Daybreak Weekend: US Jobs, Made in Europe, China PMI Data

0:01The news doesn't stop on the weekends. Context changes constantly. And now Bloomberg is the place to stay on top of it all. Hi, I'm David Gurra. Join us every Saturday and Sunday for the new Bloomberg This Weekend.

0:13Nathan Hager:I'm Christina Ruffini. We'll bring you the latest headlines, in-depth analysis, and big interviews. All the stories that hit home on your days off. And I'm Lisa Mateo. Watch and listen to Bloomberg This Weekend for thoughtful, enlightening conversations about business, lifestyle, people, and culture. On Saturday mornings, we put the past week's events into context, examining what happened in the markets and the world. Then on Sundays, we speak with journalists, columnists, and key political figures to prepare you for the week ahead. Join us as soon as you wake up and bring us with you wherever your weekend plans take you.

0:45Watch us on Bloomberg Television, listen on Bloomberg Radio, stream the show live on the Bloomberg Business app, or listen to the podcast.

0:52Nathan Hager:That's Bloomberg this weekend, Saturdays and Sundays starting at 7 a.m. Eastern on February 28th. Make us part of your weekend routine on Bloomberg Television, Radio, and wherever you get your podcasts.

1:10Bloomberg Audio Studios. Podcasts. Radio. News.

1:17This 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 look ahead to jobs data in the U.S. and what they may mean for Fed policy. I'm Nathan Hager in Washington. I'm Caroline Hepco in London, where we discuss what the Made in Europe plan means for countries and companies. I'm Doug Krizner, looking ahead to the reading on sentiment among Chinese purchasing managers. That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C., Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on BloombergRadio.com and the Bloomberg Business App.

2:09Good day to you. I'm Nathan Hager. We begin today's program with some key economic data. in the U.S. we get non-farm payrolls for the month of February at 8 30 a.m. Wall Street time on Friday. For more on how this latest jobs report could affect Fed policy and interest rates, let's bring in Bloomberg International Economics and Policy Correspondent Michael McKee. Mike, thanks for being here. Of course, this comes after that surprisingly strong January jobs report. Is that going to be a one-off or could it be the start of a trend? Well, that's the question that this whole data release will turn on.

2:44And for once, we can say that this is an important number because we've had several Fed officials say, particularly Chris Waller, say that if we get the same kind of number this month, then he would think that he probably would vote to hold instead of dissenting in favor of a rate cut on March 18th. So it does have some implications. Of course, the other side of that is, does unemployment go up? The forecast at the moment is for it to tick up to 4.4 % from 4.3%. That might not move the needle for the Fed. But if it were anything more than that, then they might get nervous and cut rates. So there's going to be a lot of scrutiny of this number this time.

3:30So it sounds like it could really go one way or the other at a time when a lot of market participants have been thinking maybe the Fed might stay on hold just until we get a new chair. Well, that's probably the case. It would, I think, take a lot for the Fed itself to change its views. In general, the majority are in favor of being on hold for right now because they think they're tight enough that they can bring down inflation if they leave rates where they are without hurting the labor market. Now, the question is, what hurts the labor market these days? Because with the lack of people entering the labor force, in large part because of all the deportations, what you're seeing is maybe 50 ,000, 60 ,000 being a neutral rate, the level that keeps the unemployment rate unchanged.

4:22And so if you get something much higher like we got last month, then it looks really good for the labor market and you don't need to cut rates. If you get something significantly below that, then they'll get a little concerned. Going into it, we're looking at about 60 ,000 as an estimate, but that could change over the week. Of course, as you know, a lot of the discussion that's been cropping up in the Fed is about how artificial intelligence might be affecting the labor market as well, not just the immigration story. Do you expect that to feed into the February numbers, or is that kind of a broader discussion?

4:55It's a broader discussion at this point. Most economists, I think the vast majority, don't think AI is showing up in the data yet, other than the money that's being spent on building AI centers. But the technology is too new and hasn't been adopted by enough companies in enough scale to really change the way companies are organized. And so it's not going to be in the labor market data, and it's not been adopted widely enough to change the inflation data. Yeah, this is something that's on the horizon, and it's certainly got everybody talking about it, but it's not there yet. Well, one phrase I keep hearing from you and your coverage of this labor market is low hire, low fire.

