Speaker 1: This is Bloomberg day Break Weekend, our global look at
Speaker 1: the top stories in the coming week from our day
Speaker 1: Break anchors all around the world, and straight ahead on
Speaker 1: the program, a look at the US housing market ahead
Speaker 1: of the big spring home buying season and some highly
Speaker 1: anticipated data on inflation and economic growth. I'm Tom Busby
Speaker 1: in New York.
Speaker 2: I'm Stephen carolind London, where we're looking ahead to AI's
Speaker 2: starring role at this year's Mobile World's Congress in Barcelona.
Speaker 3: And I'm Ran Curtis in Hong Kong. I'll take a
Speaker 3: look at my news upcoming results, whether AI makes an intercot.
Speaker 4: That's all straight ahead on Bloomberg Daybreak Weekend, The business
Speaker 4: news you need to wrap up your week, Available on Apple, Spotify,
Speaker 4: the Bloomberg Business Appen everywhere you get your podcasts.
Speaker 1: Good day to you. I'm Tom Busby and we begin
Speaker 1: today's program with home buyers, home sellers, home builders, and
Speaker 1: home improf been chains for more on where we stand.
Speaker 1: We welcome Bloomberg Intelligence US home building analyst Drew Reading.
Speaker 5: Drew, thanks for being here, Thanks for having me.
Speaker 1: Well, let's start with the biggest roadblocks in the home
Speaker 1: buying selling Everybody sky high home prices, a dearth of
Speaker 1: homes on the marketplace, and mortgage rates, which just last
Speaker 1: week rose back above seven percent for the first time
Speaker 1: since early December. Drew, is there any relief in sight,
Speaker 1: any good news out of this.
Speaker 5: I think you hit the nail on the head with
Speaker 5: the challenges facing the home buyer. I mean, we've had
Speaker 5: home prices rise more than forty percent over the last
Speaker 5: couple of years. We've had interest rates rise from three
Speaker 5: percent now above seven percent. We have the worst affordability
Speaker 5: on record if you look at monthly payments relative to income.
Speaker 5: We've been describing the housing market as kind of a
Speaker 5: tale of two markets. On one hand, you have the
Speaker 5: resale market, who's battling not only the high rates, but
Speaker 5: low inventory and homeowners who don't want to sell. On
Speaker 5: the other hand, you have the new home market, where
Speaker 5: builders have done extremely well. Sales actually grew in twenty
Speaker 5: twenty three, and that's because they've been bringing more supply
Speaker 5: to the market. They've been pretty aggressive and adjusting base prices.
Speaker 5: So if you look at prices in the new home market,
Speaker 5: they were actually down double digits in twenty twenty three,
Speaker 5: And most importantly, they've been offering financing incentives, so that's
Speaker 5: been a big tool in their belt that the existing
Speaker 5: home market really doesn't have to leverage. So a buyer
Speaker 5: who's going out into the market now is looking at
Speaker 5: something in the seven percent range. Builders are able to
Speaker 5: offer lower rates somewhere in the five and a half
Speaker 5: to six percent range, So that's been a huge differentiator
Speaker 5: for them.
Speaker 1: Now, you follow the builders, so you know what they do,
Speaker 1: where they do it, how they think. Home builder sentiment
Speaker 1: actually was I think a six month high right now. However,
Speaker 1: they also face a lot of challenges, don't they. Not
Speaker 1: enough available land, not enough of skilled labor. I mean,
Speaker 1: how are they still building these homes where people want
Speaker 1: to buy with the challenges that they face.
Speaker 5: Yeah, builders have been facing these challenges for quite some
Speaker 5: time now. You mentioned, you know, the lack of available labor,
Speaker 5: particularly as volumes heat up, the lack of developed land,
Speaker 5: which we think could become even more of a problem
Speaker 5: for the industry. But the way I would look at
Speaker 5: the new home market is, on one hand, you have
Speaker 5: the large, well capitalized, pickly traded home builders, and on
Speaker 5: the other hand you have smaller private peers. We think
Speaker 5: that the large builders are going to continue to take
Speaker 5: market share from those smaller private piers. And the main
Speaker 5: reason is because a lot of the private builders are
Speaker 5: reliant on regional bank financing in order to grow, whether
Speaker 5: it's for land acquisition, land development, or construction loans. And
Speaker 5: with not only the cost of those loans going higher,
Speaker 5: but also the availability as the economy has weakened a
Speaker 5: little bit, we're seeing their ability to access that growth
Speaker 5: capital has come down. We think that the large builders
Speaker 5: are stepping in to fill the void because they've got
Speaker 5: strong balance sheets, they've got long land pipelines, and they're
Speaker 5: able to self develop their land. So we think that,
Speaker 5: you know, as we move through twenty twenty four and
Speaker 5: into twenty twenty five, they'll continue to be the beneficiaries.
Speaker 1: Now I imagine also some of these builders, the ones benefiting
Speaker 1: the most, are the ones building homes where people want
Speaker 1: to live. And that means the Sun Belt Florida, all
Speaker 1: the way across to Texas and the Southwest. Are there
Speaker 1: other builders having success? You know, the Toll Brothers up
Speaker 1: in the northeast. Are they building big houses, make mansions
Speaker 1: or even mansions? Are are they all seeing you know,
Speaker 1: the rising tide lift all boats in the housing market.
