Daybreak Weekend: Nvidia Earnings, Fed Minutes, Fashion Week

Bloomberg Audio Studios, Podcasts, radio News. 0:00:09.680 --> 0:00:12.119 This is Bloomberg day Break Weekend, our global look at 0:00:12.160 --> 0:00:14.360 the top stories in the coming week from our Daybreak 0:00:14.360 --> 0:00:16.920 anchors all around the world, and straight ahead on the program, 0:00:16.960 --> 0:00:19.599 earning season rolls on. We'll take a look ahead to 0:00:19.640 --> 0:00:21.799 results from the chip maker at the center of the 0:00:21.960 --> 0:00:25.720 artificial intelligence Boom on Wall Street and Video, which just 0:00:25.760 --> 0:00:27.760 became the third most valuable company in the S and 0:00:27.840 --> 0:00:28.560 P five hundred. 0:00:28.760 --> 0:00:31.920 I'm Tom Buzber, New York. I'm Stephen Carolyn London. We're 0:00:31.920 --> 0:00:33.240 looking ahead to London. 0:00:32.960 --> 0:00:36.120 Milan and Paris fashion weeks as the luxury sector faces 0:00:36.159 --> 0:00:37.840 cooling demand for its products. 0:00:38.080 --> 0:00:41.000 I'm deg Prisoner previewing the next move from the Reserve 0:00:41.080 --> 0:00:44.000 Bank of Austria. 0:00:44.240 --> 0:00:48.320 That's all straight ahead on Bloomberg Daybreak Weekend, the business 0:00:48.360 --> 0:00:52.320 news you need to wrap up your week. Available on Apple, Spotify, 0:00:52.479 --> 0:00:55.800 the Bloomberg Business Appen everywhere you get your podcasts. 0:01:00.520 --> 0:01:01.080 Good day to you. 0:01:01.160 --> 0:01:03.880 I'm Tom Busby, and we begin today's program with earnings 0:01:03.920 --> 0:01:07.600 this Wednesday from Nvideo and for more on what to expect, 0:01:07.720 --> 0:01:12.600 we welcome Bloomberg Technology co host ed ludlow Ed and Video. 0:01:12.680 --> 0:01:15.600 This past week edging past the market value of Amazon 0:01:15.640 --> 0:01:19.520 dot Com then Alphabet worth one point eight trillion dollars. 0:01:20.520 --> 0:01:21.920 Is this unstoppable? 0:01:22.000 --> 0:01:26.959 This company, it seems unstop stoppable. It seems like a juggernaut, 0:01:27.040 --> 0:01:30.400 right And when you look at what Wall Street expects 0:01:30.440 --> 0:01:33.479 them to say when they post earnings next week, there 0:01:33.520 --> 0:01:36.640 are no signs that that will stop. You know that 0:01:37.520 --> 0:01:40.720 there's a lot of misconception and a lack of understanding 0:01:40.760 --> 0:01:43.240 about why in Nvidia has been on the tear that 0:01:43.319 --> 0:01:45.760 it has. And when we talk about in video in 0:01:45.800 --> 0:01:49.440 the AI context, what we're literally talking about is that 0:01:49.920 --> 0:01:53.920 the AI development, the building of large language models, it 0:01:54.040 --> 0:01:58.960 requires just one hundreds of square miles of data centers, 0:01:59.480 --> 0:02:02.600 just rat some racks of servers, and those servers are 0:02:02.640 --> 0:02:05.960 basically lots of big boxes that get stacked up on 0:02:05.960 --> 0:02:08.600 one another. And those boxes, you can think of them 0:02:08.680 --> 0:02:11.720 like supercomputers. So you know, the listener at home has 0:02:11.760 --> 0:02:15.880 maybe a desktop and it's a sort of rectangular shaped box. 0:02:16.400 --> 0:02:18.680 Think about something that's ten times the size of that, 0:02:19.000 --> 0:02:21.720 and then take that box and times it by one thousand. 0:02:22.240 --> 0:02:24.640 And in Video's role in that is that they provide 0:02:24.680 --> 0:02:28.600 the brains in that box, the GPU or AI accelerator 0:02:29.240 --> 0:02:32.560 and all of the money that's flowing into AI to 0:02:32.639 --> 0:02:36.480 build out that infrastructure. The reality is that you've only 0:02:36.520 --> 0:02:41.120 been able to build it within video products. Until very recently, 0:02:41.160 --> 0:02:42.760 there was no one else on the market doing that. 0:02:43.120 --> 0:02:46.360 So the numbers are that Wall Street sees revenue growth 0:02:46.360 --> 0:02:49.760 of three hundred and sixty nine percent year on year 0:02:50.040 --> 0:02:52.760 in the coming quarter. I'll repeat it, three hundred and 0:02:52.760 --> 0:02:55.839 sixty nine percent top line growth. And what's so astonishing 0:02:56.360 --> 0:02:59.040 is that last quarter they had two hundred and eighty 0:02:59.120 --> 0:03:02.760 percent tope and growth year on year, so it just 0:03:02.840 --> 0:03:04.760 doesn't seem to be tapering out yet. 0:03:04.960 --> 0:03:07.240 And the shares are up two hundred and thirty percent 0:03:07.240 --> 0:03:08.720 in the past twelve months. 0:03:08.400 --> 0:03:10.359 So it's it's yeah. 0:03:10.600 --> 0:03:13.360 Everything is just you know, coming up of roses for 0:03:13.400 --> 0:03:17.120 this company. But who are in Video's biggest customers and 0:03:17.440 --> 0:03:19.280 who are its top competitors? 0:03:19.639 --> 0:03:22.919 Yeah, I mean the question of who the biggest customers 0:03:23.080 --> 0:03:26.079 are goes right to the explanation I gave on how 0:03:26.120 --> 0:03:30.360 AI works in the real world, and the short answer 0:03:30.400 --> 0:03:34.680 is the hyperscalers, the cloud companies that own, operate and 0:03:34.720 --> 0:03:38.040 control the data centers. For the most part, that means 0:03:38.080 --> 0:03:43.560 Microsoft Azure and in video powering AWS, which is Amazon's 0:03:43.600 --> 0:03:47.680 cloud business. The other big player is Google and Google 0:03:47.680 --> 0:03:50.240 Cloud Platform. But remember Google's done a bit of work 0:03:50.280 --> 0:03:53.560 with its own custom silicon. But for the most part, 0:03:54.120 --> 0:03:56.800 even if you see the news headline like for example, 0:03:57.720 --> 0:04:00.440 and Thropic, which is a really big a company that 0:04:00.480 --> 0:04:04.320 makes a generative AI product is powered by Nvidia, we 0:04:04.440 --> 0:04:06.680 don't mean that that, you know, The CEO of and 0:04:06.760 --> 0:04:09.600 Propic knocks on the door of Nvidia in Santa Clara 0:04:09.680 --> 0:04:11.520 and says, hey, can I have a big bag of 0:04:11.600 --> 0:04:14.240 chips please, and throws it over his shoulder and off 0:04:14.240 --> 0:04:17.400 he goes to make AI. The reality is that you're 0:04:17.440 --> 0:04:21.080 still reliant on a hyperscaler and that Nvidia ships those 0:04:21.560 --> 0:04:26.320 h one hundreds. They're called to the cloud provider and 0:04:26.360 --> 0:04:29.719 the data center that they go into, and the AI 0:04:29.800 --> 0:04:34.360 company never has direct contact with with Nvidia. But it's 0:04:34.440 --> 0:04:37.400 kind of a triumvirate. You have Nvidia providing the hardware, 0:04:37.880 --> 0:04:41.400 the hyperscaler that runs, the data centers operating it, and 0:04:41.440 --> 0:04:45.000 the AI company basically pays for the compute, pays for 0:04:45.160 --> 0:04:46.440 use of that cloud capacity. 0:04:47.120 --> 0:04:50.479 And who competes at that kind of level within video? 