Daybreak Weekend: Bank Earnings, UK Asset Slump, Nippon Steel

Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.960 --> 0:00:12.240 This is Bloomberg day Break Weekend, our global look at 0:00:12.280 --> 0:00:14.360 the top stories in the coming week from our Daybreak 0:00:14.360 --> 0:00:16.880 anchors all around the world. Straight ahead on the program, 0:00:16.920 --> 0:00:19.079 but look at some key inflation data in the US 0:00:19.120 --> 0:00:22.079 how it may impact the Fed's next move. I'm Tom 0:00:22.120 --> 0:00:23.200 Busby in New York. 0:00:23.600 --> 0:00:25.960 I'm Caroline Hedge here in London, where we are focused 0:00:26.000 --> 0:00:29.160 on a UK asset slump and what may come next. 0:00:29.360 --> 0:00:32.400 I'm dead Chrisner looking at the outlook for China's byd 0:00:32.920 --> 0:00:35.280 as well as the fallout from the blocking of the 0:00:35.400 --> 0:00:37.400 US Steel Nipon Steel merger. 0:00:38.360 --> 0:00:42.400 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:42.440 --> 0:00:46.160 eleven three year in New York, Bloomberg ninety nine to one, Washington, DC, 0:00:46.640 --> 0:00:50.920 Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 0:00:51.320 --> 0:00:54.520 Sirius XM one twenty one, and around the world on 0:00:54.600 --> 0:00:57.720 Bloomberg Radio, dot Com and the Bloomberg Business App. 0:01:02.800 --> 0:01:03.360 Good day to you. 0:01:03.400 --> 0:01:05.600 I'm Tom Busby, and we begin today's program with a 0:01:05.640 --> 0:01:08.880 slew of economic data in the US consumer Price Index, 0:01:08.959 --> 0:01:11.920 the producer price Index, retail sales all for the month 0:01:11.959 --> 0:01:16.680 of December. How will all this data impact FED policy? 0:01:17.000 --> 0:01:20.280 For more on how all this data may impact FED policy, 0:01:20.319 --> 0:01:23.160 were joined by Edward Harrison. He's the author of Bloomberg's 0:01:23.280 --> 0:01:24.959 Everything Risk newsletter. 0:01:25.280 --> 0:01:25.800 Well Edward. 0:01:25.880 --> 0:01:28.240 For the first FOMC policy meeting of the year. The 0:01:28.319 --> 0:01:31.360 FED has a lot to consider, but let's start with 0:01:31.400 --> 0:01:34.280 what we know already. The data we got this past Friday, 0:01:34.400 --> 0:01:39.320 a very unexpectedly strong December jobs report, how many jobs added, 0:01:39.520 --> 0:01:42.760 the unemployment rate moving down. What does all that mean? 0:01:43.040 --> 0:01:46.120 Yeah, Tom, good to talk to you. I think what 0:01:46.120 --> 0:01:48.640 it means is is that there's a lot of uncertainty 0:01:48.680 --> 0:01:51.640 about where inflation is headed. You know, the narrative in 0:01:51.680 --> 0:01:55.960 twenty twenty four, for the large part of the year 0:01:56.000 --> 0:02:00.480 had been that inflation was headed down inexorably towards two percent, 0:02:00.560 --> 0:02:03.520 that's the Fed's target. But now we've stalled at this 0:02:03.680 --> 0:02:07.640 level that is too high. For instance, the data that 0:02:07.760 --> 0:02:11.320 come out this week in terms of the CPI, we're 0:02:11.360 --> 0:02:14.200 expecting to see a number like three point three percent, 0:02:14.639 --> 0:02:18.400 taking out voluable food and energy two point nine percent overall, 0:02:18.480 --> 0:02:21.560 that's well north of where the FED wants it to be. 0:02:22.120 --> 0:02:26.000 And so as a result, we're in an indefinite holding pattern. 0:02:26.000 --> 0:02:28.280 The FED is not going to cut ridgs any further 0:02:28.639 --> 0:02:29.200 from here. 0:02:29.880 --> 0:02:33.160 Well, so the FED is seeing all this inflation data 0:02:33.160 --> 0:02:35.320 coming out. That is their big focus now the job 0:02:35.400 --> 0:02:38.280 market less of a worry. We've seen it decrease a 0:02:38.320 --> 0:02:42.600 little bit, but still very strong. What about retail sale 0:02:42.720 --> 0:02:46.120 some other data we're going to get, Yeah, you know, I. 0:02:46.080 --> 0:02:49.240 Think it's it's an interesting question in terms of you know, 0:02:49.280 --> 0:02:54.600 we get three days of data with PPI, CPI, retail sales. 0:02:54.639 --> 0:02:57.639 I would say that of the three, it's the CPI 0:02:57.720 --> 0:02:59.560 that the Fed's going to focus on, and that markets 0:02:59.560 --> 0:03:02.560 are going to take a que off. Of retail sales 0:03:03.160 --> 0:03:05.560 is you know, the number is actually going to be 0:03:05.919 --> 0:03:09.200 is expected to be lower than it was in the 0:03:09.240 --> 0:03:13.679 prior month, but when you take out autos and gas, 0:03:13.960 --> 0:03:16.200 people are expecting it to go up. So it's kind 0:03:16.240 --> 0:03:19.560 of hard to parse out, you know, what the market 0:03:19.560 --> 0:03:23.040 reaction is going to be irrespective given the jobs report 0:03:23.120 --> 0:03:27.639 that we saw last week. I think that the market's 0:03:27.720 --> 0:03:32.600 probably going to expect those numbers to be relatively robust. 0:03:32.800 --> 0:03:36.440 Yeah, people are working, they're spending money, and we've seen 0:03:36.480 --> 0:03:40.320 that with a national retail Federation looking at online you 0:03:40.360 --> 0:03:43.640 know these are at or near record spending levels, so 0:03:44.160 --> 0:03:45.440 people are feeling pretty. 0:03:45.160 --> 0:03:47.760 Good, definitely, And you know the jobs report, let me 0:03:47.800 --> 0:03:50.680 just go back to that for a second. We tick 0:03:50.760 --> 0:03:53.320 down last week to four point one percent from four 0:03:53.320 --> 0:03:56.960 point two percent. That tells you not just that the 0:03:57.040 --> 0:04:00.040 labor market is doing well, but that the anxiety that 0:04:00.080 --> 0:04:02.360 a lot of people might have that bad things are 0:04:02.400 --> 0:04:03.840 about to happen and they're not going to open up 0:04:03.880 --> 0:04:08.280 their checkbooks is lessened. And so we should therefore expect 0:04:08.280 --> 0:04:11.160 that retail sales, especially in this holiday season, to be 0:04:11.320 --> 0:04:14.400 relatively robust. So that side of the coin, I don't 0:04:14.400 --> 0:04:16.440 think it's going to be as much of a mover 0:04:17.200 --> 0:04:20.840 for markets because they know that the US economy is 0:04:20.839 --> 0:04:26.120 doing well. The real question is is inflation stalled to 0:04:26.160 --> 0:04:30.800 this level or is it potentially even re accelerating beyond 0:04:31.520 --> 0:04:36.240 this level to a higher into the three percent range. 0:04:36.560 --> 0:04:39.120 And that's the big focus now for the FED and 0:04:39.279 --> 0:04:42.400 what would drive inflation. I mean, obviously we always have 0:04:42.440 --> 0:04:46.520 the housing problem. It's not even an uneven market, it 0:04:46.600 --> 0:04:50.440 is just a problem where people cannot afford some of 0:04:50.480 --> 0:04:54.039 these homes. We have elevated rates now back up to 0:04:54.440 --> 0:04:57.440 six point ninety nine percent according to the Mortgage Bankers' Association. 