Daybreak Weekend: The Double Dip, UK Housing, Korea Data, House Budget Battle

This is Bloomberg day Break Weekend, our global look at 0:00:04.600 --> 0:00:06.760 the top stories in the coming week from our Daybreak 0:00:06.800 --> 0:00:09.440 anchors all around the world. Straight ahead on the program. 0:00:09.520 --> 0:00:11.640 It's been quite a run for the bulls on Wall 0:00:11.640 --> 0:00:13.920 Street as we enter the final stretch of the year. 0:00:14.080 --> 0:00:16.400 I'm Tom Busby in New York. I'll have that store. 0:00:16.480 --> 0:00:19.400 I'm pline Hege here in London, where we're watching upcoming 0:00:19.520 --> 0:00:22.439 data for signs of the slow puncture in the UK's 0:00:22.440 --> 0:00:23.400 housing markets. 0:00:23.520 --> 0:00:25.400 I'm dek Krisner with a look at how the Bank 0:00:25.440 --> 0:00:29.040 of Korea might respond to vibrancy in the South Korean economy. 0:00:29.080 --> 0:00:31.720 I'm Kayleie Lyons in Washington, where Congress is set to 0:00:31.760 --> 0:00:35.120 return from his holiday break with a long to do list. 0:00:35.479 --> 0:00:38.760 That's all straight ahead on Bloomberg day Break Weekend, the 0:00:38.800 --> 0:00:41.360 business news you need to wrap up your week in 0:00:41.560 --> 0:00:45.760 just one fifteen minute podcast available on Apple, Spotify, The 0:00:45.760 --> 0:00:49.040 Bloomberg Business Appen everywhere you get your podcasts. 0:00:50.560 --> 0:00:53.640 Well, good day to you. I'm Tom Busby. We begin 0:00:53.680 --> 0:00:56.920 today's program with a focus on the stock market as 0:00:56.960 --> 0:00:59.480 we enter the last trading month of the year. After 0:00:59.520 --> 0:01:01.640 a slump in twenty twenty two. This year has been 0:01:01.680 --> 0:01:05.680 a good one for equity investors, particularly those in tech. 0:01:05.720 --> 0:01:08.039 Now the Nasdaq has far outpaced both the S and 0:01:08.040 --> 0:01:10.800 P five hundred and the Dow Jones Industrial Average. And 0:01:10.880 --> 0:01:14.319 right now with inflation easing, a surprisingly strong corporate earning 0:01:14.360 --> 0:01:16.480 season now wrapping up, and bets that the Fed is 0:01:16.520 --> 0:01:19.440 done hiking rates, we've seen with just a few minor 0:01:19.520 --> 0:01:23.880 hits a November rally, the big question can it continue well? 0:01:23.920 --> 0:01:26.920 For that, we bring in Bloomberg Intelligence Chief Equity Strategist 0:01:27.000 --> 0:01:30.679 Gina Martin Adams and her colleague Bloomberg Intelligence equity strategist 0:01:30.920 --> 0:01:33.240 Michael Casper. Thank you both for being here. Gina, I'm 0:01:33.240 --> 0:01:35.240 going to start with you, where do you see the 0:01:35.280 --> 0:01:37.880 economy now and what do you anticipate we're going to 0:01:37.880 --> 0:01:39.639 see in the markets in the weeks ahead. 0:01:39.840 --> 0:01:42.560 Yeah. So, we actually have a really interesting model we 0:01:42.600 --> 0:01:45.400 call our economic regime model, which gives us a sense 0:01:45.440 --> 0:01:50.560 of where the economy is in real time. And unfortunately, 0:01:50.840 --> 0:01:55.040 after the regime model was generally supportive of very strong 0:01:55.120 --> 0:01:58.040 risk taking conditions in the broader equity markets throughout much 0:01:58.040 --> 0:02:02.040 of twenty twenty three, it actually took another dip in October, 0:02:02.200 --> 0:02:04.560 and if we take a step back, and we think 0:02:04.600 --> 0:02:07.600 about what this regime model tells us. Back in twenty 0:02:07.680 --> 0:02:10.560 twenty two, the regime model said that the economy was 0:02:10.800 --> 0:02:13.960 very low probability still in recovery. In other words, the 0:02:14.000 --> 0:02:16.080 economy may have already been in some form of a 0:02:16.120 --> 0:02:18.800 recession in twenty twenty two, at least according to this model, 0:02:19.080 --> 0:02:22.640 which of course coincided with terrible equity market returns. As 0:02:22.680 --> 0:02:24.960 the economy was decelerating, we lost a lot of momentum 0:02:24.960 --> 0:02:27.359 in the equity market as well. And then come into 0:02:27.440 --> 0:02:29.519 twenty twenty three, and the model actually signaled that we 0:02:29.560 --> 0:02:32.880 should get more optimistic. As of January of twenty twenty three, 0:02:33.120 --> 0:02:34.560 it was saying, you know, it's not going to get 0:02:34.639 --> 0:02:36.640 much worse here. Things are starting to get a little 0:02:36.639 --> 0:02:40.119 bit better. Even though that getting better was somewhat short term. 0:02:40.120 --> 0:02:42.480 In twenty twenty three, it did support the rally in stocks, 0:02:42.960 --> 0:02:45.720 and now it's saying, hey, hold on a minute. Things 0:02:45.760 --> 0:02:48.639 do appear to have slowed precipitously in the fourth quarter. 0:02:49.240 --> 0:02:52.320 Even though the earnings recovery does appear to be underway, 0:02:52.440 --> 0:02:55.280 there are certain segments of the earnings recovery that look 0:02:55.320 --> 0:02:58.680 pretty vulnerable to a deceleration in the broader economy right now, 0:02:59.280 --> 0:03:01.520 and that could be the risk going into twenty twenty 0:03:01.520 --> 0:03:04.800 four is the groups that really did not correct in 0:03:04.840 --> 0:03:08.200 that first dip in twenty twenty two may be set 0:03:08.200 --> 0:03:10.320 to correct as we move into twenty twenty four. That 0:03:10.360 --> 0:03:13.639 doesn't mean the whole market is necessarily vulnerable because we 0:03:13.720 --> 0:03:16.120 went through twenty twenty two, but it does mean that 0:03:16.160 --> 0:03:18.320 there are some vulnerabilities in the equity market and we 0:03:18.360 --> 0:03:20.560 need to navigate those as we approach next year. 0:03:20.760 --> 0:03:23.320 And are there specific segments you're referring to right now 0:03:23.400 --> 0:03:24.440 about the Yeah. 0:03:24.200 --> 0:03:25.840 I'll let Mike talk to that a lot because he 0:03:25.880 --> 0:03:29.320 does run our sectors scorecard. But specifically the consumer sectors 0:03:29.320 --> 0:03:31.200 look quite weak. If we think about what happened in 0:03:31.240 --> 0:03:33.520 the fourth quarter earning season, sorry, the third quarter earning 0:03:33.560 --> 0:03:35.880 season that just passed for the S and P five hundred, 0:03:36.600 --> 0:03:40.280 really generally pretty strong earnings emerged X Energy the index 0:03:40.320 --> 0:03:43.160 posted nearly ten percent earnings growth. When we look at 0:03:43.200 --> 0:03:45.000 the whole S and P five hundred at large, it 0:03:45.040 --> 0:03:48.200 looks like about four percent earnings growth. But we did 0:03:48.240 --> 0:03:50.920 start to see some downward revision momentum. We started to 0:03:50.960 --> 0:03:54.880 see some guidance in particular from those consumer companies and 0:03:55.160 --> 0:03:58.400 consumer staples and discretionary do appear to be the worst sectors. 