0:04:50.720 --> 0:04:53.160 Yeah, so for quite a long time now, and when 0:04:53.160 --> 0:04:54.800 I say that, it actually is not a long time, 0:04:54.839 --> 0:04:57.480 it's basically two years. Because all of this has happened 0:04:57.720 --> 0:05:02.360 in two years. Nvidia has been the only name where 0:05:02.360 --> 0:05:07.600 they're actually building its scale these GPUs graphics processing units, 0:05:07.640 --> 0:05:10.799 and in very simple terms, a GPU can make lots 0:05:10.839 --> 0:05:14.440 of mathematical calculations in parallel at once. That's why they're 0:05:14.480 --> 0:05:18.400 good for training large language models or building AI. AMD 0:05:18.680 --> 0:05:21.480 has recently come to the market with a similar products 0:05:21.560 --> 0:05:25.200 called the mi I three hundred series. But you don't 0:05:25.240 --> 0:05:28.839 just sort of start building these in huge volumes. It 0:05:28.880 --> 0:05:31.520 takes a really long time to ramp, and as you know, 0:05:31.680 --> 0:05:35.000 there's been a chip supply crunch in the post pandemic 0:05:35.120 --> 0:05:39.359 era which has impacted that. So AMD is slowly ramping. 0:05:39.400 --> 0:05:42.159 The principal difference between the two of them is that 0:05:42.240 --> 0:05:44.760 AMD realizes in video has got a real hold on 0:05:44.800 --> 0:05:48.240 this market for training large language models. But once you've 0:05:48.240 --> 0:05:50.480 trained the model and you want to start actually running 0:05:50.680 --> 0:05:53.760 the technology in the real world, you have consumers using 0:05:53.839 --> 0:05:57.479 generative AI tools like chat, GPT, or start integrating AI 0:05:57.520 --> 0:06:01.280 tools into your own software. Move to what's called inference. 0:06:01.480 --> 0:06:04.360 In other words, getting a response from the model you ask, 0:06:04.400 --> 0:06:07.000 it's something, it gives your response, and AMD is basically 0:06:07.040 --> 0:06:10.200 saying ours is going to be better because what they 0:06:10.240 --> 0:06:13.920 all have in common is is incredibly expensive to do 0:06:13.960 --> 0:06:16.960 both of those functions. And so there's a battle that's 0:06:17.000 --> 0:06:20.159 brewing now as the market shifts from training models to 0:06:20.240 --> 0:06:22.760 actually using them in the inference stage. And it'll be 0:06:22.760 --> 0:06:25.320 interesting to see if AMD starts to take some market share. 0:06:26.000 --> 0:06:28.320 So what's next for Nvidia? How do they pivot now? 0:06:29.000 --> 0:06:31.120 Well, I think they just keep going. I mean, you 0:06:31.160 --> 0:06:33.159 guys may have seen that I did an interview with 0:06:33.360 --> 0:06:36.240 Nvidia's CEO Jensen Huang last week or the end of 0:06:36.400 --> 0:06:39.200 a couple of weeks ago. And the next big market 0:06:39.360 --> 0:06:42.640 is what Jensen's calling sovereign AI. So right now, all 0:06:42.680 --> 0:06:46.240 of the financing and activity behind AI is being done 0:06:46.240 --> 0:06:49.479 by the private sector, big tech companies. But there is 0:06:49.520 --> 0:06:53.680 an academic school of thought that, because of how impactful 0:06:53.839 --> 0:06:57.480 artificial intelligence will be on society, governments should have their 0:06:57.520 --> 0:07:02.200 own operations. Right, government should have supercomputers and data centers 0:07:02.920 --> 0:07:06.280 that they control, that is, training large language models, that is, 0:07:06.720 --> 0:07:10.520 giving some kind of national level AI competence. And Jensen's 0:07:10.560 --> 0:07:13.560 been flying around the world to every region, speaking to 0:07:14.000 --> 0:07:17.440 you the leaders of those nations, and doing deals, you know, 0:07:17.560 --> 0:07:21.760 saying let's collaborate, we can do something where we sell 0:07:21.840 --> 0:07:23.960 directly to you that doesn't really show up in the 0:07:23.960 --> 0:07:24.840 financials yet. 0:07:24.920 --> 0:07:26.840 Wow, a lot to look forward to. Well, our thanks 0:07:26.840 --> 0:07:30.440 to Bloomberg Technology co host ed Ludlow, thanks for being here. 0:07:30.400 --> 0:07:31.320 Ed, Thank you very much. 0:07:31.320 --> 0:07:33.920 Hapy weekend, And now we turn to the Fed and 0:07:34.080 --> 0:07:36.920 minutes from the January meeting of the FOMC will be 0:07:36.960 --> 0:07:40.680 released this coming Wednesday, and policymakers voted to keep benchmark 0:07:40.760 --> 0:07:44.160 lending rates unchanged at that meeting for the fourth time 0:07:44.200 --> 0:07:46.600 in a row. So what will they reveal and how 0:07:46.680 --> 0:07:49.760 soon will the Fed pivot to cutting rates? For some insight, 0:07:50.080 --> 0:07:54.760 we welcome Bloomberg International Economic and Policy correspondent Michael McKee. So, Michael, 0:07:54.880 --> 0:07:57.440 what are you expecting to see in these minutes? 0:07:57.760 --> 0:08:01.000 You didn't need me, You just answered the question. That's 0:08:01.000 --> 0:08:03.880 what people want on Wall Street to find out is 0:08:03.920 --> 0:08:07.640 when and under what conditions will the FED start lowering 0:08:07.640 --> 0:08:09.760 interest rates? And I'm not sure they're going to get 0:08:09.840 --> 0:08:14.280 a complete answer. We have heard from a lot of 0:08:14.280 --> 0:08:18.200 Fed officials since the meeting that they thought the news 0:08:18.600 --> 0:08:22.440 was good on the economy and things were progressing towards 0:08:22.440 --> 0:08:25.640 the two percent target, but they're not there yet, and 0:08:25.720 --> 0:08:27.880 so they want to see more good news, which just 0:08:27.920 --> 0:08:32.120 basically means they need more months of data. How many months, Well, 0:08:32.280 --> 0:08:35.760 they're not sure of that either. They have to wait 0:08:35.800 --> 0:08:38.680 and see how the data comes in and whether it 0:08:38.800 --> 0:08:42.200 is in any way confusing. So when you're looking at 0:08:42.240 --> 0:08:46.280 the minutes, you'll probably see something along the lines of 0:08:46.400 --> 0:08:49.840 most members agreed that progress had been made, but there's 0:08:49.840 --> 0:08:51.720 not going to be anybody who says it's time to 0:08:51.760 --> 0:08:52.600 cut Well. 0:08:52.679 --> 0:08:54.640 Boy, well, let's talk about some of the data we 0:08:54.720 --> 0:08:58.920 have seen, and we've seen a pretty robust labor market, 0:08:58.960 --> 0:09:02.520 although seen a lot of especially in the tech sector, 0:09:02.800 --> 0:09:07.040 job cuts nowadays. Consumer demand has been good, spending, you know, 0:09:07.280 --> 0:09:11.040 not as strong sustained economic growth, the soft landing, I mean, 0:09:11.120 --> 0:09:12.600 all of that is pretty good. 0:09:13.480 --> 0:09:18.000 Well, we've had a week where the data sort of 0:09:18.000 --> 0:09:20.400 contradicted each other when you're thinking about it. In terms 0:09:20.400 --> 0:09:23.040 of the FED, they had a strong CPI number, which 0:09:23.120 --> 0:09:25.840 took a lot of people by surprise and of course 0:09:26.640 --> 0:09:30.040 raised questions about whether