0:04:57.880 --> 0:05:00.840 What other factors are driving inflation, So, you know. 0:05:00.960 --> 0:05:03.559 It's a very good question as to where the FED 0:05:03.680 --> 0:05:06.719 is on all of this going forward. Because it was 0:05:06.760 --> 0:05:12.159 interesting that our colleague, Matthew Bosler, he spoke to people 0:05:12.160 --> 0:05:15.880 at the FED and they talked about this I would 0:05:16.000 --> 0:05:21.400 call rather obscure inflation measure that takes out imputed numbers. 0:05:21.680 --> 0:05:24.839 And he has a quote, I think from Christopher Waller, 0:05:24.880 --> 0:05:28.040 who's very well regarded in the FED. He said that 0:05:28.080 --> 0:05:31.080 inflation in twenty twenty four has been largely driven by 0:05:31.080 --> 0:05:34.640 increases in imputed prices such as housing services and non 0:05:34.720 --> 0:05:39.120 market services, which are estimated, they're not observed directly, and 0:05:39.160 --> 0:05:42.000 so he takes comfort from that the fact that when 0:05:42.040 --> 0:05:46.360 you take those imputed prices out, actually inflation looks better. 0:05:46.720 --> 0:05:49.800 So what it says to me is that the FED 0:05:50.480 --> 0:05:53.039 is going to be fine with inflation at the level 0:05:53.080 --> 0:05:58.080 that it is now. They could cut still if inflations 0:05:58.200 --> 0:06:02.000 at these levels and you know, slightly below, it's if 0:06:02.040 --> 0:06:06.560 inflation starts to trend higher, that's where we're gettingto problems 0:06:06.560 --> 0:06:07.239 going forward. 0:06:07.440 --> 0:06:09.600 So right now, it sounds like you're saying we may 0:06:09.640 --> 0:06:13.160 not need to see a reduction in interest rates right now. 0:06:13.400 --> 0:06:17.160 Yeah, I don't think that. I think we won't see 0:06:17.160 --> 0:06:20.719 it for the near future. I think we're in hold 0:06:20.720 --> 0:06:23.080 for a long time and we don't need to see it. 0:06:23.120 --> 0:06:27.360 I mean, the unemployment rate tick down. We're getting almost 0:06:27.360 --> 0:06:34.040 four percent increase in hourly wages, jobless claims are almost 0:06:34.440 --> 0:06:37.840 as low as two hundred thousand initial claims a week. 0:06:38.120 --> 0:06:40.480 Those are all very good numbers. It says that the 0:06:40.520 --> 0:06:44.400 economy is doing well. And actually Jerome Powell, the FED chair, 0:06:44.520 --> 0:06:46.359 told us as much in the last time that he 0:06:46.440 --> 0:06:47.120 spoke to us. 0:06:47.440 --> 0:06:50.520 All right, so we may see July. I know after 0:06:50.600 --> 0:06:54.320 Friday's blow out jobs report, people are talking now next 0:06:54.360 --> 0:06:55.320 rate decrease will be. 0:06:55.279 --> 0:07:01.159 October, exactly. October is the new number. And don't be 0:07:01.240 --> 0:07:06.599 surprised if, eventually, especially if we get any negative data 0:07:06.640 --> 0:07:11.240 on inflation, that the market starts thinking maybe they pause 0:07:11.880 --> 0:07:14.520 for the entirety of this year, and that's going to 0:07:14.560 --> 0:07:18.120 be very negative for interest rates at the long end 0:07:18.160 --> 0:07:20.760 of the curve, also for mortgage rates as well. 0:07:20.880 --> 0:07:21.080 Well. 0:07:21.080 --> 0:07:23.760 Our thanks to Edward Harrison is the author of Bloomberg's 0:07:23.840 --> 0:07:28.040 Everything Risk newsletter. We move next to the new earning season, 0:07:28.160 --> 0:07:30.520 kicking off later this week. Some of the nation's biggest 0:07:30.520 --> 0:07:34.880 banks reporting their fourth quarter results, JP Mortgage, Chase, Goldman, Sachs, 0:07:35.160 --> 0:07:37.960 City Group, Wells Fargo kicking things off on Wednesday, and 0:07:38.040 --> 0:07:40.800 for more on what to expect from America's biggest lenders, 0:07:41.040 --> 0:07:45.160 we're joined by Alison Williams, Bloomberg Intelligence, Senior Analyst, Global 0:07:45.160 --> 0:07:48.120 Banks and Asset Managers. Allison, thanks for joining us. So 0:07:48.680 --> 0:07:51.800 what are you expecting to see starting this Wednesday? 0:07:51.920 --> 0:07:57.119 So there's three areas of focus with the earnings this week. 0:07:57.920 --> 0:08:00.600 You know, first just the regulatory outlooks. Second is the 0:08:00.600 --> 0:08:05.320 airing impact of the macroeconomic outlook, and finally, what is 0:08:05.360 --> 0:08:08.840 the outlook for the capital markets momentum? And while the 0:08:08.880 --> 0:08:12.400 regulatory outlook is the most important structurally, we expect that 0:08:12.400 --> 0:08:14.560 we're going to get the least amount of new or 0:08:14.600 --> 0:08:18.800 helpful information on that front, while we expect the banks 0:08:18.840 --> 0:08:23.520 to probably provide the most bullish information on the latter point, 0:08:23.560 --> 0:08:27.600 the capital markets momentum. And so let's take each of 0:08:27.640 --> 0:08:31.119 these in turn. To begin with, the big six banks 0:08:31.120 --> 0:08:34.240 are up fifteen to twenty five percent in the past 0:08:34.240 --> 0:08:39.120 few months, and that's largely fueled by sentiment. Estimates are up. 0:08:39.160 --> 0:08:41.400 They're up about two to two and a half percent 0:08:42.240 --> 0:08:45.680 for twenty twenty five. So some of it is the 0:08:45.880 --> 0:08:50.360 better capital markets outlook as well as the economic and 0:08:50.480 --> 0:08:53.280 monetary policy outlook, but it really is I think the 0:08:53.320 --> 0:09:00.720 structural regulatory optimism that's boosting boosting these banks. From our standpoint, 0:09:00.760 --> 0:09:03.560 we do expect relief in the form of lesser new 0:09:03.600 --> 0:09:07.320 regulation in the coming years. We also expect relief from 0:09:07.360 --> 0:09:11.240 a water down and perhaps pushed out BUZZL three rules, 0:09:11.280 --> 0:09:16.000 as well as antitrust scrutiny lessening under Trump. But we 0:09:16.120 --> 0:09:19.600 think that specific issues like Wells Fargo's as a cap 0:09:20.120 --> 0:09:23.920 you know, this is something that we don't expect to 0:09:23.960 --> 0:09:27.240 see a political benefit too. The bank is working through 0:09:27.280 --> 0:09:32.640 its issues and it has to show specific progress against 0:09:32.920 --> 0:09:36.079 sort of a set plan for the bank, and they 0:09:36.120 --> 0:09:37.240 still have some work to do. 0:09:37.640 --> 0:09:41.120 So are you expecting these regulatory changes to start on 0:09:41.280 --> 0:09:42.800 day one of the new administration? 