other countries are growing more strongly. Germany, 0:18:56.320 --> 0:18:59.280 as you know, is very reliant on its industry, and 0:18:59.640 --> 0:19:04.800 if borrowing costs remain higher than investments are becoming less attractive. 0:19:04.840 --> 0:19:07.080 It's only one part of the story, but lower interest 0:19:07.160 --> 0:19:10.760 rates would probably help German industry to some extent. 0:19:10.840 --> 0:19:13.879 Yes, what sort of pace can we expect when it 0:19:13.880 --> 0:19:16.560 comes to the cuts from now? Do you think so? 0:19:16.600 --> 0:19:20.000 Economists have long estimated that there will be quarterly cuts. 0:19:20.480 --> 0:19:24.400 That's for several reasons. One is that the ECB publishes 0:19:24.480 --> 0:19:29.000 economic forecasts once every quarter. That's also going to happen 0:19:29.119 --> 0:19:33.200 next week, coinciding with a likely cut. The other reason 0:19:33.240 --> 0:19:38.399 is that they're very focused on wage data because the 0:19:38.440 --> 0:19:43.440 ECB is afraid that elevated wage growth could stoke inflationary 0:19:43.480 --> 0:19:47.399 pressures and these sort of the sort of information also 0:19:47.640 --> 0:19:50.120 comes at a quarterly pace, so all of that makes 0:19:50.560 --> 0:19:54.879 makes it more likely that or points to the baseline 0:19:54.960 --> 0:19:59.240 as for quarterly cuts in between is not ruled out, 0:19:59.359 --> 0:20:03.960 but it would probably need some surprises in the data 0:20:04.200 --> 0:20:04.960 for that to happen. 0:20:05.560 --> 0:20:09.679 Well, inflation was two point two percent in August. Is 0:20:09.720 --> 0:20:14.320 the battle for you know, dominance over inflation complete? Then, 0:20:14.400 --> 0:20:17.000 I mean that's very close to the ECB's target. 0:20:17.040 --> 0:20:19.679 Is yeah, exactly, it's just barely above the target. But 0:20:19.840 --> 0:20:23.040 one important reason for the slowdown was a dip in 0:20:23.160 --> 0:20:27.199 energy costs, and that's also because energy prices were so 0:20:27.320 --> 0:20:30.879 volatile last year, so it's partly a statistical effect. And 0:20:31.000 --> 0:20:34.720 when you look under the hood, there is still services 0:20:34.760 --> 0:20:38.959 inflation that's running at twice the ECB's target. That's causing 0:20:39.000 --> 0:20:44.240 some uneasiness because it's really determined by domestic factors like 0:20:44.840 --> 0:20:48.240 the wage growth that we already talked about the labor market. 0:20:48.520 --> 0:20:53.840 And as long as services inflation stays elevated, then the 0:20:54.160 --> 0:20:56.800 ECB is not going to sound all clear. So it 0:20:56.840 --> 0:20:59.280 doesn't have to go it doesn't have to be that 0:20:59.400 --> 0:21:03.159 all composedonents of inflation go back to two percent, but 0:21:03.680 --> 0:21:07.639 at the moment there's still too much discrepancy. And we 0:21:07.800 --> 0:21:10.119 also expect inflation to come back toward the end of 0:21:10.160 --> 0:21:13.880 the year because these statistical effects on energy are going 0:21:13.920 --> 0:21:16.640 to become less favorable in. 0:21:16.640 --> 0:21:20.640 Terms of the policymakers who make those decisions. How united 0:21:20.760 --> 0:21:25.679 are they in terms of the strategy. 0:21:24.000 --> 0:21:29.240 So they've been relatively united. In recent weeks, we've heard 0:21:29.600 --> 0:21:34.760 different emphasis from them. So on there's one cohort in 0:21:34.840 --> 0:21:39.520 the twenty six member Government Council who emphasized the economy, 0:21:40.200 --> 0:21:45.520 the sluggish economy with that points to a preference for 0:21:45.560 --> 0:21:49.159 somewhat faster interest rate cuts. On the other hand, we 0:21:49.240 --> 0:21:54.240 have some who keep emphasizing the components of the inflation 0:21:54.320 --> 0:21:59.159 baskets that are not are still too elevated. So you 0:21:59.240 --> 0:22:03.320 have just a different emphasis really at the moment. So 0:22:03.359 --> 0:22:08.280 there is some friction, I would say, and that could 0:22:08.280 --> 0:22:11.680 come depending on how the economy develops. That could even 0:22:12.160 --> 0:22:13.960 become more pronounced in the coming month. 