Daybreak Weekend: Fed Meeting, US Tech, European Defense Earnings | Bloomberg Daybreak: US Edition
Summary
Federal Reserve Meeting: The upcoming Fed meeting is expected to result in a quarter-point rate cut, with a potential for another cut in December, influenced by recent consumer price data.
US Tech Earnings: Earnings from major tech companies, including Microsoft, Meta Platforms, Alphabet, Apple, and Amazon, are anticipated, with a focus on the impact of AI on cloud revenues.
AI and Cloud Divergence: Companies like Microsoft and Google are expected to benefit significantly from AI-driven cloud revenue growth, while Amazon and Meta may not see the same level of impact.
European Defense Sector: European defense companies, such as Airbus and Leonardo, are preparing for potential conflicts and are focusing on increasing defense autonomy and joint procurement within the EU.
Defense Market Dynamics: There is a perceived bubble in the European defense market due to increased investor interest, with a focus on the need for sustainable and innovative defense technologies.
South Korea-US Trade Talks: Ongoing negotiations focus on structuring a $350 billion investment pledge, with discussions on potential currency swaps to support South Korea's foreign exchange market.
Australia-US Rare Earths Agreement: A landmark deal aims to boost America's access to Australian rare earths, strengthening trade ties and supply chains, while balancing competition and collaboration between companies.
Transcript
[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, a look ahead to next week's Fed meeting and earnings from some of tech's magnificent seven companies. I'm Caroline in London where we're looking ahead to European defense earnings including from Airbus and Leonardo. >> We'll look at top interviews from the APEC finance ministers meeting in South Korea. I'm Nathan Hager in Washington. 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. >> Good day to you. I'm Nathan Hager. We begin today's program with the Federal Reserve. The Fed begins its two-day meeting to decide monetary policy on Tuesday. The October decision comes Wednesday, followed, of course, by the news conference from Fed Chair Jay Powell. For more on what to expect, we are joined now by Stuart Paul, US economist with Bloomberg Economics. And Stuart, if the markets are to be believed, everybody's expecting a cut, especially after the consumer price data from Friday that we finally got. Is uh is that what you're expecting? >> That is what we're expecting. And I think that the consumer price data that we got on Friday uh actually opens the door even wider for an additional cut in December. Uh but I think that the Fed is going to uh certainly uh try to avoid surprising markets at this point and will deliver that quarter point cut next week that everyone's been holding their breath for. So, if that's the case, would it be a surprise if the Fed did not signal a December cut? Given that we still don't know whether we're going to get the data if this government shutdown keeps going on, >> I think policymakers will try to keep their options open and their explicit messaging will be something like every meeting is live. We're not making any decisions in advance of the meetings themselves. Um, so I don't think that they're going to be so bold as to uh offer some sort of clarion call for a December cut, but I think that uh the fact that the Fed is comfortable with sequential cuts right now and still views policy as at least modestly restrictive makes a December cut more likely than not. Also, >> so let's talk a little bit more about why the consumer price data opens the door even further to that December cut. Uh we seem to be getting that indication from the markets as well. What are you seeing in the data that's got you open to that? >> There are really three or four items that stood out to me in the Friday report. The first is that tariff pass through uh remained modest. When we track the product or spending level tariff that has been applied since April and the price growth that we have seen for those spending categories since April tariff pass through to the consumer level is still rather modest. Second, core goods prices just in the aggregate uh are still uh downshifting. there's been a deceleration in prices in core goods which should quell some fears further for the Fed. The third thing that I'd point to is that core services which typically matters most to the Fed. Uh core services prices are also tame and there was a major step down in rents. uh and rents and owners equivalents of rents are one of the spending categories that are most highly uh levered to monetary policy decisions which shows that there might be some additional room for the Fed to bring down rates given the fact that home prices and home price appreciation has been slow and so rent growth has also slowed. I think that all of those details from the September CPI report are going to be viewed favorably by the Fed when it meets next week. >> Are you thinking then that uh we could continue to see pass through on the tariffs uh from this data given that we might not see further data. Even the White House is warning that if the shutdown goes on, we're not going to get potentially an October consumer price index. I think that even if we were to get an October consumer price index, uh, we would have to look at it rather skeptically because the data collection process has been interrupted by the shutdown. Instead, we have a an alternative measure uh, and we look at a broad swath of data that allows us to get a more realtime understanding of price pressures. And right now it looks like tariff pass through is relatively limited. And Nathan, one thing that I'd point out is that firms ability to pass through tariff costs that they've incurred throughout the supply chain, firms ability to pass through those tariff costs to consumers are being limited by consumers income growth. Consumers cannot bid up the price of goods and services in a cooling labor market. And when that's the case, again, the Fed just has a little bit of space to cut. They don't have to worry as much about the upside inflation risk created by tariffs. Instead, they can rotate their attention even more toward the maximum employment side of their dual mandate. >> Really appreciate this, Steuart, ahead of that Fed decision on Wednesday. Our thanks to Stuart Paul, US economist with Bloomberg Economics. Next, we move to corporate earnings from some of tech's magnificent seven companies. This week, we hear from five of them. Microsoft, Meta Platforms and Alphabet on Wednesday. Then on Thursday, it's Apple and Amazon. Busy times for Mandeep Singh, senior tech industry analyst for Bloomberg Intelligence who joins us now. Mandep, thanks for being with us. Uh we call them the Mag 7, but do these companies really rise together in tandem still? >> They do. Although I would say that you know with Gen AI uh really making a difference in terms of the topline contributions, this will be a quarter where you will see some divergence between the likes of Microsoft and Google which may get a much bigger lift in their cloud revenues from AI versus let's say Amazon or Meta where Amazon even though it has a very sizable cloud business may not get the same kind of lift from AI that uh the other two hyperscalers are getting and also Meta I think because they don't have a cloud business uh it'll be interesting to see if Meta ends up increasing their capex numbers for 2026. >> Let's talk a little bit more about that divergence then because it seems like particularly for Microsoft it's been off to the races with their partnership with Open AI. Is that what's got you thinking that uh that may be fueling the divergence here? >> Yes. And also Open AI has signed three big deals to expand their data center capacity and that's not with Microsoft. So it signed you know a big deal with Oracle uh with uh Broadcom with Nvidia and also another deal with AMD and you know Microsoft still ends up benefiting because they have uh a 49% stake in open AI they get a revenue share from open AI and also you know with open AI doing so well in terms of you know the deploying their models it indirectly uh benefits Microsoft uh on the Azure side where we saw Microsoft uh Azure business growing 39% last quarter and this quarter maybe another solid quarter of around 40% growth. So that's where the tailwind is so strong for a company like Microsoft. >> And when it comes to uh Google parent Alphabet, I guess we just got that confirmation that uh Google's got this partnership with Anthropic. Uh I don't know if we're going to see that reflected in the earnings, but what does that mean for them going forward? >> It's huge. I mean uh another company that's benefited from AI workload uh spend is Google cloud segment. Not their ad revenue but their cloud segment. And uh I think with this anthropic