Speaker 5: Yeah, that's a great question. And you know, when you
Speaker 5: look big picture, the Sunbelt is really where you want
Speaker 5: to be due to more favorable demographic patterns. That's where
Speaker 5: the population shifting, that's where the job growth is. Affordability
Speaker 5: is better, so you see some migration out of some
Speaker 5: of the higher cost markets. What's interesting right now is
Speaker 5: we are seeing pretty broad based rebound in the new
Speaker 5: home market across the country. Some of the hardest hit
Speaker 5: markets in the back half of twenty twenty two were
Speaker 5: in the West, think California, the Pacific Northwest to Southwest,
Speaker 5: but we're even seeing a strong rebound there. You mentioned
Speaker 5: the Northeast, which is actually an interesting example because if
Speaker 5: you look at sales paces that the builders have been
Speaker 5: doing relative to twenty nineteen, the Northeast and the Midwest
Speaker 5: have held up really well. And I think part of
Speaker 5: that has to do with the fact that maybe these
Speaker 5: are markets that didn't participate as much on the way up,
Speaker 5: so they weren't the boom markets, but they also didn't
Speaker 5: follow as much on the way down. When things got
Speaker 5: a little bit hairy. Theer in the back half of
Speaker 5: twenty twenty two and into twenty twenty three, So the
Speaker 5: Northeast has done really well. We heard from Toll Brothers
Speaker 5: recently they noticed strength across their entire footprint, across all
Speaker 5: of their price points. So it's been a pretty broad
Speaker 5: based rally.
Speaker 1: Wow, yeah, everybody wins now. One thing you have been
Speaker 1: reporting on though, is is more modest, moderately priced new homes,
Speaker 1: more of them going up. What can you tell us
Speaker 1: about that.
Speaker 5: There's been a decided shift over the last several years
Speaker 5: from builders who wanted to engage more at the entry level.
Speaker 5: One of the reasons is because that's where a lot
Speaker 5: of the demographic based demand is now and will be
Speaker 5: in the coming years. The other reason that they're targeting
Speaker 5: that market is for relative affordability. As I mentioned, affordability
Speaker 5: is near the worst on records. So one way builders
Speaker 5: are looking to address that is through doing smaller square
Speaker 5: footage floor plans, which allows them to get the price down.
Speaker 5: They're also doing projects with more density, so they could
Speaker 5: spread more units over the same piece of land and
Speaker 5: spread out costs that way and address affordability for the
Speaker 5: buyer through density. So there's a couple of different ways
Speaker 5: they're doing it. It's something that's been ongoing for a
Speaker 5: couple of years, but it's starting to be emphasized a
Speaker 5: little bit more. Now.
Speaker 1: One last question, Drew, and it's about last week we
Speaker 1: had home depot earnings. This week we have lows. Are
Speaker 1: we likely to see the same kind of not disappointing results,
Speaker 1: but clearly home improvement projects have slowed down.
Speaker 5: Yeah, expectations coming into the print for lows are all
Speaker 5: that high. As you mentioned, home Deep gives some rather
Speaker 5: disappointing guidance I think on the outlook for twenty twenty four,
Speaker 5: calling for the market to be down about one percent,
Speaker 5: I expect to hear similar commentary from Loew's.
Speaker 1: Our thanks to Bloomberg Intelligence US home building analyst Drew Redding,
Speaker 1: and up next, some closely watched economic data points out
Speaker 1: this week what they could mean for the Fed's next
Speaker 1: policy meeting just three weeks from now. And for more
Speaker 1: we welcome Bloomberg International Economic and Policy correspondent Michael McKee. Well,
Speaker 1: let's start with the Fed's preferred measure of inflation. This
Speaker 1: is a mouthful. The personal consumption expenditure core price index
Speaker 1: for the month of January and the fourth quarter. That's
Speaker 1: the biggie this week. What are you expecting to see?
Speaker 6: Well, we get to the fourth quarter as part of
Speaker 6: the GDP report. It's a revision, so that doesn't get
Speaker 6: as much attention from the Fed because it's quarterly, it's
Speaker 6: over a three month average. But the monthly number, which
Speaker 6: represents the latest month that we have will be January,
Speaker 6: and that's the one that the FED looks at because
Speaker 6: it gives them the most complete picture they think of
Speaker 6: where inflation is at the moment, and that's going to
Speaker 6: be the key for them, where inflation is at the
Speaker 6: moment in the PCE, because in the CPI, obviously it
Speaker 6: was not good news for January. Now, the forecast for
Speaker 6: the PCE is for a two point four percent year
Speaker 6: over year increase, which is down from two point six
Speaker 6: the year before, and a two point eight percent, down
Speaker 6: from two point nine percent for the core. FED Vice
Speaker 6: chair Phillip Jefferson spoke last week and said the FED
Speaker 6: staff is basically predicting the same thing. So there are
Speaker 6: people out there who think we might see an increase
Speaker 6: in the PCE this month because of some unusual factors,
Speaker 6: but the Fed seems sanguine going into the number.
Speaker 1: Now, what are the factors that we see that could
Speaker 1: make inflation even worse.
Speaker 6: Well, one of the questions is what's happening with energy
Speaker 6: and with food because those went up in the CPI report,
Speaker 6: expected to but not by as much as they did.
Speaker 6: And then the ongoing question is always what's happening with housing?
Speaker 6: The CPI showed unexpected strength in housing inflation when it's
Speaker 6: supposed to be according to everybody who follows it going down.
Speaker 6: It's less of a weight in the PCE, so it
Speaker 6: may not make as much of a difference, but it
Speaker 6: could affect that number as well. But the big one
Speaker 6: in the PCE, this is what I call the Pogo problem.