0:22:14.520 --> 0:22:17.199 Okay, that would be yeah, something certainly to watch. What 0:22:17.240 --> 0:22:20.120 will lower interest rates mean for the European banking sector. 0:22:21.880 --> 0:22:25.160 So the banking sector has long enjoyed a windfall from 0:22:25.240 --> 0:22:27.840 higher interest rates. We've already seen that this is no 0:22:28.000 --> 0:22:31.880 slowly coming to an end. Interest rates have already been 0:22:32.400 --> 0:22:38.040 lowered on mortgage credit, so for them, that's it's a 0:22:38.080 --> 0:22:41.719 new chapter. Then if the ECB goes ahead with lowering 0:22:41.760 --> 0:22:42.520 interest rates. 0:22:43.359 --> 0:22:45.960 And just lastly, what do we expect to hear from 0:22:45.960 --> 0:22:49.760 policymakers in terms of guidance? It's very cautious obviously from 0:22:50.119 --> 0:22:52.840 Christine Legarde in a lot of her press conferences. What 0:22:52.880 --> 0:22:55.840 do you think they will hear from policymakers from their guidance? 0:22:57.000 --> 0:23:02.000 Yes, that's a good questions. I suspense Luggard will keep 0:23:03.320 --> 0:23:08.240 stick to that total openness, because otherwise the risk is 0:23:08.280 --> 0:23:14.600 always at the ECB stokes market expectations for more cuts, 0:23:14.680 --> 0:23:20.040 and they're afraid of causing a somewhat an overreaction. So 0:23:21.359 --> 0:23:25.119 like there's probably little upside in giving much guidance at 0:23:25.119 --> 0:23:30.200 this stage, So Logard might well stick to to what 0:23:30.240 --> 0:23:32.040 she said in the past, is that they are going 0:23:32.119 --> 0:23:35.399 to remain data dependent and the path, especially for the 0:23:35.480 --> 0:23:38.680 next meeting, is completely open. Whether she gives any signals 0:23:38.800 --> 0:23:42.600 for further down the line some something very cautious, I 0:23:42.640 --> 0:23:47.119 mean that can be ruled out, but my suspicion is 0:23:47.320 --> 0:23:50.320 she's gonna be very open at this meeting. 0:23:50.760 --> 0:23:53.840 That was Bloomberg's Alex Weber speaking to me. My thanks 0:23:53.840 --> 0:23:56.600 to him for looking ahead to the ECB's interest rate 0:23:56.640 --> 0:24:01.000 decision on Thursday, the twelfth of September. I'm Caroline Hepke 0:24:01.040 --> 0:24:03.520 here in London. You can catch us every weekday morning 0:24:03.520 --> 0:24:06.320 for Bloomberg Daybreak. You're at beginning at six am in London. 0:24:06.520 --> 0:24:08.000 That's one am on Wall Street. 0:24:08.119 --> 0:24:11.680 John, Thanks Caroline, and just ahead on Bloomberg day Break weekend, 0:24:11.880 --> 0:24:15.240 I'll look ahead to a major product showcase from Apple. 0:24:15.760 --> 0:24:31.600 I'm John Tucker. This is Bloomberg. This is Bloomberg Daybreak Weekend, 0:24:31.920 --> 0:24:34.360 our bloob look ahead of the top stories for investors 0:24:34.400 --> 0:24:36.720 in the coming week. I'm John Tucker in New York. 0:24:37.160 --> 0:24:40.080 Apple is going to hold a major product showcase on Monday, 0:24:40.280 --> 0:24:44.320 and the iPhone sixteen lineup will be center stage. The 0:24:44.440 --> 0:24:47.600 launch may mean gains in market share for Apple suppliers 0:24:47.640 --> 0:24:50.480 in Asia, and for a closer look, let's get to 0:24:50.560 --> 0:24:53.960 Doug Chrisner, co host of Daybreak Asia. John. 0:24:54.000 --> 0:24:56.520 The event is titled It's Glow Time. I think the 0:24:56.640 --> 0:24:59.199 question is whether it will produce a glow for Apple. 