Daybreak Weekend: Tesla Earnings, European Banks, Trump-Albanese Meeting | Bloomberg Daybreak:…
Summary
Tesla Earnings: Tesla reported record EV and battery storage shipments, driven by the expiration of the $7,500 EV tax credit in the US, but future quarters may see a slowdown as subsidies phase out.
EV Market Challenges: The EV industry, including Tesla, faces near-term challenges with expected weaker earnings and cash flow, but long-term opportunities exist with potential market share gains and price competition.
Netflix Revenue Growth: Netflix is anticipated to report double-digit revenue growth, driven by a strong content slate including hits like "K-pop Demon Hunters," but future guidance will be crucial for stock performance.
Content Strategy: Netflix's content strategy focuses on a mix of original, licensed, and reality shows, with significant investments in original content driving viewership and engagement.
European Banks Outlook: European banks are expected to follow the strong performance of US banks, with investment banking and retail lending growth, but face challenges from potential interest rate cuts and geopolitical risks.
Barclays Expansion: Barclays is investing heavily in its US operations with a $1 billion refurbishment of its New York trading hub, signaling a commitment to expanding its presence in the US market.
UK Banking Policy: The UK banking sector is watching for potential deregulation and the possibility of a windfall tax, which could impact profitability amid ongoing economic adjustments.
Transcript
How many vendors does it take to meet all your organization's food needs? Just one. Easy Cater, the workplace food platform that lets teams order from a huge variety of restaurants, over a 100,000 nationwide, all through a single vendor. In addition to all that variety, Easy Cater also gives you full visibility of your organization's food spend with invoicing, centralized reporting, and seamless integration with expense management systems, all on one platform. Easyater, your business tool for food. To learn more, visit easycater.com/mpodcast. >> This holiday season is likely to be a roller coaster for logistics and manufacturing, but having the right staff in place can be easy when you choose Express Employment Professionals. They can handle everything to ensure you have the right size contract workforce. Go to expresspros.com. Solve your workforce challenges when you choose Express to support your hiring in a variety of roles, including two of our biggest areas, manufacturing and logistics. Visit expresspros.com today. That's expresspros.com. Running small and medium-siz businesses is hard work. Business owners need to be sure their ads are working just as hard as they do. Amazon streaming TV ads makes your marketing dollar work harder. With Amazon ads, trillions of insights help small and medium businesses reach the right customers that matter. Your ads will show up during the shows the people are actually watching and measurement tools show you what's working the hardest. Gain the edge with Amazon ads. [Music] >> Bloomberg Audio Studios podcasts, radio, news. 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, we'll get you set for a couple big earnings reports from Tesla and Netflix. I'm Nathan Hager in Washington. >> I'm Caroline Hedgar in London where we're looking ahead to European Bank earnings, including from Barkclays. I'm Doug Krnner looking at how rare earths will be a topic when Australia's prime minister visits the White House in the week ahead. >> That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 1130 New York, Bloomberg 991 Washington DC, Bloomberg 929 Boston, DAB Digital Radio London, SiriusXM121, and around the world on Bloombergradio.com and the Bloomberg Business App. [Music] Good day to you. I'm Nathan Hager. We begin today's program with earnings. 90 companies on the S&P 500 open their quarterly books this week. We want to focus on two of the big ones, Tesla and Netflix. Here to get us set for what to expect from the EV giant this week is Steve Man, senior autos analyst for Bloomberg Intelligence. Great to have you with us on the weekend program, Steve. I mean, this is the quarter where we got that record delivery number, right? Wasn't it close to half a million vehicles sold? What's that going to mean for the numbers you're keeping an eye out on? >> Uh, thanks, Nathan. Yeah, they did have a record uh shipment for the quarter on EVs, but they also had a record shipment on their battery storage business, too. Uh I mean yeah I mean not not a surprise because look the 7500 tax credit EV tax credit it went away at the end of September uh in the US. So there was a lot of consumer coming in the market taking advantage of that $7500 credit and bought a lot of EVs. So you know we saw record EV sales for Tesla. They're not alone. Um GM also had a record sale. uh Fords uh if it's not records almost record sales as well. So the the industry really got a boost. Um but you know I think the most important thing now is what do we expect uh in the coming quarters uh which is you know a slowdown. >> Yeah. So what do we expect given that these uh subsidies are going away? I mean it stands to reason that we're probably not going to see these kind of blowout delivery figures in quarters to come, right? >> Yeah. Absolutely not. um you know two two ways that we're looking at this. First in an air term definitely some challenges uh for Tesla as well as the rest of the EV market. You know Rivian and and Lucid to to name a couple. Um you know there's been a lot of pull forward demand uh into the third quarter. Uh so you know expect kind of weak earnings uh you know weaker cash flow in the next couple quarters uh for for these EV makers. Um but long term it's going to be an interesting market because uh without the 7500 you're definitely going to have less buyers. There will be buyers but less buyers uh in in the marketplace and there are a lot of products out there like in the last 2 three years with the Biden administration pumping a lot of money into the EV market uh every automaker you know rolled out new products expanded capacity um so there's going to be a lot of new EVs out there uh we actually expect price competition right price competition and wouldn't be surprised there's some consolidation in the marketplace as well we started to see that. Uh GM just uh uh announced they're going to book $1.6 billion in write-offs on EVs. Uh we expect they probably going to have to rightsize their product portfolio as well. >> Yeah. So we saw the new products as well, specifically on Tesla's side in those uh finally lower priced models of the Model Y and the Model 3. What could that mean for Tesla's outlook and and for their margins as well? Yeah, it you know if you think of the uh the flip side, it could be an opportunity right for Tesla, they are the largest EV maker in in terms of sales uh globally and in the US uh one of the biggest um definitely biggest in the US. So it's also an opportunity for them potentially gain market share. You know they are the you know one of the very few profitable EV makers uh in the world. So launching those products for broader appeal makes sense. Uh if you look at social media, there's actually now talks about them, you know, revisiting the earlier plans of of rolling out uh the model 2, which is even a cheaper vehicle. So uh if they can do that, they they may able to gain market share. >> You mentioned the record for battery storage uh in Tesla's latest quarter as well. Of course, there's a lot of ambition in this company, not just from EVs, but from the autonomous vehicle side, robo taxis. Where should the focus be for investors as we get ready for this quarter to uh to be explained? >> Yeah, I I think uh you know, when they release earnings and on the conference call, uh wouldn't be surprised that Elon Musk will primarily focus on their AI initiatives, right? uh Robo Taxi is probably the the the only business that we have better visibility on on driving the top line and the bottom line. We think that's, you know, that's probably going to come through in 2028. Uh not immediately. Uh you know, they've rolled out uh out, you know, robo taxing in Texas, and parts of California. They're looking to roll it out in in other states, maybe at least two more before year end. Uh but the you know you know the financials don't really roll in until then but you know Robo Taxi is probably the earliest uh uh the business is going to have the earliest impact on on their bottom line. Optimus robot um I think uh it's going to be a while. There's some technical issues behind Optimus Robot. Uh it's going to be hard to convince uh not you know other automakers to adopt humanoid robots. So, you know, any optimist sales or or adoption will probably be more of an internal uh you know, within the confines of Tesla. >> All right. Well, thanks for this, Steve, as we look ahead to Tesla earnings later on this week. That is Steve Man, senior autos analyst for Bloomberg Intelligence. Now, let's turn to the other big earnings story we've got our eye on this week. That would be Netflix. The streaming giant opens its third quarter books on Tuesday. And for more we're joined by Githa Ranganathan, senior US media analyst for Bloomberg Intelligence. Great to speak with you, Githa. And uh I guess Netflix is expecting another great quarter. I mean, they've been guiding for something like double-digit revenue growth, right? >> Absolutely. Yes. Uh so you know as we kind of look forward to Netflix uh third quarter earnings one of the things that we want to highlight because Netflix no longer discloses subscriber numbers but the two numbers that you know everybody's looking for especially on the street one is revenue growth numbers and as you just pointed out yes doubledigit growth that's what we're looking for the the magic number for this quarter is going to be 17% uh and of course again we're going to look for guidance for fourth quarter uh consensus is right now expects about 16%. So, you know, double digits, high double digits, high teens, that's kind of what we're looking for. But really, the headline for uh you know, the the third quarter as well as for the second half, I think as a whole, is just the content slate. So, Netflix management uh themselves have kind of referred to uh the content slate this year, especially in the second half, being somewhat of an embarrassment of riches. They've had some of their biggest titles debut on the service. So, we're talking Wednesday, we're we're talking Stranger Things, we're talking Squid Game, all of their biggest hits coming aboard on the platform this year. >> But what's really turned out to kind of be an absolute sleeper hit in the third quarter uh is K-pop Demon Hunters. Nobody saw this coming. >> This was absolutely monstrous, huge. Uh so, we just saw 500 million viewing hours just in the third quarter alone. I think by the end of this year, we're probably going to see about a billion hours. This is their biggest movie of all time on their service. So, just a breakout uh film that has really driven engagement meaningfully. Uh and I think we're going to see that reflected in the numbers. >> So, just given how bonkers K-pop Demon Hunters was for Netflix, is the bar really high for them? if they don't meet the expectations that they've put out there, is that going to put a hurt on the stock? >> So, the one thing I think that we're going to watch for, I think 3Q is definitely going to be strong. Uh the the one number that can probably cause some uh nervousness is going to be if they actually release guidance for 2026. So, last year, the first time that they issued guidance for 2025 was when they reported third quarter 2024 earnings. So the expectation on the street is okay they're probably going to give us a 2026 guidance number. Again remember revenue for this year uh the revenue growth number for the full year again that that the magic word there doubledigit revenue growth it's actually 15%. Can they keep that up? So if it comes in much lower if it comes