Speaker 1: This is Bloomberg day Break Weekend, our global look at
Speaker 1: the top stories in the coming week from our Daybreak
Speaker 1: anchors all around the world. Straight ahead on the program,
Speaker 1: Wall Street races for a key jobs report. I'm Tom
Speaker 1: Busby in New York. I'll have that story.
Speaker 2: I'm Carolyn Hetki here in London, where we're asking what's
Speaker 2: next for the UK's car industry.
Speaker 3: I'm Brian Curtisy in Hong Kong. We look at what
Speaker 3: to expect and what not to expect when China and
Speaker 3: the European Union get together for a summit.
Speaker 4: I'm Kayley Lyones in Washington, where the CEOs of the
Speaker 4: US's biggest banks are getting set to testify in the summer.
Speaker 5: That's all straight ahead on Bloomberg Daybreak Weekend. The business
Speaker 5: news you need to wrap up your week. Available on Apple, Spotify,
Speaker 5: The Bloomberg Business Appen everywhere you get your podcasts. Good
Speaker 5: day to you.
Speaker 1: I'm Tom Busby. We begin today's program with a focus
Speaker 1: on the economy. While many expect the Fed to put
Speaker 1: further rate increases on hold for now, each key economic
Speaker 1: report takes on more importance after signs that US consumer
Speaker 1: spending and the labor market maybe cooling along with inflation.
Speaker 1: This coming Friday, we get the November jobs report, and
Speaker 1: helping us break down what it all means and what
Speaker 1: we should expect to see is anawong Chief US economists
Speaker 1: with Bloomberg Economics and Michael McKee, Bloomberg's International Economics and
Speaker 1: Policy correspondent. Now, let's start with some of the data
Speaker 1: that we've taken, whether that we've seen over the last
Speaker 1: week or so, Americans slowing their spending in October. Personal
Speaker 1: spending along with personal incomes both rising two tenths of
Speaker 1: a percent in October. Mike, that's in line with forecasts,
Speaker 1: but not a very encouraging numbers.
Speaker 6: It's not bad given the month and the fact that
Speaker 6: September was a very strong month for spending and it
Speaker 6: was also back to school month. We haven't seen in
Speaker 6: the October numbers yet the holiday spending that is to come,
Speaker 6: so you really have have to sort of average it
Speaker 6: out over a couple of months and we'll see how
Speaker 6: October turns out. I thought one of the most interesting
Speaker 6: things though, was on the income side, because incomes were
Speaker 6: definitely restrained, and the biggest drop was in wages after
Speaker 6: many months of a half percent or four tens percent
Speaker 6: gain in wages each month. We only saw a tenth
Speaker 6: of eight percent gain. Now, one month does not make
Speaker 6: a trend. We saw some months last year where we
Speaker 6: had negative percentages for wage gains and it rebounded. But
Speaker 6: if this is a sign that labor markets are loosening,
Speaker 6: and if this continues, it's kind of what the Fed
Speaker 6: wants to see wage gains coming down to a more
Speaker 6: sustainable level. And therefore it fits the narrative that their
Speaker 6: hoping comes true of a soft landing.
Speaker 1: And what do you think about that?
Speaker 7: Yeah, what struck me about what Mike just said is
Speaker 7: the narrative. What is the narrative right out there right now?
Speaker 7: So this past week we saw a lot of Fed
Speaker 7: speaker came out and I detected a visibly dubbish pivot
Speaker 7: and all of them. Particularly most notable to me is
Speaker 7: Chris Waller and Lorettamester, both of whom are among the
Speaker 7: most hawkish FED officials, and it sounded to me that
Speaker 7: they have become more confident that the labor market is loosening,
Speaker 7: wage growth is slowing, and that inflation is definitely on
Speaker 7: track to have a couple more good months of low
Speaker 7: monthly print. And I think what the PCE report last
Speaker 7: week showed us, as Mike was sane, is like.
Speaker 8: The wage growth is lowing.
Speaker 7: Even though it's only one month of report, it actually
Speaker 7: corroborates what the Beige Book narrative is also telling us.
Speaker 7: So our read of the Beige Book that was released
Speaker 7: last week is that it was pretty downbeat and across
Speaker 7: most of the districts contexts we're talking about how there
Speaker 7: are more job at hints for other jobs while the
Speaker 7: turnover within the same firm as lower, so less people
Speaker 7: are quitting. So what this means is that the people
Speaker 7: who are looking for jobs would take a longer time
Speaker 7: being in the unemployed state. And usually historical this tends
Speaker 7: to drive unemployment persistently. It's not just a one month thing.
Speaker 7: Usually it will become a trend thing when you see
Speaker 7: such a phenomenon.
Speaker 1: Yeah, those continuing claims up to nearly two million.