0:03:58.840 --> 0:04:01.320 That said, there are some strong sectors, and I'll let 0:04:01.320 --> 0:04:04.280 Mike speak to those, because there are opportunities in this environment. 0:04:04.320 --> 0:04:06.360 What's a strength from you, Mike, let's hear it. Let's 0:04:06.360 --> 0:04:06.880 hear it. 0:04:06.920 --> 0:04:09.840 Certainly, Communications is the one at the top of the list, 0:04:09.880 --> 0:04:12.920 right so, earnings have been strong in twenty twenty three, 0:04:12.960 --> 0:04:14.920 They're expected to be strong in twenty twenty. 0:04:14.640 --> 0:04:15.280 Four as well. 0:04:16.400 --> 0:04:18.520 Tech is up there as well. We run a five 0:04:18.560 --> 0:04:21.440 factor sector scorecard and those two are at the top 0:04:21.480 --> 0:04:24.400 of the scorecard right now. It's joined by financials, which 0:04:24.400 --> 0:04:28.440 is quite an interesting case if you believe consensus rate 0:04:28.480 --> 0:04:31.279 expectations for twenty twenty four. There for a little bit 0:04:31.279 --> 0:04:34.040 of yield curve steepening, which should be a good fundamental 0:04:34.080 --> 0:04:38.040 driver for especially the banks within financials, and our model's 0:04:38.080 --> 0:04:41.440 flaging financials as one of the top plays in the 0:04:41.520 --> 0:04:43.520 S and P five hundred at least. Right now. On 0:04:43.560 --> 0:04:46.400 the flip side, I'll talk about some of the weakness. Definitely, 0:04:46.440 --> 0:04:50.800 the defensives. Utilities, real estate staples have been consistently towards 0:04:50.839 --> 0:04:52.280 the bottom of our model in the s and P 0:04:52.400 --> 0:04:55.560 five hundred, and they're staying there at least right now. 0:04:56.240 --> 0:04:59.120 So let's go back to the weaknesses. Now, we discussed 0:04:59.400 --> 0:05:04.360 the consumer, discretionary, consumer staples. So we're getting some mixed 0:05:04.480 --> 0:05:08.320 signals on the consumer. They're pulling back, they're not pulling back. 0:05:08.320 --> 0:05:10.559 They're spending well, gas is cheaper, so people are spending 0:05:10.600 --> 0:05:13.200 money elsewhere. Where do you see the consumer right now? 0:05:13.200 --> 0:05:16.120 And we are going, I mean Thanksgivings over, we are 0:05:16.120 --> 0:05:19.039 in the heart of the shopping season. Now where do 0:05:19.080 --> 0:05:19.960 you see the consumer? 0:05:20.279 --> 0:05:20.640 Yeah? 0:05:20.720 --> 0:05:24.160 So, unfortunately, I think sentiment tells you a lot about 0:05:24.160 --> 0:05:26.039 what you need to know about the US consumer. And 0:05:26.120 --> 0:05:29.719 sentiment has been deteriorating very rapidly over the last couple 0:05:29.720 --> 0:05:33.080 of months after it recovered a little bit in early 0:05:33.120 --> 0:05:35.960 twenty twenty three. And the biggest conundrum with respect to 0:05:36.040 --> 0:05:40.440 sentiment is this occurred without an increasing gas prices. Normally, 0:05:40.480 --> 0:05:44.120 the consumer is pretty predictable. When they see gas prices accelerating, 0:05:44.120 --> 0:05:45.720 they get a little bit, you know, they get a 0:05:45.720 --> 0:05:47.919 little bit bummed out. They don't feel great, They have 0:05:47.960 --> 0:05:50.440 to spend more at the pump, and so they spend 0:05:50.520 --> 0:05:54.040 less elsewhere, and that definitely happened in parts of twenty 0:05:54.080 --> 0:05:57.760 twenty two. But we've seen gas prices actually correcting for 0:05:57.800 --> 0:06:00.480 the last several weeks. Gas prices moving lower has not 0:06:00.640 --> 0:06:03.000 enabled to bump in consumer sentiments. So the consumer's a 0:06:03.000 --> 0:06:03.880 little bit bummed out. 0:06:04.360 --> 0:06:04.680 I think. 0:06:04.720 --> 0:06:07.919 At the same time, we are seeing some minor job 0:06:07.960 --> 0:06:11.400 losses emerge or some weaknesses emerge in the broader job market, 0:06:11.800 --> 0:06:14.760 and that is filtering through to consumer confidence. Consumers are 0:06:14.760 --> 0:06:16.760 feeling just a little bit less confident than they have 0:06:16.839 --> 0:06:19.920 been in the last couple of years. It doesn't necessarily 0:06:19.960 --> 0:06:22.080 mean the consumer has to crash And I think that 0:06:22.120 --> 0:06:24.479 this is one thing that's really important to consider is 0:06:25.320 --> 0:06:28.320 we all think of two thousand and nine as the 0:06:28.360 --> 0:06:31.160 representative example, or two thousand and eight as the representative 0:06:31.200 --> 0:06:34.400 example of what to expect from the consumer, and that 0:06:34.680 --> 0:06:37.360 was one of the single worst recessions for the US 0:06:37.400 --> 0:06:41.200 consumer in US history. So that's not necessarily the outlook. 0:06:41.240 --> 0:06:43.480 Just because the consumer is feeling bummed out doesn't mean 0:06:43.920 --> 0:06:45.960 that their spending has to go through the floor and 0:06:46.000 --> 0:06:48.320 they crash out and they don't spend a dime. 0:06:48.440 --> 0:06:50.240 Yeah, that's a tough comparison, it's. 0:06:50.120 --> 0:06:53.920 A really tough comparison. Instead, they may just incrementally pull 0:06:54.080 --> 0:06:55.839 back a little bit as they get a little bit 0:06:55.920 --> 0:07:00.240 more cautious with respect to their outlays. Nonetheless, that can 0:07:00.320 --> 0:07:05.159 have material impacts on sectors where earnings are somewhat sensitive 0:07:05.200 --> 0:07:07.279 to what's happening with that overall growth out look. 0:07:07.440 --> 0:07:10.760 Yeah, the job market has consistently good, but we have 0:07:10.880 --> 0:07:14.640 seen some cracks. We've seen continuing claims rise. That means 0:07:14.760 --> 0:07:17.320 long term unemployed are having a little trouble right now. 0:07:17.400 --> 0:07:21.720 And I think that is where we're seeing the consumer 0:07:21.760 --> 0:07:23.880 pull back, the people who say, hey, I don't know 0:07:23.880 --> 0:07:25.520 what's going to happen in a month or a year. 0:07:25.640 --> 0:07:25.920 Yeah. 0:07:25.960 --> 0:07:28.520 And if you think about how that though impacts profits, 0:07:28.560 --> 0:07:30.160 and this is something that MI can I do a 0:07:30.200 --> 0:07:33.280 lot is really just analyze what's happening and inside the 0:07:33.320 --> 0:07:35.240 profit stream for the S and P five hundred as 0:07:35.240 --> 0:07:37.760 well as the Rustle two thousand, because profits are what 0:07:37.840 --> 0:07:40.760 drives stock prices. The economy doesn't necessarily drive stock prices, 0:07:40.800 --> 0:07:43.800 it's profits that do. Right, And if the consumer is 0:07:43.840 --> 0:07:47.560 reacting because many businesses are pulling back on their investment 0:07:47.600 --> 0:07:51.320 in employment, that actually impacts the earning stream in different 0:07:51.360 --> 0:07:54.120 ways than I think many people think, because if we're 0:07:54.120 --> 0:07:58.160 seeing job losses emerge, which we did and in little 0:07:58.200 --> 0:08:00.000 bits and pieces over the course of the last day 0:08:00.040 --> 0:08:02.600 teen months, but nonetheless we did see job losses emerge. 