0:24:59.640 --> 0:25:03.000 iPhone demand has been stagnant for nearly three years. Unit 0:25:03.080 --> 0:25:07.080 sales have been nearly flat, and according to Bloomberg Intelligence, 0:25:07.200 --> 0:25:09.800 much of that volume was driven largely by the need 0:25:09.840 --> 0:25:14.199 to upgrade iPhones sold three and four years ago. So 0:25:14.320 --> 0:25:16.560 with the iPhone sixteen, much of the hype as we know, 0:25:16.720 --> 0:25:22.040 revolves around the suite of AI tools branded as Apple Intelligence. Now, 0:25:22.119 --> 0:25:25.720 analysts at Bloomberg are predicting the replacement of aging phones 0:25:25.760 --> 0:25:28.679 will continue to be a big driver of sales for 0:25:28.720 --> 0:25:32.280 the iPhone sixteen, much more so than Apple Intelligence. Our 0:25:32.320 --> 0:25:35.840 analyst are saying Apple Intelligence will likely have a greater 0:25:35.960 --> 0:25:39.919 impact in fiscal twenty twenty six. Well beyond AI, the 0:25:39.960 --> 0:25:44.720 iPhone sixteen is expected to have several upgrades, larger displays, 0:25:44.880 --> 0:25:48.359 additional capabilities for the camera, to name a few, and 0:25:48.440 --> 0:25:52.960 these changes have created opportunities for Apple suppliers, especially since 0:25:53.480 --> 0:25:57.240 Apple has been working to diversify its supply chain right 0:25:57.280 --> 0:26:01.760 across Asia, not just in terms of oponent manufacturers, but 0:26:01.840 --> 0:26:05.960 among assemblers as well. I spoke earlier with Stephen saying 0:26:06.119 --> 0:26:09.320 he is see your tech industry analyst for Bloomberg Intelligence 0:26:09.520 --> 0:26:10.280 in Hong Kong. 0:26:11.000 --> 0:26:16.000 Apple does have the tendency to keep only a handful 0:26:16.080 --> 0:26:19.520 of supplier in certain components, or sometimes even just keep 0:26:19.560 --> 0:26:23.120 the soul supplier. I think it's better for the control 0:26:23.200 --> 0:26:27.480 the quality and the delivery. In the near term, we 0:26:27.600 --> 0:26:31.080 may not see any major increase in terms of assembler 0:26:31.119 --> 0:26:35.080 But then in certain markets, for example like India, they 0:26:35.320 --> 0:26:40.800 start working with Tata for the iPhone assembly, so if 0:26:40.800 --> 0:26:42.479 they are doing a good job, I mean Tata. If 0:26:42.480 --> 0:26:45.399 they're doing a good job, then hard to tell. But 0:26:45.520 --> 0:26:47.960 so far I think we're still looking at three major 0:26:48.000 --> 0:26:49.679 supplier in the side. 0:26:50.080 --> 0:26:54.000 When it comes to the parts manufacturers, are they at 0:26:54.000 --> 0:26:56.879 a state right now in terms of their production capacity 0:26:56.880 --> 0:26:59.240 where they can meet what you think is going to 0:26:59.280 --> 0:27:01.320 be a little bit of a pickup in demand. Do 0:27:01.359 --> 0:27:03.919 you think that that's probable or we maybe going to 0:27:03.960 --> 0:27:06.960 have a little too much demand and supply is going 0:27:07.000 --> 0:27:08.280 to take a while to catch up. 0:27:08.920 --> 0:27:12.040 I think in terms of capacity, I don't really see 0:27:12.080 --> 0:27:16.400 any major issue given that we're not the overall smartpha 0:27:16.440 --> 0:27:19.359 obviously become a much more mature market as a whole. 0:27:19.920 --> 0:27:24.480 So the capacity issue to some extents is probably more 0:27:24.520 --> 0:27:30.640 about relocation as the supply chain is trying to cope 0:27:30.680 --> 0:27:34.639 with the juopidical tension, so some components supply might be 0:27:34.680 --> 0:27:39.120 forced to relocate. But so far, for the like a camera, 0:27:39.840 --> 0:27:43.040 we don't really see a lot of relocation happening. I 0:27:43.080 --> 0:27:46.720 think component supply are still generally cautious. 