deal, what they're signaling is they are ready to sell their TPU chips outside of their own cloud. And uh this is huge because Nvidia really dominated that space. And now you have got TPU chips that can actually compete with Nvidia at the chip level. And to my mind, this expands, you know, the relevance of TPUs outside Google Cloud and it could have huge ramifications, you know, uh 12 to 24 months out because it could be at a much lower price point than Nvidia chips. And that's where you know it gets very competitive if uh other companies start to adopt uh TPU chips. >> And on the other side of the coin, you mentioned Amazon and Meta Platforms. Of course, we're coming into these earnings for Amazon after that big AWS outage uh last week. How vulnerable is Amazon right now? >> I mean to me the key metric here is cloud margins. So with both Microsoft and Google you will see cloud margins expand. In the case of Amazon we saw cloud margins actually go down last quarter and partly that has to do with the fact that AI isn't that big of a tailwind for Amazon still and you know they may be taking a lower margin uh for AI workloads just to make sure that they maintain their market share. Remember they are the largest incumbent cloud provider. So they have to add more revenue to grow at a higher rate than the other two clouds. And that's where they may be taking a margin hit. So margins for cloud segment of AWS are really important uh this quarter. >> And in terms of um meta platforms, I know they've been spending a lot of time poaching AI workers from Apple. Um is that going to pay off for them? Well, now we also read some news that they are actually laying off up to 600 people. So, a lot going on in Meta in terms of their AI efforts. And uh I think uh the main concern here is if Meta ends up raising their capex by let's say another 30 to 40% for 2026, which means they are spending almost hundred billion dollars in capex next year. How does that translate into ROI? So that ROI question for Meta is really applicable because the only place where Meta has seen a lip from AI is in more targeted ads and in ad pricing and because they don't have a separate cloud business. Uh I think the question around ROI may get louder uh if they end up uh you know guiding for in excess of hundred billion dollars in capex for 2026. And when it comes to Apple, of course, we've been talking for so long about how they've been trying to play catch-up around artificial intelligence. What's the main driver for them? Uh, as we look ahead to their earnings, >> I mean, it has to be uh, iPhone 17 and what kind of a refresh cycle it could trigger. I think Apple has to do more than just the hardware side. they need a a much better LLM strategy whether that means partnering with someone or you know doing something on their own but uh time is really running out in terms of laying out what their AI strategy will be and that is where there are still questions around Apple >> thanks for this mandep really appreciate it that's Mandep Singh senior tech analyst for Bloomberg intelligence and coming up on Bloomberg dayb breakak weekend we look ahead to defense earnings in Europe Europe from the likes of Airbus and Leonardo. I'm Nathan Hager and this is Bloomberg. [Music] This is Bloomberg Daybreak Weekend, 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 take a look at some of the top interviews from the APEC finance ministers meeting in South Korea. But first, European defense companies are grappling with renewed Russian threats, the ongoing war in Ukraine, and significant dependencies on Americanmade weapons and systems. There's also been a defense selloff in recent weeks following the ceasefire in the Middle East, and now uncertainty around President Trump's stance toward Vladimir Putin amid intensified diplomatic efforts to bring peace between Russia and Ukraine. with some of Europe's biggest defense names including Airbus and Leonardo reporting earnings in the next few days. Let's get more from Bloomberg Daybreak Europe anchor Caroline Heepker in London. Nathan, the EU's defense readiness plan sets an ambitious goal. Europe should be ready for a potential war with Russia by 2030, but its details are vague. The main underpinning is a push for European defense autonomy. The aim is for 40% of procurement in the EU's flagship defense programs to be conducted jointly instead of separately by all the different member states and this by the end of 2027. So in short the idea is buy more buy together and buy European even if US weapons for now may actually be the quickest fix. Torston R is the co-CEO of the Munich based defense technology firm Helsing. He says that the increase in investor interest in his sector has led to a bubble in the defense market. He's been speaking to Bloomberg's Tom McKenzie at the Bloomberg London Tech Summit. >> I think there's definitely a bubble right now and the reason for it is in 2021 not a single European VC in particular wanted to touch defense. Now everyone has moved into defense and you know including the crypto caravan that's moved from crypto now into defense and is trying to spend its money there. I think in some ways it doesn't matter. It creates noise in the market obviously, but there is a lot of money. I think that's not going to see a return. >> So that was the co-CEO of Helsing. Putting market moves to one side. How prepared is Europe? How is it coping with the shifting sands in US policy, growing hybrid threats, and uncertain timelines for funding and defense procurement? What can we expect from the earnings of Europe's largest defense company, Airbus, and the others, including Leonardo, which are all to come in the next few days. Well, joining me is Bloomberg's global defense editor, Jerry Doyle. Welcome to the radio studio. Thank you for being with us. Jerry, this is a really big topic. There is a fragile ceasefire between Israel and Hamas right now. There is a push for peace in Russia and Ukraine. Meanwhile, of course, you got the Trump administration who are really zigzagging very frequently on policy, you know, whether it comes to Gaza or whether it's about the Kremlin or even potentially about Taiwan. Does that change the outlook for the defense sector in your view or do the fundamentals basically stay the same? >> I think the fundamentals are basically the same. I mean, you're you're absolutely right. on Ukraine for instance, there's going to be a meeting and then there's not going to be a meeting and then there is a meeting but nothing comes of it. There's going to be a deal, there's no deal. Because uh of that uncertainty, I I think a lot of people might perceive that there's also uncertainty in terms of what Europe is is looking for in terms of defense spending and investment in the sector. But again, if you talk to European politicians and policy makers, there is a very strong commitment to uh increasing defense spending, increasing investment in the defense sector in Europe and making sure that their country's militaries are able to sort of stand on their own because the one thing that seems fairly certain despite everything else that's happening in Washington is there does seem to be a pullback of the US uh from from Europe in terms of uh being the type of ally and partner that it has been in the past. >> Yeah, absolutely. And we've seen, haven't we, such a big uptick in terms of drones, in terms of jet incursions into NATO airspace, particularly in Eastern Europe, and this idea of kind of hybrid threats as well. Are European nations going to be able to shore up their air defense systems because 80% of it is basically Americanmade? >> Yeah, I mean, the the main problem for Europe on this score is at the the very high end. European defense companies make uh sort of excellent short-range air defense systems, radar directed guns, and short-range missiles that can handle low-flying threats, cruise missiles, drones, and things like that. Uh and they also have the the mid-range sort of very well covered with with very effective systems such as NAS and IST. where Europe struggles in terms of production is the very highest end. The types of systems that can just intercept um hypersonics uh maneuvering glide vehicles uh even you know ICBMs or other type of longrange ballistic missiles. uh really the the US uh US defense companies are the only ones who produce that type of system and so for the time being Europe is is relying on those but for the the rest of its needs I think Europe uh with with the right sort of directed spending can can get it done. >> Okay, that's interesting. And there's also expected to be a lot of money that is going to be spent um in Europe and in NATO. How far do you think that the push to reach the 5% defense spending target for NATO countries um in Europe is going to be able to sort of sustain the defense industry or boost the defense industry in Europe which is obviously a