Bloomberg Daybreak US edition is brought

to you by OTC Markets Group. OTC Markets

overnight platform for exchange listed

securities, MoonATS, provides access to

global securities in US dollars from

8:00 p.m. to 4:00 a.m. Eastern, Sunday

through Thursday. Learn more at

otcarkets.com/moon.

Moonats is operated by OTC Link LLC, a

FINRA registered broker dealer, and is

available only through participating

broker dealers. Some people treat

ChachiPT like some kind of smart search

engine and some use it to get work done.

ChachiPT work is a new way of working in

ChachiPT 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 ChachiPT to work on your most

ambitious ideas and projects. Get

started at chachept.com by selecting

work mode available on plus and pro

plans. Healthcare doesn't always work

great. If you've ever waited on a refill

or couldn't schedule an appointment, you

get it. That's the kind of stuff Optum

is changing. They're using data and

technology to integrate patient care,

pharmacy, and everything else. So,

healthcare is connected, not

complicated. What's that look like?

Cheaper prescriptions that are easier to

get and care that looks at the whole

person, how you need it. Optimum is

helping make healthcare work as one for

everyone. Learn more at

business.optimum.com.

>> Bloomberg Audio Studios, podcasts,

radio, news.

This is Bloomberg Daybreak Weekend, our

global look at the top stories in the

coming week from our Daybreak anchors

all around the world. Straight ahead on

the program, we look ahead to August

jobs numbers in the US. I'm Nathan Hager

in Washington.

>> I'm Caroline Heper in London where we're

looking ahead to the state elections in

Eastern Germany, what it could mean for

the rest of Europe.

>> I'm Doug Krer looking at whether the

reading on South Korean inflation will

point to another rate hike from the BOK.

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 some key

economic data in the US. Non-farm

payrolls for the month of August are due

out this Friday, 8:30 a.m. Wall Street

time as it is the first Friday of every

month. And for more on how this month's

numbers could affect Fed policy, we are

very pleased to be joined by Edward

Harrison, senior strategist for

Bloomberg News and author of the

Everything Risk newsletter. Ed, what's

the risk of the kind of negative

surprise that we saw from the July

non-farm payrolls print?

>> I think the risk is relatively high,

Nathan, because of the temporary um

protected status workers who have now

left the payrolls. I think that that's

the big question. How many of those

workers uh were working under temporary

protected status? And uh what does that

mean for non-form payrolls? It could

actually be such a large number in the

hundreds of thousands that you see a

negative number for uh for the next

month as as well as last month.

>> You're talking about the impact of

tighter immigration policy on this labor

market. Is that part of what we've been

seeing in the overall trend uh whe when

it comes to labor market growth of this

low hire low fire environment?

>> It definitely is. I mean there are two

factors that come together. One, as uh

an economy tightens and it gets closer

to full employment, you naturally have

uh fewer opportunities. uh you know the

the the massive gains that you have at

the beginning of a cycle just aren't

there at the end of a a business cycle

or in the middle of it. Then secondarily

you see uh in the United States in

particular recently that we've tightened

immigration policy in a way that will

mean non-farm payrolls are closer to

zero on average than they were before.

meaning that you can get these negative

numbers and it's not necessarily a sign

that the economy is weak in the way that

it would have been when we had a large

uh growth of immigration. The case of

the Haitian workers who have lost

temporary protected status in particular

that is an encapsulation of that

immigration policy in a very single

month and that's why this particular

number is uh volatile and could surprise

to the downside. Is that the main factor

at play here? Uh is it immigration

policy? What other factors could

potentially be at play here when it

comes to what we could see?

>> I think uh there are some benchmark

revisions uh that are coming into play.

Uh so that's going to muddy the waters

somewhat. Uh and then you also have the

participation rate which has been going

down uh as baby boomers age. Uh and so

that also plays a factor. So there are

multiple factors but I think just

because of the uh how quickly the uh the

status change happened that will

probably be the main factor and I would

say that the benchmark revisions are

going to be the secondary factor and

then sort of trend factors uh add on to

that.

>> There's been a lot of talk as well about

whether artificial intelligence is

having an impact on the labor market as

well. Are you starting to see that come

into play? you know, I haven't really

seen that come into play in particular

because it's not clear whether or not

that's a positive or a negative factor.

Uh there's been such a huge boom in

artificial intelligence related

positions that it could be a positive

factor there, but then taking away

potentially in displacements that uh

we're starting to see pop up as a

negative factor. and therefore it's not

clear if the trend is net positive or

net negative at this point.

>> So is it your base case then that when

we get those numbers on Friday that we

are going to see a negative print?

