Jay Powell Signals No Hike, Amazon Earnings On Tap, and China Looks To Expand Global Influence

This is Bloomberg day Break Weekend, our global look at 0:00:06.280 --> 0:00:08.280 the top stories in the coming week from our day 0:00:08.280 --> 0:00:11.400 Break anchors all around the world. And just to handle 0:00:11.400 --> 0:00:14.960 the program, Earnings, earnings and more earnings, big Tech highlights 0:00:14.960 --> 0:00:17.760 the week, plus Chair Jay Cowell, the Fawn's the Fed's 0:00:17.800 --> 0:00:21.480 plan to continue fighting inflation. I'm John Tucker in New York. 0:00:21.920 --> 0:00:24.799 I'm Brian Curtis in Hong Kong. We look at China's 0:00:24.800 --> 0:00:27.280 efforts to do more on the global stage. 0:00:28.000 --> 0:00:30.240 I'm Caroline Hedker Hair in London, where we're looking at 0:00:30.280 --> 0:00:33.160 the European response to the Israel Hamas Wool. 0:00:35.159 --> 0:00:39.159 That's all straight ahead on Bloomberg Daybreak Weekend, the business 0:00:39.240 --> 0:00:41.560 news You need to wrap up your week in just 0:00:41.720 --> 0:00:46.239 one fifteen minute podcast available on Apple, Spotify, the Bloomberg 0:00:46.320 --> 0:00:48.920 Business App, and everywhere you get your podcasts. 0:00:52.600 --> 0:00:55.600 Hi everybody, I'm John Tucker, and we begin today's program 0:00:55.720 --> 0:00:59.240 with companies opening their books. A big week for earnings 0:00:59.320 --> 0:01:01.080 with about a third of the S and P five 0:01:01.160 --> 0:01:04.840 head at reporting this coming week. Among the highlights, Google, 0:01:05.160 --> 0:01:10.000 Meta and Amazon. And let's start right now with Bloomberg 0:01:10.080 --> 0:01:15.120 Intelligence Senior US retail analyst Punamgoyle as she covers Amazon 0:01:15.280 --> 0:01:18.200 for us put them good to talk to Amazon reporting 0:01:18.319 --> 0:01:21.639 third quarter earnings in the coming week, can you break 0:01:21.760 --> 0:01:25.640 down for us the part the important parts of Amazon. 0:01:26.360 --> 0:01:29.280 They're not just selling stuff online that then gets delivered 0:01:29.319 --> 0:01:30.280 to my front porridge. 0:01:30.520 --> 0:01:32.400 No they're not. They're doing a lot more than that. 0:01:32.600 --> 0:01:36.160 So when you think about Amazon, you clearly have their marketplace, 0:01:36.200 --> 0:01:38.760 which is Amazon dot Com. But they also have a 0:01:38.800 --> 0:01:41.800 big business known as awus, which is their cloud business, 0:01:42.319 --> 0:01:46.000 which not only is a growing business, it's also Amazon's 0:01:46.080 --> 0:01:50.720 most profitable business, contributing to largely all its profit are 0:01:50.800 --> 0:01:53.400 most of its profits today. Those are the two big 0:01:53.480 --> 0:01:56.880 businesses inside Amazon. But within that there's also a third 0:01:56.920 --> 0:01:59.960 business which is now a forty plus billion dollar busin 0:02:00.560 --> 0:02:04.040 it is their advertising business, and that business continues to 0:02:04.160 --> 0:02:07.960 grow at a twenty percent plush clip. It also boasts 0:02:08.240 --> 0:02:11.560 high profit margins, which we think will be the third 0:02:12.120 --> 0:02:15.320 growth river to the Amazon story and a key one, 0:02:15.480 --> 0:02:18.680 especially in the coming years of the scales app business. 0:02:18.800 --> 0:02:21.840 Even further, Yeah, you know, when I signed up for Prime, 0:02:21.919 --> 0:02:27.640 I got Prime Video, and only because I can't share 0:02:27.720 --> 0:02:31.520 somebody's Netflix account anymore. I think I've switched to commercials 0:02:31.560 --> 0:02:35.040 on that and is that really a driving force for them? 0:02:35.160 --> 0:02:37.799 Well, it is so right now, their advertising business, the 0:02:37.880 --> 0:02:40.560 forty billion dollars roughly business that I talked about, is 0:02:40.680 --> 0:02:44.280 primarily driven by their retail business. So the add on 0:02:44.639 --> 0:02:49.120 of these ads onto Prime video is incremental. And remember 0:02:49.200 --> 0:02:51.720 you have the option right you can choose the ad 0:02:51.800 --> 0:02:54.480 free version and pay for that, or you can take 0:02:54.520 --> 0:02:57.880 the adversion, So the clients will have an opportunity to 0:02:58.000 --> 0:03:01.200 decide what works for them. Given that they've added this 0:03:01.320 --> 0:03:04.040 new revenue stream for advertising, it's only going to help 0:03:04.360 --> 0:03:08.400 growth even faster for the advertising segment of their business. 0:03:08.880 --> 0:03:14.560 You mentioned AWS, How does generative AI everybody's latching on 0:03:14.680 --> 0:03:16.040 to that. How does that figure into it? 0:03:16.240 --> 0:03:19.240 Yeah, Generative AI is really something that Amazon is investing 0:03:19.280 --> 0:03:21.760 heavily in, just like the rest of the world, including 0:03:21.840 --> 0:03:25.320 tech companies and even retail companies. You know, it's all 0:03:25.360 --> 0:03:28.000 about making sure that you can really use the data 0:03:28.040 --> 0:03:31.079 that you've have hand at hand, and you can implement 0:03:31.240 --> 0:03:35.080 solutions to make it plus frictionless for the consumer and 0:03:35.200 --> 0:03:38.600 also provide capabilities to businesses. For Amazon, which is for 0:03:38.640 --> 0:03:42.600 AWS to really grow their business in a way that 0:03:42.800 --> 0:03:44.040 they couldn't do it before. 0:03:44.160 --> 0:03:44.240 Right. 0:03:44.320 --> 0:03:46.960 We've heard of AI for a very long time, for decades, 0:03:47.000 --> 0:03:50.040 it's been around, but generative AI is truly game it's 0:03:50.080 --> 0:03:52.680 a game changer. And our colleague wandsays, we're in a 0:03:52.840 --> 0:03:55.640 whole piece on generative AI where you know, they talk 0:03:55.680 --> 0:03:58.920 about just the growth in that industry and the investments 0:03:58.960 --> 0:04:01.360 that are going to come and I have already started 0:04:01.360 --> 0:04:05.880 to begin. That's really going to help improve ROI across 0:04:06.000 --> 0:04:08.800 every facet of the organization, whether it's on the e 0:04:08.920 --> 0:04:11.840 commerce side, whether it's in the back office, whether it's 0:04:11.880 --> 0:04:14.960 in marketing and advertising. I mean, you name it. It's 0:04:15.000 --> 0:04:17.599 going to implement every it's going to have an impact 0:04:17.680 --> 0:04:19.000 on every part of your business. 