5:43Is that still where we are? And if we do get some job growth in this report, where do you think it's going to show up? Well, the best bet for job growth is going to be in healthcare services because that's where almost all the job growth has been for some months. The people who take care of all the baby boomers who are retiring, that sort of thing. We haven't seen much job growth anywhere else. There has been some in construction because of the AI build-out. But I think what we're still seeing at this point is a lot of companies sitting on the sidelines, Not sure what the business climate is going to be like.

6:20And now even more so, it wouldn't show up in these February numbers, but even more so because of the tariff decision by the Supreme Court. We don't know what tariffs are going to be. We don't know what they'll put them on again. And so you don't know what companies are going to do. So at this point, don't look for a huge amount of hiring. And you're right. It's low firing. Jobless claims remain extremely low. don't give any indication that companies are making big layoffs. So does that mean we're in kind of wait-and-see mode as far as company thinking is going in terms of where wages go as well?

6:55Because we have heard at least some talk from the administration that they think that wages are keeping up with or even outpacing inflation at this point. Wages have been growing a little faster than inflation, which is what you want to see. You don't want to see wages shooting up because then that could create an inflation issue. But that's not the historical pattern. We did see wages rise significantly coming out of the pandemic because companies were desperate to try to get workers to come work for them. But now, since they're not hiring, wages have been coming down and they're just about at a kind of a neutral level where they're not an inflation problem, but they're still enough to get you ahead of inflation.

7:38So the wage issue isn't going to change much probably either. Appreciate this, Mike, ahead of another Jobs Friday later on this week. That's Michael McKee, international economics and policy correspondent for Bloomberg Radio and Television. Let's take a look now at some stocks making news in the week ahead. I'm Nathan Hager, joined by Bloomberg equities reporter Carmen Reinecke on another pretty busy week for earnings, despite the fact almost everybody's reported already. But we hear from a big name in retail this week, Target on Tuesday. day. It seems like it's been tough for Target for several quarters now, Carmen.

8:15Nathan Hager:Carmen Gimenez - Yeah, it's true. A key figure for them is comparable sales growth. It's been negative in the last three quarters. It's something that analysts are expecting will fall again. That's something I'm definitely going to be watching. Shares have actually gotten a little bit of a resurgence so far this year. They're up about 17 % after four consecutive years of falling. That's going to be really important. Earnings, generally speaking, move stocks. I'm also watching this after Walmart's report earlier in the month. It forecast less earnings growth for the year than Wall Street anticipated and had a pretty conservative view of the U.S.

8:50Nathan Hager:economy and sort of unpredictable times for consumers, which I think raised a little bit of a red flag. So Walmart usually does offer a kind of conservative guidance at the start of the year and then raises it in the following quarters. But this is still one that people are really watching as a bellwether for the U.S. economy. And Target is right in line after that. Yeah, absolutely. You mentioned that the stock has been on the rise since the start of the year, despite all the troubles. Does that really raise the bar for Target when it comes to meeting those earning expectations? It certainly could.

9:25Nathan Hager:It's the next catalyst for sure that investors will be watching for, deciding if they want to continue to buy the stock or sell. I think the target's gotten so beat up in the last few years that it's maybe not the biggest indicator that the bar is raised. And especially because we know they're in the turnaround. I think expectations aren't super high for them. So we'll see. I mean, certainly bulls want to see this rally continue. And we also hear from another software name, CrowdStrike on Tuesday as well. Every time I think about CrowdStrike, I think about the outage from a year or so ago. Is that something investors still think about?

10:05Nathan Hager:That's such a good question. I think that CrowdStrike was able to really move past that quite quickly. It's not something that I've necessarily seen as the biggest problem for CrowdStrike in the last few months. Certainly, the bigger thing that I'm looking at is that We've seen really broad-based weakness in software. And this was actually one of the stocks that got hit recently when Anthropic announced a new security feature in its Cloud AI model. So it's a cyber security company and other companies sort of in that space, Cloudflare, Zscaler, SailPoint slumped. So CrowdStrike has regained some of those losses.