>> I think my base case is that we're going

to see a very close to zero print and it

could be negative. I think that that's

not going to be reflected per se in the

uh the unemployment uh number which is

4.1%

presently and is projected to be 4.1% uh

for the coming month but uh it will be a

demonstrabably negative effect on

non-farm payrolls and that could it

makes the chance very high that the

number could be negative again. Thank

you, Ed. As always, good to get you on

before a jobs Friday. That's Ed

Harrison, senior strategist for

Bloomberg News and the author of the

Everything Risk Newsletter. Let's take a

look now at some stocks making news in

the week ahead. I'm Nathan Hager, joined

by Bloomberg equities reporter Matthew

Griffin. So, we're kind of at the tail

end of the earnings parade, but we've

got some uh pretty big names reporting

this week, including Palo Alto Networks

out with its results on Tuesday. Where's

the bar for PaloAlto after the strong

results we got from a crowd strike when

it comes to cyber security, Matthew?

>> Well, Nathan, the bar is pretty high. I

was looking at analysts expectations for

Palo Alto. That's ticker PW,

and they're looking for about 30%

year-over-year revenue growth. This

comes as all of these cyber names are

now considered AI beneficiaries.

companies are spending more on cyber

security because they're worried about

things like this trend of models hacking

companies like Anthropic's decision not

to even release the Claude Mythos 5

model to the general public because of

its cyber capabilities

and it's really remarkable what's

happened in the stock market as a result

you know the first couple months of this

year these were considered AI disruption

candidates they were SAS apocalypse

names and They all traded down as a

result. Now they have rallied. And so my

question would be what is the buy side

looking for here? The valuation has

spiked above 90 times forward earnings.

Those are levels not seen in more than a

decade. So I am wondering what will be

enough for investors here.

>> Yeah, I mean that's a really good point

given that you know since the start of

the year we've already seen just Palo

Alto alone nearly double its stock

market value. I mean you have to wonder

whether there is further upside from

here.

>> Yes. I mean with AI you know you you

look at what's happened to a lot of the

AI winners. You can never discount it.

But we have seen some of the names for

example uh some of the chip names

moderating uh their own share growth in

recent months. And so the question I

guess would be when will that happen for

the cyber names?

>> Absolutely. Um, we're going to hear from

another one of those uh names and at

least in the tech space on Wednesday

when we get results from Broadcom after

that day's closing bell. Another AI bell

weather after the the blowout outlook we

saw from Nvidia this past week. Can we

expect something similar from from

Broadcom, do you think?

>> Well, the real question here is what is

Broadcom going to say about, you know,

whether they see blowout revenue in the

future. So the bar for this company

that's ticker AVgo for their key revenue

stream the AI chip revenue is not

necessarily that high in terms of

analyst expectations for this quarter.

It's about in line with their $16

billion outlook for the quarter. But for

next year analysts are expecting revenue

from AI chips of about $120 billion.

that would imply six-fold growth over

two years, you know, compared to the

last full year we have numbers for. And

so, City says that 2027 outlook or

commentary or anything we get from the

company is going to be really important.

The quarterly outlook for that revenue

stream really disappointed investors

when they gave it in June. The stock

fell 13% in a day. So, we'll see if this

report can reignite optimism. We could

also learn more about their sales deals

with major AI players or these chip

financing deals. Our colleagues have

reported the company's in talks with

lenders to raise more than $60 billion

in debt for a deal that would benefit

Anthropic and other companies and

investors are going to be eager to hear

if there are any developments on that

front.

>> Yeah, absolutely. And you know, given

what we heard, like I said, from Nvidia

just this past week about, you know, how

much revenue they expect to get from the

uh still continuing AI demand here. Uh I

guess I wonder whether uh it's one of

those uh rising tides that lifts all

boats kind of situation that could

benefit for Broadcom. Is that kind of

what analysts are thinking right now?

>> It's what Wall Street is hoping.

Broadcom has positioned itself as a key

competitor to Nvidia, but Nvidia is

still the market leader. And so we do go

into these reports wondering how much

they will benefit from the rising tide.

That positioning though as a key

competitor, it does mean this report

will tell us a lot about the broader AI

infrastructure complex. So, anything

that confirms that bullish outlook from

Nvidia, which was for about 70% revenue

growth in the next fiscal year, that

would be a positive and it would start

offsetting some of the concerns about

the AI trade that are growing. We're

seeing falling token prices that

complicates the return on investment

question. And something I've been

reporting a lot on a lot is these

regulatory concerns, the public push

back to data centers and what that can

mean for AI infrastructure spending.

>> Along with the chip names, we're also

going to hear from a retail name uh the

athleisure company Lululemon on

Thursday. It feels like the turnaround

just keeps waiting for Lululemon,

Matthew.

