Daybreak Weekend: US Jobs, Special European Council, Australia Eco
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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 the latest on the U.S. labor market, how that could impact Fed policy. I'm Tom Busby in New York. I'm Caroline Hepka in London, where we're bringing you the latest on Europe's defining moment. I'm Doug Krisner looking at Australia's economy ahead of some key data points in the week ahead.

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 February jobs report here in the U.S. We'll get non-farm payroll numbers Friday, 8.30 a.m. Wall Street time. And for more on this and how it could possibly impact Fed policy moving forward, we're joined by Michael McKee, Bloomberg International Economics and Policy Correspondent. Well, Michael, let's start with what you expect to see in these numbers for February.

Well, we're going to get a lot more data before Friday that will maybe lead economists to adjust some of these numbers. But basically, what we've seen is what we'll get, is what they're saying. Last month, we had 143,000 jobs. This month, they're looking for about 158,000. No change in the unemployment rate, expected to stick at 4%.

Average hourly earnings will be a little bit lower on a month-over-month basis, a little bit higher on a year-over-year basis, just because of the number of weeks in the month and that sort of thing. The biggest thing is there is no confidence around any of these numbers because we don't know what's –

The impact of the new administration has actually been on all the numbers, not just jobs, but everything else. Everything else. Well, jobs, speaking of jobs in this administration, we're not going to see the...

all these massive layoffs for till March numbers, maybe April, maybe even later, right? Yes. Uh, first thing is that they didn't really start all the layoffs till February 14th. And that was the last day of the survey period. And if you work for just an hour during the two week survey period, uh, you're counted as employed. So that won't have an impact, uh, unless there was, you know, some changes the administration made really early on, but that they would be small. Uh,

we still aren't seeing it in the jobless claims numbers. What we might see is something in average hours worked because we've seen these surveys that show a bit of a decline in enthusiasm. So if companies are being careful about putting people to work or working any overtime, they might cut back a little bit on that.

Well, now, before we talk about some of the data that's coming up next week, let's talk about what we learned about this past week because some very telling. And again, you mentioned the Trump administration, the great unknowns ahead of the Trump administration coming in like this, the merchandise trade deficit that we got.

Yeah, it was the biggest trade deficit ever, $153 billion deficit, largely because companies were afraid of tariffs and they were importing a lot of supplies ahead of time. Industrial supply imports went up 33%. People were stockpiling because they don't know exactly what's coming, which

leads us to Tuesday and the administration's theoretical announcement of tariffs because we don't know whether the president will pull back or not. I think a lot of people are hoping he doesn't postpone them in the sense that at least if you get a number, then you can start planning around it.

And that's what the Fed would like to see. And I'm sure a lot of companies would like to see to have an idea of exactly what's going to happen. Otherwise, you're going to keep importing a lot of stuff. Yeah, yeah, yeah. You push it back, push it back, and all that will be stockpiled here in the U.S. Now, we also got PCE numbers just on Friday. And what does that tell us about inflation and inflation?

Tells us we're still making some progress. They came in as expected. It's pretty easy for economists to anticipate what the numbers will be because a lot of it comes out of the CPI and PPI reports, which we got a couple of weeks ago. So there was still some progress. Not a bad news story like the CPI was. And so it keeps the Fed on track to maybe at some point resume lowering interest rates. But all this, again, depends on

the president and what he's going to do. We saw a big decline in spending. After an eight-tenths increase in December, we saw spending fall by two-tenths of a percent, which is not good news. And it also parallels those bad consumer sentiment reports that we got. So the question for the Fed, or for Wall Street, about the Fed is, are they going to cut rates

anytime soon because inflation has behaved and they can, as they were, or because the economy is slowing down and it's an emergency and we have to cut interest rates. Well, a lot to look forward to. The February jobs report out this coming Friday. Our thanks to Michael McKee, Bloomberg International Economics and Policy Correspondent.