0:09:44.280 --> 0:09:47.080 We are not, And in fact our view is really 0:09:47.480 --> 0:09:50.240 just that we're going to get less new regulation. So 0:09:50.679 --> 0:09:53.680 it's not going to be anything that we see day 0:09:53.720 --> 0:09:56.280 one or in the near term, and In fact, our 0:09:56.360 --> 0:10:00.000 view is just that things like Basil three could get 0:10:00.280 --> 0:10:06.880 out further, and that's really the benefit. Similarly, with antitrust scrutiny, 0:10:06.960 --> 0:10:10.960 it's really just that we'll see less action, not necessarily 0:10:11.160 --> 0:10:15.280 new or immediate action. And so turning to the economy 0:10:15.280 --> 0:10:18.880 and monetary policy, we expect that charge offs tick up, 0:10:19.280 --> 0:10:22.360 but in general, client trends are healthy, and we think 0:10:22.360 --> 0:10:25.040 the outlook for both net interest income and charge offs 0:10:25.080 --> 0:10:29.680 are supportive for profitability for twenty twenty five. Of course, 0:10:29.840 --> 0:10:33.360 card will continue to lead on loan growth, and because 0:10:33.559 --> 0:10:36.400 fourth quarter trends tend to be the seasonally strongest corner 0:10:36.480 --> 0:10:40.440 for that business, we'll have lots of positive commentary there. 0:10:40.960 --> 0:10:43.760 And so it's really those equity fees where we may 0:10:43.800 --> 0:10:47.439 see a sequential increase. We also think that we may 0:10:47.440 --> 0:10:49.760 see an increase in the M and A fees. That's 0:10:49.920 --> 0:10:53.520 an area that we are bullish on for twenty twenty five, 0:10:53.640 --> 0:10:57.400 not only because of the anti trust scrutiny, but we 0:10:57.520 --> 0:11:02.280 do think that getting pass the election and in this 0:11:02.960 --> 0:11:06.480 current interest rate cycle, that there is a little bit 0:11:06.520 --> 0:11:10.760 more there is a little bit better sentiment among CEOs, 0:11:10.760 --> 0:11:12.559 and that will help to fuel some activity. 0:11:12.880 --> 0:11:15.880 Let me then ask you about the Federal Reserve signaling 0:11:16.040 --> 0:11:19.319 fewer rate cuts this year, and after this Friday's jobs report, 0:11:19.320 --> 0:11:21.400 it looks like a lot of Wall Street is betting 0:11:21.480 --> 0:11:24.640 on the next rate cut not until October. Now what 0:11:24.679 --> 0:11:27.560 will that mean to growth and revenue at these lenders? 0:11:27.880 --> 0:11:31.120 So for the net interest income, we do expect to 0:11:31.120 --> 0:11:36.840 see stabilization this quarter, and then given where the curve 0:11:37.080 --> 0:11:40.040 has moved and expectations for the for the forward curve 0:11:40.120 --> 0:11:44.040 has moved, we could get more positive views on that front. 0:11:44.320 --> 0:11:48.120 In particular, we're looking to JP Morgan, who has sort 0:11:48.160 --> 0:11:51.439 of returned to this positive cycle of be and raise. 0:11:51.840 --> 0:11:54.720 Estimates have been rising into the earnings for that bank 0:11:54.760 --> 0:12:00.120 following bullish guidance in December, but still there could be 0:12:00.160 --> 0:12:02.760 some room, we think, for them to be and raise 0:12:02.840 --> 0:12:07.520 again and interesting comm guidance is a focus for that bank, 0:12:07.559 --> 0:12:12.000 But really for JP Morgan, what we're looking for is 0:12:12.040 --> 0:12:17.160 to see continued leadership in their overall profitability. Just help 0:12:17.200 --> 0:12:20.280 buy the execution at that bank as well as some 0:12:20.320 --> 0:12:21.640 of their leadership positions. 0:12:21.760 --> 0:12:26.120 Our thanks to Alison Williams, Bloomberg Intelligence Senior Analyst, Global 0:12:26.160 --> 0:12:29.640 Banks and Asset Managers. Coming up on Bloomberg day Break weekend, 0:12:29.679 --> 0:12:32.760 we'll focus on a UK asset slump and what may 0:12:32.800 --> 0:12:46.160 come next. I'm Tom Busby and this is Bloombergen. This 0:12:46.200 --> 0:12:48.600 is Bloomberg day Break weekend, our global look ahead at 0:12:48.640 --> 0:12:51.200 the top stories for investors in the coming week. I'm 0:12:51.240 --> 0:12:54.240 Tom Busby in New York. Up later in our program 0:12:54.280 --> 0:12:57.240 will break down what lies ahead after President Biden's decision 0:12:57.280 --> 0:13:01.240 to block Nippon Steele's acquisition of US Deal. But first 0:13:01.559 --> 0:13:04.080 back in twenty twenty two, the UK's guilt market was 0:13:04.120 --> 0:13:07.720 plunged into crisis, sparked by the now infamous mini budget 0:13:07.920 --> 0:13:11.600 of then UK Prime Minister Liz Trusts. Now two years on, 0:13:12.000 --> 0:13:14.960 investors are concerned the country could be on course for 0:13:15.040 --> 0:13:18.600 another collision with the markets. Can the government assuage their 0:13:18.640 --> 0:13:21.240 concerns for more? Let's go to London and bring in 0:13:21.280 --> 0:13:24.040 Bloomberg day Break. Europ banker Caroline. 0:13:23.600 --> 0:13:27.120 Hepgar Tom, we have seen a tumultuous week in UK 0:13:27.320 --> 0:13:30.800 bond markets over the past few days. Long term UK 0:13:30.880 --> 0:13:34.320 boring costs have soared and the pound has fallen, a 0:13:34.400 --> 0:13:38.440 rare combination that can signal investors have lost faith in 0:13:38.480 --> 0:13:41.400 the government's ability to keep a lid on the national 0:13:41.440 --> 0:13:45.840 debt and control inflation. The current surge in debt costs 0:13:45.880 --> 0:13:50.280 also threatens to wipe out Chancellor Rachel reeves slim at 0:13:50.400 --> 0:13:54.680 nine point nine billion pound buffer against her budget rules 0:13:55.080 --> 0:13:59.320 and to create instability ahead of an official fiscal update 0:13:59.600 --> 0:14:02.880 on the tw twenty sixth of March. For investors, it 0:14:02.920 --> 0:14:07.480 all makes for a precarious state of affairs. Averson why 0:14:07.679 --> 0:14:12.400 a fund manager Energy Investment says that investors are concerned. 0:14:12.679 --> 0:14:15.880 I think what's looking different in the UK is that 0:14:15.960 --> 0:14:20.680 they have very little policy room to move. We know 0:14:20.760 --> 0:14:23.440 that borrowing is near record highs and we know that 0:14:23.840 --> 0:14:27.800 taxation is near record highs, and so it's very much 0:14:27.840 --> 0:14:31.240 a situation of the Labor Party needing to be a 0:14:31.240 --> 0:14:33.840 bit creative in terms of where they get this extra 0:14:33.920 --> 0:14:38.760 revenue from. And looking at valuations over the last day 0:14:38.880 --> 0:14:42.560 or so, we are pricing in very similar levels to 0:14:42.600 --> 0:14:46.359 what we saw in twenty twenty two and a trust backdrop, 0:14:46.480 --> 0:14:49.720 and of course that was driven by unfunded tax cuts 0:14:49.720 --> 0:14:53.360 and more fiscal recklessness. But now we're looking at potential austerity, 0:14:53.440 --> 0:14:56.000 so we are looking at very different backdrops, but very 0:14:56.000 --> 0:14:57.600 similar guilt pricing. 