>> Yes, Nathan. And this stock, ticker LLU,

it really is a case of low expectations

this quarter. Analysts are expecting

revenue to just barely grow to be up

about 1%.

But even clearing that bar is not

guaranteed. I mean, we could list a lot

of headwinds facing this company.

Increased competition from companies

like Vori, product launch issues like

the see-through leggings, criticism from

their founder, Chip Wilson. And then

there's the question of how much credit

investors are going to give anything

that they say about those issues this

quarter because they have a new CEO

Heidi O'Neal taking over next month.

That could change the narrative. It

could change the strategy. Maybe it will

finally put that turnaround into effect.

One thing that I am going to be

interested to see from this company is

what they say about tariff refunds. They

have spent a lot on tariffs. It's been a

key cost bucket. They've said they're

applying for refunds, but that they

didn't factor that into guidance. So,

that could be a source of upside to

consensus here if those refunds come

through. Maybe not high quality, durable

upside, but something that would help

investors as they wait for a broader

rebound in their sales.

>> All right, really appreciate this,

Matthew. Thanks for coming on with us.

That's Bloomberg Equities reporter

Matthew Griffin. And coming up on

Bloomberg Daybreak Weekend, we will look

ahead to state elections in Eastern

Germany. I'm Nathan Hager and this is

Bloomberg.

Bloomberg Daybreak US edition is brought

to you by OTC Markets Group. Thinking

about joining the exploding overnight

market space, but unsure where to start?

Designed to meet the needs of a growing

international investor base, OTC Markets

overnight platform for exchange listed

securities, Moon ATS, provides access to

global securities in US dollars from

8:00 p.m. to 4:00 a.m. Eastern, Sunday

through Thursday. Extend your trading

day and trade global securities in US

dollars through a FINRA licensed broker

dealer. In the first half of 2026, over

28.1 billion US traded on Moon ATS.

Learn more about Moon ATS. Visit

otcarkets.com/moon.

Moon ATS is operated by OTC Link LLC, a

FINRA registered broker dealer.

This is the Bloomberg Tech Minute

brought to you by ChachiPT. Now with

ChachiPT work. I'm Carol Masser. Bill

Gates Breakthrough Energy Ventures is

betting on a cheaper way to produce

clean jet fuel and made its first

investment from a fund that is backed by

Alaska Air, American, and several other

carriers. The investment is aimed at

accelerating the commercialization of

clean aviation fuel. The recipient is

Bostonbased Lydian, which is developing

lowercarbon jet fuel made from hydrogen

and carbon dioxide and is one of a

growing number of companies developing

next generation clean jet fuel

technology. Lydian says it can reduce

capital expenses by more than 50%

compared with competing technologies.

Lowering those costs is seen as crucial

to making sustainable aviation fuel or

SAF commercially viable as it remains

far more expensive than conventional jet

fuel. Today, clean fuels represent a

tiny fraction of the overall market.

That's the Bloomberg Tech Minute brought

to you by ChachiPT. Put ChachPT to work

on your most ambitious ideas and

projects. Get started at chachipp.com

today by selecting work mode. available

on plus and pro plans.

>> This is Matt Rogers from Lost Cultures

with Matt Rogers and Bowen Yang. This is

Bowen Yang from Lost Cultures with Matt

Rogers and Bowen Yang.

>> You know when people try a new food and

suddenly it's like, wait, that's the

reaction a lot of people are having when

they first try Cupid Mayo.

>> It's the one with the red cap and the

little baby on the bottle. You've

probably seen it in the grocery store

before. And if you've ever just walked

past it, some people would say that's a

huge mistake

>> because this mayo is different.

>> Most mayonnaise uses whole eggs. Qie

only uses egg yolks, which gives it this

rich umami flavor. It's smoother,

deeper, and almost buttery.

>> Once people try it, they start putting

it on everything.

>> Egg sandwiches, fries, burgers. Some

fans even swear by dipping pizza crust

in it.

>> And once you notice it, you start seeing

it everywhere.

>> Chefs use it. Restaurants use it. People

who really care about flavor use it.

Never tried it? Grab the bottle with the

red cap next time you're at the store.

>> Put it on just about anything.

>> Then you'll understand.

>> Cute. The original Japanese mayonnaise.

>> 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 the

program, we'll look ahead to some key

economic data in South Korea. But first,

in the coming days, voters head to the

polls for state elections in Eastern

Germany. The far-right alternative for

Germany party is set to put in a strong

performance in the industryheavy state

of Saxony on halt. So what could the

vote mean for Germany's future, its

politics, its economy, and for the rest

of Europe? For more, let's go to London

and bring in Bloomberg Daybreak Europe

anchor Caroline Heb. Nathan, you might

be wondering why regional elections in

Germany could change the outlook for

European politics. While the far-right

AFD party, the alternative for

Deutseland, is comfortably ahead in the

polls for the Saxony Anhalt election in

the next few days. And if the Aft wins,

it would see the far right gain control

of a German state government for the

first time since the Second World War. A

strong showing for the anti-immigration

party could further complicate

policymaking for Chancellor Friedrich

Mertz's flagging government coalition.

