Daybreak Weekend: US Inflation, Lagarde Address, China Eco Outlook
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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. Straight ahead on the program, a look ahead to some key inflation data in the U.S., how that may impact Fed policy. I'm Tom Busby in New York. I'm Caroline Hepka in London, where we're considering the role of the ECB in a changing Europe. I'm Doug Krisner looking at the outlook for China's economy with those new U.S. tariffs in effect.

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 some key inflation data out this week here in the U.S. CPI data for February on Wednesday, PPI for that same month on Thursday. And for more and much more, we're joined by Bloomberg's Edward Harrison, editor of the Everything Risk newsletter.

Well, Edward, inflation, the problem that won't seem to go away with all the uncertainty caused by President Trump, those on-again, off-again tariffs and policy changes. What do you expect to see in these two reports? The first inflation reports of the new Trump administration.

Hey, Tom, good to talk to you. In terms of what I'm expecting, I know the market is expecting 2.9% to be the headline number year over year. It was 3% in the prior month. That's in January. These are the February numbers.

to the degree that we get a two handle on the number, the first number being two, which is the Fed's target 2%, that's good. But any upside surprises will leave us at 3% inflation or more. And we know that the CPI is going to be followed, as you were saying, by the PPI, where the expectation is actually 3%, 3.3%. Well, that's good news. And that's looking back.

Looking ahead, do you see anything being done right now by the White House to drive consumer prices lower? Or could we be seeing, you know, more trouble ahead? There's nothing that I see in terms of the actual policy on...

tariffs that is helpful for inflation. However, I would say that a lot of what we've seen in terms of the overall policy mix is dampening growth. And to the degree that dampening growth means that there's less demand, that could actually mean that prices fall. So you talked about the jobs numbers that we saw last week. Those were pretty

bad if you look at the internals of the numbers underneath in terms of what it says about the wherewithal, particularly of low income households. And so that's going to be largely positive for inflation, although negative for the economy. Well, let's let's talk about what else we didn't see in those numbers. That's all those massive job cuts at the federal level. We won't see maybe till March's numbers, April or even beyond. Right.

That's right. Yeah. And, you know, if you look at the jobless claims that we've seen over the last few months, they've actually been relatively good. For instance, the one that came out last week showed a decrease in the number of initial jobless claims and it was lower than expectations. So that says that it's really at a gross level of the economy wide, not having an impact yet. It may have an impact later, but

but we're not seeing that in any of the jobs numbers that we've seen so far. But even though we haven't seen it, we did see a huge spike in underemployment. That's this so-called U6 number, which takes into account people who want to work but can't find full-time employment and those who are underutilized. That's

underemployment number, 8.0%, is up from 7.5% the previous month. And this is the largest spike that we've seen in the last two to three years. This is the highest number since like 2021. And what does it tell us looking ahead? I mean, are more people going to be fighting for fewer jobs, more qualified people?

Yes, it tells us, number one, that there's a trend towards underemployment. It's been going on for two years now. We hit sort of a low in the beginning of 2023, and we've spiked up, this particular spike being the worst in that time period. And it also says that in conjunction with other data that we see, that lower income households in particular,

particular are really hurting. We've seen the highest car payments, the largest number of Americans falling behind on their car payments in three decades. We see spiking credit card delinquencies. And in this particular report, we also saw that the number of hours worked was down, as well as the labor force participation. So all of that is like, if you think of this as forward looking, it's saying that

the number, which was only slightly higher in unemployment, will go even higher going forward. And that's a negative sign for the economy. Well, this is all fuel for the Fed. Again, they're battling stubbornly high inflation. We've got this mixed information coming on jobs.

Is there anything you see that could make the FOMC consider a change in rates, whether up or down, or is it just hold steady? They've played their cards close to their vest recently. However, I would say that the market at a minimum has been leaning into pulling forward the rate cuts that

the Fed would make. If you think about the two pushes, the pull and push of higher inflation and lower growth, the market has definitely been leaning towards the lower growth, pushing the Fed forward in terms of their rate cuts. And given the fact that growth looks to be declining, GDP now, for instance, shows a negative number for Q1.

That would say that, yes, they could cut as soon as June. The market has June as the first cut, and it's looking for almost three cuts for the entirety of 2025. The February Consumer Price Index out this Wednesday, the Producer Price Index out on Thursday. And our thanks to Bloomberg's Edward Harrison, editor of the Everything Risk newsletter.

