Daybreak Weekend: US Mortgages, Nobel Prize, China Golden Week

0:00A hard day's work starts with someone willing to do it. And where there's a will, there's a Ford F-Series truck. Determination shows up wherever you do. And so does your truck. What Rob Neuit, Max Donigberg, is based on cargo, vehicle configuration accessories and number of basters. Some people treat Chachy-P-T like some kind of smart search engine. And some use it to get work done. Chachy-P-T work is a new way of working in Chachy-P-T that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful can just become something useful. Put Chachy-P-T to work on your most ambitious ideas and projects. Get started at chachy-P-T dot com by selecting work mode, available on plus and pro plans. This is Robert Smith from Business History. If you're listening to this, there's a good chance you're a small business owner.

1:02And like every small business owner you started with a dream to do what you love and watch it grow. What you probably didn't dream about, keeping up with cyber threats. That's where mastercard can help, with access to tools that help identify cyber threats to better protect your business. Building a dream business, priceless. For cyber security and a changing world, there's mastercard. Learn more at mastercard.com slash small business. 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. Just a hint on the program. We'll discuss mortgage rates in the US and also the outlook for the housing market moving forward. I'm John Tucker in New York. I'm T.W. Adabio in London, where we're asking just how political this year's Nobel Prize presentations could get. I'm Dech Crisner looking at how Chinese consumers may spend during the Golden Week holiday.

2:05That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 113O, New York, Bloomberg 991, Washington, DC, Bloomberg 929, Boston, D.A.B. Digital Radio London, serious XM 121, and around the world on Bloomberg Radio.com and the Bloomberg Business app. Hi everybody, I'm John Tucker. Let's start today's program with US mortgage rates. The mortgage rates climbing for a six straight week to an almost three year high. The contact rate on a 30 year fixed rising to 7.3%. That's the highest since November of 2023. For more, we're joined by Erica Adelberg, Bloomberg Intelligence, Seap Mortgage, Back Securities Strategies. That's quite a title. What is the state of housing more importantly? How mortgages are dictating what's happening in the housing market right now? Hi, thanks for asking me to join today.

3:06Mortgage rates are definitely getting to that point where they've become unaffordable for a pretty wide swath of Americans right now. Also refinancing have gone completely out of the money. A lot of people who may have bought mortgages, bought homes in the past few years hoping to refinance are pretty out of luck right now. It's interesting you mentioned the arm rate because actually we are seeing an increasing number of borrowers up to 10% of FHA borrowers up to 12% overall go into adjustment rate mortgages as an alternative. But that's not exactly a bargain either and you open up to all sorts of risks should rates go even higher. Yeah, I mean the one thing that makes these types of arms a little bit different than the ones we had, let's say before the financial crisis, is you do have a pretty strong fixed rate period of about five years. For most of these or even longer for some of the conventional ones and you know how long does a person typically stay in their house?

4:07I think the average time is typically about seven years but that's going out right now with all these people locked into low rate mortgages that they took out during the pandemic. So I wouldn't expect that 3.2% over here, you know they're going to bury me in my basement. Yeah, we're expecting that to kind of continue because not only did people take you know buy homes during that period, a lot of people did, but a lot of people refinanced into those low rates. So that's kind of extending the tenure at homes and actually as long as we're mentioning that some of these people who maybe taking out loans more recently for the hybrids may have a big deal. They may have if they took out the 3.1 variety may already be coming due to a recent rate. But as I said, the most bars do have to qualify especially in the conventional space, you know, Dilly Fanny, Freddie and Banks at a higher rate, assuming at least one reset upwards. Whether or not they can, it's another question but that was that where they qualified as opposed to back before the financial crisis when these were much shorter reset arms.

5:11And you didn't necessarily have to qualify assuming that rates would go up. If you follow this market, you have to be something of an economist. We had data, the unemployment data, the jobs data that we got on Friday, that indicated it was a little weaker than expected. So that tells us the Federal Reserve with respect to interest rates may not have to to hike as much as some thought. And that's going to impact the market. Yeah, well, one of the reasons, you know, just taking a step back, one of the reasons that rates have gone up of course is because, especially since the start of the Iran War, inflation has been a big concern for global economists, especially US economists and the Federal Reserve. So they did implement their first hike this year since 2023 when at the beginning of the year actually with they were expected to cut rates. Because we, you know, it was assumed that inflation was trending towards their desired target. So as a result with hikes now being priced in the market that in turn, even though they don't directly control interest rates for mortgages, that did pressure rates higher.

