Daybreak Weekend: Fed Meeting, ECB Decision, RBA Preview
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This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our daybreak anchors all around the world. And straight ahead on the program, we look ahead to this week's monetary policy decision from the Fed, plus a first batch of big tech earnings. I'm Tom Busby in New York. I'm Caroline Hepka here in London, where we're asking how the European Central Bank will negotiate the new world order. I'm Doug Prisner, looking at what we can expect from next week's print on CPI in Australia.

That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C., Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on BloombergRadio.com and the Bloomberg Business App. ♪

Good day to you. I'm Tom Busby and we begin today's program with the Federal Reserve. The Fed concluding its two-day meeting on Wednesday, expected to issue its first monetary policy decision of the new year. For more on what we might expect to see and why, we're joined by Michael McKee, Bloomberg International Economics and Policy Correspondent. Well, Michael, after cutting rates for three meetings in a row, what do you expect to see this week from the Fed?

Not much. The Fed is going to be on hold. They've pretty much made that clear. The markets have right now priced in a one basis point chance of any kind of Fed move. So nobody's expecting a whole lot. It's more going to be the focus on Jay Powell and his press conference afterwards and what he might say about future Fed moves.

All of this in the context of the new president and what his economic plans are going to be, since they don't know yet. And, you know, we're kind of a week into this and we haven't heard yet what he's going to do with tariffs and things. At this point, the Fed's on hold until there's some more news. Well, let's talk about what the Fed is dealing with as far as data.

The U.S. labor market remains strong. December job creation better than forecast. Unemployment rate low. Wages outpacing inflation. Long-term unemployment, though, that was a surprise. Had a three-year high this week, though, right? Yeah. It's not a total surprise in that what we have seen lately is –

Companies are not hiring. They're not really firing. The total number of people who are filing initial jobless claims is still very low. It's sort of bounced around because of the holidays and seasonal adjustment factors, and now we have a little bit of input of people who've lost their jobs in the Los Angeles fires.

But in general, people are not hiring. So if you do lose your job, it takes a little bit longer now to find a job. The number of continuing claims rising up to close to two million. But that's not telling us that the economy is in trouble at all. The labor market still feels strong. Of course, the Fed's going to be watching every jobs report very closely. And inflation has been well behaved, if not coming down.

Yeah, let's talk about inflation. So CPI in December, 2.9% year over year. PCE, 2.8%. So not bad, not great, still a little far from the target, but as you say, steady. Treading water, basically, is kind of where we are. And the issue for the Fed is they look at PCE, which runs maybe three or four basis points below where CPI does.

And so we're looking at 2.4% for PCE. End of this week, we're going to get the PCE report for the month of December. And betting is it's going to be restrained.

But CPI is what Americans look at and makes it into the newspapers and things like that. And that has an effect on inflation expectations. And we did see in the most recent University of Michigan reports that people were expecting at least over a quarter.

longer time horizon inflation to rise. And if that's the case, then the Fed is going to be keeping a close eye on that because they worry that if inflation expectations keep going up, then people are going to go back and ask their bosses for raises and you get into the circular situation that they've been trying hard to avoid for years. It doesn't look like we're really going to have that happen, but it's something to keep an eye on.

So we kind of know what we're dealing with on inflation. We see the results of the labor market, housing very uneven, but still struggling. The wild card here, as you alluded to before, is President Trump, his new policies, and

how it affects the economy, how it will affect the Fed's decisions. So let's talk about that. Last time he was in the White House, he appointed Jerome Powell to chair the Fed. But when the central bank made some pretty difficult decisions, he did not agree with. I'm being kind here. He was unrelenting in his criticism, demanding to be consulted on rates and on policy. Is anything going to change other than, you know, as you said,

immigration, his raids that took place last week. Well, we're not expecting any major change in the president's attitude towards the Federal Reserve.