Speaker 6: Last week, Mike, continuing claims do show that the labor
Speaker 6: market seems to be getting a little looser. People who
Speaker 6: get jobless claim jobless benefits are taking longer to find jobs,
Speaker 6: which is what you would expect in this situation. I
Speaker 6: thought perhaps one of the most interesting things, not just
Speaker 6: the sort of shading of their views by Chris Waller
Speaker 6: and Loretta mess was in the page book when we
Speaker 6: saw for the first time since the recovery began, companies
Speaker 6: saying they are beginning to accept the idea that they
Speaker 6: might lay people off and that they're not filling jobs
Speaker 6: because of attrition. It's not a huge trend yet, but
Speaker 6: it does. It's a break with what the narrative, to
Speaker 6: use the term again has been that we have this
Speaker 6: very strong labor market. It does seem to be finally
Speaker 6: loosening up. And I think that's the point that Chris
Speaker 6: Waller was making, that what we have now is an
Speaker 6: economy that is feeling the lagged impacts of the rate increases.
Speaker 1: So we may have had peak employment because of that.
Speaker 6: Well, it depends on how you define peak employment. The
Speaker 6: economy continues to add jobs, but the question is do
Speaker 6: we see unemployment go up or the number of jobs
Speaker 6: created go down significantly, which is what the FED is expecting,
Speaker 6: but not so far. Analys and Economy surveyed by Bloomberg.
Speaker 1: Let's en and then let's talk about what's coming up
Speaker 1: this Friday, the November Jobs report. What are you expecting
Speaker 1: to see.
Speaker 7: So we are definitely focusing more on what's happening to
Speaker 7: the unemployment rate as opposed to putting too much weight
Speaker 7: on the headline non farm payroll. So that's aid we
Speaker 7: are expecting the unemployment rate to climb to four percent,
Speaker 7: that's versus the three point nine percent from the previous month,
Speaker 7: and for non farm payroll to add about one hundred
Speaker 7: and fifty thousand jobs. And let me qualify those numbers
Speaker 7: for a little bit. So in terms of the non
Speaker 7: farm payroll headline, we are the one hundred.
Speaker 8: And fifty k that we are expecting.
Speaker 7: Well, that includes the thirty k that's added from the
Speaker 7: resolution of the UAW strike. So if you smooth it
Speaker 7: over a couple of months, in fact that that underlying
Speaker 7: pace of job growth is actually low more than one
Speaker 7: hundred and fifty k, And then in terms of the
Speaker 7: unemployment rate of four point zero unemployment rate would trigger
Speaker 7: the psalm's rule as well as a whole bunch of
Speaker 7: other recession rules. So Bill Dudley and I looked at
Speaker 7: about twenty eight rules of thumbs on that tends to
Speaker 7: have a very good record of calling for real time
Speaker 7: in real time calling and real time a recession. And
Speaker 7: we look at, for example, the U one unemployment rate.
Speaker 7: That unemployment rate captures how many of the unemployed have
Speaker 7: been so for fifteen weeks or longer. And whenever that
Speaker 7: YOU one unemployment rate increases persistently, it is usually a
Speaker 7: harbinger of recession already in place. And also there's another
Speaker 7: unemployment rate called U two unemployment rate, and it captures
Speaker 7: the layoffs and the temporary workers who are and I
Speaker 7: able to find anymore. And that part actually has not
Speaker 7: triggered any rules yet, and so we would be keeping
Speaker 7: an eye on all those U one, you two, you
Speaker 7: three unemploymery because it tells you various parts of the
Speaker 7: labor market. And what that tells me so far is
Speaker 7: that number one layoffs has not really happened yet. Mass
Speaker 7: layoffs has not happened yet. That's the YouTube unemployment rate. However,
Speaker 7: people who are unemployed indeed has been taker taking longer
Speaker 7: and longer to find a job. That's you one unemployment rate,
Speaker 7: and overall that should drive YOU three unemployment rate up,
Speaker 7: which is the typical UH metric for measuring whether a
Speaker 7: recession has happened.
Speaker 6: And it makes the job support much more interesting, many
Speaker 6: more UH indicators to dive into there. I think one
Speaker 6: of the things that we do want to see besides unemployment,
Speaker 6: which she gave a very good description of, is whether
Speaker 6: or not job creation does slow. If we got one
Speaker 6: hundred and twenty thousand, which is proximately what Enna is
Speaker 6: talking about in terms of job creation x strikers being
Speaker 6: added back, that would be much closer to what the
Speaker 6: Fed thinks is the minimum needed to absorb new entrance
Speaker 6: to the labor force to basically keep us kind of neutral,
Speaker 6: and they wouldn't think that's bad at all. I'm not
Speaker 6: sure how the markets would react to that. Right now,
Speaker 6: the Bloomberg consensus is one hundred and seventy five thousand,
Speaker 6: which one assumes includes that thirty thousand, so it's a
Speaker 6: little bit stronger than the Bloomberg Economics number. But I
Speaker 6: would also caution that over the coming week we'll get
Speaker 6: a lot more of the input data that people look
Speaker 6: at when they make their forecasts, so that could be
Speaker 6: revised by the time we get to Friday morning.
