This is Bloomberg day Break Weekend, our global look at the top stories in the coming week from our day Break anchors all around the world. Straight ahead on the program of busy week for investors on Wall Street, Apple, Microsoft leading the earnings cavalcade, and we'll also get a FED decision and the January jobs report. I'm Tom Busby in New York.
I'm callin Hedge in London, where we're looking ahead to the Bank of Eglins first rate decision of twenty twenty four.
I'm Ryan Curtisy in Hong Kong. We look ahead to China's BMI so weather recent support measures. He can turn the tide in the Chinese too.
That's all straight ahead on Bloomberg Daybreak Weekend. The business news you need to wrap up your week, available on Apple, Spotify, the Bloomberg Business Appen everywhere you get your podcasts.
Good day to you.
I'm Tom Busby. We begin today's program with a very busy week ahead for earnings on Wall Street. We'll hear from more than one hundred companies in the S and P five hundred with big tech leading the way. Results from Apple, Microsoft, Amazon, Alphabet and Meta Platforms, among others.
For a closer look at.
What to expect from the two three trillion dollar giants Apple and Microsoft. We're pleased to bring in anurag Rana, senior tech analyst with Bloomberg Intelligence, now anorog. Let's start with Apple, which has been a lot of headlines lately for its new Vision Pro mixed reality headset, trouble with the smart watch, app store commissions, challenges for the iPhone sales in China. So what are you expecting to see from Apple's Q one on Wednesday?
Listen. I hope they give some good news about China because, as you said, you know, for I mean, it's an amazing company. But all I can say is in lust two months, all I've heard is just negative news come out for Apple. So it's a you know, for their sake, I hope they come out and give some good comments about China and they can you know, grow the smartphones in that particular market, because that is the single biggest factor that can dictate how they're going to grow this year.
So that's that's that's forefront on our mind right now.
Well, we did get a surprise to the upside though for twenty twenty three in iPhone sales in China though, didn't We yes, But.
At the same time, I think expectations were so low. But you know, I still have to see how things shape up in twenty twenty four because you know, we have seen that Quahwei's phone was doing pretty well around the holidays, so we you know, we still need to figure out how December shapes up.
And how about iPhone sales everywhere? Everywhere else but China.
See the problem with everywhere else is and I'm going to talk about developed markets. You know, markets like the US and Western Europe, it is relatively mature or I would say stagnant. So when you see those markets, the install base of the number of people to have phone, that's only going to grow gradually, let's say in the rate of about two to three percent. That's not much to really, you know, boost the top line of the company.
It was really China as the growth growth engine right now because when you look at the number of units there, China has about one billion smartphones out there. Apple has an you know, about an eighteen percent market share or somewhere and that range. So we still have a long way to go for Rabert to grow in that market.
And I think that really was was, you know, my hope that if they can continue to grow well in China, then the next big market over the next three to five years is going to be India and so forth. So that kind of gives you like a ten year growth driver. But if China's going to slow down, you're not going to see massive, massive growth there. Then it brings down the growth rate of the entire company.
Yeah.
Wow, Well another possible generator of revenue the Vision Pro mixed reality headset. What not yet, but there was a burst of enthusiasm when when pre orders came out just this past week.
But what do you see there?
Yeah, it's three thousand and five hundred dollars. I mean, it's not a needle mover to me because you know, to be very honest, how many how many units can you sell any year? Let's say you sell half a million units, that's about one billion dollars or one and a half billion dollars in sales. So it's really not it's not something that I think it's going to add to the big top line of the company. Because remember
Apple's revenue bases four hundred billion dollars. So even if you can go out and sell let's say one million units, it's not one million is way above anybody is expecting. That's like, you know, one percent of the revenue of the less than one percent of the revenue of the total company. So it's it's a lot of good discussion. We'll have a lot of fun when it's out there and people are going to play around with it, but it's really not a needle mover when you look at some financial analysis.
And another hit that Apple's taking is the regulatory challenges to its commission on it to app developers on the app store. What's the latest there, because that could yeah billions, right.
Yeah, yeah, that is I think the single biggest shoe right now. It's just everything that's legal, legal challenges and regulatory challenges around their app store and around the services business in general. I mean not just the app store. You know, the money that they receive from Google. There's a lot of discussion around it, and I think that is something that we spend most of our time looking into. We recently had a webinar topic talking about this topic.