0:14:57.960 --> 0:15:01.480 That was averson why from and G Investments speaking to 0:15:01.520 --> 0:15:05.320 me and Stephen Caroll on Bloomberg Radio. The government has 0:15:05.360 --> 0:15:09.400 offered reassurances, the Chief Secretary to the Treasury, Darren Jones, 0:15:09.440 --> 0:15:13.480 pointing out that UK guilt markets continued to function in 0:15:13.520 --> 0:15:18.040 an orderly way, and Bloomberg reporting that Rachel Reeves will 0:15:18.080 --> 0:15:23.280 prioritize public spending cuts over any tax increases if it 0:15:23.360 --> 0:15:26.880 indeed comes to that. But the fate of the UK's 0:15:26.880 --> 0:15:30.280 debt market is something I've been discussing in more detail 0:15:30.320 --> 0:15:34.760 with Bloomberg's chief UK economist Dan Hanson ahead of fresh 0:15:34.800 --> 0:15:38.080 inflation data coming in the next few days. 0:15:38.320 --> 0:15:40.520 There's been an awful lot going on, hasn't there. And 0:15:40.520 --> 0:15:43.680 I think really the driver of all well, there are two. 0:15:43.720 --> 0:15:48.040 There are two drivers really. One is global inflation concerns, 0:15:48.480 --> 0:15:52.920 and you know, in deep integrated global markets, the UK 0:15:53.720 --> 0:15:56.560 is a small player, so what happens in the US 0:15:56.560 --> 0:15:59.800 matters for the UK, So you know we import a 0:15:59.840 --> 0:16:03.400 lot of what goes on in US markets, particularly in 0:16:03.440 --> 0:16:06.120 the guilt market. So that's the first thing. The second 0:16:06.120 --> 0:16:10.240 thing I think is that there is this ongoing concerns 0:16:10.400 --> 0:16:14.440 I think is the right word about the UK's fiscal 0:16:14.480 --> 0:16:17.640 position coming out of the budget on October the thirtieth 0:16:17.720 --> 0:16:22.520 last year, and the uncertainty about what chance with these 0:16:22.600 --> 0:16:25.760 jacker Rachel Reeves will will do about it with a 0:16:26.720 --> 0:16:29.200 in the what is being called the spring forecast, which 0:16:29.240 --> 0:16:34.240 is on March twenty sixth Reeves has been quite adamant, 0:16:34.240 --> 0:16:35.920 at least up till now, that there will only be 0:16:35.960 --> 0:16:39.360 one fiscal event per year, and that or one event 0:16:39.400 --> 0:16:43.880 where spending in taxes are changed, I should say. And 0:16:43.920 --> 0:16:47.400 the hope was, at least Labour's hope or the government's hope, 0:16:47.600 --> 0:16:50.160 was that they wouldn't have to make any changes to 0:16:50.160 --> 0:16:54.480 fiscal policy at the upcoming statement. As things stands, it 0:16:54.520 --> 0:16:57.040 looks like they will have to make some changes. So 0:16:57.640 --> 0:17:00.400 there's been at an awful lot going on, but it 0:17:00.800 --> 0:17:05.960 keeps us busy. So I think the key thing and 0:17:05.960 --> 0:17:08.360 the most interesting thing, at least for us, has been 0:17:08.480 --> 0:17:11.679 the shift in borrowing the expectations around borrowing costs in 0:17:11.720 --> 0:17:12.120 the UK. 0:17:13.000 --> 0:17:15.919 Yeah, and so this is the guilt market is also 0:17:15.960 --> 0:17:19.160 though to pick you up on that point around inflation, 0:17:19.280 --> 0:17:21.840 we do get inflation data out in the days ahead, 0:17:22.600 --> 0:17:25.680 how are we thinking about that? The stickiness of inflation 0:17:25.800 --> 0:17:28.080 here in the UK and therefore what the Bank of 0:17:28.119 --> 0:17:28.840 England has to do. 0:17:29.400 --> 0:17:31.080 Yeah, So I mean I think I don't think it's 0:17:31.080 --> 0:17:33.720 going to tell us anything we didn't already know. I 0:17:33.720 --> 0:17:36.760 think it's you know, if you if you sort of 0:17:36.760 --> 0:17:40.119 put the numbers together, we're looking for a modest rise 0:17:40.400 --> 0:17:42.920 from two point six to two point seven. I could 0:17:42.960 --> 0:17:44.840 see it coming in at two point six as well. 0:17:44.960 --> 0:17:46.360 I mean, if you're going into the if you really 0:17:46.400 --> 0:17:49.600 want to get into the minuture of the numbers, it's 0:17:50.560 --> 0:17:52.639 there's a There are a lot of volatile categories that 0:17:52.680 --> 0:17:55.040 can affect the CPI in December, one of which is 0:17:55.680 --> 0:17:58.240 the price of air travel. A lot depends on when 0:17:58.280 --> 0:18:00.439 the ONS collects the data, so there there's a bit 0:18:00.440 --> 0:18:02.679 of uncertainty around the number. But the big picture, as 0:18:02.760 --> 0:18:05.880 you've you've rightly said there, is that it will continue 0:18:05.920 --> 0:18:11.440 to signal sticky inflation. Two point six prints or a 0:18:11.440 --> 0:18:12.960 two point seven print would be above the Bank of 0:18:12.960 --> 0:18:17.840 England's expectation that it had in its November forecast. So 0:18:17.960 --> 0:18:21.280 bringing it all together, it's going to continue, I think, 0:18:21.320 --> 0:18:23.480 to just sort of support the view that the UK 0:18:23.640 --> 0:18:27.639 has this special inflation problem but has got a persistent 0:18:27.760 --> 0:18:31.080 or sticky inflation problem, and if you look at the 0:18:31.119 --> 0:18:34.000 outlook for this year, it's unlikely that inflation is going 0:18:34.000 --> 0:18:36.000 to drop much below where we are now. It's probably 0:18:36.040 --> 0:18:39.040 going to oscillate somewhere between where we are now and 0:18:39.840 --> 0:18:41.760 three or perhaps a touch above it. So we're going 0:18:41.760 --> 0:18:45.040 to be in that range which clearly isn't two percent. 0:18:45.480 --> 0:18:49.360 And therefore interest rates in the UK may remain higher 0:18:49.400 --> 0:18:51.919 for longer, and therefore the pressure on the government and 0:18:51.960 --> 0:18:57.399 government finances would remain in terms of what the Chancellor 0:18:57.560 --> 0:19:02.840 needs to do, needs to set what would convince investors? 0:19:02.880 --> 0:19:06.480 What do you think markets want to hear right now? 0:19:07.080 --> 0:19:11.399 Well, I think the answer I mean this problem is 0:19:11.480 --> 0:19:14.080 going back to the answer to my first question. There 0:19:14.600 --> 0:19:16.600 there's a global element to it which is very hard 0:19:16.600 --> 0:19:19.320 to fight. It's very hard to do something about that. 0:19:19.480 --> 0:19:21.720 But there is a UK specific bit of it as well, 0:19:21.960 --> 0:19:27.840 and that is that stems predominantly from concerns about fiscal policy. 0:19:27.960 --> 0:19:31.920 So the remedy has to be around fiscal policy. And 0:19:31.960 --> 0:19:34.560 the question is how do you reign in borrowing And 0:19:34.600 --> 0:19:36.880 there are two obviously two ways of doing that. One 0:19:36.920 --> 0:19:39.120 is you raise taxes, the other is you cut spending. 0:19:39.800 --> 0:19:42.040 And it sounds like the noise is coming from the government. 