in lower than I would say 13 14%. Yes that is going to probably cause some nervousness. So yes, talking about that high bar, all of this engagement metrics kind of really playing into that. Uh and then the other metric that we're kind of looking for with Netflix apart from revenue is margin. So this year I think their margin growth is going to be really strong. I think they've they've already guided to 30%, it's probably going to be a little bit ahead of that. They're probably going to raise guidance. So again, next year if they're a little bit softer on that number, uh again, maybe that causes a little bit of a pull back in the stock. What's going to be driving the margins for Netflix in quarters going forward? Is it going to be growth in subscribers? Is it going to be revenue from advertising? >> Yeah, I'm really glad that you brought it up because now that they don't disclose subscribers anymore, it's a little bit hard to get transparency. And again, just for full disclosure, they haven't actually disclosed any hard metrics around advertising either. So, we don't necessarily know exactly what the advertising revenue is. Of course, there have been some guesstimates that it was probably around a billion dollars uh and change uh in 2024. That's probably going to be upwards of two billion this year. Uh but then you're absolutely right. We're expecting a significant ramp up going into 2026. And that is going to be one of the major drivers for both the topline growth as well as uh you know operating margin. So for operating margin, you need strong topline growth, but you also need content cost rationalization. And that's really what we've seen uh Netflix do extremely well. So they're uh you know we're seeing revenue grow, you know, mid- teens levels, sometimes even high teens, but content cost grow only about mid to high single digits. And that's where we're seeing this huge jump in operating margins year after year. >> And when it comes to uh content cost management, where is the focus going to be do you think uh for Netflix? Is it going to be on that, you know, original content, the scripted stuff, or is it going to be uh more reality shows or even more live shows? >> It's going to be all of the above. So, we've seen them really do a very good job. Originals, as you pointed out, drives majority of the viewership uh on the Netflix platform. We've seen that in all of the engagement stats that they disclose from time to time. That makes up about 50 to 55% of their content budget. Uh but you're absolutely right. They have a really nice mix. They also have a good amount of licensed content. Uh you know content that they get from the Disneys and the Warner Brothers and the Paramounts of the World. So they're making very concerted investments across the board. >> All right. Well, thank you for this Gita. Really great having you on with us. That is Gita Ranganathan, senior analyst for US media for Bloomberg Intelligence. And coming up on Bloomberg Daybreak Weekend, we'll look ahead to bank earnings out of Europe, how they may have been affected by rate cuts and geopolitical risk. I'm Nathan Hager and this is Bloomberg. [Music] How many vendors does it take to meet all your organization's food needs? Just one. Easy Cater, the workplace food platform that lets teams order from a huge variety of restaurants, over a 100,000 nationwide, all through a single vendor. In addition to all that variety, Easy Cater also gives you full visibility of your organization's food spend with invoicing, centralized reporting, and seamless integration with expense management systems, all on one platform. EasyCater, your business tool for food. To learn more, visit easycater.com/mpodcast. >> You're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic options plays on the side. The point is, you're engaged with your investments, and Public gets that. That's why they built an investing platform for those who take it seriously. On Public, you can put together a multi-asset portfolio for the long haul. Stocks, bonds, options, crypto, it's all there. Plus, an industry-leading 3.8% APY high yield cash account. Switch to the platform built for those who take investing seriously. Go to public.com and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com. Paid for by public investing. All investing involves the risk of loss, including loss of principle. Brokerage services for US listed registered securities, options, and bonds in a self-directed account are offered by Public Investing, Inc., member FINRA and SIPC. Crypto training provided by Backed Cryptosolutions LLC. Complete disclosures available at public.com/disclosure. >> How can you free your team from time-consuming office tasks? Amazon business empowers leaders to not only streamline purchasing, but better support their teams. Smart business buying tools enable buyers to find and purchase items fast so they can focus on strategy and growth. It's time to free up your teams and focus on your future. Learn more about the technology insights and support available at amazonus.com. This is Bloomberg Daybreak Week and our global look ahead at the top stories for investors in the coming week. I'm Nathan Hager in Washington. Up later in our program, we'll look ahead to a key meeting between Australian Prime Minister Anthony Albanzy and President Donald Trump. But first, European banks have seen a trillion euro surge in value since late 2022 as interest rates have come down. But that may come under pressure from growing fears over sovereign risks in France and threat of a new bank tax in the UK. While rate cuts and geopolitical risk are added burdens with the UK's biggest banks, Barclays, Nat West, and Lloyds reporting earnings in the next few days. We want to get more from Bloomberg Daybreak Euro Banker Caroline Heepker in London. >> Nathan, European banks are eyeing Wall Street after a bumper set of earnings for the third quarter. JP Morgan, Goldman Sachs, and Cityroup all comfortably beat estimates with a combined profit of more than $20 billion. But the CEOs of a number of US giants did sound alarm bells that market optimism is perhaps overblown. JP Morgan's Jamie Diamond pointed to a pair of recent bankruptcies in the private credit space. >> I probably shouldn't say this, but when you see one cockroach, there probably more, you know, and so we we should everyone should be forewarned on this one. >> So Diamond's comments came amid an increasingly complex macroeconomic picture. You've got global trade wars, tariffs, and political turmoil for the banks to think about. So against that backdrop, lenders on the other side of the Atlantic are also looking to balance risks and opportunities. So how have European banks been fairing? So joining us now is Bloomberg's finance reporter Will Shaw and Philip Richards. Bloomberg Intelligence is senior banking analyst. Welcome to both of you. Thank you for being with me. Philip, can I start with you on the third quarter earnings? How are European banks expected to fare specifically against those Wall Street lenders who've reported just in the last few days? >> Yeah, so we've had obviously the US banks reporting and they've actually come across um quite a lot stronger than the market was expecting particularly on the investment banking side. Um seems some quite um hefty beats coming through on fixed income, equity trading also quite a big return in terms of M&A um and those know also quite ahead of consensus coming through as well. but also on the retail banking side as well. Um, lending growth has been um, higher than most people expected. Um, a couple of wobbles on the on the credit quality side, but overall they've been very strong. And so the question is how much of that is going to, you know, follow through to the European banks in the week coming ahead. I think bottom line is I think they should follow quite similar trends. I mean there obviously a lot of overlap in terms of the investment banking space where the banks are operating and therefore I think they could be fairly hefty beats there as well. >> Hefty beats expected. Okay, that's interesting. Will um how have the Wall Street banks done during the earning season? What are the expectations then in your view for the big uh UK lenders including of course Barkclay's coming up? >> Yeah, so I think like Philip says the um the Wall Street banks have have really smashed it I I suppose is the technical financial term. Morgan Stanley's stock traders soared past expectations. They were beating rivals on a surge in trading activity around turbulence from Donald Trump's policies. Goldman Sachs also posted record thirdarter revenue down to like a resurgence in deal making as M&A began to resume. People now obviously looking ahead to Barclays. Now Barclays, the analysts that we take note of, they expect equities traders to make about 750 million pounds. That would be an increase of about 8% on the same period a year ago. Uh then macro traders, they're sort of tipped to make about 1.2 billion. that would be up about 2%. Deal makers looking at perhaps making around 600 million pounds in banking fees and underwriting revenue. Again, that would be an uplift of around 2%. >> So, those are the numbers we're watching out for then. Um, Philillip, it's obviously been, you know, the context in Europe, this fantastic four years, interest rates have fallen and therefore, you know, you've had a good kind of tailwind for European banks. We've seen that in the share prices, but you've highlighted, of course, that there are more threats now into the second half of this year. What are the big challenges for the European banks? >> Yeah, I think that's fair. I mean, the sector's been on a huge run as he flagged there. I mean, up about 160% over that period. Um, that compares to the the wider market about 40% higher. So, a big outperformance from the European bank. But what I would say is they were very at very distressed levels at that time when they first start that run started. um and where we are today. Yes, we're back at basically the highest level since the the great financial crisis over 2007208. So, we've had this rally, but it has really been supported by fundamental improvements. You know, obviously said interest rate hikes supported it. Um the economy is in a better position now. Credit quality is all low. So, it's not just about is that bubble in terms of the share price. Actually, the underlying earnings is much better. >> And you talk about the risk going forward. I think actually some of those risks have already come through in terms of interest rate cuts. We've seen that now in both um Europe and the UK. Um and actually from here maybe one more cut um in each market but probably quite minimal from here. So a lot of that pain has happened already and actually if you look at economic growth say conditions are still slow but they're getting better. Um and certainly economists have been upgrading forecasts overall and therefore you know those things could help the banks. >> We heard a little bit of JP Morgan CEO just about the issue with risky loans. I mean some people you know are concerned about this others are not. Are there signs of exposure amongst European banks to riskier loans? What's the concern there in your view? >> Yeah, this follows through from two um big problems in the US forricolor and first brands. Um and and the comment from JP Morgan was basically that you don't often get just one or two hiccups. Normally they come together and that's a sign of stress in the market. And what I would say actually in the UK or even across Europe, we haven't really seen that yet. there's not really been many big cases coming through. Um, credit quality remains actually very strong across the sector. But what I would say these are well below normalized level the current charge offs. So they will gradually rise and there will be some negatives. But overall if you look at on a longer term perspective actually credit quality remains very strong for the banks. >> Again will I want to bring you back in on the UK banks and on Barclays. I