We have a podcast on it, so we you know, we this is a this is a serious, serious stuff because not is remember one thing. A dollar that you generate on the app store probably has operating margins of seventy five percent. This is very high margin business. So if there are issues around you know, how much fees can they charge, how much it's going to go down, all sorts of stuff that really does have you know, hamper not just the top line revenue, but also the profitability of the company.
Oh boy, well, now let's move to Microsoft then, which has made big bets on artificial intelligence and cloud computing, and they see need to be paying off pretty well.
What do you think?
I think? You know, they are probably one of the better positioned companies in technology right now in you know, I would say in a holistic way because it's they have so many businesses, but the really big driver, at least for the near term, is going to be their cloud infrastructure business. Now, if you look at you know, open ai as a company, open AI's back end is Microsoft's cloud infrastructure, so you use a lot more check GPT. Microsoft makes more money off of it. So that's that's
the way you want to think about it. Last time, when their cloud infrastructure numbers came out, they had about three hundred three percentage points contribution from AI in general, we think that number climbs throughout the year. That's an area where we are most optimistic that it is going to lead to a good recovery for Microsoft's organic growth rate in the second half. We have already seen from you know, results from IBM that things are actually looking
rosy for the tech industry and videos done well. TSMC talked about a good year this in twenty twenty four. So we feel confident that, you know, Microsoft growth rates will improve as the year progressive because when you look at overall technology spending, you know, companies have been under investing for the last two years. You know, they really did well the five years before that, but you know, we have seen a pause in the last two years.
So we think twenty twenty four could be the year where we see a revival in tech spending.
Well, let's talk just for a minute about Microsoft's gaming division and reports last week that it's laying off nearly two thousand workers at its recently acquired Activision, Blizzard unit, and Xbox unit. Is this just a redundancy of jobs or is it indicative of more trimming down at Microsoft?
Now it's just I mean, normally when you make a very large acquisition. They bought Activision for sixty nine billion dollars and Activision at the end of twenty twenty two had thirteen thousand people. So when you look at the article, I saw that that said they had about combined about twenty two thousand people. So you would expect some redundancies from an acquisition. That's the cost energies. Whenever you have duplication,
you will see a little bit of that. I don't see that as an indication that the business conditions are bad. This is more so right sizing and changing demondgin structure of the company.
There is a lot to look forward to.
Well.
Our thanks to anaag Rana, Bloomberg Intelligence Senior Technology analyst. Thank you for joining us. We now turn our attention to the US economy. Two big events this week, a two day FED meeting and a decision on interest rates. Also the January jobs report, and for a preview, let's bring in Michael McKee, Bloomberg International Economics and Policy correspondent. Michael, thank you, and well let's start with that FOMC meeting.
And after three meetings in a row of leaving the federal funds rate unchanged, what are you expecting to see on Wednesday.
I'm expecting to see the Federal Open Market Committee leave infrastrates unchanged four meetings in a row. We went into the blackout period saying that they basically were looking at not moving interest rates because they're waiting for more data and so they're not going to surprise the markets that we've gotten a lot more data that are interesting, but they're not anything that would move the Fed to any
kind of emergency change in plans. But the question that everybody's going to be asking is what about the March meeting or what about the May meeting?
Jay Poll not going to.
Really answer those, but will he push back against the market expectations of at least cut in May.
Well, let's talk about the data. Then that will lead to what you expect to see unchanged. About the economy, we got some pretty good encouraging news last week about inflation, about jobs.
Yeah, the economic data that came in during the last week, during the blackout period when we can't ask them about it was extraordinarily strong. Fourth quarter GDP at three point three percent, much higher than the anticipated number and not down all that much from what we saw in the
third quarter. Consumer spending with strong business investment picked up, and those would make the argument that the Fed wants to keep interest rates unchanged for longer, except that the inflation numbers have continued to go down, which suggests that maybe they can cut So now it gives them even more reason to say, we want more data to confirm what we're seeing, because if they had to make a great decision this time, it would be a close call.
And that more data that they're going to get we're going to see on Friday.