Speaker 1: What kind of jobs are we absorbing here.
Speaker 6: Well, mostly what we have been seeing is healthcare jobs,
Speaker 6: and still some leisure and hospitality jobs. Leisure hospitality is
Speaker 6: the category that has not regained all of its employment
Speaker 6: yet from the pandemic, so probably we'll see more in
Speaker 6: that category. It will be interesting to see what we
Speaker 6: see in terms of retail because of course this is
Speaker 6: the time of year when retailers add temporary employees, and
Speaker 6: there's anecdotal reporting that they've added fewer than in previous years.
Speaker 6: But does that mean we're adding more people in warehousing
Speaker 6: and transportation, which is where sort of the Amazon and
Speaker 6: Walmart workers end up in those situations over the holidays.
Speaker 6: So that's going to be something to look at in
Speaker 6: the jobs report as well.
Speaker 5: Well.
Speaker 1: We'll find out this Friday and our thanks to Anna Wong,
Speaker 1: Chief US Economists with Bloomberg Economics and Michael McKee, Bloomberg
Speaker 1: International Economics and Policy correspondent, and coming up on Bloomberg
Speaker 1: day Break weekend, we head to Europe and look at
Speaker 1: some key data coming out of the auto industry.
Speaker 5: There.
Speaker 1: I'm Tom Busby and this is Bloomberg. I'm Tom Busby,
Speaker 1: New York. Later in our program, Congress continues its funding battles,
Speaker 1: but first in the UK we get fresh data on
Speaker 1: the number of new car registrations in the coming days.
Speaker 1: The sector has shown some signs of recovery recently, but
Speaker 1: manufacturer is still battling against the challenging post Brexit economic environment,
Speaker 1: including painful tariffs on electric vehicles. For more, let's go
Speaker 1: to London and bring in Bloomberg day break europe banker
Speaker 1: Caroline hepgar Tom.
Speaker 2: Only a few days ago, nis An announced more than
Speaker 2: two billion pounds of investment into the British car industry.
Speaker 2: The Japanese car maker will set up another battery factory
Speaker 2: and produce more electric vehicles at its plant in Sunderland.
Speaker 2: The government is supporting this investment, which is the latest
Speaker 2: attempt to inject life into an industry that continues to
Speaker 2: grapple with the lasting effects of the twenty sixteen Brexit vote.
Speaker 2: So can the UK really compete as the industry shifts
Speaker 2: towards electric vehicles. Were thinking about this, of course, in
Speaker 2: the context of new car registration's data that is due
Speaker 2: in the next few days. Bluemberg's Global Automotive editor, Craig
Speaker 2: Trudell has been speaking to me about it. I began
Speaker 2: by asking him just to give us a reading on
Speaker 2: the current state of the UK car market sales overall.
Speaker 9: On the surface, the numbers have looked pretty good lately.
Speaker 9: We've had fifteen consecutive months of growth. That's obviously you
Speaker 9: know that that sounds great, but so has the European market,
Speaker 9: and so it's really sort of a matter of you know,
Speaker 9: kind of keeping up with the joneses that in that respect,
Speaker 9: it's also the case that, as you alluded to, you know,
Speaker 9: we're still a long ways from where we were pre pandemics.
Speaker 9: So back in twenty nineteen there were two point three
Speaker 9: million new cars registered in the UK. Last year there
Speaker 9: was one point six million, so about seven hundred thousand
Speaker 9: units short of of where we were before the pandemic,
Speaker 9: and so we're still a long ways from where we
Speaker 9: were before, you know, before the industry dealt with this
Speaker 9: mass disruption.
Speaker 2: So in terms then of how important the UK car
Speaker 2: market actually is to these Comke has just put that
Speaker 2: into context.
Speaker 9: For Yeah, for all the challenges the UK has been having,
Speaker 9: it is still Europe's number two market after Germany. It's
Speaker 9: also one of the more important markets in the world
Speaker 9: for premium and higher end vehicles. So you still have
Speaker 9: quite a bit of wealth on the part of consumers
Speaker 9: in the UK. A lot of the luxury brands do
Speaker 9: quite well here, so it is a very important market,
Speaker 9: even if it has you know, faded and relevance to
Speaker 9: some degree, I would say, especially on the manufacturing side.