kind of a huge question. >> Yeah. I I again I think the commitment is going to be there because the underlying reality, the thing that has gotten European governments on board with the idea of spending more on defense is the war in Ukraine and sort of the threat of Russian aggression. That does not show any signs of abating. Even if the war in Ukraine ends, I think that European governments are now very well aware that that Russia does sort of pose a threat to Europe that maybe the that perception didn't exist 15 years ago or 20 years ago. Now it does and because that reality is not going to change then the the pressure to spend is still going to be there. >> Yeah. But a lot of that is reflected in the valuations. So there's a question of whether the huge run up that we've seen in the stock market valuations of a lot of these big firms in Europe whether you know you're going to have to deliver now in terms of the spending. >> Yeah, you will. And you know some of that's going to be easier than others. And I think to to the point earlier that there might be a lot of froth in in you know defense investment. >> I think that's probably true to some extent. It's sort of a chicken and egg problem where there is all this spending right. So some companies are going to, you know, that might have made just ordinary things before might see this money and say, "Oh, instead of making widgets, now we're making death widgets, right?" So we're we're going to, you know, partake in this this huge uh boost of spending. But there's also a whole other set of companies that from the get-go have some sort of interesting bit of defense related technology and now they have a market for it, right? And so I think it's weeding out that the first type of company that is just sort of trying to to capitalize on the increased defense spending without having anything really to to offer in terms of you know innovation or uh new new sort of angles or approaches to defense technology. Uh getting those sort of off the board which you know eventually they they sort of will fall by the wayside and and focus more on the companies that are are bringing something new to the table. >> Yeah. Death widgets. I think that cuts through the PR kind of industry jargon, doesn't it? Um, >> it's a good band name, too. >> Yeah. In terms of the individual companies also who are very much um involved in this and we're going to hear from in the next few days. I mean, Airbus and Leonardo and other companies are pushing for preparedness. So, Airbus obviously wants to fill the gaps in space and satellite capabilities. In the last few days, we've also had this tie up between Airbus and Leonardo and Tales, an agreement to merge their space business. So, there's a lot that is moving and even when we started really thinking about defense quite a few months ago, as this was all building, the pressure was mounting. There was a big question about whether you'd get a lot more joint cooperation that seems to be coming through in the industry now. >> I think so. Um in Europe there is this commitment to try to do it domestically to try to do it as a continent. Space is also one of these areas that Europe uh is very reliant on the US for at the moment especially on the military side and you can see the importance of having satellite imagery just in the Ukraine war during the period earlier this year when the US cut off Ukraine from uh satellite based intelligence for a while. Ukraine immediately started to suffer on the battlefield. Um so having those assets and having ownership of them is very important to uh Europe and European government. Airbus obviously has a lot of experience in this area and so I think there's a lot of potential for for joining the forces of some of these technological giants to get into satellites. There could be a lot of payoff for Europe. The problem then becomes how do you get this stuff into orbit? And that is something that Europe still lacks is uh you know a high tempmpo fast cadence uh heavy launch system for the moment. If you want to get a lot of stuff in orbit really fast, you probably are going to have to buy it right on SpaceX. >> Yes, exactly. So it's the competition who anywhere in the world can actually keep up with Elon Musk's uh SpaceX. Absolutely. We're thinking about the individual defense companies, but I suppose the bigger question for Europe and and I want to ask you because of your years of studying this industry is whether or not Europe can fight a war with Russia. This whole idea around 2030, whether that's too far away, whether it's going to be a traditional war, whether we're already in a war, I mean, there are a lot of questions about Europe versus Vladimir Putin's Russia. Yeah, I think that qualitatively European allies collectively have a big edge over Russia in almost every area. And you can kind of see in the way the war in Ukraine has gone for Russia that, you know, they they've had trouble making any headway against a much smaller and more poorly equipped adversary. How are they going to fare against the combined militaries of Europe which have trained together for decades which have topshelf equipment which do have access to all these high-end systems that Ukraine doesn't have. It's very difficult to picture that going well for Russia. I think the big issue for Europe then is not the amount of hardware or the quality of the hardware they have, but it's about mustering more people. you you have to expand your your militaries in order to operate all these new planes, in order to operate all the new armor and artillery systems that are being produced. You have to be able to uh fight a sustained war, which is something Russia has shown it it's very good at just by sort of continually conscripting wave after wave of people to fight in war in Ukraine. I think that's the biggest challenge for Europe. Uh when you say getting Europe ready to to fight a war for Russia, that that's what it is. It's not getting more hardware. It's not building better stuff. It's just having the the horses to be able to stay in a sustained fight with a very large country. >> Jerry Doyle, thank you so much for your time. That is Bloomberg's global defense editor, Jerry Doyle. We'll have full coverage and analysis of European defense earnings including from Airbus and Leonardo with quarterly earnings due on Wednesday the 29th of October right here on Bloomberg Radio. I'm Caroline Hepka in London. You can catch us every weekday morning for Bloomberg Daybreak Europe beginning at 6:00 a.m. in London. That's 1 am on Wall Street. Nathan, >> thanks Caroline. And coming up on Bloomberg Daybreak weekend, we'll look at some key conversations this week with South Korea's finance minister Ku Yanol and Australian Treasurer Jim Chalmer's. I'm Nathan Hager and this is Bloomberg. [Music] This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Nathan Hager in Washington. This week, finance ministers from the Asia-Pacific Economic Cooperation member economies gathered in South Korea to discuss a broad range of issues that includes the global economic outlook, fiscal policy, and structural reform. This is the last ministerial level meeting before the apex summit in the coming week. And Bloomberg had the chance to speak with several top officials, including South Korea's finance minister, Ku Yan Chol. He says the ongoing trade talks between South Korea and the US are focusing on the structure of a $350 billion investment pledge rather than a currency swap. Coup spoke exclusively with Bloomberg's Sheron from the sidelines of the APEC finance ministers meeting. They started on the progress of negotiations. We understand that the US investment fund has been very difficult to agree on the details and you've told Secretary Bessent about um the feasibility of having so much cash upfront. Should we be expecting installments in payments? Then >> Bessant has understood that due to the current state of Korea's foreign exchange market, we cannot pay upfront. He understands that. However, regarding how to proceed on this with negotiations currently underway with the US, I ask for your understanding that I cannot yet provide specific details on the plan. >> Bank of Korea Governor Eyong said that the maximum amount that can be raised in dollars annually without market disruptions is $20 billion. Are we looking at around those figures right now? >> Maximum, >> yes. The Bank of Korea currently estimates that the maximum amount we can raise without significantly impacting the foreign exchange market is $20 billion. >> What does that mean for upfront payments though? Does that mean frontloading some and then paying annually? >> Regarding that aspect, we are keeping various possibilities open for the foreign exchange market and are currently in negotiations with the United States. But that's one of the options that you've talked to Secretary Bessant and to Washington about. >> I cannot