We move next to some fourth quarter retail earnings in the U.S. from Macy's, the nation's largest department store operator, and the clothing chain Gap. They're both out on Thursday. Now, for more on what to look for in those Q4 results, their outlooks for the year ahead, the impact of stubbornly high inflation, the threat of more U.S. tariffs, what all that tells us about consumer spending. I know it's a lot, but we're joined by Mary Ross Gilbert, Bloomberg Intelligence Senior Equity Analyst covering retail.

Well, Mary, thank you for joining us. Let's start with what you expect to see in those earnings reports from Macy's and Gap, and this includes the all-important holiday quarter.

Yes, Tom. So when we look at Macy's, Macy's already came out and gave us a little preview of what they saw quarter to date. And at that time, they said, OK, we're going to be at the lower end of their $7.8 billion in revenues for the quarter. So it was going to be $7.8 to $8 billion. Analysts are right around that low end at $7.8 billion.

And based on consumer transaction data, we think they come in near that estimate, maybe even slightly beat. On the earnings per share side, analysts are at about $1.54. We think they likely beat that estimate, as they have in the past eight quarters. But the real focus here is going to be on the go-forward business for Macy's.

And also, as you pointed out, there's going to be a little discussion on tariffs. They don't have a huge exposure. Their private label business is probably around 15% of sales. And then the portion that they source from China is less than that. They haven't disclosed specifically, but we estimate they're probably somewhere around under 5% of revenues in terms of exposure there. But we will get a little update.

With Gap, we think the company beats analyst estimates. So analysts are estimating revenue to fall 5.3%. We think sales may decline just 1% to 2%. And this is based on Bloomberg second measure transaction data, as I mentioned earlier with Macy's. And also on the earnings per share side, we see them beating. Analysts are looking for just 37 cents a share. That company is

really executing. Old Navy, which is just over half of the business, just debuted a new performance fabric for its activewear line called Studio Smooth. So think Viore and Lululemon and the really buttery soft leggings that they have, and they retail for $98.00.

Old Navy's is just $28 and it's already selling very well. So I think that very, very strong execution there. Gap has just been doing, the Gap brand itself has been doing very well and just debuted a

a new video campaign featuring Parker Posey and talking about live in Gap and Gap feel like Gap. Well, and she's now on that hit HBO show, White Lotus. So good timing there. Gap, though, not the same, though, at its two other brands, Banana Republic and Athleta. Still lagging?

Actually, no, I think you're seeing both of those pick up. I'm more confident in Athleta in terms of where they are. With Banana Republic, I think they're doing fine according to the transaction data. I think those also are probably tracking a little bit better than analyst estimates.

They're smaller because the two biggest pieces of the business are really Old Navy and Gap. But we're really looking for new leadership at Banana Republic to really set directions. So it doesn't seem as exciting to me as it was before. But I think that could change once they bring in new leadership. But they do have a new – speaking of White Lotus –

Banana Republic is going to do a collaboration. So it's going to be, you know, Banana Republic X White Lotus. And that's going to be dropping next Wednesday. I know that in the store here in Century City, they just sent me an invite to come attend that. So I think that could be really exciting. Wow. Yeah. Forward thinking. Night of the Gap, huh? Yeah.

Well, let's go back to Macy's because Macy's and they also have some other brands that have been doing very well, right? Blue Mercury, Bloomingdale's. But Macy's and it's addressed some challenges it has had closing stores over the last year, investing more money in successful ones. So what's what's the strategy there? And is it working for Macy's? Yes, Tom. So you're absolutely right. This new strategy, which is where they're

Guess what? They're going back to their basics. And that is adding more service in their stores. They've also really improved the store. So when you go in, they're a lot more open. There's no clutter. And they're bringing in more relevant brands. So a brand that they brought in, it's Avec Lafayette. And this was a brand that was started in 2017 by Max Azria's daughter, Joyce Azria.