0:08:03.120 --> 0:08:05.320 If we see those job losses emerge, that means companies 0:08:05.320 --> 0:08:08.560 are spending less, which means their margins can improve, which 0:08:08.560 --> 0:08:11.920 means they actually can have earnings growth. This is what 0:08:12.000 --> 0:08:14.640 took a lot of folks by surprise throughout twenty twenty three, 0:08:14.720 --> 0:08:17.680 is the earnings environment actually improved quite materially. Even though 0:08:17.680 --> 0:08:21.480 the economy was generally decelerating for much of this year, 0:08:22.080 --> 0:08:25.880 we did see profit growth emerge in the second half 0:08:25.920 --> 0:08:28.840 of this year. That's not because revenue growth got stronger. 0:08:29.000 --> 0:08:31.040 It's because companies were cutting costs. 0:08:31.640 --> 0:08:34.560 And we've seen that in information technology, Mike, You've seen 0:08:34.600 --> 0:08:37.559 some saying, well, maybe not going to you know, buy 0:08:37.600 --> 0:08:40.600 a whole new system of computers and mainframes. Have you 0:08:40.640 --> 0:08:42.040 seen Yeah, certainly. 0:08:42.320 --> 0:08:45.240 I think tech companies margin has been a driver for 0:08:45.520 --> 0:08:48.920 long term tech gains, especially last cycle, and I think 0:08:48.920 --> 0:08:51.319 that's really where they're focused. They can't really control what's 0:08:51.360 --> 0:08:54.440 going on in revenues. That's more economically sensitive, so everybody's 0:08:54.480 --> 0:08:56.200 going to focus on the margin line and how they 0:08:56.200 --> 0:08:58.680 can improve their business. And I'll just add that the 0:08:58.720 --> 0:09:02.120 trends that Genus pointing out are also evident in small caps, right, 0:09:02.200 --> 0:09:06.280 So small cap net income margins are actually starting to improve. 0:09:06.320 --> 0:09:09.000 They hit a bottom a few quarters ago and they're 0:09:09.000 --> 0:09:12.240 starting to move upward, and that's causing some earnings growth 0:09:12.280 --> 0:09:14.800 in the Russell two thousand when it's been pretty much 0:09:14.800 --> 0:09:18.120 a dearth for over a year. So an interesting trend 0:09:18.160 --> 0:09:18.800 of merging there. 0:09:19.559 --> 0:09:22.120 Well, as we start to wrap up, we talked about 0:09:22.120 --> 0:09:25.040 some sectors that have been in real trouble. Let's go 0:09:25.080 --> 0:09:27.640 back to the ones that are doing really well. AI 0:09:27.640 --> 0:09:31.240 fueled information technology sector is doing really well. You spoke 0:09:31.280 --> 0:09:34.520 of a few others. What can investors look forward to 0:09:34.960 --> 0:09:36.040 in the final month of the year. 0:09:36.320 --> 0:09:38.280 Yeah, so the final month of the year. I want 0:09:38.280 --> 0:09:40.920 to point out though, the valuations on tech. We keep 0:09:41.040 --> 0:09:44.920 talking about tech. Tech valuations are the only it's the 0:09:44.920 --> 0:09:47.439 only sector trading above its pre pandemic norm pretty much 0:09:47.720 --> 0:09:49.560 by a wide margin. If you look at everything else 0:09:49.559 --> 0:09:51.640 in the S and P five hundred, it's cheap to 0:09:51.679 --> 0:09:54.200 that pre pandemic five year average. So there's a bit 0:09:54.240 --> 0:09:57.079 of a dichotomy there in the S and P five hundred, 0:09:57.080 --> 0:09:59.040 and I'm really watching that going into the end of 0:09:59.080 --> 0:10:01.679 the year. I mentioned the communitycation stocks before having strong 0:10:01.679 --> 0:10:05.080 earnings growth. Communications actually is the cheapest sector in the 0:10:05.160 --> 0:10:06.880 S and P five hundred right now if you look 0:10:06.920 --> 0:10:11.679 at their megacaps, Alphabet, Matta, Disney, Netflix, all cheap to 0:10:11.720 --> 0:10:14.080 their pre pandemic five year averages, which is in stark 0:10:14.120 --> 0:10:16.760 contrast to everything else that's going on in tech, with Apple, 0:10:16.880 --> 0:10:21.280 Microsoft and Nvidia trading well above those averages. So that's 0:10:21.320 --> 0:10:22.360 what I'm watching the end of the year. 0:10:22.400 --> 0:10:24.160 Well, it's a lot to look forward to. And our 0:10:24.160 --> 0:10:28.040 thanks to Bloomberg Intelligence Chief Equity Strategist Gina Martin Adams 0:10:28.360 --> 0:10:31.920 and our colleague Bloomberg Intelligence Equity strategist Michael Casper. Thank 0:10:31.960 --> 0:10:32.840 you both for being here. 0:10:32.920 --> 0:10:34.240 Thank you very much for having us. 0:10:34.280 --> 0:10:34.600 Thank you. 0:10:34.760 --> 0:10:37.360 Coming up on Bloomberg day Break Weekend will take you 0:10:37.400 --> 0:10:39.959 to Europe to see how the mortgage and real estate 0:10:40.000 --> 0:10:43.240 markets in Britain are holding up. I'm Tom Busby and 0:10:43.320 --> 0:10:56.480 this is Bloomberg. This is Bloomberg day Break Weekend, our 0:10:56.520 --> 0:10:59.080 global look ahead at the top stories for investors in 0:10:59.120 --> 0:11:01.800 the coming week. I'm Tom Busby in New York. Up 0:11:01.840 --> 0:11:05.079 later in our program, as Congress returns from their holiday break, 0:11:05.120 --> 0:11:08.000 we preview the upcoming budget battles for the house in 0:11:08.080 --> 0:11:11.960 the new year. But first, in the UK, inflation is slowing, 0:11:12.040 --> 0:11:14.920 but the Bank of England is warning against any expectations 0:11:15.120 --> 0:11:18.800 of an interest rate cut. Cold comfort for suffering homeowners 0:11:19.000 --> 0:11:23.040 following fourteen rate hikes by the Central Bank. There. Fresh 0:11:23.120 --> 0:11:24.640 data in the coming days will tell us how the 0:11:24.679 --> 0:11:26.960 mortgage and real estate markets in Britain are holding up. 0:11:26.960 --> 0:11:29.319 And for more, let's go to London and bring in 0:11:29.360 --> 0:11:32.560 Bloomberg Daybreak europe Banker Caroline Hepgar Tom. 0:11:32.640 --> 0:11:35.199 Economists say that the UK housing market is in the 0:11:35.240 --> 0:11:38.160 middle of a slow puncture, so we're watching the upcoming 0:11:38.280 --> 0:11:42.600 data on mortgage lending and house prices carefully. Figures last 0:11:42.640 --> 0:11:46.840 month from Halifax and nationwide showed a slight uptick in prices, 0:11:46.920 --> 0:11:50.040 but also a major slow down in the number of sales. Economists, 0:11:50.080 --> 0:11:53.440 including our own nirvaj Sha, warned that prices still have 0:11:53.640 --> 0:11:56.320 further to fall. Joining me now to discuss is our 0:11:56.400 --> 0:11:59.880 economics report Lucy White and our European real Estate reported 0:12:00.080 --> 0:12:02.600 Damien Shepherd, you can tell us all about how the 0:12:02.640 --> 0:12:05.599 housing market is actually holding up. Damien, can you just 0:12:05.679 --> 0:12:08.760 talk us through where the UK housing market is at 0:12:08.800 --> 0:12:12.480 the moment. It's sort of quite difficult to discern that sometimes. 