Speaker 1: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 1: top stories in the coming week from our daybreak anchors
Speaker 1: all around the world, and straight ahead on the program Inflation.
Speaker 2: I'm Tom Busby in New York.
Speaker 3: I'm Karlin Hety here in London, where we're looking ahead
Speaker 3: to Europe's insurers reporting earnings admit extreme weather.
Speaker 4: I'm Brian Curtis in Hong Kong. We look forward to
Speaker 4: Ali Baba's earnings and to see if the environment has
Speaker 4: really changed.
Speaker 5: I'm Daily Liones in Washington, where we're thinking about libor
Speaker 5: strife and its impact on President Biden.
Speaker 6: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 2: Good day to you.
Speaker 1: I'm Tom Busby, and we begin today's program with Inflation,
Speaker 1: as we await July inflation data coming out this Thursday,
Speaker 1: and joining us to talk about what do you expect
Speaker 1: and so much more. Bloomberg's Global Economics and Policy editor
Speaker 1: Michael McKee.
Speaker 2: Michael, thanks for being here.
Speaker 7: Great to be here again.
Speaker 1: Well for starters, What are we expecting to see in
Speaker 1: the July consumer Prices report?
Speaker 8: I hate to do this to you, but I'll start
Speaker 8: by being a little nerdy here. We are expecting inflation
Speaker 8: to rise because there was no inflation in July of
Speaker 8: last year. Inflation came in flat at zero percent change
Speaker 8: in July of twenty twenty two. So if we get
Speaker 8: a little inflation, and we're predicting a little inflation, it
Speaker 8: just is going to make inflation overall go up. So
Speaker 8: we're expecting at this point a two tenths percent gain
Speaker 8: for the month of July, which would push inflation up
Speaker 8: to three point two percent from three percent. Obviously, that
Speaker 8: is something the Fed is going to look through and
Speaker 8: analysts are going to look through and not think it's
Speaker 8: a may your issue.
Speaker 1: Well, the Fed last month in June three percent. That
Speaker 1: was very encouraging. Still, the Fed voted unanimously to hike
Speaker 1: ats benchmark lending grade twenty five basis points. That's after
Speaker 1: a slight pause in the previous meeting. What would it
Speaker 1: take in terms of CPI for the Fed to change
Speaker 1: up to pause again to know what would we they
Speaker 1: look for.
Speaker 8: J Powell was asked that question at his news conference
Speaker 8: after that FED decision, and basically he said it would take.
Speaker 7: Several months of a trend.
Speaker 8: In other words, if we saw inflation rising for several months,
Speaker 8: then they would start to think that we have a problem,
Speaker 8: that inflation is coming back and they need to crack
Speaker 8: down more. If inflation were a surprise to the downside
Speaker 8: this month and maybe another month, then the Fed might
Speaker 8: be inclined when they get to the September meeting to
Speaker 8: hold off again.
Speaker 1: And the next day we get producer prices.
Speaker 2: What have we seen there there?
Speaker 8: We've seen some disinflation. Producer prices have come down, particularly
Speaker 8: for energy and food and some of the more basic numbers.
Speaker 8: The issue is that we have seen oil prices rise
Speaker 8: in the last couple of weeks, and that could catch
Speaker 8: It wasn't through much of July, but that could catch
Speaker 8: on to the end of the survey and we could
Speaker 8: see end up seeing a little bit of a rise
Speaker 8: in headline producer prices. We'll be watching the core to
Speaker 8: see if progress continues to be made there. Producer prices
Speaker 8: and consumer prices are not directly linked because there are
Speaker 8: middlemen in the middle, but they give you a sort
Speaker 8: of trend idea of which way you're going.
Speaker 1: Now, you talked about energy prices. Oil prices back to
Speaker 1: eighty bucks a barrel. We haven't seen that in several months.
Speaker 1: Gasoline up twenty five cents a gallon in just the
Speaker 1: past week. So now there are legitimate factors in this,
Speaker 1: the heat O peck plus. But is there any end
Speaker 1: is demand is actually down?
Speaker 8: Yeah, the real problem has been time that we've had
Speaker 8: some refinery outages, especially down south, in part because of
Speaker 8: the heat, some unusual outages of refineries, and that's made
Speaker 8: gasoline more scarce. So the price has gone up, and
Speaker 8: there's a feeling that if and when things cool off
Speaker 8: down there. I feel lucky because we're in the Northeast
Speaker 8: where it's not been that hot, But if and when
Speaker 8: things cool off down there, then we should see the
Speaker 8: refineries come back online and prices dropped.
Speaker 7: So sometime within the next month.
Speaker 8: Now, obviously, as opek plus raises the price of the
Speaker 8: input to this oil, that's going to put some upward
Speaker 8: pressure on gasoline prices, but nothing to the extent that
Speaker 8: we have seen. And what would end up happening is
Speaker 8: gasoline prices would not rise by as much and so
Speaker 8: you'd see a down trend in headline.