inflation is going to be coming 0:09:30.120 --> 0:09:33.520 back or not. Inflation could be driven by a strong economy, 0:09:33.520 --> 0:09:35.880 which we had been seeing, and then we got the 0:09:35.920 --> 0:09:39.760 retail sales numbers that showed a lot of weakness. Some 0:09:39.840 --> 0:09:42.360 of that may have been weather related and it may 0:09:42.960 --> 0:09:47.200 reverse in the next month, which would be another argument 0:09:47.280 --> 0:09:51.600 for waiting on the Fed side. But if the economy 0:09:51.720 --> 0:09:54.840 is weakening, then you would assume there would be less 0:09:54.840 --> 0:09:57.320 inflation and we'd be more on the path that the 0:09:57.360 --> 0:10:01.079 FED wants to see. The jobless claim numbers came in 0:10:01.400 --> 0:10:05.079 down this week, which is a bit surprising given what 0:10:05.120 --> 0:10:08.200 we have seen and heard in the layoff announcements, but 0:10:08.480 --> 0:10:11.560 it does suggest that the labor market is still strong, 0:10:11.640 --> 0:10:13.840 and as long as the labor markets strong, people will 0:10:13.840 --> 0:10:16.199 be spending. It's only a question of how much. 0:10:16.920 --> 0:10:19.000 Yeah, and the and the high inflation that we're seeing, 0:10:19.000 --> 0:10:23.200 I mean, that's affecting certainly housing business, you know, borrowing 0:10:23.320 --> 0:10:25.439 and infrastructure spending. 0:10:25.520 --> 0:10:28.760 So what else is it affecting negatively? 0:10:29.800 --> 0:10:35.840 Well, this last month's numbers were kind of distorted by 0:10:35.960 --> 0:10:39.240 the weather, so we know there's some issues in there. 0:10:39.280 --> 0:10:45.319 But inflation is making a difference in housing definitely, because 0:10:45.840 --> 0:10:48.840 we've been expecting housing prices to come down in the 0:10:48.880 --> 0:10:52.040 CPI and the PCE, and they haven't really done that. 0:10:52.800 --> 0:10:55.800 They actually rose in the CPI numbers, and so FAN 0:10:55.840 --> 0:10:58.640 officials are a little confused about that, as is everybody. 0:10:59.280 --> 0:11:04.640 Why we see rent prices falling and that doesn't translate 0:11:04.679 --> 0:11:08.080 into lower housing numbers because they use the rent numbers 0:11:08.120 --> 0:11:12.120 to calculate those. If that were to finally take off 0:11:13.520 --> 0:11:16.000 and go down, then the FED would feel a whole 0:11:16.040 --> 0:11:19.320 lot better about the inflation picture right now. But the 0:11:19.360 --> 0:11:22.160 good news is inflation has come down a lot, to 0:11:22.200 --> 0:11:24.960 the point where now for the last six or eight months, 0:11:25.640 --> 0:11:30.880 Americans average hourly earnings have outpaced inflation. That looks like 0:11:30.920 --> 0:11:34.200 the American people haven't noticed yet, but they're finally ahead 0:11:34.200 --> 0:11:36.960 of the game and maybe they'll start to notice that soon. 0:11:37.200 --> 0:11:41.760 Yeah, someone should tell them that it's looking good. Hey, everybody, Well, 0:11:41.960 --> 0:11:45.520 our next FMC meeting March nineteenth and twentieth. So what 0:11:45.600 --> 0:11:48.400 are we going to get between now and then, or 0:11:48.400 --> 0:11:50.760 what is the FED going to get to come to 0:11:50.800 --> 0:11:51.400 their decision. 0:11:52.200 --> 0:11:55.280 We'll get another CPI reading and we will also get 0:11:55.760 --> 0:12:00.360 the jobs numbers for the month, and we should get 0:12:00.400 --> 0:12:03.160 retail sales before that, so they'll have another month's picture. 0:12:03.160 --> 0:12:06.160 They'll have the February picture before they have to make 0:12:06.200 --> 0:12:09.600 a decision. We won't have the PCE index, which is 0:12:09.640 --> 0:12:12.480 the inflation number that they follow, and there's been a 0:12:12.480 --> 0:12:16.000 wedge between the CPI and the PCE that is partly 0:12:16.040 --> 0:12:19.439 based on the waiting of the things in the various categories. 0:12:19.480 --> 0:12:24.160 PC's been running a lot slower and it's much closer 0:12:24.160 --> 0:12:27.760 to the two percent goal that the Fed has and 0:12:27.800 --> 0:12:28.440 they won't. 0:12:28.240 --> 0:12:29.160 Have that data. 0:12:29.240 --> 0:12:32.960 So expect March to be an on hold meeting. They've 0:12:33.040 --> 0:12:35.880 kind of signaled that at this point. By the time 0:12:35.880 --> 0:12:38.080 we get to the meeting after that in May, there 0:12:38.120 --> 0:12:41.240 should be enough data that they can make a decision. 0:12:41.280 --> 0:12:44.719 But if it comes in contradictory as it has this 0:12:44.920 --> 0:12:47.400 past month, they may not be ready then either. 0:12:47.520 --> 0:12:49.040 Well, it's a lot to look forward to. Well. 0:12:49.040 --> 0:12:53.440 Our thanks to Bloomberg International Economic and Policy correspondent Michael McKee, 0:12:54.240 --> 0:12:56.800 and coming up on Bloomberg day Break weekend, we're looking 0:12:56.840 --> 0:13:00.920 ahead to London, Milan and Paris for fashion as the 0:13:00.960 --> 0:13:04.320 luxury sector faces cooling demand for its products. I'm Tom 0:13:04.320 --> 0:13:17.640 Busby and this is Bloomberg. This is Bloomberg Daybreak Weekend. 0:13:17.679 --> 0:13:19.920 Our global look ahead at the top stories for investors 0:13:19.960 --> 0:13:22.160 in the coming week. I'm Tom Busby in New York. 0:13:22.559 --> 0:13:25.520 The biggest fashion brands will be showcasing their designs across 0:13:25.559 --> 0:13:28.400 Europe in the coming days at the London, Milan and 0:13:28.559 --> 0:13:31.679 Paris fashion Weeks. These glitzy events are happening at a 0:13:31.760 --> 0:13:34.760 challenging time for many luxury names. So how are the 0:13:34.760 --> 0:13:38.520 world's most illustrious fashion houses protecting their profits while also 0:13:38.640 --> 0:13:42.120 prioritizing style well for more, Let's go to London and 0:13:42.160 --> 0:13:45.160 bring in Bloomberg Daybreak europe banker Stephen Carroll. 0:13:45.120 --> 0:13:48.000 Tom it's a tricky time to be in fashion. Cooling 0:13:48.000 --> 0:13:51.720 demand for luxury products after the pandemic, along with slowing 0:13:51.760 --> 0:13:55.880 sales in China and higher inflation, have squeezed some key 0:13:55.960 --> 0:13:59.640 drivers of growth. This season of European Fashion Weeks are 0:13:59.679 --> 0:14:02.080 expected to be as glamorous as ever, with the fashion 0:14:02.080 --> 0:14:05.840 elite descending on London, then Milan, and then Paris. While 0:14:05.880 --> 0:14:09.720 luxury giants LVMH and Armez had good stories to tell 0:14:09.760 --> 0:14:13.280 in their most recent results with strong sales and key brands, 0:14:13.559 --> 0:14:15.800 there was less good news and the likes of Burbery, 0:14:15.800 --> 0:14:18.839 which issued a profit warning, wiping the equivalent of almost 0:14:18.880 --> 0:14:22.880 one hundred and thirty million dollars off its outlook. I've 0:14:22.920 --> 0:14:25.480 been discussing all of this with Bloomberg opinion columnist Andrea 0:14:25.600 --> 0:14:30.240 Felsted and our European luxury reporter Angelina Rascouette. I started 0:14:30.280 --> 0:14:34.480 by asking Angelina how important Fashion Week events are to 0:14:34.560 --> 0:14:35.560 these big brands. 