Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg day Break Weekend, our global look at
Speaker 2: the top stories in the coming week from our Daybreak
Speaker 2: anchors all around the world. That's straight ahead on the program,
Speaker 2: a look at the March jobs report here in the
Speaker 2: US and what it means for FED policy. I'm Tom
Speaker 2: Busby in New York.
Speaker 1: I'm Caroline Hepcker here in London, where we're asking if
Speaker 1: the eupin Central Bank has won it's battle against inflation.
Speaker 3: I'm Brian Curtis in Hong Kong. I'll look ahead to
Speaker 3: China's PMIS and whether the PBOC wants to use the
Speaker 3: Chinese currency to juice the economy.
Speaker 4: That's all straight ahead on Bloomberg day Break Weekend on
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Speaker 2: Good day to you. I'm Tom Busby, and we begin
Speaker 2: today's program with the March Jobs report, we get those
Speaker 2: numbers this coming Friday. What does this mean for Fed
Speaker 2: policy going forward? Well for more, we're joined by Michael McKee,
Speaker 2: Bloomberg International Economics and Policy Correspondent. Now, Michael, we saw
Speaker 2: blowout gains in January, strong growth in February, even though
Speaker 2: the unemployment rate ticked a little higher three point nine percent.
Speaker 2: What are you expecting to see for March this Friday?
Speaker 5: Pretty much the same thing. Want to make it sound boring,
Speaker 5: but we have no indication that the labor market has
Speaker 5: fallen off. And right now, the forecast consensus from econdom
Speaker 5: was surveyed by Bloomberg is for about two hundred and
Speaker 5: fifteen two hundred and sixteen thousand. That would be down
Speaker 5: from the prior month. But we haven't really been sure
Speaker 5: about what the numbers would be in some time because
Speaker 5: they keep coming in stronger than anticipated. So if we
Speaker 5: see something similar to that again, it would be mixed
Speaker 5: news for the FED and that they want people to
Speaker 5: get jobs and it's good for the economy. But the
Speaker 5: question becomes is an inflationary right?
Speaker 1: Right?
Speaker 2: Yeah? So a surprise to the upside would be no surprise,
Speaker 2: but it could hurt things let's talk about another thing,
Speaker 2: that's average hourly earnings and what are we looking for there?
Speaker 2: And that will what will that tell us about inflation?
Speaker 5: And yeah, average hourly earnings has been the Fed's focus
Speaker 5: in these jobs numbers because they're looking at whether or
Speaker 5: not employers are still having to pay up to attract
Speaker 5: employees and then raise prices to cover that. Right now,
Speaker 5: we're looking for a jump in average hourly earnings and
Speaker 5: no change in a year over year basis four point
Speaker 5: three percent. That's good for workers, it's above inflation. Inflation
Speaker 5: adjusted wages have been rising over one percent for the
Speaker 5: past some months, so that's from the worker side good news.
Speaker 5: But it still concerns the FED in terms of is
Speaker 5: that what's pushing up service industry prices as particular, which
Speaker 5: has been a big contributor to the fact that they
Speaker 5: can't get inflation down to two percent yet now not yet.
Speaker 2: And another concern for the FED is the unemployment rate.
Speaker 2: Now we know it's three point nine percent for February,
Speaker 2: they're expecting three point eight, still below what they view
Speaker 2: as an appropriate level four point one.
Speaker 5: Right Well, the FED thought we would get to four
Speaker 5: point one this year. They thought we would get to
Speaker 5: four point one last year, and we did. The unemployment
Speaker 5: rate has continued to surprise the FED. One of the
Speaker 5: questions is going to come with the labor force participation rate.
Speaker 5: We have seen more people entering the labor force, which
Speaker 5: is one reason that unemployment rose from its low of
Speaker 5: three and a half to now this three point nine percent,
Speaker 5: and that could be a reason for us to go
Speaker 5: over four. Nobody thinks we're going to go significantly over four,
Speaker 5: but it's been a while since we've been there, so
Speaker 5: there's a feeling at some point we have to go
Speaker 5: back to around that level. Because the FED and most
Speaker 5: economists think we are below the natural rate of unemployment,
Speaker 5: we're still in a level at which we see inflationary
Speaker 5: pressures because there's not enough people to take all the jobs.
Speaker 2: Well, now, fifteen million jobs added since Biden took office.
Speaker 2: How is this momentum carrying the perception of his economy
Speaker 2: biden Omics.
Speaker 5: It's starting to get better. We've had some numbers on
Speaker 5: consumer sentiment. They've been up but down just a little bit.
Speaker 5: But people are feeling pretty good still about the labor force,
Speaker 5: and that's because they have jobs, and if they have jobs,
Speaker 5: they can go out and spend, and the economy is
Speaker 5: growing faster than had been anticipated this year. So it's
Speaker 5: a reason perhaps that we have seen some of the
Speaker 5: polls turn around for President Biden. But you need to
Speaker 5: keep it going. And that's the question is is this
Speaker 5: going to continue?
Speaker 2: Yeah, November still a long way away. Well, let's talk
Speaker 2: about some of the jobs that we're seeing growth and
Speaker 2: some of the jobs where we're losing a little steam.