Speaker 1: And again, people are not filling up like they were before.
Speaker 1: People still working from home, don't need the gas, so
Speaker 1: it's confounding to see it keep going up even though
Speaker 1: demand has leveled off.
Speaker 8: Well, it's been an unusual kind of situation. But what
Speaker 8: happened after this pandemic. Maybe people are flying more, people
Speaker 8: are ta I don't know about taking a train, but
Speaker 8: taking cruise ships, things like that.
Speaker 7: We've seen good reports from the airlines, so.
Speaker 8: Maybe it isn't a driving summer for a lot of people.
Speaker 8: And I guess with the heat that wait it is,
Speaker 8: you can understand.
Speaker 1: That well people are traveling. Part of that consumer confidence
Speaker 1: has moved higher. Fears about a recession. We just had
Speaker 1: last week Bank of America squash the previous forecast for
Speaker 1: a recession, but there are signs consumers maybe pulling back
Speaker 1: on their spending. Let me give you a couple of
Speaker 1: examples that I saw on that as Altria, the maker
Speaker 1: of Marlborough saying people are cigarettes are so expensive, they're
Speaker 1: buying discount smokes. Pepsi says, people want pepsi, but they're
Speaker 1: going to dollar stores, They're going to warehouse clubs trying
Speaker 1: to get a deal. So are we seeing that you
Speaker 1: are there signs that consumers are being more conservative.
Speaker 8: Now we're kind of getting back to spending levels and
Speaker 8: spending patterns that we saw before the pandemic. A lot
Speaker 8: of people went to the walmarts and dollar stores and
Speaker 8: things like that, trying to save money in the past
Speaker 8: on groceries, et cetera. And they're going back to that behavior.
Speaker 8: But this is all kind of what you would expect
Speaker 8: in a world that's not overstimulated by the government and
Speaker 8: that is facing higher interest rates and costs of doing business,
Speaker 8: because if it is trying to tamp down on demand,
Speaker 8: the issue becomes when it crosses some sort of line
Speaker 8: and we get to the point where people start to
Speaker 8: worry about recession and then pull back even more and
Speaker 8: we get what results in a contraction.
Speaker 1: And the clock is ticking on something that could really
Speaker 1: change that for forty million Americans. That's the looming restart
Speaker 1: of those federal student loan payments. And that's in October.
Speaker 1: That's coming up pretty quickly.
Speaker 8: That is coming quickly, and it's going to be interesting
Speaker 8: to see what happens because for a lot of people,
Speaker 8: they just use that money to spend on other things
Speaker 8: and in theory still have it.
Speaker 7: They just have to reprogram it to paying bills.
Speaker 8: But a lot of people took out other loans and
Speaker 8: use the money they were saving on their student loan
Speaker 8: bills to pay the other loans. And now they're going
Speaker 8: to have two sets of bills and one set of payments.
Speaker 8: And then there's another group that kept paying throughout the
Speaker 8: entire time period because they figured, well, it's going to
Speaker 8: come back anyway, and I should make progress on bringing
Speaker 8: down my loan, especially when they're not charging me interest.
Speaker 8: And so how that all plays out isn't going to
Speaker 8: be clear, but it isn't completely clear, but it is
Speaker 8: expected to have an impact.
Speaker 2: Now.
Speaker 8: I economists sort of extrapolate from the total number of
Speaker 8: people with loans and their average loan payment and come
Speaker 8: up with a number like a tenth or two tenths
Speaker 8: off GDP, so not a huge amount, but enough to
Speaker 8: make a difference.
Speaker 1: Well a huge amount for people in their twenties and thirties.
Speaker 1: I would think, well, let's talk a little bit more
Speaker 1: about the FED and their timeline the next meeting number
Speaker 1: twentieth right, correct, Well, what do we see between then
Speaker 1: and now that's going to influence the Fed's next decision
Speaker 1: as far as consumer spending, inflation, jobs, and more.
Speaker 8: Well, I've got the couple of jobs reports like the
Speaker 8: one we just saw, and we have another one coming
Speaker 8: up which will give us the August payrolls at the
Speaker 8: beginning of September, and then the CPI report we're talking
Speaker 8: about in another CPI report before they meet again, and
Speaker 8: we'll have one more PCE inflation report along with consumer
Speaker 8: spending at the end of August. So the Fed will
Speaker 8: have a couple of months worth of data before they
Speaker 8: meet again. And that goes back to the point I
Speaker 8: made about what Jay Poal said that they want to
Speaker 8: see a couple of months trend to have an idea
Speaker 8: of where we're really going with this. Are we seeing
Speaker 8: inflation come down and demand soften? Are we seeing incipient
Speaker 8: signs of a recession because people are pulling back a lot,
Speaker 8: or is inflation coming back? Those are the questions that
Speaker 8: they hope a lot of this data will answer.