We move now to corporate earnings from computer software giants Oracle and Adobe. Oracle earnings out on Monday. Adobe comes out on Wednesday. And for more on what to expect, we're joined by Brody Ford, Bloomberg tech reporter. Now, Brody, let's start with Oracle, a pioneer in cloud computing, using that to enhance its AI solutions to customers. What do you expect to see this week?

Oracle is so interesting because, yeah, there is pioneer and database technology that for a couple of years there was kind of written off as a bit of a software dinosaur. But they've managed to really remake themselves as a large cloud provider. I mean, the best example of that being what happened at the White House a couple of weeks ago when Oracle.

You know, Trump brought Larry Ellison up on the podium and announced this giant Stargate initiative saying that $100 billion will be spent building data centers across the country.

and so investors are really curious like do we see this happening in oracle's earnings what are the trends in their cloud infrastructure which is really what folks are trading on right now there's been this whole storyline too of whether the cloud infrastructure providers like microsoft are starting to pull back on building data centers if so that would maybe you know

you know, indicate poorly for AI demand and how sustainable this boom can be. And so any commentary around the pace of building data centers and any pullback will be really important. Well, part of that Stargate project that you mentioned, I mean, that seems to be Oracle's main project in that. Main participation is building those data centers out. Is that right?

- Right, so with Stargate, the infrastructure, there's a lot of names involved, right? OpenAI, Oracle SoftBank, but really who's building this stuff is Oracle, right? And so they're effectively a vendor here and that's that, you know, any of this spending would in theory boost Oracle sales. Of course, you have to ask how much is this marketing?

Because Oracle, the one project we know about, Oracle is already working on before this announcement. And so there's some potential that this is a, you know, rebranding of work Oracle is already doing. And if it is net new, I think we will find out, you know, with earnings.

And you mentioned Microsoft, the big leaders, Microsoft's Azure, Amazon Web Services. How is Oracle competing against those giants? And is it a giant itself in all this?

They have tried to brand themselves as particularly effective for AI workloads, and I think successfully so. I mean, they've really had a pretty crazy boost in sales. You got to remember that, yeah, I mean, AWS, Microsoft, to a lesser extent Google, they are magnitudes larger than Oracle.

But Oracle's growing really quickly. I mean, they really burst on the scene with being the main vendor for TikTok, which creates a ton of, you know, computational demand and is a huge customer. And then kind of from there, they were able to land these

more kind of AI native startups and they landed Uber. And so they're taken very seriously now as a contender in this cloud world, but they're still in that challenger basket. If they're able to become more of a primary vendor for open AI with all their massive AI workloads,

I think that would be a game changer for Oracle. But it's still yet to be seen whether they can continue. I mean, they've been posting numbers like 60, 70 percent revenue growth in their cloud unit, which is, I mean, in this market is pretty unheard of. It's runaway success.

Well, let me ask you then, you know, besides it's a participation in Stargate, which, as you mentioned, may be a rebranding some other plans. What kind of capital spending do you see in the year ahead? Where is their money going with all that revenue coming in from their cloud business?

Right now that CapEx is all about data centers, right? I mean, outside of Stargate, they're building data centers all over America and the Middle East. I mean, it's a real data center boom right now. And it's kind of like how in previous eras of the tech booms, we would watch headcount as a kind of a leading indicator of how the business is going. That's kind of what's happened with CapEx. You know, it's become a number that investors track to be able to say, you know,

are they experiencing enough demand that they're going to keep building data centers? It's watched as this leading indicator. And so,

If that misses expectations, that might tell investors, oh, man, are they seeing a little demand slowdown? So that's a it's kind of a key number here that it wasn't, you know, a year or two ago. Yeah. Oh, look for that. Well, let's now get your expectations for Adobe, which issued a pretty weak outlook back at its last earnings in December, citing uncertainty about losing business to AI startups. So what do you expect to see in its earnings this week?

The big question for Adobe is that in the age of AI, are people still gonna pay for programs like Photoshop? You know, if I can Google AI image generator and make a pretty good photo, am I gonna pay my, you know, $40 a month license? And investors can't decide the answer here. If you look at the stock, it goes up, it goes down.

