Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg day Break Weekend, our global look at
Speaker 2: the top stories in the coming week from our Daybreak
Speaker 2: anchors all around the world. Straight Ahead on the program,
Speaker 2: look ahead to earnings from chip giant Nvidia, along with
Speaker 2: some of the biggest US retailers. I'm John Tucker in
Speaker 2: New York.
Speaker 3: I'm Caroline Hebge here in London, where we're looking at
Speaker 3: the upcoming earnings test for Europe's low cost airlines.
Speaker 4: I'm Dog Krisner looking at whether Japan's economy will show
Speaker 4: improvement in the first quarter.
Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
Speaker 1: eleven three year, New York, Bloomberg ninety nine to one, Washington, DC,
Speaker 1: Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Syrias
Speaker 1: XM one twenty one, and around the world on Bloomberg
Speaker 1: Radio dot Com and the Bloomberg Business app.
Speaker 2: And good day to everybody. I'm John Tucker. Let's start
Speaker 2: today's program with the company founded in a Denny's restaurant
Speaker 2: in East San Jose, California, Wednesday, after the close of
Speaker 2: regular trading. The biggest company, in Vidia opening its books
Speaker 2: to investors. It's going to preview and walk you through
Speaker 2: all the details. We're joined by Bloomberg Technology co anchor
Speaker 2: Ed Ludlow. Ed, I got to start with a China question.
Speaker 2: Which of Nvidia's future results are going to reflect purchases
Speaker 2: from China?
Speaker 5: Nobody knows.
Speaker 2: That is the great That's why we bring you on board, Ed, That.
Speaker 6: Is the great mystery and mystique of Nvidia, because you know,
Speaker 6: for all the headlines and the discussion of what Nvidia
Speaker 6: can or cannot sell to Chinese companies, you know, with
Speaker 6: Jensen Wang alongside President Trump in China, there's a big
Speaker 6: misunderstanding of how it actually works. So like the US
Speaker 6: government will say we have approved Nvidia to sell a
Speaker 6: certain generation of chip to a certain group of Chinese companies. Great, fantastic,
Speaker 6: and Jensen one will go on stage as he's done
Speaker 6: many times in twenty twenty six so far, and say
Speaker 6: good news, guys, like we have orders from Chinese companies
Speaker 6: for the H two hundred, which is the generation of
Speaker 6: chip they're permitted to sell, really good like real orders.
Speaker 6: And so as a result of those orders, we're going
Speaker 6: to ramp up. We're going to go to our suppliers
Speaker 6: make sure that we have those chips. But nobody actually
Speaker 6: knows if China's okay with this. And you know, it's
Speaker 6: really interesting because to his credit, Gensmong has always been
Speaker 6: really consistent with me when I've discussed it with him.
Speaker 6: When they negotiate this stuff, they don't actually themselves negotiate
Speaker 6: with the Chinese government. If Chinese tech companies are allowed
Speaker 6: to buy their chips, they will, they'll place orders, and
Speaker 6: that we should infer from that means that the Chinese
Speaker 6: government said it was okay. And so the only way
Speaker 6: of knowing is if it shows up on the income statement.
Speaker 6: That's the joy of covering earnings and public companies, it's
Speaker 6: either there in black and white or it's not.
Speaker 2: Yeah, you know, it's it's kind of hard for me
Speaker 2: when I go home in the afternoon, said to pass
Speaker 2: someplace that doesn't have a data center under construction. What's
Speaker 2: the where's the growth going to come from? For in video?
Speaker 2: Is it those data centers that are popping up seemingly everywhere.
Speaker 6: Well, look, I really want to have some fun and
Speaker 6: make this like just digestible for the audience. All you
Speaker 6: need to know is that wherever it's coming from, the
Speaker 6: video numbers are really big. You know this story. You
Speaker 6: mentioned Denny's right in April nineteen ninety three. When this
Speaker 6: company was found in Denny's, I was less than a
Speaker 6: year and for most of the company's initial history it
Speaker 6: made chips that powered video games consoles and no one.
Speaker 2: Really can the GPUs work, right, Yeah, gpu.
Speaker 6: The origin of the GPPU, the graphics processing unit, is
Speaker 6: that it's very good at running multiple computations at the
Speaker 6: same time, which for the layman means when you're playing
Speaker 6: a video game, all those pixels appear on the screen.
Speaker 6: You know, that's what its origin was. Now fast forward
Speaker 6: to present day. You know they are still growing revenues
Speaker 6: at near to eighty percent year on year. You know, actually,
Speaker 6: what we'll see is revenue growth accelerate into this quarter.
Speaker 6: Their margins are at seventy five percent. Like margins at
Speaker 6: seventy five percent for a company that sells chips, it's
Speaker 6: just bonkers. It's just nuts, That's all you need to know.