Speaker 1: And it's not just our central bank, but in England
Speaker 1: and in the Eurozone they're dealing with very similar situations,
Speaker 1: but in a way a worse inflation problem over there.
Speaker 1: Is it influencing the US inflation or is.
Speaker 2: It the opposite? Are we helping them.
Speaker 8: At this point we are not helping Europe all that
Speaker 8: much because the dollar is strong, so their trade is
Speaker 8: not as vigorous with the US, but it does help
Speaker 8: the United States some now. Trade in this case, because
Speaker 8: we're in a post pandemic situation, is less important between
Speaker 8: the United States and these other countries than it is
Speaker 8: among those countries. The European Union trades heavily among itself,
Speaker 8: and people there have done sort of the same thing
Speaker 8: that we have in terms of cutting back on goods spending,
Speaker 8: and companies have cut back on investments and that's hurting them.
Speaker 8: Manufacturing powers like Germany in France and Italy there because
Speaker 8: their economies are struggling with the lack of manufacturing, and
Speaker 8: we've seen that in the PMI numbers, and we see
Speaker 8: that in the industrial production numbers in the UK. It's
Speaker 8: accommodation of things. It's a little bit of that but
Speaker 8: it's also the bureaucracy brought on by Brexit for trade
Speaker 8: has slowed trade and made it more expensive. They're still
Speaker 8: trying to negotiate new free trade agreements and they haven't
Speaker 8: had a lot of luck, certainly not with the United
Speaker 8: States yet, so they have the added costs from that
Speaker 8: as well. And then they've got a very strong labor
Speaker 8: market in the same way that the United States does,
Speaker 8: which also puts upward pressure on prices.
Speaker 2: Well, thank you, Michael.
Speaker 1: And that was Bloomberg's Global Economics and Policy editor Michael McKee.
Speaker 1: And coming up on Bloomberg day Break weekend, insurance companies
Speaker 1: attempt to change with climate change risk lurking.
Speaker 2: I'm Tom Busby and this is Bloomberg.
Speaker 1: This is Bloomberg day Break Weekend, our global look at
Speaker 1: the top stories in the coming week from our Daybreak
Speaker 1: anchors all around the world.
Speaker 2: Up later in our program.
Speaker 1: Earnings from Chinese e commerce giant Ali Baba and the
Speaker 1: Chinese government's role in tech in that country. But first,
Speaker 1: extreme weather gripping many parts of the world, with July
Speaker 1: likely to be announced as the world's hottest month on record.
Speaker 1: The impact on society is enormous and on the insurers
Speaker 1: who navigate climate change for more, or let's head to
Speaker 1: London and bring in Bloomberg Daybreak Europe anchor Caroline Hepgirk Tom.
Speaker 3: Europe's big insurers, from Alians to generally munich Ree and
Speaker 3: Zero Insurance, are reporting their earnings in the days ahead,
Speaker 3: but Europeans are among the least insured against certain types
Speaker 3: of extreme weather and other natural disasters, something that we've
Speaker 3: seen a lot of across the continent over the last
Speaker 3: few months. For more, I'm joined by Blomberg's Germany correspondent
Speaker 3: Oliver Crook. Oliver, great to have you with us. Extreme
Speaker 3: weather has hit Europe in the past few months in
Speaker 3: a way I think, I'm sure you'll agree that has
Speaker 3: made many people think about climate change in a totally
Speaker 3: new light. Don't you think I.
Speaker 9: Would think so? But you know, obviously, as you know,
Speaker 9: this is an exceedingly polarized issue for some people. It's hard, though,
Speaker 9: when you see the kind of trend in terms of
Speaker 9: the temperatures rising over the last century to kind of
Speaker 9: not at least pose yourself the question, particularly when you
Speaker 9: see the ways that it touches, you know, human life
Speaker 9: in all this different way. We've talked about how it
Speaker 9: touches agriculture. Sometimes it's cooking food right on.
Speaker 1: The branch you have.
Speaker 9: You know, all these rivers drying up. The Rhine is
Speaker 9: one we've talked about a lot of the most important
Speaker 9: waterway in Europe. You know that moves just tons and
Speaker 9: tons and tons down, up and down every single day,
Speaker 9: and that basically becomes unnavigable at a certain point. We've
Speaker 9: seen it in France with the nuclear react they can't
Speaker 9: draw enough water to cool off, and obviously these wildfires
Speaker 9: in Greece. So I think it's front of mine for everybody.
Speaker 9: I think the challenge that the market has is how
Speaker 9: do you price these risks and how do you think
Speaker 9: about these financially?
Speaker 10: Yeah?
Speaker 3: Absolutely, And you were speaking to someone very interesting Munich
Speaker 3: reads ernst Rauch about this, because they've got a whole
Speaker 3: climate center and they do big reporting not just on
Speaker 3: their own business, but kind of more broadly across the
Speaker 3: insurance sector. They've also Munich re itself has its earnings
Speaker 3: coming up in the days ahead. Is weather making certain
Speaker 3: things uninsurable?