6:20So the fact that the non-farm payrolls came in a little bit weaker than expected could at least give them a move to pause, which could provide some breathing room for the Fed and some breathing room for homeowners. For against further rate hikes is a home out of reach for a lot of Americans right now. I mean, by my estimate, and you know, there's all sorts of ways to estimate this. But if you just look at something like the National Association of Realtors, affordability Index, which compares median incomes to the qualifying income to buy the median priced home, that says that more than 50% of Americans can afford a home. But, you know, builders are helping with that a little bit for new construction by offering. They're building less expensive homes. They're building smaller homes. And they are also... Oh my god, one more shed. Well, actually, I was looking at the square footage and like we're actually just, there's been a trend in the US culture just spying bigger and bigger homes. Everybody thinks they need four bedrooms, five bathrooms.

7:20So I think that, you know, they're downscaling that maybe to a more reasonable expectation. Because the price per square foot hasn't really fallen, but the price of new homes has fallen or at least the new homes that people are buying. So that tells you that they're just buying smaller square footage. And they're also offering these things called rate buy downs, although it does cut into their profit margins, where they offer to pay points up front so that some borrowers can have a slightly lower mortgage rate. Wait, we ran through a lot of stuff there. Thanks to Erica Adelberg, Bloomberg intelligence chief mortgage-backed security strategist. Right now, let's take a look at some of the stocks making news in the week ahead. John Tucker, along with Christine Aquino, the Bloomberg managing editor for Market's Live. Good to see you. Thanks for stopping by. So next week we get Constellation Brands, Pepsi and Delta Airlines, among others. Let's start with Constellation Brands, the people behind... Among other things, Corona beer. I was doing a back of the envelope calculation.

8:23How much beer that I've had to drink over the years. Tell me. It's a lot. That's a back of the envelope. Apparently, like with younger folks today, this is kind of an outlier, but I'm kind of an outlier, drinking less. What in God's name is wrong with them? Apparently, that's the trend now. And that is the big challenge for a company like Constellation Brands. I mean, just generally, our Blomontologist's analysts taking a look at the beer market, which is over $100 billion. And they're looking at this and seeing just a decline in this market generally, because we have, as you mentioned, John, just the younger generation not drinking anymore and not drinking as much. And they're preferring hemp derived beverages like THC beverages over alcohol. And then there's, of course, the GLP1 usage trend as well. And all of this combined really just creates a very challenging market for anyone in a beer business.

9:24And that's what Constellation Brands is going to be going up against in terms of their earnings. This stock, the ticker symbol STC, they've been on the longest losing streak since what, 1986? Not like it's a by the dip story either at this point. No, I mean, I think a lot of analysts in this space really looking at more structural changes when it comes to the customer base and their habits and how that's going to impact a lot of the companies in this space. And also because there's a crowding out effect, right? There's a lot of them within that space competing for market share. And traditionally, with older generations, they've done all right. But just the changes that we're seeing now all coming together with the crease alcohol consumption, increased GLP usage, all these things combining to really make it a tough environment for Constellation Brands and all of its other peers. Next up PepsiCo. Now people aren't drinking beer. Are they chopping down free dose and that stuff, apparently not.

10:25I think a lot of the same issues applied to PepsiCo. Absolutely. A lot of the same issues and that's why we've seen for PepsiCo specifically. A couple of downgrades of late JP Morgan downgrading company to neutral from overweight and that's exactly what they're concerned about, right? Just the food and beverage segments underperforming particularly in North America. And they've also cited salty snacks in particular, has been lacklust. They're probably tied to the increase in GLP one usage, if you ask me. And then we also saw them cut Deutsche Bank to a hold from the buy previously. Again, analysts there are citing that they don't necessarily see a clear path for improvement given soft demand. And then of course, higher costs on the other end as well, kind of squeezing the company both ways. How much pricing power does PepsiCo have? I mean, they have recently raised prices. Yeah, absolutely. And I think that is the worry for analysts as well, right? Like they have managed to wield up pricing power in previous quarters. But at a time when consumers are struggling to afford groceries and gas, the question is how much more can they squeeze out of these consumers?