mean you you focus on Barclays and what they're doing in lots of detail and I did also think that the stories around Barclays and their expansion in the US is very interesting. I mean they're spending what a billion dollars on the refurb of their New York trading. >> It's it seems enormous, doesn't it? Yeah. Like you say they're they're preparing to spend at least a billion renovating their skyscraper which is in New York's Time Square. uh they'll begin construction on that tower in the middle of next year and it's currently in the design phase and it's expected to wrap up in about 2030. I think a lot of people were surprised at the sheer scope of the of the expenditure there. Barclays is obviously Britain's investment bank. It you it's it's big. It's big here. It's not always as visible um in the US as as perhaps some of the other rivals over there. the big five, Goldman, Cityroup, Morgan Stanley, etc. And I think it was really interesting to see them put their money where their mouths are and show just how committed they are to the US market with with with such enormous expenditure there. >> Well, just thinking about that, if Barclays is the UK's investment bank, the policy outlook, I think, is very interesting. Phillip, we've got the budget coming up in November and there's been plenty of talk not just of deregulation and of things like changing the ring fencing rules for banks in the UK, but also the possibility of a bank win full tax on the Chancellor Rachel Ree. What do you think about this? >> Yeah, it's a bit of a contrast, isn't it? Um, give one hand and take away with the other. So promises of deregulation to match the US which are obviously the whole that's the main word in the US at the moment are now supportive and as you say it was less in terms of the ring fencing that could release capital for the banks it could lead to a reduction in operating expenses so they're all positive but then on the flip side you know these banks are now on obviously in a much more profitable position you know 15% plus um profitability return on equity for the largest um UK banks and that's obviously quite attractive to a chancellor who's struggling to raise cash >> I suppose Yeah. Shall I ask you what the odds are, do you think, of her actually doing it or not? Maybe this is impossible. >> It's impossible to say. I mean, it's been mentioned, it's been widely talked about in the market, but um the chances obviously keeping her cards um close to her chest as it were, and therefore she's not revealing anything yet. We have seen it across a number of other European markets. Um so it wouldn't be out of the blue. We've seen it in Poland, we've seen in Italy. So yes, it's possible, but who who knows? >> Okay. Yeah. So windful taxes, people might be thinking about that in the industry. Well, well, in terms of other things then that are happening on the banking front and trying to beef up trading, that's the other thing. I mean, the US banks are so good at that. And does the UK have something to rival that? You know, if maybe there is a windfall tax coming, is there going to be a big pot to tax? >> Yeah. So, Adil Khn, who's global head of markets at Barclays, you know, he's been making a bit of a concerted push into macro trading this year. They've hired more than a dozen senior macro traders as it looks to make the most out of all the turbulence in the bond market stemming from the Trump administration. So they've been hiring people from the likes of JP Morgan, Millennium, Neora, Morgan Stanley. They're all big names and it's it's essentially part of uh the the CEO Venat's three-year plan to boost returns across the investment bank. He's identified priority areas which include European rates as well as equity derivatives and securitized product trading. So yeah, they do seem to be really flexing their muscle in this area at the moment. And I think no conversation on any topic frankly in finance or banking is is without the AI factor, artificial intelligence and banking. So interesting. You've also reported on Barclay shifting some of its top executives to try to lead an AI push. What would an AI push look like for Barclays? >> Well, I mean, all banks obviously are thinking a lot about AI at the moment, what it means for speeding up uh creating greater efficiencies, thinking perhaps about what it might mean for headcount going forward. Evident AI, which is a company which tracks performance in AI of of different banks, it doesn't frankly rate Barclays particularly highly. I would I would expect Barclays to be looking around slightly nervously at the other Wall Street banks and seeing what they're doing. You know, are they at risk of falling behind? They're thinking about areas such as where generative AI can be used in parts of the trading floor to make things more efficient. They've also promoted Antuinet O'Neal to group chief information officer in charge of areas including AI strategy. So, they are on this >> interesting. I think I we should also put it into context and listening to Karen Ward also of JP Morgan asset management of course she's their chief market strategist who was speaking to us in the last few days on Bloomberg radio. I just thought this was really a great nugget that was so interesting about AI and whether or not it's going to benefit the UK or not. This is what she had to say. The thing I will say with conviction is if AI delivers productivity benefits the UK will benefit. One of the things in markets at the moment I find very hard to make sense of is the idea that the tech giants will grow their earnings at 20% forever more and that's why you pay 30 times earnings for them but yet corporate global corporate is going to have earnings growth of you know low single digits you know that that can't make sense. Yeah, absolutely. Thank you so much to both of you for joining me. Really appreciate your views. That is Bloomberg's finance reporter Will Shaw and Philip Richards. Bloomberg Intelligence is senior banking analysts. We will have full coverage and analysis of the UK bank earnings and European bank earnings in the days ahead including Barclay's quarterly earnings due out on the 22nd of October. Also, we'll have Nat West and Lloyds to bring you on Bloomberg Radio. I'm Caroline Hepka here in London. You can catch us every weekday morning here for Bloomberg Daybreak Europe beginning at 6 a.m. in London. That's 1:00 a.m. on Wall Street. Nathan, >> thanks Caroline. And coming up on Bloomberg Daybreak Weekend, Australia's prime minister is set to meet with President Trump. What implications could that have for the Australian economy? More on that next. I'm Nathan Hager and this is Bloomberg. [Music] How many vendors does it take to meet all your organization's food needs? Just one. Easy Cater, the workplace food platform that lets teams order from a huge variety of restaurants, over a 100,000 nationwide, all through a single vendor. In addition to all that variety, Easy Cater also gives you full visibility of your organization's food spend with invoicing, centralized reporting, and seamless integration with expense management systems, all on one platform. Easyater, your business tool for food. To learn more, visit easycater.com/mpodcast. >> You're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic options plays on the side. The point is, you're engaged with your investments, and Public gets that. That's why they built an investing platform for those who take it seriously. On Public, you can put together a multi-asset portfolio for the long haul. Stocks, bonds, options, crypto, it's all there. Plus, an industry-leading 3.8% an 8% APY high yield cash account. Switch to the platform built for those who take investing seriously. Go to public.com and earn an uncapped 1% bonus when you transfer your portfolio. That's publicub.com. Paid for by public investing. All investing involves the risk of loss, including loss of principal. Brokerage services for US listed registered securities, options, and bonds in a self-directed account are offered by Public Investing Inc. member FINRA and SIPC. Crypto trading provided by Backed Cryptosolutions LLC. Complete disclosures available at public.com/disclosure. >> Every business starts with an idea. How can you go from daydrer to industry leader? Amazon business accelerates your journey with smart business buying. Get everything you need to grow in one familiar place. From office supplies to IT essentials and maintenance tools. Amazon business takes the buying experience you know and love from Amazon. Plus tools that help you save costs and make insights based decisions. Ready to bring your visions to life? Learn how at amazonus.com. >> This is Bloomberg Daybreak Weekend. Our global look ahead of the top stories for investors in the coming week. I'm Nathan Hager in Washington. Australian Prime Minister Anthony Albanzy will be in the nation's capital in the week ahead to meet with President Trump for a preview. Let's get to Doug Krner, host of the Daybreak Asia podcast. Nathan, several issues will dominate the conversation when Albany visits the White House. Perhaps the most important topic, critical minerals. For a closer look, I'm joined now by Bloomberg's Paul Allen in Sydney. Paul, thanks for helping me preview the meeting. You and I have talked in the past about Australia's vast reserves of rare earths. If you had to look at a potential deal between the US and Australia, where rare earths are concerned, what might it look like? >> Well, there's certainly a lot of speculation around this, Doug. uh the prospect of a deal around critical minerals because we've heard President Trump talking in the past about ideas like well maybe we could take over Greenland or involvement in Ukraine and at the core of a lot of these statements is these countries critical mineral reserves and Australia depending on how you slice and dice it has either the largest or the second largest critical minerals deposits in the world but the limitation here is the refining of those uh deposits. Australia's got the mines. It certainly has the scope for plenty more, but all of the processing happens offshore, mostly in China. Some of it happens in Korea as well. So, any discussion around a potential deal likely to focus in on on how these minerals get processed. And there's been some speculation in the media that there could be some sort of deal with the US in the range of 7 to $800 million, but beyond that, we don't know anything. The government's been very tight lipped about this which again leads to future speculation that we very well could see something get announced when uh Anthony Albanesei meets President Trump. >> So Paul, what is preventing Canbor from building up refining capacity in Australia when it comes to the processing of rare earths? >> Certainly the political will exists. I think the question is more a commercial one. I can give you an example of one company. It's a small company called Australian Strategic Minerals. It's seen a very healthy runup in its stock price on the ASX. So, this is despite the fact that it doesn't actually have a mine in Australia. For as long as I can remember working for Bloomberg in Australia, ASM has been talking about starting a mine near a town called Do in New South Wales. It's still about to start its prefeasibility stage, so it's taking a long, long time. There's certainly a desire to get this done, but critical minerals processing very energy intensive. It generates a lot of toxic waste as well. So, putting together these things seems to be the major hiccup. The biggest critical minerals miner listed on the ASX is Linus, but it does all of its refining in Malaysia, but it does have a mine here in Australia. So it does speak to this broader problem of the cost, the pollution, uh the regulation of getting processing underway in Australia. >> President Trump was saying earlier that the US is in fact in a trade war with China. How is this being viewed in Australia right now, the tension between Washington and Beijing? It has forever been a very very difficult tight rope for