Yeah, and that's kind of interesting because we're going to see a slower job creation number, at least according to what the Bloomberg consensus of the survey is one hundred and sixty eight thousand. Now we'll see next week when we get some additional data from ADP and the ism numbers whether that changes people's But the unemployment rate is expected to rise a little to three point eight percent
now the Fed is predicting that. But the wild card here is remember all those storms we had earlier in January, did they keep anyone from going to work? That's going to be an interesting question because you basically only have to show up or zoom in. I guess once during the week and you're counted as employed. So some people think that we may see this lower number because we had weather interruptions. But it's pretty hard for weather to
make a huge difference in the overall number. So it's going to be interesting to see what we get and then what the Fed thinks of that. They want to see a slow down. If we don't get it, then that adds weight to the idea of higher for.
Longer, higher for longer.
Well, some jobs, certainly, I mean January is always volatile, as you've said before, but some jobs like housing, you have a big ice storm, I mean that just shuts down for two weeks.
Yeah, well, it's going to be I hate to say interesting again because I've been saying that a lot, but it's going to be interesting again because we also got new home sales last week and they were stronger than anticipated in the month of December. But people don't go out looking for houses when there's a lot of snow on the ground or weather is bad or something like that.
So they just had the holiday.
So we may see a weather effect on that, and also on construction building starts, because it's hard during a blizzard to start digging a hole and putting up two by fours. So there may be some weather affected data, but it won't it won't be decisive for the fit.
Oh a lot to look forward to.
Well, our thanks to Michael McKee, Bloomberg International Economics and Policy Correspondent, and coming up on Bloomberg day Break weekend, we head to Europe for a preview of a policy decision coming from the Bank of England.
I'm Tom Busby, and this is Blue.
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 get an update on the health of the Chinese economy. But first, after the ECB and the Bank of Japan, investors will be looking for their first clues about the path for interest rates from the Bank of England in the coming days. Markets are expecting the first move in the summer, but Governor Andrew Bailey is not convinced the
fight against inflation is over just yet. For more, let's go to London and bring in Bloomberg Daybreak eurobanker Caroline Hepger.
Tom the latest inflation figures for the UK showed an optic in December, complicating the path ahead for the Bank of England. Whilst the BOE was the first major global central bank to start hiking interest rates, some analysts think that it'll be the loss to start cutting. The question of when is still the main preoccupation for markets, though we've been discussing this with many of our guests on
Bloomberg Radio. Now here's what Charlotte Ryland, the head of investment at CCLA Investment Management, told us about her expectations for the Bank of England decision.
Clearly they were a little late to the party in terms of sort of pushing the rates up. The UK economy seems to be somewhat more inflationary than others, and I imagine part of that is, you know, some of the dislocations we've had from the back of Brexit, the sort titled labor market that we have, which to do with migration as well, so you know, it's been a more difficult position for them, and it's clearly a much more vulnerable economy in terms of you know, the consumer
as well. So it's a delicate to typrope theicult a balance between the inflationary pressure and not completely derailing the economy.
So that's Charlotte Ryland's view. Now let's hit from Sam Linton Brown from BNP Parryber. He's talked to us about how the Bank of England is in a different position to other major global central banks.
The Bank of England potentially could prove to be a little bit more of an idiosyncratic narrative this year because one could argue that the stickiness of inflation will prove to be more persistent than elsewhere. Our central case is that the Bank of England will begin cutting rates around the middle of this year, cut by one hundred and twenty five basis points. That's not too different to what
market's currently pricing. But I'd say if there's a risk on the three ECB fed Bank of England where they actually end up doing less tightening because of inflation or less easy I should say because of inflation, I'd say it's the Bank of England.
So that was Sam Linton Brown from BMP Parryber and those are some of the views from the markets in terms of the outlook for the Bank of England. On the data front, headline inflation was four percent in December for the UK. The PMI surveys for January brought better than expected readings, but the manufacturing sector still in contraction. So economists do widely expect the Bank of England to hold interest rates at their next meeting at five and
a quarter of percent. So it is going to be the post meeting press conference which is going to have the potential to produce more answers. Perhaps. I've been discussing that with our senior economics reporter, Philip Aldrich. I started by asking him what he'll be watching out for in the decision from Governor Andrew Bailey and colleagues.
Yeah, and I mean not just from Bailey, but so the whole nine member rate setting committee will they make their judgment. And the last meeting, which was about the second week of December, three of them voted for rate risers, the other six decided to cold rates. Now, since then, the inflation numbers have come down more quickly than expected. There's been a bit of a question of a few questions about whether we're going to have a brief technical recession.