Speaker 5: Well, last month we lost to some manufacturing jobs which
Speaker 5: had been expected for some time and hadn't shown up
Speaker 5: yet because the ism numbers other measures of manufacturing have
Speaker 5: suggested a slow down. So we'll watch manufacturing payrolls. But
Speaker 5: most of the jobs are still being created in the
Speaker 5: health services industry and that's expected to continue for quite
Speaker 5: some time. As America ages, we need more people to
Speaker 5: help take care of them, so that a rise there
Speaker 5: is not a surprise. A rise in leisure and hospitality
Speaker 5: would not be a surprise. Those jobs turnover fairly quickly,
Speaker 5: and we've never really gotten back all the jobs at bars,
Speaker 5: restaurants and hotels that we lost during the pandemic. After that,
Speaker 5: you'd want to look at something like retail to see
Speaker 5: if companies are still feeling like Americans are going to
Speaker 5: shop enough to add workers. We've gotten through now January
Speaker 5: February where the extra help they hire for the holiday
Speaker 5: season gets let go. Are they still letting go people
Speaker 5: or are we going to see a rise in retail payrolls.
Speaker 2: That's going to be something to watch as well, and
Speaker 2: also another economic indicator construction jobs. Construction jobs have been
Speaker 2: interesting because the builders can't build houses fast enough. There's
Speaker 2: so much demand for new homes, and they have been
Speaker 2: able to find workers. Construction jobs have been rising, and
Speaker 2: so that's a consideration. Do we still see construction jobs rising.
Speaker 2: This kind of plays into the whole debate too about
Speaker 2: immigration in the presidential race, because a lot of undocumented
Speaker 2: immigrants are taking construction jobs, and without them, you wouldn't
Speaker 2: have the ability to build as many homes. So there's
Speaker 2: some good news bad news in that. Well our thanks
Speaker 2: to Michael McKee, Bloomberg's International economics and policy correspondent. Well
Speaker 2: we move now to the Walt Disney Company's annual meeting
Speaker 2: of shareholders. It'll be held on April third. It's usually
Speaker 2: an uneventful affair, but not this year. Activist investor, try
Speaker 2: On Fund Management founder Nelson Peltz going up against Disney
Speaker 2: CEO Bob Iiger looking for a seat on Disney's board.
Speaker 2: And for more on what's turned out to be a
Speaker 2: battle Royale, we're joined by Thomas Buckley, Bloomberg News entertainment reporter.
Speaker 2: So Thomas lay it out what is behind this fight
Speaker 2: for at least one board seat at Disney.
Speaker 6: Well, as you said, Tom, I think that in previous
Speaker 6: years it's been a pretty uneventful of third the Disney
Speaker 6: Annual General Meeting. I think that it couldn't be more eventful.
Speaker 6: In fact, this year, Nelson Pels's Trend Fund Management, the
Speaker 6: activist firm, has accumulated a stake in Disney work without
Speaker 6: three point five billion dollars and has been lobbying for
Speaker 6: board seats for the better half of almost two years now.
Speaker 6: And even a couple of weeks ago, it looked like,
Speaker 6: you know, Disney had turned in a very strong earnings
Speaker 6: report and it seems as though momentum on the Trian
Speaker 6: and Nelson Pelts side had really slowed. But since then
Speaker 6: we've seen a number of people step out in support
Speaker 6: of Pelts. Now that includes directors on the boards of
Speaker 6: companies where he's previously selled as a director, including Procter
Speaker 6: and Gamble, Montalize, Janis, Henderson and Moore. And now we
Speaker 6: have proxy advisers Iss and Egan Jones also supporting his
Speaker 6: candidacy for a board seat. So what seemed like in
Speaker 6: maybe an early victory for Disney is maybe now looking
Speaker 6: a bit more like a contest.
Speaker 2: Well, what is the problem that he has with Eiger
Speaker 2: and the direction of the Disney Company. What does he
Speaker 2: want to see changed?
Speaker 6: I think there are a number of issues that tryan
Speaker 6: light laid out in a one hundred and thirty three
Speaker 6: page white paper recently. Now he focuses on really the
Speaker 6: lack of oversight and accountability at the board level, which
Speaker 6: he claims has been the case for most of Disney's
Speaker 6: recent history. I think that Disney has taken steps to
Speaker 6: address a number of the complaints or you could say
Speaker 6: arguments laid out on the white paper. For example, it's
Speaker 6: appointed former Morgan Stanley's CEO James Gorman to its board
Speaker 6: and also former Sky CEO Jeremy Director Aid in a
Speaker 6: succession planning process. Obviously, will remember that the succession planning
Speaker 6: process as carried out by the board for the CEO
Speaker 6: that preceded Barbiger, so Bob Jpek, who lasted little less
Speaker 6: than three years and the role was not successful, which
Speaker 6: is why Barbigo had to return. Since his return in
Speaker 6: twenty twenty two, as contract has been extended all the
Speaker 6: way out of twenty twenty six. So I think that
Speaker 6: Nelson probably feels as though the board could be doing
Speaker 6: a better job, certainly in areas of succession planning and accountability.