Speaker 9: So this is the this is the question. I asked
Speaker 9: him if it made things uninsurable? And so he gave
Speaker 9: a sort of interesting response that he said, listen, we're
Speaker 9: an insurance company. We will ensure anything. The problem is
Speaker 9: you will not be able to afford it. And they
Speaker 9: look at a sort of simple equation about kind of
Speaker 9: the risk that is generated by kind of natural disasters,
Speaker 9: how vulnerable we know, how in what ways have you
Speaker 9: mitigated it, and the underlying value of the assets, and
Speaker 9: he says that even despite the latter two, what he's
Speaker 9: seeing across the globe is a high higher risk of
Speaker 9: basically weather related events. He says eighty to ninety percent
Speaker 9: is down to weather, and that a third of all
Speaker 9: of the losses in the first half of this year
Speaker 9: we're not down to actually a single weather event, but
Speaker 9: just more powerful storms over in the United States.
Speaker 4: Yeah.
Speaker 3: Absolutely, And the data that munich Re pulled together showing
Speaker 3: a near record year for losses due to natural disasters,
Speaker 3: so things like earthquakes in Turkey and Syria and the
Speaker 3: storms that you mentioned in the US. I mean, the
Speaker 3: numbers globally are quite staggering, aren't they.
Speaker 11: Yeah.
Speaker 9: Absolutely, I mean one hundred and ten billion dollars in
Speaker 9: the first half of the year. And really, again I
Speaker 9: was very interested to speak to him, because you know,
Speaker 9: in a topic that is polarized for many people, it's
Speaker 9: their business to understand what is going on in the
Speaker 9: world and to try to appraise that risk. So I
Speaker 9: asked him about kind of how he really thinks about
Speaker 9: climate change and how many you know, how much are
Speaker 9: these losses can we say are really attributable to climate change?
Speaker 12: We observe up what of losses from weather related events
Speaker 12: in many parts of the world, and with many weather
Speaker 12: related perils, depending on the region, it is flooding, it
Speaker 12: can be what's called these convective storms of severe thunderstorms
Speaker 12: in the United States, or wildfires in some parts of
Speaker 12: the world. So with this upward trend, we of course
Speaker 12: as a risk management company, we need to understand what
Speaker 12: are the drivers of this trend, and the first element
Speaker 12: of these drivers are socioeconomic factors, so increasing wealth and
Speaker 12: population and inflation of course today plays a major role
Speaker 12: in this as well. However, even after adjusting for inflation
Speaker 12: and wells, we do see in some regions upward trends
Speaker 12: with respect to losses which cannot be explained by these
Speaker 12: socio economic factors. And here we analyze and also meteorological data.
Speaker 12: We collaborate with scientific organizations in order to understand whether
Speaker 12: there is a link between increasingly severe weathers it's understorms
Speaker 12: of flooding, extreme rainfalls and others and the losses we observe.
Speaker 12: And the outcome is as of today, is that we
Speaker 12: have strong indications, not a scientific proof, but strong indications
Speaker 12: that part of the increase of losses is already driven
Speaker 12: by changing weather patterns, and they are by themselves driven
Speaker 12: by climate change, and.
Speaker 9: Sort of regardless of the cause. If this is just
Speaker 9: proportionally and numerically going up, this obviously is going to
Speaker 9: bear on the price of ensuring things. Can you talk
Speaker 9: to me about how much more expensive insurance is going
Speaker 9: to get as a result of these changes.
Speaker 13: Well, first of all, if the has a component of
Speaker 13: our analysis, so the probability of severe flooding or severe
Speaker 13: other weather events is increasing and or the intensity of
Speaker 13: these events, then yes, the overall risk increases.
Speaker 11: And that drives the premium.
Speaker 12: Now the question is, of course, by how much, and
Speaker 12: there is no simple answer, especially no uniform answer for
Speaker 12: all parts of the gold and all parents.
Speaker 9: I also want to talk to you about the risk
Speaker 9: not just of insurance prices going up, but basically parts
Speaker 9: of the world becoming unensurable. We hear about this in Florida,
Speaker 9: you know, California possibly a risk. Now we see kind
Speaker 9: of weather patterns changing and how hot it's getting across Europe.
Speaker 9: What's the risk for the uninsurable portions of the world
Speaker 9: where you just cannot make an assessment or it's just
Speaker 9: too risky.
Speaker 11: The challenge is much more if we look at the
Speaker 11: need to adjust our prices in line with increasing risks,
Speaker 11: and here climate change drives up the risks and as
Speaker 11: a consequent drives up the risk premium.
Speaker 3: So that was ernsw Ralph ahead of Corporate Climate Center
Speaker 3: at munich RE speaking to you Oliver. As we think
Speaker 3: then about you know, the financial consequences of this, how
Speaker 3: do we think about then the earnings that we're going
Speaker 3: to get from munich Re Zero Insurance, General ARLI and
Speaker 3: the other big insurance names across Europe.