11:32And the fact that there are these analysts now warning that we may be getting to the end of that peak in demand. I think really both ill for PepsiCo's earnings coming up next week. All right, let's finish up with one of the airline stocks Delta Airlines. It was recently out there were getting criticism. Elon Musk was making fun of Delta's Wi-Fi. They apparently snubbed Starlink, but I'm not sure that's really going to show up in earnings. No, not necessarily. They're very interesting. I mean, again, for airlines, it's all about fuel costs. And that's been a big issue for just the space in general, right? And so, I think the expectation is that margins will like to be lower. Though, you know, again, some of those higher yields slower capacity growth will help those results, but to a limited extent. I think at this point that increases in the cost of fuel costs, we've definitely felt that particularly over the summer.

12:32And some of that probably will compensate for higher fuel costs, but to what extent, right? And so I think their expectation is that margins will like to be lower. So, to a limited extent, I think at this point, that increase in fuel doesn't seem to be letting up at least for the end users. And that's really going to hurt airlines moving forward. And to be sure Delta is a premium airline, they cater to the premium flyers. So, I would expect there are a little more insulated if price increases go up because of fuel. Yeah, I mean, there's definitely an element of that. And of course, you know, there are a full service carrier. And as you mentioned, you know, they have a more diverse customer base. And so we do have a higher income segment of their customer base, probably being a little bit more resilient to the idea of higher costs. And again, like there are people willing to pay up for first class or business class seats, especially on long-haul flights. But just in general, though, the pressure of higher fuel costs not necessarily relenting.

13:34And so it's really a question of how much can day make up in terms of revenue from that higher income segment is going to be one of the key questions for the set of results. All right, Delta Papsico Constellation Branch. We look forward to those earnings in the coming days. Thanks to Christina Kino. Thank you. Appreciate it. Bloomberg, managing editor for Market's Live. And just ahead of Bloomberg Daybreak weekend, we're going to discuss what we can expect from this year's Nobel Prize presentations. I'm John Tucker, and this is Bloomberg. Some people treat Chachy-P-T like some kind of smart search engine. And some use it to get work done. Chachy-P-T work is a new way of working in Chachy-P-T that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version.

14:36So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put Chachy-P-T to work on your most ambitious ideas and projects. Get started at chachy-P-T dot com by selecting Work Mode, available on plus and pro plans. This is the Bloomberg Market Minute brought to you by Comcast Business. The market's faced plenty of challenges this year, rising energy costs, higher interest rates, pushback to massive artificial intelligence spending. But through it all, stocks keep breaking records, and some analysts think they still can, with a focus on the fundamentals. Nadia level is head of global equity strategy at UBS. But others like Miller-Tayback strategist Matt Mailey say those challenges could eventually lead to a downturn. And Wall Street may be starting to take notice.

15:37A recent city group index shows more analysts cut rather than raise their earnings forecasts for corporate America for the first time in more than five months. That was the Bloomberg Market Minute brought to you by Comcast Business, one partner powering 90% of the Fortune 500 and millions of small businesses. When you add it all up, no one does business like Comcast Business. Running a business means you're always on the move. The Delta Sky Miles Reserve Business American Express Card is made for frequent travelers who want premium benefits that works as hard as they do. For a limited time, new Delta Sky Miles Reserve Business Card members can earn 200,000 bonus miles, the highest miles offered this year. And when you need to recharge or find a quiet place to work, the Delta Sky Club can turn a layover into precious productive time.

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17:41Asana is the operating system for human agent teams. Your easy button for AI productivity across every team. Ready to go, AI teammates, pre-built for marketing, ops, and IT. No prompt engineering, no setup. They show up where the work is happening already onboarded in your workflows, ready to deliver. And the more they work with your team, the smarter they get. With Asana, your whole company can work on the same plan towards the same goal, whether you're a team of 10 or 10,000. Asana, where humans and agents work flow together. Try it at asana.com. That's ASANA.com. This is Bloomberg Daybreak Weekend, our global look ahead of the top stories for investors on the comic week. I'm John Tucker in New York. Up later in the program, we're going to look ahead to China's Golden Week holiday. And how it may impact travel-related spending. But first, in the coming days, the recipients of one of the world's biggest honors will be announced. This year, the Nobel Prize pot increasing by $1.2 million per category.

