Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Welcome to a special edition of Bloomberg Daybreak Weekend, our
Speaker 2: global look at the top stories in the coming week
Speaker 2: from all of our Daybreak anchors, including Tom Busby. This
Speaker 2: is not Tom Busby, it's Tom Kean McKee out of
Speaker 2: tantrum and said, I'm only going to talk to Tom
Speaker 2: Keen about next week. It's just so so exciting. Michael
Speaker 2: McKee joins now driving all of our economic work here,
Speaker 2: of course off a blowout two hundred and seventy two
Speaker 2: thousand job statistic. Once again, it's morning in America except
Speaker 2: for inflation. Inflation is out there and to drive Daybreak
Speaker 2: forward into next week. Am I right that we have
Speaker 2: an inflation report at eight thirty in a Fed report
Speaker 2: at two pm.
Speaker 3: Yes, the Fed will be getting the inflation numbers just
Speaker 3: before they vote. However, they've probably done most of the math,
Speaker 3: and generally economists are pretty good at forecasting the price indexes,
Speaker 3: so there might be a surprise. But if there's no surprise,
Speaker 3: then not going to change anything in their outlook. They
Speaker 3: will have submitted their views on what they think is
Speaker 3: going to happen going forward, and we'll get the dot
Speaker 3: plot and we'll see what they say.
Speaker 2: Is this a two hour conversation you and I could
Speaker 2: have it? I mean, there's so much going on. Yeah,
Speaker 2: my head's absolutely spinning about this from the jobs report,
Speaker 2: and we can look back at that. We'll touch on
Speaker 2: that in a moment, but let's stay on inflation now.
Speaker 2: I was making a joke with Claudia Sam about the
Speaker 2: lift in cat food prices, which is tangible. Are we
Speaker 2: still seeing the shock in goods prices like Claudius Sam
Speaker 2: saw with Puffy the cat.
Speaker 3: Not the same way food prices and I'm sorry her
Speaker 3: cat food went up, But food prices have been flat
Speaker 3: for the last.
Speaker 4: Couple of months.
Speaker 3: They haven't been rising, when one of the bright spots
Speaker 3: for inflation. Overall goods inflation has gone up a little
Speaker 3: bit in the last two months, but very little. It's
Speaker 3: still services price inflation that is rising, and that's been
Speaker 3: the Fed's worry because labor is such a big part
Speaker 3: of service price costs. Labor went up, and we saw
Speaker 3: an increase in average hourly earnings.
Speaker 2: Well, let's span the globe as they used to do
Speaker 2: on Wide World of Sports. Claudia Sam's got the cats,
Speaker 2: cat food up. I got vet Bill and Kennel Fee,
Speaker 2: and let me tell you. I can tell you service
Speaker 2: sector online is up, and it's not up modest like
Speaker 2: these are real jumps. Let's talk about service sector inflation
Speaker 2: that we're gonna see the same day as the Fed.
Speaker 2: It's still tangible, isn't it. It's not disinflation, right.
Speaker 3: Well, it's disinflation, but it's not deflation. Certainly, it's not flat.
Speaker 3: It's been going up at a slightly slower pace. Give
Speaker 3: me a note. Well, it's been rising about four tenths
Speaker 3: a month, and the Fed wants to see that down
Speaker 3: around two tenths or or lower. The question is how
Speaker 3: fast do they get there? How fast do we see
Speaker 3: this stuff squeeze out?
Speaker 5: Now?
Speaker 3: We had the big rise in average hourly earnings last month,
Speaker 3: and some of that may have been the rise in
Speaker 3: California's minimum wage, which mostly affects service industry workers. So
Speaker 3: you have that service industry inflation still coming through because
Speaker 3: I'm sure restaurants raise their costs to try to recoup
Speaker 3: some of what they had to pay in the additional wages.
Speaker 3: But then it's a one off. Do we then see
Speaker 3: next month that it drops back that's the guess the
Speaker 3: FED has to make.
Speaker 2: Let's go to the FED meeting, and I'm going to
Speaker 2: start with something I believe I've never seen. We had
Speaker 2: an ECB rate cut last week, inflation forecasts up by
Speaker 2: the ECB. I believe I've never seen that. The Fed's
Speaker 2: not going to do that. When they cut, They've got
Speaker 2: to have an inflation forecast coming down, don't.
Speaker 3: They Yes, absolutely, and we get a new forecast from them.
Speaker 3: They'll put out their summary of Economic Projections with the
Speaker 3: dots with the dot plot, and they will have new
Speaker 3: inflation forecasts. Whether they'll change it or not is a question,
Speaker 3: because these are forecasts where we're going to be at
Speaker 3: the end of this year, at the end of next year,
Speaker 3: and they've already forecast that inflation is going to drop
Speaker 3: and drop slowly, but it's going to get there. So
Speaker 3: we may not see a big change in the inflation forecast.