0:12:12.160 --> 0:12:12.760 Yeah, exactly. 0:12:12.840 --> 0:12:15.160 I think the main two things that people have their 0:12:15.200 --> 0:12:17.440 iron at the moment is where a house price is 0:12:17.440 --> 0:12:20.160 at and where a mortgage rate's at. In terms of 0:12:20.200 --> 0:12:24.520 the latter, mortgage rates are extremely high but steadily declining, 0:12:24.640 --> 0:12:27.240 And in terms of house prices, again we're seeing some 0:12:27.280 --> 0:12:30.880 steady declines, but not necessarily the doomsday predictions that we 0:12:30.960 --> 0:12:33.560 had at the back end of twenty twenty two. So 0:12:33.559 --> 0:12:36.160 there's some housing data coming out next week which should 0:12:36.160 --> 0:12:38.360 point us perhaps more in the direction as to where 0:12:38.360 --> 0:12:41.640 we're going. But we're in a period where buyers are 0:12:42.360 --> 0:12:45.320 looking at the market and thinking I'm priced out a 0:12:45.320 --> 0:12:47.400 lot of them are anyway, And at the same time, 0:12:47.480 --> 0:12:50.320 sellers will have a lot of nerves about where the 0:12:50.400 --> 0:12:52.360 value of their properties going. So in a bit of 0:12:52.400 --> 0:12:55.360 a strange period as we enter the winter, do. 0:12:55.280 --> 0:12:58.679 You expect the house prices to continue falling then? And 0:12:58.720 --> 0:13:02.120 sort of how severe? Because who's as I mentioned Niral 0:13:02.200 --> 0:13:04.480 Shah saying is actually a slow puncture. A lot of 0:13:04.480 --> 0:13:08.520 people had really thought, had not you know, completely discounted 0:13:08.520 --> 0:13:10.320 the idea for crash, But we don't seem to be 0:13:10.360 --> 0:13:13.840 in that position now. How far how fast do you 0:13:13.840 --> 0:13:15.280 think prices are falling? 0:13:15.840 --> 0:13:18.360 I think slow puncture is a really great definition for 0:13:18.400 --> 0:13:23.000 what's happening. I think we're in a period where the 0:13:23.040 --> 0:13:25.439 buyers are looking at the headlines and thinking I should 0:13:25.440 --> 0:13:27.640 be getting a discount if I'm buying a property now, 0:13:27.880 --> 0:13:30.520 And at the same time, you've got sellers who you know, 0:13:30.640 --> 0:13:33.800 aren't willing to come to terms with the fact that 0:13:33.880 --> 0:13:36.760 their house price is probably not worth what it was, 0:13:37.640 --> 0:13:41.120 you know, eighteen months ago. So I think once those 0:13:41.480 --> 0:13:45.280 you know, two things come together and buyers and sellers 0:13:45.320 --> 0:13:48.360 start to see more eye to eye, then we'll start 0:13:48.400 --> 0:13:50.240 to see those house prices accelerate more. 0:13:51.080 --> 0:13:53.320 Lucy White want to bring you in on this point. 0:13:53.400 --> 0:13:57.000 Then the relationship between the housing data that we get 0:13:57.000 --> 0:14:01.160 and the UK's overall economic position, I mean, the housing 0:14:01.280 --> 0:14:04.160 market is is a fundamental bedrock of the economy. 0:14:04.679 --> 0:14:07.400 Absolutely. I think this is one of the tensions that's 0:14:07.440 --> 0:14:10.440 really holding back any further force in prices at the 0:14:10.440 --> 0:14:12.600 moment is that actually, you know, we've had a lot 0:14:12.640 --> 0:14:14.840 of talk about a recession, but we haven't necessarily seen 0:14:14.880 --> 0:14:18.080 that yet, and in some ways the economy has held 0:14:18.160 --> 0:14:20.360 up a lot better than we might have expected in 0:14:20.400 --> 0:14:24.200 the aftermath of the pandemic. So what's actually holding back 0:14:24.240 --> 0:14:26.080 any further declines at the moment is the fact that 0:14:26.080 --> 0:14:29.320 we're not really seeing huge losses in the labor market. 0:14:29.320 --> 0:14:33.440 You know, we're not seeing huge rises in unemployment. And 0:14:33.560 --> 0:14:36.520 while there's no force selling, there's a real constraint on 0:14:36.600 --> 0:14:39.000 supply at the moment, so you know, people aren't being 0:14:39.040 --> 0:14:41.400 forced to sell their homes, so you know, there's nothing 0:14:41.440 --> 0:14:44.800 really pushing the house prices down. At the same time, 0:14:44.920 --> 0:14:47.400 you know, we've got buyers, as you say, constrained by 0:14:47.960 --> 0:14:52.080 you know, very high mortgage prices. So I think, you know, 0:14:52.160 --> 0:14:55.480 as long as the Bank of England base rate remains 0:14:55.520 --> 0:14:57.240 where it is at the moment, you know, we're not 0:14:57.280 --> 0:15:01.240 going to see mortgage rates hugely come down. A lot 0:15:01.280 --> 0:15:03.160 of economists I'm just talking to you are saying that 0:15:03.200 --> 0:15:05.720 we're not going to really see any any huge change 0:15:05.720 --> 0:15:08.040 in the mortgage rates until the Bank of England starts 0:15:08.280 --> 0:15:10.520 cutting its rate. Whether that is you know, as the 0:15:10.560 --> 0:15:13.120 market's expecting sometime next year or you know, the Bank 0:15:13.120 --> 0:15:14.760 of England is pushing back on that a little bit 0:15:14.800 --> 0:15:16.760 and saying, you know, it's going to be later and 0:15:16.800 --> 0:15:17.560 remains to be seen. 0:15:18.040 --> 0:15:22.480 And also of course the impact that people remortgaging has 0:15:22.520 --> 0:15:24.920 on consumer spending. I mean, you've got something like one 0:15:24.960 --> 0:15:28.800 point six million people who are still about to face 0:15:28.840 --> 0:15:31.000 a kind of a repricing in their mortgage, will have 0:15:31.040 --> 0:15:33.440 to re mortgage their homes. That could be a very 0:15:33.480 --> 0:15:36.920 significant effect that has yet to hit the economy. 0:15:36.520 --> 0:15:39.200 Absolutely, yeah. And whether we see you know, kind of 0:15:39.200 --> 0:15:43.240 people deciding to downgrade into smaller properties as that happens, 0:15:43.840 --> 0:15:45.640 it's still kind of up in the air at the moment. 