Speaker 2: Well, now you talked about the support that Pelt has,
Speaker 2: but let's talk about the support that Iiger has won
Speaker 2: from Glass Lewis, JP Morgan Chase CEO, Jamie Diamond, and
Speaker 2: big names like Loreen Powell, jobs Star Wars director George Lucas,
Speaker 2: a favorite of many people, and also the Disney family.
Speaker 2: How does that backing affect, you know, what's going to
Speaker 2: happen this week?
Speaker 6: Well, I think that's really interesting because fundamentally we're seeing
Speaker 6: both sides Marshal support. I think that, you know, I'm
Speaker 6: not sure how you would argue necessarily the credibility of
Speaker 6: Glass Lewis versus the credibility of Iss versus the credibility
Speaker 6: of Evon Jones. I mean, these people are very much
Speaker 6: in the same game of speaking to shareholders and speaking
Speaker 6: to the companies and seeking to really, I suppose, improve
Speaker 6: governance of the companies that they monitor. I think the
Speaker 6: fact that a number of these proxy advisors are split
Speaker 6: speaks volumes probably about the shareholder base being split. I
Speaker 6: think that the support from Jamie Diamond would probably sway
Speaker 6: a number of institutional shareholders. The support from the likes
Speaker 6: of George Lucas, as you said, it's Star Wars, we
Speaker 6: might sway a number of retail shareholders. But I think
Speaker 6: that's certainly the support for Trian from a number of
Speaker 6: directors where Nelson's also served on the board might sway
Speaker 6: some disgruntleeds soucial shareholders who maybe bought Disney at the top,
Speaker 6: you know, around twenty twenty one and feel as though
Speaker 6: a bit of adgitus is what's needed at the company.
Speaker 2: Well, try On Fund controls about three and a half
Speaker 2: billion dollars of Disney stock. How big a slice is
Speaker 2: that holding and how much sway does that give Pelton
Speaker 2: try On?
Speaker 6: Well, the holding has certainly grown over time. So when
Speaker 6: Nelson first disclosed stake in the business at the time
Speaker 6: of what Biker's return. In November twenty twenty two, the
Speaker 6: steak was worth anywhere between eight hundred and nine hundred
Speaker 6: million dollars. It has grown materially over time because it
Speaker 6: includes Nell shares pledged by the former chairman of Marvel Entertainment,
Speaker 6: Ike Palmetto, who was fired unceremoniously by Aiger last year.
Speaker 6: To give a bit of context, I mean that three
Speaker 6: point five billion dollar steak compares to a market cap
Speaker 6: of about two hundred and twenty one million dollars, so
Speaker 6: on that front is a pretty meaningful, sizable steak. I'm
Speaker 6: certainly a shareholder that if it were anybody other than
Speaker 6: Nelson or Tryan, I think that the boys would probably
Speaker 6: be very much engaging with behind the scenes. Given the
Speaker 6: size of the of the voting power, I think that
Speaker 6: it gives naturally Tryan quite a bit of credibility. I mean,
Speaker 6: it's it's a huge stake to have in any business,
Speaker 6: especially one in the world's largest sense company.
Speaker 2: Well that virtual shareholder meeting this coming Wednesday. In our
Speaker 2: thanks to Thomas Buckley, Bloomberg News entertainment reporter, for his
Speaker 2: insights coming up on Bloomberg day Break Weekend we'll talk
Speaker 2: about whether the European Central Bank has won its battle
Speaker 2: against inflation. I'm Tom Busby, and this is Bloomberg. This
Speaker 2: is Bloomberg day Break weekend, our global look ahead at
Speaker 2: the top stories for investors in the coming week. I'm
Speaker 2: Tom Busby in New York. Up later in our program,
Speaker 2: how close is the US Senate to passing a bill
Speaker 2: that would force TikTok's parent company to either sell the
Speaker 2: app or be banned in the US. But first, after
Speaker 2: the latest rounds of central bank rate decisions, investors are
Speaker 2: placing their bets on summer rate cuts. But one thing
Speaker 2: stands in a way. The data. One of the most
Speaker 2: important metrics is inflation in the EU. The higher for
Speaker 2: longer strategy was originally adopted by policymakers around the world
Speaker 2: in a bid to rain in soaring inflation levels. Is
Speaker 2: that fight over European core inflation data due next week
Speaker 2: may provide the biggest clue yet And for more, Let's
Speaker 2: go to London and bring in Bloomberg Daybreak europe anker
Speaker 2: Caroline Hepger Tom.
Speaker 1: So far in twenty twenty four, economists, CEOs and central
Speaker 1: bankers have all been consumed by one question when will
Speaker 1: interest rates come down?
Speaker 7: In Europe?
Speaker 1: Rates have reached their highest points since the global financial
Speaker 1: crisis in two thousand and eight, and yet the ECB
Speaker 1: has held interest rates steady at four and a half
Speaker 1: percent since September of last year. Even in the face
Speaker 1: of growing market pressure. There is a glimmer of hope, though.