10:45Nathan Hager:It's down still, though, 19%, almost 20 % on the year. So that's actually something that I'm looking for sort of most in these earnings is what are they going to say about AI going forward and how they're incorporating it if they're, you know, they are worried about disruption or if they sort of have plans to maybe integrate it and, you know, build their business going forward. With that kind of decline and with the way that software stocks have been hammered so far in this discussion around AI disruption, you have to wonder whether after these earnings, maybe some investors might see CrowdStrike as a buy opportunity.

11:18Is that something that you're thinking about?

11:20Nathan Hager:Oh, totally. I mean, we've seen so many valuations kind of come in because of these big sell-offs. So if you are a value investor, if you're even just looking for stocks at a discount, there are a lot of names in software that maybe make sense. So definitely going to be watching there and seeing if investors hear good things in the report and say, OK, this is definitely the time to buy. And then on Wednesday, Broadcom reports its results. With all this nervousness around the AI spending story, where is the bar for the AI infrastructure company Broadcom? You know, especially after NVIDIA, I think it's going to be really interesting to see how investors react to this report.

12:00Nathan Hager:So it's another chip maker. It's also kind of gotten some shine as maybe, you know, moving in and kind of grabbing more market share in the chip making space. But that being said, it's also kind of moved sideways this year. We've seen, you know, investors really rotating out of these sort of big tech companies, these, you know, early sort of picks and shovels, AI companies and into, you know, just maybe safer parts of the market. So Broadcom's down 10 percent so far this year. And I'm just really interested to see how investors react to this report. Analysts still expect really solid figures out of Broadcom.

12:39Nathan Hager:So they're estimating adjusted earnings per share growth and revenue growth of more than 27-28 % for this company. So we could see another kind of similar reaction where the results are really good and investors just still aren't convinced and buying shares here. Yeah, I mean, it used to be, you know, it's 20-something percent earnings growth was huge. But after NVIDIA reporting something like 70-plus percent, the bar is kind of in a different place for these companies, isn't it? Totally. And it's also just under this umbrella of the wide-based anxiety around AI and kind of coming from two sides.

13:22Nathan Hager:I mean, we talked about software, people worried about disruption there. But then on the flip side, all of the CapEx spending that's boosted NVIDIA and Broadcom would also be a beneficiary of is worrying to investors. They're worried about cyclicality. They're worried that it's going to stop at some point. So that's really overshadowed, one, just stocks in the AI trade, but the broader market. Yep. Some big names to keep an eye on this week. Thank you, Carmen. Really appreciate this. That's Carmen Reinecke, equities reporter for Bloomberg News. And coming up on Bloomberg Daybreak Weekend, we'll look at the Made in Europe plan and what it'll mean in the EU and beyond.

13:59I'm Nathan Hager, and this is Bloomberg.

14:22Every weekday, keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled, and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break. So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens. It's smart, calm and to the point.

14:56And it fits into your morning. You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. On Apple, Spotify, YouTube or wherever you get your podcasts.

15:12This 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 the program, we'll look ahead to manufacturing data in China. But first, made in Europe. That's the tagline of a new scheme to rejuvenate Europe's defense, energy and manufacturing sectors. The raft of policy ideas proposed by the EU Commission is drastic. They include forcing government procurement processes to look locally, tying foreign investors into joint ventures and hiring European workers. The act is set to be adopted by the EU Parliament next week.

15:46Let's get more now from Bloomberg Daybreak Europe anchor Caroline Hepger in London. For decades, Europe has advocated for and been built on free trade. But in the next few days, the European Union is hoping to introduce a strategy to reverse the continent's de-industrialization. The so-called Made in Europe plan will enforce strict rules to keep investment, factories and know-how inside the EU. But it's causing fights, not just in turn, Only between countries within the EU's borders, but externally from those who are warning against protectionism. Recently, Stephen Cowell and I spoke to the US ambassador to the EU, Andrew Puzda.

16:27He called the idea a serious mistake.

16:31Nathan Hager:Well, maybe Europe rules would be a direct contravention of not only the terms, but the spirit of the framework trade agreement that was agreed to in Scotland, because we've agreed not to have those kinds of preferences between our two countries. And I think adopting them would be a serious mistake, I would say particularly in the area of defense, because we have a very intermixed defense industrial base between the United States and Europe. Many of the weapons, the armaments that we're using not only in NATO but also shipping to Ukraine have production capacities in Europe as well as the United States, and the machines that make them, some are made in the Czech Republic in Finland, some are made in the U.S.