Speaker 2: Okay, So then on that side of things, how important
Speaker 2: was the announcement from Nissan for example, that two big
Speaker 2: into a pounds worth of investment.
Speaker 9: Was Sunderland is a massive factory. It's Nissan's largest assembly
Speaker 9: plant in the world, and it's really crucial that the
Speaker 9: UK was able to sort of solidify its future, especially
Speaker 9: what we've seen over the last half decade or so.
Speaker 9: So car product here slumped last year to the lowest
Speaker 9: since nineteen fifty six. You could chalk that up to
Speaker 9: a few factors. Honda closed up plant here in twenty
Speaker 9: twenty one, you had Stalantis, you know, shift a car
Speaker 9: factory to vans, which you know don't count toward cars
Speaker 9: of course, but it's also you know, a lower volume plant.
Speaker 9: As a result of that shift, you've seen JLR sort
Speaker 9: of shift you know upmarket to higher value, lower volume products,
Speaker 9: and so you know, the UK now is down to
Speaker 9: four major manufacturers at this point. You have Nissan and
Speaker 9: JLR that kind of compete for top dog status and
Speaker 9: go back and forth. You have BMW and Mini and
Speaker 9: you have Toyota and those four are sort of what
Speaker 9: we have left.
Speaker 2: Wow, for an industry that has been so crucial for
Speaker 2: successive governments, right, that was sort of kicked off really
Speaker 2: going back as far as that, The issue then with
Speaker 2: that how much has the government currently had to help
Speaker 2: in order to keep those names here and in production.
Speaker 2: As you said, I remember the reporting around Sunderland. The
Speaker 2: real worry was around a lot of potential job losses.
Speaker 9: Yeah, you know, we had a good story just this
Speaker 9: week as the UK announced you know, this manufacturing plan
Speaker 9: and I think it was two billion pounds that they
Speaker 9: were committing to auto manufacturing specifically. I think there's been
Speaker 9: a really interesting sort of reluctance to sort of be
Speaker 9: drawn into, you know, the sort of subsidy wars that
Speaker 9: have kicked off. You know you had. Of course, the
Speaker 9: Inflation Production Act in the US has been hugely controversial,
Speaker 9: even among some of America's allies. You've seen Canada react
Speaker 9: to that in an extremely aggressive way and throw billions
Speaker 9: of dollars at companies like Volkswagen to get them to
Speaker 9: make battery investments. I think the UK has both been reluctant,
Speaker 9: as I mentioned, to be drawn into that, but I
Speaker 9: don't think that they can fully exclude themselves. There is
Speaker 9: some element of needing to bring you know, investment in
Speaker 9: by sort of offering some major incentives. And that's always
Speaker 9: been how the game has has been played in this
Speaker 9: industry because of the number of jobs and high value
Speaker 9: employment that that this industry brings. It's it's sort of
Speaker 9: inherent to the way you know, plants, plant locations get decided.
Speaker 2: Yeah, absolutely stuck with that. Competition got to deal with it.
Speaker 2: What about the problem though, of this sort of post
Speaker 2: Brexit issue. How significant are these tariffs meant to come
Speaker 2: in on the first of January.
Speaker 9: It would be really significant and I think it would
Speaker 9: be embarrassing honestly, both, you know, for the UK government
Speaker 9: and for Brussels. I think, you know, there was good
Speaker 9: intention here. There was you know, really an interest in
Speaker 9: getting the EV supply chain localized in the UK and
Speaker 9: in Europe, but there have been real challenges with the industry,
Speaker 9: you know, making progress on that on that front. Here
Speaker 9: in the UK, you had a British Vault, a startup
Speaker 9: that you know, had big ambitions but wasn't able to
Speaker 9: execute on them. You've had in Europe in general, just
Speaker 9: you know, sort of slow progress and getting the supply
Speaker 9: chain up and running and so, you know, again good intentions.
Speaker 9: It made sense to try and you know push the
Speaker 9: industry in that direction, but you know, given how far
Speaker 9: behind the industry is and sort of you know, getting
Speaker 9: that set up, and it's you know, really sort of
Speaker 9: across the board. Even Tesla's is behind in you know,
Speaker 9: localizing battery production and its German plant. You know, if
Speaker 9: nothing is done before the end of the year, we're
Speaker 9: talking about tariffs between the EU and the UK, two
Speaker 9: you know, very important trade partners to one another, Tariffs
Speaker 9: being put on each other's evs that wouldn't apply to say, China,
Speaker 9: and of course that would not go over particularly well,
Speaker 9: especially when consumers already sort of bocking at buying evs
Speaker 9: because they're already too expensive.
Speaker 2: Yeah, and so unusually you've got this, Actually the car
Speaker 2: industry on both sides of the channel, in Europe and
Speaker 2: the UK, you really wanting some mitigation measures. So what's
Speaker 2: the EU proposing on that front?