Adobe itself has unveiled all types of generative AI products saying that look, professionals use our services and they're going to want to have AI within it. They're not going to abandon us for, you know, some startup that only has a web interface. I think that argument makes sense, but it's unclear that in the age of AI, when more work can be automated, maybe you need less people

For a business like Adobe, which charges per user, you know, it doesn't seem to bode well, ultimately. Oracle, Q3 earnings out on Monday after Wall Street's closing bell. Adobe, Q1 earnings out after the bell on Wednesday. Our thanks to Brody Ford, Bloomberg Tech Reporter. Coming up on Bloomberg Daybreak Weekend, we'll look ahead to the role of the ECB in a changing Europe. I'm Tom Busby, and this is Bloomberg. ♪

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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 at whether China can maintain its growth target for 2025. But first, after a week filled with geopolitical uncertainty and potential inflation-boosting tariff announcements, European Central Bank Chief Christine Lagarde will address central bankers, financial market participants, and academics this week.

How will she make sense of a changing landscape? Well, for more, let's go to London and bring in Bloomberg Daybreak Europe anchor Caroline Hepker. Tom, while Europe is reckoning with questions of defence and security and trade uncertainty, its central bank is mulling how to respond.

Nearing the final leg of the interest rate cutting cycle, policymakers in Europe must now navigate internal divisions and complicated decision-making in the months ahead. At the March meeting, the group delivered a widely anticipated cut in the deposit rate to 2.5%. Now attention shifts to how the institution can support a region facing significant threats to peace and prosperity.

impetus to fill defence coffers spurred by waning US military commitments in what has been one of the most consequential changes of recent decades.

Germany says that it will alter its own ironclad fiscal rules and unlock hundreds of billions of euros for rearmament. Other European leaders are turning more united in their support of Ukraine and also fast-tracking defence capabilities. It could all still come unstuck, but all told, it will surely be a major focus now for the European Central Bank and its leader, Christine Lagarde.

We've been speaking to Natalia Lipikina, head of EMEA equity strategy at JP Morgan, about the broader new reality now facing Europe. I think it's just uncertainty that we will have to live with. And we still don't know how big the tariffs will be. Will they be temporary or not? So there will be still this overhang risk that most likely will stay with the market for some time and continue.

What is interesting is that there probably will be more volatility in the market, which we really haven't seen in the last couple of years. But this year shows us that there is just so much going on in the world that we will see the markets going up and down and having this volatility in between. Some of the very big names in the U.S. sold off a great deal yesterday and have done since the February highs. Is U.S. exceptionalism growing?

At risk, that's the other kind of big thought in markets right now? I would say that there are probably cracks in that theme. But overall, we do continue to think that the U.S. will outperform Europe into the year end. We do continue to see very strong earnings growth in the U.S. market.

call it 10%, 12% this year, followed by very similar growth next year. The market is getting worried about this AI trade. We think that it's still a secular growth story. And there are loads of interesting themes and companies that have been beaten up recently that are quite attractive right now. That was Natalia Lipikina, head of EMEA Equity Strategy at J.P. Morgan, speaking to us on Bloomberg Radio.

So how will Christine Lagarde present the place of her institution amidst all of this uncertainty? I've been speaking to Bloomberg's ECB reporter, Jana Randau, about the ECB and its watchers'

conference. Who will be there and why is it so important? There is some sentiment in the market and in the ECB watchers community that that quarter point interest rate cut, that was the last easy decision for the ECB for a very long time. And that has to do with the fact that

that the economic outlook is just so uncertain. We don't know what's going to happen to tariffs. We don't know what's going to happen to massive fiscal spending across the region. Is it going through? The plans are there now, but they have to go through parliaments that those bonds have to be issued.

Those orders for equipment have to be made and that doesn't happen overnight. We all know how difficult it is. So, you know, the ECB is flying blind once again. And that makes, you know, predictions about where they're headed very, very difficult for April, but also for beyond. Tell us about the ECB and its Watchers Conference. Who will be there? Why is it important?

Yes, so the ECB Watchers Conference is this one conference a year which is hosted at the University in Frankfurt where ECB Watchers from the world of academia, economists from some of the biggest banks, but also the ECB policymakers themselves get together.

To discuss whatever is happening in the world, whatever is on their mind. So it's the place to be if you're interested in the ECB next week. It's the one event that you cannot miss, maybe aside from the Cintra conference that the ECB puts on at the start of summer every year.

for a few years now, the President Lagarde has showed up there as the keynote speaker, usually delivering a very meaty, heavy policy speech, outlining the challenges, discussing the challenges, and outlining her vision of what policy should do over the next couple of months. Now, I've tried to find out

what she might be talking about next week and I have gloriously failed because the ECB has kept very tight-lipped about even the topic of her comments. So I'm fully expecting her to be

Very authoritative, very clear in her analysis, but what she is actually going to be talking about, it's going to be a secret for a while longer. That's fascinating. It is such an uncertain time for Europe, for the region.