Speaker 1: In a statement released following its last interest rate decision,
Speaker 1: the ECB said inflation projections have been revised down, in
Speaker 1: particular for twenty twenty four, which mainly reflects a lower
Speaker 1: contribution from energy prices. Now the central Bank has set
Speaker 1: itself a target of reducing inflation to two percent across
Speaker 1: all European countries combined, and officials might be closer than
Speaker 1: they think. According to Bloomberg's recent now cast of inflation,
Speaker 1: Eurozone inflation already sits at two percent. The gauge, compiled
Speaker 1: by Bloomberg Economics, incorporates thirty two variables ranging from unemployment
Speaker 1: to those energy costs are mentioned, and it has hit
Speaker 1: one point nine five percent after a drop in anual
Speaker 1: producer prices fed into the model. The figure is subject
Speaker 1: to change because of the nature of the now cast,
Speaker 1: but the drop speaks to a broader trend of falling
Speaker 1: European inflation. In fact, it's been on a downward trend
Speaker 1: for months as energy prices dip and the twenty country
Speaker 1: Eurozone economy stagnates for a second year in a row.
Speaker 1: So lower inflation should lead to lower interest rates, at
Speaker 1: least according to ECB President Christine Legarde, who said in
Speaker 1: a recent speech that the decisions of the Central Bank
Speaker 1: regarding rate cuts would be guided by economic data.
Speaker 8: Domestic price pressures will still be visible. We expect services inflation,
Speaker 8: for example, to remain elevated for most of this year,
Speaker 8: so there will be a period ahead where we need
Speaker 8: to confirm on an ongoing basis that the incoming data
Speaker 8: supports our inflation outlook. So this has two important implications
Speaker 8: for the policy path. Head two important implications. First, our
Speaker 8: decisions will have to remain data dependent and decided meeting
Speaker 8: by meeting, responding to new information as it comes in.
Speaker 8: This implies that even after the first rate cut, we
Speaker 8: cannot we cannot precommit to a particular rate path, however
Speaker 8: tempting that is, however much some of you would like
Speaker 8: to see it. If we are honest to our methodology
Speaker 8: and if we have discipline. In adhering to these principles,
Speaker 8: we cannot That was the first important implication. The second
Speaker 8: important implication is that our policy framework will remain important
Speaker 8: to process the incoming data and calibrate the appropriate policy
Speaker 8: stants inflation outlook, dynamics of underlying inflation, transmission of monetary policy.
Speaker 8: But at the same time, the relative weights assigned to
Speaker 8: the three criteria will have to be regularly examined.
Speaker 1: That was the ECB President Christine Lagarde speaking at the
Speaker 1: ECB and Its Watchers conference earlier this month. It's not
Speaker 1: all good news though. Underlying price pressures, particularly from salaries
Speaker 1: in the services sector, are still relatively high, a potential
Speaker 1: indicator that the trend towards slowing inflation could change. It's
Speaker 1: one of the reasons that the ECB continues to emphasize
Speaker 1: that rate cuts come only once they are sure that
Speaker 1: wage restraint is taking effect and that inflation and its
Speaker 1: slow down is actually here to stay. Because of this,
Speaker 1: European central bankers aren't declaring victory just yet. They have
Speaker 1: talked about most measures of underlying inflation having eased further,
Speaker 1: but domestic price pressures remaining high. Now one group hoping
Speaker 1: to see falling inflation next week, will be investors who
Speaker 1: are pricing in a ninety percent chance of an ECB
Speaker 1: rate cut by June. I was discussing this point with
Speaker 1: Black Crook's senior investment strategists Laura Cooper.
Speaker 9: So we'll be watching for whether that broadening, that upside
Speaker 9: kind of price pressures persist in March. But I don't
Speaker 9: think that's necessarily going to deviate the ECB away from
Speaker 9: a June rate cut. I think because at that point
Speaker 9: Christine Legard made it quite clear that they will have
Speaker 9: sufficient data to have more confidence than inflation is on
Speaker 9: that sustained trajectory back to two percent. So we're still
Speaker 9: leaning towards this rate cut in June and then at a
Speaker 9: very gradual pace through the end of the year because
Speaker 9: essentially they may not want to cut back to back
Speaker 9: because for fear of markets essentially extrapolating out that easing
Speaker 9: trend and markets could anticipate them getting back to neutral
Speaker 9: much sooner than what they actually want to kind of
Speaker 9: guide markets towards.
Speaker 1: That was Black Fox's Laura Cooper. Now, we are expecting
Speaker 1: data for inflation out of Europe in the next few
Speaker 1: days to examine what they could mean for the future
Speaker 1: path of great cards. Bloomberg's ECB reporter Alexander Webber has
Speaker 1: been speaking to me about what exactly we're expecting from
Speaker 1: those figures.
Speaker 10: We expect the number to come in roughly at a
Speaker 10: similar level as in February, meaning around two point six.
Speaker 10: There are some, including Bloomberg Economics, who forecast a slight
Speaker 10: decline to two point four. So all of that is
Speaker 10: in line with the expectation that inflation will continue to slow,
Speaker 10: but at a slower pace than what we've seen in
Speaker 10: recent months.
Speaker 1: Does the CPI number tell us the whole story? Do
Speaker 1: you think about the inflation.