I don't want to speak for him because he certainly speaks enough. But he did insult Powell and the Fed last time because they weren't cutting interest rates and weren't cutting interest rates as fast as he wanted. And so one can imagine that he's not going to be happy that the Fed is on hold. Now, I think there are enough areas in which he's stuck his fingers through.

immediately after taking the oath of office that he may not be too focused on this week's Fed meeting. But if the Fed stays on hold for a while because they think some of his policies are going to be inflationary, then I would imagine we will hear from him on that.

A decision from the Federal Reserve this Wednesday about 2 p.m. Wall Street time. Our thanks to Michael McKee, Bloomberg International Economics and Policy Correspondent. We now turn to the current Q4 earnings season as Wall Street prepares to get its first batch of big tech results this week from Apple, Microsoft, and MetaPlatforms. And for more on what to expect, we're joined by Mandeep Singh, Bloomberg Intelligence Senior Tech Industry Analyst.

The big question is artificial intelligence still the big driver for big tech and for each of those companies? What do you expect to see this week? Yeah, look, I think 4Q is typically a seasonally strong quarter for Max 7 companies. And I expect this time it will be no different. Although, you know, what we saw with President Trump's inauguration and the Project Stargate, which really impacts the AI spend,

I mean, look, you know, once the government is behind something like this in a big way and it's bringing in new dollars, which is the case here, you know, the $100 billion investment. A lot of dollars. And just to put it in context, you know, the total CapEx spending in 2024 from the four big hyperscalers was around $240 billion. And that was like a 56% growth. So clearly, you know, that momentum should

be intact if we get these additional $100 billion in 2025, which I think was the aim of this discussion. So look, I mean, when I look at the earnings,

Meta is expected to grow earnings close to 30%. Alphabet also over 25%. And these are, you know, off a very strong comp. So Microsoft's earnings growth will be somewhat slower because their depreciation expenses are going up now. And we know Apple has been struggling, you know, with the China exposure and their top line remains muted. So Apple has continued to

kind of struggle when it comes to really driving that top line. But again, everyone is waiting for that big smartphone refresh cycle with this AI wave. Well, that's coming in. Well, that brings us to Apple then. So Apple,

Beaten to the punch, it looks like this year from Samsung with an ultra-thin phone. They really think ultra-thin is going to boost sales, right? Well, so more than the phone factor, to me, what's really important here is the impact of tariffs and what goes on, you know, with the China exposure. Because

Apple's supply chain is still predominantly in China. And even though they have moved some of their manufacturing and assembly to India and other locations,

If there is, you know, universal tariffs and that's the proposal, right, with China and Canada and Mexico, that will impact Apple. And, you know, anybody who gets parts or products, product components there. So clearly that is a big risk with Apple. And given its muted top line growth and the other factor I would throw in there is the whole Google Chrome decision. Because one of the remedies that Google has proposed is

is there shouldn't be any contracts, you know, in terms of them being the default operating system on iOS devices. And remember, Google pays Apple over $20 billion a year to be the default operating system. So all that revenue is in play here in terms of how it could impact Apple services revenue for that matter.

well let's talk about microsoft yeah you brought that up with uh the stargate open ai microsoft has invested about 750 million into ai they've pulled back since then but who else are are the winners we know oracle we know japan softbank open ai is privately held company but

Who else among these big tech companies will be the beneficiary of this? I mean, to me, you know, the suppliers, the Nvidia and anybody who supplies to the data center kind of build out.

wins here. And that's where, you know, for foundational model companies, it actually increases the pressure on a Google or a Meta or Anthropic to increase their CapEx because guess what? OpenAI has more compute available now for training their large-anglet models, for inferencing. So that kind

kind of creates an advantage for OpenAI Microsoft. Microsoft has already told us they generate about 10 billion in cloud revenue from AI workloads. So if they have more compute capacity through Oracle, and remember, part of that OpenAI revenue

flows through Microsoft because of the agreement they have. And so Microsoft clearly is a beneficiary, even though this is not being built on their cloud, it's on Oracle Cloud. So I think that's where all the other players on the LLM and cloud side are somewhat excluded here. And at least the project's target seems to have picked the companies that are involved and they are the direct beneficiaries.