It will be very interesting to see how Christine Lagarde maybe tackles that. What is the role of the ECB here then? How will Lagarde and her team be thinking about this huge moment for the continent?

Yeah, I mean, first of all, you know, she has a very large number of very talented economists. And I think they will do the heavy work now trying to understand what all these announcements and all the news we've seen over the past couple of days and also are still going to see as we march forward.

how that is going to affect the economy. She was asked at her post-decision press conference, does the ECB have a role in maybe helping to finance these massive investments that are going to come? And she was very, very clear there saying, our job is to guarantee price stability and that is the best contribution we can make. And after that, it's for somebody else or other people to step up. And I think

That tells you a little bit about their state of mind. They are going to watch the implications. They will take the decisions necessary to keep inflation stable, keep the economy in a good place, and will be very, very attentive to the data as they arrive and to projections that hopefully, unlike the ones that came out, the recent ones, will actually tell them where the region is headed.

And yet the ECB has been so influential and often central in past crises in Europe.

So one wonders what the ECB will be thinking about tariffs, the threat to peace in Europe. Will they be on Lagarde's agenda, on the agenda of the European Central Bank? For sure. And if there's one thing that can be said about President Lagarde is that she's a very political ECB president and she has her very own opinion. She is not shy to lash out at Donald Trump.

She's made her opinions very well understood in the past on what she thinks about tariffs, what she thinks about certain types of policies. And I'm sure we can expect to her

to hear more from her about that. But she also very well knows how sensitive the situation is and how charged the situation is and that central banks in the current moment, and especially when you sit in Europe, are very well advised to be a force of calm and not add to the tension.

So she's going to do her job as much as she can in keeping inflation stable in the Eurozone. Be a voice of reason when it comes to warning against tariffs and navigating the challenges with defense. I wouldn't expect her to add to tensions, but she will make herself heard.

talk to us then about whether there are internal divisions in the meeting of European leaders in just the last few days. The divisions have been clear when it comes to Hungary and the rest of Europe, one out of 27. Do you think on the council, the ECB divisions, internal divisions might deepen or might even emerge?

I think, yes, I think so. I mean, there was speculation already going into the March meeting about what happens next. And April was always a bit of a question mark. It's even more of a question mark now. Are we going to see another cut? Are we maybe going to see a pause? And my impression from speaking to people after the meeting was out is that that

you know, the dovish camp is worried about the economy in the current state.

room for more interest rate cuts. The Mohawkish members, they are slightly more concerned about the implications for inflation from tariffs, from fiscal policy, and that they might want to just pause and take stock and be a bit careful. Also because interest rates are now broadly approaching that territory that we can describe as neutral, where it's not...

restricting the economy anymore. And so there are different views on what the economy needs. But overall, there is the sentiment that they don't want to add to the fighting and the controversy. And this is what we saw last week.

at the last meeting as well, that there was this sense of coming together and rallying behind the consensus. And as much as I expect, you know, a lot of loud noises going or approaching the April meeting with very forceful opinions, I also see a lot of room for them coming together, coming to the table and making a decision that everybody can support in April, or at least a broad majority can support.

Just very briefly, Jana, as ECB reporter, you know, the ECB and its watchers event, the annual event, as you describe it, very important, you know, on the same sort of footing as the Cintra meeting.

In terms of what you're going to try to glean out of the events, what are you going to be beetling around and trying to do and write about, do you think, just briefly? Yeah, I mean, I think it's just the way the ECB analyzes the current situation. There wasn't a whole lot in the post-ECB press conference just because it was so fresh and maybe policymakers didn't have a whole lot of time to reflect on the new events

the new situation, the new reality they're in. So I expect a lot more reflection on the challenges for Europe, on what might be necessary in running the economy. And I think that will be interesting because we can infer how policy, how they might also think about policy in the months ahead.

My thanks to Bloomberg's ECB reporter, Jana Randau. And we will keep you up to date with the European Central Bank and its Watchers Conference in the coming days here on Bloomberg Radio. I'm Caroline Hepke 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. Thank you, Caroline. And coming up on Bloomberg Daybreak Weekend, we'll look at whether China can maintain its growth target in 2025.