confirm that at this time. However, Secretary Bessant fully understands the difficulties in Korea's FX market and is having internal discussions on how to respond to the situation. Because of the potential financial shocks to South Korea, there was a lot of talk about a potential currency swap agreement. Is that still on the table? >> Whether a currency swap is needed and to what extent will depend entirely on how the deal is structured. It may not be necessary at all or it could be arranged on a smaller scale. Therefore, the currency swap itself is a necessary condition, not a sufficient one. So, depending on how this deal turns out, we plan to consult with the US regarding the currency swap aspect as well. Even if we have a currency swap, it will be difficult to just blindly provide money to the US without considering the commercial rationality or viability of the project being selected. >> I'm understanding then that this option is still alive. If that's the case when it comes to perhaps the structure, could it be something similar as to the Argentina style going through the Treasury instead of directly from the Fed? Regarding the currency swap, we're not doing it because we lack short-term foreign reserves like Argentina. It's a situation where Korea needs foreign currency to make long-term investments as requested by the US. So, the US must provide the lack of foreign currency. Therefore, it doesn't align with the conventional short-term currency swap structure. So, regarding that aspect, if we were to engage in a currency swap arrangement with the US, there are further points that require discussions. >> The South Korean loan at 1,400 uh per dollar. Is that the new normal? Do you think that reflects fundamentals? We believe much of the recent depreciation reflects market concern that the tariff negotiations haven't been finalized. So we are currently pursuing negotiations with the US within a range that doesn't significantly impact Korea's foreign exchange market. Fortunately, US Treasury Secretary Bessant is fully aware of the situation in Korea's foreign exchange market. Therefore, once the issue is resolved, that uncertainty will likely fade. We have seen clearly the impact on South Korean automakers because the tariffs continue to be of course much higher than for Japan for Europe who already uh the US has lifted those levies. What can the government do at this point to support the sector? In the short term, the government is providing all possible policy support to automakers and auto parts companies facing difficulties due to these higher tariffs compared to the EU and Japan. We believe that if these negotiations yield some breakthrough, those issues could also be resolved. in these ongoing trade negotiations is the fact that South Korea would lose its advantage over say Japan before the trade deal because Korea had a free trade agreement with the US. It had um an advantage of around 2.5%. Is that being discussed at this point? I conveyed that point to President Trump and explained to Bessant and Lutnik. I explained that since Korea is an FTA partner, tariffs on Korea are already sufficiently low. But tariffs on other countries aren't sufficiently low, making it unfair. Even so, it seems the US isn't very willing to understand that aspect. In any case, we plan to continue explaining and persuading them. >> Because of the exuberance around artificial intelligence, we are seeing South Korea's stock market on a tear. Are you concerned that this could be a market bubble? The current stock market reflects expectations for the Korean economy, such as enhancing shareholder value in the Korean capital market, expanding dividends, or resolving unfair practices, expectations for the modernization of the Korean stock market. On top of these expectations, we are actively supporting the core technology economy to ensure a robust Korean economy that can be a global investment destination. That was South Korea finance minister Ku Yan Chol speaking with Bloomberg's Sherion. Staying at the APEC Finance Minister's meeting, we also got the chance to hear from Australian Treasurer Jim Chalmer's. He spoke to Bloomberg's husind almond after his country and the US signed a landmark deal to boost America's access to rare earths and other critical minerals as part of a push to curb reliance on China's supply chains. They started by talking about what the agreement means for the Australian economy. Were you given any assurances that perhaps this won't just be America first? >> Prime Minister Albanesei had uh an outstanding meeting with President Trump. We're very very pleased with how the meeting went and the critical minerals framework is really one of the most important uh bits of progress that we saw in those discussions. And what that's all about is about helping to ensure Australia becomes a world leader in the export of rare earths and critical minerals. It's all about making sure that we strengthen our trade ties with the US. Uh that we strengthen supply chains uh and that we make sure that this remarkable opportunity that Australia has with rare earths and critical minerals is properly maximized. >> So who will decide which projects are viable? Is the government choosing the winners here? >> Well, this industry already we think there are about$13 billion Australian uh of uh projects in the pipeline. Uh a really extraordinary opportunity for Australia, a golden opportunity. And what the American administration and the Australian government have agreed is that each of us uh will invest a billion dollars over the next six months, as you rightly said in your introduction, uh in some of these really important projects. Uh we believe Australia can be and will be uh a world leader in the supply of rare earths and critical minerals. The agreement and the framework that was agreed with President Trump is an important part uh of that effort. It's a golden opportunity for Australia and we intend to maximize it. >> The thing is there is reason to think that could be competition between an American and Australian company. I'm just wondering how will it be decided when it comes to that? For instance, if you have liners and empty materials at odds, how will you decide? >> Well, it's not beyond ush for the commercial arrangements to reflect the scale of this opportunity uh and our obligations to each other under this framework. Obviously, rare earths and critical minerals have a number of important applications including in defense and technology uh and in the industries that uh the US administration are very keen to work closely with Australia on. Uh we intend to be a reliable supplier around the world. Uh but this agreement with the US is about strengthening trade ties with the Trump administration and the US more broadly. It's about making sure that those supply chains are robust and reliable. Uh we will have markets all around the world uh for these critical minerals and that's a good thing. Uh but the American relationship is very important to us and today we strengthened it. When you think about these rare earth deal and the projects which are coming up, we know that Gina Reinhardt for instance has a figure in a lot of these pies and some are raising the concern that perhaps you know taxpayers money would end up at one end of town which is the richer end of town. I mean how do you respond to such concerns? Oh, this critical minerals opportunity for Australia is a big opportunity for our workers, our local communities, for our businesses and our investors. Uh, and there's more than one investor or owner of uh critical minerals resources in Australia. Uh, but whether it's uh mining, refining, adding value, processing, working with our international partners, uh we shouldn't see this as anything other than a massive opportunity for Australia. It's why we put so much effort into engaging whether it be with the US administration, whether it be here in APEC with the 21 economies of our region. We recognize uh that Australia's got a lot to offer the world. uh we've got uh uh important relationships right around the region and we intend to supply uh other economies with our critical minerals and rare earths in a way uh where the benefits in Australia are broadly shared including amongst uh our worldleading mining workforce. >> Do you think China overplayed its hand in imposing the curbs on rare earth supplies? >> I wouldn't engage in that sort of commentary. We engage with uh the Chinese administration in good faith and in Australia's national interest. Uh we engage with all of our trading partners uh in that fashion. I'll leave the uh analysis to others. Uh our interest here is in making sure that we play an important role in strengthening supply chains in this industry uh whether it's in the United States or elsewhere. Uh but our relationship with China is important to us in economic terms as well. We've put a lot of effort into stabilizing that relationship. Uh the Chinese economy is not without its fair share of challenges, but we are confident that it will continue to be an important source of growth in our own economy in Australia. Uh and we believe it's possible to engage with the Americans in the way that we have been uh and to continue to stabilize and invest in that very important China relationship at the same time. That was Jim Chalmer's, Australia's treasurer, speaking with Bloomberg's House Linda Ammon at the APEC Finance Ministers meeting in South Korea. And that does it for this edition of Bloomberg Daybreak Week. And 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. [Music]