0:04:19.279 --> 0:04:21.479 Oh, the Prime Day events was so what do they 0:04:21.560 --> 0:04:22.920 tell us? How did they go so far? 0:04:23.160 --> 0:04:25.640 They actually went really well. You know what we noticed 0:04:25.680 --> 0:04:29.679 over the Prime Day that just happened recently is according 0:04:29.720 --> 0:04:32.599 to numbers that we've seen, sales were up about six percent. 0:04:33.120 --> 0:04:36.480 And that's pretty impressive just given that we're in a 0:04:36.560 --> 0:04:39.200 period of time where the consumer, you know, could be 0:04:39.320 --> 0:04:42.520 stretched a little in terms of their pocketbook because of 0:04:42.600 --> 0:04:45.760 the growing interest rates, the rising debt levels that we're seeing. 0:04:45.800 --> 0:04:49.720 Consumer confidence is clearly you know, not where we'd like 0:04:49.800 --> 0:04:52.480 it to be. So we do think that having a 0:04:52.560 --> 0:04:56.560 respectable mid single digit game based on numerator numbers is 0:04:56.960 --> 0:05:00.800 a good number, and it's actually bodes for the holiday 0:05:00.839 --> 0:05:05.520 season for Amazon. The desire for value is clearly fun 0:05:05.640 --> 0:05:07.720 and center in the consumer's mind and we saw that 0:05:07.839 --> 0:05:08.560 over Prime Day. 0:05:08.720 --> 0:05:11.839 Okay, so real quick, what do you expect from Amazon's results? 0:05:12.080 --> 0:05:14.360 I think the results will be good. On the online side. 0:05:14.440 --> 0:05:16.760 We'll start to see mid single digit game, which is 0:05:16.800 --> 0:05:20.360 an improvement from earlier this year when salesware down. I 0:05:20.480 --> 0:05:23.960 also think the cloud business will hold study. Our analysts 0:05:23.960 --> 0:05:26.400 who covers the cloud business you know, thinks that the 0:05:26.720 --> 0:05:29.320 uptick that we wanted to see later this year won't 0:05:29.360 --> 0:05:31.479 come as soon as we expected, but the business will 0:05:31.520 --> 0:05:34.560 still hold study at around a twelve percent clip. And 0:05:35.360 --> 0:05:37.880 next year is really when we'll start to see improvement 0:05:37.960 --> 0:05:39.960 in the cloud business of growth rates will begin to 0:05:40.040 --> 0:05:43.440 pick up. The longer term opportunity for aw rest remains 0:05:43.600 --> 0:05:47.720 very much impact with margins increasing and growth also increasing. 0:05:48.400 --> 0:05:52.000 That's the preview of the Amazon from Bloomberg Intelligence. Senior 0:05:52.240 --> 0:05:55.600 US retail analyst Punham Goil put them, Thanks very much, 0:05:55.720 --> 0:05:58.760 appreciate it and the other earnings we're keeping track of 0:05:58.920 --> 0:06:03.520 and previewing Amazon and Meta platforms. And to take a 0:06:03.560 --> 0:06:07.760 deeper dive into that, Bloomberg Intelligence Senior technology analyst man 0:06:07.960 --> 0:06:11.840 Deep Sing joints us, what's the overarching themes for all 0:06:11.920 --> 0:06:12.640 these companies? 0:06:13.200 --> 0:06:16.760 Well, so, for Alphabet and Meta, clearly there is a 0:06:16.880 --> 0:06:20.520 read through on ad spending and it is tied to Macro. 0:06:20.880 --> 0:06:25.000 So if Tesla is saying macro is not looking good, 0:06:25.560 --> 0:06:28.800 that doesn't bode very well for ad spending. At the 0:06:28.880 --> 0:06:34.440 same time, these companies have much easier comps going into 0:06:34.520 --> 0:06:37.800 this quarter because the last four quarters weren't that great either. 0:06:38.440 --> 0:06:42.320 So my sense is, given what we have heard so far, 0:06:42.560 --> 0:06:45.520 they should at least have an inline quota or at 0:06:45.640 --> 0:06:49.320 least better than expected given the easier comps I alluded to, 0:06:49.520 --> 0:06:52.640 and the ad pricing has gotten better from the data 0:06:52.680 --> 0:06:54.200 points that we've gutted so far. 0:06:54.400 --> 0:06:57.640 Yeah, we had those bang up results from Netflix. Does 0:06:57.680 --> 0:07:01.080 that give us any indication what we can expect here? 0:07:01.520 --> 0:07:01.719 Yeah? 0:07:01.880 --> 0:07:09.120 So, Actually Alphabet has exposure to YouTube where which is 0:07:09.320 --> 0:07:12.520 very similar to Netflix in terms of the subscription side 0:07:12.560 --> 0:07:15.120 of the business as well as ads, is much bigger 0:07:15.320 --> 0:07:19.400 and what Netflix said last night was they were able 0:07:19.440 --> 0:07:23.360 to raise prices without really causing churn as well as 0:07:23.440 --> 0:07:26.360 they saw some lift in their ads business. Albeit it's 0:07:26.520 --> 0:07:29.720 very small for Netflix, but clearly the read through is 0:07:30.440 --> 0:07:34.360 YouTube numbers should look solid when Alphabet reports. And now 0:07:34.440 --> 0:07:38.520 on the cloud side, another of alphabet segments, the tailwinds 0:07:38.520 --> 0:07:42.440 are their generative AI investments should help Alphabet Cloud segment 0:07:42.520 --> 0:07:45.920 actually to post better than expected print. 0:07:45.840 --> 0:07:50.600 All right with Punam we discussed generitive AI. How does 0:07:50.680 --> 0:07:53.520 it apply here? I mean specifically, give me a good example. 0:07:53.760 --> 0:07:59.200 So Alphabet has launched their own copilots for their productivity suite, 0:07:59.320 --> 0:08:02.880 so these are subscription based offerings as well as the 0:08:03.120 --> 0:08:06.360 entire training of these large aguage models is done on 0:08:06.520 --> 0:08:09.400 the cloud and Alphabet we know Google Cloud is one 0:08:09.440 --> 0:08:12.480 of the most formidable players when it comes to generative 0:08:12.480 --> 0:08:13.160 AI training. 0:08:13.400 --> 0:08:15.360 What are large language models? 