Speaker 6: We have met the enemy and he is us. Our
Speaker 6: listeners are at fault because so much trading has gone
Speaker 6: on in the markets, and obviously the markets have continued
Speaker 6: to go up, so stock trading fees are a big
Speaker 6: component of why the PCE has stayed high. And there
Speaker 6: are some analysts who really follow this stuff closely who
Speaker 6: think that's the number that's going to push PCE higher
Speaker 6: and instead of lower.
Speaker 1: Let's go back to GDP because you talked about that.
Speaker 1: We're going to get a reading, a second reading on
Speaker 1: fourth quarter GDP. What kind of growth overall growth are
Speaker 1: we expecting in the economy, and also what does that
Speaker 1: mean for the full year?
Speaker 6: Oh, if we only knew what it meant for the
Speaker 6: full year. Three point three percent was the initial read,
Speaker 6: and the economists we survey don't expect a change in that,
Speaker 6: just a little bit of a change in the composition,
Speaker 6: with more coming from business investment in inventories and a
Speaker 6: little bit less from personal consumption consumer spending. But for
Speaker 6: the year, the view has been that we are seeing
Speaker 6: a slowing in the economy, and we have seen some
Speaker 6: numbers that suggest that. But I go back to some
Speaker 6: of the remarks from FED officials in this last week
Speaker 6: where they warn that one of the dangers is that
Speaker 6: consumer spending doesn't drop off that much, and that we
Speaker 6: do see a stronger than expected economy through the year.
Speaker 6: That could put pressure on inflation, and that would have
Speaker 6: an impact on if and when they start cutting interest rates.
Speaker 6: So it's something to keep in mind. It's really hard
Speaker 6: to make a prediction because it's been so it's been
Speaker 6: so weird coming out of the pandemic. Nobody expected the
Speaker 6: kind of recovery that we've gotten, and it could keep going.
Speaker 1: Well, that's for sure. I mean, even with a slight
Speaker 1: pullback in consumer spending, three point three percent growth in
Speaker 1: the final three months of the year is pretty strong.
Speaker 1: Good news in Washington, certainly for this administration as we
Speaker 1: go into an election year.
Speaker 6: Yeah, they should be meeting to figure out how they're
Speaker 6: going to sell all this to the American public because
Speaker 6: obviously the political polls don't match what's happening with the
Speaker 6: economy at this point. But overall, if the economy doesn't
Speaker 6: go into recession and inflation does come down, then that
Speaker 6: could be good news for Joe Biden. The saying is
Speaker 6: always it's the economy stupid, and people have wondered if
Speaker 6: that's going to be the case this year, and we'll see.
Speaker 1: Well, a lot to look forward to, and our thanks
Speaker 1: to Bloomberg International Economic and Policy correspondent Michael McKee, coming
Speaker 1: up on Bloomberg Day Break weekend to look ahead to
Speaker 1: the Mobile World Congress that takes place in Spain this week.
Speaker 1: I'm Tom Busby, and this is Bloomberg. This is Bloomberg
Speaker 1: Day Break weekend, our global look ahead at the top
Speaker 1: stories for investors in the coming week. I'm Tom Busby.
Speaker 4: In New York.
Speaker 1: Up later in our program a look at inflation in
Speaker 1: New Zealand and the next move from its bank, as
Speaker 1: well as earnings from China's biggest tech giant, but first.
Speaker 1: Mobile technology arguably one of the fastest growing sectors of
Speaker 1: the twenty first century and one investors think has boundless possibilities.
Speaker 1: In the coming days, everyone who is anyone in the
Speaker 1: world of connectivity will convene under one roof at the
Speaker 1: annual Mobile World Congress in Barcelona, trading ideas and discussing
Speaker 1: the future. But can telecom keep up with multiple high
Speaker 1: paced advancements in the world of tech. For more, Let's
Speaker 1: go to London and bring in Bloomberg Daybreak anchor Steven Carroll.
Speaker 2: Tom The market frenzy about tech and artificial intelligence driven
Speaker 2: gains seems to have reached fever pitch this earning season.
Speaker 2: Telecommunications is one of the many industries that's racing to
Speaker 2: adapt and harness its advantages. This year's Mobile World Congress
Speaker 2: in Barcelona will see major tech companies, including the likes
Speaker 2: of Meta, lining up to showcase their AI products to
Speaker 2: the sector. A recent survey of more than four hundred
Speaker 2: telecoms industry professionals by AI chip giant Nvidia underlined this,
Speaker 2: over half of respondents agreed or strongly agreed that adopting
Speaker 2: AI will be a source of competitive advantage. That's a
Speaker 2: score that's up from just thirty nine percent in twenty
Speaker 2: twenty two. In Nvidia themselves are seeing blockbuster growth thanks
Speaker 2: to the technology, and their latest results show no sign
Speaker 2: of that growth slowing down. The CEO of Futurum, Daniel Newman,
Speaker 2: and bab o'donald, chief analyst at TECHnalysis, say the pressure
Speaker 2: is on for Nvidia to continue these gains.
Speaker 7: The only result that was going to be acceptable was
Speaker 7: not only a beat, but a substantial beat and a
Speaker 7: guidance upbeat because people are beginning to wonder, how many
Speaker 7: consecutive quarters can this company continue to run with triple
Speaker 7: digit revenue growth and high triple digit earnings growth. But
Speaker 7: it seems each quarter they continue to surprise.