And it's wonderful, beautiful, stylish clothes that really appeals to the millennial. Macy's had it since 2017, but it was just in a limited amount of doors. And now it's been expanded, and I just saw it in our store here in Century City. So that's brand new for this store. But I think it's absolutely on trend and relevant and should do really well. So they need to do more of that.

And so in these stores that they are revitalizing, they did see a lift in positive comp sales, but it's small, right? Because they did 50 stores. They're now adding another 75 stores, including the one next door to me. And I've already seen the improvement there. But still, when you look at Nordstrom, I mean, the traffic there is always busier. And I think

you know, we'll see good numbers coming out of Nordstrom. So I think they have a ways to go with the mainline Macy's. But as you pointed out, Bloomingdale's and Blue Mercury are really doing well. And those are comping positive. And we think they get a lift with the Sachs-Niemann merger because they're having issues with vendors and customer service. And that could shift more luxury sales to Nordstrom and Bloomingdale's. Well, a lot to look forward to. Our thanks to Mary Ross Gilbert, Bloomberg Intelligence Senior Equity Analyst Consultant.

covering retail. Coming up on Bloomberg Daybreak Weekend, we'll look ahead to a special European Council summit, how that may impact the war in Ukraine. 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.

Up later in our program, we'll look ahead to the first reading of Australia's economy following the RBA's first rate cut since November of 2020. But first, the path to peace in the war in Ukraine took a radical turn this week as a meeting between U.S. President Donald Trump, Ukraine President Volodymyr Zelensky, and U.S. Vice President J.D. Vance devolved into an argument right in front of the White House press. Here's what that sounded like when they met in the Oval Office on Friday.

We're trying to solve a problem. Don't tell us what we're going to feel. I'm not telling you. Because you're in no position to dictate that. Remember this. You're in no position to dictate what we're going to feel. We're going to feel very good. You will feel influenced. We're going to feel very good and very strong. You will feel influenced. You're right now not in a very good position.

You've allowed yourself to be in a very bad position, and he happens to be right about it. You're not in a good position. You don't have the cards right now. With us, you start having cards. Right now, you're playing cards. You're playing cards. You're gambling with the lives of millions of people. You're gambling with World War III. You're gambling with World War III. And what you're doing is very disrespectful to the country, this country.

that's back to you far more than a lot of people said they should have. Have you said thank you once this entire meeting? No, in this entire meeting, have you said thank you? You went to Pennsylvania and campaigned for the opposition in October. Offer some words of appreciation for the United States of America and the president who's trying to save your country.

Please, you think that if you will speak very loudly about the war you can... He's not speaking loudly. He's not speaking loudly. Your country is in big trouble. Can I answer? No, no. You've done a lot of talking. Your country is in big trouble. I know. You're not winning. You're not winning this.

You have a damn good chance of coming out okay because of us. Mr. President, we are staying in our country, staying strong from the very beginning of the war. We've been alone, and we are thankful. I said thanks in this cabinet. You haven't been alone. We gave you, through the stupid president, $350.

billion dollars, we gave you military equipment and you men are brave, but they had to use our military equipment. If you didn't have our military equipment, if you didn't have our military equipment, this war would have been over in two weeks. In three days. I heard it from Putin. In three days. This is something new. Maybe less. In two weeks. Of course, yes. It's going to be a very hard thing to do business like this. I tell you. To say thank you

I said a lot of times to American people. Except that there are disagreements, and let's go litigate those disagreements rather than trying to fight it out in the American media when you're wrong. We know that you're wrong. But you see, I think it's good for the American people to see what's going on. I think it's very important. That's why I kept this going so long.

You have to be thankful. You don't have the cards. I'm thankful. You're buried there. People are dying. You're running low on soldiers. Listen, you're running low on soldiers. It would be a damn good thing. Then you tell us, I don't want to cease fire. I don't want to cease fire. I want to go and I wanted this. Look...