Speaker 10: Picture at the moment. There's a bigger focus also on
Speaker 10: the core number. Again that is still higher than the
Speaker 10: headline number, which has been driven lower by energy. At
Speaker 10: the core, the driving forces are really services, so that's
Speaker 10: where a lot of the focus is. We also expect
Speaker 10: a slight decline in the core inflation number to two
Speaker 10: point nine, so still reasonably above the two percent target
Speaker 10: that the ECB is signing.
Speaker 1: Have there been indicators and that in the slowdown in
Speaker 1: inflation is actually substantial on here to say, there are
Speaker 1: some concerns about potentially a spike higher once inflation does
Speaker 1: actually dip, that it then could rebound.
Speaker 10: That could be rebound in the second half of the year.
Speaker 10: So even if inflation hits two percent around the middle
Speaker 10: of the year, which is what some forecasters are saying,
Speaker 10: that doesn't mean the inflation fight is really over. So
Speaker 10: the ECB wants to see inflation stay sustainably at the
Speaker 10: two percent level, and that may not be really the
Speaker 10: case until next year. So that's partly because there's energy
Speaker 10: costs have been so volatile on a kind of government
Speaker 10: measures that are now being phased out. That all makes
Speaker 10: for a very bumpy path down to the two percent target.
Speaker 1: Okay, so bumpy path, but how much bearing Also, do
Speaker 1: you think that the individual figures next week you're going
Speaker 1: to actually have on the ECB's first rate decision.
Speaker 10: So we have a rate decision on April eleven. The
Speaker 10: officials have already pretty clearly guided us toward a cut
Speaker 10: in June, so nobody's really expecting any action in April.
Speaker 10: The inflation figure is probably not going to change all
Speaker 10: that much about it. What officials are really waiting for
Speaker 10: is wage data for the first quarter, and that doesn't
Speaker 10: come in until May even early June, and that's when
Speaker 10: we have the real certainty about what's going on in
Speaker 10: the economy and the crucial wage data that people are
Speaker 10: waiting for.
Speaker 6: Yeah.
Speaker 1: Absolutely. I mean, do you think the markets are pricing
Speaker 1: in interest rate cuts in the curve of rate cuts
Speaker 1: too aggressively for the rest of the year. What's of you?
Speaker 10: That is very difficult to say at the moment, so
Speaker 10: market surprising around for cuts. There's been very little clarity
Speaker 10: on what happens after June. Some officials have said that
Speaker 10: expectations are about reasonable where they are now. On the
Speaker 10: other hand, the environment is so uncertain that nobody wants
Speaker 10: to really be too concrete about the path for interest
Speaker 10: rates down. The views seem to be diverging quite a
Speaker 10: lot at the moment, and a lot will just depend
Speaker 10: on the data, how it comes in, whether there's going
Speaker 10: to be breaks on the way down, and then how
Speaker 10: things develop in the fall. That's when we're going to
Speaker 10: have more clarity. At the moment, there's really a high
Speaker 10: level of uncertainty.
Speaker 1: Yeah absolutely. I'm in the deposit rate for the ECB
Speaker 1: is at a higher four percent, so yes, the kind
Speaker 1: of clarity on how that comes down is quite uncertain.
Speaker 1: Just talk to us a bit about European services. Could
Speaker 1: this be a cause for inflation perhaps to remain sticky,
Speaker 1: is that the main worry that we've seen in terms
Speaker 1: of the inflation rate for the twenty area Eurozone.
Speaker 10: Yeah, service is absolutely key at the moment because it's
Speaker 10: solabor intensive, and that means wages are play playing a
Speaker 10: much bigger role than in other sectors of the economy.
Speaker 10: And the labor market is still very tight, especially in
Speaker 10: light of the economic weakness that we've seen. Even been
Speaker 10: a recession in Germany in or likelihood, but still the
Speaker 10: labor market has held up very well. And if an
Speaker 10: economic rebound really materializes now in the coming quarters, that
Speaker 10: means the labor market is pro not going to soften
Speaker 10: any further. So wages are really where it's at. Demands
Speaker 10: from labor unions are still very elevated, and we have
Speaker 10: to see whether they can realize these demands, what companies
Speaker 10: are saying, whether they give in and services are really
Speaker 10: the key.
Speaker 1: Yeah, absolutely, Alisond, How does you compare globally then, I
Speaker 1: mean e's Europe is actually approaching the two percent inflation target.
Speaker 1: It does seem to be that there's been a convergence
Speaker 1: in recent weeks around the view of the in the
Speaker 1: Bank of England, the ECB all cutting interest rates around
Speaker 1: the same time in June. Is that what you're seeing
Speaker 1: in the data? How likely is that to remain in place,
Speaker 1: that idea of convergence.
Speaker 10: Yeah, it does seem like that at the moment. There
Speaker 10: was for a while there was the worry that, especially
Speaker 10: in the US where the economy is just stronger, that
Speaker 10: the FED may not be able to cut as soon.