0:08:16.480 --> 0:08:20.760 So in a nutshell, these are you know, models that 0:08:20.960 --> 0:08:24.880 can do a lot of things, you know, from being 0:08:24.960 --> 0:08:30.040 a chat bot to doing language translations, to helping you 0:08:30.120 --> 0:08:33.600 with your searches and really you know, with the chat 0:08:33.679 --> 0:08:38.319 gipt wave catching on this year, this has become a 0:08:38.400 --> 0:08:40.319 big market. In fact, we think it's going to be 0:08:40.360 --> 0:08:42.679 a trillion dollar market over the next ten years. In 0:08:42.800 --> 0:08:46.160 terms of influencing how we use our software, this will 0:08:46.200 --> 0:08:50.120 be a feature in everything we interact with around us 0:08:50.160 --> 0:08:52.600 with a software, websites, apps. 0:08:53.200 --> 0:08:56.840 Yeah, every time I use my free YouTube looking at 0:08:56.920 --> 0:08:59.280 videos on that, it asked me if I want to 0:08:59.320 --> 0:09:02.960 sign up or the paid subscription service? Is that really 0:09:03.000 --> 0:09:05.120 a driver a lot of people going to that? I 0:09:05.240 --> 0:09:05.520 think so. 0:09:06.200 --> 0:09:08.600 YouTube, just to give you some numbers, has a two 0:09:08.679 --> 0:09:12.480 point seven billion monthly active user base. Compare that to Netflix, 0:09:12.520 --> 0:09:15.640 they reported two hundred and fifty million subscribers and out 0:09:15.679 --> 0:09:18.120 of that two point seven billion for YouTube they have 0:09:18.280 --> 0:09:22.720 about eighty to ninety million paid subscribers. And now they 0:09:22.760 --> 0:09:25.920 have launched YouTube TV, they're showing live sports content the 0:09:26.040 --> 0:09:29.959 NFL Sunday Ticket So clearly things are moving in their 0:09:30.040 --> 0:09:33.880 direction and the subscription revenue should come out pretty strong. 0:09:34.240 --> 0:09:36.840 What's specific to meta platforms earnings? 0:09:36.840 --> 0:09:40.120 Are you looking at the reality lab losses? They keep 0:09:40.200 --> 0:09:44.120 saying every time the street models lower losses, they say, 0:09:44.320 --> 0:09:46.120 we are still spending on metaverse and. 0:09:46.240 --> 0:09:48.880 Clearly that they still don't know what metaverse is. 0:09:49.040 --> 0:09:52.720 Yes, so they are. They've just released a third version 0:09:52.800 --> 0:09:57.480 of their Quest headset and they're still investing heavily in it. 0:09:57.679 --> 0:10:00.360 At the same time, I think Meta has turned around 0:10:00.440 --> 0:10:04.480 in the sense they've done some effective cost cutting as 0:10:04.520 --> 0:10:08.480 well as the ad site has rebounded. And look, they 0:10:08.559 --> 0:10:11.199 are a formidable player in the large anguid models and 0:10:11.280 --> 0:10:12.679 generateor AI space as well. 0:10:13.040 --> 0:10:17.040 Bloomberg Intelligence Senior Technology analyst man Deep sing Man Deep 0:10:17.080 --> 0:10:18.959 thanks a lot for stop off. I appreciate it. And 0:10:19.200 --> 0:10:21.560 just to head on Bloomberg day Break Weekend the future 0:10:21.640 --> 0:10:24.679 of the interest rates, we bring you a conversation with 0:10:24.840 --> 0:10:28.400 Federal Reserve Chair J. Pllell. I'm John Tucker, and this 0:10:28.800 --> 0:10:43.280 is Bloomberg. This is Bloomberg day Break Weekend, our global 0:10:43.320 --> 0:10:45.319 look a heap of the top stories for investors in 0:10:45.360 --> 0:10:47.640 the coming week. I'm John Tucker in New York. Up 0:10:47.720 --> 0:10:51.280 later in the program reaction from Europe involving the conflict 0:10:51.360 --> 0:10:53.480 in the Middle East. But first we're going to turn 0:10:53.520 --> 0:10:56.040 our attention to the economy. The Federal Reserve currently in 0:10:56.160 --> 0:10:59.920 its quiet period until November three, but our David Weston 0:11:00.080 --> 0:11:02.360 going up with the fedshere J Powell right before that 0:11:02.480 --> 0:11:05.719 quiet period began and got his thoughts on the economy 0:11:05.880 --> 0:11:07.000 and the interest rates. 0:11:07.320 --> 0:11:09.559 We all write down our estimates of the longer run 0:11:09.760 --> 0:11:12.679 neutral rate every quarter in the Summary of Economic Projections, 0:11:12.760 --> 0:11:16.439 and that's based on models. It's based on also looking 0:11:16.520 --> 0:11:20.000 out the window and including lags, thinking how are our 0:11:20.040 --> 0:11:23.040 current rates affecting the economy. So the evidence of your 0:11:23.080 --> 0:11:26.680 eyes is that the economy is handling much higher rates 0:11:26.760 --> 0:11:31.360 at least for now, without difficulties. So notionally, that might 0:11:31.480 --> 0:11:33.760 tell you that the neutral rate has risen, or it 0:11:33.840 --> 0:11:36.200 may just tell you that we haven't had rates high 0:11:36.280 --> 0:11:39.199 enough for long enough. You're right, though, but you know, 0:11:40.160 --> 0:11:43.240 we have models for everything, we have formulas for everything. Ultimately, 0:11:43.280 --> 0:11:46.760 as a practitioner, we have to, you know, focused on 0:11:46.880 --> 0:11:49.960 what the economy is telling us, even taking lags into account. 0:11:50.200 --> 0:11:53.160 What's it telling us. Does it feel like policy is 0:11:53.200 --> 0:11:54.080 too tight right now? 0:11:54.280 --> 0:11:55.160 I would have to say no. 0:11:55.760 --> 0:11:57.720 I think the evidence is not that policy is too 0:11:57.800 --> 0:12:01.680 tight right now. And word five five and a quarter 0:12:01.679 --> 0:12:02.520 to five and a half percent. 0:12:02.800 --> 0:12:06.079 That was Jay Powell speaking with Bloomberg's David Weston late 0:12:06.160 --> 0:12:08.280 last week, and we're pleased to welcome David right now 0:12:08.320 --> 0:12:11.800 in the studio for more on his interview with a chairman. 0:12:12.320 --> 0:12:16.439 My impression with Palell's speech preceding you to the Economic 0:12:16.520 --> 0:12:18.800 Club of New York was that it was, And I'll 0:12:18.880 --> 0:12:22.360 use the phrase that our interest rates strategist Tira Jersey 0:12:22.440 --> 0:12:25.920 used kind of wishy washy, see a wishy washy kind 0:12:25.960 --> 0:12:26.199 of guy. 0:12:26.320 --> 0:12:28.679 Well, I'm not sure he would embrace that description. But 0:12:28.880 --> 0:12:32.880 one man's wishy washy may be another man's optionality and saying, 0:12:32.960 --> 0:12:34.800 we don't know a lot of things right now. We 0:12:34.960 --> 0:12:37.040 have to be able to move in different directions. And 0:12:37.160 --> 0:12:40.480 he clearly is incremental. He wants to take it data 0:12:40.520 --> 0:12:43.199 point by data points, see what comes in. Doesn't want 0:12:43.200 --> 0:12:46.520 to commit to early. He's not a grand theorist. I 0:12:46.600 --> 0:12:47.559 think he would admit to that. 0:12:49.040 --> 0:12:51.160 You know, I'm more than happy to have other people 0:12:51.280 --> 0:12:53.240 do my work for me and kick up my feet 0:12:53.360 --> 0:12:53.880 on the desk. 0:12:54.360 --> 0:12:54.559 Is J. 0:12:54.800 --> 0:12:57.680 Powell able to kick up his feet on his desk 0:12:57.760 --> 0:13:01.520 at the Federal Reserve in Washington as interest rates rise 0:13:01.640 --> 0:13:04.240 and the bond market might be doing some of the 0:13:04.320 --> 0:13:05.720 work for the Federal Reserve. 