If you could get a ceasefire right now, I tell you, you'd take it so the bullets stop flying and your men stop getting killed. Of course we want to stop the war. But you're saying you don't want a ceasefire. But I said to you, with guarantees. I want a ceasefire because you'll get a ceasefire faster than an agreement. Ask our people about ceasefire, what they think.

That wasn't with me. That wasn't with me. That was with a guy named Biden who was not a smart person. That was with Obama. Excuse me. That was with Obama who gave you sheets and I gave you javelins. I gave you the javelins to take out all those tanks. Obama gave you sheets. In fact, the statement is Obama gave sheets and Trump gave javelins. You got to be more thankful.

Because let me tell you, you don't have the cards. With us, you have the cards. But without us, you don't have any cards. The sharp encounter between Presidents Trump and Zelensky plus Vice President J.D. Vance overshadowed what was supposed to be a moment of unity between the leaders and puts any possibility of a peace deal between Russia and Ukraine in question. Now, does it fall to Europe to form a resolution? For more, let's go to London and bring in Bloomberg Daybreak Europe anchor Caroline Hepker.

This week, Vladimir Putin's new envoy for foreign economic cooperation took to X for the first time since 2012.

Kirill Dmitriev used the platform to declare the importance of US-Russia cooperation to address what he's described as world challenges. His sudden re-emergence on the site after years of silence highlights the rapid rehabilitation of Russia by President Trump and the new challenge now facing the international community.

European leaders, meanwhile, are holding a special European Council in the coming days, taking place just two weeks before a planned quarterly summit. They're going to discuss defence spending and Russia's war on Ukraine in a world without the historically assured US security guarantee.

The emergency summit will aim to take stock of US-EU relations after various leaders have held meetings at the White House to get FaceTime with the US president. So what will happen next in this extraordinary few weeks for global politics and who, if anyone, will succeed in winning the favour of President Trump?

I've been speaking to Bloomberg's EMEA News Director, Rosalind Matheson. If you're a leader in Europe at the moment, you spend a lot of time saying very much out loud, we're going to spend more on defence. That's very clear. And we are starting to see some numbers come around that, including in the UK, of course, obviously, as well. But what we're understanding in Europe is that the EU is basically trying to find a way to unlock hundreds of billions of euros in extra funding for defence.

And that could come in a bunch of different ways, including potentially the joint issuance of bonds, for example, repurposing existing funds as well, shifting spending from other places. But that's going to be part of the conversation when EU leaders meet is how practically they can all start to increase the defence spending, both at a national level and also at a European level, and how they can show that

very clearly in particular to the US President Donald Trump, that they're meeting their words with action. The question is, will there be agreement across the EU when the leaders meet about A, doing that, and then B, how to do it? And what's the best mechanism to do so? Because of course, these all come with costs at home. And if you're talking about potentially ramping up

joint issuance about shifting spending that may come at the expense of other programs that Europeans want. And so you could see some domestic imperatives feed in their way. People say, well, hang on, my voters don't want that to happen and it could be a backlash for me. So we're expecting there to be a proper conversation about the mechanism to increase defense spending

Are we going to see an actual agreement come from this meeting? That's really up in the air. Various European leaders are speaking to President Trump, making visits to Washington. Talk us through their communication priorities with the president.

Well, we had Emmanuel Macron, obviously, from France there. And we've also got the UK Prime Minister, Keir Starmer, meeting with Donald Trump. And the message from that is really that the US cannot afford to go it alone when it comes to things like Ukraine and Russia, that really Europe does need to be very much in the conversation. So is the UK when it comes to things like conversations around future security guarantees for Ukraine, etc.

for example, when it comes to conversations around mutual defence, for example. So there'll be a message about how, yes, Europe and the UK have gotten the message and they're going to increase their own defence spending and their own security. But also that when Donald Trump talks about resolving things like Ukraine, for example, that he really does need Europe in the conversation. Well,