Daybreak Weekend: Fed Meeting, US Tech, European Defense Earnings | Bloomberg Daybreak: US Edition
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[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, a look ahead to next week's Fed meeting and earnings from some of tech's magnificent seven companies. I'm Caroline in London where we're looking ahead to European defense earnings including from Airbus and Leonardo. >> We'll look at top interviews from the APEC finance ministers meeting in South Korea. I'm Nathan Hager in Washington. 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. >> Good day to you. I'm Nathan Hager. We begin today's program with the Federal Reserve. The Fed begins its two-day meeting to decide monetary policy on Tuesday. The October decision comes Wednesday, followed, of course, by the news conference from Fed Chair Jay Powell. For more on what to expect, we are joined now by Stuart Paul, US economist with Bloomberg Economics. And Stuart, if the markets are to be believed, everybody's expecting a cut, especially after the consumer price data from Friday that we finally got. Is uh is that what you're expecting? >> That is what we're expecting. And I think that the consumer price data that we got on Friday uh actually opens the door even wider for an additional cut in December. Uh but I think that the Fed is going to uh certainly uh try to avoid surprising markets at this point and will deliver that quarter point cut next week that everyone's been holding their breath for. So, if that's the case, would it be a surprise if the Fed did not signal a December cut? Given that we still don't know whether we're going to get the data if this government shutdown keeps going on, >> I think policymakers will try to keep their options open and their explicit messaging will be something like every meeting is live. We're not making any decisions in advance of the meetings themselves. Um, so I don't think that they're going to be so bold as to uh offer some sort of clarion call for a December cut, but I think that uh the fact that the Fed is comfortable with sequential cuts right now and still views policy as at least modestly restrictive makes a December cut more likely than not. Also, >> so let's talk a little bit more about why the consumer price data opens the door even further to that December cut. Uh we seem to be getting that indication from the markets as well. What are you seeing in the data that's got you open to that? >> There are really three or four items that stood out to me in the Friday report. The first is that tariff pass through uh remained modest. When we track the product or spending level tariff that has been applied since April and the price growth that we have seen for those spending categories since April tariff pass through to the consumer level is still rather modest. Second, core goods prices just in the aggregate uh are still uh downshifting. there's been a deceleration in prices in core goods which should quell some fears further for the Fed. The third thing that I'd point to is that core services which typically matters most to the Fed. Uh core services prices are also tame and there was a major step down in rents. uh and rents and owners equivalents of rents are one of the spending categories that are most highly uh levered to monetary policy decisions which shows that there might be some additional room for the Fed to bring down rates given the fact that home prices and home price appreciation has been slow and so rent growth has also slowed. I think that all of those details from the September CPI report are going to be viewed favorably by the Fed when it meets next week. >> Are you thinking then that uh we could continue to see pass through on the tariffs uh from this data given that we might not see further data. Even the White House is warning that if the shutdown goes on, we're not going to get potentially an October consumer price index. I think that even if we were to get an October consumer price index, uh, we would have to look at it rather skeptically because the data collection process has been interrupted by the shutdown. Instead, we have a an alternative measure uh, and we look at a broad swath of data that allows us to get a more realtime understanding of price pressures. And right now it looks like tariff pass through is relatively limited. And Nathan, one thing that I'd point out is that firms ability to pass through tariff costs that they've incurred throughout the supply chain, firms ability to pass through those tariff costs to consumers are being limited by consumers income growth. Consumers cannot bid up the price of goods and services in a cooling labor market. And when that's the case, again, the Fed just has a little bit of space to cut. They don't have to worry as much about the upside inflation risk created by tariffs. Instead, they can rotate their attention even more toward the maximum employment side of their dual mandate. >> Really appreciate this, Steuart, ahead of that Fed decision on Wednesday. Our thanks to Stuart Paul, US economist with Bloomberg Economics. Next, we move to corporate earnings from some of tech's magnificent seven companies. This week, we hear from five of them. Microsoft, Meta Platforms and Alphabet on Wednesday. Then on Thursday, it's Apple and Amazon. Busy times for Mandeep Singh, senior tech industry analyst for Bloomberg Intelligence who joins us now. Mandep, thanks for being with us. Uh we call them the Mag 7, but do these companies really rise together in tandem still? >> They do. Although I would say that you know with Gen AI uh really making a difference in terms of the topline contributions, this will be a quarter where you will see some divergence between the likes of Microsoft and Google which may get a much bigger lift in their cloud revenues from AI versus let's say Amazon or Meta where Amazon even though it has a very sizable cloud business may not get the same kind of lift from AI that uh the other two hyperscalers are getting and also Meta I think because they don't have a cloud business uh it'll be interesting to see if Meta ends up increasing their capex numbers for 2026. >> Let's talk a little bit more about that divergence then because it seems like particularly for Microsoft it's been off to the races with their partnership with Open AI. Is that what's got you thinking that uh that may be fueling the divergence here? >> Yes. And also Open AI has signed three big deals to expand their data center capacity and that's not with Microsoft. So it signed you know a big deal with Oracle uh with uh Broadcom with Nvidia and also another deal with AMD and you know Microsoft still ends up benefiting because they have uh a 49% stake in open AI they get a revenue share from open AI and also you know with open AI doing so well in terms of you know the deploying their models it indirectly uh benefits Microsoft uh on the Azure side where we saw Microsoft uh Azure business growing 39% last quarter and this quarter maybe another solid quarter of around 40% growth. So that's where the tailwind is so strong for a company like Microsoft. >> And when it comes to uh Google parent Alphabet, I guess we just got that confirmation that uh Google's got this partnership with Anthropic. Uh I don't know if we're going to see that reflected in the earnings, but what does that mean for them going forward? >> It's huge. I mean uh another company that's benefited from AI workload uh spend is Google cloud segment. Not their ad revenue but their cloud segment. And uh I think with this anthropic deal, what they're signaling is they are ready to sell their TPU chips outside of their own cloud. And uh this is huge because Nvidia really dominated that space. And now you have got TPU chips that can actually compete with Nvidia at the chip level. And to my mind, this expands, you know, the relevance of TPUs outside Google Cloud and it could have huge ramifications, you know, uh 12 to 24 months out because it could be at a much lower price point than Nvidia chips. And that's where you know it gets very competitive if uh other companies start to adopt uh TPU chips. >> And on the other side of the coin, you mentioned Amazon and Meta Platforms. Of course, we're coming