And these kind of messages or economic signals would suggest that the bankingland needs to start thinking about rate cards, and obviously that's what is happening in Europe at the European Central Bank and at the FED. So there is this So although we're not expecting anyone to well maybe one member may vote for a rate cut, we're not expecting the Committee as a whole to vote for a
rate cut. This is going to It's something which which people are going to be looking out for for to see whether the Bank is now sort of following the other major central banks in sort of signaling that there may be a change of direction.
Yeah.
Absolutely, And the Bank of England decision comes fairly swiftly after the ECB interest rate decision. And yet is there a difference, a kind of gap opening up between the position of the UK and the Bank of England and as you say, the FED and.
The ec well, the gap so the gap is it's not on the rate where the rate policy is I mean, obviously bank the Bank of England's up there with the FED and higher than the ECB. The gap is in in the future trajectory of policy. And the Fed has
signaled that they are considering rate cuts. The ECB has, I mean the president of the ECB, Christine la Guard, said that the June May you know, there may be rate cuts starting in the summer, and obviously the market is now pricing these rate cuts in for all three central banks. What we are not, what we've not heard from the Bank of England is any kind of hint that they're going to move in this direction. So the last communication they had was all about, you know, we
need to worry about potential for further inflation. We've got to be vigilant these kind of you know, further tightening maybe on the cards. Three people did vote for a rate rise, so it's so there. So their language is kind of out of step with the sort of consensus thinking at the moment that you know, there have been you know, wages are still being proving a little bit
stronger than we're expected. You know we've had we've had in the very later stad we've had the pmis the business activity numbers that they have been relatively strong, and so that so, you know, markets are beginning to think that there's not going to be just masses of rate cuts over this year. But the bank has got to start signaling that this this is something that is on the agenda now.
In terms of the UK and you know, whether it's in a special position or in a different position to others. The Red Sea. How do we think about the inflationary pressures coming from the Red Sea? Obviously the UK and with the US and taking action against you know who, the militants, you know, which is the thing that is threatening shipping. Does that particularly affect the UK more than other places?
No, the sort of the immediate effect on us is the direct effect on us is not is not enormous. We don't we There was I can't remember the specific numbers, but there was some economic study which showed that we don't actually get that much of our imports directly directly goods imports that are directly coming through the Red Sea and the Sewers Canal, but there is this sort of second, second round hit. So the stuff we are importing is coming from countries which are going to be feeling the
effect of this or to a much larger degree. It clearly is a risk. I mean, what we learned through the COVID pandemic was that when supply chains get disrupted, that can be an enormous cost to business, and that that cost does get passed on and we have seen indications of that and as so in the stronger PMI data that came out this week. There was also evidence that costs have started to rise again and the and
the acceleration in cost was notable. Now you could you can draw the draw the correlation the causation from the sort of red sea disruption in the HUTI. So it's it is, it's definitely on something which people are being their alert to the to the risk. And you probably we're already potentially going to have a little increase in the inflation numbers for January which are not out yet.
So if you have that and plus these worries about the supply chain disruption, that you could start to get people getting a bit nervous about the inflation beginning to pick up again.
There's quite a big mismatch between market expectations for right cuts from the Fed and the FED signaling bit sort of less for the ECB. What's the picture for the mask could expectations around the Bank of England versus what we think they you know what they are planning and saying.
Yeah, so it's about a percentage point cut so for this year and those cuts to start in May or June, depending on I think it's around June now. But the that is that is probably stronger than the Bank of England would like. Now we are inflation is likely to hit around two percent April May June time because we're going to have a big drop in the energy price cap and that that that fall in April, which it's a staggered three monthly reset, that fall in April is
anticipated and it's expected to deliver this. You know, we finally back to inflation target. You know, there are concerns that it could then start accelerating later on, but the Bank of England is not going to want to just say, oh, we've hit two percent, right, job done, We're going to get back down to you know, three percent super quick.
There.
You know, there are underlying pressures. You've got so and core inflation which is still proving quite sticky.
We also have to think that this Bank of England rate decision comes just a little bit ahead of the budget the beginning of March. Let's think about what the Chancellor is preparing to do. A lot of emphasis, a huge amount of pressure on the government to cut taxes from within their own party, from the sort of thinking that Suna can hunt have. I mean, how are you thinking about that? Could that be inflationary. How does that play into the economic picture for Britain.