0:15:45.960 --> 0:15:48.440 But you know, as we say, as you say, the 0:15:48.480 --> 0:15:52.200 Bank of England is thinking that around half of its 0:15:52.240 --> 0:15:55.160 monetary tightening, you know, those rate hikes that have happened 0:15:55.160 --> 0:15:58.040 since December twenty twenty one, about half the effect of 0:15:58.080 --> 0:16:00.720 that has been felt in the economy me so far. 0:16:01.520 --> 0:16:03.960 And partly that is because you know, we've got a 0:16:03.960 --> 0:16:07.280 lot more people now on fixed rate mortgages than we 0:16:07.360 --> 0:16:10.080 did have in the past, and they're not really feeling 0:16:10.120 --> 0:16:13.840 the effect of those base rate hikes until their fixed 0:16:13.920 --> 0:16:16.000 term comes to an end, and as you say, several 0:16:16.000 --> 0:16:18.120 of those are going to be next year, and that's 0:16:18.120 --> 0:16:20.360 when a lot of people really might start feeling the pain. 0:16:20.880 --> 0:16:25.200 Lucy, I wonder whether you were struck by you know, 0:16:25.240 --> 0:16:28.280 you're talking about young people, Damien, that the recent surveys 0:16:28.320 --> 0:16:30.720 around the number of young people you know who, especially 0:16:30.760 --> 0:16:33.080 those who are renting, who are leaving London and the 0:16:33.120 --> 0:16:38.840 Southeast because of affordability issues. I mean, the effect again 0:16:38.920 --> 0:16:44.240 on the UK economy is very significant in terms of 0:16:44.440 --> 0:16:48.800 you know, the property bonanza sort of helps fuel the 0:16:48.800 --> 0:16:51.360 wealth of many millions of people, but it has been 0:16:51.720 --> 0:16:56.520 really quite destructive to opportunities for others, especially perhaps younger people. 0:16:56.600 --> 0:16:58.640 Absolutely, yeah, and you know, we're seeing a lot of 0:16:59.240 --> 0:17:01.560 data at the moment saying that you know, if you 0:17:01.640 --> 0:17:04.840 can afford to buy a house, it's better than renting. 0:17:04.880 --> 0:17:09.280 You know, it's more cost effective than renting, and that's 0:17:09.320 --> 0:17:11.600 just not really an option for so many young people, 0:17:11.600 --> 0:17:13.840 as Damien was saying, because supply is so constrained in 0:17:13.880 --> 0:17:15.960 those hot spots like London. And as you say, we 0:17:16.000 --> 0:17:18.040 are seeing more and more evidence that younger people are 0:17:18.040 --> 0:17:21.440 starting to move out of the capital to find opportunities elsewhere. Anecdotally, 0:17:21.480 --> 0:17:25.280 I've been hearing from several businesses who are kind of saying, 0:17:25.280 --> 0:17:29.240 we're really struggling to recruit some of those younger graduate 0:17:29.880 --> 0:17:33.639 jobs because people just can't afford to live here anymore. 0:17:33.680 --> 0:17:36.000 You know, they're going to Manchester or Birmingham or Liverpool, 0:17:36.560 --> 0:17:38.720 and that's going to be a real problem, I think, 0:17:38.800 --> 0:17:43.199 especially as businesses try and you know, find people at 0:17:43.200 --> 0:17:44.880 that at that lower end of the scale. And it's 0:17:44.880 --> 0:17:46.280 worth saying as well that this is going to be 0:17:46.520 --> 0:17:49.320 a double edged sword for rishie Zunak ahead of an 0:17:49.359 --> 0:17:52.800 election next year because on the one hand, you know, 0:17:52.920 --> 0:17:55.920 his traditional voter base tend to be older people who 0:17:56.200 --> 0:17:58.200 don't want to see a fall in house prices. You know, 0:17:58.240 --> 0:18:01.040 they're sitting on properties that they've and they're very happy 0:18:01.080 --> 0:18:03.320 with the way things are going. But at the same time, 0:18:03.760 --> 0:18:06.920 the millennial generation is the first generation that isn't growing 0:18:06.960 --> 0:18:10.119 more conservative as it gets older, possibly because of you know, 0:18:10.160 --> 0:18:13.439 issues like house prices, and that's going to be a 0:18:13.480 --> 0:18:16.399 real challenge for the Conservative Party as it needs to 0:18:16.800 --> 0:18:21.200 you know, retain popularity among some of those age groups in. 0:18:21.240 --> 0:18:24.440 Terms of higher for longer then There's another argument though, 0:18:24.480 --> 0:18:26.800 in terms of the Bank of England keeping interest rates 0:18:26.800 --> 0:18:29.360 you know, perhaps higher for longer, which is still the 0:18:29.359 --> 0:18:33.280 theme that officials are talking about, that actually that can 0:18:33.359 --> 0:18:36.800 be absorbed, that the period of time over which will happen, 0:18:37.000 --> 0:18:39.359 that it's a normalization of interest rates, and that that 0:18:39.400 --> 0:18:43.439 can be absorbed that sort of strategy. How do we 0:18:43.480 --> 0:18:45.720 think about higher for longer From the Bank of England. 0:18:46.160 --> 0:18:48.320 I think it's something that they're really pushing on at 0:18:48.320 --> 0:18:50.200 the moment because they need to make sure that those 0:18:50.200 --> 0:18:54.760 inflation expectations among you know, people in the economy are anchored. 0:18:54.800 --> 0:18:56.040 You know, they don't want to end up in a 0:18:56.080 --> 0:18:59.480 situation like we were getting towards, you know, earlier this year, 0:18:59.520 --> 0:19:02.560 perhaps where people are thinking, oh, you know, inflation has 0:19:02.560 --> 0:19:05.800 been so high for so long that I don't believe 0:19:05.840 --> 0:19:07.440 it's going to come back down to two percent, which 0:19:07.480 --> 0:19:10.280 is where it's supposed to be, and for that reason 0:19:10.320 --> 0:19:14.240 they start bargaining up their wages again, inflation ends up 0:19:14.280 --> 0:19:17.600 in a sort of self sustaining doom loop essentially, So 0:19:17.640 --> 0:19:19.359 the Bank of England really is kind of trying to 0:19:19.400 --> 0:19:22.080 hammer home that message that we will stay high for 0:19:22.119 --> 0:19:23.160 as long as we need to. 0:19:23.480 --> 0:19:26.479 Thank you to Bloomberg Economics reporter Lucy White and our 0:19:26.520 --> 0:19:29.200 European real estate report at Damien Shepherd. Really great to 0:19:29.240 --> 0:19:31.680 have you on Bloomberg Radio. I'm Caroline Hepgar here in London. 0:19:31.720 --> 0:19:34.520 You can catch us every weekday morning for Bloomberg Daybreak. 0:19:34.560 --> 0:19:37.120 You're at beginning at six am in London. That's one 0:19:37.119 --> 0:19:38.240 am on Wall Street. 