0:13:06.000 --> 0:13:08.880 Well, we talked to you about that specifically, whether, in fact, 0:13:09.000 --> 0:13:11.920 particularly raising the yields in the longer end of the curve, 0:13:12.080 --> 0:13:14.040 we're really doing some of his work for him. And 0:13:14.280 --> 0:13:16.640 when pressed, he allowed as how, on the margin, as 0:13:16.720 --> 0:13:18.920 he put it, on the margin, it reduces some of 0:13:18.960 --> 0:13:21.959 the pressure to keep interest rates going up. At the 0:13:22.000 --> 0:13:24.959 same time, he thinks inflation is coming down, perhaps a 0:13:25.000 --> 0:13:26.959 little more slowly than he would have thought it is 0:13:27.000 --> 0:13:29.120 coming down. At the same time, the economy, as you know, John, 0:13:29.240 --> 0:13:32.880 is just really charging ahead, which is I think a conundrum. 0:13:32.920 --> 0:13:35.160 But he says, look, it's good news at least so far. 0:13:35.480 --> 0:13:38.040 Yeah, you know, it's just I just can't believe the figures, 0:13:38.120 --> 0:13:41.520 especially when it comes to consumer spending. I suppose a 0:13:41.600 --> 0:13:44.800 lot of this is left over from the pandemic that 0:13:45.240 --> 0:13:48.360 we have pent up spending. Did he address that at 0:13:48.400 --> 0:13:51.640 all the reasons behind why the economy and especially the 0:13:51.760 --> 0:13:54.560 US consumer is just so darn strong at this point. 0:13:54.760 --> 0:13:57.560 He certainly said that there were more savings than they 0:13:57.600 --> 0:13:58.320 had understood. 0:13:58.640 --> 0:13:59.360 That was his prize. 0:13:59.400 --> 0:14:01.600 They had more dry powder, if you will, to spend 0:14:01.679 --> 0:14:03.839 down for the consumer that they've really kicked in. He 0:14:03.920 --> 0:14:05.959 also suggested that perhaps part of it is just a 0:14:06.040 --> 0:14:08.400 pent up demand because we were cooped up for so long, 0:14:08.720 --> 0:14:10.679 and so we're coming out, whether it's travel or its 0:14:10.760 --> 0:14:14.920 other experiences, to really spend money. He also suggested that 0:14:15.120 --> 0:14:17.439 in fact, we will see some slowdown and that's not 0:14:17.559 --> 0:14:20.120 necessarily a recession. I'm not saying that, but we will 0:14:20.160 --> 0:14:21.960 see some slow down and probably as we get into 0:14:21.960 --> 0:14:22.640 twenty twenty four. 0:14:22.920 --> 0:14:26.960 A credibility is so important at this juncture. And just 0:14:27.040 --> 0:14:29.040 to tell everybody just to go back in time just 0:14:29.120 --> 0:14:31.920 a bit. It was a time when the United States 0:14:32.000 --> 0:14:35.480 dollar was backed up by gold, something really credible you 0:14:35.520 --> 0:14:38.160 could put your hands on. Then along came the Nixon 0:14:38.200 --> 0:14:41.400 administration and they sort of gutted the Breton Woods Agreement 0:14:41.800 --> 0:14:44.520 where there was a gold standard, and then you had 0:14:44.720 --> 0:14:47.480 the US Central Bank had to come in and that 0:14:47.760 --> 0:14:50.640 had to be the credible source to back everything up. 0:14:51.040 --> 0:14:53.520 That's kind of the history of why it's so important. 0:14:54.280 --> 0:14:57.520 Is j Pal in your sense, a credible guy? And 0:14:57.680 --> 0:15:01.040 is the institution as we know it today credible institution? 0:15:01.600 --> 0:15:03.840 Probably one of the most important questions there is in 0:15:03.880 --> 0:15:06.480 the economy today, John and I guess I would say 0:15:06.600 --> 0:15:09.760 time will tell. Thus far, I think he's been fine. 0:15:10.000 --> 0:15:11.520 One of the issues though, I think John and I 0:15:11.680 --> 0:15:13.800 did ask him about this is do you have as 0:15:13.880 --> 0:15:16.280 much control over the economy as we thought you did. 0:15:16.800 --> 0:15:19.200 There are some people who indicate. Larrie Summers has said 0:15:19.200 --> 0:15:21.400 this to us that because of the so called terming 0:15:21.480 --> 0:15:23.880 out of the debt, both corporate and household, that is 0:15:23.920 --> 0:15:26.200 to say, when interest rates were zero or close to it, 0:15:26.320 --> 0:15:29.360 people took a lot longer term debt and as a result, 0:15:29.480 --> 0:15:31.960 when they raise intertrace now a lot of people and 0:15:32.000 --> 0:15:35.040 corporations are not directly affected because they got their money 0:15:35.080 --> 0:15:37.480 locked up for a while. And I asked, is that 0:15:37.680 --> 0:15:40.280 a real issue. He said he thinks they still have 0:15:40.680 --> 0:15:43.520 effect with respect to interest rates, but he allowed, as 0:15:43.600 --> 0:15:45.680 how that is something of a change in the economy. 0:15:45.880 --> 0:15:49.600 They've got this target of two percent inflation in the 0:15:49.720 --> 0:15:53.960 US economy. David, I have no idea where that number 0:15:54.160 --> 0:15:57.720 came from. Are they really sticking to that or can 0:15:58.080 --> 0:15:59.680 that sort of fluctuate? 0:16:00.360 --> 0:16:02.280 If memory is serious. I think it came from New Zealand. 0:16:02.360 --> 0:16:04.440 Originally New Zealand said the band came up with that, 0:16:04.520 --> 0:16:07.040 as I recall, And that's a good question. But I 0:16:07.120 --> 0:16:10.240 think important question is not should it be two percent? 0:16:10.720 --> 0:16:12.800 But if they change it at this point, does it 0:16:13.000 --> 0:16:14.360 do more damage than good. 0:16:14.600 --> 0:16:18.120 There's this thing we call the neutral rate, the rate 0:16:18.240 --> 0:16:21.040 that the failed reserve wants. That would no longer be 0:16:21.600 --> 0:16:25.760 contractionary for the economy and would no longer stimulate the economy. 