Australia to walk because on the one hand China is Australia's largest trade partner by some considerable distance and it was not that long ago when Scott Morrison was prime minister that the country was reeling under trade strikes from China for all sorts of things from coal to wine to barley and when the new government got elected here four years ago the Albanese government that was seen as something of a reset and those trade strikes s have since been wound back and the relationships improved again. But it's well known that China is no fan of the Orcus agreement between the United States and the United Kingdom. The United States is Australia's most important ally. The relationship there is very very close as well on a diplomatic level. uh we heard from the prime deputy prime minister Richard Miles saying that no country is closer to the US than Australia in terms of how we engage in the level of trust that is there. So navigating that tight rope particularly when your closest ally is calling saying it's in a trade war with your closest trading partner. It's a really difficult foreign policy balancing act. Paul, I'd like to pivot to another area of importance for the Albanese visit to the White House, and that would be the AUS Defense Pact. I know this is an area where there has been a great deal of tension, and I think things are still simmering a bit. Can you give me some context here and bring me up to speed on where this conversation is currently? Domestically, at least, there is bipartisan support in Australia for this defense pact. It was initially announced by uh Scott Morrison, Joe Biden, and Boris Johnson, or it might have been Richishi Sunnak. It's hard to keep track of what's been going on in the UK sometimes, but that was a Liberal government uh that announced that policy in Australia. Since then, we've had a change of government to a Labor government, and that defense pact is still in place. So, politically at least, it's ironclad. Of course, within the political parties, there is some distaste for it. within Australia. Also, as you can imagine, there are significant segments of the public that aren't in favor, but for Australia's part, this is going ahead. Billions of dollars have already been made in down payments to the United States to improve or build up its ship building capability. But in terms of the relationship between the three partners in this pact, I think that's where the tension's really been coming in because of course the US uh under the eye of Albridge Kby has been running a review into this and it's understood certainly within Australia that Mr. Colby is somewhat of an Orcus skeptic. Now the British Prime Minister K Starmer has been trying to calm everybody down. He's a supporter of orcus and he says look when I came to power we also had a review. It's quite natural. You know, the Trump administration's back in power in the US. Of course, they want to have a review. Well, there wasn't a review in Australia when the government changed, but that might be illustrative of it being a bipartisan policy. But there's certainly nervousness now in Australia that look, we've made these down payments. We're committed to this plan. We need submarines. Please don't cancel. So, will the Albany visit bring a sense of closure to this chapter or is the conversation likely to continue before a final decision is made? We would find out very soon and there's a degree of optimism on the Australian side. The deputy prime minister, Richard Miles, uh, was in the United States back in August to really lay the foundation and the groundwork for this visit. He met with JD Vance. He met with Marco Rubio and Pete Haggath as well. There is a photo of them all together smiling. And Richard Ba says, "Look, the group shared only positive words about Orcus." So, he's confident that it's going to go ahead. Anthony Albanesei is actually on holiday this week. He's having a week off for the first time since he was uh won re-election, but it's understood that he's taken a lot of homework away with him on holiday to read up on this and uh work very hard diplomatically to make sure that this proceeds. Paul, I'm going to change gears on you once again because I know you spent several days last week at the A&Z investment conference in Sydney, and you had quite a few conversations there, in particular, the talk you had with the assistant governor and chief economist at the RBA, Sarah Hunter. I'd like to play a portion of that interview, and I was hoping that you might help us set it up. >> Absolutely. This was at the uh City Australia and New Zealand conference that's organized by city and uh there is always a range of fascinating speakers there and it was really great to be able to talk to assistant governor and chief economist Sarah Hunter at the RBA because it's going to be a very important couple of weeks for the Reserve Bank. We're going to have thirdarter consumer prices come out. We only get consumer prices quarterly in Australia and we've got inflation back inside the RBA's 2 to3 target band. The central bank is still taking this very slow and cautious approach towards easing. It left rates unchanged at this last meeting and the next decisions coming up in the first week of November. So Sarah Hunter I was asking her about inflation and you know she was expressing caution again that you know some pockets are remaining stubbornly sticky. We've had now two uh months of the the monthly indicator for the three months of the September quarter and there's just a couple of categories that look like they've come through a little bit stronger than we were anticipating. The first of those is uh housing. So that's the amalgamation of rents and in particular new dwelling uh construction costs and the second is market services and those ones are are particularly important because they are core components of the CPI. they will come through in the trim mean and so we're just monitoring those two but given that they've as they've printed through a touch stronger than we expected we think that that will then show up in that full quarterly print that we get uh at the end of October >> so how much weight do you think the board is going to be placing on that before deciding it next move >> I mean all data matters all data is important obviously inflation data is is very important because it's part you know it's core to the mandate of keeping inflation in that 2 to 3% target band on an ongoing basis so yeah definitely it's going to feature. Of course, we also as part of the November meeting uh will be publishing on the day of the meeting itself our updated forecast in our November SMP. So, they'll also get that information as well and obviously everyone else will too. Um and that will give you a real sense of how we've read the data, whatever it turns out to be and what it means for the outlook. >> Yeah, I want to talk about the forecast a little later, but just circling back to that point that you made about house prices, and this is something we typically see when we're in an easing cycle. House prices tend to go up often has an impact on rents as well. Um so what are the recent pickup telling you about getting inflation back to target? >> Yeah. What's so how surprises specifically? Of course they're not directly in the CPI but they are they are um one of the first typically uh domestic transmission channels for monetary policy. So it's not a surprise that um since you know we started cutting rates in February we've seen a little bit of a a lift in the momentum in the housing market and that's come through in prices. uh and then we'll expect to see that transmit through into new dwelling construction activity. So um you know uh the viability of projects improves and lift in demand for um dwellings and that will come through into construction over the forecast and then also it'll flow through um a little bit into consumer spending as well. We're really monitoring that channel and thinking about what that then means for inflation. We're not surprised that we've seen the pickup because we've seen it before in cutting cycles. So what we've seen isn't out of line with uh previous periods, but obviously we're monitoring it and it's really for the board what they're really focused on now is, you know, keeping inflation around about the middle of the target band, particularly uh that underlying trim mean metric because that's our best lead for where headline inflation will be over the medium term. >> How much confidence did you do you have that inflation will be in the midpoint of that target band by 2026? Well, look, um, forecasts, uh, um, you know, inevitably you get things a little bit wrong, at least sometimes you get them, um, quite a lot wrong. And so that's the job for me and my team is really looking at what's happening, um, updating our forecast, taking on the new information, um, taking on what's happening around the world as well and what that actually means for the outlook. We're obviously that's very much what we're trying to achieve. That's what we want to achieve. We've got to a point now where obviously we had that trim mean inflation was 2.7% in the June quarter and and you know the un uh the labor market had been we think relatively stable in recent months. We really would like to to keep it there. You know trim mean around the middle of the target band headline eventually there too and the labor market stable but we've got to respond uh to what the data tells us um and what else might be happening that we didn't foresee and you can always get surprised by shock. So, that's the job and uh you're forever looking forward and things are always changing, but I hope that I can come back in a year and that's what we've achieved. But let's see. >> All right, that was the RBA's chief economist and assistant governor there, Sarah Hunter. She was speaking with me at the City Australia New Zealand conference. And it was interesting, Doug, because I was also speaking to the City Australia CEO, Mark Woodruff. Uh for his part, he thinks the RBA is done with its easing cycle for now. 3.6%. That's the end of it. Paul, I was noticing that TD Securities was saying the economic data that will be released over the next couple of days for Australia may be stronger than expected. Paul, thank you so very much. Bloomberg's Paul Allen joining from Sydney. I'm Doug Krer. You can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast. Nathan, hi. Thanks, Doug. And that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at 5:00 a.m. Wall Street time for the latest on markets overseas and the news you need to start your day. I'm Nathan Hager. Stay with us. Top stories and global business headlines are coming up right now. How many vendors does it take to meet all your organization's food needs? Just one. Easy Cater, the workplace food platform that lets teams order from a huge variety of restaurants, over a 100,000 nationwide, all through a single vendor. In addition to all that variety, Easy Cater also gives you full visibility of your organization's food spend with invoicing, centralized reporting, and seamless integration with expense management systems, all on one platform. EasyCater, your business tool for food. To learn more, visit easycater.com/mpodcast. Every business starts with an idea. How can you go from daydreamer to industry leader? Amazon business accelerates your journey. With smart business buying, get everything you need to grow in one familiar place. From office supplies to IT essentials and maintenance tools. Amazon business takes the buying experience you know and love from Amazon. Plus, tools that help you save costs and make insights based decisions. Ready to bring your visions to life? Learn how at amazonus.com. His Small Business Insurance knows there is no business like your business. Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to his insurance for protection. Find flexible coverage that adapts to the needs of your small business with a fast, easy online quote at his.com. That's his coox.com. There's no business like small business.