0:19:38.280 --> 0:19:41.560 Tom our thanks to Bloomberg day Break Europe Banker Caroline 0:19:41.600 --> 0:19:44.520 Hepgar and coming up on Bloomberg day Break weekend. It's 0:19:44.560 --> 0:19:47.359 a big week ahead in South Korea. We'll get a 0:19:47.359 --> 0:19:50.680 preview of what we can expect. I'm Tom Busby and 0:19:50.760 --> 0:20:03.800 this is Bloomberg. This is Bloomberg day Break Weekend, our 0:20:03.800 --> 0:20:06.159 global look ahead at the top stories for investors in 0:20:06.200 --> 0:20:09.560 the coming week. I'm Tom Busby in New York. Will 0:20:09.600 --> 0:20:12.680 the Bank of Korea keep the door open for another 0:20:12.880 --> 0:20:16.000 possible rate hike from the current three point five percent? 0:20:16.640 --> 0:20:18.879 Or will it keep its restrictive policy in place for 0:20:19.000 --> 0:20:22.280 longer after prices rose more than expected last month? For more, 0:20:22.720 --> 0:20:25.840 let's get to Bloomberg Daybreak Asia co host Doug Krisner. 0:20:25.960 --> 0:20:29.679 Tom, there are several positives for South Korea exports are recovering, 0:20:30.040 --> 0:20:32.680 the labor market has been resilient, and the economy is 0:20:32.680 --> 0:20:37.280 still expanding. Now the glaring negative. South Korea's household debt 0:20:37.440 --> 0:20:40.400 increased last quarter to a record. We want to take 0:20:40.440 --> 0:20:43.240 a closer look now with Bloomberg's Paul Jackson, who covers 0:20:43.320 --> 0:20:46.560 the economies of South Korea and Japan. He joins us 0:20:46.560 --> 0:20:49.119 from our studios in Tokyo. Paul, it's always a pleasure. 0:20:49.280 --> 0:20:52.399 So South Korea has avoided recession. We know that the 0:20:52.440 --> 0:20:54.600 Bank of Korea was one of the first global central 0:20:54.600 --> 0:20:56.920 banks to hike rates. I think there was a total 0:20:56.960 --> 0:21:00.280 of about three hundred basis points and tightening between August 0:21:00.280 --> 0:21:04.119 twenty one and January twenty three. Now, since January, the 0:21:04.160 --> 0:21:07.320 BOK has kept that key rate restrictive and it's done 0:21:07.320 --> 0:21:10.360 so for five consecutive meetings. So we have a policy 0:21:10.400 --> 0:21:12.919 meeting in the coming week. I mentioned the fact that 0:21:12.920 --> 0:21:17.320 household dead is elevated. It seems like tighter credit conditions 0:21:17.440 --> 0:21:19.760 are warranted. So what's next for the BOKA. 0:21:20.160 --> 0:21:23.639 Well, I think they're going to keep with this hawkish 0:21:23.720 --> 0:21:26.480 hold stance. It makes a lot of sense for them. 0:21:27.000 --> 0:21:30.639 They kind of threaten to go higher. They talk about 0:21:30.720 --> 0:21:34.840 taking rates higher if needed, but really I think we've 0:21:34.840 --> 0:21:39.040 got into a situation where it's about keeping the rate 0:21:39.160 --> 0:21:42.240 where it is at three point five percent, which is 0:21:42.520 --> 0:21:45.399 the highest it's been since two thousand and eight. So 0:21:45.480 --> 0:21:48.760 it is pretty restrictive, and it's a case of keeping 0:21:48.800 --> 0:21:53.600 this in place for longer rather than going higher. And 0:21:53.760 --> 0:21:59.080 we spoke to an ex board member just earlier this month, 0:21:59.119 --> 0:22:02.040 and that was kind of a view that he adhered to, 0:22:02.200 --> 0:22:04.960 that it's a case of sticking at this three point 0:22:05.000 --> 0:22:09.359 five percent for longer rather than pushing it higher. Now, 0:22:09.600 --> 0:22:13.800 we have seen some challenges to the central banks inflation 0:22:13.960 --> 0:22:18.160 few and for economists too, because we're up to three 0:22:18.200 --> 0:22:21.760 point eight percent again, and you know, we were down 0:22:21.800 --> 0:22:24.520 in the two percent range earlier in the year, so 0:22:25.200 --> 0:22:28.160 things have been heating up. This is not exactly what 0:22:28.200 --> 0:22:31.960 you're wanting to see if you're an inflation fighting a bank. 0:22:32.200 --> 0:22:36.800 But given these household debt concerns and so on, I 0:22:36.840 --> 0:22:38.840 think they just want to keep it at the sweet 0:22:38.840 --> 0:22:40.359 spot of three point five percent. 0:22:40.440 --> 0:22:43.919 So is anyone concerned about stress in the overall financial 0:22:43.960 --> 0:22:46.280 system as a result of household at being so high? 0:22:46.280 --> 0:22:48.159 Has that been a concern at this point. 0:22:48.880 --> 0:22:52.240 I think it has been a concern, and in terms 0:22:52.240 --> 0:22:57.640 of dealing with that issue, I think the property market 0:22:57.680 --> 0:23:01.880 is a key supplier of this household debt, the key 0:23:01.960 --> 0:23:04.720 factor in this household debt. So it's been a case 0:23:04.760 --> 0:23:08.639 of ensuring that the property market doesn't crash. Now in 0:23:08.680 --> 0:23:14.639 actual fact, well there was a fall in prices. Everything's 0:23:14.920 --> 0:23:18.080 on the rise again and that's been one of the 0:23:18.119 --> 0:23:22.359 reasons why the household debt started to rise again. So 0:23:22.480 --> 0:23:24.879 I think some of these measures that the government took 0:23:25.200 --> 0:23:29.400 to ensure that the property market didn't crash maybe been 0:23:29.440 --> 0:23:32.760 a bit too successful and now feeding into the debt. 0:23:32.840 --> 0:23:34.679 So maybe it's a case of the government needing to 0:23:34.760 --> 0:23:37.480 pair back some of its extra measures to support the 0:23:37.480 --> 0:23:40.399 property market. That's the better way forward than getting the 0:23:40.440 --> 0:23:43.560 Bank of Korea to change policy, which is more like 0:23:43.720 --> 0:23:47.440 moving your super tanker in the ocean. It's not something 0:23:47.480 --> 0:23:48.720 you want to do lightly. 0:23:48.600 --> 0:23:50.959 So very quickly. What did the government do to support 0:23:51.040 --> 0:23:53.520 the property market to keep things from crashing. 0:23:53.880 --> 0:23:56.600 Well, I think it's just a case of enabling people 0:23:56.640 --> 0:24:01.760 to take out loans to buy, and also to support 0:24:02.480 --> 0:24:07.280 those owners looking to turn over their properties and put 0:24:07.320 --> 0:24:12.800 more out into the market. Keeping the liquidity going in place. 