0:16:26.040 --> 0:16:29.280 Does he give any indication of does he have any 0:16:29.360 --> 0:16:30.280 idea where that should be? 0:16:30.480 --> 0:16:33.200 He calls it the long term equilibrium rate. That's what 0:16:33.240 --> 0:16:35.320 you're talking about, and some people call it our star, right, 0:16:35.520 --> 0:16:38.760 that sort of number. And I asked him that flat out, 0:16:38.840 --> 0:16:41.600 because back in twenty twenty, you remember, they changed their framework, 0:16:41.920 --> 0:16:45.320 and he said he thought that that equilibrium rate had 0:16:45.400 --> 0:16:47.560 come down to about one point eight from about two 0:16:47.560 --> 0:16:49.840 point five. I asked him where he thought it was today. 0:16:50.160 --> 0:16:53.080 He said he thought most people thought it was a 0:16:53.120 --> 0:16:56.240 little under two. He's around two percent, he thinks, is 0:16:56.320 --> 0:16:56.680 what it is? 0:16:56.880 --> 0:16:59.200 What kind of a time frame? Does he have a 0:16:59.320 --> 0:17:02.880 time frame or when we can see number one, the 0:17:03.600 --> 0:17:07.520 true effects of the previous policy tightening taking effect. I 0:17:07.560 --> 0:17:11.040 think it was Milton Friedman the University of Chicago who 0:17:11.119 --> 0:17:13.800 came up with the phrase long and variable lags for 0:17:14.240 --> 0:17:16.560 monetary policy, I eat the tightening. 0:17:16.920 --> 0:17:19.200 I brought that up with him quite specifically. I said, Okay, 0:17:19.359 --> 0:17:21.480 long and variable we understand that how far are we 0:17:21.640 --> 0:17:23.960 through those long and variable laves? Are we twenty five percent? 0:17:24.000 --> 0:17:26.720 Are we fifty percent? He said, nobody can know. He 0:17:26.880 --> 0:17:29.840 also said he thinks it's different than when Milton Friedman 0:17:29.920 --> 0:17:32.840 came up with that phrase because Center Bank's now telegraph 0:17:32.920 --> 0:17:36.280 so much more, and so it affects my financial conditions, 0:17:36.520 --> 0:17:38.960 which is a way of tightening policy without actually raising rates. 0:17:39.000 --> 0:17:41.200 So he said it may be different how long and 0:17:41.280 --> 0:17:44.439 variable they are, but he refused to commit. And basically, 0:17:44.600 --> 0:17:46.240 by the way, John I said, how can you set 0:17:46.320 --> 0:17:48.240 monetary policy going forward if you do have a sense 0:17:48.280 --> 0:17:50.680 of with your twenty five fifty seventy five percent way through? 0:17:50.840 --> 0:17:51.880 He said, no, we'll wait and see. 0:17:52.119 --> 0:17:54.280 Yeah, it used to be in the past where you 0:17:54.480 --> 0:17:58.480 wouldn't see an immediate reaction in the markets at least, 0:17:59.400 --> 0:18:03.560 but with the added transparency from the Federal Reserve, you 0:18:03.600 --> 0:18:07.159 almost see it instantaneously in the markets. He addressed that 0:18:07.200 --> 0:18:07.760 as well well. 0:18:07.760 --> 0:18:10.680 The financial conditions clearly are doing part of the work 0:18:10.800 --> 0:18:13.679 for him, and they very much are focused on financial 0:18:13.680 --> 0:18:15.919 conditions in the extent of tightening. And certainly John obviously 0:18:16.040 --> 0:18:18.280 came up with what's going on with bond yields because 0:18:18.320 --> 0:18:20.280 we've had real tightening with the ten and the thirty. 0:18:20.400 --> 0:18:23.720 What's happened with it? So and he recognizes that's an 0:18:23.720 --> 0:18:27.960 important part of how they try to influence monetary policy is. 0:18:28.160 --> 0:18:30.879 The transparency working for the Federal Reserve. I mean, you 0:18:31.000 --> 0:18:34.680 remember from previous Fed chairman, you didn't know what the 0:18:34.720 --> 0:18:36.359 hell they were talking about at times. 0:18:36.760 --> 0:18:38.040 But he's come back a little bit from that. 0:18:38.160 --> 0:18:38.320 Right. 0:18:39.200 --> 0:18:41.600 At one point it was all about forward guidance, and 0:18:41.640 --> 0:18:43.520 now he's a little more reluctant to give foreign guides. 0:18:43.640 --> 0:18:46.600 It's not like the Greenspan opacity where you really, as 0:18:46.640 --> 0:18:48.359 you say, he'd go up to Congress and you had 0:18:48.400 --> 0:18:50.800 no idea what the man was saying. He certainly is 0:18:50.840 --> 0:18:53.359 much more transparent than that. You have to put that together, 0:18:53.480 --> 0:18:55.680 John once again with what you called wishy washy I 0:18:55.760 --> 0:18:58.520 said optionality. He's taking it one step at a time. 0:18:58.880 --> 0:19:00.960 We have to remember he is a lawyer like I'm 0:19:00.960 --> 0:19:03.160 a lawyer, and listening to him talking to him, he's 0:19:03.160 --> 0:19:05.640 a very smart man and you know, learn in hand. 0:19:05.720 --> 0:19:07.920 The famous judge once said, if I get to write 0:19:07.920 --> 0:19:09.560 the facts in the opinion, you can write anything you 0:19:09.600 --> 0:19:11.320 want in the law because the facts are determined. I 0:19:11.400 --> 0:19:13.320 think my impression of j. Powal, this is just me 0:19:13.440 --> 0:19:15.920 talking now, is that he is that kind of lawyer 0:19:15.960 --> 0:19:18.359 that he wants to take it fact by fact and 0:19:18.520 --> 0:19:20.679 that will tell us where we're going. He doesn't come 0:19:20.760 --> 0:19:23.960 in with a Cartesian theory like Descartes, a theory of 0:19:24.040 --> 0:19:25.080 the case in advance. 0:19:25.840 --> 0:19:28.600 Well, that wasn't wishy washy at all and very transparent. 0:19:28.800 --> 0:19:31.040 David Weston, thanks a lot. I we appreciate it. Just 0:19:31.080 --> 0:19:34.000 ahead on Bloomberg Daybreak weekend, we take you to Asia 0:19:34.119 --> 0:19:36.800 and look at how China is trying to reinvigorate its 0:19:36.880 --> 0:19:40.639 role on the global stage. I'm John Tucker. This is Bloomberg. 0:19:51.200 --> 0:19:53.280 I'm John Tucker in New York with your global look 0:19:53.280 --> 0:19:55.680 ahead of the top stories for investors in the coming week. 0:19:56.000 --> 0:19:58.920 At the height of the Israel Gaza conflict and China's 0:19:59.040 --> 0:20:03.280 economic slow to how is China trying to reinvigorate its 0:20:03.440 --> 0:20:06.400 role on the global stage. To find out more, Let's 0:20:06.400 --> 0:20:09.200 go to Bloomberg Daybreak Asia co host Brian Curtis. 