Speaker 6: And they do it with massive profits and cash generation,
Speaker 6: and so in this quarter that's not changing. But here's
Speaker 6: the to answer your actual question, where does it all
Speaker 6: come from it's still the big cloud computing companies what
Speaker 6: we call hyperscalers, that account for more than fifty percent
Speaker 6: of those revenues. But that's why the timing of earnings
Speaker 6: is really interesting. You know, if you're a real nerd
Speaker 6: like me, you look at the calendar and you're like,
Speaker 6: oh wow, in video reports earnings mad twentieth. But the
Speaker 6: reason that I stress that is that all of nvda's
Speaker 6: biggest customers have already done earnings and they've told us
Speaker 6: how much they're going to spend on chips this year.
Speaker 6: So it always kind of logical, and it all results
Speaker 6: in video winning.
Speaker 2: Frankly, it's still safe to say in video pretty much
Speaker 2: as a near monopoly in this film.
Speaker 6: Yeah, well, just to make sure that we're covered and
Speaker 6: I adhere to my own and Bloomberg's high standards. A
Speaker 6: technical monopoly is where you have more than seventy percent
Speaker 6: market share. And what's happening in AI right now is
Speaker 6: a very big shift from a period of time where
Speaker 6: all of the computers, and we're talking about computers right GPUs, clusters,
Speaker 6: data centers, what you're talking about is absolutely ginormous computers.
Speaker 6: Until this point, what those computers were largely doing was
Speaker 6: training the models, taking really vast volumes of data and
Speaker 6: training models on that data. Now people are using them.
Speaker 6: They're running the models either through prompts that generate a
Speaker 6: text response, it can be an image response. That's what
Speaker 6: we call inference. And when we get to that in
Speaker 6: Prince phase and video looks over its shoulder a little
Speaker 6: bit more because there are more custom silicon. Different car
Speaker 6: companies have their own chips. There are other chips on
Speaker 6: the market that would claim to be better than in
Speaker 6: videos in that sense, but there's not yet any evidence
Speaker 6: that they've sort of had their market dominance chipped away
Speaker 6: at by any of these would bees.
Speaker 2: You're going to pour over those earnings as they come
Speaker 2: across Wednesday after the close of regular trading. All right,
Speaker 2: thanks to Bloomberg Technology co anchor Ed Ludlow, Let's take
Speaker 2: a look now at some of the stocks making news
Speaker 2: in the week ahead. I'm John Tucker along with Isabel Lee,
Speaker 2: the Bloomberg Cross Asset reporter. The parade of earnings continues,
Speaker 2: and we're going to start with the biggest retailer in
Speaker 2: the world, Walmart. What's the expectation there?
Speaker 7: Walmart ticker WMT earnings will be on May twenty. First,
Speaker 7: that's a Thursday, which I checked right before we came
Speaker 7: on because you said we had to know the day.
Speaker 8: It's Thursday, seven am.
Speaker 7: ET earnings call is eight am, so early wake up
Speaker 7: if you really want to know more about Walmart revenue expected.
Speaker 7: The consensus estimates is seven hundred and forty eight billion dollars.
Speaker 7: Adjust the diluted EPs two dollars and niney three cents
Speaker 7: and deluted EPs two dollars and ninety three cents. So
Speaker 7: I could bore you with the numbers, but key themes
Speaker 7: to watch definitely market share gains. We know Walmart is
Speaker 7: positioned to benefit from its value and convenience proposition with
Speaker 7: sustained e commerce momentum.
Speaker 8: Maybe not in New York. I really can't relate whenever, Yeah, you.
Speaker 2: Know, I would love to go to I've never been
Speaker 2: to one.
Speaker 8: Oh my gosh, they're not around here.
Speaker 7: I think I may have been to one, or maybe.
Speaker 2: I'm making it up, but which makes us more than
Speaker 2: qualified to talk about.
Speaker 7: It's a once in a lifetime thing for me. I
Speaker 7: would love to go to. You and I can go
Speaker 7: on a field trip there we.
Speaker 2: Go, We can expense. It Now, when I talk about Walmart,
Speaker 2: I said that the world's largest retailer, but it's also
Speaker 2: the world's largest grocery chain too.
Speaker 8: Is a lot of people shop there.
Speaker 7: So according to Jennifer bartist Huss of Bloomberg Intelligence, she's
Speaker 7: going to be looking at online profitability. They're going to
Speaker 7: see whether e commerce margins have improved. Same Star sales
Speaker 7: Ana wealet revenue gains of four to five percent are anticipated,
Speaker 7: And of course you're going to see consumer health.
Speaker 8: I mean we have all heard this.
Speaker 2: Yeah, this is kind of a bell weather in terms
Speaker 2: of economic performance for do I dare say the lower
Speaker 2: end consumer.
Speaker 7: Yes, so you're going to see that. And we've heard
Speaker 7: time and again and all the radio shows the K
Speaker 7: shaped economy. I just read again a note today that
Speaker 7: travel is going to see heightened K shape economy. And
Speaker 7: I thought, obviously, I mean, the higher income will be
Speaker 7: in private jets and I will be in economy.
Speaker 8: You know, So.