0:14:36.240 --> 0:14:39.560 These events are very important because obviously you're unveiling and 0:14:39.600 --> 0:14:43.960 you're you're going to be showing your consumer's WATA will 0:14:44.000 --> 0:14:48.120 be the trend. And obviously, in the age of social media, 0:14:48.560 --> 0:14:51.840 you know, you have influencers, celebrities who's got millions of followers. 0:14:52.360 --> 0:14:56.400 So actually the impact of these fashion shows are huge. 0:14:56.520 --> 0:14:59.800 And you know, but it's not just fashion shows obviously. 0:14:59.840 --> 0:15:01.920 I and if you think just about Miley Cyrus, like 0:15:02.760 --> 0:15:04.760 recently she was at the Grammars and she was wearing 0:15:04.760 --> 0:15:06.640 a Gucci you know, at some point she was wearing 0:15:06.680 --> 0:15:09.080 a Gucci gown with a bag, and that's very important 0:15:09.080 --> 0:15:10.600 for the brand. You know, you think about Gucci, I'm 0:15:10.640 --> 0:15:12.760 going to be going to the show and in Milan 0:15:12.840 --> 0:15:16.040 next week. It's a brand that is in turnaround and 0:15:16.480 --> 0:15:19.200 he needs all the attention and the visibility can get. 0:15:19.680 --> 0:15:21.880 They have a new recently new designer. I mean this 0:15:21.960 --> 0:15:25.360 is going to be his third show, so indeed it's 0:15:25.400 --> 0:15:28.320 going to be you know, very important. But remember there's 0:15:28.320 --> 0:15:30.920 always a lag also between the unveiling of a collection. 0:15:31.320 --> 0:15:35.080 So his first collection, Sabato at Gucci, was in September 0:15:35.160 --> 0:15:37.640 and it's now only hitting the stores right now, so 0:15:37.680 --> 0:15:41.400 there's always a lag of course, So the financial impact 0:15:41.400 --> 0:15:44.920 cannot be assessed obviously right away. Right away, what you 0:15:44.960 --> 0:15:48.000 can assess is you know, the bus you know, if 0:15:48.040 --> 0:15:51.440 a video goes viral, that's pretty much what you can assess. 0:15:51.840 --> 0:15:54.160 Andrea, that brings us very neatly something you've been writing 0:15:54.160 --> 0:15:56.320 about recently when it comes to Gucci as well. Just 0:15:56.320 --> 0:15:58.800 the headline from your piece Gucci can be revived, but 0:15:58.840 --> 0:16:02.520 it won't go viral. Tell us more about how you're 0:16:02.520 --> 0:16:04.720 thinking about the series of fashion weeks. 0:16:04.960 --> 0:16:09.960 Yes, obviously Gucci, as Angelina mentioned, it's it's moving from 0:16:10.120 --> 0:16:15.760 its bold maximalism that it had before to this new 0:16:16.280 --> 0:16:21.520 much sleeker esthetic in line with quiet luxury. This this 0:16:21.680 --> 0:16:24.840 trends that emerged around a year ago at the at 0:16:24.880 --> 0:16:28.720 the shows early last year, which sort of set the 0:16:28.760 --> 0:16:30.040 direction of fashion. 0:16:30.200 --> 0:16:30.480 Now. 0:16:30.760 --> 0:16:32.960 The worry is that We're having a bit of quiet 0:16:33.040 --> 0:16:38.840 luxury fatigue, so this could be potentially awkward for Gucci. 0:16:39.160 --> 0:16:43.400 I'm not sure that the that the new Gucci is 0:16:43.520 --> 0:16:49.560 really is distinctive enough to stand out in the way 0:16:49.680 --> 0:16:54.200 that the past designer Alessandro and Mikayley did. It's also 0:16:54.240 --> 0:16:57.880 going to take a while, as Angelina said, to come through, 0:16:58.200 --> 0:17:01.120 So yes, this will we really want to. 0:17:01.160 --> 0:17:04.359 Watch Miley cyrus not enough to revive an entire brand. 0:17:04.400 --> 0:17:07.240 Andre I wanted to ask you though about Burbery as well, 0:17:07.280 --> 0:17:09.560 because they made us bash in the last season of 0:17:09.560 --> 0:17:13.200 Fashion Weeks in September with their takeover of Barn Street Station, 0:17:13.400 --> 0:17:17.320 for example, but the company still saw a profit warning 0:17:17.320 --> 0:17:20.800 its recent earnings report. Is this going to be a 0:17:20.840 --> 0:17:23.800 difficult showcase for Burbery? Do they need to turn around 0:17:23.840 --> 0:17:24.360 the vibes? 0:17:25.119 --> 0:17:27.679 I think it's going to be just as sort of 0:17:27.800 --> 0:17:32.720 confident and exciting as September was, because what Birbury needs 0:17:32.760 --> 0:17:36.040 to do is, as Angela Andlina mentioned, it's all about 0:17:36.040 --> 0:17:39.880 creating a buzz, creating a halo effect, and Burbury really 0:17:39.920 --> 0:17:41.880 needs to do that. So it's got some quite nice 0:17:41.920 --> 0:17:46.440 products some coming through. It's got a lot of nice bags, 0:17:46.640 --> 0:17:49.399 you know, Daniel Lee is really pumping out the products. 0:17:49.400 --> 0:17:53.400 There's a new trench bag which is canvas, very much 0:17:53.480 --> 0:17:58.040 in line with the nylon bag trend we've seen. There's 0:17:58.080 --> 0:18:00.720 been a lot of narrative that Burber has been putting 0:18:00.720 --> 0:18:04.119 the prices up and that's putting people off. That's missing 0:18:04.160 --> 0:18:08.440 the point. You know, what you need is brand desirability. 0:18:09.200 --> 0:18:12.040 It's starting to happen. Burbery is starting to move there's 0:18:12.080 --> 0:18:14.679 a list index of the most in demand brands that 0:18:14.720 --> 0:18:18.720 people are searching for and buying started to move up gradually. 0:18:18.800 --> 0:18:22.920 I'm seeing some young people with the Burbery check bags, 0:18:23.240 --> 0:18:27.680 Barberary check scarves, often vintage, so that's really good size. 0:18:27.720 --> 0:18:29.600 What it needs to do is it really needs to 0:18:30.160 --> 0:18:34.720 pump up that desirability. It needs to get those bags 0:18:34.800 --> 0:18:38.680 out to influencers so that we can follow and see 0:18:38.680 --> 0:18:43.200 them in you know, Instagram, pos, TikTok videos, Pinterest boards. 0:18:43.680 --> 0:18:46.520 And I think when that happens that that could be 0:18:46.600 --> 0:18:50.000 good for Birbary because I feel that a lot of 0:18:50.040 --> 0:18:54.240 the turnaround stories a lot of the brands are kind 0:18:54.280 --> 0:18:57.240 of they've been around for a while. I mean, Gucci 0:18:57.560 --> 0:19:02.359 was exploding around eight years ago. The Mew Mew turnaround 0:19:02.520 --> 0:19:07.200 is and the product turnaround are pretty well established now. 0:19:07.480 --> 0:19:10.280 I feel that there is room for something new and 0:19:10.359 --> 0:19:13.560 exciting and if Barberie can get it right, that can 0:19:13.600 --> 0:19:16.200 be Actually can tell I'm the lone Barbary. 