Would you consider Meta being excluded here? Absolutely. I mean, there was no mention of Meta. No mention at all. We've heard of, you know, NVIDIA, obviously a beneficiary, but...

but yeah, have not heard for a company that big. And Meta, look, it's trying to develop its own hardware. They're doubling down when it comes to the AR glasses. The Ray-Ban glasses has been a success, but they really are going all in when it comes to developing their own hardware to compete with Apple.

Now, we know Reality Labs will end up losing about $20 billion in 2025. So whether it's going to be accretive to EPS, time will tell, but not in the near term. And that's, I think, something they have to be mindful of, given they're investing more in CapEx.

for the GPU compute, and now they are really doubling down in terms of the glasses hardware. They'd have to sell a lot of smartwatches and earbuds coming up. Well, our thanks to Mandeep Singh, Bloomberg Intelligence Senior Tech Industry Analyst. And coming up on Bloomberg Daybreak Weekend, we'll look at how the European Central Bank will negotiate the new world order. I'm Tom Busby, and this is Bloomberg. ♪upbeat music playing♪

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The world is built on code. From the apps we use every day to the systems powering industries, developers like you are the architects of tomorrow. But let's be real. The road to innovation can get a little tricky. You need the right tools to move fast, but you also need a community to help you go further. That's where Microsoft comes in. Microsoft has the tools to help you move at lightning speed, like GitHub Copilot, VS Code, and a ton of AI resources to keep you on the cutting edge.

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This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. Up later in our program, we'll look ahead to a key inflation measure coming out of Australia. But first, Europe's policymakers meet for the first time this year. In the coming days, they're expected to cut interest rates again as inflation stabilizes right around the 2% target. For more, let's go to London and bring in Bloomberg Daybreak Europe anchor Caroline Hepker.

Tom, EU inflation is on track to hit its 2% target in the coming months, clearing the way for cuts to borrowing costs and building on the four rate reductions we saw in 2024. But with a new occupant in the White House and threats of punitive tariffs swirling, 2025's European Central Bank trajectory is far from decided. The bank's president, Christine Lagarde, has made it clear that

policymakers will continue along their gradual path irrespective of US economic policy. Officials from across the hawk-dove spectrum have signalled openness to further moves after January in Europe, although of course without pre-committing to any cuts.

Interest rates have been a hot topic at this year's meeting of the World Economic Forum in Davos, where Bloomberg's Germana Bissetti has been speaking to a panel of experts about their predictions for central bank policy in 2025. She discussed what is to come with the French central bank's

Bank Governor François-Villereux de Gallo, State Street CEO Ron O'Hanley, the economics professor Isabella Weber from the University of Massachusetts Amherst, and Nikolai Tangen, who is the CEO of Norhers Bank Investment Management. Some words about inflation, and I will keep the European perspective. But we have been collectively, including the Fed, successful against inflation. And if I take the European figures, we were at a peak of more than 10%.

October 22, we are now at 2.4 and we expect for this year as an average 2.1, so more or less on target. For the effects of the Trump administration, it's probably too early to tell. We could expect, but I say it very cautiously, this program to have inflationary effects in the U.S. due to tariffs, fiscal expansions, etc., but to be seen.

On the European side, I don't think that the inflationary effects will be that significant. So I would expect this disinflation process to go on and our victory against inflation to be final, if I may, because the tensions on the labour and goods markets in Europe are much poorer, obviously. Which means

If I may, some words about short-term rates and long-term rates and using the very important difference you introduced. On the short-term rate, this is about monetary policy. So this is our responsibility. For the ECB, we were the earliest one to cut last June. We are now the lowest one. We are at 3% while the Fed and the Bank of England are above 4%.

And I would say that for the quarters to come, probably our task is the simplest also, due to the fact that we are vigilant but confident on this inflation, as I said, and we are still quite far of the neutral rate, which is probably estimated to be around 2%. So, seen from today, but it will be data to even, to expect

our policy rate to be around 2% by next summer is a plausible scenario, which could mean a decoupling, let us be clear, between ECB and Fed. The decoupling is not an issue. Both of us are independent on both sides of the Atlantic.