Speaker 2: Okay, let's move on. This is one store I have
Speaker 2: been in, actually put an Anderson window there. It's expensive,
Speaker 2: but I'm talking home depot. One of the things I'm
Speaker 2: seeing more and more at home depot, more and more
Speaker 2: like professionals, carpenters, whatever, show up and it's not just
Speaker 2: you know, people bozos like me.
Speaker 8: So okay, Home Depot ticker is HD. You are not
Speaker 8: a bozo.
Speaker 7: But I think home Depot is the kind of place
Speaker 7: that you're welcome on. I think it's the kind of
Speaker 7: place that you just have what you If you need something,
Speaker 7: it's there Because I go to Home Depot guess for
Speaker 7: what plans?
Speaker 2: Really?
Speaker 7: Yeah, they have you see, you never noticed because that's
Speaker 7: not what you need. I never noticed the carpentry because
Speaker 7: I live in the tiny New York apartment. But Home
Speaker 7: Depot is also going to report earnings May nineteen. That's
Speaker 7: a Tuesday. Oh, this is even earlier. The release will
Speaker 7: be at six am ET earning is called will be
Speaker 7: nine am, so you can have breakfast in between. Revenue
Speaker 7: expected is one hundred and seventy eight billion dollars. Adjusted
Speaker 7: diluted EPs is sixteen dollars and thirty one cents, gap
Speaker 7: diluted EPs fifteen dollars and ninety eight cents, and that's
Speaker 7: earning sixteen billions. So again key themes to watch your also,
Speaker 7: consumer confidence, I mean uncertainty, inflation and job security has really.
Speaker 7: I guess the hed people from making large home improvements.
Speaker 7: Why will you remodel your kitchen when you think you're well.
Speaker 2: The other thing is the mortgage rates and what the
Speaker 2: ten year going out, the thirty year the long bond
Speaker 2: that was hovering right around five percent with the latest
Speaker 2: economic figures, that feeds through mortgage rates home expenses one
Speaker 2: hundred percent.
Speaker 8: That's a great point.
Speaker 7: And I think another key theme to watch is we
Speaker 7: have management indicating they've learned to manage tariff, so we'll
Speaker 7: see how that plays out. I feel like tariff we
Speaker 7: kind of forgot about it. When I say forgot, like
Speaker 7: new headlines have kind of dominated the market, but it's
Speaker 7: still very alive and well.
Speaker 2: Okay, let's finish up with the last stock on your list.
Speaker 2: And I'm just hoping there's some intersection between artificial intelligence
Speaker 2: and John Deere. I mean, they're building all these data
Speaker 2: centers everywhere they are, and Deer makes stuff that you
Speaker 2: can build data with, like tractors and stuff like that.
Speaker 7: I guess, yeah, that's actually no tickers. The they have
Speaker 7: earnings also made twenty one Thursday six am. Earnings call
Speaker 7: is ten am, so you get a longer breakfast in between.
Speaker 7: Net sales is estimated to be forty one billion, total
Speaker 7: revenue forty seven billion dollars net come four point eight
Speaker 7: billion dollars, et cetera. So they're expected to post a
Speaker 7: better than expected fullier twenty twenty six results. Again, to
Speaker 7: your point, it's driven by maybe agricultural equipment makers and
Speaker 7: the and the momentum in building construction.
Speaker 2: Well, you know the farmer, you know, we call it
Speaker 2: farm again, and what's happening on next ye right now? Well, yeah, no,
Speaker 2: it's been a very difficult time, especially with the tariffs
Speaker 2: and the planting season. So you know, again dear something
Speaker 2: of a bill weather for the Yuba's economy.
Speaker 8: Yeah, tarriff.
Speaker 7: Also, you're right is a key risk and used inventory
Speaker 7: overhang because there's an elevated use tractor inventories which can
Speaker 7: continue to weigh a new equipment demand in pricing. I
Speaker 7: guess where do you store these things? They're so gigantic and.
Speaker 2: They're trust me, they're expensive too. I can imagine I
Speaker 2: know from firsthand experience. Wow, Isabelle, thank you for showing
Speaker 2: up today. Appreciate it. Isabelle Lee is our Bloomberg Cross
Speaker 2: asset reporter. Coming up on Bloomberg day Break weekend, we're
Speaker 2: going to take a look at the upcoming earnings test
Speaker 2: for Europe's low cost airlines. I'm John Tucker, and this
Speaker 2: is Bloomberg. This is Bloomberg day Break weekend to our
Speaker 2: global look ahead at the top stories for investors in
Speaker 2: the coming week. I'm John Tucker in New York. Up
Speaker 2: later in the program, we're going to look ahead to
Speaker 2: some key economic data in Japan. But first, Europe's largest
Speaker 2: low cost airlines report earnings in the coming days. And
Speaker 2: this comes against a backdrop of rising ut certainly jet
Speaker 2: fuel costs driven by the war in Iran. Let's get
Speaker 2: more now from Bloomberg Daybreak Europe anchor Caroline Hepger.