Speaker 9: Yeah, so listen, I'll talk about Alians because they're sort
Speaker 9: of the biggest and they would released over on Thursday,
Speaker 9: and so they you know, they've actually have had a
Speaker 9: pretty good run. And what's interesting is because Alliance also
Speaker 9: has this massive asset management unit, but actually this year
Speaker 9: it's the insurance that's done the heavy lifting. Their insurance
Speaker 9: side of the business has done very well and they
Speaker 9: may even raise you know, operating profit outlook, and so
Speaker 9: things are looking very solid in the insurance sector. They've
Speaker 9: actually you know, they I don't know how big natural
Speaker 9: catastrophe will be in terms of their bottom line. We
Speaker 9: may see some more claims in Italy and Germany in
Speaker 9: the second quarter due to the floods, but they did
Speaker 9: not have huge natural catastrophe expenses over in the first quarter,
Speaker 9: and that is in part, perhaps, Caroline, something that we
Speaker 9: I'm sure we will talk about is the lack of
Speaker 9: insurance for natural disasters here in Europe. I was actually
Speaker 9: astounded by some of these numbers.
Speaker 14: Yeah.
Speaker 3: Absolutely, This, this idea of the underinsured in Europe is
Speaker 3: a big issue, especially as you say, you've highlighted, well,
Speaker 3: the wildfare is increased, but there've been drought conditions in
Speaker 3: Spain as well as along the River Rhine.
Speaker 7: Yeah.
Speaker 9: Absolutely. And when you look at a sort of global
Speaker 9: breakdown of kind of what is uninsured Asia Pacific, fifty
Speaker 9: seven percent of the direct losses are uninsured North America.
Speaker 9: That's only twenty four percent globally. On average, it's sixty
Speaker 9: one percent. In Europe it's almost ninety percent. So I
Speaker 9: mean that that to me came as a you know,
Speaker 9: as a real shock. You think of a kind of
Speaker 9: more developed nations and richer nations are kind of more
Speaker 9: risk averse and more willing to ensure certain assets, and
Speaker 9: I was really stunned to discover that that's the sort
Speaker 9: of European figure here.
Speaker 3: Absolutely, Oliver, thank you so much for joining me. We
Speaker 3: look ahead then and await the earnings in the next
Speaker 3: few days from the big insurance names hit in Europe
Speaker 3: Alians generally Munich, Re's Insurance and others, so there'll be
Speaker 3: a lot of focus on those results. Thank you so
Speaker 3: much for being with me. I'm Caroline Hepga here in London.
Speaker 3: You can catch us every weekday morning for we've been
Speaker 3: bag Daybreak. You're at the beginning at six am in London.
Speaker 3: That's one am on Wall Street.
Speaker 2: John.
Speaker 1: Thank you, Caroline, and coming up on Bloomberg day Break weekend,
Speaker 1: Ali Baba earnings and the Chinese tech industry.
Speaker 2: I'm Tom Busby. This is Bloomberg.
Speaker 1: I'm Tom Busby in New York with your global look
Speaker 1: ahead at the top stories for investors in the coming week.
Speaker 1: What's next for tech companies in China following the end
Speaker 1: of a government crackdown. Chinese e commerce giant Ali Baba
Speaker 1: among those in focus with an earnings report on tap
Speaker 1: and for more, Let's go to Hong Kong and Bloomberg
Speaker 1: Daybreak Asia host Brian Curtis.
Speaker 4: Tom Alibaba reports earnings in the coming week, and the
Speaker 4: results will be arriving at a time that the landscape
Speaker 4: is changing fast, especially for big platform companies in China.
Speaker 4: Ali Baba, May Twan and Peers make it an extra
Speaker 4: subsidy through twenty twenty four to speed up their business expansion.
Speaker 4: That's a step that Paul, as you make, is hope
Speaker 4: will speed up consumption in the country. China has been
Speaker 4: making a number of efforts of late to stimulate the economy,
Speaker 4: and consumption is a very big part of that story.
Speaker 4: Joining us now is Sarah Jung, Bloomberg China Technology Reporter.
Speaker 4: So Sarah, let's talk about the earnings first, and then
Speaker 4: we'll take a look at the broader environment and see
Speaker 4: how that is changing. What are we expecting in terms
Speaker 4: of sales and profits from these earnings in this latest quarter.
Speaker 10: We're expecting to see some of the recovery that you
Speaker 10: just talked about being reflected. Obviously, consumption has been more
Speaker 10: uneven than expected following China's reopening, but there have been
Speaker 10: new revenue growth factors that have been, you know, injecting
Speaker 10: momentum in the various businesses. And that's because Ali Baba
Speaker 10: announced its historic reshuffling with a division into six individual
Speaker 10: business units earlier this year, and so that's given each
Speaker 10: of the units a chance to actually seek independent funding
Speaker 10: or public listings. So that in addition to some of
Speaker 10: the latest leadership announcements and reshufflings that we've seen, are
Speaker 10: expected to bring more optimism for investors.