Speaker 8: This is a company that continues to execute and completely
Speaker 8: blow away everybody's most robust forecast. I mean, they raise
Speaker 8: their own forecast, the street raises the forecast, and they
Speaker 8: still beat them. It's kind of crazy. And of course
Speaker 8: the big question has been how.
Speaker 7: Long can this continue?
Speaker 8: How long can this go on. The competition has never
Speaker 8: been more fierce than it is right now foreign Vidia,
Speaker 8: but they have a huge headstart.
Speaker 7: Do you think there is sort of a consensus in
Speaker 7: the industry to put some competitive pressure back on.
Speaker 8: In video, they've been innovating at a pace that nobody
Speaker 8: else has been able to keep up.
Speaker 2: With Daniel Newman from Futuram and Bob O'Donnell at tech Analysis,
Speaker 2: they're discussing the latest results from Nvidia with Bloomberg. Well,
Speaker 2: perhaps some of those future gains could come from AI
Speaker 2: collaborations with the telecoms industry. Those conversations will be happening
Speaker 2: at Mobile World Congress in the coming days. Apart from
Speaker 2: the latest tech, industry players will also be considering the
Speaker 2: regulatory requirements that are facing some telecoms companies that aren't
Speaker 2: applicable to their big tech cousins. Telecoms may just be
Speaker 2: at the beginning of its AI journey, but will it
Speaker 2: be a dalliance or a long lasting partnership. While I've
Speaker 2: been discussing all of this with our European telecoms and chips,
Speaker 2: Jillian Deutsch and I started by asking here how important
Speaker 2: Mobile World Congress is in setting the agenda for the sector.
Speaker 9: Yeah, this is really the key event for the year,
Speaker 9: and I think it's gonna be fun to kind of
Speaker 9: see not as European telcos which have lots of things
Speaker 9: that they're pushing, for example, deregulation and lots of m
Speaker 9: Andy talks across Europe, but also a lot of different
Speaker 9: international telcos and also major US tech companies coming to
Speaker 9: all descending on Barcelona to kind of really set the
Speaker 9: agenda for tacos in tech the next year.
Speaker 2: So AI is one of the key themes at this
Speaker 2: year's events, talk us through where Telecom's companies are with
Speaker 2: them implementing that technology and where they found success with it.
Speaker 9: Yeah, I mean AI has definitely hit a taco sector
Speaker 9: of course as well, and so I think we're going
Speaker 9: to be seeing lots of announcements about, you know, different
Speaker 9: offerings with different US tech giants for example, and how
Speaker 9: they're integrating artificial intelligence into their offerings, you know. I mean,
Speaker 9: I just definitely think a lot of this is hype.
Speaker 9: I think anyone who founds tech is used to hypes
Speaker 9: of course, and AI is obviously in the most recent ones.
Speaker 9: But I do think there's a lot of really interesting
Speaker 9: ways that companies are trying to integrate AI into their offerings,
Speaker 9: really kind of to improve the experience for consumers when
Speaker 9: it comes to customer service also with businesses, and really
Speaker 9: kind of creating you know, more streamlined offerings for their
Speaker 9: for their clients. And so I think a lot of
Speaker 9: this also will be kind of in with kind of
Speaker 9: key announcements with big tech giants. So we already saw
Speaker 9: now key is stock going up recently when they announced
Speaker 9: a partnership with the Videos. Those kind of big names
Speaker 9: obviously are really important to show that they are really
Speaker 9: serious about AI and intergeting AI. But also I think
Speaker 9: we'll see some interesting ones. You know, BT for example,
Speaker 9: last year announced pretty massive job cuts fifty five thousand
Speaker 9: people until twenty to thirty and that's not entirely but
Speaker 9: at least in part because they're integrating AI, so it's
Speaker 9: kind of helping them to trim from the fat in
Speaker 9: the company. And so I think that's we might see
Speaker 9: some more more kind of uses of AI in that sense.
Speaker 2: So does it do we have the sense that European
Speaker 2: companies are sufficiently investing in this given that so many
Speaker 2: of the technology advancements are coming from US firms.
Speaker 9: That's a great question. I mean, celcos are It's funny,
Speaker 9: they are really afraid of just becoming you know, a
Speaker 9: pipe in the ground, right, And so it's kind of
Speaker 9: sparked this kind of panic a lot of among a
Speaker 9: lot of tech tech taco companies across Europe, and so
Speaker 9: that has led to this massive push to keep innovating
Speaker 9: and and there are a lot of questions about whether
Speaker 9: or not they actually can outcompete you know, Silicon Valley
Speaker 9: giants that have you know, massive market caps and have
Speaker 9: all of that talents obviously you know, really harmonized or
Speaker 9: centralized into one location and already in their companies, and
Speaker 9: a lot of what these celcos are doing is to
Speaker 9: really trying to compete with them. So you see a
Speaker 9: lot of kind of IT solutions and cloud solutions and
Speaker 9: networks and factories and these are all things that actually
Speaker 9: put tuco's in direct competition with US tech giants. And
Speaker 9: I think there's a lot of skepticism that they can
Speaker 9: really outcompete tech giants, but that is really a crucial
Speaker 9: crucial thing for tacos going forward, if they really want
Speaker 9: to make sure they're not just you know a utility company.
Speaker 2: So it is a question of cooperation as well as
Speaker 2: some competition in these areas too.