0:19:15.760 --> 0:19:19.400 Ball Anthony, I wonder do you have a contrarian view 0:19:19.480 --> 0:19:22.280 on on on Birbary From what Andrea was talking about, 0:19:22.320 --> 0:19:24.159 is that the big highlight from London Fashion Week that 0:19:24.160 --> 0:19:24.960 you'll be looking at. 0:19:24.840 --> 0:19:30.480 For Yeah, so for sure, Burbery is definitely the most 0:19:30.480 --> 0:19:33.760 famous brand coming out of London Fashion Week. And uh 0:19:34.240 --> 0:19:39.280 and the tricky uh bit with Birberies that obviously being 0:19:39.320 --> 0:19:42.400 a publicly listed company and it's not a group, it's 0:19:42.440 --> 0:19:45.399 only one brand, right, so so so it has to 0:19:45.440 --> 0:19:49.680 report results on a quarterly basis and that's scrutiny. Sometimes 0:19:49.680 --> 0:19:53.040 it's very difficult for a brand that's in turnaround mode. 0:19:53.160 --> 0:19:56.000 I mean, you know Andreas right, you have to be 0:19:56.080 --> 0:20:00.199 confident and you know that about the designer. You know 0:20:00.240 --> 0:20:03.040 he wasn't named less than two years ago and it 0:20:03.080 --> 0:20:06.159 doesn't happen overnight. So so that's the tricky bit. And 0:20:07.040 --> 0:20:09.320 Burbery in comparison to all the other groups, you know 0:20:09.359 --> 0:20:12.000 that you know if so is part of one group. 0:20:13.080 --> 0:20:15.359 Loueve is part of a group, so so you don't 0:20:15.400 --> 0:20:18.840 get the granularity of their performance on a quarterly basis. 0:20:18.880 --> 0:20:24.000 And that's that's actually the challenge for for Burbery because 0:20:24.040 --> 0:20:26.800 of course LVMH another company that you cover, Andrelia is 0:20:27.880 --> 0:20:30.719 an absolute mammoth in this area and and kind of 0:20:30.920 --> 0:20:33.760 covers a lot of ground in terms of brands as well. 0:20:33.800 --> 0:20:36.639 Does that allow for more space for underperformance and of 0:20:36.680 --> 0:20:39.200 certain brands, yes, I. 0:20:39.119 --> 0:20:42.600 Mean, you know, and and and they're not. You know, 0:20:42.800 --> 0:20:47.600 they have some mega brands like Viviiton and Christian and 0:20:47.760 --> 0:20:51.640 some brands who who who started from a very small 0:20:51.760 --> 0:20:54.520 and you know, with very small sales numbers and now 0:20:54.720 --> 0:20:56.600 we know that they've actually grown a lot in the 0:20:56.640 --> 0:20:58.439 past five to ten years. You know, if you think 0:20:58.480 --> 0:21:02.440 about a brand like Louieve with the designer Jonathan Anderson, 0:21:02.480 --> 0:21:05.760 he's an Irish designer trained at the London College of 0:21:05.800 --> 0:21:08.600 Fashion and he's done Wonders at WAVIN. We don't get 0:21:08.600 --> 0:21:12.080 the numbers of Louve, but we know he's done Wonders 0:21:12.160 --> 0:21:14.720 and they're very happy with him. And it's the same 0:21:14.720 --> 0:21:17.880 thing with Celine with its slimann again, we don't get 0:21:17.880 --> 0:21:21.720 the numbers, but we know these brands have fair very well. 0:21:21.760 --> 0:21:24.720 And actually another brand that that was at some point problematic, 0:21:24.760 --> 0:21:27.000 I mean he said it in I think it was 0:21:27.200 --> 0:21:30.080 more than five or six years ago in results that 0:21:30.359 --> 0:21:33.000 you know, Mark Jacobs was struggling and they managed to 0:21:33.040 --> 0:21:36.159 turn it around and they're very happy with the turnaround 0:21:36.200 --> 0:21:38.639 that they managed to do so. But being part of 0:21:38.680 --> 0:21:41.520 this wider group where you only have numbers by unit, 0:21:41.880 --> 0:21:45.720 not by brands, that is very helpful. That gives breathing 0:21:45.800 --> 0:21:48.880 room for the brands and for the managers who are 0:21:48.920 --> 0:21:50.640 in charge and the designers as well. 0:21:51.520 --> 0:21:54.080 Andrea, can you give us since we're talking about London 0:21:54.119 --> 0:21:56.520 fashion making then you know the European tour that follows 0:21:56.920 --> 0:22:01.080 with Malan and with Paris. What's your feeling abound the 0:22:01.359 --> 0:22:03.800 British fashion industry post breaks? 0:22:03.800 --> 0:22:04.400 It has that. 0:22:04.400 --> 0:22:06.720 Post challenges to it. Is that something that's led to 0:22:06.720 --> 0:22:07.159 a shift? 0:22:07.280 --> 0:22:11.800 It really has. The loss of those tax breaks for 0:22:12.200 --> 0:22:16.840 overseas shoppers in London has really hurt the London fashion 0:22:17.040 --> 0:22:21.560 fashion demand, particularly Berbery. It's another headwind that Burbery has 0:22:21.600 --> 0:22:24.239 to deal with. But across the across the board, there 0:22:24.280 --> 0:22:27.520 are hopes that might be revived. It was difficult for 0:22:27.600 --> 0:22:32.000 the government to say we are giving luxury shopping a 0:22:32.119 --> 0:22:35.520 tax break when we had the cost of living crisis 0:22:35.560 --> 0:22:39.760 going on. Optically it didn't look very good. But now 0:22:39.840 --> 0:22:43.360 that seems to be subsiding. There are hopes that that 0:22:43.520 --> 0:22:47.800 can be reversed and that can breathe life back into 0:22:47.880 --> 0:22:49.240 London fashion sales. 0:22:49.760 --> 0:22:51.600 Ay, and I wonder when you think about the other 0:22:51.880 --> 0:22:53.840 shows that you'll be going to, in the other brands 0:22:53.840 --> 0:22:56.600 that you'll be monitoring, what are their highlights are you 0:22:56.640 --> 0:22:57.320 looking out for? 0:22:59.080 --> 0:23:02.360 I mean, obviously with Too is always a big it's 0:23:02.400 --> 0:23:06.600 a big moment because it's the biggest luxury fashion brand. 0:23:06.760 --> 0:23:10.040 And uh so last month in January it was the 0:23:10.080 --> 0:23:13.320 Men's Worst Show. So that was Pharrell Williams. Uh third 0:23:13.440 --> 0:23:16.440 show for the brand since it's been named, second show 0:23:16.480 --> 0:23:19.720 in Paris. So now, you know, it'll be interesting to 0:23:19.720 --> 0:23:23.560 see what Nicola offers for for for for ladies and 0:23:23.840 --> 0:23:27.000 you know they, you know, we you know, when Forarrell 0:23:27.040 --> 0:23:28.960 Williams was named, you know, people are saying, oh, maybe 0:23:28.960 --> 0:23:32.320 he's going to like take all the spotlight away from 0:23:32.440 --> 0:23:36.400 from from from Nicolajeska, but actually Nicola, you know, he's 0:23:36.440 --> 0:23:40.880 been at Veton for ten years and they just renewed 0:23:40.880 --> 0:23:43.720 his contract. So it's a vote of confidence for Nicolai 0:23:44.400 --> 0:23:46.960 and uh and so for sure, I'll be I'll be 0:23:47.080 --> 0:23:48.960 looking forward to that one. I'm still hoping to get 0:23:48.960 --> 0:23:52.960 my invite. But uh and then uh, and then hermess 0:23:53.040 --> 0:23:56.160 as well, I mean hermess is the you know, Andrew 0:23:56.359 --> 0:24:00.199 was sort of mentioning the quiet luxury armess is you 0:24:00.200 --> 0:24:02.000 could put it in that basket. I mean, it really 0:24:02.080 --> 0:24:06.640 caters to the most to the ultra high network individuals. 