Speaker 3: John, we will get into an uncertain airline business as
Speaker 3: we approach peak travel season here in Europe. Willie Walsh,
Speaker 3: the industry veteran of the Director General of the International
Speaker 3: Air Transport Association, has worn recently that airlines can't keep
Speaker 3: absorbing the additional costs that they're seeing. The war in Iran,
Speaker 3: which began in February, has upended the industry. London's Teithow Airport,
Speaker 3: one of the major hubs in Europe reported a drop
Speaker 3: in passenger numbers in April of five point three percent
Speaker 3: from a year earlier, and that's down to six point
Speaker 3: seven million passengers. As the Middle East war has disrupted
Speaker 3: global air travel. The airport's CEO called it though a
Speaker 3: short term disruption now. Bloomberg Intelligence forecasts that the big
Speaker 3: European carriers like IAG and Air France CARELM are going
Speaker 3: to see their fuel costs go up by twenty seven
Speaker 3: percent for LIFTANND so that figure is twenty two percent
Speaker 3: for twenty twenty six, so creating a big challenge for profitability.
Speaker 3: Others cast doubt on the risk of jet fuel shortages,
Speaker 3: seeing them as an excuse to cut unprofitable flights of
Speaker 3: the low cost carriers reporting in the next week or so.
Speaker 3: Ryanair is relatively well protected by fuel hedging, but it
Speaker 3: remains exposed to potential supply disruptions and pressure on consumer spending.
Speaker 3: Easy Jet meanwhile has warned that the war in the
Speaker 3: Middle East will widen its first half loss and weigh
Speaker 3: on summer demand. Overall, investors will be watching very closely
Speaker 3: for further cuts to full year guidance for both of
Speaker 3: these airlines.
Speaker 5: Well.
Speaker 3: Joining us now is Danny Lee, Aviation and transport reporter
Speaker 3: based in Asia. Danny good to speak to you how
Speaker 3: much is air travel currently being affected by the impact
Speaker 3: of wars Well Caroline.
Speaker 5: The airline industry is grappling with a more than doubling
Speaker 5: in fuel costs and the counting of that cost is
Speaker 5: resulting in multiples of billions and higher fuel bills. And
Speaker 5: right now we've only seen a fraction of that be
Speaker 5: reported by the airline industry through at least one month
Speaker 5: of earnings that has filtered through. But it's now into
Speaker 5: the second and the third quarter where we are seeing
Speaker 5: the volatility and the surge and jet fuel costs which
Speaker 5: is absolutely wrecking airline balance sheets across the piece, and
Speaker 5: in particular, when you see airlines grappling with higher fuel costs,
Speaker 5: they are now thinking about how they can mitigate those losses,
Speaker 5: in particular having to cut the number of flights they
Speaker 5: operate because simply there are flights out there which are
Speaker 5: just not profitable. So there is a balance to be
Speaker 5: brought between operating profitably and being being generally conserved. Even
Speaker 5: how they approach this, this ongoing war we have seen
Speaker 5: stretching into almost three months now, and this is a
Speaker 5: challenge for aliens. How do they grapple with a surge
Speaker 5: and fuel costs and when they have to pass on
Speaker 5: the alans have to pass on the costs onto customers.
Speaker 5: How much are passengers willing to bear? And this is
Speaker 5: a challenge for airlines to figure out, and particularly if
Speaker 5: your low cost carrier, where you are trying to stimulate
Speaker 5: demand with lower prices, all of a sudden those prices
Speaker 5: become a lot higher.
Speaker 3: Yeah, So then what do we expect to hear from
Speaker 3: Ryan Air an easy Jet in terms of their results,
Speaker 3: because they are obviously the big low cost carriers in Europe.
Speaker 5: Yeah, easy Jet has already braced investors for bad news.
Speaker 5: So the UK low cost carrier expects a headline loss
Speaker 5: of between five hundred and forty to five hundred and
Speaker 5: sixty million pounds. It tends to be the weaker period,
Speaker 5: those first six months of the year, and it's the
Speaker 5: earnings period which captures only a month of the year
Speaker 5: round war. But so far the airline says it has
Speaker 5: added twenty five million pounds to its fuel bill. So
Speaker 5: as volatility in Jeff does settle down a little bit,
Speaker 5: it's still going to be more than counting the costs.
Speaker 5: That doubling of costs of pressure is only going to
Speaker 5: be felt in the later quarters. And I think it's
Speaker 5: that kind of clarity from CEO Kent and Javis which
Speaker 5: we'll be able to understand just what impact the Iran
Speaker 5: war is having on the likes of the locals Carricer
Speaker 5: and easy Jet in particular, because they just cannot pass
Speaker 5: on the full amount of higher jet field costs on
Speaker 5: to price sensitive passengers. So I think the key question
Speaker 5: is how much is that down arrow story going to
Speaker 5: extend into its kind of forecasts in future and how
Speaker 5: will it be able to recoup as much of the
Speaker 5: fares as it can pay airlines and not able to
Speaker 5: do it so much in the near term, but it's
Speaker 5: towards the later end of view that they will be
Speaker 5: able to. As for Ryan, it will post its for
Speaker 5: year earnings and it has already guided towards very healthy
Speaker 5: profit architects of two point three billion euro But Riina
Speaker 5: has been cautious in the large about its full year
Speaker 5: targets and whether its fiscal year ahead will change materially
Speaker 5: in terms of how it's thinking about demand, the amount
Speaker 5: of flight to operate and even being able to carry
Speaker 5: as mess and many passengers that can. However, just like
Speaker 5: with easy Jet Rhine, they may well be beneficiaries from
Speaker 5: the war in as much as the fact that passengers
Speaker 5: may not choose to fly long haul because of the
Speaker 5: costs and because of various other risk factors and may
Speaker 5: stick to Europe. So this could still be an upside
Speaker 5: momentum when people think about booking their travels this summer
Speaker 5: and beyond.