into these earnings for Amazon after that big AWS outage uh last week. How vulnerable is Amazon right now? >> I mean to me the key metric here is cloud margins. So with both Microsoft and Google you will see cloud margins expand. In the case of Amazon we saw cloud margins actually go down last quarter and partly that has to do with the fact that AI isn't that big of a tailwind for Amazon still and you know they may be taking a lower margin uh for AI workloads just to make sure that they maintain their market share. Remember they are the largest incumbent cloud provider. So they have to add more revenue to grow at a higher rate than the other two clouds. And that's where they may be taking a margin hit. So margins for cloud segment of AWS are really important uh this quarter. >> And in terms of um meta platforms, I know they've been spending a lot of time poaching AI workers from Apple. Um is that going to pay off for them? Well, now we also read some news that they are actually laying off up to 600 people. So, a lot going on in Meta in terms of their AI efforts. And uh I think uh the main concern here is if Meta ends up raising their capex by let's say another 30 to 40% for 2026, which means they are spending almost hundred billion dollars in capex next year. How does that translate into ROI? So that ROI question for Meta is really applicable because the only place where Meta has seen a lip from AI is in more targeted ads and in ad pricing and because they don't have a separate cloud business. Uh I think the question around ROI may get louder uh if they end up uh you know guiding for in excess of hundred billion dollars in capex for 2026. And when it comes to Apple, of course, we've been talking for so long about how they've been trying to play catch-up around artificial intelligence. What's the main driver for them? Uh, as we look ahead to their earnings, >> I mean, it has to be uh, iPhone 17 and what kind of a refresh cycle it could trigger. I think Apple has to do more than just the hardware side. they need a a much better LLM strategy whether that means partnering with someone or you know doing something on their own but uh time is really running out in terms of laying out what their AI strategy will be and that is where there are still questions around Apple >> thanks for this mandep really appreciate it that's Mandep Singh senior tech analyst for Bloomberg intelligence and coming up on Bloomberg dayb breakak weekend we look ahead to defense earnings in Europe Europe from the likes of Airbus and Leonardo. I'm Nathan Hager and this is Bloomberg. [Music] This is Bloomberg Daybreak Weekend, 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 take a look at some of the top interviews from the APEC finance ministers meeting in South Korea. But first, European defense companies are grappling with renewed Russian threats, the ongoing war in Ukraine, and significant dependencies on Americanmade weapons and systems. There's also been a defense selloff in recent weeks following the ceasefire in the Middle East, and now uncertainty around President Trump's stance toward Vladimir Putin amid intensified diplomatic efforts to bring peace between Russia and Ukraine. with some of Europe's biggest defense names including Airbus and Leonardo reporting earnings in the next few days. Let's get more from Bloomberg Daybreak Europe anchor Caroline Heepker in London. Nathan, the EU's defense readiness plan sets an ambitious goal. Europe should be ready for a potential war with Russia by 2030, but its details are vague. The main underpinning is a push for European defense autonomy. The aim is for 40% of procurement in the EU's flagship defense programs to be conducted jointly instead of separately by all the different member states and this by the end of 2027. So in short the idea is buy more buy together and buy European even if US weapons for now may actually be the quickest fix. Torston R is the co-CEO of the Munich based defense technology firm Helsing. He says that the increase in investor interest in his sector has led to a bubble in the defense market. He's been speaking to Bloomberg's Tom McKenzie at the Bloomberg London Tech Summit. >> I think there's definitely a bubble right now and the reason for it is in 2021 not a single European VC in particular wanted to touch defense. Now everyone has moved into defense and you know including the crypto caravan that's moved from crypto now into defense and is trying to spend its money there. I think in some ways it doesn't matter. It creates noise in the market obviously, but there is a lot of money. I think that's not going to see a return. >> So that was the co-CEO of Helsing. Putting market moves to one side. How prepared is Europe? How is it coping with the shifting sands in US policy, growing hybrid threats, and uncertain timelines for funding and defense procurement? What can we expect from the earnings of Europe's largest defense company, Airbus, and the others, including Leonardo, which are all to come in the next few days. Well, joining me is Bloomberg's global defense editor, Jerry Doyle. Welcome to the radio studio. Thank you for being with us. Jerry, this is a really big topic. There is a fragile ceasefire between Israel and Hamas right now. There is a push for peace in Russia and Ukraine. Meanwhile, of course, you got the Trump administration who are really zigzagging very frequently on policy, you know, whether it comes to Gaza or whether it's about the Kremlin or even potentially about Taiwan. Does that change the outlook for the defense sector in your view or do the fundamentals basically stay the same? >> I think the fundamentals are basically the same. I mean, you're you're absolutely right. on Ukraine for instance, there's going to be a meeting and then there's not going to be a meeting and then there is a meeting but nothing comes of it. There's going to be a deal, there's no deal. Because uh of that uncertainty, I I think a lot of people might perceive that there's also uncertainty in terms of what Europe is is looking for in terms of defense spending and investment in the sector. But again, if you talk to European politicians and policy makers, there is a very strong commitment to uh increasing defense spending, increasing investment in the defense sector in Europe and making sure that their country's militaries are able to sort of stand on their own because the one thing that seems fairly certain despite everything else that's happening in Washington is there does seem to be a pullback of the US uh from from Europe in terms of uh being the type of ally and partner that it has been in the past. >> Yeah, absolutely. And we've seen, haven't we, such a big uptick in terms of drones, in terms of jet incursions into NATO airspace, particularly in Eastern Europe, and this idea of kind of hybrid threats as well. Are European nations going to be able to shore up their air defense systems because 80% of it is basically Americanmade? >> Yeah, I mean, the the main problem for Europe on this score is at the the very high end. European defense companies make uh sort of excellent short-range air defense systems, radar directed guns, and short-range missiles that can handle low-flying threats, cruise missiles, drones, and things like that. Uh and they also have the the mid-range sort of very well covered with with very effective systems such as NAS and IST. where Europe struggles in terms of production is the very highest end. The types of systems that can just intercept um hypersonics uh maneuvering glide vehicles uh even you know ICBMs or other type of longrange ballistic missiles. uh really the the US uh US defense companies are the only ones who produce that type of system and so for the time being Europe is is relying on those but for the the rest of its needs I think Europe uh with with the right sort of directed spending can can get it done. >> Okay, that's interesting. And there's also expected to be a lot of money that is going to be spent um in Europe and in NATO. How far do you think that the push to reach the 5% defense spending target for NATO countries um in Europe is going to be able to sort of sustain the defense industry or boost the defense industry in Europe which is obviously a kind of a huge question. >> Yeah. I I again I think the commitment is going to be there because the underlying reality, the thing that has gotten European governments on board with the idea of spending more on defense is the war in Ukraine and sort of the threat of Russian aggression. That does not show any signs of abating. Even if the war in Ukraine ends, I think that European governments are now very well aware that that Russia does sort of pose a threat to Europe that maybe the that perception didn't exist 15 years ago or 20 years ago. Now it does and because that reality is not going to change then the the pressure to spend is still going to be there. >> Yeah. But a