Speaker 3: It's pretty clear now that we will see a change
Speaker 3: in the dot plot because everybody, including City Group, on
Speaker 3: Friday after the Jobs report, priced out their July rate cut.
Speaker 3: So you don't have three rate cuts anymore. You're going
Speaker 3: to have two or one. That's going to be the
Speaker 3: issue for the beneficials submitting their guesses.
Speaker 2: Tom Buzby would be polite on Bloomberg Daybreak, I'm not
Speaker 2: going to be polite. Do you have a question yet
Speaker 2: for the chairman?
Speaker 3: Well, the question that presents itself following what we've seen
Speaker 3: in the last week, and we saw stronger than expected
Speaker 3: ism numbers, stronger than expected hiring, is are you tight enough?
Speaker 3: Does the Fed have enough restraint on the economy to
Speaker 3: bring inflation down? And we'll get a partial answer to
Speaker 3: that from the CPI numbers, But there have been questions
Speaker 3: about whether the Fed is restrictive enough and if we're
Speaker 3: still getting jobs reports like this, one could argue maybe
Speaker 3: they're not. Their argument has been we just haven't waited
Speaker 3: long enough.
Speaker 2: Is our international economics and policy correspondent, Michael. Thank you
Speaker 2: so much, and now we dash to big tech. Of course,
Speaker 2: to Apple, Tom Busby, I'll look at the Worldwide Developers
Speaker 2: Conference in Cooper.
Speaker 6: Tino on Monday. Apple kicks off it's week long Worldwide
Speaker 6: Developers Conference event for twenty twenty four, but this year
Speaker 6: is different. It is all about a for more on
Speaker 6: the event and what to expect. We're joined by Mark German,
Speaker 6: Bloomberg's chief correspondent on Global Technology Now Mark, there may
Speaker 6: be a lot going on at Apple's Worldwide Developers Conference,
Speaker 6: but it looks like it's AI strategy and a rather
Speaker 6: unlikely AI partnership will be the big focus. So what
Speaker 6: do you expect to see.
Speaker 7: It's all going to be about artificial intelligence at Apple
Speaker 7: for the foreseeable future, and at the conference on Monday,
Speaker 7: they're going to introduce new versions of iOS, macOS, Ipedos
Speaker 7: with AI at the very forefront, and the big idea
Speaker 7: is to integrate artificial intelligence in a way that syncs
Speaker 7: with your day to day capabilities in your applications, with
Speaker 7: a strong privacy focus, So you're not going to see
Speaker 7: whizbang features like image generation. Things like open AI and
Speaker 7: Google gem and I have shown and they're really intricate
Speaker 7: demos recently. You're going to see things like summarizing incoming notifications,
Speaker 7: automatically replying to text messages and emails, the ability to
Speaker 7: quickly edit photos using AI. But there's also going to
Speaker 7: be an interesting partnership with OpenAI for an integrated chatbot
Speaker 7: because Apple knows that some consumers want that functionality as well.
Speaker 7: So it's going to be a very broad AI strategy
Speaker 7: here for Apple to set the stage for the next
Speaker 7: three years at the company.
Speaker 6: Now, Apple a little late maybe to the AI boom,
Speaker 6: Microsoft Alpha Bit, even Amazon way ahead. Is this partnership
Speaker 6: with open ai. Do you see it as temporary? How
Speaker 6: soon will Apple have its own AI chatbot?
Speaker 7: Apple certainly is very late to the game here regarding
Speaker 7: generatord AI or these modern sets of artificial intelligence based
Speaker 7: on technology known as a large language model. It's so interesting.
Speaker 7: Apple was ahead of the game for many years with Siri,
Speaker 7: which was introduced at the end of twenty eleven, but
Speaker 7: they got lapped very quickly by Amazon Alexa and Google Assistant,
Speaker 7: and then they got lapped again with the introduction of
Speaker 7: open AI's chat GPT in November of twenty twenty two.
Speaker 7: So it's fair to say they were caught absolutely flat
Speaker 7: put it. They spent the last year and change trying
Speaker 7: to reverse that and integrate as much AI as possible
Speaker 7: through a program known internally as Project gray Matter. Now,
Speaker 7: the OpenAI partnership is interesting because this is specifically for
Speaker 7: a chatbot component and the generation of text messages and
Speaker 7: different things that you can use check GPT for, such
Speaker 7: as writing email. Now. I anticipate this partnership to be
Speaker 7: long term in the sense that it will exist for
Speaker 7: the next few years or so. But in an even
Speaker 7: longer term, maybe five to ten years, you're going to
Speaker 7: see Apple shift to its own chatbot, but it's going
Speaker 7: to take a while for Apple to get there. There
Speaker 7: are still concerns with chatbots and generative AI. There's the
Speaker 7: idea of what's known as a hallucination, which is AI
Speaker 7: and generative AI reporting incorrect information, to taking information from
Speaker 7: the Internet and presenting it in an incorrect way. And
Speaker 7: that's what Apple's trying to avoid, and by using open AI,
Speaker 7: they're pushing the onus on them rather than taking responsibility
Speaker 7: for those incorrect information suggestions.