I'm Tom Busby and this is Bloomberg. When you have bars in the sky, onboard showers and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

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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. U.S. tariffs on Canada and Mexico capturing the headlines last week, but the Trump administration also slapped additional tariffs on China. For more on what those levies could mean for the world's second largest economy, let's get to the host of the Daybreak Asia podcast, Doug Krisner.

Tom, in the last week, Chinese leadership set an ambitious goal for economic growth at around 5% for 2025. You know, this marks the third straight year that China has maintained that growth target. And Premier Li Cheng did say that meeting it again will be difficult. I'm joined now by Katya Dmitrieva, Bloomberg News Asia Economy reporter. She joins us from our studios in Hong Kong.

Katya, thank you for joining us. Can we talk about the growth target to begin with? Does it seem realistic at this point? Depends who you ask. Chinese officials definitely think they can make it. It's the exact same target they set in 2024. They've met their targets for the past three years. So history would suggest that once they set something, they're going to do everything they can to meet it.

If you ask economists, however, we've got a Bloomberg survey and it says that China is more likely to hit 4.5%. Now, the question is really how much this stimulus can help revive consumption. I know that's always the question, but this year in particular, because...

From Premier Li Cheng's speech, it's very clear that they're doing a couple things. So they're boosting how much they're going to be spending in their budget deficit or how much they're comfortable with spending this year. What is that percentage right now?

So they've got a fiscal deficit target of 4%, which means that they're going to be spending a lot more on a number of programs. We only know kind of a handful of what those will be. They're raising the pension payout levels. There's a public subsidy for medical insurance that they're going to be boosting. The question, though, is what else are they going to do? And if history, again, serves as a guide, we know that throughout the year, the first few months,

Growth is quite strong. They roll out these programs and then about halfway through the year, they're forced to do more because the numbers aren't aren't stacking up. Do you think that leadership in Beijing is operating under the assumption that it is inevitable that more U.S. tariffs or at least higher U.S. tariffs are on the way?

Absolutely. And you can see that in their reaction. So if you just look at Trump's previous statements, everything from 60% to 100% tariffs on China, which he said during the campaign trail. Now, 100% take that with a grain of salt. But I think 60% was mentioned enough that that's what a lot of economists and analysts and people in Beijing are now pricing in. And so the reason why this NPC was particularly important is because

It was the first chance that Chinese officials could react to that eventuality or what is perceived to be that eventuality. So raising the fiscal deficit target and also focusing on the consumer is a sign that they're not going to be or trying not to be as reliant on exports.

Right. Because if you have these tariffs coming in from the U.S. and you have this growing protectionism really globally, then you can't rely on those tariffs or you can't rely on trade. You can't rely on exports as much because it's just going to contribute to deflation. It's not going to get your growth to about 5 percent. If Chinese leadership has to do more on the stimulus side, are people talking about the risk that may be associated with that? I'm thinking about the debt levels.

that are maybe problematic already. Yeah, there's going to be a lot of debt issuance for sure. And of course, fiscal deficit increasing. But this is kind of with China is a special case.

in some ways. And in some ways, it's also not. So it's a special case in that they have more control over these things. So we're going to see a lot more bond issuance. There's some response in markets. They're still hungry for that debt. So we're dealing with a trade war right now. And one of the things that I thought was very interesting is Beijing reiterating this stance on opening up markets to foreign investors.

Where is this foreign capital going to come from in the mind of Chinese leadership other than the U.S.?

They're hoping it'll come from all over the U.S., maybe Europe, but Southeast Asia and Asia in particular. You've seen since 2018 really solidifying of trade and foreign direct investment ties between China and Asia, especially as companies kind of pulled back from the States and Europe. And there were a lot more restrictions in those regions and kind of the Western world.

So there is a sense that Asia could contribute a lot more. Think of India, think of even South Korea and a lot of the Southeast Asian economies that are growing at a much faster clip and sort of minting new companies and millionaires and billionaires every day. So I think the thinking is that the investment will come from there. However, it'll be a pretty tall order to get foreign investment to come back.

There's still a lot of questions about the property sector bottoming out. In fact, if you speak to any investor, they will flag that particular issue. In fact, the data shows the opposite, that domestic investors are taking their money out of China at a much faster clip and money is going into China at a much slower rate.

So it's not looking optimistic for that. I think we're going to get figures in the week ahead on foreign direct investment for China. But what are some of the important data points that you are looking at in the coming days? I know over the weekend we'll have some inflation numbers, also new loans data. But is there anything in particular that you think can shed a light on the vibrancy or the lack of vibrancy in the Chinese economy? I think so.