17:18Nathan Hager:There's a very intermixed supply chain, a defense industrial base, and a focus on having our defense products be interoperable. In other words, that if we're a NATO member and we're producing military hardware, We can't have it working for different sized train rails or weights that don't work on European highways. We have to have these things interoperable. And this by Europe preference, particularly in these defence procurement initiatives, is a real threat to our defence industrial base. And that worries me a lot. That was the US's ambassador to the European Union, Andrew Posder, speaking to Stephen Carroll and I on Bloomberg Radio.

18:02Joining me now to discuss is our Brussels Bureau Chief, Suzanne Lynch, and our Chief Europe Correspondent, Oliver Crook. Suzanne, firstly, what is the plan from the European Commission when it comes to this legislation? Look, I think this is the culmination of a long-running discussion here in Brussels about the EU's competitiveness problem. We've been hearing for a long time about problems within the single market that businesses feel that there are too many regulations. And I think those reports, those twin reports from two former Italian leaders, Mario Draghi and Ricoletta, really focus minds in Brussels.

18:43So I think this Made in Europe plan, this Industrial Accelerator Act, is going to be the fulcrum of this plan to boost European competitiveness. And I think it can be seen as a kind of follow-up document or a repository, if you like, to these calls for better European competitiveness, a stronger European economy, that Mario Draghi in particular articulated in his report. This push seems to be coming in some part from France, but it also has seen a lot of delays. Why does it keep getting delayed? I think it's a sign. You're absolutely right. Look, France has been vocal for years about, you know, its belief that Europe needs to be, as they put it, more strategically autonomous, that it needs to stand on its own when it comes not just to defence, but also to the economy.

19:35And, you know, I think some of the stereotypes, Caroline, in Europe are sometimes close to the bone. I think France has taken a more, we would say, protectionist approach to how the single market works for years in the EU. It's been always a strong voice for that. So, yes, France has been pushing this and the French commissioner, Céjourné, is in the lead on this. However, I think what we've seen is a pushback or at least deep questioning by a lot of other stakeholders in Brussels. So, firstly, within the European Commission itself, that's where this plan is going to be published from. This is the starting point for EU legislation.

20:09there have been several other commissioners or their DGs, their sections of the European Commission, who've had questions about this, about how it's going to work in practice, about how is it still in tune with the European Union's free trade policies, for example. So you've got initial blowback within the Commission itself before they even publish their document. And then outside the European Commission, you've got EU member states also questioning this. So you've got this coming down on the usual path, those more free trade economies, maybe the Nordics, Ireland, Germany as well. I mean, we've already had Friedrich Merz saying, yes, we agree there should be a bit of a made in Europe policy, but let's make sure that this is just in certain sectors and we don't go too far down that route.

20:53And then there's kind of a third pillar, and that's the other partners of the EU. So be it the UK and the United States, they've also raised questions about at a time when these third countries are trying to move closer to Europe and are working closer with Europe, for example, on defence, why is the EU potentially putting up barriers, as they see it, to collaboration? So I think that's why there has been a delay. The European Commission is trying to get it right. And even though they know what always happens in the EU is this is just the first step. They will put out this Industrial Accelerator Act and then everyone will pile in and try and get concessions and try and make changes.

21:30But they're trying as much as possible to get this to as close of a consensus document as they can before it's published here in Brussels. Indeed. I mean, embedding European preference into public procurement, of course, it has unleashed a lot of questions within Europe and without. Oliver, in terms of your assessment of what's driven Europe into this new phase, maybe, of industrial strategy, you know, I suppose remind us of why we're here and just what's at stake. Well, what's really funny is that actually the Draghi report came out before Trump was elected president of the United States, right?

22:09And so there was this idea that this might just sort of end up in a drawer somewhere, might just be, you know, make for yet another report and a doorstop, you know, for somewhere in Brussels. And then there was the election inauguration of President Donald Trump. And then all of these questions about European competitiveness, the lack of it, the fact that they're not these big companies. I mean, you can really go through some, many of the sort of superlatives used by Mario Draghi. One of my favorite was that basically no, I think it was no company that was founded in the last 50 years and Europe's market cap exceeds something like$200 billion.