What do you think the attitude of the newly elected chancellor-in-waiting, Friedrich Merz, might be as he looks to form a government? And whilst President Trump has used his strongest language yet in recent days about

the EU, i.e. the European Union set up to screw the US, in his words. What do you think the attitude of Germany is going to be to this, obviously central to policymaking in Europe? Well, it'll be very interesting because, in fact, Friedrich Moers is obviously not Chancellor yet and he's got to work out how

to form a government, but he's already met with the French president, Emmanuel Macron. So he's getting his ear to the door there, at least in the conversations as things are moving so quickly these days when it comes to the political landscape and the geopolitical landscape. And so he's obviously part of the conversation already, which is very important. Friedrich Merz actually might have a bit of a rapport with

Donald Trump. They are both conservative, although conservative in different ways. And Donald Trump did congratulate Friedrich Merz on his election win in Germany quite quickly and, you know, welcoming a conversation with him sometime soon. And so there might be a little bit of common ground just in terms of how they talk to each other. And really having a rapport is probably the very first and most important step for

these days in dealing with the US under Donald Trump. So it's possible he might actually gel a bit with Donald Trump. That said, Friedrich Moser has also been a fierce advocate for Ukraine.

and for the need for Ukraine to be supported. And so there might be some points of difference around that. And obviously, of course, if there are to be tariffs on European goods as well. It's not just about hot wars, about military wars. It's also possibly about economic war, certainly about trade tariffs.

How do you think Europe is thinking about this? The tit-for-tat idea that there could be retaliation from the EU if President Trump does impose, as he has said he wants to, 25% tariffs. It's very murky, actually, the rhetoric versus the reality of tariffs out of the Trump White House currently.

And we don't know exactly what a 25% tariff on the EU would look like. We don't know whether that would be all exports that are sent from the EU into the US or only certain sectors or certain products. It's very unclear what exactly we're looking at. And that's why you can see for now that while European leaders and the European Union are saying they will very firmly retaliate

if needed, and they are drawing out plans indeed to do so, and they have lists indeed to do so, that they're holding their fire a little bit because it's very unclear exactly what they're dealing with. We can see, for example, with Canada and Mexico that

tariffs are not being implemented immediately. There's further talk potentially about them being pushed back again. So if you come out too strongly there, you know, do you risk Donald Trump's ire and does he then push ahead quickly on tariffs that he didn't intend to move so fast on, for example?

And so it's really about the game of kind of trying to work out how to manage the situation with Donald Trump in a theoretical sense when tariffs are not yet real, but are possibly coming. And we don't know what those tariffs are.

But certainly we do know that the European Commission has drawn up lists of goods for potential retaliation and have said very clearly they're willing to use them if needed. My thanks to Bloomberg's EMEA News Director Rosalind Matheson for speaking to me and will continue to bring you full coverage of the special European Council planned for Thursday the 6th of March.

I'm Caroline Hepka here 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 ahead to a slew of economic data out of Australia next week. 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. A ton of economic data coming out of Australia this week, including the first reading of the country's economy following the Reserve Bank of Australia's first rate cut since November of 2020. For more, let's get to the host of the Daybreak Asia podcast,

Doug Krisner. Tom, we're looking ahead to the report on Aussie GDP, along with numbers on retail sales and trade. They're all on tap. For more on what we can expect, I'm joined by Swati Pandey, Asia EcoGov reporter for Bloomberg News. Swati joins us from our radio studio in Sydney. Thank you for making time for us. Can we begin by taking a step back

because it was only a few weeks ago that the Reserve Bank of Australia cut the policy rate for the first time in more than four years. So a lot has been happening with the Australian economy. Maybe it's a little complicated. Can you help me understand where things stand at the moment? Yes, it's all happening in Australia, Doug. We had the first rate cut in four years. The Reserve Bank of Australia had been a laggard in this easing cycle. And finally, it delivered everything.

and that was largely driven by inflation report, which showed that price pressures are indeed cooling, which was one of the RBA's biggest concerns last year when it decided to keep rates unchanged. And then come January, the

The data showed that prices are cooling. Consumer sentiment was weak. People weren't spending. And so the Reserve Bank thought it's a good time to start easing cycle. But it was really cautious as well. It sounded very hawkish despite the rate cut and signaled to the market.

that do not expect many more cuts. Maybe it's one and done or maybe one more. So I mentioned that we're going to get the retail sales data. How are consumers in Australia behaving right now in the major cities?