Speaker 9: Yeah, absolute, I me, you know, we already do see
Speaker 9: lots of tacos and tech giants working together. They have
Speaker 9: for a long time when it comes to data centers
Speaker 9: and other kinds of partnerships they've had, or even you know,
Speaker 9: when you open up your you know, you turn on
Speaker 9: your TV, you probably see YouTube or Netflix offerings, right,
Speaker 9: So telcos really do rely on us tech giants as well.
Speaker 9: It's kind of a fren of me love hate relationship
Speaker 9: between the two, and I do think we see that
Speaker 9: that kind of relationship really play out in Brussels, where
Speaker 9: I'm based and covered tech regulation or have cover tech Regnation.
Speaker 9: A lot of these techos argue that they're way more
Speaker 9: over regulated than they're often American counterparts, and are really
Speaker 9: pushing for tucos to help out with with helping tech giants.
Speaker 9: Excuse me, helping telcos with these massive, expensive network infrastructure investments.
Speaker 9: And they say, you know a lot of these tech
Speaker 9: giants get to piggyback off of the really expensive and
Speaker 9: complicated work that they do.
Speaker 2: Yeah, that's a really just in conversation that I'm sure
Speaker 2: will be featuring two at Mobile Work Congress. What you know,
Speaker 2: the European Commission recently published a white paper on this
Speaker 2: on reforms to the market. What were the problems that
Speaker 2: that white paper identified.
Speaker 9: I think it's really interesting because Taco's for the past
Speaker 9: least couple of years, I've really been, like I said,
Speaker 9: arguing that tech companies need to help with the bill
Speaker 9: for infrastructure, and this argument was dubbed fair share Tech
Speaker 9: companies need to pair their fair share for infrastructure. That
Speaker 9: specific lobbing effort failed, but what they did do is
Speaker 9: really put Taco's back at the top of regulator's agenda.
Speaker 9: They've been really overlooked for the past five plus years.
Speaker 9: So this white paper was really interesting because it actually
Speaker 9: dives into the issues that Tacos have been complaining about
Speaker 9: for years and acknowledge a lot of the issues that
Speaker 9: they've been complaining about. You know, it's an incredibly fragmented
Speaker 9: market with over fifty players in you across the EU,
Speaker 9: you know, compared to the United States where they're early
Speaker 9: three maybe four kind of massive players. They do knowledge
Speaker 9: that they're overregulated. There's too much bureaucracy to get permits
Speaker 9: et cetera. But I think when it comes to the
Speaker 9: actual solutions, I think most of the telcos I talk
Speaker 9: to feel like the paper is kind of lacking. There's
Speaker 9: some talk about, oh, we should harmonize spectrum policies atle
Speaker 9: bit more across the European Union, and we need to
Speaker 9: make it easier for companies to achieve scale by merging
Speaker 9: across borders. But telco's for their main number one ask
Speaker 9: really has been to merge in market, and there's very
Speaker 9: little acknowledgement of that. And you know, and even when
Speaker 9: when the Commission was unveiling this paper, you know, we
Speaker 9: had Margaret Investigate, the competition chief for the European Commission, saying,
Speaker 9: you know, in market consolidation is not the answer. So
Speaker 9: I think that was kind of met with a lot
Speaker 9: of sadness among the telcos. But it also will have
Speaker 9: a new commission coming in next year, and so it
Speaker 9: really is a question of what is that next commission,
Speaker 9: who's in charge, what do they think is actually the solution?
Speaker 9: Do they even do they take up telcos as a
Speaker 9: topic end item?
Speaker 2: Yeah, so an interesting time for those companies too. I
Speaker 2: mean we're also in the midst of earning season of
Speaker 2: course as well, what's sort of financial state are these
Speaker 2: companies in.
Speaker 9: Not not a great one in them And there's obviously
Speaker 9: a lot of nuance between companies and different markets, but
Speaker 9: these more broadly speaking, we definitely see declining revenues for
Speaker 9: almost all of these tacos year on year, and I
Speaker 9: think there's some really interesting trends that have come out
Speaker 9: of that. So I think a good one to look
Speaker 9: at is Votaphone, for example. You know, they're really a
Speaker 9: key pan European toco. They're actually exiting a lot of markets.
Speaker 9: You know, they've sold off their operations in Spain, is
Speaker 9: going to They're trying to exit Italy. There's a massive
Speaker 9: merger in the UK, so I mean there's one, but
Speaker 9: this is an example of the kind of massive M
Speaker 9: and A talks we're seeing across Europe. And you know,
Speaker 9: this is really so that companies can try to achieve
Speaker 9: that scale that they say is necessary to actually make
Speaker 9: the kind of big infrastructure investments that they need to
Speaker 9: remain competitive. So every kind of company is trying to
Speaker 9: scramble to find solutions in that sense. But we're also
Speaker 9: seeing a lot of foreign investment more hedge funds coming in.
Speaker 9: Whenever I talk to telco's and I ask, you know,
Speaker 9: where do you see this market in five years? Really
Speaker 9: no one has a clear pick sure or what it's
Speaker 9: going to look like, which is kind of frightening but
Speaker 9: also quite exciting I think for companies. So it'll be
Speaker 9: very interesting to see where that kind of talk is
Speaker 9: at ahead of this at the conference.
Speaker 2: Because one of the really big investments these companies have
Speaker 2: been making has been in five G networks. Are those
Speaker 2: investments paying off for these companies or when are they
Speaker 2: expected to a great question.