Speaker 9: Yeah, it's it's interesting, you know, three options being propos here,
Speaker 9: you know, one being do nothing, which I think is
Speaker 9: is you know, quite unlikely that that that that will happen,
Speaker 9: because again I think it would be embarrassing to sort of,
Speaker 9: you know, for for Europe and the UK to put
Speaker 9: themselves in this position. Uh, there's a complicated you know,
Speaker 9: sort of you know, short term measure of sort of
Speaker 9: kicking the can down the road by one year. That
Speaker 9: would be you know, complicated just from a sort of
Speaker 9: logistical standpoint. The other option that the industry is is
Speaker 9: pushing for is a much longer delay here, roughly three years.
Speaker 9: And you know, of course it would necessarily you know,
Speaker 9: it would to some degree not necessarily reflect well on
Speaker 9: the industry that you know, it's taking them this much time.
Speaker 9: But I also think it's a sort of you know
Speaker 9: reality that it does take you know, an industry this
Speaker 9: big and this complicated, uh, you know, to make these
Speaker 9: sorts of you know, longer term investments, and you know,
Speaker 9: if the industry were to sort of rush into them
Speaker 9: before or you know, before the consumer is ready and
Speaker 9: before you know, or sort of under under dress you know,
Speaker 9: you you sort of raised the odds that that we
Speaker 9: have problems and and you know, put evs out there
Speaker 9: that aren't aren't ready, and with batteries that that are problematic.
Speaker 9: We've seen a lot of you know, sort of teething
Speaker 9: issues on the part of the industry with battery fire something.
Speaker 2: Yeah, thank you so much for being with us. Craig
Speaker 2: tru Dallas, Bloomberg's Global Automotive edis are looking at one
Speaker 2: of the key issues facing the UK's car industry. I'm
Speaker 2: Caroline Hepga here in London. You can catch us every
Speaker 2: weekday morning for Bloomberg Daybreak Europe, beginning at six am
Speaker 2: in London. That's one am on Wall Street.
Speaker 1: Tom our thanks to Bloomberg Daybreak Europe Banker Caroline Hepgar
Speaker 1: and coming up on Bloomberg day Break weekend. China trying
Speaker 1: to improve trade relations with another vital partner, not the
Speaker 1: US though. I'm Tom Busby and this is Bloomberg. I'm
Speaker 1: Tom Busby in New York with your global look ahead
Speaker 1: at the top stories for investors in the coming week.
Speaker 1: The European Union has said it does not want to
Speaker 1: decouple from China, but rather de risk parts of its relationship.
Speaker 1: So with a summit coming up between the two blocks,
Speaker 1: how my China and the EU navigate their dialogue on
Speaker 1: improving their trade relationship. For more, let's get to Bloomberg
Speaker 1: Daybreak Asia co host Brian Curtis.
Speaker 3: Tom China and the European Union are sent to hold
Speaker 3: a summit on December seventh and eighth. The European Commission
Speaker 3: and Council presidents Ursulav Underlay and then Charles Michelle will
Speaker 3: travel to China. One of the big issues of late
Speaker 3: China is concerned about the European Union's launch of an
Speaker 3: anti subsidy investigation into the imports of electric vehicles. This
Speaker 3: summit comes around after a series of high level dialogues
Speaker 3: of late and these happened earlier this year on issues
Speaker 3: including trade and foreign policy. Joining us now is Jenny
Speaker 3: Marsh Bloomberg Team leader for Greater China and the Economics
Speaker 3: and Government Team. Jenny, thanks so much for being with us.
Speaker 3: So this is the first face to face or in
Speaker 3: person summit with Beijing's leadership for Europe in some four years.
Speaker 3: A lot is expected. What can we expect?
Speaker 10: Yeah, I mean a lot's expected, and at the same time,
Speaker 10: almost nothing is expected because you know these two blocks
Speaker 10: they are they're at a really low point in their
Speaker 10: ties at the moment. It's extremely acrimonious, and you know
Speaker 10: they're going to obviously be talking about the differences in trades,
Speaker 10: and I think, you know, market access is what this
Speaker 10: trip is all going to come down to, and you know,
Speaker 10: neither side has really much room to give. I think,
Speaker 10: you know, obviously front and center for the Chinese is
Speaker 10: this probe into its subsidies and support for the EV market,
Speaker 10: and the europe has been saying to China that it
Speaker 10: needs to cooperate with this probe because it's very hard
Speaker 10: for Europe to come to a fair conclusion if it
Speaker 10: doesn't have visibility over all the different ways. You know
Speaker 10: that China does support its EV industry, so they're going
Speaker 10: to be looking for more access there. You know, China's
Speaker 10: position on this is very clear. They think that the
Speaker 10: Europeans are being unfair and they say they have this
Speaker 10: kind of full supply chain of the things that you
Speaker 10: need to create evs in China and lots of the
Speaker 10: raw materials for batteries for example, are made in China
Speaker 10: and processed in China, which would use its costs. So
Speaker 10: they each have their own positions on this, and it's
Speaker 10: going to be probably at the heart of the discussions,
Speaker 10: although there are other issues around the trade relationship and
Speaker 10: just the bilateral relationship in general they'll be discussing.