It's a question of long-term interest rates. So, when you say next summer, the news person in me is asking, you mean summer of 2025 or summer of 2026? The market is pricing at 100%, 2% by December 2026. Sorry for my English ambiguity because I'm...

This summer, 25. So 100 basis points cut by mid-summer. We will see. Again, it's data driven. It's just more impressive than what the market is pricing in. You are a journalist, I am a central banker. But on long-term interest rates, this is a different story. Here there are speedovers, obviously. There is also a very significant difference of levels.

If you look at the 10-year interest rates, it was yesterday about 2.5 in Germany and 4.6 in the US. But there is some kind of cool movement or cool rise in the last month. It's a partial cool rise, but what explains this rise in the US? Perhaps a technical explanation which is important. As you know, when you look at long-term interest rates, you can have two explanations. You can have monetary policy expectations.

So the succession of short-term interest rates forwarded. And then you have the term premiere. What increased in the last four months is the term premiere. And this reflects increased uncertainty. It's about inflation fears. It's about two lakhs fiscal policy, starting with the US. And it's about global uncertainty.

To say it with other words, and I will conclude with that, but this is a very important point on the direction of interest rate. There is a risk that the benefits of disinflation and monetary easing is weighted or lost by increased uncertainty, economic fragmentation and a too lax fiscal policy. Or to say it in other words,

An economic policy, in order to be efficient, including for growth, must be consistent. And this is a very important lesson for both sides of the Atlantic. That was Bloomberg's Germano Bessecci hosting a panel entitled Where Interest Rates Will Go at this year's meeting of the World Economic Forum in Davos.

So how will the shift in international relations shake up the ECB's plans? I've been speaking to Bloomberg's ECB reporter Jana Randau, asking her how much of a factor Trumponomics will be in ECB policymaking going forwards. Well, frankly, it depends entirely on how it actually affects the Eurozone economy.

We've learned already that election campaigning isn't governing and isn't running a government. So we'll see how much of the threats that he's made over the past months, you know, running for office, how much of that will actually materialize on tariffs. We know the sentiment seems to be bad for growth.

unclear what it will do to inflation. So there's a lot of uncertainty and that is surely going to stick around, which of course is never good for an economy that's already struggling.

which makes the ECB stands for a data-dependent, meeting-by-meeting approach, all the more reasonable. Yes, absolutely. President Trump saying only recently that the EU could be in for tariffs given how badly, as he sees it, it treats the United States. So in terms of the punitive measures, what do economists think that it risks in terms of the hit to growth versus a hit to inflation?

Yeah, so on growth, it seems pretty clear that the impact will be negative.

What's more interesting is to look at inflation just because there are different forces at play. Of course, you raise tariffs, they will push up prices and goods we import from the US. But the EU, of course, is not the only region facing those threats and facing tariffs. So if China, for example, becomes part of the...

part of the game, then we might see a redirection of Chinese exports that were once going to the U.S., flooding into Europe. And we, of course, know that China is already facing deflationary risks that producer prices there have increased.

have declined and have been weak. So that might actually bring some deflationary pressures into the Eurozone as well. So the balance is going to be interesting. And from where I am and from where policymakers are at the moment, it's next to impossible to tell. Yes.

But traders are pricing in cuts for January and March. How solid are those and what's the picture beyond those meetings? Yeah, January, March, from what we've heard over the past couple of days, seem to be almost a done deal. Even hogs like Dutch governor Klaas Knoot said,

said he's fine with those two meetings being on the table for rate cuts. After that it gets a lot more interesting just because we're expecting for services to reprice. Don't forget services prices are still running at a 4% clip, so twice the ECB's target.

We should have more information by March or by April about Trump's policies. We should be a bit smarter on how much of a spring revival the economy is.

can produce. And so what we're seeing in markets and also when you speak to some economists that April is kind of a bit of a wild card. So the market is currently pricing three cuts through June 4th by the end of the year. And a lot will depend on the forecast that will come out and on the information that we receive until then.