Speaker 9: I mean, I think what the best way to look
Speaker 9: at is to start with the Tulco infrastructure companies. So
Speaker 9: this is no Ki and Erickson. They really hold this
Speaker 9: kind of Nordic do compily very really interesting because they're
Speaker 9: at the mercy of network operators and no Key in
Speaker 9: their recent earnings was saying, look, you know, these companies
Speaker 9: have to start investing in five G if they want
Speaker 9: to really remain competitive with each other. And they say
Speaker 9: that these investments will start soon, but they really don't
Speaker 9: have a great idea of when that actually will happen.
Speaker 9: And I think, you know, we do see inflation decreasing.
Speaker 9: Of course, energy costs are lower than they have been,
Speaker 9: so I think there's some optimism that maybe this is
Speaker 9: the year where things start to turn around, but it's
Speaker 9: not a very clear picture when this actually could turn around.
Speaker 9: I also not mention, you know, not just with five G,
Speaker 9: which is obviously a massive focus for tacos, but there's
Speaker 9: also a lot of talk about open ram, which is
Speaker 9: basically a technology that allows network operators to pick and
Speaker 9: choose parts from different suppliers. There's been a lot to
Speaker 9: talk about open round for a long times when pushed
Speaker 9: by the US government, but it never really gained traction
Speaker 9: until the end of last year when at and T
Speaker 9: and that's some massive contract with Ericson to actually start
Speaker 9: rolling this out in the US. We see Deutsche Telcom also
Speaker 9: in Germany doing this with Nokia, and so I think
Speaker 9: that's also giving companies some hope, and that might that
Speaker 9: might also kind of help for Nokia and Erickson, and
Speaker 9: that might kind of stimulate more and more network infrastructure investment.
Speaker 9: So maybe this is the year, but I'll be curious
Speaker 9: to see if there's actually much optimism in Barcelona about it,
Speaker 9: or if this is just you know, another year. There's
Speaker 9: some hope, but never actually any any reality.
Speaker 2: Thanks too, Bloomberg's European Telecoms and Chips reporter Gillian Deutsch. There,
Speaker 2: I'm Stephen Carroll in London. You can catch us every
Speaker 2: weekday morning here for Bloomberg Daybreak Europe. Begetting at six
Speaker 2: am in London at one am on Wall Streets.
Speaker 1: Tom, Thank you, Steven, and coming up on Bloomberg day
Speaker 1: Break weekend, another closely watched central bank rate decision and
Speaker 1: earnings from a Chinese tech giant. I'm Tom Busby, and
Speaker 1: this is Bloomberg. I'm Tom Busby in New York with
Speaker 1: your global look ahead at the top stories for investors
Speaker 1: in the coming week. For markets in the Asia Pacific region,
Speaker 1: two things stand out in the week ahead, a rate
Speaker 1: decision from New Zealand Central Bank and an earnings report
Speaker 1: from online retail giant and search giant by Do for more.
Speaker 1: Let's get to Bloomberg's Doug Chrisner, co host of Daybreak Asia.
Speaker 5: Tom.
Speaker 10: We begin with Kiwi inflation. We know higher prices have
Speaker 10: been sticky in several economies, and New Zealand is no exception.
Speaker 10: The question now is over the response on the part
Speaker 10: of central bankers the Reserve Bank of New Zealand will
Speaker 10: meet in the week ahead. Recently, the swaps market has
Speaker 10: been pricing in a possible rate hike from the RBNZ
Speaker 10: in the coming months. How real is that possibility though?
Speaker 10: Let's bring in James McIntyre from Bloomberg Economics Asia. He
Speaker 10: joins us from our studios in Sydney. James, always a pleasure,
Speaker 10: Thanks for joining us. I'm going to ask you that question.
Speaker 10: How real is the possibility that the RBNZ raises rates again?
Speaker 4: Great?
Speaker 11: Look, thanks for having me, it's great to be here.
Speaker 11: And look, I think that I think it's not a
Speaker 11: real possibility, but their threat is there. The RBNZ have
Speaker 11: been quite hawkish still, even though they've done a lot
Speaker 11: and they went earlier than everyone else, and also even
Speaker 11: though they are getting things moving in the right direction,
Speaker 11: whether it's the inflation story with the New Zealand, the
Speaker 11: unemployment rate, labor capacity beginning to ease up, a lot
Speaker 11: of that is moving in the right direction. But they've
Speaker 11: stayed tremendously hawkish. There's a few reasons why, but I
Speaker 11: think that they're more a threat than anything. It's likely
Speaker 11: to become a reality over the next few months.
Speaker 10: When you look at inflation expectations, though, can you give
Speaker 10: me a sense of how that measure has been moving.
Speaker 11: Yeah, well, there is a there's a key measure of
Speaker 11: inflation expectations two year ahead expectations from a survey the
Speaker 11: RBNZ does, and those expectations actually dropped down to about
Speaker 11: two and a half percent. Now one to three percent
Speaker 11: is the rbnz's target band, and they want to hit
Speaker 11: that midpoint of two. So two and a half percent
Speaker 11: for inflation over the next two years is not quite
Speaker 11: there yet. But more than a quarter of the participants
Speaker 11: in that survey saw that headline inflation measure moving to
Speaker 11: the midpoint of the rbnz's banned by the end of
Speaker 11: this year. So things are moving in the right direction there.
Speaker 11: But I think that that might not actually necessarily be
Speaker 11: the thing that the rbnz's super worried about at this point.
Speaker 11: I think maybe that market pricing, which before traders had
Speaker 11: begun to move to price in the chance of another hike,
Speaker 11: that market pricing had seen those two year swaps. So
Speaker 11: if we think about the to your inflation expectations from
Speaker 11: economists to your swaps out there in markets, those had
Speaker 11: been beginning to price in more and more of the
Speaker 11: arbyens at easing, and that's something that we think that
Speaker 11: they might have wanted to or that might be beginning
Speaker 11: to start to try and talk against right now.