18:45But we'll have committee managed to keep the politics at bay. And for more, let's go to Bloomberg Daybreak Europe reporter Tiwa Arabeo. Last year's Nobel Peace Prize winner, Venezuelan politician Maria Carina Machado, shocked the world by presenting her medal to US President Donald Trump shortly after receiving it. The gesture came after a campaign which many thought would culminate in the world leader being awarded the prize himself. This year, betting markets have identified the US president as a contender for the Peace Prize once again, alongside embattled Ukrainian leader Vodamir Zelensky. But one of the president's political opponents is also seemingly in the running. Canadian Prime Minister Mark Carney recently briefly became the favorite to win the prize on US prediction market Calci before his odds later fell. Of course, no one knows who has made the Nobel Committee shortlist. It's a famously closely guarded secret.

19:45But some countries, including Cambodia and Pakistan, have indicated that they have nominated the president to receive the honor this year. The prize giving also comes at an interesting time for US Nordic relations. The US President signed a security deal with Denmark and Greenland in New York during a busy week of diplomacy around the UN General Assembly recently. But Lewis Lukins, a former deputy chief of mission at the US Embassy in London, says Trump's relationship with the region is still complicated. They are happy that that threat seems to be gone. There's still a huge level of suspicion or distrust around Donald Trump. There's a feeling here and end in Copenhagen, by the way, that everything that Donald Trump has gotten in this deal, he could have just asked for it nicely a year and a half ago and he would have gotten it. So the whole like we're going to invade, we're going to take over Greenland was sort of an unnecessary distraction, which has left, I think, in a bad taste in the, for many Greenland people, they're happy about US investment.

20:51They're happy that the notion that the US will take over Greenland and take away sovereignty is now no longer an issue. But at the same time, they feel a little bit upset about the whole way this thing has happened. And that's why Lewis Lukins, former deputy chief of mission at the US Embassy in London there, speaking to Bloomberg's David Gura and Christina Rafini following the deal announcement last month. So all this year's ceremony be any less political and who's in the running for the other major prizes. Joining us with more is Bloomberg's managing editor for the Nordic's Katty, Poignan, Parlo, and our Stockholm bureau chief Charles Daly. So Cassie, let's start with you. We know how much President Trump wanted to win the Nobel Peace Prize last year. Do you think he's lost interest this year? Well, President Trump hasn't brought up the prize very much recently. And there hasn't been anything like the pressure he put on last year. He last mentioned the Peace Prize on social media in January actually when the 2025 Peace Law,

21:58Riet Maria Corina Machado of Venezuela, presented her medal in a gilded frame to him in the White House. But you know, there's always still time. The announcement isn't until Friday, October 9th, he can still weigh in. And of course, the Nobel prizes aren't all just about the Peace Prize. There are six Nobel categories awarded each year. And they'll be starting in the next few days, culminating with that Peace Prize announcement, Charles. Could you just talk us through that full agenda? What are the highlights? What should we be watching? Yeah, as you said, it's six prizes over a period of six days starting on Monday with physiology or medicine. And then each subsequent day has one category of prize, including physics, chemistry, literature, and then peace and economics as you pointed out. And I think, you know, for Bloomberg audience, we're obviously interested in the Peace Prize given its geopolitical consequences.

22:59And also the economics prize. If we're talking about the schedule, it's also interesting to note that there is each prize kind of has a different day, a different time of day when it's announced. And that reflects that there are different institutions and award bodies selecting the prize winners. That's really interesting to hear. And of course, we are actually in a pretty important year for the Nobel Prize organization. They are increasing the prize money on offer this year. What's the reasoning behind that? Could you just talk a bit about what this year represents in Nobel history? Yes, as you say, that they're increasing the prize pot per category by one million crore to a total of 12 million crore. And that in part reflects the fact that the Nobel Foundation is celebrating 125 years or its anniversary this year. It is financed by the will of Alfred Nobel, who died in 1896. And the prize money this year, equating to about 60 million crore is roughly about 1% of the overall investment capital that's currently in the Foundation's coffers.