Look, since pretty much all of 2024, consumers were being very stingy. People weren't spending at all. People were waiting for big discounting events like the November Black Friday sales and events like that to actually spend.

However, the government gave everybody tax cuts, which kicked in in July 2024. We also got some subsidies on energy. We got some subsidies on rents. And that basically gave people a little bit more of spending power. And then we also, like I said, inflation came down. So the real purchasing power of people improved significantly.

So towards the end of last year, so kind of November, December, January period, we have seen people spending more. And if you go out in Sydney, it's buzzing. It's crazy buzzing. Pubs, restaurants, shopping centers, everything. People are feeling a little bit more confident.

And I'm sure the rate cut that we got in February will further help that too. So from what I understand, the labor market is holding up very well, right? That's true. So like the U.S., Australia's labor market is pretty strong as well.

Our unemployment rate is hovering in that 4, 4.1 territory, which is really low by Australian standards, also very low by historical standards. That is driven by really strong employment growth. It has surpassed all expectations.

And that is because government demand has been really strong. Government has been spending left, right and center. And that has supported GDP as well as the labor market. So I mentioned we will also get figures on trade in the coming week. Can we talk a little bit about the potential impact on these U.S. tariffs on Australia? Is it likely that there will be any impact at all? Absolutely.

Trade is an interesting topic right now, so quite topical as well. And Australia is a small open economy. One fourth of Australia's GDP comes from trade and 30% of our exports go to China. So you can see how vulnerable we are to anything that happens in the trade side of things.

We have had seven years of trade surplus. So pretty much from 2018 through till the end of 2024, every single month we have had trade surplus. Is that at risk? Not really, because China's demand is

still seems really strong. We've had a period where China put some embargo on Australian products and Australia was able to still sell to other markets. Now, as far as Donald Trump's policies are concerned, Australia does not export too much to the US. We import a lot.

which is good from Donald Trump's perspective. Yeah, but I'm wondering about something like steel and aluminum. I know that a lot of the ores and minerals are exported from Australia to China for processing. And if Chinese demand in those areas were to contract a little bit, couldn't that have...

a knock-on effect in Australia? Yeah, so there is a risk from the cascading effects or reciprocal effects. And, you know, there are a lot of permutations and combinations that people have been talking about. The direct impact so far from people I have spoken to, from economists,

And also the responses we have seen from trade bodies and stuff seems like from a macro perspective, Australia will be fine. Obviously, individual companies who are at the receiving end of these tariffs will be affected. And they have been lobbying as well. And Australia's prime minister and trade minister have been lobbying to get some relief from the US. The last time that Donald Trump was in office,

Australia did win a reprieve. So we're keeping our fingers crossed that that happens again. I mentioned the GDP report that we're also expecting in the week ahead. Give me a sense of what the market is expecting in terms of overall economic growth. So like

I mentioned earlier, Australia's economy has been pretty weak pretty much since the middle of 2023. All of 2024 was very tepid. We are in the deepest per capita slump since 1991.

excluding the pandemic, which means people have been feeling like they are going backwards, even though the economy has been growing. So we have not had a recession as such, but individually people have gone back. So that is...

unlikely to change that per capita recession probably is unlikely to change but this data that we are expecting is for the last three months of 2024 it does look like the economy did pick up and that was driven by consumer spending people feeling more confident about their finances public demand has been strong as well

government spending. We have election this year too. So some of the spending is driven by that. So together with consumer spending, trade and public

public demand, it looks like the last three months of 2024 were good. And so far, the momentum, it's only been like two months of the year. It looks good as well. Swati, thank you so much for helping us understand the nuances of what's been happening these days in the Australian economy as we look ahead to this week's ECOdata. Swati Pandey, Asia ECOGov reporter for Bloomberg News, joining us from our studios in Sydney.