Speaker 10: And then the question is always what does that mean
Speaker 10: for the ECB. Does the ECB dare to go first
Speaker 10: or do they want to avoid that kind of divergence,
Speaker 10: which of course has some impact on the exchange rate
Speaker 10: and so on. But at the moment it does seem
Speaker 10: also when you listen to what Fed officials are saying
Speaker 10: Jerom Powell still guiding for a cut this year, then
Speaker 10: it does seem like convergence is still the most likely scenario.
Speaker 1: That was Alexander Webber, Bloomberg's ECB reported, they're speaking to
Speaker 1: me around the inflation to expecting from Europe and what
Speaker 1: it might mean for the eacy beat. My thanks to
Speaker 1: him for joining me. I'm Caroline Hepge here in London.
Speaker 1: You can catch us every weekday morning for Blueberg Daybreak Europe,
Speaker 1: beginning at six am in London. That's one am on
Speaker 1: Wall Street.
Speaker 2: Tom Well, thank you, Caroline, and coming up on Bloomberg
Speaker 2: day Break weekend to look at the social media app TikTok.
Speaker 2: Will the app be allowed to stay in the US
Speaker 2: or get banned? I'm Tom Busby and this is Bloomberg.
Speaker 2: I'm Tom Busby in New York with your global look
Speaker 2: ahead at the top stories for investors in the coming week.
Speaker 2: After passing in the House, the US Senate now working
Speaker 2: on a bill that would force TikTok's Chinese parent company
Speaker 2: to either sell the app or be banned in the
Speaker 2: US on national security concerns. For more, let's get to
Speaker 2: Bloomberg day Break Asia co host Doug Krisner Tom.
Speaker 11: The Senate will return from recess in a week. Before
Speaker 11: the break, the chair of the Commerce Committee, Maria Cantwell,
Speaker 11: said she's considering a public hearing on the TikTok bill.
Speaker 11: You may know that it passed the House back in March,
Speaker 11: and the President has said he's willing to sign it.
Speaker 11: For a closer look at what maybe next. I'm joined
Speaker 11: in the San Francisco studio by Bloomberg's Asia Counts. She
Speaker 11: covers social media. She's also a member of the Technology
Speaker 11: America's West Team. Thanks for stopping by. I'm glad we
Speaker 11: could do this. One of the things that I've read
Speaker 11: is that this bill has already run into several roadblocks
Speaker 11: in the Senate, and it doesn't seem as though there
Speaker 11: is a great deal of consensus on how to approach
Speaker 11: whatever issues are at stake here. Is there any agreement
Speaker 11: though that you're aware of? Is their commonality?
Speaker 12: I think that Congress can agree that there needs to
Speaker 12: be some sort of data privacy legislation. Again, like you said,
Speaker 12: they disagree on what exactly that would look like. But
Speaker 12: we've really seen Congress come together around this TikTok stuff
Speaker 12: and mobilize a way that they haven't been able to
Speaker 12: do for a host of other issues.
Speaker 11: One of the arguments against an outright ban has to
Speaker 11: do with the violation of the First Amendment. Are you
Speaker 11: hearing that that has any kind of traction as a
Speaker 11: rebuttal to this move to ban TikTok?
Speaker 12: I mean, it seems like all the rebuttals that may
Speaker 12: have come and TikTok has used an argument themselves haven't
Speaker 12: really seemed to gain ground, but that is one that
Speaker 12: TikTok has used, that these users, these one hundred and
Speaker 12: seventy million Americans, should have the right to be able
Speaker 12: to share their voices and their stories and to hear
Speaker 12: other people's voices and stories as well.
Speaker 11: One of the fascinating things about this story is the
Speaker 11: way in which TikTok was able to rally the users
Speaker 11: together to turn them into effectively lobbyists reaching out to
Speaker 11: members of Congress pushing back on this legislation, and in
Speaker 11: a weird way, it feels as though they made the
Speaker 11: point themselves, showing illustrating the extent to which this platform
Speaker 11: is so prevalent and has so much influence.
Speaker 7: I agree.
Speaker 12: I think in some ways that actually backfired on TikTok
Speaker 12: because of that exact reason. You were able to see
Speaker 12: them influence and sort of mobilize one hundred and seventy
Speaker 12: million people, and that was sort of an example of
Speaker 12: how the app could be used. You imagine it being
Speaker 12: used in a more malicious way of how the app
Speaker 12: could be weabinized.
Speaker 11: This is not the first time, as we know that
Speaker 11: the move has taken place in Washington to try to
Speaker 11: ban this app. During the Trump administration, it seemed like
Speaker 11: the administration got pretty close. And one of the things
Speaker 11: that ended up happening was the firm Oracle Corporation, was
Speaker 11: given the ability to house a lot of the data
Speaker 11: on service here in the United States as a way
Speaker 11: of addressing the concern about this level of national security
Speaker 11: and potential breach of that type of sensitive information. That
Speaker 11: doesn't seem to have gone far enough. But what do
Speaker 11: we know about what Oracle is doing to try to
Speaker 11: keep a hand or a handle on this data in
Speaker 11: a safe way.