24:13So it's an important year for Nobel history and for the Nobel Prize. But it's also been a bit of an important year for President Donald Trump's relationship with the Nordic countries more broadly. Cassie, we've recently reached a resolution on Greenland has his relationship with those countries improved now. Is it in a better place than it was this time last year? Yes, there is indeed a deal. It was signed a few weeks ago in New York between the US, Denmark and Greenland as you know Greenland is a semi-autonomous part of the Danish kingdom. And what the deal does, it makes NATO a really integral part of securing Greenland and it helps lessen these tensions within the military alliance and among these Western nations. And it does put the relationship with the Nordic region and President Trump in a better place for sure.

25:15But perhaps some reports saying that Norway could be expected to receive more tariffs. Is there something that we're likely to see in the coming months? So Norway isn't hardy to that specific deal and it has had a bit of a rocky recent history with President Trump with the Nobel Prize being one of one of the issues. Now the US has levied an additional tariffs of 10% on the European Union, but Norway, which is outside of the block, its exports are paying 12.5% tariff. So a higher rate and some of the Norwegian officials who visited the US for some trade talks in August, they came back saying that there's a real possibility that the tariff could rise even further from there. And I wonder given this situation, you mentioned that the Nobel Prize was previously a sticking point for the relationship between the US and Norway. Is there less or more pressure on the committee this year to give President Donald Trump the peace prize?

26:19Well, the public pressure has certainly lessened, but the committee who decide on this prize, they're not political at all. They are elected by the Norwegian parliament, but currently any sitting lawmakers are barred from being members of this committee to increase its independence. So nor are we, in this that politicians have no weight and no say in who gets the prize itself. And so we shouldn't really expect the Nobel committee to be swayed by any public statements, but of course we don't know what's going on behind closed doors. Yeah, certainly. And of course all eyes are on Norway for the awarding of the peace prize, but the rest of the awards take place in Sweden. Charles, I want to bring you back in. How popular is this ceremony in Sweden? Is it something that the general population look forward to every year? What can we expect to happen?

27:19Yeah, I mean, I think that's right. It's a source of national pride for Swedes generally, but I think beyond the ceremony itself, what really is the big event on December 10th is the banquet in the evening when the king and the royal family are present. This is an event that's broadcast live on national TV for several hours and even school children in Sweden will get dressed up on Nobel day and have a slightly posh of a normal lunch at school. So yeah, it's a big day on the calendar for Swedes. Sounds like fantastic. Fun, I have to ask because we've mentioned the prize money going up this year. Many of the winners will be academics. What do you think that means for them when they win not just the money, but the prestige put that into words for us? Yeah, I think it's a really good question. I think I think for academics generally speaking, it is probably seen as the ultimate professional accolade.

28:20And you know, it can really transform say an unknown scientist into a global profile overnight. And you know, I think back to 2023 when Cataline, Carica won the medicine prize. And that was, you know, she was not necessarily that known, but her research basically underpinned what would be the COVID vaccine and became a sort of household name overnight as a result of that prize win. Okay, so definitely practical applications for that Nobel winning research will have to keep a close lookout on the winners. But Cassie, I just want to come back to you briefly because it is true that there are also some organizations rumored to be nominated for the peace prize. What has been the precedent in this area? Well, we've got just under 300 candidates that have received nomination for the 2026 prize. And the bulk of them are individuals, but there's almost 80 organizations as well.

29:20There is no public list of who's in the running, but sometimes people who nominate nominate them disclose who they've nominated. And then there are also like a lot of educated guesses. In recent years, the price has alternated between a person and then the next year an organization, but there is really kind of no rule to mean that they have to follow this sequence. If they did follow that sequence, it would be this year, the time of an organization to get it. And among the ones that are kind of heavily guessed, the polymarket betting site has 25 million dollars. In betting volume on the peace prize and Sudan's emergency response rooms, which is a humanitarian aid organization in the civil war. They're leading the betting right now, but you've also got saved the children. You've got the international court of justice, the committee to protect journalists. And there's even the international space station has been mentioned.