Speaker 3: It raises the question, I suppose, it's really a dilemma
Speaker 3: whether or not, as a major trading block like Europe,
Speaker 3: whether you can reduce your economic dependence on China without
Speaker 3: souring relations It's difficult.
Speaker 10: I mean, Italy seems to have managed very gracefully to
Speaker 10: sort of boud out of the the bri while maintaining
Speaker 10: its relationship with China. But I think what China does
Speaker 10: really take bridge at is sort of this kind of
Speaker 10: de risking framework, which you know was the Europeans Funderlayan
Speaker 10: who coined that phrase. While de risking is more powasable
Speaker 10: than decoupling to China, it's actually the same thing with
Speaker 10: a different name, And essentially that means sort of ring
Speaker 10: fencing big parts of your economy from the Chinese, and
Speaker 10: often it's those parts of the economies that they really
Speaker 10: care about, and if from the US side it's the
Speaker 10: high tech chips and so yeah, it creates these tensions
Speaker 10: and it's hard to separate the trade relationship from the
Speaker 10: ballateral relationship, and it actually, I mean Europe is telling China.
Speaker 10: On Don Brobsky's visit earlier this year, he made it
Speaker 10: very clear that they don't see the human rights side,
Speaker 10: for example, separate to trade in economic relationships. So if
Speaker 10: increasingly they're both moving away from this idea like you
Speaker 10: can trade with someone but you can disagree on fundamental values,
Speaker 10: now that's sort of changing a bit, and both sides
Speaker 10: actually are linking those two different sides of the relationship more.
Speaker 3: It's been highlighted that what Europe is looking for is
Speaker 3: a level playing field, and as you mentioned, one of
Speaker 3: the ways that we can kind of look at that
Speaker 3: is the trade surplus that China enjoys with Europe. It's massive,
Speaker 3: it's more than four hundred billion euros. So you're wondering,
Speaker 3: how do you write size that in others? What could
Speaker 3: China buy from Europe more to help change that relationship.
Speaker 8: Yeah, and that's a good question.
Speaker 10: There are all these different sort of restrictions at the
Speaker 10: moment on European cosmetics that the Europeans are going to
Speaker 10: be lobbying to get removed, and also on instant formula,
Speaker 10: so there's trade barriers there which are hold mete. European companies,
Speaker 10: the French particularly, are concerned about the cosmetics barriers.
Speaker 8: So that's something that the Europeans.
Speaker 10: Could love be for Whether or not that will be
Speaker 10: sufficient to sort of to narrow that huge trade deficit
Speaker 10: that you mentioned, you know, I'm sure of, but it's
Speaker 10: sort of it's going to be a bigger problem going forward.
Speaker 10: This is not going to go away because China's being
Speaker 10: very clear. You know, you have Pangang Sheng talking in
Speaker 10: Hong Kong this week about how China needs to sort
Speaker 10: of back away from its sort of property led growth
Speaker 10: and to sort of put money into these sort of
Speaker 10: new emerging green markets, which you know EV's is one
Speaker 10: of them. If China ramps up its manufacturing capacity in
Speaker 10: those areas, what Europe and others worried about is sort
Speaker 10: of China's going to flood the market essentially, because it
Speaker 10: has built a sufficient amount of the factories it needs
Speaker 10: to meet domestic demand right now.
Speaker 8: So where where does that excess go?
Speaker 3: And one of the other areas that we haven't talked
Speaker 3: about is the commodities, the crucial commodities that Europe buys
Speaker 3: from China, and there's a little bit of complication with
Speaker 3: that because China is now talking about actually limiting the
Speaker 3: possible sales of certain types of rare earth minerals, for instance,
Speaker 3: and so it may be difficult for Europe to either
Speaker 3: raise or reduce its economic dependence on China when it
Speaker 3: comes to commodities.