0:24:06.720 --> 0:24:09.240 And uh. And you know, for many, many years we 0:24:09.280 --> 0:24:12.080 associated l Mess with the leatherboods, with handbags and with 0:24:12.280 --> 0:24:15.600 you know, but actually they've done tremendously well when it 0:24:15.680 --> 0:24:18.000 comes to ready to wear. And they have these two 0:24:18.920 --> 0:24:23.000 uh designers, uh you know, two ladies, Uh, one for 0:24:23.119 --> 0:24:26.000 men's wearing, one for for women's wear, and they've done wonders. 0:24:26.440 --> 0:24:26.800 Uh. 0:24:26.960 --> 0:24:28.800 So you know, but that but I'm one of of 0:24:28.800 --> 0:24:30.720 course it is you know, you it's it's it's less 0:24:30.960 --> 0:24:34.000 you know, on logos, it's less on bold maximalism that 0:24:34.000 --> 0:24:36.560 that Andrew was talking about. It's more on the the 0:24:36.880 --> 0:24:40.600 the quiet but uh, you know, the the think about 0:24:41.280 --> 0:24:45.080 you know clothes that you can you know their their 0:24:45.160 --> 0:24:47.800 viability will last for over a season. Let's put it 0:24:47.840 --> 0:24:52.440 this way, and then otherwise, uh, you know, is always 0:24:52.480 --> 0:24:56.200 an important one of course. Uh Maria gras acuity, she's 0:24:56.200 --> 0:24:58.320 been she's been with the brand for for many years 0:24:58.359 --> 0:25:01.040 and actually she's done Wonders as well for commercially. 0:25:02.280 --> 0:25:05.320 Andrea, final thought from you, it's the fortieth year of 0:25:05.359 --> 0:25:07.240 London Fashion Week, so it's a bit of a milestone 0:25:07.280 --> 0:25:09.880 as well. Have you have you kind of a particular 0:25:09.960 --> 0:25:12.240 view unwhere of about the next forty years might be 0:25:12.240 --> 0:25:13.199 taking London fashion. 0:25:13.720 --> 0:25:17.600 I'm London's always been very innovative in fashion. When we 0:25:17.680 --> 0:25:22.520 think about you know, many designers come through some Martins, 0:25:22.640 --> 0:25:26.199 for example. London can be quite edgy as well, so 0:25:26.920 --> 0:25:33.879 I think that it's important to keep that, you know, experimentation, edginess, 0:25:35.280 --> 0:25:38.199 to have a different point of view from some of 0:25:38.240 --> 0:25:41.000 the bigger capitals. And I think if Barbery can get 0:25:41.040 --> 0:25:44.439 it right, it can really reinforce that. 0:25:45.040 --> 0:25:48.200 That was Bloomberg Opinion columnist Andrea Felsted and our European 0:25:48.280 --> 0:25:51.960 luxury reporter Angelina Rascouette. I'm Stephen Carroll in London. You 0:25:51.960 --> 0:25:55.200 can catch US every weekday morning here for Bloomberg Daybreak Europe, 0:25:55.240 --> 0:25:58.280 beginning at six am in London and one am on 0:25:58.320 --> 0:25:59.879 Wall Street, Tom. 0:26:00.119 --> 0:26:02.359 Stephen and coming up on Bloomberg day Break weekend, the 0:26:02.359 --> 0:26:05.920 Reserve Bank of Australia releasing minutes from its latest policy meeting, 0:26:06.160 --> 0:26:09.000 and we'll get a preview. I'm Tom Busby and this 0:26:09.240 --> 0:26:21.520 is Bloomberg. I'm Tom Busby in New York with your 0:26:21.520 --> 0:26:23.800 global look ahead at the top stories for investors in 0:26:23.840 --> 0:26:26.360 the coming week. In the week ahead, the Reserve Bank 0:26:26.400 --> 0:26:30.200 of Australia releases minutes from its latest policy meeting. That's 0:26:30.240 --> 0:26:33.240 when the RBA left its benchmark rate on hold after 0:26:33.320 --> 0:26:37.720 lifting it thirteen times since twenty twenty two. Bloomberg's Doug 0:26:37.760 --> 0:26:40.959 Christner and Paul Allen from the Daybreak Asia team on 0:26:41.000 --> 0:26:41.920 what it all means. 0:26:42.359 --> 0:26:45.400 Tom. We know how rampant inflation was in many developed 0:26:45.440 --> 0:26:49.879 economies during the pandemic, and central bankers responded with aggressive 0:26:49.960 --> 0:26:52.919 rate hikes. In a last year, the stories seemed to 0:26:53.000 --> 0:26:57.200 shift to immaculate disinflation, but that's no longer a given, 0:26:57.320 --> 0:27:01.560 as the recent USCPI data show clients have stalled and 0:27:01.640 --> 0:27:05.080 it's forced an adjustment to expectations for the number of 0:27:05.200 --> 0:27:07.560 rate cuts from the FED and how aggressive the FED 0:27:07.600 --> 0:27:07.879 may be. 0:27:08.119 --> 0:27:11.520 Other central banks facing a similar dynamic, and this week 0:27:11.560 --> 0:27:13.920 we might get inside into how the RBA have used 0:27:13.920 --> 0:27:16.879 the inflation story. Minutes from the last meeting of the 0:27:16.880 --> 0:27:20.240 Reserve Bank of Australia schedule for release on Tuesday for 0:27:20.280 --> 0:27:23.639 a look ahead, we're joined by Swati Pandi, Bloomberg Australia 0:27:23.760 --> 0:27:27.000 Economy Government Reporter and Swati We've got a big piece 0:27:27.000 --> 0:27:30.840 of the puzzle with the January unemployment numbers ticking up 0:27:30.840 --> 0:27:33.080 to four point one percent. I believe that's the highest 0:27:33.119 --> 0:27:36.200 in two years, one hundred thousand full time jobs lost. 0:27:36.200 --> 0:27:38.560 A little bit more is that it can we say 0:27:38.600 --> 0:27:40.800 that tightening's now off the table for the RBA. 0:27:41.080 --> 0:27:44.520 It was a surprising piece of data and a very 0:27:44.520 --> 0:27:48.159 important one as well, because the RBA has been looking 0:27:48.240 --> 0:27:51.760 at the jobless rate and that was also one of 0:27:51.760 --> 0:27:55.280 the reasons why they have been hawkish. But the ABS 0:27:55.359 --> 0:27:59.000 has tried to play it down that report by saying 0:27:59.040 --> 0:28:02.240 there is a lot of c reasonality in December and January, 0:28:02.520 --> 0:28:05.840 January being a very popular month for people to go 0:28:05.920 --> 0:28:10.359 on holidays, and also there have been some people who 0:28:11.119 --> 0:28:15.040 were marked as unemployed, but they were actually in between jobs, 0:28:15.280 --> 0:28:19.200 so we could see a revision in the unemployment rate, 0:28:19.680 --> 0:28:23.600 maybe going back down in February. So I would say 0:28:23.640 --> 0:28:28.320 it's probably too early to say that we are in 0:28:28.640 --> 0:28:33.080 a market where the labor where the labor market is easing. 0:28:33.880 --> 0:28:38.760 There are tentative signs, but overall the RBA's assessment is 0:28:38.800 --> 0:28:42.240 that the labor market is still tight and demand is 0:28:42.240 --> 0:28:43.520 still exceeding supply. 0:28:43.840 --> 0:28:47.000 That said, the labor market data did get the market's attention. 