Daybreak Weekend: Tesla Earnings, European Banks, Trump-Albanese Meeting | Bloomberg Daybreak:…
Summary
Transcript
How many vendors does it take to meet all your organization's food needs? Just one. Easy Cater, the workplace food platform that lets teams order from a huge variety of restaurants, over a 100,000 nationwide, all through a single vendor. In addition to all that variety, Easy Cater also gives you full visibility of your organization's food spend with invoicing, centralized reporting, and seamless integration with expense management systems, all on one platform. Easyater, your business tool for food. To learn more, visit easycater.com/mpodcast. >> This holiday season is likely to be a roller coaster for logistics and manufacturing, but having the right staff in place can be easy when you choose Express Employment Professionals. They can handle everything to ensure you have the right size contract workforce. Go to expresspros.com. Solve your workforce challenges when you choose Express to support your hiring in a variety of roles, including two of our biggest areas, manufacturing and logistics. Visit expresspros.com today. That's expresspros.com. Running small and medium-siz businesses is hard work. Business owners need to be sure their ads are working just as hard as they do. Amazon streaming TV ads makes your marketing dollar work harder. With Amazon ads, trillions of insights help small and medium businesses reach the right customers that matter. Your ads will show up during the shows the people are actually watching and measurement tools show you what's working the hardest. Gain the edge with Amazon ads. [Music] >> Bloomberg Audio Studios podcasts, radio, news. 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, we'll get you set for a couple big earnings reports from Tesla and Netflix. I'm Nathan Hager in Washington. >> I'm Caroline Hedgar in London where we're looking ahead to European Bank earnings, including from Barkclays. I'm Doug Krnner looking at how rare earths will be a topic when Australia's prime minister visits the White House in the week ahead. >> That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 1130 New York, Bloomberg 991 Washington DC, Bloomberg 929 Boston, DAB Digital Radio London, SiriusXM121, and around the world on Bloombergradio.com and the Bloomberg Business App. [Music] Good day to you. I'm Nathan Hager. We begin today's program with earnings. 90 companies on the S&P 500 open their quarterly books this week. We want to focus on two of the big ones, Tesla and Netflix. Here to get us set for what to expect from the EV giant this week is Steve Man, senior autos analyst for Bloomberg Intelligence. Great to have you with us on the weekend program, Steve. I mean, this is the quarter where we got that record delivery number, right? Wasn't it close to half a million vehicles sold? What's that going to mean for the numbers you're keeping an eye out on? >> Uh, thanks, Nathan. Yeah, they did have a record uh shipment for the quarter on EVs, but they also had a record shipment on their battery storage business, too. Uh I mean yeah I mean not not a surprise because look the 7500 tax credit EV tax credit it went away at the end of September uh in the US. So there was a lot of consumer coming in the market taking advantage of that $7500 credit and bought a lot of EVs. So you know we saw record EV sales for Tesla. They're not alone. Um GM also had a record sale. uh Fords uh if it's not records almost record sales as well. So the the industry really got a boost. Um but you know I think the most important thing now is what do we expect uh in the coming quarters uh which is you know a slowdown. >> Yeah. So what do we expect given that these uh subsidies are going away? I mean it stands to reason that we're probably not going to see these kind of blowout delivery figures in quarters to come, right? >> Yeah. Absolutely not. um you know two two ways that we're looking at this. First in an air term definitely some challenges uh for Tesla as well as the rest of the EV market. You know Rivian and and Lucid to to name a couple. Um you know there's been a lot of pull forward demand uh into the third quarter. Uh so you know expect kind of weak earnings uh you know weaker cash flow in the next couple quarters uh for for these EV makers. Um but long term it's going to be an interesting market because uh without the 7500 you're definitely going to have less buyers. There will be buyers but less buyers uh in in the marketplace and there are a lot of products out there like in the last 2 three years with the Biden administration pumping a lot of money into the EV market uh every automaker you know rolled out new products expanded capacity um so there's going to be a lot of new EVs out there uh we actually expect price competition right price competition and wouldn't be surprised there's some consolidation in the marketplace as well we started to see that. Uh GM just uh uh announced they're going to book $1.6 billion in write-offs on EVs. Uh we expect they probably going to have to rightsize their product portfolio as well. >> Yeah. So we saw the new products as well, specifically on Tesla's side in those uh finally lower priced models of the Model Y and the Model 3. What could that mean for Tesla's outlook and and for their margins as well? Yeah, it you know if you think of the uh the flip side, it could be an opportunity right for Tesla, they are the largest EV maker in in terms of sales uh globally and in the US uh one of the biggest um definitely biggest in the US. So it's also an opportunity for them potentially gain market share. You know they are the you know one of the very few profitable EV makers uh in the world. So launching those products for broader appeal makes sense. Uh if you look at social media, there's actually now talks about them, you know, revisiting the earlier plans of of rolling out uh the model 2, which is even a cheaper vehicle. So uh if they can do that, they they may able to gain market share. >> You mentioned the record for battery storage uh in Tesla's latest quarter as well. Of course, there's a lot of ambition in this company, not just from EVs, but from the autonomous vehicle side, robo taxis. Where should the focus be for investors as we get ready for this quarter to uh to be explained? >> Yeah, I I think uh you know, when they release earnings and on the conference call, uh wouldn't be surprised that Elon Musk will primarily focus on their AI initiatives, right? uh Robo Taxi is probably the the the only business that we have better visibility on on driving the top line and the bottom line. We think that's, you know, that's probably going to come through in 2028. Uh not immediately. Uh you know, they've rolled out uh out, you know, robo taxing in Texas, and parts of California. They're looking to roll it out in in other states, maybe at least two more before year end. Uh but the you know you know the financials don't really roll in until then but you know Robo Taxi is probably the earliest uh uh the business is going to have the earliest impact on on their bottom line. Optimus robot um I think uh it's going to be a while. There's some technical issues behind Optimus Robot. Uh it's going to be hard to convince uh not you know other automakers to adopt humanoid robots. So, you know, any optimist sales or or adoption will probably be more of an internal uh you know, within the confines of Tesla. >> All right. Well, thanks for this, Steve, as we look ahead to Tesla earnings later on this week. That is Steve Man, senior autos analyst for Bloomberg Intelligence. Now, let's turn to the other big earnings story we've got our eye on this week. That would be Netflix. The streaming giant opens its third quarter books on Tuesday. And for more we're joined by Githa Ranganathan, senior US media analyst for Bloomberg Intelligence. Great to speak with you, Githa. And uh I guess Netflix is expecting another great quarter. I mean, they've been guiding for something like double-digit revenue growth, right? >> Absolutely. Yes. Uh so you know as we kind of look forward to Netflix uh third quarter earnings one of the things that we want to highlight because Netflix no longer discloses subscriber numbers but the two numbers that you know everybody's looking for especially on the street one is revenue growth numbers and as you just pointed out yes doubledigit growth that's what we're looking for the the magic number for this quarter is going to be 17% uh and of course again we're going to look for guidance for fourth quarter uh consensus is right now expects about 16%. So, you know, double digits, high double digits, high teens, that's kind of what we're looking for. But really, the headline for uh you know, the the third quarter as well as for the second half, I think as a whole, is just the content slate. So, Netflix management uh themselves have kind of referred to uh the content slate this year, especially in the second half, being somewhat of an embarrassment of riches. They've had some of their biggest titles debut on the service. So, we're talking Wednesday, we're we're talking Stranger Things, we're talking Squid Game, all of their biggest hits coming aboard on the platform this year. >> But what's really turned out to kind of be an absolute sleeper hit in the third quarter uh is K-pop Demon Hunters. Nobody saw this coming. >> This was absolutely monstrous, huge. Uh so, we just saw 500 million viewing hours just in the third quarter alone. I think by the end of this year, we're probably going to see about a billion hours. This is their biggest movie of all time on their service. So, just a breakout uh film that has really driven engagement meaningfully. Uh and I think we're going to see that reflected in the numbers. >> So, just given how bonkers K-pop Demon Hunters was for Netflix, is the bar really high for them? if they don't meet the expectations that they've put out there, is that going to put a hurt on the stock? >> So, the one thing I think that we're going to watch for, I think 3Q is definitely going to be strong. Uh the the one number that can probably cause some uh nervousness is going to be if they actually release guidance for 2026. So, last year, the first time that they issued guidance for 2025 was when they reported third quarter 2024 earnings. So the expectation on the street is okay they're probably going to give us a 2026 guidance number. Again remember revenue for this year uh the revenue growth number for the full year again that that the magic word there doubledigit revenue growth it's actually 15%. Can they keep that up? So if it comes in much lower if it comes in lower than I would say 13 14%. Yes that is going to probably cause some nervousness. So yes, talking about that high bar, all of this engagement metrics kind of really playing into that. Uh and then the other metric that we're kind of looking for with Netflix apart from revenue is margin. So this year I think their margin growth is going to be really strong. I think they've they've already guided to 30%, it's probably going to be a little bit ahead of that. They're probably going to raise guidance. So again, next year if they're a little bit softer on that number, uh again, maybe that causes a little bit of a pull back in the stock. What's going to be driving the margins for Netflix in quarters going forward? Is it going to be growth in subscribers? Is it going to be revenue from advertising? >> Yeah, I'm really glad that you brought it up because now that they don't disclose subscribers anymore, it's a little bit hard to get transparency. And again, just for full disclosure, they haven't actually disclosed any hard metrics around advertising either. So, we