Speaker 10: This is sort of one of the few areas where
Speaker 10: China actually has some leverage. I think, you know, it's
Speaker 10: fund and difficult to respond to US and Europeans sort
Speaker 10: of trade curves in the past, but it's kind of
Speaker 10: dominance in the market of rare earths is something that
Speaker 10: China does have in its tool box. Although it's sort
Speaker 10: of already granted licenses for the export of some of
Speaker 10: these minerals that it did put the restrictions on, the
Speaker 10: Commerce Ministry has sort of given the green light for
Speaker 10: China to export, and so it sort of still remains
Speaker 10: to be seen how strictly China is going to enforce
Speaker 10: those but it's a reminder to the Europeans that, you know,
Speaker 10: if they press ahead with this EV program, they come
Speaker 10: out with a bunch of sort of tariffs on Chinese
Speaker 10: EV's at the end of it, then China does have
Speaker 10: ways it can respond that could hurt the European market.
Speaker 3: Why hasn't China actually confirmed this summit yet?
Speaker 10: This is sort of how China does diplomacy. It's sort
Speaker 10: of baffling to the rest of the world. But they
Speaker 10: very rarely confirm at these kind of events until the
Speaker 10: last minute, I guess because it just gives them some
Speaker 10: some wiggle room if they want to move things, they
Speaker 10: don't have to then backtrack because they never said anything
Speaker 10: in the first place. It also just adds that kind
Speaker 10: of sort of instability as opposed to the European side.
Speaker 10: You know, we could call this off stop. We haven't
Speaker 10: confirmed it in public. You know, it's kind of petty.
Speaker 10: But this is just sort of textbook and how the
Speaker 10: Chinese do it, and there wasn't really too much to
Speaker 10: be read into it.
Speaker 3: So the US, in describing its relationship and its aims
Speaker 3: on the relationship with China, says it wants to de
Speaker 3: risk but not decouple. Does Europe have a position in
Speaker 3: particular on how it is either reducing its dependence or
Speaker 3: even disengaging from China.
Speaker 10: The Europeans are the architects of the de risking idea
Speaker 10: of the language, and there were some reports earlier this
Speaker 10: year where they did sort of identify you know, national
Speaker 10: security is national security through economic security, so it's sensitive technologies.
Speaker 10: So it's very much in alignment with the US position,
Speaker 10: apart from they haven't they haven't adopted the sort of
Speaker 10: measures that the Americans have about you know, areas where
Speaker 10: American companies can invest or limiting access to sort of
Speaker 10: the chips.
Speaker 8: But they also don't have the same.
Speaker 10: Level of technology that the Americans do right now, so
Speaker 10: they're still really working through how they see the implementation
Speaker 10: of de risking and they're sort of couple of sets
Speaker 10: behind the US And.
Speaker 3: Just finally just a bit of fun. Obviously, European brands
Speaker 3: are very big in China, very well known, particularly in
Speaker 3: the luxury end of the market. Are there China brands
Speaker 3: Chinese brands that are known well in Europe?
Speaker 8: Not too many. I mean Idye.
Speaker 10: Byd By the one probably, and I think the Europeans
Speaker 10: would rather it be less well known.
Speaker 3: All right, Jenny, thanks so much for joining us. Jenny
Speaker 3: marsh with us Bloomberg team leader for a Greater China
Speaker 3: Eco GOV. I'm Brian Curtis's song with Doug Christner. You
Speaker 3: can catch us every weekday. Here for Bloomberg day Break
Speaker 3: Asia beginning at seven am in Hong Kong and six
Speaker 3: pm on Wall Street tom.
Speaker 1: Our thanks to Bloomberg day Break Asia co host Brian Curtison.
Speaker 1: Coming up on Bloomberg day Break Weekend, a look at
Speaker 1: a busy week ahead in Washington. I'm Tom Busby, and
Speaker 1: this is Bloomberg. This is Bloomberg day Break Weekend, our
Speaker 1: global look ahead at the top stories for investors in
Speaker 1: the coming week. I'm Tom Busby in New York. It's
Speaker 1: going to be a busy week ahead in Washington as
Speaker 1: Congress continues its funding battles and some key hearings, including
Speaker 1: testimony from some of the biggest names in the business world,
Speaker 1: appear before the Senate.
Speaker 8: For more.
Speaker 1: Let's add to our Bloomberg ninety nine one newsroom in
Speaker 1: Washington and Bloomberg Sound On co host Kaylee Lines.
Speaker 4: Yeah, Tom, This coming Wednesday is going to be a
Speaker 4: big day for big bank speak on Capitol Hill. The
Speaker 4: CEOs of all eight jesibs global systemically important banks will
Speaker 4: be appearing before the Senate Banking Committee for the annual
Speaker 4: oversight of Wall Street Firm's hearing. So Jamie Diamond Brian moynihan,
Speaker 4: Jane Fraser, David Solomon, James Gorman, Charlie Sharf, and even
Speaker 4: Robin Vince of BNY Mellon and Ron o'hanley of State Street.