0:28:47.280 --> 0:28:50.040 We spoke earlier in the week with Charlie Jamison, he 0:28:50.160 --> 0:28:52.800 is the CIO of Jamison Coot Bonds. Here's what he 0:28:52.880 --> 0:28:53.360 had to say. 0:28:53.440 --> 0:28:55.800 We need to be generating more employment in order to 0:28:55.880 --> 0:28:58.440 keep those numbers designable. There has been a lot of 0:28:58.680 --> 0:29:00.920 loss of momentum in the me as we said, and 0:29:00.920 --> 0:29:03.560 that's certainly, you know, different to what you guys are 0:29:03.600 --> 0:29:05.640 saying in the United States at the moment, where the 0:29:05.640 --> 0:29:08.360 economy seems to have accelerated a little bit in the 0:29:08.400 --> 0:29:10.320 in the first part of the looking at employment and 0:29:10.840 --> 0:29:11.760 inflation data. 0:29:11.880 --> 0:29:14.320 So it's brought forward now the notion of rate cuts 0:29:14.320 --> 0:29:16.840 from the RBA. SWATI, is it too soon to talk 0:29:16.840 --> 0:29:17.760 about rate cuts. 0:29:17.840 --> 0:29:21.760 It's actually not too soon. But if you ask Reserve 0:29:21.840 --> 0:29:25.480 Bank Governor Michelle Velock, she would say it is too 0:29:25.520 --> 0:29:29.800 soon because they are still not ruling out interest rate hikes. 0:29:29.880 --> 0:29:34.000 That was her commentary last week, So they are not 0:29:34.160 --> 0:29:37.160 ruling anything out for that matter. But she's still sounding hawkish. 0:29:37.240 --> 0:29:41.040 Since she's still talking hard on inflation, markets are now 0:29:41.080 --> 0:29:45.440 expecting some probability of an August rate cut. There are 0:29:45.440 --> 0:29:48.800 some economists who are expecting a June rate cut. A 0:29:48.880 --> 0:29:53.160 Bloomberg economist is also expecting a rate cut around May June. 0:29:53.440 --> 0:29:56.720 So yes, it's it's still three months down the track. 0:29:56.800 --> 0:29:57.840 I would say, wa'ts. 0:29:57.680 --> 0:29:59.640 The inflation story telling us right now. 0:30:00.080 --> 0:30:03.920 Inflation is still well above the RBA's target, still has 0:30:04.000 --> 0:30:08.000 a four handle to it. ARBs target is two to 0:30:08.120 --> 0:30:11.719 three percent. They are targeting the midpoint two point five percent. 0:30:12.240 --> 0:30:15.160 So it is still at a level where a Michelle 0:30:15.160 --> 0:30:19.239 Bullock is really uncomfortable, and that is one of the 0:30:19.280 --> 0:30:25.080 reasons her vague guidance, I would say, is for interest 0:30:25.160 --> 0:30:29.680 rates to remain elevated for longer. The RBA's forecast does 0:30:29.720 --> 0:30:33.200 not show inflation in the midpoint until twenty twenty six. 0:30:33.480 --> 0:30:36.640 I was reading comments earlier in the week from Maryan Coller, 0:30:36.680 --> 0:30:39.480 the head of Economic Analysis from the RBA, and one 0:30:39.480 --> 0:30:42.720 of the things she was cautioning is that inflation may 0:30:42.760 --> 0:30:47.120 be sticky. Paul, give me your perspective. You live in Sydney. 0:30:47.200 --> 0:30:50.040 What is it like, you know, the cost of living 0:30:50.120 --> 0:30:52.560 right now? What are common people kind of dealing with 0:30:52.640 --> 0:30:54.200 in in their everyday affairs. 0:30:54.560 --> 0:30:57.000 Yeah, this is an interesting one that you raised, because 0:30:57.240 --> 0:31:01.440 we have Michelle Bullock last week speaking to Parliament about 0:31:01.520 --> 0:31:06.360 this and questions about businesses using the cover of high 0:31:06.440 --> 0:31:09.760 inflation to start pushing up prices were raised. And look, 0:31:09.920 --> 0:31:12.600 certainly from an anecdotal point of view, and I'm sure 0:31:12.600 --> 0:31:14.880 Swaty will back me up here, is if you just 0:31:14.960 --> 0:31:17.280 go on your regular grocery shop, you're just out and 0:31:17.320 --> 0:31:22.160 about doing things. Inflation's running, it's, you know, something above 0:31:22.640 --> 0:31:27.320 the RBA's target window, but you're buying things that might 0:31:27.360 --> 0:31:31.080 be higher by fifty, sixty, even one hundred percent than 0:31:31.560 --> 0:31:34.240 what they were a year ago. Now, the two big 0:31:34.280 --> 0:31:37.920 supermarket chains in Australia, Coals and Woolworth, start coming under 0:31:37.920 --> 0:31:40.520 fire as well for this type of thing. They're defending 0:31:40.560 --> 0:31:44.080 themselves against this accusation of price guarding. But you know, 0:31:44.160 --> 0:31:46.800 it's a hot subject in Australia at the moment, isn't 0:31:46.800 --> 0:31:49.720 it smitty just how much consumers are paying for things 0:31:50.200 --> 0:31:52.920 and how that doesn't really square away with the official 0:31:52.960 --> 0:31:53.680 inflation rate. 0:31:54.080 --> 0:31:58.680 That's absolutely right. Haircuts have become very expensive and it's 0:31:59.520 --> 0:32:05.880 eating out. Restaurants have raised their prices. I still would 0:32:06.000 --> 0:32:08.760 say that when you're out and about in Sydney, if 0:32:08.800 --> 0:32:12.520 you go to a pub on Friday, it's still buzzing, 0:32:12.680 --> 0:32:17.040 still teaming with people. So we are not really seeing 0:32:17.120 --> 0:32:23.360 that impact on every day kind of lifestyle. Yet we've 0:32:23.400 --> 0:32:28.280 not had a big impact on people really cutting down 0:32:28.960 --> 0:32:32.960 drastically on their budget at an aggregate level. I'm sure 0:32:33.000 --> 0:32:36.200 there are people at either ends of the spectrum who 0:32:36.200 --> 0:32:39.800 are very deeply affected, but if you are going out 0:32:39.800 --> 0:32:43.040 and about, it just feels like a normal day. During 0:32:43.080 --> 0:32:48.440 Boxing Day. In fact, around Christmas, shopping malls were chocolate block. 0:32:48.520 --> 0:32:51.840 They were huge queues of cars waiting to park, and 0:32:51.880 --> 0:32:53.720 that was the time we were talking about a hard 0:32:53.760 --> 0:32:56.120 landing soft landing, so it just did not feel like 0:32:57.480 --> 0:32:59.280 a recession is coming for that matter. 0:33:00.000 --> 0:33:02.280 You know, it's interesting because I think we have just 0:33:02.360 --> 0:33:04.560 in listening to the conversation here, I think we have 0:33:04.720 --> 0:33:09.040 to discriminate between services inflation and goods inflation. And I 0:33:09.160 --> 0:33:12.240 recently saw that the IMF was recommending that the RBA 0:33:12.680 --> 0:33:15.360 needed to raise rates to tame inflation. Is the IMF 0:33:15.440 --> 0:33:17.800 looking more at the services side than the good side? 0:33:17.840 --> 0:33:22.720 I would say the IMF is looking at the services 0:33:22.760 --> 0:33:26.040 side because that is something that Michelle Bullock and earlier 0:33:26.120 --> 0:33:30.200 Marion Kohler mentioned as well, that that is that part 0:33:30.280 --> 0:33:34.520 of inflation is quite sticky, and their concern is that 0:33:35.400 --> 0:33:39.479 it will remain elevated for some time. And another concern 0:33:39.520 --> 0:33:42.360 that they have is inflation expectations. So if you allow 0:33:42.440 --> 0:33:46.520 inflation to remain higher or above the target band for 0:33:47.320 --> 0:33:53.480 a long time, it will unanchor or do more inflation 0:33:53.600 --> 0:33:57.520 expectations as well, which right now is at two point 0:33:57.600 --> 0:33:58.360 five mid point. 