Debates are live in Europe's largest

economy around migration, the war in

Ukraine, and the cost of living. And to

make matters worse for Chancellor Mertz,

one of the key automakers in the

country, the industrial giant Volkvaren

says that Germany will have to shoulder

tens of thousands of additional job

carts. That's bad news for regional

economic disparity and for Mertz's CDU

party ahead of this vote. Here is

Bloomberg's industrials reporter Will

Wilks. for workers and maybe more for

the German state. This is an urgent

problem for them. The German state is

already part of Volkswagen through lower

Saxony and what the German state wants

is the best possible outcome for jobs.

Obviously, German politics is very

heated up at the moment. There's a

regional election coming up where the

far right might make a major

breakthrough and what the German

government really wants to see is

solutions found for workers that does

not kind of heat up politics anymore.

That was Bloomberg's industrials

reporter Will Wilks there. Chancellor

Mertz says that he can spearhead a

German economic recovery saying that it

has the potential to exceed 1% GDP

growth next year. But what do voters in

Saxony and Halt think? Joining us now is

Camille Kavula who is our German finance

and economy ministry reporter who also

covers AFD the party and Jenny Tier who

is our deputy bureau chief in Germany.

Welcome to both of you and thank you for

speaking to us. Jenny, can I start with

you? First of all, why do these state

elections in Germany actually matter for

German politics and for the future of

the country? Yeah, they matter because

they'll send a strong signal to the

government in Berlin and Chancellor Mays

basically saying we don't like what

you're doing and we feel neglected. So

if the far right really wins, that means

getting an absolute majority and

actually being in executive power, then

this would be historical for Germany and

and definitely send waves to the

government in Berlin and yeah, the

pressure will definitely increase then

and that's going to be a problem for an

already quite fragile coalition there.

>> Yeah. So maybe a protest vote in some

senses, a big signal to the government

in Berlin. Camel, tell us about AFD's

controversial, it must be said,

candidate Olri Sigund in terms of why

he's important as a figurehead and the

issues that he's been campaigning on.

>> So what are the Sigmans? The the FD's

top candidates, he's also the FD's, you

could say, more approachable face,

right? He's he's young. He's

charismatic. He's highly effective on

social media as well. And he doesn't

look or or sound radical, which which

makes him also an option for voters who

might otherwise hesitate to support a

farright party. But in terms of

policies, um he's he's quite in line

with the federal AFD. He campaigns for

tougher immigration controls, more

deportations, opposes support for

Ukraine, saying that it's at the expense

of of German taxpayers while also

calling for rebuilding relations with

with Russia.

>> What does the polling look like at the

moment currently in the last few days?

>> The FD is far ahead. They're at around

42%

so it's like 20 20 percentage points in

front of the conservatives, Matt

Conservatives. So, it looks like they're

going to win. The only question is if

it's going to be an outright majority.

>> Jenny, what does the polling look like

for Fredick Mertz's CDU? And why has

Mertz shown sort of difficulty? Why do

you think that there is this popularity

it would seem for the AfD?

>> Yeah, I think a lot of people are quite

frustrated which is also showing in in

the national polling numbers the AFD is

ahead. um I think 8 to nine percentage

points of the conservatives and this is

obviously a problem for for Mads and his

coalition. I think one of the root

causes on the one hand is the German

economy been stagnating for quite a

while pretty sluggish growth and also

there's a lot of insecurity because

especially in the industry sector in the

car industry which is under a lot of

pressure from China and tens of

thousands of jobs are in danger. So

people are not really certain about

their future and this is what kind of

draws them of course to seemingly easy

solutions um and and populism from from

either side.

>> So yeah, I think this is why the the

government is really looking um to the

east and hoping for the best.

>> Yeah. Camel AFD supporters oppose also

more aid to Ukraine and they maybe think

that the money should be spent on

domestic issues. How important is that

issue to think about uh in the

motivation of of voters the Russia

Ukraine issue?

>> It's quite important. It's quite a

polarizing issue like migration or it

has become a quite polarizing issue. DFD

or Sigman, they use Ukraine as a symbol

of of of a government that finds money

for international commitments while

local schools, roads and hospitals in

Germany deteriorate. So he he draws on

also on on on a kind of East German

grievance, the belief that the former

East has been neglected by Berlin. And

the message also draws on a stronger

pro-Russian sentiment in in parts of

Eastern Germany. also concerns about

energy prices and the deep distrust of

the political establishment in Berlin.