0:19:42.119 --> 0:19:44.639 At least, it sounds like that cutting spending is going 0:19:44.680 --> 0:19:48.359 to be the way the government goes to bring things 0:19:48.400 --> 0:19:51.199 back sort of steady the ship, if you like to 0:19:51.480 --> 0:19:54.520 put it, because at least when you think about the 0:19:54.520 --> 0:19:56.679 budget and the backlash to the rise in taxes that 0:19:56.720 --> 0:19:59.639 we had, it seems very unlikely to me that they 0:19:59.680 --> 0:20:02.119 will raise is tax further because of the backlash to 0:20:02.160 --> 0:20:05.720 the rise in payroll tax that we had, and also 0:20:05.760 --> 0:20:08.960 because of the manifesto or commitments that were made during 0:20:08.960 --> 0:20:14.440 the election that income tax, employee, national insurance not employer 0:20:14.560 --> 0:20:18.040 national insurance, employee national insurance, corporation tax, value added tax, 0:20:18.080 --> 0:20:20.000 none of those things will rise, and they account for 0:20:20.560 --> 0:20:23.719 upwards of seventy percent of the tax take, so it's 0:20:23.800 --> 0:20:26.399 very difficult to see how they would go near the 0:20:26.440 --> 0:20:29.359 tax space. Again, it feels like they'll go for spending cuts. 0:20:29.960 --> 0:20:32.640 What are the risks of stagflation for the UK? 0:20:34.119 --> 0:20:36.760 I think they are in the near term. We're sort 0:20:36.760 --> 0:20:39.240 of back where we were sort of in this sort 0:20:39.240 --> 0:20:41.359 of twenty twenty two to twenty twenty three period. Obviously, 0:20:41.400 --> 0:20:44.680 the inflation picture is completely different. We had sort of 0:20:44.720 --> 0:20:47.320 eleven percent inflation in the UK we're at I know 0:20:47.320 --> 0:20:50.200 we're above target, but it's very different at two point 0:20:50.240 --> 0:20:52.240 six compared to eleven point one, which was the peak. 0:20:52.359 --> 0:20:55.440 That's the first point. But on the other side of 0:20:55.480 --> 0:20:59.360 the sort of stagflation story, the jobs market does look 0:20:59.400 --> 0:21:02.919 like it's loose now and by well, it's looser certainly 0:21:02.920 --> 0:21:04.880 than it was in twenty twenty two, twenty twenty three, 0:21:04.920 --> 0:21:07.119 and it is loosening, you know. The Bank of England 0:21:07.160 --> 0:21:09.520 said that it's December meeting that the labor market is 0:21:09.560 --> 0:21:13.080 in balance sort of. Any further loosening from here means 0:21:13.119 --> 0:21:16.719 there's spare capacity in the labor market, unemployment is rising. 0:21:17.359 --> 0:21:19.520 That presents a really difficult trade off for the bank 0:21:19.840 --> 0:21:23.000 because you've got this inflation picture, you've got this potentially 0:21:23.040 --> 0:21:27.560 weakening labor market, and the bank is charged with targeting inflation. 0:21:27.600 --> 0:21:29.280 It doesn't have a dual mandate like the FED, so 0:21:29.320 --> 0:21:32.320 it can't lean on one side of another site or 0:21:32.359 --> 0:21:35.000 the second part of the mandate if you like. So 0:21:35.080 --> 0:21:37.320 I think it's going to be a difficult period for 0:21:37.359 --> 0:21:37.720 the bank. 0:21:38.240 --> 0:21:42.880 My thanks to Bloomberg's Dan Hanson, our chief UK economist. Well, 0:21:43.000 --> 0:21:46.359 while Rachel Reeves and the government grapple with their response. 0:21:46.400 --> 0:21:50.600 The Chancellor may not have much time as business leaders 0:21:50.640 --> 0:21:55.719 grow increasingly frustrated. Neil Carburry, the CEO of the Recruitment 0:21:55.800 --> 0:22:01.000 and Employment Confederation, says that patience is running thin in 0:22:01.040 --> 0:22:03.400 the wake of October's budget changes. 0:22:04.040 --> 0:22:06.280 Well, look, the fiscal position is really difficult and it 0:22:06.320 --> 0:22:08.800 looks really difficult going out year after year from here. 0:22:09.680 --> 0:22:12.280 The ability of the UKI to do long term economic 0:22:12.320 --> 0:22:16.560 policy making is what's an issue here. I think this 0:22:16.640 --> 0:22:19.760 government coming to power has tried to move more in 0:22:19.840 --> 0:22:23.800 that direction. As you say, there's a long run to 0:22:23.880 --> 0:22:26.240 judge it, but I think we need to see more 0:22:26.280 --> 0:22:29.200 of the tough choices fronted up in the open rather 0:22:29.320 --> 0:22:32.320 than rather than pushed into the background. 0:22:32.920 --> 0:22:35.920 We mentioned that your survey is scrutinized by the Bank 0:22:35.960 --> 0:22:38.840 of England. How much of a head window interest rates 0:22:39.200 --> 0:22:41.240 at this point? What are you hearing from your members 0:22:41.320 --> 0:22:43.919 about traders expectations that the BOE is not going to 0:22:43.960 --> 0:22:46.119 go nearly as far as some had expected at least 0:22:46.320 --> 0:22:47.440 three six months ago. 0:22:47.720 --> 0:22:51.399 Well, we watched this really closely because a bit of 0:22:51.400 --> 0:22:53.720 a foible of the way the temporary labor market works 0:22:54.440 --> 0:22:56.960 is you know, if I place someone as an agency 0:22:56.960 --> 0:22:58.560 as a temporary worker, I paid them this week, but 0:22:58.600 --> 0:23:00.760 I get paid in a month or three months time. 0:23:01.080 --> 0:23:05.520 So effectively I'm acting as a short term bank for clients. 0:23:06.720 --> 0:23:09.240 And clearly therefore temporary labor supply is a lot more 0:23:09.240 --> 0:23:15.359 expensive now than it was five years ago. We definitely 0:23:15.400 --> 0:23:19.760 think that the capacity of the temporary labor market to 0:23:19.880 --> 0:23:22.160 supply and to meet the needs where companies maybe sitting 0:23:22.200 --> 0:23:26.680 back a bit and going permanent, not confident about creating 0:23:26.680 --> 0:23:32.320 permanent jobs, is being affected by cost of capital, and 0:23:32.320 --> 0:23:35.800 we think that's happening on investment decisions inside client businesses 0:23:35.840 --> 0:23:36.440 as well. 0:23:36.680 --> 0:23:38.960 What do you really think that the government has to 0:23:39.000 --> 0:23:42.399 say this week to people like you, to your the 0:23:42.440 --> 0:23:43.600 businesses that you speak to. 0:23:44.240 --> 0:23:46.520 I think then has to be a real opening up 0:23:46.560 --> 0:23:50.399 on the next year to eighteen months. What are you 0:23:50.440 --> 0:23:53.040 asking your business and how are we moderating that Because 0:23:53.040 --> 0:23:55.160 if you look at things like the employment Rights Bill 0:23:55.880 --> 0:23:58.440 that's coming up time and again as a potential threat 0:23:58.480 --> 0:24:00.680 in our world in the labor market, and yet it's 0:24:00.760 --> 0:24:03.200 unformed at the moment. We need government to give commitments 0:24:03.240 --> 0:24:08.960 to things like protecting the gig economy in flex flexible 0:24:09.000 --> 0:24:12.040 labor in the zero hour's contract rules, because right now 0:24:12.080 --> 0:24:13.840 a lot of firms just say, well, I'm not hiring 0:24:13.880 --> 0:24:15.880 permanently because they don't have the confidence, and I'm now 0:24:15.920 --> 0:24:18.280 not hiring temporary because I don't know what happens in 0:24:18.280 --> 0:24:20.160 that world after the bill NOL. 0:24:20.200 --> 0:24:23.240 How does it break down in terms of SECTI by sector, 0:24:23.320 --> 0:24:26.960 industry by industry. You're pointing to the challenges and the 0:24:26.960 --> 0:24:29.720 softness now, the weakness in the labor market. Where is 0:24:29.720 --> 0:24:30.800 that most acutely felt. 0:24:31.240 --> 0:24:34.600 So we've seen a really tough long period for construction. 