Speaker 4: We understand that the consumption boom is lagging a little
Speaker 4: bit compared to what was expected. Is that the case
Speaker 4: at that end, at the sort of e commerce segment
Speaker 4: that Alibaba represents, or is it right across the board.
Speaker 10: Yeah, we're expecting that to be reflected in terms of
Speaker 10: year on year growth, especially for the bread and butter
Speaker 10: business Talba and t Mal, and also in the international business.
Speaker 10: There's going to be some headwinds from just the broader
Speaker 10: macroeconomic environment for Ali Express, Lozada and Traniol, which is
Speaker 10: their businesses in Europe and Southeast Asia.
Speaker 4: What about the cloud business is that something that will
Speaker 4: stand out in terms of the rest of the earnings.
Speaker 10: So Cloud is very interesting because we saw that the CEO,
Speaker 10: Daniel Jong, he's stepping down and he's going to focus
Speaker 10: just on heading up Cloud. Cloud is expected to be,
Speaker 10: it was expected to be a pillar of growth for
Speaker 10: Ali Baba in the years to come. It's been you know,
Speaker 10: lost making so far, and it's been losing a bit
Speaker 10: of market share to some of the government state backed
Speaker 10: cloud providers. But because of the energy and the frenzy
Speaker 10: and excitement around AI in China's market right now, that
Speaker 10: is something that we're looking to see Ali Cloud now
Speaker 10: that it's separate and has its own operating environment where
Speaker 10: Daniel John can focus entirely on Cloud to give it
Speaker 10: some new energy.
Speaker 4: So at the top now, with Joe's high there, it
Speaker 4: seems like it's coincided with his being named to that
Speaker 4: position and Daniel Jong being moved to the Cloud exclusively
Speaker 4: that the stock has kind of caught fire. I'm not
Speaker 4: sure the two are connected, but if you could say
Speaker 4: a couple of words about what it means to have
Speaker 4: Joe's High back in that position.
Speaker 10: Sure, So Joe's High. He's a known entity. He's been
Speaker 10: with Alibaba since the very beginning. Having him there as
Speaker 10: a reliable, you know, person at the helm of the company,
Speaker 10: that's something that investors are excited about. Same with the
Speaker 10: new CEO, Eddie Wu. He's also been a longtime veteran
Speaker 10: of the company. So these are people who have been
Speaker 10: with Jack Maw, who's sort of still the spiritual leader
Speaker 10: of the company from the very beginning. Again, known entities,
Speaker 10: known quantities who have been heading up some of the
Speaker 10: major units since the beginning. Eddie Wu, for example, he
Speaker 10: was the chief architect of some of Ali Baba's flagship
Speaker 10: products like Taba and t mal. So we know that
Speaker 10: we know that it's a positive.
Speaker 6: It's a positive.
Speaker 10: That's right.
Speaker 4: You mentioned Jack Maw is still the spiritual leader of
Speaker 4: Ali Baba, and I'm just curious about to what extent
Speaker 4: he's still involved in the running of the company.
Speaker 10: It's interesting because earlier this year when he reappeared on campus,
Speaker 10: employees were so excited to see him, and that sort
Speaker 10: of speaks to the mantra and maxims that he has
Speaker 10: instilled in the company's culture from the beginning. Joe Zai
Speaker 10: and Eddie Woo, like I mentioned, they both embody that
Speaker 10: as well. He is not directly involved in the day
Speaker 10: to day operations from what we know anymore, given the
Speaker 10: regulatory scrutiny and the tech crackdown over the last two years,
Speaker 10: he's really been stepping back from the limelight. And there
Speaker 10: was a lot of speculation before about whether or not
Speaker 10: he could return to China. We did see him back
Speaker 10: in Honzo, so that's another positive sign from the regulatory side.
Speaker 4: Now, I'm curious about the overall environment. We've had a
Speaker 4: little bit of a change in thinking in China, I
Speaker 4: think from policymakers, even to the extent that in the
Speaker 4: property market, what they've been saying now is they've sort
Speaker 4: of not repeated the old mantra that houses are for
Speaker 4: living in, not for investing in. I wonder if the
Speaker 4: attitude has changed for the big technology companies, the big
Speaker 4: platform companies. It seems like ever since the ant IPO
Speaker 4: was pulled that big was bad and they wanted to
Speaker 4: support smaller companies, and I wonder whether or not that
Speaker 4: has changed right exactly.
Speaker 10: It's really interesting we're seeing more and more signs from
Speaker 10: regulators that they want the big tech companies Tencent, Ali
Speaker 10: Baba by doing the rest to help them resuscitate what's
Speaker 10: really a flagging economy at the moment.
Speaker 4: So so big is okay.