Three things. There's three indicators that I always watch when it comes to China. There's the CPI and PPI, which I'm wrapping into one as inflation.

There's housing and in particular home sales, home prices for some of the biggest cities. So we get that. We get the inflation data this week. We get new home prices, used home prices in a couple of weeks. And then I would say the third thing is retail spending.

So talk to me about the behavior of the Chinese consumer. Do we know anything about how well retail spending has been performing? It has been very weak. In fact, the last few months in particular have been surprisingly weak given that the start of the year we had a major holiday. We thought spending was going to lift significantly.

as a result of that. But actually, to end the year, there was this unexpected slowdown and sort of starting the year as well. I mean, in general, the issue is that there's still a two-speed economy, right? You have industrial production that's picking up. You have retail sales and consumption that's flatlining. And growth is just nowhere near where it should be to support

economic growth and certainly nowhere near where it needs to be to support 5% growth, especially if you're going to be relying on the consumer specifically. Katya, thank you so much for joining us. Katya Dimitrieva, Bloomberg News, Asia Economy reporter joining us. For more on the outlook for China's economy, we turn to Shahzad Qazi. He is the chief operating officer, also managing director at China Beige Book International. Shahzad, it's always a pleasure.

China Beige Book International has just released its report for the month of February. February. Can you help me understand what you guys have discovered? Yeah, last week's China Beige Book economic release showed that the economy continues to improve in 2025. It's the second straight month at least where we've seen growth accelerate.

And this time around, you had the industrial sector doing quite well. However, the one thing that stood out in the report that we talk about is that consumption took a backseat. What do you think is going on there that is holding consumption back beyond just negative sentiment?

Well, what happened was that in the lead up to the Lunar New Year, you saw the travel sector do good, restaurants do good, people going out there and buying things that the retailing segment was doing well also. But there was a pareback from that speed or that intensity. And I think what this comes down to is the fact that you don't have right now any type of sustained consumer or household-focused stimulus in China.

One of the things that we talk a lot about in terms of consumer confidence in China, that it's very much linked to the property market. And we know that home prices are still struggling, right? Is that sharing a big part of the blame here? Well, the property market, uh, is actually starting to trend, especially the housing market in the right direction. Yes, of course, you're still far below levels that, you know, from years ago, however, that pain has eased quite significantly, uh,

over the last year or so, as Beijing has tried to take its foot off the neck of the market. - What do we know about the labor market, speaking of markets? - The labor market is doing all right. You haven't seen hiring go back to those pre-COVID levels in our economic surveys. I mean, you've certainly seen periods last year where hiring slowed down, which were concerning, but all around, the picture isn't very inspiring, but again, there isn't that alarm

or crisis in the labor market data. So when you look at the types of companies that you are talking to, I'm thinking there's obviously state-owned enterprises, the gargantuan companies that exist in China, and then medium, smaller-sized, more entrepreneurial-type organizations. Do we need to differentiate and talk about sentiments within those camps?

Yeah, I think that's going to become even more important, especially if the party is now pledging that the private sector is going to get very good credit support finally, and they're going to be, uh, you know, provided the type of, uh, policy, uh, support rather, I should say that they need in order to succeed, uh,

Well, that's going to play out in the numbers. And that has not been the case. SMEs have historically really struggled to go out there and get credit and to get the kind of money that they need in order to have a successful thriving business in order to invest and hire. They've always been second fiddle to the big state or enterprises. How well capitalized are the banks right now?

The banks are not in any kind of crisis. Yes, China is recapitalizing, and that took up a lot of headlines. But the major banks are not in any kind of crisis. Now, do you have some kind of financial crisis brewing maybe at some local levels? Potentially. I think the property market story will be playing out there. Obviously, continued issues with local government finances. So that may be a story for the long run, but I think the big banks are doing all right for now. One of the big things that we've been talking about is the deep-seek policy.

artificial intelligence chatbot that was released a couple of weeks ago and how that has reinvigorated the high tech space in China. Talk to me a little bit about the momentum, the follow through that you're seeing as a result of that development. Yeah, look, I think we're certainly picking up some amounts of positive sentiment from that, even within the surveys early on. We'll see how that plays out over the rest of the year, especially in the e-commerce area. And of course, how some of the more high end tech manufacturing firms

are performing as we learn more about DeepSeek and as we learn about some of the other potential models, similar models.

Shahzad Qazi, COO and Managing Director at China Beige Book International. I'm Doug Krisner. You can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast. Tom. Thank you, 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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