Speaker 3: Yes, I think that's really interesting. I mean, consumers in
Speaker 3: many parts of the world are under a lot of pressure,
Speaker 3: aren't they. So what do you think the airlines are
Speaker 3: going to say about summer bookings? As you know, consumers
Speaker 3: are facing her petrol prices inflation affecting lots of goods
Speaker 3: that they might be buying, including holidays.
Speaker 5: Well, the airline industry by and large has seen that
Speaker 5: level of demand keep up with pace, and so airlines
Speaker 5: are seeing booking levels largely about the same. However, easy
Speaker 5: Jet has worn that the conflict situation has resulted in
Speaker 5: a kind of denting of booking's momentum, So they are
Speaker 5: seeing a little bit of a hit easy Jet, And
Speaker 5: I think the question is does that continue, so that
Speaker 5: would be very key for the CEO Kenson Javis to
Speaker 5: spell out. But also that kind of elasticity really the
Speaker 5: ability for customers to be willing to pay more off
Speaker 5: for airfas because ultimately the higher oil prices doesn't just
Speaker 5: affect airfares, It affects a whole facet of the economy
Speaker 5: and for households from goods to services, particularly into the
Speaker 5: shopping baskets, So that extra cost is coming everywhere, and
Speaker 5: I think people will be thinking about what do they
Speaker 5: prioritize in spending in the near term.
Speaker 3: What is the state of jet fuel supplies? Are the
Speaker 3: shortages real? Are they particularly affecting Europe? I know where
Speaker 3: you are in Asia, it's been a very pointed issue.
Speaker 5: Yeah, the jet fuel shortage is still a live and
Speaker 5: real issue. We've heard a lot from airlines talking about
Speaker 5: being covered in jet fuel needs for March, April, May
Speaker 5: into June, but there is limited visibility and given the
Speaker 5: Straits of hor Moos is still largely blocked to an
Speaker 5: extent a pre key critical waterway. You know, there's been
Speaker 5: a lot of scrambling to find all terms of sources,
Speaker 5: particularly from the US. We haven't really heard too much
Speaker 5: more in terms of deep concerns that airlines have we
Speaker 5: already have seen out and start to cut schedules just
Speaker 5: to make sure that where they're there are more challenged
Speaker 5: airports where fuel supply maybe a question, they will focus
Speaker 5: on a higher priority bookings and airports where there is
Speaker 5: bigger business. I don't think we've seen too much more
Speaker 5: in terms of shortage concerns out there, but as we
Speaker 5: get into the peak summer season that dynamic may start
Speaker 5: to change a little bit more. But the Europe and
Speaker 5: Asia are the big areas to watch when it comes
Speaker 5: to fuel availability because of the reliance of the imports
Speaker 5: of jet fuel.
Speaker 3: What about the cost of flying? We know that consumers
Speaker 3: are thinking about this. If you look at surveys of consumers,
Speaker 3: what are we actually seeing in terms of ticket prices?
Speaker 5: Well, ticket prices are going up by and large, and
Speaker 5: some industry surveys point to a doubling of airfares and
Speaker 5: even in the recent months so into May and June
Speaker 5: that fair airfare is about fifty sent higher then from
Speaker 5: then last year. Because of what we have seen with
Speaker 5: the around more impact on jet fuel prices, on the
Speaker 5: disruption in demand, because of the impact in the Middle East,
Speaker 5: so there is seeming a tendency that airfares will stay
Speaker 5: higher for longer. Not great, but at the same time,
Speaker 5: airlines still feel fairly optimistic in the near to longer
Speaker 5: term about or midterm about passengers still wanting to travel,
Speaker 5: that level of demand out there, and so therefore we
Speaker 5: are still seeing airlines looking at expansion, and so therefore
Speaker 5: that level of expansion will feed into stimulating more bookings. However,
Speaker 5: there is still that challenge of filling those flights at
Speaker 5: those relatively higher prices, and I think airlines are still
Speaker 5: going to be grappling with that level of price sensitivity overall,
Speaker 5: because at some point and passengers will say we're not
Speaker 5: going to be paying this price, and whether they try
Speaker 5: to look for a cheaper alternative or just not fly
Speaker 5: at all or delay their travel. It remains a big question.
Speaker 5: As we move into the latter part of a year.
Speaker 3: What do you think might come out of this energy
Speaker 3: kind of impact. Do you think there'll be fewer airlines,
Speaker 3: fewer routes or is that too simplistic.