30:24Wow, so there are a fair few names rumored to be on that list, of course, as you mentioned, it is a closely guarded secret. My thanks to Bloomberg's Cati Poyne Parlo and Charles Daley. Well, we'll have full coverage of all those Nobel Prize decisions, including that all important peace prize on Bloomberg platforms. I'm T.W. Adabayo in London. You can catch us every week day morning here for Bloomberg Daybreak Europe beginning at 6 a.m. in London and 1 a.m. on Wall Street. John and coming up on Bloomberg Daybreak weekend, we'll look at what we can expect from China's Golden Week holiday. I'm John Tucker and this is Bloomberg. Some people treat Chachi P.T. like some kind of smart search engine and some use it to get work done. Chachi P.T. work is a new way of working in Chachi P.T. that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work.

31:29It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful can just become something useful. Put Chachi P.T. to work on your most ambitious ideas and projects. Get started at chachipt.com by selecting Work Mode, available on plus and pro plans. This is the Bloomberg Market Minute brought to you by Comcast Business. The markets faced plenty of challenges this year, rising energy costs, higher interest rates, pushback to massive artificial intelligence spending. But through it all, stocks keep breaking records, and some analysts think they still can with a focus on the fundamentals. Nautilovell is head of global equity strategy at UBS. Ernance has been good and continues to be good. And while you know we might be past the peak in Ernance growth, we're not past the peak in Ernance level. But others like Miller-Tayback strategist Matt Mele say those challenges could eventually lead to a downturn.

32:31Whenever we see a significant rise in bond yields like we have and a significant rise in oil prices like we have, the stock market always, or pretty much always ignores it for a while. And Wall Street may be starting to take notice. A recent city group index shows more analysts cut rather than raise their earnings forecasts for corporate America for the first time in more than five months. That was the Bloomberg Market Minute brought to you by Comcast Business, one partner powering 90% of the Fortune 500 and millions of small businesses. When you add it all up, no one does business like Comcast Business. Running a business means you're always on the move. The Delta Sky Miles Reserve Business American Express Card is made for frequent travelers who want premium benefits that works as hard as they do. For a limited time, new Delta Sky Miles Reserve Business Card members can earn 200,000 bonus miles, the highest miles offered this year. And when you need to recharge or find a quiet place to work, the Delta Sky Club can turn a layover into precious productive time. Or a restful reset.

33:37You can enjoy 15 visits each medallion year to the Delta Sky Club when flying Delta, an unlock unlimited Delta Sky Club access after spending $75,000 in purchases on your card during a calendar year. Plus, receive four one-time guest passes each medallion year so you can bring a colleague along. That's 15 Sky Club visits plus four guest passes for an annual value of up to $950. Value estimate based on $50 per visit rate to purchase additional visits or bring a guest to the Delta Sky Club. Apply today at www.delta.com slash podcast. Offer ends 11, 426 minimum spending requirements and terms apply. This is Alexis Christoffer's for Bloomberg Surveillance. AI is everywhere. Outcomes are not. Not because AI doesn't work, but because AI hasn't reached the workflows yet. The campaigns, the launches, the quarterly planning. Those workflows are still run by humans alone. AI is making individuals faster, but it's not making businesses more productive. That's the gap. Asana is built to close. Asana is the operating system for human agent teams. Your easy button for AI productivity across every team.

34:46Ready to go. AI teammates prebuilt for marketing, ops and IT. No prompt engineering, no setup. They show up where the work is happening already onboarded in your workflows, ready to deliver. And the more they work with your team, the smarter they get with a sonnet. Your whole company can work on the same plan towards the same goal, whether you're a team of 10 or 10,000. Asana were humans and agents workflow together. Try it at a sonnet.com. That's a S a N a dot com. This is Bloomberg daybreak weekend. Our global look ahead at the top stories for investors in the coming week. I'm John Tucker in New York. In China, the Golden Week holiday is underway. It started last Thursday and it's going to run into the coming week. Golden week typically sparks a jump in travel related spending. And for war, let's go to Bloomberg's Doug prisoner. He's the host of the daybreak Asia podcast. Thanks, John. The Golden Week holiday has become a reliable measure of overall household spending. This year, Golden Week began on Thursday.