0:24:12.960 --> 0:24:15.760 It's South Korea is such an important bell weather for 0:24:15.800 --> 0:24:18.720 global trade. I think exports account for roughly forty percent 0:24:18.760 --> 0:24:23.080 of GDP. We're talking about semiconductors, we're talking about automobiles, 0:24:23.200 --> 0:24:26.600 even cargo ships. How is the export side of the 0:24:26.640 --> 0:24:30.119 economy functioning? And given the fact that you know, China 0:24:30.280 --> 0:24:33.120 is still weak, we've got weakness in Europe. I mean, 0:24:33.359 --> 0:24:34.720 is that showing up in the data. 0:24:35.800 --> 0:24:38.520 Yeah, I think we're you know, we are seeing that 0:24:38.560 --> 0:24:43.159 the figures not just in South Korea but also in 0:24:43.240 --> 0:24:47.159 Japan and around the region. Still fairly feeble for China, 0:24:47.240 --> 0:24:52.480 but showing signs of improvement. I think the overall export 0:24:52.600 --> 0:24:56.240 picture is starting to look rosier for South Korea. We 0:24:56.400 --> 0:24:59.800 have had the first rise year on year last month, 0:25:00.040 --> 0:25:03.760 and we've got preliminary data for November also pointing to 0:25:04.320 --> 0:25:08.880 a further gain this month. And remember the exports did 0:25:08.920 --> 0:25:12.600 help lift GDP in the last quarter. We're expecting a 0:25:12.760 --> 0:25:15.000 year on year growth to be about two percent in 0:25:15.040 --> 0:25:18.760 the last quarter. That's the economist's view. So that should 0:25:19.000 --> 0:25:22.440 take us to about one point four percent for the year, 0:25:22.440 --> 0:25:25.640 which is in line with the IMF forecast. A note 0:25:25.720 --> 0:25:29.280 also The IMF released its report last week on South 0:25:29.359 --> 0:25:32.520 Korea and says, hey, Bank of Career should really just 0:25:32.560 --> 0:25:37.120 stay where it is, keep policy going, and exports should 0:25:37.160 --> 0:25:41.760 help to lift the economy next year for growth over 0:25:41.840 --> 0:25:43.399 two percent two point four percent. 0:25:43.480 --> 0:25:46.280 Obviously, the currency is a big part of the trade story, 0:25:46.359 --> 0:25:49.360 and the Korean one has been holding up reasonably well, 0:25:50.040 --> 0:25:54.600 particularly against the dollar. If the FED now begins to 0:25:54.640 --> 0:25:57.679 make a minor change in policy, Let's assume for the 0:25:57.680 --> 0:25:59.560 moment that the FED is on hold and maybe in 0:25:59.600 --> 0:26:02.679 fact we get raid cuts mid twenty twenty four. What 0:26:02.800 --> 0:26:05.560 would be the outlook then for the Korean currency? Wouldn't 0:26:05.600 --> 0:26:08.200 it strengthen? And might that not be a negative when 0:26:08.240 --> 0:26:09.840 you consider the trade story. 0:26:10.280 --> 0:26:13.240 Well, I think that the one has been at very 0:26:13.280 --> 0:26:16.320 low levels. We're in a better position than we were 0:26:16.480 --> 0:26:18.480 a year ago. I mean, in the fall of last 0:26:18.560 --> 0:26:23.119 year it was pushing four hundred and fifty, which was 0:26:23.800 --> 0:26:26.520 seen as very very weak for the one. We're in 0:26:26.560 --> 0:26:30.600 a better place now would below oney three hundred, so hey, 0:26:30.920 --> 0:26:33.199 a bit more strengthening. I don't think that's going to 0:26:33.200 --> 0:26:35.719 be too bad, and I don't think policymakers are going 0:26:35.760 --> 0:26:38.159 to be too concerned about that it's really been the 0:26:38.440 --> 0:26:42.040 weakness that has been the concern up till now. 0:26:42.600 --> 0:26:44.879 So we were talking about the importance of trade, and 0:26:44.960 --> 0:26:47.960 I know that the South Korean president was recently in 0:26:48.000 --> 0:26:51.520 the UK looking to establish a free trade agreement. What 0:26:51.560 --> 0:26:52.480 do we know about that? 0:26:52.840 --> 0:26:57.040 Yeah, so President Yun has been in the UK this week. 0:26:57.080 --> 0:27:01.159 He met King Charles the Third and also Prime Minister 0:27:01.520 --> 0:27:06.480 Rishi Sinak and they're essentially launched kind of officially the 0:27:06.520 --> 0:27:10.400 trade negotiations between the two sides. Now, if you think 0:27:10.520 --> 0:27:15.080 back to Brexit, when the UK left the EU, you 0:27:15.119 --> 0:27:19.199 know they had to quickly renegotiate trade agreements with some 0:27:19.320 --> 0:27:22.200 key countries and Career was one of them. But essentially 0:27:22.240 --> 0:27:24.440 all the conditions in the agreement they've got in place 0:27:24.480 --> 0:27:27.280 at the moment are just like copycat, you know, what 0:27:27.400 --> 0:27:33.320 they had during the time of membership of the EU. 0:27:33.640 --> 0:27:38.359 So now these latest round of negotiations should give you know, 0:27:38.480 --> 0:27:42.679 more concrete signs of whether you know, there's an actual 0:27:42.800 --> 0:27:46.000 change in the trade relations that's more favorable to both countries. 0:27:46.200 --> 0:27:48.760 And let's face it, for the UK that's probably more 0:27:48.800 --> 0:27:52.640 important to them because they've got to justify this move 0:27:53.000 --> 0:27:55.360 out of the EU, which hasn't been a great success 0:27:55.400 --> 0:27:55.720 so far. 0:27:55.880 --> 0:27:57.520 Yeah, yeah, and I would imagine a lot of the 0:27:57.520 --> 0:28:00.159 focus is going to be on critical technologies. I'm thinking 0:28:00.240 --> 0:28:06.080 artificial intelligence, quantum computing, semiconductors obviously, do I have that right. 0:28:06.800 --> 0:28:08.639 Yeah, that's right. The corporation is going to be a 0:28:08.680 --> 0:28:14.080 lot of that. They have announced more research funding for 0:28:14.520 --> 0:28:17.760 UK and South Korea to be looking into those areas 0:28:17.800 --> 0:28:22.600 of artificial intelligence semiconductors, as you mentioned, So that's a 0:28:22.680 --> 0:28:25.280 key point of the cooperation between the two sides. 0:28:25.359 --> 0:28:27.560 Paul, it's always a pleasure. Thank you so much for 0:28:27.600 --> 0:28:30.360 spending some time to chat with us. Bloomberg's Paul Jackson. 0:28:30.440 --> 0:28:33.200 He covers the economies of South Korea and Japan for 0:28:33.359 --> 0:28:36.679 us from our bureau in Tokyo. I'm Doug Krisner. You 0:28:36.680 --> 0:28:39.720 can catch Brian Curtison myself weekdays here for Bloomberg day 0:28:39.720 --> 0:28:42.960 Break Asia, beginning at seven am in Hong Kong six 0:28:43.040 --> 0:28:44.160 pm on Wall Street. 0:28:44.320 --> 0:28:47.800 Tom, Thank you, Doug, and coming up on Bloomberg Daybreak weekend, 0:28:47.880 --> 0:28:50.720 the House getting ready to return from its Thanksgiving break 0:28:50.760 --> 0:28:53.680 with a very long to do list for lawmakers as 0:28:53.680 --> 0:28:56.360 they head back to the capital. I'm Tom Busby, and 0:28:56.480 --> 0:29:03.280 this is Bloomberg. I'm Tom Busby in New York with 0:29:03.360 --> 0:29:05.720 your global look ahead at the top stories for investors 0:29:05.720 --> 0:29:07.840 in the coming week. And it's a busy week on 0:29:07.920 --> 0:29:12.000 Capitol Hill as lawmakers return from their Thanksgiving break. For more, 0:29:12.120 --> 0:29:14.360 Let's head to our Bloomberg ninety nine one newsroom in 0:29:14.440 --> 0:29:17.840 Washington and Bloomberg's sound on co host Kaylee Lines. 