Speaker 10: So from what I've read about the key we inflation,
Speaker 10: the headn't line number is cooling a bit, but there
Speaker 10: are elements that are proving to be sticky. Where do
Speaker 10: we find those elements in the economy.
Speaker 11: Yeah, it's in the non tradable side of the New
Speaker 11: Zealand inflation basket. So we've had the tradable inflation falling,
Speaker 11: and that's especially things like the energy price decline and
Speaker 11: the goods price deflation that we've been seeing coming from
Speaker 11: all around the world, and those are the things that
Speaker 11: are kind of actually not really within the ARBs control.
Speaker 11: Those non tradable side of things. Services inflation in particular,
Speaker 11: they're proving a little bit stickier, and in the fourth
Speaker 11: quarter data that we had back at the end of
Speaker 11: January on the twenty fourth, they were quite a bit
Speaker 11: stronger than expected and not only by economists, but the
Speaker 11: arbiens it's own exit dictations for those. So that's that's
Speaker 11: a lot of the services side within the economy, rents
Speaker 11: being a bit of a challenge there and some of
Speaker 11: the other services pricing that some of the domestic labor
Speaker 11: costs might be a problem. For now we think that
Speaker 11: that things are on track for those to EBB. But however,
Speaker 11: the arben said, this is this dynamic that we're that
Speaker 11: we've got with the hawkishness and some of that market pricing,
Speaker 11: and even some of our economists peers thinking that the
Speaker 11: Arbenz might want to actually do a little bit more
Speaker 11: to take a little bit of extra insurance. So not
Speaker 11: quite there yet on the non tradables front, which is
Speaker 11: the part that from the domestic side and from the
Speaker 11: what the Arbenz can control where they've probably got their
Speaker 11: their maximum point of nervousness.
Speaker 5: Stay.
Speaker 10: When I think of higher prices in New Zealand, the
Speaker 10: property market comes to mind when you look at how
Speaker 10: home buyers have been behaving in an environment where rates
Speaker 10: have been elevated, at least on the mortgage side. Has
Speaker 10: there been a shift? Is are sales contracting a bit,
Speaker 10: our prices coming down? What's the behavior of the housing market?
Speaker 11: Pit, Yeah, we've had a bit of a turn in
Speaker 11: the housing market. So we had been in a decline
Speaker 11: as the housing market was responding to the rate hikes
Speaker 11: thus far. But as the RBNZ has been on that pause,
Speaker 11: we have seen some life come back into the property market.
Speaker 11: Now part of that has been the very very strong
Speaker 11: demand for property that we've seen. So like Australia, New
Speaker 11: Zealand has been recently experiencing a really massive rebound in
Speaker 11: its migration. We're getting population growth in the high twos,
Speaker 11: possibly getting towards three percent, and that's really showing up
Speaker 11: across a whole range of parts of the economy. But
Speaker 11: in the property sector it's showing up in extra demand
Speaker 11: for rents, an inflation problem for the RBNZ. And on
Speaker 11: the price side of the market, we're seeing a little
Speaker 11: bit of a pickup and activity a little bit more
Speaker 11: confidence than some of those prices starting to rise. So
Speaker 11: that's again one of the sort of if you're on
Speaker 11: the camp of cutting rates soon in New Zealand, you'd
Speaker 11: be looking at where the economy is going in terms
Speaker 11: of activity, consumer spending, the unemployment rate, and where the
Speaker 11: inflation track is ultimately going. But if you were going
Speaker 11: to be a little bit hawkish and sort of thinking
Speaker 11: that the RBNZ could hike that property sector and the
Speaker 11: little bit of a migration stirred revival there, along with
Speaker 11: inflation on the non tradable side being a little bit
Speaker 11: too high. They're the kind of factors that you're balancing there.
Speaker 10: I'm sure it's going to be a very interesting conversation
Speaker 10: around the table at the meeting of the Reserve Bank
Speaker 10: of New Zealand in the week ahead. James, thank you
Speaker 10: so much for helping us preview the meeting. James McIntyre
Speaker 10: from Bloomberg Economics Asia. Up next we go to Hong
Speaker 10: Kong and the other host of Daybreak Asia, Brian Curtis Doug.
Speaker 3: We'll be having a chat with Ernie bot in the
Speaker 3: coming week as by Do reports its fourth quarter earnings.
Speaker 3: The ernie chatbot has been generating considerable excitement for Baidou
Speaker 3: as it looks to capitalize on AI. Erniebot is based
Speaker 3: on Baidu's internally developed large language model, and like others,
Speaker 3: it can generate tech images and videos. Bidou said at
Speaker 3: the end of December that the chatbot had attracted more
Speaker 3: than one hundred million users. We thought it would be
Speaker 3: a good time to take a look at how baid
Speaker 3: and other companies in Asia are doing on the generative
Speaker 3: AI front, where the buzz seems to be a little
Speaker 3: bit less than what we're hearing in the United States.
Speaker 3: And joining us now for a look at baido is
Speaker 3: Jumping Huang, who covers technology companies for Bloomberg News. Jumping
Speaker 3: thanks very much for coming into our studios. So Bidu
Speaker 3: is competing against ten Cent and Ali Baba and others
Speaker 3: to commercialize this as far as we know, and I
Speaker 3: know we won't know for sure until we get the
Speaker 3: earnings in the coming week, but as far as we know,
Speaker 3: how well is byd monetizing AI.