Speaker 10: Now, we won't see them return to sort of the
Speaker 10: swaggering days of before COVID zero, before the tech crackdown
Speaker 10: in but we will see them slightly be unshackled to
Speaker 10: be able to pursue sort of tech sectors that Beijing
Speaker 10: sees as its primary priorities strategically, So for example, in AI, cloud, computing, chips,
Speaker 10: these are all strategic areas they need to compete with
Speaker 10: the US, and we're going to see them be able
Speaker 10: to move forward in those areas.
Speaker 4: In the past, they snapped up a lot of smaller companies,
Speaker 4: startups and really used the energy there. And you know,
Speaker 4: the push in new technology areas is that likely to continue.
Speaker 10: That it seems like is still being rained in to
Speaker 10: some extent, So we're not going to see them be
Speaker 10: the main drivers of venture capital and investment. So a
Speaker 10: lot of the startups we're talking to now they're not
Speaker 10: really looking for investments from Tencent and some of the
Speaker 10: big giants anymore. Now they're more focused on just like
Speaker 10: smaller level applications and working with maybe early stage kind
Speaker 10: of investors rather than trying to be acquired by the
Speaker 10: big giants.
Speaker 4: And I wonder whether or not they're as successful as
Speaker 4: they were before in attracting talent.
Speaker 10: Talent is a big problem. Like we've been sort of
Speaker 10: dancing around this issue of China's likeish economy and so
Speaker 10: youth unemployment. That's a really big issue. Another reason why
Speaker 10: Beijing wants these big tech companies to come back and
Speaker 10: revive some of that employment situation. But yeah, talent is
Speaker 10: definitely a big issue. We were seeing some layoffs from
Speaker 10: some of these companies and just a lot of anecdotes
Speaker 10: about people leaving the industry or not being able to
Speaker 10: get the same kind of bonuses that they did before.
Speaker 4: Now, we had an interesting moment recently where and wanted
Speaker 4: to buy back shares and wanted to buy back shares
Speaker 4: from all the shareholders, including the biggest one, Ali Baba,
Speaker 4: and Ali Baba chose not to sell. Now, some people
Speaker 4: interpreted that as a positive because it meant that Ali
Speaker 4: Baba wanted to retain, you know, more ownership and involvement
Speaker 4: in Ant and others might have wondered whether or not
Speaker 4: that meant that there was a little bit of difference.
Speaker 7: In the management teams. Have we been able to explore
Speaker 7: that we.
Speaker 10: Have, So I think what Ali Baba said officially is
Speaker 10: that they decided not to sell any of their stake
Speaker 10: because and is still an important strategic partner to them.
Speaker 10: And what analysts say is that actually they're really hoping that,
Speaker 10: you know, as Ant starts to come back, they're able
Speaker 10: to build up their business again they can help contribute to,
Speaker 10: for example, Ali Baba Cloud Ali Cloud's growth going forward.
Speaker 10: They have been a really big contributor to their revenue,
Speaker 10: and now that they can build themselves back up again
Speaker 10: and expand, they can again be one of the highest
Speaker 10: contributors to that cloud revenue.
Speaker 4: So we've seen Ali Baba split into six different parts,
Speaker 4: and that's it's kind of slow in rolling out. For
Speaker 4: the other big companies like ten Cent and may Twan
Speaker 4: and perhaps a few others, is it likely they'll take
Speaker 4: that path as well.
Speaker 10: Alibaba actually is relatively unique in this aspect where we've
Speaker 10: when we talk to analysts, they say that splitting into
Speaker 10: six different units allows them to unlock different kinds of
Speaker 10: business potential of these individual units. So for example, like
Speaker 10: Ali Clouds Hinau, which is a logistics arm and uh
Speaker 10: International Digital commerce, so for example al Express, Lozada. They
Speaker 10: all have business models that can be spun off relatively independently.
Speaker 10: Where it's different from a company like Tencent, which is
Speaker 10: built around we Chat, this everything app that everyone uses
Speaker 10: in China. It's a lot harder to break off parts
Speaker 10: of the Tencent, you know, business from that core ecosystem.
Speaker 10: So we're not expecting to see the same kinds of
Speaker 10: movement from competitors like Tencent.
Speaker 4: Sarah Jong, Bloomberg China Technology Reporter. I'm Brian Curtis along
Speaker 4: with Doug Christner. You can catch us every weekday here
Speaker 4: for Bloomberg day Break Asia, beginning at six am in
Speaker 4: Hong Kong and six pm on Wall Street.
Speaker 1: Tom, thank you, Brian, And coming up here on Bloomberg
Speaker 1: day Break Weekend, we go to Washington and I'll look
Speaker 1: at all the union activity lately and what this means
Speaker 1: for the presidential race. I'm Tom Busby. This is Bloomberg.
Speaker 1: This is Bloomberg day Break Weekend, our global look ahead
Speaker 1: at the top stories for investors in the coming week,
Speaker 1: I'm Tom Busby in New York labor and politics and
Speaker 1: focus as we head to the twenty twenty four presidential election.