>> So a lot of maybe some concerns also and

different attitudes maybe towards

Russia. Having said that, Germany's

counter intelligence have warned of a

Russell linked influence campaign on

these elections. So that also remains

something of an issue of of whether that

influence campaign is is going to

deliver some results.

>> That's true. Um, German intelligence has

warned about Russia linked

disinformation campaigns, but currently

there's no evidence that the election

itself will not be free or or fair. So,

it's true it's taking place in a rather

manipulated and and hostile information

environment. And that's all like

Russia's broad hybrid war strategy,

right? like weakening trust in

democratic institutions and helping

parties that are maybe less critical of

Moscow and social media makes of course

all those campaigns more effective but

yeah as you know Germany is not alone

facing this problem it's it's other

European democracies and especially the

United States are confronted with with a

similar problem right

>> yeah absolutely then to a thought about

what in Germany is called the firewall

do you think that that cracks in Germany

this is the idea that other political

parties won't work with the AFD even if

they are elected, you know, that that

has happened in the past. Do you think

that that is eroded if the AFD does

particularly well at a regional level?

I don't expect the firewall to fall. I

expect it to remain at least formally in

place after the election. But an AFD win

would definitely put it under enormous

pressure, especially if the party falls

just short of an outright majority and

need a governing partner because then

the whole discussion about the firewall

and this could trigger a serious debate

inside the Conservatives um over whether

this refusal to cooperate with the FD is

still sustainable and if this strategy

which Matts put in place um has already

failed. So the pressure especially on

merits would be particularly intense

because also parts of the conservatives

um are ideologically closer to the AFD

than the social democrats or the greens

are. Um there might also be some CDU

lawmakers who jump ship and and join

AFD.

>> Yeah. Yeah. And of course there are two

tests aren't there coming up. There's

the election in Saxony Anhalt which is

on the 6th of September and then there's

another regional vote on the 20th of

September. Jenny, let me bring you in

then. What do you think an AFD victory

would mean, not just for Germany, but

also for Europe and for the far right

and this sort of whole process? So if

the AFD wins, the government will be

under increasing amount of pressure and

also specifically MATS and he will be

basically fighting for his political

survival and of course his focus then

will probably shift more to the domestic

side and because M is a very strong

supporter of of Ukraine this might have

an effect on yeah basically the EU's

support of of Ukraine because if they

lose Germany as a supporter then of

course I'm going to have a huge problem

and and in general I think people will

be especially of course Germany's

neighbor will be very suspicious because

they might think okay have the Germans

um forgotten their history because the

AFD is saying well let's let's move on

let's not remember all what's happened

in the past you know we're different

people now let's move on and I think the

majority of the Germans still very much

remember the history. We have a huge

so-called inong school tour um the

remembrance culture here in Germany

where the Nazi pass is definitely huge

part of our education and and people

know about it and are aware about it.

But of course, as a German neighbor, um

I can definitely understand if if some

of Germany's neighbors are not feeling

particularly good about these kind of

developments.

>> Well, we'll leave it there. Camille

Kavula, our German finance and economy

ministry reporter, and Jenny Tier, our

deputy bureau chief in Germany. Thank

you for your thoughts. I'm Caroline

Hepker. You can catch us every weekday

morning here for Bloomberg Daybreak

Europe beginning at 6:00 a.m. in London.

That's 1:00 a.m. on Wall Street. Nathan,

>> thanks Caroline. And coming up on

Bloomberg Daybreak weekend, we look

ahead to some key inflation data in

South Korea. I'm Nathan Hager and this

is Bloomberg.

This is the Bloomberg Tech Minute

brought to you by ChachiPT. Now with

ChachiPT work. I'm Carol Masser. Bill

Gates Breakthrough Energy Ventures is

betting on a cheaper way to produce

clean jet fuel and made its first

investment from a fund that is backed by

Alaska Air, American, and several other

carriers. The investment is aimed at

accelerating the commercialization of

clean aviation fuel. The recipient is

Bostonbased Lydian, which is developing

lowercarbon jet fuel made from hydrogen

and carbon dioxide and is one of a

growing number of companies developing

next generation clean jet fuel

technology. Lydian says it can reduce

capital expenses by more than 50%

compared with competing technologies.

Lowering those costs is seen as crucial

to making sustainable aviation fuel or

SAF commercially viable as it remains

far more expensive than conventional jet

fuel. Today, clean fuels represent a

tiny fraction of the overall market.

That's the Bloomberg Tech Minute brought

to you by ChachiPT. Put ChachPT to work

on your most ambitious ideas and

projects. Get started at chachipp.com

today by selecting work mode. available

on plus and pro plans.