0:27:46.240 --> 0:27:50.280 He is Steven saying from a Bloomberg Intelligence, Let's continue 0:27:50.280 --> 0:27:54.080 the conversation on the iPhone sixteen and Apple's supply chain 0:27:54.119 --> 0:27:57.080 across the Asia Pacific. The let's have office with us. 0:27:57.119 --> 0:28:00.480 He as Bloomberg Tech Editor in Hong Kong, along with 0:28:00.600 --> 0:28:04.480 newly Parnell Asia Tech reporter, also based in Hong Kong. 0:28:04.960 --> 0:28:07.320 Good of you guys to join us. Vlad, let me 0:28:07.359 --> 0:28:10.920 begin with you. I want to understand how well prepared 0:28:10.960 --> 0:28:12.240 Apple is for this launch. 0:28:12.760 --> 0:28:15.600 Well, an Apple launch is one of the best orchestrated 0:28:15.680 --> 0:28:18.600 events on the tech calendar. It's actually remarkable. I was 0:28:18.600 --> 0:28:21.480 thinking recently that every September we get a new iPhone, 0:28:21.480 --> 0:28:24.600 we get tens of millions of units distributed and prepared 0:28:24.600 --> 0:28:28.200 across the world. You can never diet Apples preparation. The question, 0:28:28.359 --> 0:28:31.719 to my mind is how well Apple does in selling 0:28:31.760 --> 0:28:34.680 this AI pitch. Like we've just been discussing, how well 0:28:34.880 --> 0:28:37.880 does it translate to consumers. Apple has been the one 0:28:37.920 --> 0:28:41.640 company in the tech industry to take these rather elusive things, 0:28:41.800 --> 0:28:44.719 simplify them, make them relatable to consumers, and make them 0:28:44.760 --> 0:28:47.600 a reason to buy advice. They've done with so many things, 0:28:47.680 --> 0:28:51.520 whether it's making the camera more relatable, video recording people 0:28:51.520 --> 0:28:54.600 who have ditched their actual cameras and replace them with iPhones. 0:28:55.040 --> 0:28:58.400 The real question is it's one for the entire industry. 0:28:58.800 --> 0:29:01.520 How well can Apple sell AI because it will affect 0:29:01.560 --> 0:29:03.160 not just Apple, put the broader. 0:29:02.880 --> 0:29:06.239 Industry newly When you consider AI, this is something that 0:29:06.280 --> 0:29:09.880 Apple obviously has invested a great deal in. How high 0:29:09.880 --> 0:29:10.600 are the stakes? 0:29:11.600 --> 0:29:13.400 I think the stakes are high, and I think what 0:29:13.680 --> 0:29:16.400 I'm anticipating and I think others are looking at, is 0:29:16.960 --> 0:29:22.520 whether sort of easier access to AI tools will really 0:29:22.560 --> 0:29:26.240 start to translate into real world applications. So, in other words, 0:29:26.480 --> 0:29:29.200 we see the sort of revolutions that's being created with 0:29:29.280 --> 0:29:33.280 access to things like chat GPT, which is a sophisticated technology, 0:29:33.360 --> 0:29:36.320 but it's a chat bock where you enter text and 0:29:36.360 --> 0:29:39.720 you get a response. I think if smartphone makers like 0:29:39.760 --> 0:29:42.040 Apple can start to introduce some of those features into 0:29:42.040 --> 0:29:44.200 the device that people already use, so you don't have 0:29:44.240 --> 0:29:45.800 to sit at a computer to use it, or go 0:29:45.880 --> 0:29:48.360 to a special website or open an app, you can 0:29:48.400 --> 0:29:52.160 bring some of these features closer to how people use 0:29:52.200 --> 0:29:55.160 their phones, which are so attached to us throughout the day. 0:29:55.720 --> 0:29:59.080 I think we could see more consumer adoption. It could 0:29:59.120 --> 0:30:01.680 see more real world applications for this kind of nebulous 0:30:01.720 --> 0:30:04.400 technology that people have been talking so much about how 0:30:04.400 --> 0:30:06.840 it's going to change the world. If Apple can show 0:30:06.920 --> 0:30:10.080 some of some of these applications and some of these 0:30:10.160 --> 0:30:12.760 use cases for this technology right on the device, I 0:30:12.800 --> 0:30:14.160 think that would be exciting to see. 0:30:14.560 --> 