35:50And because the mid autumn festival started a week earlier, if a person requested some time off, this break does amount to around 13 days. So here's the question. Can this extended holiday translate into increased retail spending for a closer look? Let's bring in Bloomberg Shirley Zhao. Shirley covers the Chinese consumer space and she joins from our studios in Hong Kong. Thank you for being here. Give me a sense of what you are seeing right now in this holiday period. Annic, totally. Are people traveling more than they did last year? The early signs and data during this prolonged holiday period are pretty positive. So we have seen a surge of domestic and cross border travel by mainland Chinese people during the mid autumn festival. And the spending also increased quite a lot. So that was pretty encouraging. And some of the most popular destinations include travel destinations include Hong Kong and Macau and perhaps some countries in Southeast Asia.

36:57And in Hong Kong, during the mid autumn festival, there is actually a lantern display in one of Hong Kong's most famous parks. And the display started around the mid autumn festival and it extends into the National Day Holiday Festival. There were so many people queuing up to enter the park to just to see the lantern display and that the government had to cut off the cues at some point. And the display also generated quite a lot of social media buzz and some Hong Kong restaurants in the core shopping districts are reporting a double digit sales growth from last year. And also the government is expecting a 5% increase of arrivals by mainland Chinese tourists to Hong Kong. So we have seen some early signs of quite positive travel and spending result.

37:57I'm glad you mentioned Macau because some of the recent data that I have seen for gaming revenue was a little disappointing I think for a fourth straight month we saw contraction in the month of September. And the analysts were expecting an increase right what's happening there give me a sense of why Macau is not doing well. We must remember that this holiday period as well as a few months ahead of the holiday period come as China's economy is still pretty weak. And last year in the months between say June and September October and even towards the end of the year China's consumer sentiment was really strong because China's stock market was boosted by AI. But this year around this time China and Hong Kong stock markets aren't doing that well. They are among the weakest in Asian key markets. And also this year Beijing has really stepped up its effort in clawing back tax revenues of rich people on their overseas wealth.

39:05So previously a lot of rich people would set up overseas trusts and buy a lot of insurances in Hong Kong and invest in stocks. But now all these investment and wealth have to be taxed and China has set up special task forces to basically track down these people and reclaim the tax revenue. That's why consumer sentiment in recent months have become relatively weak. So what is your sense of whether or not travelers are choosing some long haul destinations. I'm thinking parts of Europe like Spain or even Portugal maybe other places in the APEC region like New Zealand. Are we getting any information that people are going beyond even Hong Kong or Singapore? We haven't seen much data on the long haul travel but the cross border travel. So traveling from China to overseas or to Hong Kong to Macau, the number of those people have increased from last year.

40:10We can assume that because of weaker consumer confidence there might be fewer trips to destinations in Europe or in Canada or in the US. But we'll have to see official data for that after the holiday. I'm curious about the cruise industry. Whether or not the chips are leaving Hong Kong and going to destinations around the APEC region and whether that business is doing well. Hong Kong is actually now trying to build a cruise tourism hub. So the government has made quite a lot of efforts to try to attract more cruise ships coming to Hong Kong to stop over in Hong Kong or leaving from Hong Kong. So we have seen an increase of the number of cruise ships visiting Hong Kong or leaving from Hong Kong. So at Hong Kong's international cruise terminal things are definitely lifelier than a few years ago.

41:10What about the month of October broadly speaking? If we move beyond the holiday, I know Halloween shows up in the month of October. There are a few other events particularly in Hong Kong that make for a pretty active calendar where you would think that consumers are going to be spending money. Do you think broadly speaking the month of October is going to be pretty positive for consumer spending? The outlook remains a little bit uncertain given what we've seen happening in Macau's casino industry and also in China's luxury spending industry. So in recent months China's luxury sales have also decreased a lot. Some luxury brands are seeing double digit drops in months like June and July. So things are a little bit murky but yes with all these major events lining up in the rest of October hopefully that will boost this tourist spending. But we'll have to wait and see.