How well has the ECB done? How well has Europe done to get inflation back down towards the 2% target? You mentioned services inflation. So on the headline rate, we're not doing badly. We are at

at 2.4% right now. It was a bit of an uptick at the end of last year, but that came as expected and policymakers said don't be upset about that too much. The ECB forecasts show inflation reaching target this year and then kind of hovering around it. So they are reasonably confident that the target is in sight. They haven't declared victory yet and that's partly to do with those services prices with domestic inflation, with core inflation, which

is still a bit sticky. They expect that to change over the coming months just because, for example, if you think of insurance prices, they get, you know, contracts get repriced once a year. So a lot of movement is expected there in the next weeks and probably months.

But that really needs to happen. And if that doesn't happen, and that's why we talk about April, that will be the moment when we know whether those expectations that the last bastion, if you want, of really sticky price pressures is falling, whether that is happening. And then they might have to, if that doesn't, then they might have to think again.

Bloomberg's Jana Randau looking ahead to the ECB rate decision, which we expect, of course, on the 30th of January. We will have full coverage of the first rate decision of this year here on Bloomberg. I'm Caroline Hepker in London. You can catch us every weekday morning for Bloomberg Daybreak Europe, beginning at 6 a.m. in London. That's 1 a.m. on Wall Street. Tom. Thanks, Caroline. And coming up on Bloomberg Daybreak Weekend, we'll look ahead to next week's read.

on Australian consumer prices. I'm Tom Busby and this is Bloomberg. With Amex Business Platinum, your dental clinic can really sparkle. With a flexible spending limit that adapts with your business, that's the powerful backing of American Express. Not all purchases will be approved. Terms apply. Learn more at americanexpress.com slash amexbusiness.

The world is built on code. From the apps we use every day to the systems powering industries, developers like you are the architects of tomorrow. But let's be real. The road to innovation can get a little tricky. You need the right tools to move fast, but you also need a community to help you go further. That's where Microsoft comes in. Microsoft has the tools to help you move at lightning speed, like GitHub Copilot, VS Code, and a ton of AI resources to keep you on the cutting edge.

But here's the best part. You can build with confidence, knowing that Microsoft security and compliance are already taken care of. No more worrying about vulnerabilities or threats while you focus on your craft.

And with Azure AI Foundry, you can build your way. The future is yours to build, no strings attached. From ready-to-code tools to full flexibility, it's all in one place. The future's in your hands. So learn more at developer.microsoft.com.

This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. The Reserve Bank of Australia doesn't meet until next month, but a key metric on inflation is out this week, and it may sway policymakers in Sydney on how they'll proceed. For more on what to watch from next week's read on Australian consumer prices, let's get to the host of the Daybreak Asia podcast, Doug Krisner.

Tom, a number of the world's central banks are in the midst of easing cycles, although recently many markets have been forced to adjust expectations on the pace of rate cuts. That's because of concern over inflation being stubborn. It's certainly true where the Fed is concerned. Interestingly, the Reserve Bank of Australia has yet to pivot to cutting interest rates. Let's explore why. Joining us now is James McIntyre. He is Bloomberg economist with a focus on Australia and New Zealand.

James joining us from our studios in Sydney. We're expecting the report on Australian consumer prices in the week ahead. We can talk about the various inputs into retail inflation in a moment. But James, can you begin by giving me an overview on the health of the Australian economy?

Yeah, well thank you again for having me. Always great to be with you, Doug. So Australia's economy, as we look forward for 2025, we're looking for a bit of a shift from how things have gone in 2024. So the economy has been quite weak. Now, you might not see that sometimes with Australia's GDP data and many Australian economic indicators, and that's because we have this super strong population growth.

So the population grew by about 2.4%, but GDP was only 0.8%. So per person, the economy is going backwards. It's a really bad outcome in terms of weakness for the economy. And you can see it especially around the consumer side of the story. And interest rates are being high for a very, very long time. It's one of the longest holds that the Reserve Bank of Australia has had in the inflation targeting era over the last decade.