Speaker 1: For more, let's head to our Bloomberg ninety nine one
Speaker 1: newsroom in Washington and Bloomberg Sound On. Co host Kaylee lines.
Speaker 5: Tom, that's right, labor has been a hot button issue
Speaker 5: this summer. So joining me now to talk more about
Speaker 5: labor is Ian Colgran, who reports on the subject for us.
Speaker 5: You're at Bloomberg. So first of all, let's just talk
Speaker 5: about ups. This deal with the Teamsters is just a
Speaker 5: handshake deal at this point, right, Is there any chance
Speaker 5: that it's not going to be ratified.
Speaker 14: There's always a chance that a deal won't be ratified
Speaker 14: and that everybody is going to be surprised. At this point.
Speaker 14: It's looking, however, like the deal probably will get through.
Speaker 14: There was a near unanimous vote of the local chapters
Speaker 14: of the Teamsters that endorsed it. However, that doesn't mean
Speaker 14: there's not grassroots opposition to this deal, and in fact
Speaker 14: there is. Just yesterday talked to one of the leaders
Speaker 14: of one of the vote No campaigns who is just
Speaker 14: starting to ramp up the campaign and holding webinars and
Speaker 14: getting the word out on Twitter and Instagram other social media.
Speaker 14: So we'll see if some of this opposition metastasizes in
Speaker 14: the next couple of weeks as teamsters vote. But at
Speaker 14: this point it's looking fairly fairly safe to say there
Speaker 14: won't be a strike.
Speaker 5: Maybe we won't see a strike in that case, but
Speaker 5: what's the likelihood we will see more strikes this summer
Speaker 5: or later on this year. I'm thinking of the auto
Speaker 5: workers primarily here.
Speaker 14: Strikes, as we've seen over the past few months, are
Speaker 14: events that tend to build on one another. You see
Speaker 14: all of the action going on in Hollywood right now.
Speaker 14: There is certainly a possibility that the auto workers could
Speaker 14: strike when their contract expires in September. It's something that
Speaker 14: they have not been shy to do in the past.
Speaker 14: In twenty nineteen, they went on a six week strike,
Speaker 14: which was the longest strike ever for the autoworker's longest
Speaker 14: auto strike in the history of the United States. And
Speaker 14: now they have a fiery new leader who has promised
Speaker 14: to really take the companies to task, and that will
Speaker 14: be a whole different dynamic here. As we get closer
Speaker 14: to the drop dead day for negotiation.
Speaker 5: Speaking of leaders Ian, how does all this play for
Speaker 5: President Biden, who has tried very hard to bill himself
Speaker 5: as a pro labor president.
Speaker 14: All of these strikes put President Biden in a tough
Speaker 14: spot because it essentially forces him to choose between the
Speaker 14: union and the company, and that's not a choice that
Speaker 14: he wants to make under any circumstance. He's somebody who
Speaker 14: has also tried very hard to champion manufacturing and American
Speaker 14: innovation under his administration. And it's just sort of a
Speaker 14: just sort of a no win situation for the president
Speaker 14: if he is to intervene in some of these strikes,
Speaker 14: because he's going to have to make somebody really unhappy.
Speaker 14: And in the case of the rail deal late last year,
Speaker 14: he did have to make a lot of union members
Speaker 14: really unhappy by forcing a deal through Congress to avoid
Speaker 14: a potentially crippling strike for the US suppled chain.
Speaker 5: So how do you think this will play in the
Speaker 5: twenty twenty four race. Considering he's not just sitting president,
Speaker 5: he's seeking reelection, He's.
Speaker 14: Certainly risks alienating his base if he angers too many
Speaker 14: union members by siding against them in some of these negotiations.
Speaker 14: They're going to be watching closely to thee whether his
Speaker 14: actions and his words match. It's something that no president
Speaker 14: really wants to deal with during a reelection campaign. It's
Speaker 14: a show of populist anger from the base that has
Speaker 14: very little chance of benefiting a moderate incmbent like President Vibe.
Speaker 5: Well, looking forward to your continued coverage of the labor strife.
Speaker 5: Ian Kulgrin, who reports on labor for Bloomberg, thank you
Speaker 5: so much, and Tom back to you.
Speaker 1: Thank you, Kaylee. That was Bloomberg's sound on co host
Speaker 1: Kaylee Lines, reporting from our Bloomberg ninety nine one newsroom
Speaker 1: in Washington, and you can hear sound on weekdays one
Speaker 1: to three pm on Bloomberg Radio. And that does a
Speaker 1: for this edition of Bloomberg day Break Weekend. Join us
Speaker 1: again Monday morning at five am Wall Street Time for
Speaker 1: the latest on markets.
Speaker 2: Overseas and the news you need to start your day.
Speaker 2: I'm Tom Buzby. Stay with us.
Speaker 1: Top stories and global business headlines are coming up right now.