0:33:58.560 --> 0:34:01.160 Well, we mentioned that Michelle Bullock the ABBYA Kevin I 0:34:01.360 --> 0:34:04.960 was speaking with senators last week in Australia. She took 0:34:05.040 --> 0:34:06.880 questions on this. What was she saying about it? 0:34:07.320 --> 0:34:11.000 She actually said that the IMF is not particularly talking 0:34:11.040 --> 0:34:14.320 about Australia. She said this is something they are talking 0:34:14.320 --> 0:34:20.400 about in general for developed economies. Because inflation continues to 0:34:20.520 --> 0:34:23.760 remain a concern. But also as far as goods inflation 0:34:23.960 --> 0:34:27.360 is concerned, it's still too early to say that we 0:34:27.440 --> 0:34:30.839 have won that battle because we have conflicts going on 0:34:31.160 --> 0:34:35.319 in parts of the world. There are supply chain disruptions 0:34:35.320 --> 0:34:38.160 that have again happened with the attacks in Red Sea. 0:34:38.640 --> 0:34:42.760 So even as far as goods inflation is concerned, Michelle 0:34:42.760 --> 0:34:47.040 Bullock is not willing to say that we have won 0:34:47.080 --> 0:34:47.719 the battle there. 0:34:48.040 --> 0:34:50.720 So my understanding is that the RBA during its tightening 0:34:50.760 --> 0:34:53.959 cycle raised rates thirteen times for a total of four 0:34:54.040 --> 0:34:56.640 hundred and twenty basis points. The policy rate now is 0:34:56.640 --> 0:35:00.279 at four thirty five. Paul helped me understand how that 0:35:00.280 --> 0:35:02.399 connects to the mortgage market in Australia. 0:35:02.520 --> 0:35:05.880 The big four banks here often cop a lot of 0:35:05.920 --> 0:35:10.040 criticism for being incredibly quick to pass on increases to 0:35:10.080 --> 0:35:12.879 the cash rate to people who are borrowing money off them. 0:35:13.040 --> 0:35:18.520 And in a country like Australia where house buying auctions 0:35:18.960 --> 0:35:22.359 practically a national sport, the tax regime has also set 0:35:22.440 --> 0:35:25.680 up very generously for people who want to buy investment properties. 0:35:26.400 --> 0:35:30.560 These sorts of interest rate moves really get people talking. 0:35:31.200 --> 0:35:33.120 There is a fair bit of competition. But if you're 0:35:33.160 --> 0:35:35.600 taking out a mortgage in Australia, yes, you do pay 0:35:35.680 --> 0:35:37.680 a lot more than you were a couple of years 0:35:37.680 --> 0:35:40.400 ago during the depths of the pandemic, when interest rates 0:35:40.400 --> 0:35:43.680 were very very low and we saw property prices just 0:35:43.920 --> 0:35:47.160 absolutely taking off. Now a lot of people took out 0:35:47.200 --> 0:35:50.279 loans when rates were at those low levels. Those rates 0:35:50.280 --> 0:35:53.280 have since increased, but we haven't seen a huge amount 0:35:53.320 --> 0:35:57.200 of mortgage stress. There's been a very few for sales, 0:35:57.239 --> 0:36:00.640 and certainly none of what was predicted the time seems 0:36:00.680 --> 0:36:03.120 to have come to pass. Is that your observation, Swati? 0:36:03.280 --> 0:36:06.439 Yes, absolutely. I would also like to add there that 0:36:06.560 --> 0:36:11.200 Australians are among the most indebted household in the world, 0:36:11.600 --> 0:36:15.600 so we have a debt to income ratio of roughly 0:36:16.200 --> 0:36:19.799 one hundred and eighty five percent, and that is one 0:36:19.840 --> 0:36:24.680 of the reasons it was expected that households would be very, 0:36:24.800 --> 0:36:29.359 very deeply hit by these interest rate hikes. But we 0:36:29.440 --> 0:36:33.520 had earnings from Commonwealth Bank of Australia earlier this week 0:36:33.920 --> 0:36:38.520 and they had like five billion dollars in profits, So 0:36:39.080 --> 0:36:42.960 clearly we are not seeing that impact in defaults and 0:36:43.440 --> 0:36:45.719 non performing assets for banks at least. 0:36:45.560 --> 0:36:47.799 So Swati. I'm wondering whether or not when we get 0:36:47.840 --> 0:36:51.040 these minutes from the last RBA meeting on Tuesday, whether 0:36:51.160 --> 0:36:54.360 we're going to be able to learn anything here, whether 0:36:54.400 --> 0:36:57.880 it's going to be kind of a level of understanding 0:36:57.920 --> 0:36:59.680 that the market will have, or do we need to 0:36:59.680 --> 0:37:02.880 say that because of this very very disappointing employment report, 0:37:03.000 --> 0:37:06.120 that it's essentially all bets are off now, we're starting 0:37:06.160 --> 0:37:07.759 almost from a clean slate. 0:37:07.719 --> 0:37:12.040 So Doug, we will have monthly inflation report next week 0:37:12.680 --> 0:37:16.120 that is going to be critical for markets, and if 0:37:16.200 --> 0:37:20.760 that is showing a softer number, I think rate bets 0:37:20.840 --> 0:37:26.640 will will be brought forward more convincingly than now. As 0:37:26.640 --> 0:37:30.640 far as the minutes are concerned. The Reserve Bank Governor 0:37:30.719 --> 0:37:35.640 held her first press conference after the rate decision last 0:37:35.680 --> 0:37:38.799 week and that went on for almost an hour and 0:37:38.840 --> 0:37:41.879 a lot of the questions around her views on interest rates, 0:37:41.920 --> 0:37:45.680 inflation and economy were answered, and then she also appeared 0:37:45.719 --> 0:37:49.279 into parliamentary appearances. So I think as far as the 0:37:49.440 --> 0:37:52.799 RBA's thinking is concerned, we already have a lot of 0:37:52.800 --> 0:37:55.839 information from them. So not sure how much more the 0:37:55.880 --> 0:37:59.239 minutes are going to show, but definitely markets will be 0:37:59.239 --> 0:38:01.040 looking out for that monthly inflation number. 0:38:01.200 --> 0:38:02.920 And Doug, I'm not sure if you're aware we're actually 0:38:02.920 --> 0:38:05.080 in the presence of history here because that was the 0:38:05.120 --> 0:38:08.200 first ever press conference by an Ibya governor and Swatty 0:38:08.280 --> 0:38:11.160 got to ask the first ever question, so that caused 0:38:11.160 --> 0:38:13.799 a little bit of consternation among the media pack. 0:38:13.960 --> 0:38:16.080 Swatty, thank you so much for making time to chat 0:38:16.120 --> 0:38:20.440 with us. Swati Pondie Bloomberg Australia Economy and Government reporter, 0:38:20.800 --> 0:38:23.239 and of course Paul Allen in Sydney, who is a 0:38:23.239 --> 0:38:26.200 member of the Daybreak Asia team. Thanks to you both, 0:38:26.560 --> 0:38:29.360 I'm Doug Prisner. You can catch Brian Curtis and myself 0:38:29.440 --> 0:38:32.560 weekdays here for Bloomberg day Break Asia beginning at nine 0:38:32.600 --> 0:38:35.840 in the morning in Hong Kong eight pm on Wall Street. 0:38:36.160 --> 0:38:38.680 Tom our thanks to Doug and Paul. And that does 0:38:38.719 --> 0:38:41.399 it for this edition of Bloomberg day Break Weekend. Join 0:38:41.480 --> 0:38:43.480 us again Monday morning at five am Wall Street Time 0:38:43.520 --> 0:38:45.880 for the latest on markets overseas and the news you 0:38:45.960 --> 0:38:47.040 need to start your day. 0:38:47.560 --> 0:38:49.200 I'm Tom Buzby. Stay with us. 0:38:49.440 --> 0:38:52.560 Top stories and global business headlines are coming up right now.