Speaker 5: There may well be a consolidation. We are already seeing
Speaker 5: consolidation that has been the case pre war, particularly in Europe,
Speaker 5: Asia and in the US. But as the cost of
Speaker 5: offline becomes more expensive for airlines, we have already seen
Speaker 5: the likes of Spirit airlines go down. Will there be others.
Speaker 5: It's still too early to tell to see which airlines
Speaker 5: may not survive at this stage, but there is a
Speaker 5: very much concerted effort to see airlines which have a
Speaker 5: better war chest, who are better capitalized, are looking at
Speaker 5: taking advantage of weaker airlines, and as result we may
Speaker 5: see consolidation, we may see some trimming as a result.
Speaker 5: But I think airlines overall, where they have the opportunity
Speaker 5: to make money and it still does and they can
Speaker 5: have that overall connectivity within their network of flights, they
Speaker 5: will all stick around and overall that level of competition
Speaker 5: will become even more intense as their stronger airlines look
Speaker 5: to become even stronger.
Speaker 3: Danny, very interesting, Thank you so much for your time.
Speaker 3: Danly Lee is aviation and transport reporter here at Bloomberg
Speaker 3: base in Asia. My thanks to him, and of course
Speaker 3: we'll have more coverage of Ryanair's results to you on
Speaker 3: the eighteenth of May and Easyjets earnings on the twenty
Speaker 3: first of May. On Bloomberg Radio and across our platforms.
Speaker 3: I'm Caroline Hebger here in London. You can catch us
Speaker 3: every weekday morning for Bloomberg Daybreak you at beginning at
Speaker 3: six am in London. That's one am on Wall Street.
Speaker 2: John all right, thanks Caroline, and coming up on Bloomberg
Speaker 2: Daybreak Weekend. I'll look it here into a GDP reading
Speaker 2: for Japan. I'm John Tucker, and this is Bloomberg. This
Speaker 2: is Bloomberg Daybreak Weekend, our global look ahead of the
Speaker 2: top stories for investors in the coming week. I'm John
Speaker 2: Tucker in New York. We go to Japan next, where
Speaker 2: the economy is expected a rebound of the first quarter,
Speaker 2: and for more, let's go to Bloomberg's Doug Krisner, the
Speaker 2: host of the Daybreak Asia podcast.
Speaker 4: Thanks John. The Japanese economy is expected to have grown
Speaker 4: at an annual rate of around one point eight percent
Speaker 4: in the first quarter. Now, this will be a preliminary reading,
Speaker 4: and if it were to hold, that would make for
Speaker 4: a second consecutive quarter of economic expansion in Japan. To
Speaker 4: help us understand the dynamics at play, let's bring in
Speaker 4: Bloomberg's Paul Jackson. Paul is ECO GOV for Japan and Korea.
Speaker 4: He is the team leader joining from the Japanese capital.
Speaker 4: Thank you, sir for joining us. One of the things
Speaker 4: that we have to touch and I think to begin with,
Speaker 4: is the fact that the war in Iran is having
Speaker 4: a great deal of impact on the Japanese economy right now.
Speaker 4: Now we know that it began in late February, so
Speaker 4: the impact on Q one will be limited only felt
Speaker 4: for the month of March. Obviously, this is very much
Speaker 4: as oil story, which leads us to inflation even before
Speaker 4: the war. Can we agree, Paul, that Japan was dealing
Speaker 4: with much higher inflation and a stubbornly weak currency is
Speaker 4: a big reason why.
Speaker 9: I think the inflation story in Japan that's been taking
Speaker 9: place over the last three or four years has been
Speaker 9: a generational change for the nation. And then you have
Speaker 9: another war emerging starting. Obviously we had the Ukraine War
Speaker 9: few years, but the start of that launched a wave
Speaker 9: of inflation, and the latest war is going to do
Speaker 9: the same. And you know, those higher oil prices, we're
Speaker 9: already seeing the impact of that on like producer prices.
Speaker 9: We recently had data showing four point nine percent increase
Speaker 9: there has been the highest in like three or four
Speaker 9: years there, So that means inflation is going to be
Speaker 9: heating up, and the Bank of Japan has already revised
Speaker 9: up its forecasts on that expectation.
Speaker 4: So to go back to the GDP report, private consumption
Speaker 4: accounts for roughly fifty five percent of domestic output in Japan.
Speaker 4: When you talk about higher prices, do you think it's
Speaker 4: going to have held back private consumption?
Speaker 9: I think this is really one of the key points
Speaker 9: of you know, examining Japan's economy at the moment. It's
Speaker 9: it's this new concept of inflation, prices going up, and
Speaker 9: can consumers adjust to that. And we have seen gradual
Speaker 9: strengthening of consumption and as people get used to the
Speaker 9: idea that prices can go up, you don't have to
Speaker 9: put everything on hold because of a bit of inflation.
Speaker 9: But Doug, the overall picture is that that consumption part
Speaker 9: of the economy is still on the weak side. It's
Speaker 9: still on the limp side, and we're expecting probably one
Speaker 9: of the weakest readings in recent quarters on the consumption side.