lot of that is reflected in the valuations. So there's a question of whether the huge run up that we've seen in the stock market valuations of a lot of these big firms in Europe whether you know you're going to have to deliver now in terms of the spending. >> Yeah, you will. And you know some of that's going to be easier than others. And I think to to the point earlier that there might be a lot of froth in in you know defense investment. >> I think that's probably true to some extent. It's sort of a chicken and egg problem where there is all this spending right. So some companies are going to, you know, that might have made just ordinary things before might see this money and say, "Oh, instead of making widgets, now we're making death widgets, right?" So we're we're going to, you know, partake in this this huge uh boost of spending. But there's also a whole other set of companies that from the get-go have some sort of interesting bit of defense related technology and now they have a market for it, right? And so I think it's weeding out that the first type of company that is just sort of trying to to capitalize on the increased defense spending without having anything really to to offer in terms of you know innovation or uh new new sort of angles or approaches to defense technology. Uh getting those sort of off the board which you know eventually they they sort of will fall by the wayside and and focus more on the companies that are are bringing something new to the table. >> Yeah. Death widgets. I think that cuts through the PR kind of industry jargon, doesn't it? Um, >> it's a good band name, too. >> Yeah. In terms of the individual companies also who are very much um involved in this and we're going to hear from in the next few days. I mean, Airbus and Leonardo and other companies are pushing for preparedness. So, Airbus obviously wants to fill the gaps in space and satellite capabilities. In the last few days, we've also had this tie up between Airbus and Leonardo and Tales, an agreement to merge their space business. So, there's a lot that is moving and even when we started really thinking about defense quite a few months ago, as this was all building, the pressure was mounting. There was a big question about whether you'd get a lot more joint cooperation that seems to be coming through in the industry now. >> I think so. Um in Europe there is this commitment to try to do it domestically to try to do it as a continent. Space is also one of these areas that Europe uh is very reliant on the US for at the moment especially on the military side and you can see the importance of having satellite imagery just in the Ukraine war during the period earlier this year when the US cut off Ukraine from uh satellite based intelligence for a while. Ukraine immediately started to suffer on the battlefield. Um so having those assets and having ownership of them is very important to uh Europe and European government. Airbus obviously has a lot of experience in this area and so I think there's a lot of potential for for joining the forces of some of these technological giants to get into satellites. There could be a lot of payoff for Europe. The problem then becomes how do you get this stuff into orbit? And that is something that Europe still lacks is uh you know a high tempmpo fast cadence uh heavy launch system for the moment. If you want to get a lot of stuff in orbit really fast, you probably are going to have to buy it right on SpaceX. >> Yes, exactly. So it's the competition who anywhere in the world can actually keep up with Elon Musk's uh SpaceX. Absolutely. We're thinking about the individual defense companies, but I suppose the bigger question for Europe and and I want to ask you because of your years of studying this industry is whether or not Europe can fight a war with Russia. This whole idea around 2030, whether that's too far away, whether it's going to be a traditional war, whether we're already in a war, I mean, there are a lot of questions about Europe versus Vladimir Putin's Russia. Yeah, I think that qualitatively European allies collectively have a big edge over Russia in almost every area. And you can kind of see in the way the war in Ukraine has gone for Russia that, you know, they they've had trouble making any headway against a much smaller and more poorly equipped adversary. How are they going to fare against the combined militaries of Europe which have trained together for decades which have topshelf equipment which do have access to all these high-end systems that Ukraine doesn't have. It's very difficult to picture that going well for Russia. I think the big issue for Europe then is not the amount of hardware or the quality of the hardware they have, but it's about mustering more people. you you have to expand your your militaries in order to operate all these new planes, in order to operate all the new armor and artillery systems that are being produced. You have to be able to uh fight a sustained war, which is something Russia has shown it it's very good at just by sort of continually conscripting wave after wave of people to fight in war in Ukraine. I think that's the biggest challenge for Europe. Uh when you say getting Europe ready to to fight a war for Russia, that that's what it is. It's not getting more hardware. It's not building better stuff. It's just having the the horses to be able to stay in a sustained fight with a very large country. >> Jerry Doyle, thank you so much for your time. That is Bloomberg's global defense editor, Jerry Doyle. We'll have full coverage and analysis of European defense earnings including from Airbus and Leonardo with quarterly earnings due on Wednesday the 29th of October right here on Bloomberg Radio. I'm Caroline Hepka in London. You can catch us every weekday morning for Bloomberg Daybreak Europe beginning at 6:00 a.m. in London. That's 1 am on Wall Street. Nathan, >> thanks Caroline. And coming up on Bloomberg Daybreak weekend, we'll look at some key conversations this week with South Korea's finance minister Ku Yanol and Australian Treasurer Jim Chalmer's. I'm Nathan Hager and this is Bloomberg. [Music] This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Nathan Hager in Washington. This week, finance ministers from the Asia-Pacific Economic Cooperation member economies gathered in South Korea to discuss a broad range of issues that includes the global economic outlook, fiscal policy, and structural reform. This is the last ministerial level meeting before the apex summit in the coming week. And Bloomberg had the chance to speak with several top officials, including South Korea's finance minister, Ku Yan Chol. He says the ongoing trade talks between South Korea and the US are focusing on the structure of a $350 billion investment pledge rather than a currency swap. Coup spoke exclusively with Bloomberg's Sheron from the sidelines of the APEC finance ministers meeting. They started on the progress of negotiations. We understand that the US investment fund has been very difficult to agree on the details and you've told Secretary Bessent about um the feasibility of having so much cash upfront. Should we be expecting installments in payments? Then >> Bessant has understood that due to the current state of Korea's foreign exchange market, we cannot pay upfront. He understands that. However, regarding how to proceed on this with negotiations currently underway with the US, I ask for your understanding that I cannot yet provide specific details on the plan. >> Bank of Korea Governor Eyong said that the maximum amount that can be raised in dollars annually without market disruptions is $20 billion. Are we looking at around those figures right now? >> Maximum, >> yes. The Bank of Korea currently estimates that the maximum amount we can raise without significantly impacting the foreign exchange market is $20 billion. >> What does that mean for upfront payments though? Does that mean frontloading some and then paying annually? >> Regarding that aspect, we are keeping various possibilities open for the foreign exchange market and are currently in negotiations with the United States. But that's one of the options that you've talked to Secretary Bessant and to Washington about. >> I cannot confirm that at this time. However, Secretary Bessant fully understands the difficulties in Korea's FX market and is having internal discussions on how to respond to the situation. Because of the potential financial shocks to South Korea, there was a lot of talk about a potential currency swap agreement. Is that still on the table? >> Whether a currency swap is needed and to what extent will depend entirely on how the deal is structured. It may not be necessary at all or it could be arranged on a smaller scale. Therefore, the currency swap itself is a necessary condition, not a sufficient one. So, depending on how this deal turns out, we plan to consult with the US regarding