Speaker 12: Right before we get deep into earning BA, I would
Speaker 12: like to know that the fundamental business for Baidu is
Speaker 12: to search advertisement and it's sort of using advertisement revenue
Speaker 12: to fund its risky projects like Erniba. So for the
Speaker 12: results we were seeing the coming week, it's essential to
Speaker 12: see if it's ever a NewView is picking up again
Speaker 12: during a very difficult time during China's economy.
Speaker 5: But back on.
Speaker 12: Learning, Yeah, it's sort of the leader, at least in
Speaker 12: the Chinese internet sphere because it's the first to launch
Speaker 12: the service to the public and it already started to
Speaker 12: charge a monthly subscription fee for a premier tier of
Speaker 12: the Arniba, which costs a dollar promounts. So monetization is
Speaker 12: kicking off, yes, but we still have to wait and
Speaker 12: see to see how big of an impact it will
Speaker 12: have to byduce top line.
Speaker 3: Now, I know that China has enforced a law to
Speaker 3: regulate this area. It's something that China perhaps is in
Speaker 3: advance over other places like the United States and Europe
Speaker 3: and others. What do we know about how tough this
Speaker 3: new law is.
Speaker 12: Yeah, so what China did is like for every generative
Speaker 12: AI service to get online to be used for Chinese
Speaker 12: users and need to get the pre approval from China's
Speaker 12: top internet regulator, the CAC, and back earlier last year,
Speaker 12: the CAC issued its first batch of approvals to Chinese
Speaker 12: tech giants, including Baidu. So we got like around that
Speaker 12: doesn't like services that was greenlight by Beijing. And that's
Speaker 12: also to say that also means that foreign services like
Speaker 12: GPT and the ones from Google and Microsoft will likely
Speaker 12: never be available within China's internet. So we're sort of
Speaker 12: like seeing yet another episode of the parannel universe of
Speaker 12: the China Internet. Versus the global Internet.
Speaker 3: And how different is the approach of Chinese chatbot compared
Speaker 3: to those in the West, particularly in light of the
Speaker 3: overhang of the legislation that's in place.
Speaker 12: The Traine spot will like actually do a lot of
Speaker 12: censorship to prevent some questionable answers from the bots. Whenever
Speaker 12: you touch upon politics or human rights or actually if
Speaker 12: you're trying to type the name of Chinese president, in
Speaker 12: many of the Chinese spots, they won't even let you
Speaker 12: to continue the conversation. So I think data is one thing.
Speaker 12: When we talk about whether it's like training data or
Speaker 12: like the output data, it's sort of filtered and self censored.
Speaker 12: That could have a negative impact on the effectiveness of
Speaker 12: the Chinese spots.
Speaker 3: And we might think that the search leader in China
Speaker 3: would have almost a step ahead or a leading start
Speaker 3: against other companies. But I understand that Chinese companies are
Speaker 3: kind of of well armed with ample CAPEX built into
Speaker 3: the spending model for this year. Are we expecting to
Speaker 3: see a lot of money spent on this?
Speaker 12: Yeah, Actually, it's quite funny. The way it's calling China
Speaker 12: is a wall of one hundred models, meaning like whether
Speaker 12: it's like tech giants or startups there, they're trying to
Speaker 12: build their own models instead of applications. Because in the West,
Speaker 12: GPT is a clear winner, and in China, like not
Speaker 12: everyone's buying by do well be the Chinese version of
Speaker 12: open Ai. Yet, so venture capitalists are trying to fund
Speaker 12: a lot of like rival models and for robbing THEE
Speaker 12: is trying to argue, hey, let's stop building model because
Speaker 12: it's a waste of resources. Let's try build applications on
Speaker 12: top of learning.
Speaker 3: And if we were to set aside generative intelligence and
Speaker 3: this push on developing a chatbot, how does Buyd's earnings
Speaker 3: look otherwise?
Speaker 12: Yeah, that goes back to my first point about advertising.
Speaker 12: So in advertising, we know it is closely tracked with
Speaker 12: China's macro economy, which is not in a good shape
Speaker 12: because it's dealing with a couple of fundamental problems like deflation, use, unemployment,
Speaker 12: and a shrinking population. And for bay Do, it's the
Speaker 12: bread and butter of its ad revenue comes from the
Speaker 12: search revenue, and traditionally automobile makers and travel agencies will
Speaker 12: be a big spender in search ads. It would be
Speaker 12: great if the company provide us any breakdown or color
Speaker 12: about who's spending more in terms of search ad and
Speaker 12: who's spending less, so we will get a better idea
Speaker 12: of where the Chinese economy is going.
Speaker 3: Japping, thanks so much for joining us. Chapping Huang, who
Speaker 3: covers technology companies for Bloomberg News. I'm Brian Curtis along
Speaker 3: with Doug Christner. You can catch us every weekday here
Speaker 3: for or Bloomberg day Break Asia, beginning at nine am
Speaker 3: in Hong Kong and six pm on Wall Street.
Speaker 1: Tom thank you, Brian, and that does it for this
Speaker 1: edition of Bloomberg day Break Weekend. Join us again Monday
Speaker 1: morning at five am Wall Street time for the latest
Speaker 1: on the market's overseas and the news you need to
Speaker 1: start your day. I'm Tom Busby. Stay with us. Top
Speaker 1: stories and global business headlines are coming up right now.