Speaker 12: Yeah, it's really interesting because the concern was that the
Speaker 12: Chinese government at any time could compel TikTok to release
Speaker 12: national security related data so that they could release data
Speaker 12: on American users. And so the solution was what you're
Speaker 12: talking about, which is Project Texas, where Orco is storing
Speaker 12: all the data of American users on American soil. How
Speaker 12: effective that is it's hard to tell. I think the
Speaker 12: arguments about Project Texas really insulating TikTok from China have
Speaker 12: not convinced Congress. They still have felt like Chinese employees
Speaker 12: at by dance or the Chinese government can have access,
Speaker 12: so it hasn't really moved the needle from their perspective,
Speaker 12: but it's gone further than most tech companies.
Speaker 11: When you look at the pushback. One of the things
Speaker 11: I think was very interesting, and Vice president Kamala Harris
Speaker 11: made this point very recently about the degree to which
Speaker 11: this platform is responsible for supporting small businesses. There are
Speaker 11: a number of users of TikTok that have really grown
Speaker 11: businesses by virtue of this app, and there's a real,
Speaker 11: I guess, a case to be made that you don't
Speaker 11: want to stifle that type of innovation, right. I mean
Speaker 11: that in and of itself doesn't like seem to be
Speaker 11: a very strong case, and I think it's something that
Speaker 11: people will consider, particularly in the context of this public hering.
Speaker 12: Right, it's a real consequence of the app going away.
Speaker 12: I think about retail or beauty. There are all kinds
Speaker 12: of products that go viral on TikTok, and then you
Speaker 12: can sustain a small business off of that. So I
Speaker 12: think it's a very real argument to be made. Again,
Speaker 12: I'm not sure how much the way that argument will have,
Speaker 12: but it is real. And aside from that, there are thousands,
Speaker 12: if not millions of creators, individual people that are creating
Speaker 12: content and able to make a living off of it.
Speaker 12: I've talked to some of them myself.
Speaker 11: When you consider the fact that the algorithm is really,
Speaker 11: you know, the golden key here. Okay, it's one thing
Speaker 11: to talk about housing data, it's another thing about really
Speaker 11: gaining access to this algorithm. It's been so effective at
Speaker 11: helping to drive users into the content that they would
Speaker 11: be most interested in. There's probably not a way where
Speaker 11: Beijing would allow something like that to fall in American hands?
Speaker 11: Am I right? Or I'm wrong?
Speaker 12: I mean, I wouldn't want to allow that, right. I
Speaker 12: mean the explosive growth of TikTok is because of the algorithm.
Speaker 12: You go on and it kind of knows you better
Speaker 12: than you know yourself in some ways, and you finds
Speaker 12: out your interests and it's incredibly effective at that. So
Speaker 12: I would not want that to fall into someone else's hands.
Speaker 11: It's important to remember too, that this is not the
Speaker 11: first move to ban TikTok in a country. India two
Speaker 11: years ago was very successful. They moved very quickly, and
Speaker 11: it wasn't just TikTok that was banned. I think fifty
Speaker 11: eight different apps created by Chinese firms were also banned
Speaker 11: from the India market. That said, at that point, TikTok
Speaker 11: really hadn't developed that much traction in India to become
Speaker 11: a threat to Bye Dance. Totally different story in the US, right.
Speaker 12: Yeah, absolutely. I mean all these tech companies sort of
Speaker 12: behind the scenes have been lobbying for TikTok to be
Speaker 12: banned because it would benefit them. You think about Facebook, Instagram, Snapchat, YouTube,
Speaker 12: they all benefit if TikTok gets banned. And then there
Speaker 12: is this sort of tension of like Facebook is banned
Speaker 12: in China and it's been banned for almost a decade,
Speaker 12: so you kind of see this back and forth between
Speaker 12: different countries.
Speaker 11: Asha, thank you so much for making time to chat
Speaker 11: with us at Bloomberg. Say Asia counts should covers social
Speaker 11: media and as a member of the Technology America's team. Now,
Speaker 11: let's pivot to China. We moved to Hong Kong next
Speaker 11: and co host Brian Curtis.
Speaker 3: Doug China's PMIS may show further improvement in one key
Speaker 3: area of the economy. We'll get the numbers for March
Speaker 3: in the coming week. The official PMI is projected to
Speaker 3: come in at fifty point one, back in expansion after
Speaker 3: last month's reading of forty nine point one, but clearly
Speaker 3: more work is needed to get the Chinese economy buzzing.
Speaker 3: Some investors had worried that China might be poised to
Speaker 3: allow the Chinese currency to weaken to add support, but
Speaker 3: then traders were confused by some back and forth movements
Speaker 3: in the pboc's reference rate fixes. Joining us now for
Speaker 3: some clarity on this is Tanya Chen, a specialist on
Speaker 3: FX and rates for Bloomberg News. So Tanya, policymakers first
Speaker 3: triggered a yuan selloff partially by weakening that rate, before
Speaker 3: then causing a rebound via some stronger settings in the
Speaker 3: next couple of days.