0:30:16.560 And the interesting thing to my mind is that will 0:30:16.560 --> 0:30:19.560 not translate into an immediate surge in sales. One of 0:30:19.600 --> 0:30:22.360 the fun things what iPhone is that there's a lot 0:30:22.400 --> 0:30:26.000 of peer pressure that happens. So if these AI features 0:30:26.160 --> 0:30:29.240 do find an audience, what will happen is you'll notice 0:30:29.280 --> 0:30:31.880 it in your friends and neighbors and family members using 0:30:31.920 --> 0:30:34.400 these features. They will write better emails all of a sudden, 0:30:34.800 --> 0:30:38.120 and is because they're using the AI making them more 0:30:38.120 --> 0:30:42.600 concise in their messaging. They will send you fun autogenerated 0:30:42.640 --> 0:30:44.920 images and you ask where did you get that from, 0:30:44.960 --> 0:30:47.240 and they will say it's the only on the latest iPhone. 0:30:47.600 --> 0:30:49.880 So one of the issues that Apple was actually faced 0:30:49.880 --> 0:30:52.960 in recent years is the fact that after the first 0:30:53.000 --> 0:30:56.280 surge of people having to upgrade because the annual upgrade cycle, 0:30:56.960 --> 0:30:59.720 sales just kind of drop off during the first half 0:30:59.720 --> 0:31:01.520 of the year. Yeah, app we started to struggle. It's 0:31:01.520 --> 0:31:04.120 had to do discounts and precedented ones in China just 0:31:04.160 --> 0:31:06.440 to keep sales going for the iPhone. And one of 0:31:06.480 --> 0:31:10.080 the fascinating things is the dynamic of people buying the 0:31:10.120 --> 0:31:13.600 iPhones in the last half of the year, then that 0:31:13.920 --> 0:31:16.880 translating into more people being attracted by the AI stuff 0:31:16.920 --> 0:31:19.680 and that potentially lifting sales in the first half of 0:31:19.680 --> 0:31:21.840 the year where Apple has its difficulties. 0:31:21.480 --> 0:31:24.120 Newly, when you look at the part suppliers in the 0:31:24.160 --> 0:31:29.520 Pacific RIM, does this launch do anything for greater diversification 0:31:29.800 --> 0:31:32.160 When you build out something like this, do you want 0:31:32.200 --> 0:31:34.560 to make sure that your supply chain is much more 0:31:34.640 --> 0:31:36.040 robust than it's been in the past. 0:31:36.880 --> 0:31:37.120 Yeah. 0:31:37.160 --> 0:31:39.560 And for some time, you know, Apple has been really 0:31:39.600 --> 0:31:43.720 interested in diversifying its supply chain, particularly in countries like India, 0:31:43.760 --> 0:31:45.479 where I was based before and where we've done some 0:31:45.560 --> 0:31:48.480 great reporting on the advances that India that Apple has 0:31:48.520 --> 0:31:52.680 been making in accelerating this speed with which they can 0:31:52.760 --> 0:31:56.200 create newest versions of the iPhones in India, so it's 0:31:56.240 --> 0:32:00.240 not simply lagging behind when they're made in China for Ekple. 0:32:00.280 --> 0:32:02.360 Now they're getting closer and closer to being able to 0:32:02.400 --> 0:32:07.000 release the very top end new iPhones in India. So, 0:32:07.120 --> 0:32:10.560 for example, you know that that allows them to diversify 0:32:10.600 --> 0:32:13.440 a bit away from the mainland because of the geopolitical 0:32:13.440 --> 0:32:16.280 issues between the US and China, and over the years, 0:32:16.280 --> 0:32:18.280 they've been really trying to build up their network of 0:32:18.360 --> 0:32:23.600 supply of component makers, suppliers and capacity in India and 0:32:23.680 --> 0:32:26.120 so so I think that's something really interesting to watch. 0:32:26.120 --> 0:32:30.120 And of course India is an important increasingly important market 0:32:30.200 --> 0:32:32.800 for actually selling its phones, so they're going to export 0:32:32.800 --> 0:32:34.440 a lot of these from India, but also they want 0:32:34.480 --> 0:32:37.880 to appeal to this one billion plus person economy as. 0:32:37.800 --> 0:32:38.520 Well, glad. 0:32:38.520 --> 0:32:41.040 As I mentioned earlier, much of the hype is focused 0:32:41.080 --> 0:32:45.160 on this AI tool or tools plural with Apple Intelligence. 