Let's turn next to China and the rally that we have seen lately in text talks. So far, these gains have far surpassed those of their American counterparts. Bloomberg opinion columnist Chuli Ren has been writing about the Chinese alternative to the Mag7. She's in our Hong Kong radio studio. Chuli, it's always a pleasure. Thank you so much. How would you describe China?

What's been happening with Chinese tech right now? Well, deep seek really has changed the perception of Chinese investors. They do feel, I mean, going back, like we know that Hong Kong, mostly Chinese companies, right? They are deep value traps. After Beijing's regulatory crackdowns on big tech and the whole property bubble burst,

like the Chinese shares are very cheap. But Deepsea basically said that, you know, China is not just a manufacturing powerhouse. It's also good with the software and digital stuff, right? Like Deepsea does generative AI. And the

people didn't really expect that a small unknown startup, even to the Chinese until a month ago, could do so well despite all the export controls. And that really fired up. And then what we are seeing is that, you know, the tech stocks, the software companies, they are doing very, very well. And there is a sense that China can be a growth market again. In the latest column that you authored for Bloomberg Opinion, you write that

A Chinese alternative to the Magnificent Seven arrives. And I'm wondering whether you're really focused on a lot of these e-commerce names that we hear so much about, like Alibaba, Tencent. Yes.

Yes. One thing, though, is like a lot of it is about positioning, like global asset managers positioning. Coming into this year, everyone is overweight on basically the big seven tech stocks, right? The so-called the notion of U.S. exceptionalism. And everyone agrees that the U.S. stock market is overvalued because everyone

Just simply because so much money has been coming in. And there is this genuine need to diversify. And now the question is, where do you diversify to, right? Like China tech stock is one story. Another story is European stocks. They have been doing quite well as well. And there is expectation that Donald Trump, however you like it politically or not, could propel peace over Ukraine, which means that it could be good for European economies, especially Germany.

You know, Beijing seems to have kind of changed its attitude where some of the big tech stories in China are concerned. I'm thinking back to the meeting a few weeks ago that Xi Jinping had with some of the leaders of these big companies. And I'm thinking of Jack Ma in particular. Has Xi Jinping changed his attitude when it comes to big tech?

He has to because, believe it or not, just because China's economic outlook is not so good, right? Like the big tech, the big e-commerce platforms, political fortunes actually are improving because they actually soak up a lot of employment, right? Like young people, the unemployment rate for young people in China is very high. And if

young people have no jobs they could become delivery workers unfortunately or like they could be Uber drivers in China that would be Didi or they could set up a small e-commerce shops selling stuff or they could be influencers and I think Beijing does recognize that these big platforms they are job creators and they need to be nice to them. When you look at valuation you're a financial analyst by training what do you see when you look at some of these companies

Chinese firms that trade in Hong Kong? Everything is relative. I mean, Tesla trades at over 100 times forward earnings. Xiaomi and the BYD, they both do EVs. They trade at roughly 40 and 25 times. And relatively speaking, everyone else is cheap compared to Tesla, right? And it's not just that. I

A lot of Chinese feel that Elon Musk has been very distracted lately and then that he's not paying attention to Tesla's business. And that opens a window for Chinese EV makers. And in fact, like a lot of EV makers, they are adding like a lot of like advanced technology.

Shuli, thank you so much. It's always a pleasure. Shuli Ren, Bloomberg Opinion columnist, joining us from our studios in Hong Kong. And 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, 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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