Speaker 13: What do we know the yuon fix, which obviously is
Speaker 13: the clearest signal that the PBOC can send in terms
Speaker 13: of what it's trying to signal around the currency. The
Speaker 13: rebuttal last week showed that perhaps the initial tolerance for
Speaker 13: letting the currency slightly weaken in the yuon fix, Perhaps
Speaker 13: equity markets reaction was not what they had hoped for,
Speaker 13: and so some investors are actually saying the sentiment actually
Speaker 13: hasn't stabilized around the currency, and the PBOC was perceived
Speaker 13: by the investment community that perhaps the PBOC was allowing
Speaker 13: the currency to decline ahead of the FED which is
Speaker 13: expected to ease later this year, and that was seen
Speaker 13: as a positive. However, due to how the markets sold
Speaker 13: off on that, the PBOC quickly reined it back in
Speaker 13: the days following by issuing much stronger fixes, and from
Speaker 13: that we saw kind of the currency strengthen. But then
Speaker 13: and also state banks coming back into the market and
Speaker 13: trying to defend the currency. Or around this seven point
Speaker 13: two line.
Speaker 3: Do we have a general sense that the PBOC wants
Speaker 3: to loosen their grip a bit on the currency or
Speaker 3: just the reverse.
Speaker 13: I think there's a couple of factors that the PBC
Speaker 13: needs to consider. Obviously, the general sentiment around the economy
Speaker 13: right now is fairly gloomy given what we've seen around
Speaker 13: the macroeconomic data.
Speaker 7: Yes, we've seen a few green shoots appearing.
Speaker 13: However, the PBOC is trying to manage a very stable
Speaker 13: currency depreciation around the currency, but also around.
Speaker 7: Its main trading partners.
Speaker 13: And actually, if you were to look kind of across
Speaker 13: the sea where the Japanese yen is trading. You know
Speaker 13: that it's also fairly weak, even after the Bank of
Speaker 13: Japan had hiked rates earlier this month, and so there's
Speaker 13: a couple of factors that the PBC needs to take
Speaker 13: into account. And obviously the widening yield interest rate differential
Speaker 13: between the yuan and also the US rates is one
Speaker 13: to consider. Considering that the pboc's economy is so on
Speaker 13: the back foot that most of the market is expecting
Speaker 13: the central bank to either lower interest rates later this
Speaker 13: year or to at least loosen the economy some more.
Speaker 3: Is there any sort of line in the sand for
Speaker 3: authorities on the one so.
Speaker 13: After the PBOC came back and rained the currency by
Speaker 13: setting stronger fixes last week, the currency was trading roughly
Speaker 13: weaker than seven point two, which was a line that
Speaker 13: they had actually fixed and maintained for the last six
Speaker 13: months or so. By allowing the currency to tread slightly
Speaker 13: weaker than seven point two shows that perhaps there is
Speaker 13: some slight signal that they're allowing the currency to marginally depreciate.
Speaker 13: We know that the last major cap that the PBOC
Speaker 13: had enforced with seven point three, and that was a
Speaker 13: line that they held most of late last year and
Speaker 13: also last summer when you saw that the reference rate
Speaker 13: with from Estimus was over thirteen hundred pips, and that
Speaker 13: was quite a strong signal to the market that they
Speaker 13: were enforcing a specific line. However, if you take another
Speaker 13: step back and you look at just what the implied
Speaker 13: volatility markets are telling you about the general sentiment towards
Speaker 13: the currency right now, you're seeing that volatility is actually
Speaker 13: not as elevated as what we have seen when the
Speaker 13: currency was weakening around seven point three, nor is it
Speaker 13: as high as it was during the trade war in
Speaker 13: twenty eighteen or when it was devalued at twenty fifteen.
Speaker 7: So taking all of this and taking this.
Speaker 13: Step back, actually the kind of bearishness around the currency
Speaker 13: is still slightly maintained.
Speaker 3: What's odd about this is that it seems like the
Speaker 3: PBOC is fixing is meant to be and has been
Speaker 3: one of the more transparent parts of China's currency regime,
Speaker 3: and now a lot of that seems to be a
Speaker 3: little bit up in the air.
Speaker 13: That's right, and I think that's also indicative of how
Speaker 13: they've been issuing monetary.
Speaker 7: Policy as of late as well.
Speaker 13: So we had seen officials coming ahead of certain announcements
Speaker 13: such as cutting the reserve requirement ratio. The way that
Speaker 13: they're managing communication around the currency could potentially track with
Speaker 13: how they're also managing the monetary policy in that they're
Speaker 13: potentially trying to catch traders off guard, and that might
Speaker 13: be a more effective way of getting what they need
Speaker 13: to be done in the market.
Speaker 3: Tanya, thanks so much for joining us. Tanya Chen a
Speaker 3: specialist on FX and rates for Bloomberg News. I'm Brian
Speaker 3: Curtis in Hong Kong along with Doug Krisner. You can
Speaker 3: catch us every weekday here for Bloomberg Daybreak Asia, beginning
Speaker 3: at eight am in Hong Kong and eight pm on
Speaker 3: Wall Street.
Speaker 2: Tom thank you, Brian. That does it for this edition
Speaker 2: of Bloomberg day Break Weekend. Join us again Monday morning
Speaker 2: at five am Wall Street time for the latest on
Speaker 2: markets overseas and the news you need to start your day.
Speaker 2: I'm Tom Busby. Stay with us. Top stories and global
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