don't necessarily know exactly what the advertising revenue is. Of course, there have been some guesstimates that it was probably around a billion dollars uh and change uh in 2024. That's probably going to be upwards of two billion this year. Uh but then you're absolutely right. We're expecting a significant ramp up going into 2026. And that is going to be one of the major drivers for both the topline growth as well as uh you know operating margin. So for operating margin, you need strong topline growth, but you also need content cost rationalization. And that's really what we've seen uh Netflix do extremely well. So they're uh you know we're seeing revenue grow, you know, mid- teens levels, sometimes even high teens, but content cost grow only about mid to high single digits. And that's where we're seeing this huge jump in operating margins year after year. >> And when it comes to uh content cost management, where is the focus going to be do you think uh for Netflix? Is it going to be on that, you know, original content, the scripted stuff, or is it going to be uh more reality shows or even more live shows? >> It's going to be all of the above. So, we've seen them really do a very good job. Originals, as you pointed out, drives majority of the viewership uh on the Netflix platform. We've seen that in all of the engagement stats that they disclose from time to time. That makes up about 50 to 55% of their content budget. Uh but you're absolutely right. They have a really nice mix. They also have a good amount of licensed content. Uh you know content that they get from the Disneys and the Warner Brothers and the Paramounts of the World. So they're making very concerted investments across the board. >> All right. Well, thank you for this Gita. Really great having you on with us. That is Gita Ranganathan, senior analyst for US media for Bloomberg Intelligence. And coming up on Bloomberg Daybreak Weekend, we'll look ahead to bank earnings out of Europe, how they may have been affected by rate cuts and geopolitical risk. I'm Nathan Hager and this is Bloomberg. [Music] How many vendors does it take to meet all your organization's food needs? Just one. Easy Cater, the workplace food platform that lets teams order from a huge variety of restaurants, over a 100,000 nationwide, all through a single vendor. In addition to all that variety, Easy Cater also gives you full visibility of your organization's food spend with invoicing, centralized reporting, and seamless integration with expense management systems, all on one platform. EasyCater, your business tool for food. To learn more, visit easycater.com/mpodcast. >> You're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic options plays on the side. The point is, you're engaged with your investments, and Public gets that. That's why they built an investing platform for those who take it seriously. On Public, you can put together a multi-asset portfolio for the long haul. Stocks, bonds, options, crypto, it's all there. Plus, an industry-leading 3.8% APY high yield cash account. Switch to the platform built for those who take investing seriously. Go to public.com and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com. Paid for by public investing. All investing involves the risk of loss, including loss of principle. Brokerage services for US listed registered securities, options, and bonds in a self-directed account are offered by Public Investing, Inc., member FINRA and SIPC. Crypto training provided by Backed Cryptosolutions LLC. Complete disclosures available at public.com/disclosure. >> How can you free your team from time-consuming office tasks? Amazon business empowers leaders to not only streamline purchasing, but better support their teams. Smart business buying tools enable buyers to find and purchase items fast so they can focus on strategy and growth. It's time to free up your teams and focus on your future. Learn more about the technology insights and support available at amazonus.com. This is Bloomberg Daybreak Week and our global look ahead at the top stories for investors in the coming week. I'm Nathan Hager in Washington. Up later in our program, we'll look ahead to a key meeting between Australian Prime Minister Anthony Albanzy and President Donald Trump. But first, European banks have seen a trillion euro surge in value since late 2022 as interest rates have come down. But that may come under pressure from growing fears over sovereign risks in France and threat of a new bank tax in the UK. While rate cuts and geopolitical risk are added burdens with the UK's biggest banks, Barclays, Nat West, and Lloyds reporting earnings in the next few days. We want to get more from Bloomberg Daybreak Euro Banker Caroline Heepker in London. >> Nathan, European banks are eyeing Wall Street after a bumper set of earnings for the third quarter. JP Morgan, Goldman Sachs, and Cityroup all comfortably beat estimates with a combined profit of more than $20 billion. But the CEOs of a number of US giants did sound alarm bells that market optimism is perhaps overblown. JP Morgan's Jamie Diamond pointed to a pair of recent bankruptcies in the private credit space. >> I probably shouldn't say this, but when you see one cockroach, there probably more, you know, and so we we should everyone should be forewarned on this one. >> So Diamond's comments came amid an increasingly complex macroeconomic picture. You've got global trade wars, tariffs, and political turmoil for the banks to think about. So against that backdrop, lenders on the other side of the Atlantic are also looking to balance risks and opportunities. So how have European banks been fairing? So joining us now is Bloomberg's finance reporter Will Shaw and Philip Richards. Bloomberg Intelligence is senior banking analyst. Welcome to both of you. Thank you for being with me. Philip, can I start with you on the third quarter earnings? How are European banks expected to fare specifically against those Wall Street lenders who've reported just in the last few days? >> Yeah, so we've had obviously the US banks reporting and they've actually come across um quite a lot stronger than the market was expecting particularly on the investment banking side. Um seems some quite um hefty beats coming through on fixed income, equity trading also quite a big return in terms of M&A um and those know also quite ahead of consensus coming through as well. but also on the retail banking side as well. Um, lending growth has been um, higher than most people expected. Um, a couple of wobbles on the on the credit quality side, but overall they've been very strong. And so the question is how much of that is going to, you know, follow through to the European banks in the week coming ahead. I think bottom line is I think they should follow quite similar trends. I mean there obviously a lot of overlap in terms of the investment banking space where the banks are operating and therefore I think they could be fairly hefty beats there as well. >> Hefty beats expected. Okay, that's interesting. Will um how have the Wall Street banks done during the earning season? What are the expectations then in your view for the big uh UK lenders including of course Barkclay's coming up? >> Yeah, so I think like Philip says the um the Wall Street banks have have really smashed it I I suppose is the technical financial term. Morgan Stanley's stock traders soared past expectations. They were beating rivals on a surge in trading activity around turbulence from Donald Trump's policies. Goldman Sachs also posted record thirdarter revenue down to like a resurgence in deal making as M&A began to resume. People now obviously looking ahead to Barclays. Now Barclays, the analysts that we take note of, they expect equities traders to make about 750 million pounds. That would be an increase of about 8% on the same period a year ago. Uh then macro traders, they're sort of tipped to make about 1.2 billion. that would be up about 2%. Deal makers looking at perhaps making around 600 million pounds in banking fees and underwriting revenue. Again, that would be an uplift of around 2%. >> So, those are the numbers we're watching out for then. Um, Philillip, it's obviously been, you know, the context in Europe, this fantastic four years, interest rates have fallen and therefore, you know, you've had a good kind of tailwind for European banks. We've seen that in the share prices, but you've highlighted, of course, that there are more threats now into the second half of this year. What are the big challenges for the European banks? >> Yeah, I think that's fair. I mean, the sector's been on a huge run as he flagged there. I mean, up about 160% over that period. Um, that compares to the the wider market about 40% higher. So, a big outperformance from the European bank. But what I would say is they were very at very distressed levels at that time when they first start that run started. um and where we are today. Yes, we're back at basically the highest level since the the great financial crisis over 2007208. So, we've had this rally, but it has really been supported by fundamental improvements. You know, obviously said interest rate hikes supported it. Um the economy is in a better position now. Credit quality is all low. So, it's not just about is that bubble in terms of the share price. Actually, the underlying earnings is much better. >> And you talk about the risk going forward. I think actually some of those risks have already come through in terms of interest rate cuts. We've seen that now in both um Europe and the UK. Um and actually from here maybe one more cut um in each market but probably quite minimal from here. So a lot of that pain has happened already and actually if you look at economic growth say conditions are still slow but they're getting better. Um and certainly economists have been upgrading forecasts overall and therefore you know those things could help the banks. >> We heard a little bit of JP Morgan CEO just about the issue with risky loans. I mean some people you know are concerned about this others are not. Are there signs of exposure amongst European banks to riskier loans? What's the concern there in your view? >> Yeah, this follows through from two um big problems in the US forricolor and first brands. Um and and the comment from JP Morgan was basically that you don't often get just one or two hiccups. Normally they come together and that's a sign of stress in the market. And what I would say actually in the UK or even across Europe, we haven't really seen that yet. there's not really been many big cases coming through. Um, credit quality remains actually very strong across the sector. But what I would say these are well below normalized level the current charge offs. So they will gradually rise and there will be some negatives. But overall if you look at on a longer term perspective actually credit quality remains very strong for the banks. >> Again will I want to bring you back in on the UK banks and on Barclays. I mean you you focus on Barclays and what they're doing in lots of detail and I did also think that the stories around Barclays and their expansion in the US is very interesting. I mean they're spending what a billion dollars on the refurb of their New York trading. >> It's it seems enormous, doesn't it? Yeah. Like you say they're they're preparing to spend at least a billion renovating their skyscraper which is in New York's Time Square. uh they'll begin construction on that tower in the middle of next year and it's currently in the design phase and it's expected to wrap up in about 2030. I think a lot of people were surprised at the sheer scope of the of the expenditure there. Barclays is obviously Britain's