0:20:09.600 --> 0:20:12.560 John. If last week's Belton Road Forum told us anything, 0:20:13.000 --> 0:20:16.440 it's that despite recent issues, China still wants to play 0:20:16.480 --> 0:20:19.600 a role on the global stage, the leading role, in fact, 0:20:19.720 --> 0:20:22.680 of an alternative block to the West. Never mind that 0:20:22.760 --> 0:20:25.399 its hands are full with a property crisis with a 0:20:25.400 --> 0:20:28.679 stumbling economy, or that his Belt and Road initiative has 0:20:28.760 --> 0:20:32.960 garnered some charges of China being labeled an irresponsible lender. 0:20:33.480 --> 0:20:36.959 China sees the Big Infrastructure project as a big success, 0:20:37.400 --> 0:20:40.879 and Russian President Vladimir Putin degrees. I caught up with 0:20:41.040 --> 0:20:45.760 Daniel ten Kate Bloomberg Asia Ekogov Executive editor and asked 0:20:45.840 --> 0:20:49.920 him how she and Putin used the bri to move forward. First, 0:20:50.400 --> 0:20:52.680 from the perspective of Vladimir Putin. 0:20:52.560 --> 0:20:55.800 China is a safe space for him to show that 0:20:55.960 --> 0:20:59.600 he's still embraced by countries, particularly in the Global South. 0:21:00.040 --> 0:21:03.320 He needs that diplomatic support to fight the isolation that 0:21:03.480 --> 0:21:07.760 the US and its allies are trying to impose on Putsin. 0:21:08.520 --> 0:21:12.040 For she, he sees Russia as a key diplomatic partner, 0:21:12.200 --> 0:21:16.359 a way to fight back against the US worldview and 0:21:16.560 --> 0:21:20.480 US rules. And this is particularly in the context of Taiwan. 0:21:21.359 --> 0:21:25.800 Bloomberg's Dan ten kid Well Alan Wong Bloomberg, China Eco 0:21:25.880 --> 0:21:28.480 guv Editor joins us for a little bit more in 0:21:28.520 --> 0:21:31.720 the way of insights on where China goes next. Alan, 0:21:31.760 --> 0:21:34.639 thanks very much for being with us. So I'm wondering 0:21:34.920 --> 0:21:38.760 in the coming week, might we see more efforts by 0:21:38.960 --> 0:21:43.080 China to mediate in some way in the Israel Hamas conflict. 0:21:43.480 --> 0:21:45.399 China has always been trying to play it a role 0:21:45.480 --> 0:21:48.040 of the peacemaker. It has proposed some sort of pre 0:21:48.160 --> 0:21:52.800 peace conference between Palestine and Israel for many decades without 0:21:52.840 --> 0:21:57.040 great success, and it will try to say things that 0:21:57.960 --> 0:22:02.760 signal its intention to be mediator, but based on our experience, 0:22:03.200 --> 0:22:06.399 that's unlikely to go very far. But China wants to 0:22:06.480 --> 0:22:10.439 position itself as a country that could bring rivals together, 0:22:10.640 --> 0:22:15.680 unlike the US. Yet, one of China's greatest diplomatic achievements 0:22:15.720 --> 0:22:19.480 in recent years is helping broker a deton between Saudi 0:22:19.480 --> 0:22:23.359 Arabia and Iran. And it's definitely going to try to 0:22:23.440 --> 0:22:25.680 do the same thing again if it can between the 0:22:25.800 --> 0:22:29.840 Palestinians and Israelis. But then that's extremely unlikely because it 0:22:29.920 --> 0:22:32.480 has tried to do the same over the last couple 0:22:32.520 --> 0:22:33.879 of decades with no success. 0:22:34.680 --> 0:22:36.639 We know that the two heads of state had in 0:22:36.760 --> 0:22:40.880 depth discussions, some of which was very private, and obviously 0:22:41.119 --> 0:22:44.879 they both made speeches. Do we know how they are 0:22:44.960 --> 0:22:48.720 approaching the idea of anything together in the Middle East? 0:22:48.840 --> 0:22:51.960 I mean, China has for decades framed itself as an 0:22:52.000 --> 0:22:55.480 ally of the Palestinian people. These ties go back many 0:22:55.560 --> 0:23:00.760 decades and back to the mal Era. Though has moderated 0:23:00.880 --> 0:23:03.720 somewhat in the recent years, it will not change his 0:23:03.800 --> 0:23:09.280 position on this sympathy. But in terms of what she 0:23:09.520 --> 0:23:11.720 and Putin can really do on the ground, I don't 0:23:11.760 --> 0:23:15.080 think there's much they can beyond rhetoric, and the most 0:23:15.200 --> 0:23:17.159 that China would say right now at this stage is 0:23:17.240 --> 0:23:20.159 that they want both parties to come to the negotiating 0:23:20.240 --> 0:23:24.080 table and stop any hostilities. But realistic there really isn't 0:23:24.160 --> 0:23:26.879 much that China would do or I mean, there's no 0:23:27.200 --> 0:23:30.840 reason for China to pressure Putin to persuade its proxies, 0:23:31.520 --> 0:23:35.960 or Iran to pressure has Bola to reduce his support 0:23:36.040 --> 0:23:39.800 for hamas this is unlikely and this will also undercut 0:23:40.280 --> 0:23:41.680 the China Russia partnership. 0:23:41.800 --> 0:23:43.440 We talked a little bit about the Built and Road 0:23:43.520 --> 0:23:48.600 Initiative as part of China setting up institutions to stand 0:23:48.720 --> 0:23:52.000 up to the West, primarily to the United States. In 0:23:52.119 --> 0:23:55.639 your view, how successful has China been in building up 0:23:55.680 --> 0:24:00.600 some of these institutions, including BLI and including BRICK and others. 0:24:02.119 --> 0:24:06.080 The b o I is a loose network of bilateral 0:24:06.160 --> 0:24:10.280 trade agreement and infrastructure projects, and it's never been formalized 0:24:10.359 --> 0:24:14.320 as like a centralized institution. In fact, people dispute over 0:24:15.119 --> 0:24:18.040 what really counts as the BI projects, and then there 0:24:18.080 --> 0:24:21.480 are projects that predate the br that are now counted 0:24:21.520 --> 0:24:24.640 as br projects. So that goes to show that it's 0:24:24.720 --> 0:24:28.119 not a very organized investment scheme. But then there are 0:24:28.160 --> 0:24:30.640 attempts by China or it's part to try to turn 0:24:30.680 --> 0:24:34.520 it into something more institutionalized. For example, in the summit 0:24:34.600 --> 0:24:38.760 this week, Csinking announced the launch of a secretariat. We 0:24:38.880 --> 0:24:41.399 don't have any details about what it's going to do, 0:24:41.560 --> 0:24:45.760 but it sounds like one step in formalizing the br 0:24:45.840 --> 0:24:48.439 I initiative going forward. 