So for the Bank of England, they're not allowed to sort of take government policy until it is government policy, so people can assume what it would be. But so we've got the March the sixth budget. You would expect it's it's sort of it's a tried and tested political playbook that you would cut taxes, give consumers and households a boost and make everybody have there's a bit of feel good factor going into the election and they've obviously
lagging in the polls terribly, so they need something. So I mean, i'd assume if at the moment it looks like the change in the sort of the rate forecast has probably given the Chancellor something between five and ten billion, I think Bloomberg economists Dan Hanson's got those sort of numbers of headroom, and so I mean, I would assume
he's going to spend every penny of his headroom and more. Now, partly the motivation for this is not just to give people tax risers and make everyone feel better, but it's also to draw this dividing line, this battleground with labor
and the more and the more money they spend. The more money that the Conservatives spent within their fiscal rules they they can, then they make it much more difficult for Labor to press ahead with their sort of twenty eight billion green investment plan without either having to ramp borrowing up much more, or cut taxes or do something else. And so it because of that commitment that the labor has made, it becomes more it becomes much more tricky
for them. The smaller the headroom is that the government leaves them, and so then their then their manifesto commitment start to look a bit sketchy. So I mean, for two reasons, for the feel good factor, for the political battle. I'm expecting some big tax cuts, and obviously you know, beyond that there will be some inflationary effect there. But it's not I don't think that anyone would suggest that it's going to be, you know the same as the Ukraine,
the post Ukraine kind of those kind of fears. It might, it might slow the rate of rate cuts down, but it wouldn't, you know, halt it.
There is the nagging voice, I'll put it that way, of the ifs the Institute for Fiscal Studies say the government must be honest whichever stripe it is, that the next government has to be honest with the state of the public finances. I mean really a very kind of strongly worded criticism that the tax and spending plans look immensely difficult for Britain and that you know, the plans have to be laid out clearly to the public.
Yeah, you know they've made this. I mean it's not the first time that there are just a government to be honest about the future trajectory for public finances. But the absolutely beyond the election there as I think it was obil's chair Richard Hughes said that there is no detail on the planned spending cuts and this behind spending cuts for the departments other than health and maybe one or two other protected departments, we're effectively a return to austerity.
There's going to be real terms cuts and that in an environment where everything is already sort of all the public services are already crumbling to a degree, is it Is it really conceivable?
So that was our senior economics reporter Philip Aldrick speaking to me, and we will have of course full coverage of the Bank of England's great decision on Thursday here on Bloomberg. I'm Caroline Hepget here in London. You can catch us every weekday morning for Bloomberg Daybreak. You at beginning at six am in London. That's one am on Wall Street.
Tom, all right, thanks to Bloomberg day Break. You're a banker, Caroline Hepgar And coming up on Bloomberg Daybreak weekend, we take you to Asia for a very busy week on the economic front. There, I'm Tom Busby and this is Bloomberg. I'm Tom Busby in New York with your global look ahead. At the top stories for investors in the coming week. China struggling to shore up its economy and halt a six trillion dollar stock market route despite the best government efforts.
Now with more eco data coming out in the coming days, Bloomberg Daybreak Asia co host Brian Curtis takes a look at the overall picture of the Chinese economy.
Tom, we look forward to China's official PMIS in the coming week. It might be a little early to see a bounce in economic activity in China, but recent measures rolled out by the Chinese government have sparked a little more excitement about Chinese assets. The PBOC will for instance, cut the bank's reserve requirements by fifty basis points on
February fifth. Bloomberg Economics called that a forceful response to a slowing economy, and that the Central Bank was likely to cut interest rates this quarter as well, all of which Bloomberg Economics said would give a positive jolt to confidence. Joining us for some insights about the challenges that China is facing and getting the economy and the markets rolling again is Jill deesis China Economy and Government editor at Bloomberg. Jill.
Earlier I spoke with Bloomberg economist Eric Chu, who covers China and Hong Kong, and just to give us a little bit more spice in our discussion, I wanted to play some comments from him. I asked him if this might do the trick to turn the economy around.
We think the positive move probably it's already too late, you know, even in January. I think many of the markets, including US, were expecting Central PBOC to cut the MPHO raid last week, right, but they didn't deliver. I think that's a big disappointment for the market and leading further leading to you know, the store market tumbo over the
past week. So I think that might be one of the reasons, you know, triggering the PBOC, you know, to hasten the moves and trying to also give more confidence to markets.