the currency swap aspect as well. Even if we have a currency swap, it will be difficult to just blindly provide money to the US without considering the commercial rationality or viability of the project being selected. >> I'm understanding then that this option is still alive. If that's the case when it comes to perhaps the structure, could it be something similar as to the Argentina style going through the Treasury instead of directly from the Fed? Regarding the currency swap, we're not doing it because we lack short-term foreign reserves like Argentina. It's a situation where Korea needs foreign currency to make long-term investments as requested by the US. So, the US must provide the lack of foreign currency. Therefore, it doesn't align with the conventional short-term currency swap structure. So, regarding that aspect, if we were to engage in a currency swap arrangement with the US, there are further points that require discussions. >> The South Korean loan at 1,400 uh per dollar. Is that the new normal? Do you think that reflects fundamentals? We believe much of the recent depreciation reflects market concern that the tariff negotiations haven't been finalized. So we are currently pursuing negotiations with the US within a range that doesn't significantly impact Korea's foreign exchange market. Fortunately, US Treasury Secretary Bessant is fully aware of the situation in Korea's foreign exchange market. Therefore, once the issue is resolved, that uncertainty will likely fade. We have seen clearly the impact on South Korean automakers because the tariffs continue to be of course much higher than for Japan for Europe who already uh the US has lifted those levies. What can the government do at this point to support the sector? In the short term, the government is providing all possible policy support to automakers and auto parts companies facing difficulties due to these higher tariffs compared to the EU and Japan. We believe that if these negotiations yield some breakthrough, those issues could also be resolved. in these ongoing trade negotiations is the fact that South Korea would lose its advantage over say Japan before the trade deal because Korea had a free trade agreement with the US. It had um an advantage of around 2.5%. Is that being discussed at this point? I conveyed that point to President Trump and explained to Bessant and Lutnik. I explained that since Korea is an FTA partner, tariffs on Korea are already sufficiently low. But tariffs on other countries aren't sufficiently low, making it unfair. Even so, it seems the US isn't very willing to understand that aspect. In any case, we plan to continue explaining and persuading them. >> Because of the exuberance around artificial intelligence, we are seeing South Korea's stock market on a tear. Are you concerned that this could be a market bubble? The current stock market reflects expectations for the Korean economy, such as enhancing shareholder value in the Korean capital market, expanding dividends, or resolving unfair practices, expectations for the modernization of the Korean stock market. On top of these expectations, we are actively supporting the core technology economy to ensure a robust Korean economy that can be a global investment destination. That was South Korea finance minister Ku Yan Chol speaking with Bloomberg's Sherion. Staying at the APEC Finance Minister's meeting, we also got the chance to hear from Australian Treasurer Jim Chalmer's. He spoke to Bloomberg's husind almond after his country and the US signed a landmark deal to boost America's access to rare earths and other critical minerals as part of a push to curb reliance on China's supply chains. They started by talking about what the agreement means for the Australian economy. Were you given any assurances that perhaps this won't just be America first? >> Prime Minister Albanesei had uh an outstanding meeting with President Trump. We're very very pleased with how the meeting went and the critical minerals framework is really one of the most important uh bits of progress that we saw in those discussions. And what that's all about is about helping to ensure Australia becomes a world leader in the export of rare earths and critical minerals. It's all about making sure that we strengthen our trade ties with the US. Uh that we strengthen supply chains uh and that we make sure that this remarkable opportunity that Australia has with rare earths and critical minerals is properly maximized. >> So who will decide which projects are viable? Is the government choosing the winners here? >> Well, this industry already we think there are about$13 billion Australian uh of uh projects in the pipeline. Uh a really extraordinary opportunity for Australia, a golden opportunity. And what the American administration and the Australian government have agreed is that each of us uh will invest a billion dollars over the next six months, as you rightly said in your introduction, uh in some of these really important projects. Uh we believe Australia can be and will be uh a world leader in the supply of rare earths and critical minerals. The agreement and the framework that was agreed with President Trump is an important part uh of that effort. It's a golden opportunity for Australia and we intend to maximize it. >> The thing is there is reason to think that could be competition between an American and Australian company. I'm just wondering how will it be decided when it comes to that? For instance, if you have liners and empty materials at odds, how will you decide? >> Well, it's not beyond ush for the commercial arrangements to reflect the scale of this opportunity uh and our obligations to each other under this framework. Obviously, rare earths and critical minerals have a number of important applications including in defense and technology uh and in the industries that uh the US administration are very keen to work closely with Australia on. Uh we intend to be a reliable supplier around the world. Uh but this agreement with the US is about strengthening trade ties with the Trump administration and the US more broadly. It's about making sure that those supply chains are robust and reliable. Uh we will have markets all around the world uh for these critical minerals and that's a good thing. Uh but the American relationship is very important to us and today we strengthened it. When you think about these rare earth deal and the projects which are coming up, we know that Gina Reinhardt for instance has a figure in a lot of these pies and some are raising the concern that perhaps you know taxpayers money would end up at one end of town which is the richer end of town. I mean how do you respond to such concerns? Oh, this critical minerals opportunity for Australia is a big opportunity for our workers, our local communities, for our businesses and our investors. Uh, and there's more than one investor or owner of uh critical minerals resources in Australia. Uh, but whether it's uh mining, refining, adding value, processing, working with our international partners, uh we shouldn't see this as anything other than a massive opportunity for Australia. It's why we put so much effort into engaging whether it be with the US administration, whether it be here in APEC with the 21 economies of our region. We recognize uh that Australia's got a lot to offer the world. uh we've got uh uh important relationships right around the region and we intend to supply uh other economies with our critical minerals and rare earths in a way uh where the benefits in Australia are broadly shared including amongst uh our worldleading mining workforce. >> Do you think China overplayed its hand in imposing the curbs on rare earth supplies? >> I wouldn't engage in that sort of commentary. We engage with uh the Chinese administration in good faith and in Australia's national interest. Uh we engage with all of our trading partners uh in that fashion. I'll leave the uh analysis to others. Uh our interest here is in making sure that we play an important role in strengthening supply chains in this industry uh whether it's in the United States or elsewhere. Uh but our relationship with China is important to us in economic terms as well. We've put a lot of effort into stabilizing that relationship. Uh the Chinese economy is not without its fair share of challenges, but we are confident that it will continue to be an important source of growth in our own economy in Australia. Uh and we believe it's possible to engage with the Americans in the way that we have been uh and to continue to stabilize and invest in that very important China relationship at the same time. That was Jim Chalmer's, Australia's treasurer, speaking with Bloomberg's House Linda Ammon at the APEC Finance Ministers meeting in South Korea. And that does it for this edition of Bloomberg Daybreak Week. And 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. [Music]