30 years or so. And what we've got there is we've got an economy that's been very weak and we're looking for it to pivot.

We're pivoting from public demand, which has been a key driver of growth with the private sector being weak, to consumers stepping up this year. But they're not really going to do that unless the RBA starts to play ball and begins to join the rate cut parade. So when I think of household spending, there is a connection obviously to what's happening in the labor market. How is the Australian jobs market right now? Well, despite growth being so terrible,

The labour market's really surprised on the upside. So we've had bumper jobs growth and the unemployment rate has gone pretty much nowhere over the course of the last 12 months. And we'd been expecting, you know, we had, the RBA had, everyone has been caught on the hop by the strength of jobs growth that's been going on. Now, some of the public demand has

part or flavour of growth in the economy or demand in the economy has been helping that and we look at sort of market sector jobs and it's been weak but nonetheless the labour market has just remained rock solid and that's one of the things that if you're looking at it you might kind of go well is the RBA really going to cut with that backdrop?

As I recall, one of the concerns on the part of the RBA in the past had been the heat in the real estate market. How is the housing market right now? Well, it depends where you sit. If you're in the smaller capitals, people probably won't know the cities of Brisbane, Perth and Adelaide. They're probably more familiar with Sydney and Melbourne being the big Australian capital cities. Those smaller ones, property prices still quite affordable and they've been running and running hard.

but there's been a very different story. It's not even, there's no middle of the Goldilocks. It's hot and cold. It's been quite cold and cooling in Sydney and Melbourne over the last, as we went into the end of the year, with buyers sitting on their hands.

rate cuts hurting capacity to pay and the very, very high mortgage interest rates. In Australia we don't have fixed rates. They're all variable floating rates off the RBA cash rate so it really packs a punch and it's really been punching on those property markets in the big capital cities and we've seen listings begin to rise, weak demand and that's been a recipe for softening prices in those two major capitals which are really important for financial stability, for confidence, for spending

and probably are going to be what the RBA cares about more. I'm also curious about the knock-on effect. What is happening in China? Maybe there is a modest recovery that's beginning to take hold. We may need a little bit more in the way of data before we can make that statement. But I'm trying to understand what's happening in Australia as a function of what's going on in China right now, particularly in regard to things like the mining industry. Yeah.

Yeah. I think one of the key sort of takeaways or linkages or things that we need to think about when we're thinking about Australia and China is that key benchmark is the iron ore price. And it hasn't really fallen away as much.

And what we have seen is that US dollar strength. So there's not just China, but if we think about the international environment, new Trump administration, tariffs, what is the global economic shakeup going to be? Well, Australia already has the type of trade position with the US that the Trump administration might like for others to see. We run a big deficit with the US. We buy far much, much, much more than from the US than we export to the US.

So we're not likely to be a tariff target. Japan, China, these are Australia's major export destinations. So any tariff impacts on those economies that might soften potentially already weak economic outcomes when it comes to China is going to be a key worry for us. So have we seen it in the iron ore price? Not yet.

what policymakers in China and Japan do and how they respond to any global economic shakeout is really going to be one of the key important things to watch over 2025 for Australia. I mentioned a moment ago that in the week ahead, we're going to be getting Australian consumer prices. When you look at the inputs that go into calculating CPI, is there any concern that something may come in a little on the hot side?

Not especially. What we've been seeing in Australia over the CPI basket over the last little while is the impact of some cost of living support measures or subsidies from federal and state governments. And they've really, especially in that third quarter data, Australia has a monthly inflation indicator, but the quarterly is the big deal. It's the main game and that's what we've got next week.

And it's what the RBA will be really looking at. That third quarter data was very, very heavily suppressed from those subsidy impacts. There'll be a little bit of that coming through. We should also see the last of energy price declines coming through in terms of fuel prices at the pump for motorists.

So that's the fourth quarter CPI. When we look ahead, though, it's really going to be a question that the RBA is going to have to ask itself is, is a government and the federal government is facing an election in the first half of this year? Are they going to announce more subsidies in the next couple of months to keep voters happy before they go to the polls? And

and will the pickup that we've seen in domestic fuel prices with a little bit of a lower Aussie dollar and some improvement in that oil price starting to feed through to the pump. These are going to be the kind of questions that not necessarily from what the backward looking data is showing, but as we look forward.