>> This is Matt Rogers from Lost Cultures

with Matt Rogers and Bow and Yang.

>> This is Bowen Yang from Lost Cultures

with Matt Rogers and Bowen Yang.

>> You know when people try a new food and

suddenly it's like, "Okay, hold on. I

got a new favorite food."

>> That's the reaction a lot of people are

having when they first try QB mayo.

>> Yeah. It's the one with the red cap and

the little baby on the bottle. You've

probably seen it at the grocery store.

>> And this mayo is different.

>> Mhm. Most mayonnaise uses whole eggs. Qi

only uses egg yolks, which gives it this

rich umami flavor. It's smoother,

deeper, almost buttery.

>> Once people try it, they start putting

it on everything. Egg sandwiches, fries,

burgers.

>> Chefs use it. Restaurants use it. People

who really care about flavor use it.

>> Put it on just about anything.

>> Then you'll understand.

>> Q.B. The original Japanese mayonnaise.

>> Amazon Health AI presents painful

thoughts. I um I can't stop scratching

my downtown. Mhm. Yeah, but I'm not

itching to go downtown and tell a

receptionist I'm here to talk about my

downtown.

Some things you'd rather type than say

out loud.

>> There's no question too embarrassing for

Amazon Health AI. Chat your symptoms and

get virtual care 24/7. Healthcare just

got less painful.

>> This is Bloomberg Daybreak Weekend. Our

global look ahead of the top stories for

investors in the coming week. I'm Nathan

Hager in Washington. South Korea will

report on inflation in the week ahead.

The question is whether the numbers

point to another rate hike from the Bank

of Korea. For more, we turn to Doug

Krer, host of the Bloomberg Daybreak

Asia podcast. Thanks, Nathan. Consumer

inflation in South Korea has remained at

or above the central bank's 2% target

for nearly a year now. A key driver of

those higher prices has been the robust

exports of semiconductors. For a closer

look at what's happening on the ground

in South Korea, I'm joined by

Bloomberg's Cat Barton. Cat is our

bureau chief in Soul. She joins us now.

Thank you for being here. There is a lot

to look at and a number of different

aspects that I'm hoping to get to. But

if we can start with the macroeconomy

since we are expecting this inflation

data in the coming week. Give me a sense

of what is happening and what the market

is expecting.

>> We're definitely uh expecting some

interesting data next week. The key

thing for the August inflation figures

is actually going to be that we know

that we're going to see a surge or we we

expect to see a surge partly because we

had SK Telecom last year was giving huge

discounts due to a whole bunch of leaks

and issues like that on mobile charges.

So once those significant kind of 50%

discounts are eradicated, we know that's

going to uh hit the August figures. But

obviously as you say overall the Bank of

Korea flagged that they're they're very

worried. The projection is obviously

2.5% both for 2025 and for 2026 for core

and it's a lot as you say due to these

absolutely roaring um exports of

semiconductors. The export figures for

July were extremely robust. We were

seeing nearly like 180% surge in the

chip exports while shipments you know of

kind of computer related more generally

products were 400%. I mean it's this

incredibly strong um external demand for

South Korea's semiconductors because

obviously Samsung electronics SKH highex

are key suppliers for Nvidia and for the

other hyperscalers um and that demand

remains really robust which is really

impacting the economy here.

>> So I want to take a closer look at the

chip story in a moment but let's reflect

back on the last week in the Bank of

Korea raising its policy rate by 25

basis points. I believe it's now at 3%.

That's after a rate hike in July. So, if

I'm reading this correctly, that's the

first time that we have seen

back-to-back rate hikes from the Bank of

Korea in more than three years. And I

found it very curious that when the head

of the BOK was kind of describing the

rationale for the move, he likened

monetary policy to a gardening tool.

Help me understand what unfolded.

>> It was probably the most interesting

Bank of Korea press conference we've had

in a long time. governor reached for

this uh gardening metaphor to explain

what was going on uh for his

back-to-back rate hikes. In Korean,

there's a local proverb that warns

against kind of delaying action. I guess

the English equivalent would be like a

stitch in time saves nine. But

basically, he was saying if we don't

contain a problem with a homie, which is

like this very small handheld Korean

plow, you will eventually need to use a

far larger shovel implement to fix this

problem. So he's basically saying we

need to act now otherwise this problem

is going to get a lot worse and we're

going to have to throw a lot more at it

to contain it. So that was he returned

to this gardening metaphor about half a

dozen times during the the press

conference to explain why he's hiked

rates back to back because they really

really really want to prevent inflation

from becoming entrenched and they want

to reduce the kind of eventual economic

cost of bringing it under control. So

you mentioned a moment ago the

inflationary forces that are tied to

what's happening in the semiconductor

industry in South Korea. Obviously we

have seen globally this buildout of AI

data centers. It's created enormous

demand for high bandwidth memory chips

made by companies like SKHix and

Samsung. And I'm wondering how much the

wage story is a part of the inflation

story, whether workers at these

production facilities are being

compensated increasingly well. And that

perhaps is one of the drivers here of

what's happening with inflation in South

Korea.