0:24:34.640 --> 0:24:37.080 Actually the trend in construction, while still negative, is slightly 0:24:37.080 --> 0:24:39.960 better now than last year. It's usually quite a good 0:24:40.000 --> 0:24:42.159 sign in terms of leading indicator. 0:24:41.840 --> 0:24:43.520 On shortage of construction work. 0:24:43.880 --> 0:24:47.880 Indeed, and then the only areas where we're seeing vacancies 0:24:48.000 --> 0:24:53.239 growing at the moment are in marginally in hospitality and 0:24:53.280 --> 0:24:57.360 then particularly in what we'd call blue collar light industrial logistics. 0:24:57.680 --> 0:24:59.960 And if you think about that that sector, that's how 0:25:00.119 --> 0:25:01.480 real area of shortage. 0:25:01.680 --> 0:25:05.160 That was Neil Carbury from the Recruitment and Employment Confederation 0:25:05.320 --> 0:25:08.239 speaking to me on Bloomberg Radio. The UK has been 0:25:08.240 --> 0:25:11.160 among the hardest hit by the route in global bond 0:25:11.240 --> 0:25:15.480 markets will continue to follow investor concerns and the speeches 0:25:15.520 --> 0:25:19.320 planned by the Chancellor in the coming weeks. I'm Caroline 0:25:19.359 --> 0:25:21.680 Hepkee here in London. You can catch us every weekday 0:25:21.680 --> 0:25:23.920 morning for Bloomberg day Break. You up beginning at six 0:25:23.960 --> 0:25:26.320 am in London. That's one am on Wall Street. 0:25:26.359 --> 0:25:29.879 Tom, Thanks Caroline, and coming up on Bloomberg day Break weekend, 0:25:29.920 --> 0:25:32.520 we'll look at one lies ahead after President Biden's decision 0:25:32.560 --> 0:25:36.400 to block Napon Steele's acquisition of US deal. I'm Tom 0:25:36.480 --> 0:25:50.520 Busby and this is Bloombergie. This is Bloomberg day Break Weekend, 0:25:50.560 --> 0:25:52.879 our global look ahead at the top stories for investors 0:25:52.920 --> 0:25:55.399 in the coming week. I'm Tom Busby in New York. 0:25:55.680 --> 0:25:58.280 With President elect Trump set to take office in a 0:25:58.320 --> 0:26:01.000 little more than a week and tariff the top of mind, 0:26:01.640 --> 0:26:04.960 what's the outlook for China's biggest automaker. Let's get to 0:26:05.000 --> 0:26:08.440 Doug Krisner, host of the Daybreak Asia podcast, for more. 0:26:09.600 --> 0:26:12.800 Tom twenty twenty five maybe the year the Chinese carmaker 0:26:12.840 --> 0:26:16.280 BYD becomes the dominant player in the global market for 0:26:16.440 --> 0:26:21.720 electric vehicles. Already, BYD has nearly overtaken Tesla to become 0:26:21.760 --> 0:26:25.040 the world's largest seller of evs. For a closer look, now, 0:26:25.080 --> 0:26:27.960 I'm joined by Danny Lee, who covers the Asia EV 0:26:28.080 --> 0:26:31.160 space for Bloomberg News. Danny joins us from our studios 0:26:31.200 --> 0:26:33.560 in Hong Kong. It's always great to have the chance 0:26:33.600 --> 0:26:37.200 to visit with you. You're so plugged in, so to speak, 0:26:37.320 --> 0:26:40.359 in the EV environment in Asia. We can talk about 0:26:40.359 --> 0:26:42.800 the BYD story in a moment, but can we begin 0:26:42.920 --> 0:26:45.320 with kind of getting the big picture on the EV 0:26:45.480 --> 0:26:48.200 market in China? How competitive are things right now? 0:26:48.520 --> 0:26:52.879 The landscape is really quite cutthroats, and we've seen that 0:26:52.960 --> 0:26:55.520 play out over the last couple of years with price 0:26:55.600 --> 0:27:01.280 cuts being dished out across the marketplace. Every car maker 0:27:01.359 --> 0:27:05.600 has been forced into a position because of the best 0:27:05.640 --> 0:27:09.240 selling car maker, BYD. But there is a real sense 0:27:09.280 --> 0:27:11.960 that if you're not cutting prices, you are going to 0:27:12.000 --> 0:27:16.719 sink very very quickly. And given the fight for what 0:27:16.800 --> 0:27:20.120 little market share there is because of the dominance of BYD, 0:27:20.800 --> 0:27:24.960 everyone's fighting for a smaller amount of vehicles that buyers 0:27:24.960 --> 0:27:28.680 are going to drive, and ultimately those who lose out 0:27:28.840 --> 0:27:31.160 are going out of business. And we've seen a few 0:27:31.200 --> 0:27:33.479 failures in twenty twenty four as a result of this 0:27:33.600 --> 0:27:37.920 squeeze on the market because we see more drivers gravitating 0:27:37.960 --> 0:27:41.800 towards the more popular EV brands out there, whether it 0:27:41.880 --> 0:27:46.040 be a BYD to a Zeker to a Gili, these 0:27:46.080 --> 0:27:50.160 are all moves being done to try and consolidate positions 0:27:50.240 --> 0:27:54.480 in the marketplace. And we see the more successful EV 0:27:54.600 --> 0:27:57.680 brands coming to the fore now and ones that are 0:27:57.880 --> 0:28:00.640 coming to the fore in China are actually to have 0:28:01.040 --> 0:28:04.000 an impact outside of China, and that's where the worry 0:28:04.160 --> 0:28:07.000 extends to because of the success of the Chinese V 0:28:07.119 --> 0:28:07.880 space overall. 0:28:08.040 --> 0:28:10.879 So when you talk about consolidation, is that really a 0:28:10.960 --> 0:28:14.840 euphemism for saying there are fewer participants in the market 0:28:14.920 --> 0:28:18.879 right now, fewer companies manufacturing, or are we actually seeing 0:28:18.920 --> 0:28:21.640 kind of merger merger and acquisition activity. 0:28:22.240 --> 0:28:27.000 We are largely seeing more of A consolidations through the failures. 