Speaker 4: They'll all be testifying. It's a really important hearing. In fact,
Speaker 4: it's so important that Shanali basic Bloomberg TV's global finance correspondent,
Speaker 4: is going to be making the trip from New York
Speaker 4: down here to Washington to cover it, and she's joining
Speaker 4: us now. So Shanali, let's just talk about themes.
Speaker 8: First.
Speaker 4: What do you expect is going to come up in
Speaker 4: this hearing.
Speaker 11: Well, there's two things. One there's the agenda of the
Speaker 11: lawmakers and then there's the agenda of the bankers themselves. Now,
Speaker 11: you have to remember that you have policymakers really trying
Speaker 11: to firm up rules around bank capital moving forward, and
Speaker 11: those rules are now in their comment period. So what
Speaker 11: is now happening is you're going to see the big
Speaker 11: US banks, the CEOs of them, take this opportunity to
Speaker 11: really make the case on why these rules would be
Speaker 11: too stringent and start to choke off some of the
Speaker 11: economic activity because they have to hold more capital against
Speaker 11: the work that they do. Now from the lawmakers perspective,
Speaker 11: they have other questions, and you saw it right when
Speaker 11: the hearing was announced in the first place. Sharon Brown
Speaker 11: I quote said that Wall Streets megabanks continue to make
Speaker 11: record profits and to reward corporations that raise prices on Americans.
Speaker 11: So inflation will still be a question. And also, like
Speaker 11: we've seen in the prior year, we will also see
Speaker 11: them question why most Americans have not seen the effective
Speaker 11: higher interest rates through their savings accounts, because rates have
Speaker 11: not risen very meaningfully relative to how quickly rates have
Speaker 11: risen been written by the Federal Reserve.
Speaker 4: Yeah, I think the capital requirements especially could be interesting
Speaker 4: and possibly contentious because there are plenty of Republicans on
Speaker 4: the Banking Committee who have been pretty vocally opposed to
Speaker 4: the Postle three end game and those higher requirements. Basically
Speaker 4: all of the Republican senators in fact, had written a
Speaker 4: letter to the FED kind of casting doubt on whether
Speaker 4: the Fed should really be pursuing this. So I guess
Speaker 4: the bankers will be more aligned with that party and
Speaker 4: it could be a little bit more contentious with the Democrats.
Speaker 11: Well, it's interesting that you mentioned that too, because you
Speaker 11: have this just a week after this hearing comes a
Speaker 11: week after Jamie Diamond was pretty public at the CNBC
Speaker 11: delivery Sorry a Dealble New York Times deal Book conference
Speaker 11: over Sorry, and he says that even liberals should be
Speaker 11: supporting Nikki Haley. And you're seeing this big call by
Speaker 11: Wall Street to support her as a presidential candidate. And
Speaker 11: it does have a lot to do with her views
Speaker 11: around the economy and domestic policy as well as international policy.
Speaker 4: Yeah, so I'm sure there are going to be plenty
Speaker 4: of juicy headlines coming out of this hearing. There also
Speaker 4: is the question Shanali, and this kind of comes back
Speaker 4: to the reason why capital requirements might be higher in
Speaker 4: the first place. As we are now, what eight nine
Speaker 4: months out of the start of the bank failures of
Speaker 4: twenty twenty three with SVB, are they going to tell
Speaker 4: us there's still reasons to worry about the health of
Speaker 4: the banking system or is this going to be a
Speaker 4: message of nothing more to see here? Guys, We're fine.
Speaker 11: Well, let's see how tempered that they might be, because
Speaker 11: remember that these banks are slated to pay a lot
Speaker 11: more in terms of a special assessment to the FDIC,
Speaker 11: which is an agency under a lot of fire for
Speaker 11: its own practices in many ways, but the banks were
Speaker 11: feeling the burn of that, and the biggest banks are
Speaker 11: paying the most into that special assessment.
Speaker 4: All right, Well, I'm really looking forward to your coverage
Speaker 4: of this coming week. Shanali Bostic, Bloomberg TV's Global finance correspondent,
Speaker 4: Thank you so much, and Tom for Wall Street to
Speaker 4: head to Washington.
Speaker 1: Thank you, Kaylee. That was Bloomberg's sound on co host
Speaker 1: Kaylee Lines, reporting from our Bloomberg ninety nine to one
Speaker 1: news room in Washington, and you can hear sound on
Speaker 1: weekdays one to three pm Wall Street Time on Bloomberg Radio.
Speaker 1: That does it for this edition of Bloomberg day Break Weekend.
Speaker 1: Join us again Monday morning at five am Wall Street
Speaker 1: Time for the latest on the market's overseas and the
Speaker 1: news you need to start your day. I'm Tom Busby.
Speaker 1: Stay with us. Top stories and global business headlines are
Speaker 1: coming up right now.