>> That is absolutely the case. It's not

even hit yet really, but that is what

the Bank of Korea is really worried

about because we're seeing workers at

Samsung Electronics, workers at SKH

Highix being offered these huge bonuses

that could um equate to, you know,

$400,500,000

like enormous bonuses and annual bonuses

which could continue for years as long

as the companies continue to hit uh

certain performance targets that were

agreed with the with the unions.

So definitely that is what the Bank of

Korea is is worrying is going to to

percolate through that demand side

pressure because of the sharp increases

in wages for semiconductor workers. And

remember that hasn't even actually

started hitting yet. The wage agreements

were announced, the bonus deals were

announced, but they won't actually be

getting those bonuses until 2027. So

it's already just anticipation that

we're seeing like property prices in the

areas around the FABS starting to rise

really steeply. We're seeing all of that

kind of anticipation of these huge

payouts percolate through even to the

dating sites like um if you're a Samsung

electronics or an SK um high

semiconductor engineer you're now one of

the most desirable people on like a

matchmaking site in South Korea. So it's

really starting to to trickle out

through the whole economy through the

whole of South Korean society because

they are one of the few countries

globally who are already making like

tremendous amounts of money from this AI

buildout. So with that, are we expecting

these companies, whether it's an SKH

Heinix or a Samsung, to expand chip

production overall? And would that not

then feed into the inflation narrative?

>> It's a really big question in South

Korea because the government recently

announced that they want to invest $880

billion in building out a new chip hub

in the south of the country. So at the

moment, all of the semiconductor

production is clustered around Seoul. So

the government's argument is that, you

know, we need to diversify. There's too

much pressure on this area already.

There's not enough, you know,

electricity. There's not enough

infrastructure. So they've proposed

building out this huge new um chips hub

in the south in Guangju. Samsung and SK

have have agreed. They're they're on

board with this massive project and that

it certainly they see very robust

demand. The the companies are saying

that they see it extending through 2027,

2028, 2029, etc., etc. So expanding

capacity could be a huge thing but again

already the impact of that on the local

area on the South Korean economy will

have to be very carefully managed indeed

but it's a huge priority for the

government because they view South

Korea's position in the kind of global

semiconductor chain as like a you know

it's a national strategic asset for them

and this administration is extremely

eager to capitalize on South Korea's

place in that semiconductor supply chain

and use this kind of momentum to help

balance regional development velment in

the country.

>> So what about moving production to the

United States? Where are we in that

process? I know that there have been

some commitments made, some

manufacturing is happening. I mean,

where are we in that process right now?

That is a very good question because

South Korea has obviously signed a $350

billion trade deal with the US but they

haven't actually started any of the the

deals under that massive agreement

unlike Japan for example which has

already you know announced a lot of a

lot of projects that are going ahead. So

what we are hearing is that the US is

not particularly happy about that and uh

they're not especially not happy. I mean

South Korea has denied some of these

reports but we've seen local media

reports here saying that Soul is coming

under quite a lot of pressure from

Washington to announce kind of big built

semiconductor projects in the US.

Obviously, there are some already. We

have groundbreaking this week with an

SKH Highix project, but I think from

Washington's perspective, they would

like to see a lot more investment state

side to see this the these these fabs

being constructed there, to see South

Korean companies investing more and

announcing bigger projects, especially

under this trade deal, which has been,

you know, progressing far more slowly

than US President Donald Trump would

like to see. And I think some of that

may have come through last week when

Trump announced this very unexpected

move to to cail um joint military drills

with the South. Some of that was uh

reportedly linked to dissatisfaction

about how slowly they were moving on the

$350 billion trade deal.