42:10We talk a lot about the K-shaped recovery or the K-shaped economy that's happening in China. Is the same thing true in Hong Kong? Do we see this bifurcation of consumers where you have those that are very wealthy or of means and then people who are maybe less apt to part with what money they do have? Yeah that's very much true or I should say that has been true in Hong Kong until recently. So that's the same more broadly in greater China as well because of the crackdown, the economic slowdown and because of the lack of AI boosted stock market. Consumption has decreased and that's affected especially big ticket items. For example jewelry, cars and some other expensive items. They are the worst hit in this wave of weakening consumer spending. But yes generally speaking the rich people remained their spending appetite remains stronger.

43:13And the middle class and the lower class people have been cutting their spending. So we have seen for example brands like Airmass and Shennao performing better than other mid-tier luxury brands. And on the lower tier of the consumption spectrum, you know we are seeing a people are basically engaging in cutthroat competition. So a lot of brands are cutting prices to compete to get to the bottom to attract more consumers. I'm curious about what's happening in the wealth management business in Hong Kong and whether in this golden week period a lot of the firms there are trying to lure mainland people into that arena and to have setup meetings perhaps to put money to work through firms in Hong Kong. Is that still the case? Yeah that's typically what happens during long holidays. So a lot of mainland Chinese people would travel to Hong Kong not only for sightseeing but also have their wealth management plans designed and signed.

44:21But in recent months because of China's tax crackdown and that's affected especially Hong Kong's wealth management sector for example insurance companies. And there are worries that this crackdown would brought into other sectors such as real estate as well. So whether China's rich people are still coming in Hong Kong in droves or whether they are taking a more way than see attitude to just see what happens. A lot of analysts are guessing that it may be the latter so the rich people may just want to halt their spending or their investment for now until this wave of crackdown has passed. Give me a sense of how this breaks down demographically. I'm going to imagine that it's the younger generation that's really kind of leaning in to do more of this spending and that older generations like mine are less app to step up to the plate and open their wallets or purses or whatever and spend.

45:23Is that typically the case? That is typically the case. So we've seen a lot of brands including luxury brands in the past years really going after the Gen Z shoppers. But over the past year or so because China has seen pretty high youth unemployment rate. Younger people spending appetite has also decreased. So for example in Hong Kong we can see a lot of younger people basically going after low budget travels. So previously a lot of people will come to Hong Kong to just shop for luxury like air mass handbags or cosmetics or pharmaceuticals. But over the past one or two years or so when they come to Hong Kong they're not spending that much. They're going after sightseeing and they're taking selfies outside of boutique bakeries and cafes and sometimes they don't even spend in those bakeries or cafes.

46:28We've seen cases where Chinese travelers would just grab a mug left over by the previous person outside of a cafe and then take a selfie with that mug and they would say, oh see I've been there. Of course this doesn't apply to everybody but we've seen cases like this and we have seen generally Chinese consumers tightening their belts. But as I mentioned there have been some pretty positive early signs for the holiday period in terms of travel and spending. So we still need to wait and see what happens. You and I have talked in the past about the impulse sometimes to have the experience rather than to purchase merchandise per se that's a trend that I think is still happening then right. Yes exactly so that's the fundamental change in Chinese shoppers shopping habits. So before they just go after brand names big brand names or products they want so they have a very clear target when they go traveling that is shopping.

47:35But now it's much more experienced based they're going after things that they have never experienced they're going after unique travel experiences so they're exploring outside of core shopping and tourism districts. Surely it's always a pleasure thank you so very much for helping us look at how consumers may engage with golden week that is Bloomberg Shirley Zhao surely covers the Chinese consumer space joining from our studios in Hong Kong. I'm Doug prisoner you can catch us weekdays for the day break Asia podcast it's available wherever you get your podcast John. Alright thanks Doug and that does it for this edition of Bloomberg day break weekend join us again Monday morning at 5 a.m. Wall Street time for the latest on markets overseas and the news you need to start your day I'm John Tucker stay with us top stories and global business headlines they are coming up right now. A business gift should do more than check a box it should reflect your brand and show someone there appreciated recognized and truly seen for imprint offers thousands of high quality customizable products like premium apparel drink wear tech and more making it easy to create a gift that feels meaningful and on brand and with for imprints expert support in their 360 degree guarantee you can be for imprints certain your order will arrive exactly as intended explore gifting with confidence at for imprints.

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