0:24:48.840 --> 0:24:52.119 Something that is, i suppose not exactly part of br I, 0:24:52.280 --> 0:24:56.560 but the power of Siberia to the gas pipeline that 0:24:56.720 --> 0:25:00.800 is supposed to bring gas from from Russia in to China. 0:25:01.359 --> 0:25:02.760 A little bit of progress. 0:25:02.400 --> 0:25:04.840 There probably we know that Putting and she spoke on 0:25:04.880 --> 0:25:06.879 a sideline, and then this is a great opportunity for 0:25:07.000 --> 0:25:10.040 them to talk to hash out the details of those deals. 0:25:10.160 --> 0:25:14.520 And the pipeline itself is a win win solution for 0:25:14.680 --> 0:25:17.840 both China, which is in need of energy and for Putin, 0:25:17.880 --> 0:25:20.240 which is in need of someone to buy the oil 0:25:20.400 --> 0:25:23.720 and gas. So I can't see why it wouldn't move 0:25:23.800 --> 0:25:25.720 forward more briskly after this. 0:25:26.000 --> 0:25:28.600 Earlier I asked Dan ten Kate about what he saw 0:25:28.800 --> 0:25:31.679 as the main issues in the China Russia partnership. 0:25:32.080 --> 0:25:35.840 Fundamentally, they have different views on the world. Putin has 0:25:35.920 --> 0:25:38.760 been known as sort of a rule breaker, someone who's 0:25:38.840 --> 0:25:42.399 not scared to militarily get involved in Syria. You know, 0:25:42.520 --> 0:25:45.159 we saw what happened in Ukraine that put China in 0:25:45.160 --> 0:25:49.000 a very awkward position. China, and she in particular still 0:25:49.440 --> 0:25:52.159 very much wants to be part of the global system 0:25:52.320 --> 0:25:55.000 and see itself as one of the leaders of the 0:25:55.080 --> 0:25:57.120 world that has some respect. 0:25:57.040 --> 0:25:59.000 And alan your thoughts on those issues. 0:25:59.440 --> 0:26:04.719 There's extra pressure on China to distance itself from Russia, 0:26:04.960 --> 0:26:08.040 which is unlikely because China has declared a no limits 0:26:08.160 --> 0:26:12.760 friendship a partnership with Russia and has reaffirmed it over 0:26:12.880 --> 0:26:16.440 time despite the Ukraine invasion. We know that lots of 0:26:16.560 --> 0:26:21.600 EU leaders shunned the Beltan Row Forum this week because 0:26:21.680 --> 0:26:25.960 of this position that Beijing has taken. But China knows 0:26:26.040 --> 0:26:29.080 this cost well and it deliberately went ahead with it 0:26:29.240 --> 0:26:32.000 and giving putting the platform in the Great Hall of 0:26:32.080 --> 0:26:35.440 the People, so it knows what he's doing and for 0:26:35.560 --> 0:26:38.480 the time being, there's no reason for China to change. 0:26:38.800 --> 0:26:41.399 It's a friendship or partnership with Russia. 0:26:41.520 --> 0:26:42.360 In fact, she's. 0:26:42.160 --> 0:26:47.840 Thinping hailed the profound friendship between China and Russia and 0:26:47.960 --> 0:26:51.800 his personal friendship with Putin, whom he has met dozens 0:26:51.840 --> 0:26:54.640 of times in the last ten years, and that's not going. 0:26:54.640 --> 0:26:58.120 To change now. China would say that it's the US 0:26:58.320 --> 0:27:02.119 that is the aggressor, and that the military, the size, 0:27:02.200 --> 0:27:04.879 and the fact that the United States has kind of 0:27:05.320 --> 0:27:07.600 helped design the world order for so many years since 0:27:07.640 --> 0:27:10.560 the Second World War, that that is one of the 0:27:10.640 --> 0:27:13.960 reasons why this kind of loose grouping of a block 0:27:14.080 --> 0:27:17.240 to stand up against the West exists. But you know, 0:27:17.320 --> 0:27:19.440 we look back at the block that used to be 0:27:19.560 --> 0:27:23.840 the Soviet Union and in essence it bankrupted itself trying 0:27:23.880 --> 0:27:26.200 to stand up to the West. Is there any danger 0:27:26.280 --> 0:27:28.080 that China is going down that road as well? 0:27:29.560 --> 0:27:33.239 The pandemic and the economics slowed down in China are 0:27:33.400 --> 0:27:38.400 hurting China's ability to find money to land to its 0:27:38.840 --> 0:27:43.000 developing country partners but the bigger problem here is that 0:27:43.400 --> 0:27:46.960 those partners are finally harder to borrow money because of 0:27:47.359 --> 0:27:50.600 the interest rate environment and also because of the impact 0:27:50.640 --> 0:27:54.960 of the pandemic on their domestic economies. The greatest threat 0:27:55.119 --> 0:27:59.119 I think will come from the developing world inability to 0:27:59.640 --> 0:28:05.440 continue to grow economically, not on China's ability to land money. Really, 0:28:06.119 --> 0:28:10.119 and China also is smart enough that it's no longer 0:28:10.280 --> 0:28:14.240 pursuing the kind of big infrastructure projects that Belton Road 0:28:14.440 --> 0:28:17.840 Initiative was initially known for, and it is kind of 0:28:18.240 --> 0:28:22.720 pivoting to a small is Beautiful strategy this year, focusing 0:28:22.960 --> 0:28:27.880 on smaller projects that are more efficient, that are better, 0:28:28.440 --> 0:28:33.520 you know, investments, instead of flashy new airport, railroads. 0:28:33.960 --> 0:28:37.520 Alan, thank you for joining us, Alan Wong, Bloomberg China 0:28:37.720 --> 0:28:41.520 ecogov editor. I'm Brian Curtis, along with Doug Prisner. You 0:28:41.600 --> 0:28:45.040 can catch us every weekday here for Bloomberg Daybreak Asia, 0:28:45.320 --> 0:28:48.320 beginning at six am in Hong Kong and six pm 0:28:48.640 --> 0:28:49.440 on Wall Street. 0:28:49.720 --> 0:28:52.680 John all right, thanks to Bloomberg Daybreak Asia co host 0:28:52.760 --> 0:28:56.280 Brian Curtis, and just ahead here on Bloomberg Daybreak weekend, 0:28:56.560 --> 0:28:59.600 we'll head to London and get a European perspective on 0:28:59.720 --> 0:29:03.640 the Italy's conflict. I'm John Tucker, and this is Bloomberg. 0:29:14.200 --> 0:29:16.880 This is Bloomberg Daybreak Weekend or Global look ahead of 0:29:16.920 --> 0:29:19.320 the top stories for investors in the coming week. I'm 0:29:19.400 --> 0:29:22.120 John Tucker in New York. There are fresh concerns that 0:29:22.280 --> 0:29:25.240 is whereas war with Hermas will spark a bigger conflict 0:29:25.320 --> 0:29:28.760 in the Middle East. European leaders, including UK's Richie Schunek 0:29:28.840 --> 0:29:32.160 and Jeremany's all off Shaws, have tried to exert influence 0:29:32.200 --> 0:29:34.960 of the region to contain the conflict. For more, Let's 0:29:35.000 --> 0:29:37.600 hit to London and bring in Bloomberg Daybreak Europe anchor 0:29:37.840 --> 0:29:38.680 Caroline Hepger. 