Speaker 9: Still positive, but this is not the kind of figure
Speaker 9: that's showing that Japanese consumers are totally on board with inflation.
Speaker 9: They've got it and they're spending again. That is not
Speaker 9: the case at the moment.
Speaker 4: So give me a sense of how the export economy
Speaker 4: performed in Q one. Obviously, we have the US tearuffs,
Speaker 4: the auto related industries in Japan have been affected by that,
Speaker 4: and then there has been can we call it a
Speaker 4: deterioration of diplomatic relations between Tokyo and Beijing, and that
Speaker 4: may have weighed on the tourism industry.
Speaker 5: Bit.
Speaker 9: Yeah, that's right. We've got all those issues weighing on trade.
Speaker 9: So you would expect that the figures don't look too good,
Speaker 9: but actually the figures have been looking pretty good, pretty strong,
Speaker 9: and the reason for that is this global surge in
Speaker 9: demand related to AI. And I think if you look
Speaker 9: at like exports out of Japan in March, they're up
Speaker 9: nearly twelve percent and largely fueled by thirty percent growth
Speaker 9: in chip exports. And we're saying in countries all through
Speaker 9: Asia this trend, I mean, especially over in South Korea,
Speaker 9: just you know, large gains in the tech sector and
Speaker 9: chips as economies look to feed this incredible surge of demand,
Speaker 9: which you could say is kind of masking you know,
Speaker 9: larger problems lurking in the global economy and in Japan too.
Speaker 4: So what was the role that the government may have
Speaker 4: played in Q one when we think of public investment.
Speaker 4: Was there a lot of government a lot of fiscal spending.
Speaker 9: Well, I think we've got in terms of reacting to
Speaker 9: the inflation story, which is now we're going to see
Speaker 9: elevated energy prices through this war, that the government is
Speaker 9: taking action to subsidize energy, and this is going to
Speaker 9: lead to more spending. So I think, really, rather than
Speaker 9: looking at Q one, it's kind of looking ahead. This
Speaker 9: is a big question mark hanging over Takchi primary Takhi's
Speaker 9: administration because she's kind of put a marker out there
Speaker 9: saying we're not going to run Japan in the same
Speaker 9: way as before. We're not going to have extra budget
Speaker 9: after extra budget. As she tries to reassure markets that
Speaker 9: her kind of expansionary approach to fiscal policy isn't going
Speaker 9: to buckle yields, buckle the bond markets and scare everyone.
Speaker 9: The problem she's going to have is that if you
Speaker 9: subsidize energy, you are going to run out of reserve funds,
Speaker 9: which mean at some point she may have to have
Speaker 9: an early extra budget and that's going to be a
Speaker 9: very bad look for her and could spoop markets going ahead.
Speaker 9: But so far their standing firm saying no extra budget
Speaker 9: is needed. But that is a point to be watching
Speaker 9: over the coming month.
Speaker 4: So as we're looking ahead just a bit. I know
Speaker 4: that a lot of our conversation has focused on Q
Speaker 4: one GDP, but let's look ahead. Given the fact that
Speaker 4: you mentioned PPI in the latest reading was the highest
Speaker 4: I think since twenty twenty three, so that obviously everything
Speaker 4: fueling this inflation narrative. Does that necessarily mean that the
Speaker 4: Bank of Japan is at risk of being behind the
Speaker 4: curve in terms of tightening and will we necessarily see
Speaker 4: a rate hike in June.
Speaker 9: Well, we've just had Treasury Secretary at Scott Besant in Tokyo,
Speaker 9: and he's one of the leading voices out there saying
Speaker 9: that the Bank of Japan certainly is at risk of
Speaker 9: falling behind the curve. And I think the takeaway from
Speaker 9: his meeting with officials here is he kept re emphasizing
Speaker 9: the message that the fundamentals of Japan's economy are strong.
Speaker 9: So what's the takeaway from that Doug, Well, if you've
Speaker 9: got a pretty positive GDP reading, you've got American officials
Speaker 9: honing in on Japan's strong at the moment. All this
Speaker 9: points to the idea that, hey, you should raise your
Speaker 9: interest rates and you should get on with it. And
Speaker 9: I think if you look at market expectations, you will
Speaker 9: see that there's more than seventy five percent chance of
Speaker 9: a rate hike coming in June. And just recently we
Speaker 9: saw one of the more sent trist board members on
Speaker 9: the Bankagapan board saying that we should raise rates as
Speaker 9: soon as possible as long as there's no clear sign
Speaker 9: of weakness in the economy.
Speaker 4: So has that been discounted? Do you think by the
Speaker 4: currency with a end right around one point fifty eight
Speaker 4: against the green back, does the foreign exchange anticipate a
Speaker 4: move in June? And I'm wondering if the market is
Speaker 4: already adjusting to that notion, maybe more is necessary to
Speaker 4: strengthen the currency a bit.
Speaker 9: I think you're right, Doug, to point out this vulnerability.