investment bank. It you it's it's big. It's big here. It's not always as visible um in the US as as perhaps some of the other rivals over there. the big five, Goldman, Cityroup, Morgan Stanley, etc. And I think it was really interesting to see them put their money where their mouths are and show just how committed they are to the US market with with with such enormous expenditure there. >> Well, just thinking about that, if Barclays is the UK's investment bank, the policy outlook, I think, is very interesting. Phillip, we've got the budget coming up in November and there's been plenty of talk not just of deregulation and of things like changing the ring fencing rules for banks in the UK, but also the possibility of a bank win full tax on the Chancellor Rachel Ree. What do you think about this? >> Yeah, it's a bit of a contrast, isn't it? Um, give one hand and take away with the other. So promises of deregulation to match the US which are obviously the whole that's the main word in the US at the moment are now supportive and as you say it was less in terms of the ring fencing that could release capital for the banks it could lead to a reduction in operating expenses so they're all positive but then on the flip side you know these banks are now on obviously in a much more profitable position you know 15% plus um profitability return on equity for the largest um UK banks and that's obviously quite attractive to a chancellor who's struggling to raise cash >> I suppose Yeah. Shall I ask you what the odds are, do you think, of her actually doing it or not? Maybe this is impossible. >> It's impossible to say. I mean, it's been mentioned, it's been widely talked about in the market, but um the chances obviously keeping her cards um close to her chest as it were, and therefore she's not revealing anything yet. We have seen it across a number of other European markets. Um so it wouldn't be out of the blue. We've seen it in Poland, we've seen in Italy. So yes, it's possible, but who who knows? >> Okay. Yeah. So windful taxes, people might be thinking about that in the industry. Well, well, in terms of other things then that are happening on the banking front and trying to beef up trading, that's the other thing. I mean, the US banks are so good at that. And does the UK have something to rival that? You know, if maybe there is a windfall tax coming, is there going to be a big pot to tax? >> Yeah. So, Adil Khn, who's global head of markets at Barclays, you know, he's been making a bit of a concerted push into macro trading this year. They've hired more than a dozen senior macro traders as it looks to make the most out of all the turbulence in the bond market stemming from the Trump administration. So they've been hiring people from the likes of JP Morgan, Millennium, Neora, Morgan Stanley. They're all big names and it's it's essentially part of uh the the CEO Venat's three-year plan to boost returns across the investment bank. He's identified priority areas which include European rates as well as equity derivatives and securitized product trading. So yeah, they do seem to be really flexing their muscle in this area at the moment. And I think no conversation on any topic frankly in finance or banking is is without the AI factor, artificial intelligence and banking. So interesting. You've also reported on Barclay shifting some of its top executives to try to lead an AI push. What would an AI push look like for Barclays? >> Well, I mean, all banks obviously are thinking a lot about AI at the moment, what it means for speeding up uh creating greater efficiencies, thinking perhaps about what it might mean for headcount going forward. Evident AI, which is a company which tracks performance in AI of of different banks, it doesn't frankly rate Barclays particularly highly. I would I would expect Barclays to be looking around slightly nervously at the other Wall Street banks and seeing what they're doing. You know, are they at risk of falling behind? They're thinking about areas such as where generative AI can be used in parts of the trading floor to make things more efficient. They've also promoted Antuinet O'Neal to group chief information officer in charge of areas including AI strategy. So, they are on this >> interesting. I think I we should also put it into context and listening to Karen Ward also of JP Morgan asset management of course she's their chief market strategist who was speaking to us in the last few days on Bloomberg radio. I just thought this was really a great nugget that was so interesting about AI and whether or not it's going to benefit the UK or not. This is what she had to say. The thing I will say with conviction is if AI delivers productivity benefits the UK will benefit. One of the things in markets at the moment I find very hard to make sense of is the idea that the tech giants will grow their earnings at 20% forever more and that's why you pay 30 times earnings for them but yet corporate global corporate is going to have earnings growth of you know low single digits you know that that can't make sense. Yeah, absolutely. Thank you so much to both of you for joining me. Really appreciate your views. That is Bloomberg's finance reporter Will Shaw and Philip Richards. Bloomberg Intelligence is senior banking analysts. We will have full coverage and analysis of the UK bank earnings and European bank earnings in the days ahead including Barclay's quarterly earnings due out on the 22nd of October. Also, we'll have Nat West and Lloyds to bring you on Bloomberg Radio. I'm Caroline Hepka here in London. You can catch us every weekday morning here for Bloomberg Daybreak Europe beginning at 6 a.m. in London. That's 1:00 a.m. on Wall Street. Nathan, >> thanks Caroline. And coming up on Bloomberg Daybreak Weekend, Australia's prime minister is set to meet with President Trump. What implications could that have for the Australian economy? More on that next. I'm Nathan Hager and this is Bloomberg. [Music] How many vendors does it take to meet all your organization's food needs? Just one. Easy Cater, the workplace food platform that lets teams order from a huge variety of restaurants, over a 100,000 nationwide, all through a single vendor. In addition to all that variety, Easy Cater also gives you full visibility of your organization's food spend with invoicing, centralized reporting, and seamless integration with expense management systems, all on one platform. Easyater, your business tool for food. To learn more, visit easycater.com/mpodcast. >> You're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic options plays on the side. The point is, you're engaged with your investments, and Public gets that. That's why they built an investing platform for those who take it seriously. On Public, you can put together a multi-asset portfolio for the long haul. Stocks, bonds, options, crypto, it's all there. Plus, an industry-leading 3.8% an 8% APY high yield cash account. Switch to the platform built for those who take investing seriously. Go to public.com and earn an uncapped 1% bonus when you transfer your portfolio. That's publicub.com. Paid for by public investing. All investing involves the risk of loss, including loss of principal. Brokerage services for US listed registered securities, options, and bonds in a self-directed account are offered by Public Investing Inc. member FINRA and SIPC. Crypto trading provided by Backed Cryptosolutions LLC. Complete disclosures available at public.com/disclosure. >> Every business starts with an idea. How can you go from daydrer to industry leader? Amazon business accelerates your journey with smart business buying. Get everything you need to grow in one familiar place. From office supplies to IT essentials and maintenance tools. Amazon business takes the buying experience you know and love from Amazon. Plus tools that help you save costs and make insights based decisions. Ready to bring your visions to life? Learn how at amazonus.com. >> This is Bloomberg Daybreak Weekend. Our global look ahead of the top stories for investors in the coming week. I'm Nathan Hager in Washington. Australian Prime Minister Anthony Albanzy will be in the nation's capital in the week ahead to meet with President Trump for a preview. Let's get to Doug Krner, host of the Daybreak Asia podcast. Nathan, several issues will dominate the conversation when Albany visits the White House. Perhaps the most important topic, critical minerals. For a closer look, I'm joined now by Bloomberg's Paul Allen in Sydney. Paul, thanks for helping me preview the meeting. You and I have talked in the past about Australia's vast reserves of rare earths. If you had to look at a potential deal between the US and Australia, where rare earths are concerned, what might it look like? >> Well, there's certainly a lot of speculation around this, Doug. uh the prospect of a deal around critical minerals because we've heard President Trump talking in the past about ideas like well maybe we could take over Greenland or involvement in Ukraine and at the core of a lot of these statements is these countries critical mineral reserves and Australia depending on how you slice and dice it has either the largest or the second largest critical minerals deposits in the world but the limitation here is the refining of those uh deposits. Australia's got the mines. It certainly has the scope for plenty more, but all of the processing happens offshore, mostly in China. Some of it happens in Korea as well. So, any discussion around a potential deal likely to focus in on on how these minerals get processed. And there's been some speculation in the media that there could be some sort of deal with the US in the range of 7 to $800 million, but beyond that, we don't know anything. The government's been very tight lipped about this which again leads to future speculation that we very well could see something get announced when uh Anthony Albanesei meets President Trump. >> So Paul, what is preventing Canbor from building up refining capacity in Australia when it comes to the processing of rare earths? >> Certainly the political will exists. I think the question is more a commercial one. I can give you an example of one company. It's a small company called Australian Strategic Minerals. It's seen a very healthy runup in its stock price on the ASX. So, this is despite the fact that it doesn't actually have a mine in Australia. For as long as I can remember working for Bloomberg in Australia, ASM has been talking about starting a mine near a town called Do in New South Wales. It's still about to start its prefeasibility stage, so it's taking a long, long time. There's certainly a desire to get this done, but critical minerals processing very energy intensive. It generates a lot of toxic waste as well. So, putting together these things seems to be the major hiccup. The biggest critical minerals miner listed on the ASX is Linus, but it does all of its refining in Malaysia, but it does have a mine here in Australia. So it does speak to this broader problem of the cost, the pollution, uh the regulation of getting processing underway in Australia. >> President Trump was saying earlier that the US is in fact in a trade war with China. How is this being viewed in Australia right now, the tension between Washington and Beijing? It has forever been a very very difficult tight rope for Australia to walk because on the one hand China is Australia's largest trade partner by some considerable distance and it was not that long ago when Scott Morrison was prime minister that the country was reeling under trade strikes from China for all sorts of things from coal to wine to barley and when the new government got elected here four years ago the