0:28:27.440 --> 0:28:30.640 Where we do see though, the effective M and A 0:28:30.640 --> 0:28:34.320 activity is where the biggest losers have ultimately been the 0:28:34.400 --> 0:28:38.960 foreign auto brands, where we've seen Volkswagen lose more and 0:28:39.040 --> 0:28:43.320 more share. We've seen General Motors also sync quite significantly 0:28:43.320 --> 0:28:48.400 over recent quarters, and even Stellantis, who has pulled back 0:28:48.400 --> 0:28:51.040 on the China market of late but then decided to 0:28:51.040 --> 0:28:53.920 do a deal. Just like Volkswagen, They're all looking for 0:28:54.000 --> 0:28:58.040 deals with Chinese EV partners, particularly ones who have a 0:28:58.160 --> 0:29:01.080 limited track record in terms of of a history, but 0:29:01.240 --> 0:29:04.600 because of what cars they can produce, with the technology 0:29:04.600 --> 0:29:07.440 and the offering that is so attractive to Chinese consumers, 0:29:07.840 --> 0:29:10.760 we've seen a lot of m and A worth billions, 0:29:10.800 --> 0:29:14.760 and so this is where we've seen this consolidation or 0:29:14.800 --> 0:29:19.360 gravitation towards foreign automakers trying to partner up because if 0:29:19.360 --> 0:29:22.040 you can't beat them, you join them, and so this 0:29:22.080 --> 0:29:24.560 is where they feel their money is best put to work. 0:29:24.720 --> 0:29:26.640 So, Danny, what is the role of the government here. 0:29:26.680 --> 0:29:28.760 I know that there are a few trade in programs 0:29:28.800 --> 0:29:32.160 which have been vital to building out the market. Is 0:29:32.200 --> 0:29:34.480 that just the way that business is done? You accept 0:29:34.520 --> 0:29:36.960 the fact that the government's going to continue to support 0:29:37.040 --> 0:29:38.160 these manufacturers. 0:29:38.880 --> 0:29:42.280 The view is from the industry that they do want 0:29:42.280 --> 0:29:46.520 to see some government support for the consumer to encourage 0:29:47.520 --> 0:29:51.080 cars to be bought electric cars specifically, and given the 0:29:51.120 --> 0:29:56.080 investment being made by these Chinese automakers billions has been 0:29:56.120 --> 0:29:59.280 spent over a multi year period, there is just an 0:29:59.320 --> 0:30:04.280 anxiety that if consumers start to wane on EV purchases, 0:30:04.320 --> 0:30:07.080 which would be hard to think given the we are 0:30:07.120 --> 0:30:12.160 seeing monthly sales of EV's compared to overall sales hitting 0:30:12.640 --> 0:30:17.040 over fifty percent. Now that they're just you know, if 0:30:17.040 --> 0:30:20.200 any slippage does come that there would be that would 0:30:20.200 --> 0:30:23.760 have a negative effect on the overall sector. But you know, 0:30:23.960 --> 0:30:27.640 China seeds the overall benefits of supporting sales to ensure 0:30:27.680 --> 0:30:31.280 that there is healthy competition and a strong marketplace, because 0:30:31.760 --> 0:30:35.920 ultimately that extends to the carmakers in China benefiting and 0:30:35.960 --> 0:30:38.200 they can translate that success globally. 0:30:38.360 --> 0:30:41.040 I was looking at your Year ahead for the EV 0:30:41.160 --> 0:30:44.120 space in China, you can see it on the Bloomberg terminal, 0:30:44.120 --> 0:30:47.240 and one line that struck me is that BYD essentially 0:30:47.280 --> 0:30:51.880 remains the brand to beat. What makes BYD so special. 0:30:51.920 --> 0:30:56.920 Well BYD has always been able to use its financial 0:30:57.000 --> 0:31:00.920 my year after year now to continue Hinley be ahead 0:31:01.080 --> 0:31:04.600 and to set the agenda, particularly when it comes to prices. 0:31:04.680 --> 0:31:08.160 But because its car lineup is so affordable and they 0:31:08.200 --> 0:31:12.760 have so many models and variants, we are talking in 0:31:12.840 --> 0:31:14.800 excess of one hundred and seventy hundred and eighty even 0:31:14.840 --> 0:31:19.320 more now intentially up to two hundred. So whatever the 0:31:19.320 --> 0:31:22.720 price point, the choice, the kind of power you want 0:31:22.920 --> 0:31:27.680 or capability or vehicle BYD is covered at every price 0:31:27.800 --> 0:31:31.640 range possible, frankly, and for many vehicle types. Now that 0:31:31.720 --> 0:31:34.959 it also includes a supercart and a pickup truck, so 0:31:35.040 --> 0:31:38.560 it has anything for everyone. And it's that kind of 0:31:38.680 --> 0:31:42.360 proliferation which means it can be all things to all consumers. 0:31:42.360 --> 0:31:46.200 And that's where other car making brands are having to 0:31:46.400 --> 0:31:46.920 catch up. 0:31:47.120 --> 0:31:50.040 So we've been talking really about the domestic market in China, 0:31:50.080 --> 0:31:53.240 and I'm curious for the entire EV industry in China 0:31:53.280 --> 0:31:57.200 how critical it is that these companies begin to develop 0:31:57.280 --> 0:31:59.880 markets offshore in foreign jurisdictions. 0:32:00.400 --> 0:32:04.120 Well, for EV companies and for auto companies buy and large, 0:32:04.920 --> 0:32:09.000 there has been a push to drive sales in any 0:32:09.080 --> 0:32:11.760 way possible, you know, because of the way in which 0:32:11.840 --> 0:32:15.400 the domestic Chinese sector has been so cutthroat. You know 0:32:15.560 --> 0:32:20.240 that by selling abroad you can attract bigger margins, significantly 0:32:20.240 --> 0:32:24.040 bigger margins in some cases. And so we have seen 0:32:24.800 --> 0:32:29.040 many Chinese carmakers go abroad as far as Brazil to Mexico. 0:32:29.880 --> 0:32:33.760 Southeast Asia has been a big, a big kind of 0:32:33.800 --> 0:32:38.160 melting pot of activity. So it is important that you diversify, 0:32:38.560 --> 0:32:41.280 and BID has understood that in a way in which 0:32:41.320 --> 0:32:44.960 it has rapidly expanded to well over one hundred countries 0:32:45.000 --> 0:32:47.640 by this point in the past three years or so. 0:32:47.720 --> 0:32:51.880 And so it's important to have some balance, so you're 0:32:51.920 --> 0:32:56.920 not reliant on the Chinese domestic market overall, because maybe 0:32:56.920 --> 0:32:59.080 one day those subsites will have to be weaned off, 0:32:59.160 --> 0:33:02.480 and you know, sales can't keep growing forever, although there 0:33:02.560 --> 0:33:06.280 is a good kind of momentum for the next several 0:33:06.360 --> 0:33:07.000 years to come. 0:33:07.600 --> 0:33:09.520 Jenny, thank you so much for spending the time to 0:33:09.640 --> 0:33:12.240 enlighten us on the Chinese EV space. And you can 0:33:12.280 --> 0:33:15.880 read Danny's piece on the Bloomberg terminal Chinese EV Makers 0:33:15.960 --> 0:33:20.320 twenty twenty five goals belye tough year ahead. He's Danny Lee. 0:33:20.360 --> 0:33:23.640 He covers the Asia EV space for Bloomberg News. And 0:33:23.720 --> 0:33:27.120 now we turn to a spat in US Japanese relations, 0:33:27.200 --> 0:33:31.640 President Biden blocking Nipon Steele's deal to acquire its American 0:33:31.760 --> 0:33:34.680 rival US deal. Now, Nepon says, at this point it's 0:33:34.680 --> 0:33:38.160 not considering alternative plans to the takeover, and yes, both 0:33:38.200 --> 0:33:42.280 companies have filed lawsuits to rescue their merger. So should 0:33:42.320 --> 0:33:44.600 we assume this deal is dead? Well, let's take a 0:33:44.640 --> 0:33:46.760 close to look at the state of affairs in the saga. 0:33:46.800 --> 0:33:50.840 I'm joined now by GERRODRIDI. He is Bloomberg opinion columnists 0:33:50.880 --> 0:33:53.880 joining us from our studios in Tokyo. Thanks for making 0:33:53.880 --> 0:33:56.600 time to check with us. Let's begin with your understanding 0:33:56.600 --> 0:34:00.160 of Biden's rationale for blocking the transaction. First of all, 0:34:00.160 --> 0:34:01.800 do you understand it? Does it make sense? 