0:29:38.920 --> 0:29:42.280 John, there are now not one, but two major wars 0:29:42.320 --> 0:29:44.240 that have broken out in the past two years that 0:29:44.440 --> 0:29:48.920 threatened global stability. For the European perspective, I've been speaking 0:29:49.000 --> 0:29:52.880 to Jane Kinnenmont, Policy and Impact director at the European 0:29:53.000 --> 0:29:57.680 Leadership Network. I began by asking Jane Kinemont about what 0:29:58.080 --> 0:30:02.320 form she thinks the ground more might take between Israel 0:30:02.400 --> 0:30:06.880 and Hamas and what to expect next from the Israeli authorities. 0:30:07.440 --> 0:30:09.680 I mean, Israel's made it clear that it wants to 0:30:09.840 --> 0:30:12.960 launch a ground invasion, and also that there will be 0:30:13.040 --> 0:30:16.040 a high price both for the Palestinians in Gaza and 0:30:16.400 --> 0:30:21.800 for Israel. There's a lot of underground tunnels in Gaza 0:30:21.880 --> 0:30:25.160 where Hamas is likely to fight, so it would be 0:30:25.240 --> 0:30:29.360 a conflict where Israel's military superiority from the air might 0:30:29.480 --> 0:30:35.640 not help it that much. But also lots of uncertainty 0:30:35.760 --> 0:30:40.680 exists because Israel's endgame is not entirely certain, you know, 0:30:40.800 --> 0:30:44.560 it doesn't know. Because this har mass attack, it was 0:30:44.680 --> 0:30:48.320 a complete strategic shock. Many people had warned that there 0:30:48.360 --> 0:30:51.280 would be some kind of explosion of violence as a 0:30:51.400 --> 0:30:54.800 result of the neglect of the Palestinian issue and the 0:30:55.000 --> 0:30:59.320 lack of peaceful avenues for Palestinians to take their cause 0:30:59.680 --> 0:31:04.880 for but the predictions were more centering around escalation in 0:31:04.920 --> 0:31:09.600 the West Bank or in Jerusalem, and Israel and many 0:31:09.640 --> 0:31:13.440 of its partners felt that it had Hamas contained, you know, 0:31:13.520 --> 0:31:16.040 and that it understood that threat and had ways to 0:31:16.400 --> 0:31:21.560 manage it. So now Netanyahu's strategy towards Hamas has been upended, 0:31:22.080 --> 0:31:26.800 and Israel does not have a clear replacement strategy. They 0:31:26.920 --> 0:31:30.840 say that they want to destroy Hamas, but they don't 0:31:31.000 --> 0:31:34.040 necessarily know that they can do it, but the bigger 0:31:34.160 --> 0:31:37.400 question still is what comes after. You know, one option 0:31:37.840 --> 0:31:41.840 might be for Israel to reoccupy Gaza, not that that 0:31:41.880 --> 0:31:44.160 would be legal under international law, but in terms of 0:31:44.200 --> 0:31:48.560 the military and political options, that's something being considered, but 0:31:48.680 --> 0:31:51.080 it's not something they strategically want to do. 0:31:51.480 --> 0:31:54.680 Okay, Well, then give me the European perspective. I mean 0:31:54.720 --> 0:31:59.240 we've had the German Laschel's visit Atala also and she 0:32:00.120 --> 0:32:02.880 medi space yesterday that seemed to have some of the 0:32:03.320 --> 0:32:07.320 similar sorts of lines around democracy and Macon. I mean, 0:32:07.960 --> 0:32:11.400 Europe has so struggled. You know, the traditional view of 0:32:11.440 --> 0:32:14.080 Europe is that it struggles with foreign policy because there 0:32:14.120 --> 0:32:16.680 are so many countries. What is the European perspective? 0:32:16.760 --> 0:32:19.920 Now, that's very much the issue is that European governments 0:32:19.960 --> 0:32:23.280 have got very different perspectives, you know, beyond the fact 0:32:23.360 --> 0:32:26.080 they all agree there should be a two state solution, 0:32:26.240 --> 0:32:28.920 but they don't know how to get there. With Ukraine, 0:32:29.080 --> 0:32:32.480 we've seen Europe being united to an unusual degree and 0:32:32.600 --> 0:32:35.640 that has meant that vonder Lane has emerged as more 0:32:35.720 --> 0:32:39.960 of a foreign policy leader than her position normally warrants, 0:32:40.280 --> 0:32:43.840 but actually in Europe, there has been a backlash against 0:32:44.080 --> 0:32:49.520 her taking the lead over Israel and Palestine because her 0:32:50.040 --> 0:32:54.240 expression of solidarity with Israel has tended to come without 0:32:55.200 --> 0:32:57.920 the kinds of points that President Biden is making about 0:32:58.000 --> 0:33:01.440 the legitimate aspirations of Palestinian to a state and the 0:33:01.520 --> 0:33:06.040 need to respect their rights. And so we've seen really 0:33:06.160 --> 0:33:09.400 different noises coming out from different European governments, with some 0:33:09.600 --> 0:33:12.320 saying we should cut all way to the Palestinians and 0:33:12.760 --> 0:33:15.840 in a far out of the other end example, there's 0:33:15.880 --> 0:33:18.080 been a minister in Spain who has said that Netta 0:33:18.160 --> 0:33:21.400 Yahoo should be tried for war crimes. So getting a 0:33:21.480 --> 0:33:24.920 coherent European position together is an issue. 0:33:25.200 --> 0:33:28.000 So that was Jay and Kinemont, the Policy and Impact 0:33:28.080 --> 0:33:31.880 director of the European Leadership Network for the European perspective 0:33:32.240 --> 0:33:35.360 on the conflict in the Middle East. I'm Caroline Hepkee 0:33:35.400 --> 0:33:37.640 here in London. You can catch us every weekday morning 0:33:37.720 --> 0:33:40.560 for Blueberg Daybreak here at beginning at six am in London. 0:33:40.720 --> 0:33:42.800 That's one am on Wall Street. John. 0:33:42.960 --> 0:33:45.600 Thanks Caroline, and that does it for this edition of 0:33:45.640 --> 0:33:48.600 Bloomberg day Break Weekend. Join us again Monday morning at 0:33:48.680 --> 0:33:52.080 five am Wall Street time for the latest markets overseas 0:33:52.320 --> 0:33:54.640 and the blues you need to start your day. I'm 0:33:54.680 --> 0:33:58.120 John Tucker. Stay with us top stories, Global business headlines 0:33:58.160 --> 0:33:59.520 are coming up right now