Albanese government that was seen as something of a reset and those trade strikes s have since been wound back and the relationships improved again. But it's well known that China is no fan of the Orcus agreement between the United States and the United Kingdom. The United States is Australia's most important ally. The relationship there is very very close as well on a diplomatic level. uh we heard from the prime deputy prime minister Richard Miles saying that no country is closer to the US than Australia in terms of how we engage in the level of trust that is there. So navigating that tight rope particularly when your closest ally is calling saying it's in a trade war with your closest trading partner. It's a really difficult foreign policy balancing act. Paul, I'd like to pivot to another area of importance for the Albanese visit to the White House, and that would be the AUS Defense Pact. I know this is an area where there has been a great deal of tension, and I think things are still simmering a bit. Can you give me some context here and bring me up to speed on where this conversation is currently? Domestically, at least, there is bipartisan support in Australia for this defense pact. It was initially announced by uh Scott Morrison, Joe Biden, and Boris Johnson, or it might have been Richishi Sunnak. It's hard to keep track of what's been going on in the UK sometimes, but that was a Liberal government uh that announced that policy in Australia. Since then, we've had a change of government to a Labor government, and that defense pact is still in place. So, politically at least, it's ironclad. Of course, within the political parties, there is some distaste for it. within Australia. Also, as you can imagine, there are significant segments of the public that aren't in favor, but for Australia's part, this is going ahead. Billions of dollars have already been made in down payments to the United States to improve or build up its ship building capability. But in terms of the relationship between the three partners in this pact, I think that's where the tension's really been coming in because of course the US uh under the eye of Albridge Kby has been running a review into this and it's understood certainly within Australia that Mr. Colby is somewhat of an Orcus skeptic. Now the British Prime Minister K Starmer has been trying to calm everybody down. He's a supporter of orcus and he says look when I came to power we also had a review. It's quite natural. You know, the Trump administration's back in power in the US. Of course, they want to have a review. Well, there wasn't a review in Australia when the government changed, but that might be illustrative of it being a bipartisan policy. But there's certainly nervousness now in Australia that look, we've made these down payments. We're committed to this plan. We need submarines. Please don't cancel. So, will the Albany visit bring a sense of closure to this chapter or is the conversation likely to continue before a final decision is made? We would find out very soon and there's a degree of optimism on the Australian side. The deputy prime minister, Richard Miles, uh, was in the United States back in August to really lay the foundation and the groundwork for this visit. He met with JD Vance. He met with Marco Rubio and Pete Haggath as well. There is a photo of them all together smiling. And Richard Ba says, "Look, the group shared only positive words about Orcus." So, he's confident that it's going to go ahead. Anthony Albanesei is actually on holiday this week. He's having a week off for the first time since he was uh won re-election, but it's understood that he's taken a lot of homework away with him on holiday to read up on this and uh work very hard diplomatically to make sure that this proceeds. Paul, I'm going to change gears on you once again because I know you spent several days last week at the A&Z investment conference in Sydney, and you had quite a few conversations there, in particular, the talk you had with the assistant governor and chief economist at the RBA, Sarah Hunter. I'd like to play a portion of that interview, and I was hoping that you might help us set it up. >> Absolutely. This was at the uh City Australia and New Zealand conference that's organized by city and uh there is always a range of fascinating speakers there and it was really great to be able to talk to assistant governor and chief economist Sarah Hunter at the RBA because it's going to be a very important couple of weeks for the Reserve Bank. We're going to have thirdarter consumer prices come out. We only get consumer prices quarterly in Australia and we've got inflation back inside the RBA's 2 to3 target band. The central bank is still taking this very slow and cautious approach towards easing. It left rates unchanged at this last meeting and the next decisions coming up in the first week of November. So Sarah Hunter I was asking her about inflation and you know she was expressing caution again that you know some pockets are remaining stubbornly sticky. We've had now two uh months of the the monthly indicator for the three months of the September quarter and there's just a couple of categories that look like they've come through a little bit stronger than we were anticipating. The first of those is uh housing. So that's the amalgamation of rents and in particular new dwelling uh construction costs and the second is market services and those ones are are particularly important because they are core components of the CPI. they will come through in the trim mean and so we're just monitoring those two but given that they've as they've printed through a touch stronger than we expected we think that that will then show up in that full quarterly print that we get uh at the end of October >> so how much weight do you think the board is going to be placing on that before deciding it next move >> I mean all data matters all data is important obviously inflation data is is very important because it's part you know it's core to the mandate of keeping inflation in that 2 to 3% target band on an ongoing basis so yeah definitely it's going to feature. Of course, we also as part of the November meeting uh will be publishing on the day of the meeting itself our updated forecast in our November SMP. So, they'll also get that information as well and obviously everyone else will too. Um and that will give you a real sense of how we've read the data, whatever it turns out to be and what it means for the outlook. >> Yeah, I want to talk about the forecast a little later, but just circling back to that point that you made about house prices, and this is something we typically see when we're in an easing cycle. House prices tend to go up often has an impact on rents as well. Um so what are the recent pickup telling you about getting inflation back to target? >> Yeah. What's so how surprises specifically? Of course they're not directly in the CPI but they are they are um one of the first typically uh domestic transmission channels for monetary policy. So it's not a surprise that um since you know we started cutting rates in February we've seen a little bit of a a lift in the momentum in the housing market and that's come through in prices. uh and then we'll expect to see that transmit through into new dwelling construction activity. So um you know uh the viability of projects improves and lift in demand for um dwellings and that will come through into construction over the forecast and then also it'll flow through um a little bit into consumer spending as well. We're really monitoring that channel and thinking about what that then means for inflation. We're not surprised that we've seen the pickup because we've seen it before in cutting cycles. So what we've seen isn't out of line with uh previous periods, but obviously we're monitoring it and it's really for the board what they're really focused on now is, you know, keeping inflation around about the middle of the target band, particularly uh that underlying trim mean metric because that's our best lead for where headline inflation will be over the medium term. >> How much confidence did you do you have that inflation will be in the midpoint of that target band by 2026? Well, look, um, forecasts, uh, um, you know, inevitably you get things a little bit wrong, at least sometimes you get them, um, quite a lot wrong. And so that's the job for me and my team is really looking at what's happening, um, updating our forecast, taking on the new information, um, taking on what's happening around the world as well and what that actually means for the outlook. We're obviously that's very much what we're trying to achieve. That's what we want to achieve. We've got to a point now where obviously we had that trim mean inflation was 2.7% in the June quarter and and you know the un uh the labor market had been we think relatively stable in recent months. We really would like to to keep it there. You know trim mean around the middle of the target band headline eventually there too and the labor market stable but we've got to respond uh to what the data tells us um and what else might be happening that we didn't foresee and you can always get surprised by shock. So, that's the job and uh you're forever looking forward and things are always changing, but I hope that I can come back in a year and that's what we've achieved. But let's see. >> All right, that was the RBA's chief economist and assistant governor there, Sarah Hunter. She was speaking with me at the City Australia New Zealand conference. And it was interesting, Doug, because I was also speaking to the City Australia CEO, Mark Woodruff. Uh for his part, he thinks the RBA is done with its easing cycle for now. 3.6%. That's the end of it. Paul, I was noticing that TD Securities was saying the economic data that will be released over the next couple of days for Australia may be stronger than expected. Paul, thank you so very much. Bloomberg's Paul Allen joining from Sydney. I'm Doug Krer. You can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast. Nathan, hi. Thanks, Doug. And that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at 5:00 a.m. Wall Street time for the latest on markets overseas and the news you need to start your day. I'm Nathan Hager. Stay with us. Top stories and global business headlines are coming up right now. How many vendors does it take to meet all your organization's food needs? Just one. Easy Cater, the workplace food platform that lets teams order from a huge variety of restaurants, over a 100,000 nationwide, all through a single vendor. In addition to all that variety, Easy Cater also gives you full visibility of your organization's food spend with invoicing, centralized reporting, and seamless integration with expense management systems, all on one platform. EasyCater, your business tool for food. To learn more, visit easycater.com/mpodcast. Every business starts with an idea. How can you go from daydreamer to industry leader? Amazon business accelerates your journey. With smart business buying, get everything you need to grow in one familiar place. From office supplies to IT essentials and maintenance tools. Amazon business takes the buying experience you know and love from Amazon. Plus, tools that help you save costs and make insights based decisions. Ready to bring your visions to life? Learn how at amazonus.com. His Small Business Insurance knows there is no business like your business. Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to his insurance for protection. Find flexible coverage that adapts to the needs of your small business with a fast, easy online quote at his.com. That's his coox.com. There's no business like small business.