0:32:45.760 --> 0:32:49.600 When you look at what companies like Samsung or Huawei 0:32:49.640 --> 0:32:52.840 even what they are doing with respect to AI, is 0:32:52.920 --> 0:32:54.760 Apple a little behind the curve? 0:32:55.280 --> 0:32:58.080 I wouldn't say so. I think it's still extremely early days. 0:32:58.080 --> 0:33:00.600 Some of the demos that I've seen from Chinese filmmakers 0:33:00.640 --> 0:33:03.120 are really fascinating. Their compelling one of them is this 0:33:03.280 --> 0:33:07.320 idea of turning AI into an agent. One of the companies, Honor, 0:33:07.360 --> 0:33:09.560 which is a spin off from Huawei. They showed me 0:33:09.600 --> 0:33:13.360 an AI demo where the AI agent went into all 0:33:13.400 --> 0:33:15.760 their apps such as we Chat, pay, Alipay, and it 0:33:15.840 --> 0:33:18.360 pulled out all of the user's pay subscriptions and then 0:33:18.520 --> 0:33:20.400 you could just tell it by voice cancel all my 0:33:20.440 --> 0:33:23.160 pay subscriptions because I'm tired of those. I find that 0:33:23.600 --> 0:33:26.520 a very interesting and very compelling user of AI, just 0:33:26.640 --> 0:33:29.000 simplifying a lot of these processes and kind of the 0:33:29.000 --> 0:33:32.920 fiddly aspects of using a phone and internet services. But 0:33:33.000 --> 0:33:35.720 that is still so early. It's so premature to say 0:33:36.560 --> 0:33:39.480 that this is the decisive or the winning feature, whether 0:33:39.520 --> 0:33:43.000 that's for Chinese manufacturers, whether it's for Samsung, whether it's 0:33:43.040 --> 0:33:45.280 for Apple or even Google. I mean, one of the 0:33:45.280 --> 0:33:48.240 interesting things is that Google advanced the launch of its 0:33:48.280 --> 0:33:51.040 new Pixel phones earlier this year to go straight up 0:33:51.040 --> 0:33:54.000 against the iPhone. And that's precisely because Google believes that 0:33:54.080 --> 0:33:56.800 it has the better AI. But like I say, it's 0:33:56.840 --> 0:33:58.120 still way too early to tell. 0:33:58.400 --> 0:34:01.400 So newly, when we look at Apple products generally, I 0:34:01.440 --> 0:34:03.240 know that they are considered to be kind of a 0:34:03.320 --> 0:34:06.960 luxury item. The price point with this new rollout is 0:34:06.960 --> 0:34:09.360 probably going to be high relative to some of the 0:34:09.400 --> 0:34:13.399 other smartphones in the market, whether it's China or India. 0:34:13.560 --> 0:34:15.239 Is there going to be appetite do you think for 0:34:15.280 --> 0:34:19.240 the market to kind of support what Apple has aspirationally 0:34:19.280 --> 0:34:21.280 in terms of total units sold. 0:34:21.640 --> 0:34:24.959 Well, we've seen in China actually that they've been losing 0:34:25.080 --> 0:34:27.840 market share with the new Huawei device, which is a 0:34:27.880 --> 0:34:32.440 direct competitor the May sixty, Huawei's high end smartphone we 0:34:32.520 --> 0:34:36.040 see Apple. You know, China is a huge market for 0:34:36.080 --> 0:34:39.040 Apple for selling iPhones. I think there's still appetite there, 0:34:39.120 --> 0:34:42.360 but certainly they've come under fresh challenges from Huawei and 0:34:42.400 --> 0:34:45.520 other makers there. And then in India, also a massive market. 