0:29:18.080 --> 0:29:21.120 Yeah, Tom. After enjoying the Thanksgiving holiday at home with 0:29:21.200 --> 0:29:25.760 their families, lawmakers may find their thankfulness slowly morphing into 0:29:25.840 --> 0:29:28.800 dread as they return to Washington to face a lot 0:29:28.800 --> 0:29:31.400 of business that they have to deal with, and it 0:29:31.520 --> 0:29:34.680 might not be easy. Joining us now for more on 0:29:34.720 --> 0:29:36.959 the long to deal list Bloomberg's Billy House who covers 0:29:36.960 --> 0:29:40.960 Congress for us. So, Billy first and foremost, let's talk 0:29:40.960 --> 0:29:43.760 about funding, because, of course, before they left for Thanksgiving, 0:29:43.800 --> 0:29:47.160 Congress passed a continuing resolution kicked the can down the 0:29:47.200 --> 0:29:51.400 road to two different funding deadlines January nineteenth and February second. 0:29:52.000 --> 0:29:54.280 It still might be far away enough that they aren't 0:29:54.280 --> 0:29:56.400 going to face the real pressure to get it figured 0:29:56.440 --> 0:29:58.040 out for a while. What's your sense? 0:29:59.120 --> 0:30:01.920 That's absolutely correct. What they did was avoid what we've 0:30:01.920 --> 0:30:05.800 seen in recent years jamming by one party or the 0:30:05.840 --> 0:30:09.440 other of a bill right before Christmas. But what new 0:30:09.520 --> 0:30:12.400 Speaker Mike Johnson did do in the Senate followed up 0:30:12.400 --> 0:30:15.760 by approving it was past a CR or current funding levels, 0:30:16.680 --> 0:30:18.840 a different approach, a two step approach. It would see 0:30:18.880 --> 0:30:24.600 some agencies come up for expiration of that funding in 0:30:24.880 --> 0:30:27.360 on January nineteenth and others on February twentieth. That's a 0:30:27.400 --> 0:30:30.360 two step sort of now deadline that he faces. That 0:30:30.440 --> 0:30:32.480 might have seemed like a good idea, but as the 0:30:32.560 --> 0:30:35.800 days go by, we see more of his people upset 0:30:35.800 --> 0:30:39.280 about that approach, saying it's very very much like his 0:30:39.400 --> 0:30:44.600 predecessor Kevin McCarthy as Speaker and relied on Democratic votes 0:30:44.640 --> 0:30:47.440 to get passed in the House. So there's been a 0:30:47.440 --> 0:30:49.360 lot of upset over that, and that will play out 0:30:49.400 --> 0:30:50.240 over the next week. 0:30:50.760 --> 0:30:53.959 Yeah, exactly. It's very similar in that it was a 0:30:54.000 --> 0:30:57.280 clean continuing resolution, no spending cuts included, and passed with 0:30:57.320 --> 0:31:00.000 overwhelming Democratic support. And yet it seems like, at least 0:31:00.120 --> 0:31:03.840 for the time being, Mike Johnson, the new Speaker, got 0:31:03.880 --> 0:31:06.440 away with it. I just wonder how long realistically that 0:31:06.560 --> 0:31:09.560 grace is going to last, how stable at footing his 0:31:09.680 --> 0:31:11.080 speakership is on. 0:31:11.440 --> 0:31:15.920 Well, it is the same mass that plagued or be 0:31:16.040 --> 0:31:21.640 deviled McCarthy with the filling of a new swearing in 0:31:21.840 --> 0:31:28.720 of a Republican this week after last week's election in Utah, 0:31:29.960 --> 0:31:34.440 Johnson can only afford to lose now four Republican votes 0:31:34.440 --> 0:31:37.560 on party line votes. That's the same math that led 0:31:37.680 --> 0:31:40.120 McCarthy to have to make deals with Democrats on almost 0:31:40.160 --> 0:31:42.400 every spending bill. That's not going to change for Johnson 0:31:42.440 --> 0:31:45.600 early next year. And so the question is he has 0:31:45.600 --> 0:31:48.120 said he's not going to do any more stopgapp spending 0:31:48.160 --> 0:31:51.560 bills known as continuing resolutions, as he just did. But 0:31:51.960 --> 0:31:54.240 how is he going to pass anything without Democrats? And 0:31:55.160 --> 0:31:58.000 that's going to be the big deal when his conservative 0:31:58.120 --> 0:32:03.400 far rank, far right rank flank wants deep spending cuts 0:32:03.400 --> 0:32:04.680 and changes to policies. 0:32:04.920 --> 0:32:07.880 And of course that's just on the appropriations side of 0:32:07.920 --> 0:32:10.440 the equation. There's also the question of emergency funding for 0:32:10.560 --> 0:32:15.800 Israel and Ukraine. Is that realistically something that could happen 0:32:15.840 --> 0:32:17.120 before the end of this year. 0:32:17.480 --> 0:32:19.800 That's the goal is to do it by mid December 0:32:19.880 --> 0:32:22.080 or by the end of the year. But and Senate 0:32:22.120 --> 0:32:26.320 supporters of the Ukraine aid anyway in both and backers 0:32:26.320 --> 0:32:31.280 in both parties are negotiating on some way out of that. 0:32:31.920 --> 0:32:35.920 The outlook in the House again is murkier because the 0:32:36.200 --> 0:32:41.920 conservatives there that are demanding stark immigration changes as part 0:32:41.920 --> 0:32:45.480 of that package, and the Senate Democrats who control that 0:32:45.600 --> 0:32:47.360 chamber just aren't going to go along with some of 0:32:47.360 --> 0:32:50.400 the things that are being floaded by the House Republicans. 0:32:50.680 --> 0:32:54.520 So that's still murky. And then there's a course aid 0:32:54.600 --> 0:32:58.600 to Israel. As time goes on and more and more 0:32:58.760 --> 0:33:04.400 public opposition shin or the polls starts showing less support 0:33:04.520 --> 0:33:09.520 for continuing levels of Israel funding, that's murk here too. 0:33:09.840 --> 0:33:12.240 All Right, well, I guess we'll see. I would imagine 0:33:12.280 --> 0:33:16.440 that George Santos wasn't feeling super thankfulness thanksgiving. Billy House, 0:33:16.440 --> 0:33:20.360 Bloomberg Congressional reporter, thank you so much, and Tom again, 0:33:20.600 --> 0:33:22.200 that to do list is long. 0:33:22.440 --> 0:33:24.760 Thank you, Kaylee. That was Bloomberg sound On co host 0:33:24.840 --> 0:33:27.400 Kaylee Lines reporting from our Bloomberg ninety nine to one 0:33:27.440 --> 0:33:31.120 newsroom in Washington, and you can hear sound on weekdays 0:33:31.280 --> 0:33:34.200 one to three pm Wall Street time on Bloomberg Radio. 0:33:34.480 --> 0:33:36.520 And that does it for this edition. Of Bloomberg day 0:33:36.520 --> 0:33:39.160 Break weekend. Join us again Monday morning at five am 0:33:39.200 --> 0:33:41.640 Wall Street Time for the latest on the market's overseas 0:33:41.680 --> 0:33:44.360 and the news you need to start your day. I'm 0:33:44.400 --> 0:33:47.400 Tom Buzzbeak. Stay with us. Top stories and global business 0:33:47.440 --> 0:33:49.760 headlines are coming up right now.