Eric j again from Bloomberg Economics, and I'm sitting with Jill Diesis, who's China Economy and Government editor at Bloomberg. So what do you make of that comment that perhaps it's a little bit too little, too late.
Well, I think that at this point the whole thing with this economic slowdown really comes down to confidence, right, confidence in the economy, confidence among investors that the government can really turn things around. And I think that's a very fair point. I mean, look, we've seen over the past year several measures that the government has taken to try to get activity going again, to try to restore confidence.
We saw a very unusual sovereign bond issuance from the middle of October of last year, trying to you know, get that out to fund more infrastructure projects, more construction, get things going again. We saw various measures to try to help restore confidence in the property sector, whether that included you know, lowering some mortgage rates, trying to encourage people to start buying homes again, incentify them in that way, and we really haven't seen anything that's led to a
more meaningful turnaround in what's happening in the economy. I think that's really just been underscored over the past few weeks with how much more of a sell off we've seen in the stock market, right, I Mean that's sort of really really underscores that issue with sentiment here. So it's difficult to see what exactly the government can do to restore that level of confidence, but it does seem clear at least, or the at least the message that investors are sending is that what has been done so
far isn't enough. And I guess we're all just not really sure where to go from here, given.
The property crisis has cut pretty deep. I mean, it's the main source of wealth for a lot of Chinese households. Is it the type of thing that we think could be turned around quickly? And is it just that investors should be more patient?
Well, I think at this point the Chinese economy is really kind of undergoing a pretty structural change, right, And I think that a lot of top polity makers have acknowledged that that the sector real estate, which used to be you know, used to comprise a quarter, if not a third, of all GDP in the world's second largest economy just isn't really ever going to get back there, and so there's a lot of focus among top officials about what exactly needs to become these new drivers of growth,
whether that's putting more into new energy. Electric vehicles is a really promising area, of renewables is a really promising area, But obviously that kind of thing takes a lot of time. I think that if you're an investor, you want to see more progress on getting activity going again. You want to see some indication that you're at least going to
get households to start spending again. But ultimately, yes, I think it's difficult when you're seeing some of these more immediate issues with a deep fallout from the property crisis, you know, not necessarily translating into an immediate fix, and knowing that those longer term transitional phases are still obviously quite a bit of a ways off.
And there is also a little bit of contrast between some of these measures that have been put in place or called for by the government and then you know tightness from the regulators. For instance, when the PBOC made the announcement about cutting the triple R. We also had another story on the Bloomberg Terminal about how Chinese officials are being told in the provinces that this belt tightening posture by President Shijen Ping is here to stay and that leaders are just going to have to get used
to it. The norm is going to be frugality. Now that's not necessarily something negative, but it contrasts a little bit with wanting to get the animal spirits going right.
I think that those do contrast with each other, but they're ultimately still two different strains. So from the regulatory perspective, yes, we've seen obviously over the past few years, an incredible crackdown on various sectors, reigning in big tech, reigning in, you know, the education sector, all of these different areas. I think that that's you know, sort of one one
piece of this. Obviously, property is another part of that, going back to, you know, here of the three red lines, and we've seen sort of this fallout in terms of how much confidence investors, businesses, Foreign investment in particular has really sort of eroded over the over the past few years. I think that you know, the government has also has tried to send multiple messages saying that, you know, they want to be a little bit more you know, discerning
about regulatory policy. They don't want to catch as many people by surprise. But they're obviously still kind of struggling with that, right. I mean, you just have to go back to December, so not too long ago, when there was a surprise gaming regulation that was announced and then caused a pretty severe stock drop for ten cents and some other major tech giants really sort of sent some
jitters through the markets there. So I think that on that side of things, the government still hasn't quite figured out how to guide people through this idea that the regular Tory crackdown is easing up, or at least that they're going to better telegraph how exactly some regulations are coming in place. I think that on the monetary policy side, at least, which this is what you saw recently from the PBOC, is there actually in a really difficult position
as well. I mean, Eric was just saying a couple of minutes ago that they disappointed earlier in January saying that they weren't going to cut policy rates even though that was very widely expected. And now they're trying to. They sort of front ran this triple R cut, this reserve requirement ratio cut. We really haven't seen that ever before.
For well, and this was more dramatic fifty basis points say, even when they were thinking about cutting the interest rate, it was only like ten basis points, right, and then we got nothing. So it's a little surprising. It's at a little bit underwhelming, I think two investors. However, in this past week we saw a little bit of a pickup in appetite four Chinese assets. Is it sustainable?