Those are going to be the ones that the RBA is going to be grappling with as to whether they feel comfortable or not beginning to ease in February, or if they want to see a little bit more data and maybe see that labor market weakness finally beginning to show up and deliver those cuts in April or May. Hey, James, thank you so much for helping us understand what's happening in the Australian economy as we look ahead to this week's report on consumer prices.

James McIntyre is Bloomberg economist with a focus on Australia and New Zealand. We move to mainland China next. Donald Trump is wrapping up his first week back at the White House, and we have seen numerous executive actions. He was expected to pursue long-threatened tariffs on day one. Well, not so, although he has floated the idea of 10% tariffs against China possibly going into effect on February 1st.

I spoke with Hua Cheng, director of Asia Credit Research at Alliance Bernstein, and we explored how U.S.-China trade relations may shift and how that may play into markets. Unlike the years of the first Trump term, China is now struggling with a weaker economy, I think it's fair to say. And given very weak domestic demand,

The economy we have seen has become a lot more reliant on exports than it was during the first Trump trade war. Are you concerned about the negative impact that tariffs might have on the overall economy in China? As you rightly pointed out, U.S.-China relation has always been a very important watch point for us.

has always been a very important driver of how investors view this region, right, view Asia. And what we're seeing is that China's economic growth, it is indeed decelerating. But we do want to point out that we really had a policy pivot in September last year that shows that China is really aware of the slowdown and will take more forceful measures to address the slowdown.

And also when it comes to external pressures, right? I think with the new administration in the U.S., what we are going to have is an acceleration of trade tension, i.e. a trade war in the form of higher terrorist pressure.

for the region. So the impact of U.S. tariffs will be greater on China than to other Asian economies. So that is something we're going to be watching very, very closely. But if you simply look at the number, I think China's

China actually successfully reduced the reliance on U.S. export over the past year, over the past years, at least, you know, from Trump 1.0. That is very true. But if you go back to what we learned last week, GDP for all of 2024 was 5%. But what was really striking about economic growth in China at the end of last year during the fourth quarter, I think the number was 5.4% growth.

So clearly, many companies were concerned about how tariffs might impact their business and they were trying to get product out of China sooner rather than later. Do you expect economic growth to hold up now that basically that event has subsided? We think it's very important to engage with the companies to understand what they are doing in order to assess the impact.

First of all, you know, I think given the fundamental headwinds to China economy, to Chinese corporates, we don't want to be too pessimistic, right? I think it's important for us to have a very balanced view. As you said, you know, the economic growth, it is slowing down. And, you know, higher U.S. tariff, it is the fundamental headwind. But a very important point we want to make, we want the audience to know is, you know, higher U.S. tariff does not

really necessarily translate into the worsening of corporate credit fundamentals. Because if you look at most of the Asian corporates, most of the Chinese corporates we look at, a very important point I want to make is that they are more driven by domestic demand, right? Or they have very little reliance on U.S. for supply. What are your expectations for additional stimulus from the government in the year ahead?

That's a very good question. I guess the good news we have so far is that we really had a policy pivot in September last year. It gives a lot of comfort to investors that shows that China is really acknowledging that the economy is slowing down, so we have to do something about it.

But what we hope to see more is, you know, more monetary policy support and more fiscal policy support, more importantly. So these are really needed to support the economy, to stabilize the economy. Hua, thank you very much for joining us. That is Hua Chung, Director of Asia Credit Research at Alliance Bernstein, joining us from Hong Kong. I'm Doug Krisner. You can catch us weekdays for the Daybreak Asia podcast.

It's available wherever you get your podcast. Tom? Thanks, Doug. And that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at 5 a.m. Wall Street time for the latest on markets overseas and the news you need to start your day. I'm Tom Busby. Stay with us. Top stories and global business headlines are coming up right now.

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