0:34:02.120 --> 0:34:04.560 The rationale absolutely does not make sense, and I think 0:34:04.560 --> 0:34:08.000 that is the most difficult to understand part about this deal. 0:34:08.160 --> 0:34:10.920 You know, we knew that Biden opposed the deal, We 0:34:11.000 --> 0:34:15.560 knew that this decision was likely coming. But I think 0:34:15.600 --> 0:34:19.239 what was shocking here was to see it put you know, 0:34:19.360 --> 0:34:23.399 so starkly in writing that, you know, the wording of 0:34:23.520 --> 0:34:27.600 Biden's executive order that he has credible evidence that Nippon 0:34:27.680 --> 0:34:30.440 Steel might take action that threatens to impair the national 0:34:30.480 --> 0:34:33.400 security of the US. You know, we're talking about a 0:34:33.480 --> 0:34:37.960 Japanese company. Japan is you know, the US's I think 0:34:38.000 --> 0:34:41.319 it's it's most important ally at this point in time, 0:34:41.600 --> 0:34:44.399 and obviously you know it's a security the US's Japan 0:34:44.480 --> 0:34:48.320 Security guardent tour. To say that a company based in 0:34:48.400 --> 0:34:52.000 Japan presents a national security threat to the US just 0:34:52.040 --> 0:34:53.160 doesn't make any sense at all. 0:34:53.239 --> 0:34:56.120 I find it particularly interesting because from what I read, 0:34:56.239 --> 0:35:00.040 many people who advise President Biden were actually in in 0:35:00.160 --> 0:35:02.799 favor of this deal, and they wanted him to kind 0:35:02.800 --> 0:35:05.840 of give his blessing, to give his approval. At the 0:35:05.960 --> 0:35:07.440 end of the day, we know he blocked it, And 0:35:07.480 --> 0:35:09.759 I'm wondering whether some of this had to do with 0:35:09.800 --> 0:35:12.200 the fact that Biden would like to be seen in 0:35:12.239 --> 0:35:15.799 his legacy as a pro labor president. Do you think 0:35:15.840 --> 0:35:16.719 that's plausible. 0:35:17.160 --> 0:35:19.720 That obviously seems to be, you know, the main factor, 0:35:19.880 --> 0:35:22.640 and you know, to a certain extent, that's understandable from 0:35:22.680 --> 0:35:25.239 Biden's point of view to say that there, you know, 0:35:25.320 --> 0:35:29.280 there obviously are political considerations for him in this matter. 0:35:29.640 --> 0:35:32.319 As you say, the reporting behind the scenes seems to 0:35:32.360 --> 0:35:35.480 indicate that the people who are in charge of deciding 0:35:35.520 --> 0:35:38.680 whether it represents a national security threat or not came 0:35:38.719 --> 0:35:41.920 down on the side of that it wasn't. And indeed, 0:35:41.920 --> 0:35:44.759 we're trying to persuade Biden to go back on this 0:35:44.840 --> 0:35:48.160 deal because it obviously it is you know, as I 0:35:48.200 --> 0:35:51.440 described it as a slap in the face of one 0:35:51.480 --> 0:35:53.480 of the US's most important allies. 0:35:53.560 --> 0:35:56.479 So how is it being read in Japan right now? 0:35:56.800 --> 0:35:58.799 What is the Japanese press saying about this? 0:35:59.280 --> 0:36:01.560 I think it is, as I say, the fact that 0:36:01.600 --> 0:36:04.680 it was coming was expected. I don't think anyone really 0:36:04.719 --> 0:36:08.680 expected this deal to go through. I think in Japan 0:36:09.000 --> 0:36:11.440 as well, you know, as well as in you know, everywhere. 0:36:11.520 --> 0:36:14.239 Really it is a little bit of a matter of well, 0:36:14.280 --> 0:36:16.759 we'll wait and see. President Biden only has a couple 0:36:16.760 --> 0:36:18.600 more weeks in office, and then we're going to have 0:36:18.960 --> 0:36:21.319 somebody else in the White House. So I think there 0:36:21.360 --> 0:36:23.440 is a little bit of an attitude of like, well, 0:36:24.200 --> 0:36:27.359 let's let's see what happens for now. Obviously, President elect 0:36:27.360 --> 0:36:29.600 Trump has also said that he has opposed the deal, 0:36:29.800 --> 0:36:32.200 but it wouldn't be surprising, or it wouldn't be the 0:36:32.239 --> 0:36:34.600 first time, shall we say, if he went back and 0:36:34.760 --> 0:36:37.560 did the opposite of something that he had previously said. 0:36:37.840 --> 0:36:39.200 So I think there is a little bit of a 0:36:39.760 --> 0:36:41.600 let's wait and see what happens in a couple of weeks, 0:36:41.640 --> 0:36:42.799 and then we'll decide what. 0:36:42.760 --> 0:36:45.120 Do you think failure of this deal. Let's assume for 0:36:45.160 --> 0:36:47.200 a moment that it does not get done, what does 0:36:47.239 --> 0:36:49.200 it mean for US Japan relations. 0:36:49.640 --> 0:36:54.040 I think it will have consequences, not just not just 0:36:54.080 --> 0:36:56.319 necessarily the failure of this deal, but the way that 0:36:56.400 --> 0:37:01.560 it is presented. There are already, you know, we are 0:37:01.560 --> 0:37:04.680 in a bit of a different mode in you know, 0:37:04.760 --> 0:37:07.600 not just in Japan, but in Asia in general at 0:37:07.600 --> 0:37:10.400 the moment, especially with you know, Trump coming back to 0:37:10.480 --> 0:37:15.359 the White House, potential you know, new leader in South 0:37:15.440 --> 0:37:18.719 Korea in the next couple of months. And also we 0:37:18.840 --> 0:37:22.200 have in Japan we have Prime Minister Ishibat, who is 0:37:23.239 --> 0:37:27.480 he takes a different look at regional security in Japan's 0:37:27.560 --> 0:37:32.080 place in Asia and Japan's place, you know, Visa VI 0:37:32.160 --> 0:37:35.719 the US to many of his his predecessors, and I 0:37:35.719 --> 0:37:40.120 think especially compared to his predecesor Kishita and obviously to 0:37:40.120 --> 0:37:45.160 to shinzo Abe, I think this will be a black 0:37:45.320 --> 0:37:49.680 mark on US Japan relations going forward, just the way 0:37:49.760 --> 0:37:53.319 that it's described. I don't know if this deal in 0:37:53.400 --> 0:37:57.319 and of itself will have you know, massive consequences. 0:37:57.480 --> 0:37:59.520 Good, it's always a pleasure. Thanks for making time to 0:37:59.560 --> 0:38:03.360 chat with he is GIROD. Reedy, Bloomberg opinion columnist, joining 0:38:03.440 --> 0:38:06.239 US from Tokyo. I'm Doug Krisner. You can catch us 0:38:06.239 --> 0:38:10.279 weekdays for the Daybreak Asia podcast. It's available wherever you 0:38:10.360 --> 0:38:11.320 get your podcast. 0:38:11.640 --> 0:38:14.680 Tom, Thanks Doug, and that does it for this edition 0:38:14.719 --> 0:38:17.560 of Bloomberg day Break Weekend. Join us again Monday morning 0:38:17.560 --> 0:38:19.600 at five am Wall Street Time for the latest on 0:38:19.719 --> 0:38:22.480 markets overseas and the news you need to start your day. 0:38:23.000 --> 0:38:26.080 I'm Tom Busby. Stay with us. Top stories and global 0:38:26.120 --> 0:38:29.120 business headlines are coming up right now.