>> But I'm curious about how Trump's effort

to revive diplomacy with North Korean

leader Kim Jong-un is being received in

Soul. Well, it's a tricky one because it

actually chimes very well with what

President Liam Jamyong of South Korea

himself wants to do. Since he came into

office, he's taken steps to reduce

tensions with North Korea. He's taken

steps to, you know, to to stop things

like propaganda broadcasts at the border

to stop, you know, floating activists

floating balloons with um propaganda

into North Korea, which infuriates the

Kim Jong-un regime. and Li Jayung hailed

Trump's announcement saying yes I mean

because from the perspective of the

South Korean government they see that

Trump in his very unorthodox way does

perhaps have the best chance of anyone

of making some kind of breakthrough with

North Korea and potentially helping to

to end this war. Remember that that

South Korea and North Korea remain

technically at war even um since the the

1950s because the the conflict ended

with an armistice not a peace treaty. So

actually the government in Seoul is

quite happy about it. But at the same

time they fear very much being cut out

of that process because North Korea does

not show any signs of wanting to talk to

Soul. They were refused basically to

engage directly. They prefer to engage

with the US which is you know what they

want. Although in fairness after Trump

posted his social media uh screed saying

that he was you know had very good ties

with Kim Jong-un, Kim Jong-un's very

powerful sister Kimo Jong came out and

said actually you know casting doubt on

whether there had been any direct

communication saying that they still

regarded the US as hostile saying uh

yesterday they were complaining about

potential arm sales by the US to to

South Korea. So it doesn't seem that the

that President Trump's move have paved

the way for an imminent breakthrough,

although obviously every every little

helps in this in this tricky situation.

Kat, before I let you go, I have to ask

about how South Korea is cultivating a

deeper relationship with Japan because I

recall reading in the last week on the

Bloomberg terminal that SKH Heinix is

exploring ways to deepen its cooperation

with the memory chip maker Kyoka

Holdings. Give me a sense of what's

happening in the relationship right now

between Soul and Tokyo.

>> It's interesting. they are looking at

how they can kind of deepen cooperation

with Japanese customers and and

suppliers. SKH Highix did indeed say

that um earlier this week um because

obviously it's a very important you know

it's a very important market for them.

They're very important uh you know

customers but they basically they don't

have any what what the SKH was saying is

that they don't have any kind of fixed

plans uh for their kind of indirect

stake in the in the Japanese. I think

it's uh what they would like to do is

see basically Japan you know develop

more because much as they're doing like

for example they were doing this

groundbreaking in Indiana uh where

they've invested obviously more than

like I think 4 billion they would like

to help develop you know in the Japanese

semiconductor industry also which is a

key um a key part uh of maybe boosting

the their neighbor helping to to um

diversify but yes it's not direct

competition for SK it wouldn't be you

know that they would necessarily be

losing out as a result of this. I think

they see it as a win-win. They see it as

some, you know, that they can help their

neighboring uh Japanese chipmaker to

kind of uh to develop and grow. And you

know, as they are doing in the US, it

works it works with the chimes with the

kind of Lee Jamyong administration's

priorities to boost ties with these two

security allies. Both, you know, Japan

and and the US are very important

security allies for them. They've just

announced that they're doing, you know,

joint uh trilateral military drills. And

I think the growing economic

cooperation, you know, feeds into that.

Uh, also

>> Cat, we'll leave it there. Thank you so

very much. Bloomberg's Cat Barton. She

is our bureau chief in Soul. I'm Doug

Krer. You can catch us weekdays for the

Daybreak Asia podcast. It's available

wherever you get your podcast. Nathan,

>> thanks Doug. And that does it for this

edition of Bloomberg Daybreak Weekend.

Join us again Monday morning at 5:00

a.m. Wall Street time for the latest on

markets overseas and the news you need

to start your day. I'm Nathan Hager.

Stay with us. Top stories and global

business headlines are coming up right

now.

Healthcare doesn't always work great. If

you've ever waited on a refill or

couldn't schedule an appointment, you

get it. That's the kind of stuff Optum

is changing. They're using data and

technology to integrate patient care,

pharmacy, and everything else. So

healthcare is connected, not

complicated. What's that look like?

Cheaper prescriptions that are easier to

get and care that looks at the whole

person, how you need it. Optum is

helping make healthcare work as one for

everyone. Learn more at

business.optimum.com.

Before you sign off, you tuned in for

ways to help teams move faster, make

sharper decisions, and turn scattered

context into work they can use. ChatgPT

for Business can help. Chat GPT for

business gives teams a shared workspace

with admin controls, permissions, and

access to work and codecs in Chat GPT.

This means your business can move from

question to answer and code to rollout

quicker. Join over 10 million business

and enterprise users worldwide already

using Chat GPT for work. Download the

Chat GPT desktop app or contact sales to

learn more.

>> It's time to plan ahead and make sure

your brand is showing up in ways that

can have an impact. For Imprints

promotional products are designed to

work as hard as you do and make a

lasting impression. From quality

apparel, including exclusive brands to

drinkware, tech, and totes, they've got

thousands of options to fit your brand

and budget. Plus, you get free samples,

expert help, and their 360° guarantee,

so you can be forimprint certain

everything shows up just right, right on

time. Explore more at forimprint.com.

Four imprint.