Well, I think we have to see where else the PBOC really goes at these measures, right. I actually thought what was really interesting from this PBOC press conference with the governor was not just that you see this reserve requirement ratio cut being front ran bigger than expected, but also it really seemed like they were focusing a lot more on structural policies to kind of guide credit into
more of their favored sectors. So, in addition to the triple R cut, Pengong Sheng, the PBOC governor, also announced that they were cutting some re lending rates so that they could, you know, better benefit make it easier to loan to I think the agricultural sector was one. They were setting up a new credit market to promote credit for green divisions, elderly care, that kind of thing. So you're actually seeing in some ways the Central Bank go
all the way back. You know, you'd have to go back several years, I think to this idea that they're more interested in using monetary policy tools to direct credit themselves to certain sectors. I don't think that's something that we've really seen from the Central Bank in quite a while.
They brought in the use of commercial property loans for developers. Now this would be new money, I guess, being able to go to developers to help them pay off some of their debts. Is that consistent with the previous theme.
Yes, well, I think it's consistent with the direction that it seems that the Central Bank has kind of been going, at least over the past few months. So again, you know, we saw much longer term change or shift from the PBOC to build more of an interest rate cord or you know, addressed policy rates rather than some of these other structural policies. I think that's begun to change over the past few months. We didn't one thing that we didn't see out of this recent press conference with the PBOC,
was you know, turning to other types of tools. There's there's this one called pledged supplemental lending, which is essentially funneling money into policy banks so that they can you know, help fund you know, property related sectors in particular. We didn't see that too much, although they have been making use of that tool recently. So I do think that, you know, even if you're seeing a shift, something that's been happening at least over the past couple of months.
Let's go back to Bloomberg economist Derek you for a moment. I asked him about the mix that we've seen between fiscal and monetary stimulus.
The monetary easing itself, you know, even interestury, CRD triple ar cuds. Yeah, that's give you something, but not that huge. I think our view is the fiscal side needs to do more compared to last year, because I think even PBOC steps up easing, it's still to be you know, incremental. Somebody is calling for PBOC to cutting trity to zero, right, so, but I don't think people are going to move that aggressively. So still on the monetary side, we don't expect a
huge boost to the growth. More it's from the fiscal side, and fundamentally, I think even with those more physical stimulus that's probably still not enough. I think fundamentally it's the policy direction. It's a policy you know, orientation that's most important for the market right now.
So we're talking about some monetary stimulus measures, some fiscal stimulus measures, and then communication measures are building confidence. Of the those three, what do you see as most important, Jill.
I will say on the fiscal stimulus side, that's obviously I think going to become more important this year. There's a growing consensus among a lot of economists, including obviously Bloomberg Economics, that there does need to be more fiscal stimulus. Maybe we aren't going to see the type of massive stimulus that we saw in the aftermath of the financial crisis, where you just see tons and tons of money being pumped into the economy, but we do know that, you know,
officials are discussing various measures. Bloomberg News reported very recently that there's some debate over the issuance of some additional special sovereign debt to sort of fund some infrastructural projects. So there are funding avenues there, But ultimately a lot of those reports haven't really moved the needle much, right, So I think that brings it back to this idea
of that communication issue. I mean, whatever policymakers are saying right now, clearly markets aren't really taking that as you know, any kind of you know, reason to be more confident in the long term. You might see some little jolts here and there in terms of markets, maybe the Pongong Shing comments, you know, just just recently did boost you know, equity markets for you know, a couple of hours or
a day or what have you. But yes, I think that it's more about that idea of how do you project that level of confidence in that policy direction, how do you present a clear vision to the public, to your investors about where this economy is going. That's really what we need to see here.
Jill, thank you so much for joining us. Jill desis China Economy and Government editor at Bloomberg. I'm Brian Curtis along with Doug Chrisner. You can catch us every weekday here for Bloomberg Day Break Asia, beginning at nine am in Hong Kong and eight pm on Wall Street.
Tom Well, our thanks to Bloomberg's Daybreak Asia co host Brian Curtis, and that does it for this edition of Bloomberg day Break Weekend. Join us again Monday morning at five am Wall Street Time for the latest on markets overseas and the news you need to start your day. I'm Tom Husby. Stay with us. Top stories and global business headlines are coming right