0:34:45.960 --> 0:34:48.040 For a long time, they've had a tiny market share 0:34:48.040 --> 0:34:52.520 in India, primarily because the device is so expensive in 0:34:52.560 --> 0:34:55.560 a market where consumers have less purchasing power. But they 0:34:55.680 --> 0:34:58.200 have made advances in India over the years, in part 0:34:58.239 --> 0:35:01.320 because by manufacturing the devices in India, the taxes are lower, 0:35:01.360 --> 0:35:03.719 so they can bring the price down. And you know, 0:35:03.719 --> 0:35:06.359 there's been some interesting advancements as well on the retail front, 0:35:06.400 --> 0:35:09.680 with Apple last year opening its first Apple stores ever 0:35:09.760 --> 0:35:12.080 in India. And Tim Cook visiting the country last year. 0:35:12.120 --> 0:35:15.000 That helps with branding, and when you have actual shops 0:35:15.040 --> 0:35:16.879 people can go into and see how the devices work, 0:35:16.960 --> 0:35:18.680 that that's been a boost. 0:35:18.360 --> 0:35:18.839 For them too. 0:35:19.120 --> 0:35:20.840 So I think certainly in India, and they have, of 0:35:20.880 --> 0:35:24.799 course a wider variety of devices, the less expensive ones 0:35:24.800 --> 0:35:26.759 in addition to the newest ones coming out, So I 0:35:26.760 --> 0:35:29.880 think that they're quite bullish on India. So yeah, China, 0:35:30.360 --> 0:35:33.120 you know, maybe growing pressure from Huawei and other competitors, 0:35:33.120 --> 0:35:35.600 but India, I think, starting from a slower base, a 0:35:35.640 --> 0:35:37.359 lot of room to expand, and I think they're pretty 0:35:37.400 --> 0:35:38.920 excited about India. 0:35:39.040 --> 0:35:41.719 And Apple really might need India because Huiwei scheduled an 0:35:41.760 --> 0:35:45.040 event the day after the iPhone event. It's literally hours 0:35:45.080 --> 0:35:47.640 after our reporting shows that it's going to be the 0:35:47.640 --> 0:35:51.560 world's first commercial smartphone with two photo folds in it. 0:35:51.560 --> 0:35:54.439 It's going to be groundbreaking device. Huiawe is really making 0:35:54.440 --> 0:35:56.399 a push. And an interesting thing is that Apple fell 0:35:56.440 --> 0:35:58.640 out of the top five in China in the June quarter. 0:35:59.040 --> 0:36:01.160 It has a real chat lynch, as Newla says, in 0:36:01.160 --> 0:36:03.800 one of his biggest markets. So it's going to need India. 0:36:03.840 --> 0:36:06.160 It's going to need to remain strong in the US, 0:36:06.360 --> 0:36:08.360 and again it all goes back to AI. Just like 0:36:08.360 --> 0:36:10.359 with and Vidia and all the other companies that we cover, 0:36:10.640 --> 0:36:13.440 AI is a real critical thing. And I also talk 0:36:13.520 --> 0:36:16.120 to another one of the Chinese muffle manufacturers this past 0:36:16.120 --> 0:36:18.040 week and I asked him, do you have a plan 0:36:18.160 --> 0:36:20.960 B if consumers don't respond well to AI? And the 0:36:21.040 --> 0:36:21.879 also well just know. 0:36:22.400 --> 0:36:25.840 Newly Pernell is Asia Tech reporter. He's based in Hong Kong, 0:36:25.960 --> 0:36:30.400 and Vladsavov is Bloomberg Tech editor, also joining us from 0:36:30.400 --> 0:36:32.959 Hong Kong. Thanks so much to both of you for 0:36:33.239 --> 0:36:35.840 helping us set up the launch of the iPhone sixteen 0:36:35.960 --> 0:36:38.960 and understanding some of the ramifications for the parts suppliers 0:36:39.360 --> 0:36:42.000 in the Asia Pacific. I'm Doug Krisner. You can join 0:36:42.040 --> 0:36:45.400 Brian Curtis and myself weekdays here for Bloomberg Daybreak Asia 0:36:45.719 --> 0:36:49.239 beginning at eight am in Hong Kong eight pm on 0:36:49.360 --> 0:36:50.000 Wall Street. 0:36:50.400 --> 0:36:53.680 John, Thanks Doug, and that does it for this edition 0:36:53.680 --> 0:36:56.919 at Bloomberg day Break Weekend. Join us again Monday morning 0:36:56.960 --> 0:36:58.880 at five am Long Street time for the latest on 0:36:59.040 --> 0:37:02.359 markets overseas. In the news you need to start your day, 0:37:02.600 --> 0:37:05.440 I'm John Tucker. Stay with us top stories and global 0:37:05.520 --> 0:37:08.319 business headlines aren't coming up right now.