Speaker 9: In the end, as we know, Japan has intervened, and
Speaker 9: this could be multiple times. We're looking at over sixty
Speaker 9: billion dollars worth of intervention so far. By our estimates,
Speaker 9: so they have been trying to prop up the end.
Speaker 9: So the hope would be that if you raise the
Speaker 9: interest rates in June and you give a hawky signal
Speaker 9: about potential further rates to come, that the yen bears
Speaker 9: might start to back off at that point. But I
Speaker 9: think there is a big question mark hanging over how
Speaker 9: convince investors will be that that's the direction we're heading in.
Speaker 4: Paul will leave it there, Thank you so very much,
Speaker 4: Bloomberg's Paul Jackson, team leader for Eco gov coverage for
Speaker 4: Japan and the Koreas we go to earnings news next
Speaker 4: in China, where last week twin tech leaders Ali Baba
Speaker 4: and ten Cent reported revenue well below estimate. Baba recorded
Speaker 4: its first operating law since twenty twenty one, and ten
Speaker 4: Cent reported its slowest pace of revenue growth in over
Speaker 4: a year. Even so, Ali Baba's cloud revenue growth accelerated
Speaker 4: and margins expanded. This helped a fuel optimism for returns
Speaker 4: from Baba's investments in AI. And that's where we begin
Speaker 4: our conversation with Eleanor Leung. Eleanor is head of Asia
Speaker 4: Teleco and Internet Research at CLSAY. She spoke with Bloomberg,
Speaker 4: zivonn Man, and David in Glaze.
Speaker 7: I think my first question is comparing it to market.
Speaker 7: Seems to be happier with Alibab, whether it is with
Speaker 7: ten Cent.
Speaker 10: Relatively quest for much of this year, right, yes, correct,
Speaker 10: We are entering a very exciting moment of the AI
Speaker 10: eras that moving away from model training and to actual
Speaker 10: application and to p monetization is a lot easier compared
Speaker 10: to see. That's why what get people excited is that
Speaker 10: AI cloud, which Barba, is better position for the A
Speaker 10: cloud compared to ten Cent. So I think the last
Speaker 10: port of result on Alibaba, the management given a very
Speaker 10: bullish guidance on their cloud growth. So the external cloud
Speaker 10: revenue already as to forty percent year neargirl in the
Speaker 10: last quarter. They expect that we're further a salt rate
Speaker 10: with noticeable margin expansion. They're so bullish is because they
Speaker 10: think that AI revenue is going to be able to
Speaker 10: grow at a triple digit and contribute more than fifty
Speaker 10: percent of the cloud revenue in one year's time. That
Speaker 10: is driven by MS model as a service, which ramping
Speaker 10: up very quickly in China, which including agentic applications such
Speaker 10: as coding, productivity, generative video tools for the enterprises, and
Speaker 10: they're willing to pay, and they have a chance to
Speaker 10: raise prices now because we are not just model training,
Speaker 10: which is a commoditized service, but now we are able
Speaker 10: to differentiate in capability that we're able to raise prices there.
Speaker 10: So that is driving the cloud growth. And the company
Speaker 10: expect to achieve one hundred billion USD revenue with twenty
Speaker 10: percent monjor in five years time.
Speaker 11: Run us for some of those numbers, right, I was
Speaker 11: looking through that, so they said ten billion REVENBEE in
Speaker 11: terms of AI intelligence services revenue, right, so that's by
Speaker 11: June thirty billion by the end of the year. Are
Speaker 11: those tall orders you think or do you think they'll
Speaker 11: be easy? Easily they can surpass these numbers.
Speaker 10: I think they can surpass the numbers because the demand
Speaker 10: in China is very high. The bottom actual is the
Speaker 10: chip supplies right now, is that the supply is demand
Speaker 10: is far greater compareditor. Surprise, as you know that China
Speaker 10: has a chip constraint because we cannot buy a lot
Speaker 10: of the Nvidia chip. But luckily, starting this year, the
Speaker 10: domestic chip supplies start picking up, so we expect the
Speaker 10: token in China is going to are full times this
Speaker 10: year in China, but all of a seventy percent is
Speaker 10: inference chip demand, and China is going to go one
Speaker 10: hundred percent self sufficient in domestic infance chip, so that
Speaker 10: will help to support the growth. And you're also saying
Speaker 10: that China doesn't really have a SaaS industry in the past,
Speaker 10: meaning that when these agentic applications come through, people jump
Speaker 10: onto it.
Speaker 4: That was Eleanor Leung, head of Asia Telecom and Internet
Speaker 4: Research at CLSA. I'm Doug Krissner. You can catch us
Speaker 4: weekdays for the Daybreak Asia podcast. It's available wherever you
Speaker 4: get your podcast, John.
Speaker 2: And that does it for this additional Bloomberg Daybreak weekend.
Speaker 2: Join us again Monday morning at five am Wall Street
Speaker 2: Time for the latest on markets overseas and the news
Speaker 2: you need to start your day. I'm John Tucker, and
Speaker 2: stay with us top stories, global business headlines coming up
Speaker 2: right now.