Speaker 6: Now, aside from those incorrect incorrect information, those hallucinizations, is
Speaker 6: there is there a danger of outsourcing It's AI to
Speaker 6: Open Eye right now? I mean that CEO Sam Altman,
Speaker 6: controversial figure, ousted from the company for a short time
Speaker 6: last year. Reasons not quite clear. Are you getting into
Speaker 6: bed with someone maybe you shouldn't.
Speaker 7: I think the only concern with partnering with open ai
Speaker 7: is actually its corporate structure, right who owns the company?
Speaker 7: How's the company operated. Can that board take out their
Speaker 7: executive team again like they did at the end of
Speaker 7: last year, right? Can that company fall flat on its face?
Speaker 7: Can it fall apart? Does it have the necessary agreements
Speaker 7: in place to keep that chat GPT server infrastructure up
Speaker 7: for the hundreds of millions of Apple customers? So those
Speaker 7: are my real concerns with the Open Ai partnership. Right,
Speaker 7: I'm not concerned with how controversial Sam Altman has become.
Speaker 7: I think that you and I care about it. I
Speaker 7: think a lot of our readers care about it. I
Speaker 7: think Wall Street cares about it, and tech fans care
Speaker 7: about it. But don't forget there's over two billion Apple
Speaker 7: devices in use. Right, I would venture to say that
Speaker 7: ninety nine percent of people who use an iPhone don't
Speaker 7: know or care who Sam Altman is, and they certainly
Speaker 7: don't care about his controversies, his arguments with Scarlett Johansson,
Speaker 7: or any of those issues. But Apple wants is a
Speaker 7: product that functions, and Open AI at this point offers
Speaker 7: the best technology in terms of a chatbot, in terms
Speaker 7: of providing generative AI technology, So that's why they went
Speaker 7: with them. Now, the good news here is that Microsoft
Speaker 7: is a big backer of Open Ai, and obviously Apple
Speaker 7: can trust Microsoft. They've been partners on many different initiatives
Speaker 7: for a number of years. In addition to rivals and
Speaker 7: chat GPT runs on Azure. Do you do have sort
Speaker 7: of that adult in the room perspective there of Microsoft
Speaker 7: to make sure this thing remains up and running.
Speaker 6: So you have these billions of devices, what changes will
Speaker 6: the iPhone user or iPad user expectancy and when will
Speaker 6: they see them? This new leap in AI with Chad GPT,
Speaker 6: So the.
Speaker 7: Big changes you're going to see are going to begin
Speaker 7: rolling out in September, right, that's going to be as
Speaker 7: part of iosaighteen, iPadOS eighteen, and Macros fifteen. And you're
Speaker 7: going to see things like, if you missed a bunch
Speaker 7: of notifications, you'll get a summary of everything you missed.
Speaker 7: If you record a voice memo, you'll get an instant transcription.
Speaker 7: If you're using the notes app to record a meeting,
Speaker 7: you'll get a summary of what happened in that meeting.
Speaker 7: If you want to reply to your text message or emails,
Speaker 7: you'll get suggested full length applies that are based on
Speaker 7: what the incoming email or text message was. If you
Speaker 7: get a bunch of emails coming in. You'll get Gmail
Speaker 7: AI like classification, putting your emails in folders for you
Speaker 7: based on if something's important, work related, personal, or maybe
Speaker 7: it's spam right, you'll get a higher level of email classification.
Speaker 7: So there's a lot of AI coming in a deeply
Speaker 7: integrated fashion across all of Apples apps. Not only a
Speaker 7: partnership with open Ai to power some of this, but
Speaker 7: it's an in house on device large language model from
Speaker 7: Apple as well as an in house large language model
Speaker 7: that runs on Apple Cloud servers. So a ton of
Speaker 7: AI based functionality coming here. This is AI everywhere for Apple.
Speaker 7: It's code named Project gray Matter. That's the part of
Speaker 7: a brain that there's a lot of the processing. So
Speaker 7: this is going to be a very big initiative for
Speaker 7: the company.
Speaker 6: Well, a lot to look forward to at Apple's Worldwide
Speaker 6: Developers Conference. It kicks off on Monday, and our thanks
Speaker 6: to Mark German, Bloomberg chief correspondent on global technology, coming
Speaker 6: up on Bloomberg day Break weekend to look ahead to
Speaker 6: London Tech Week. I'm Tom Busby and this is Bloomberg.
Speaker 6: This is Bloomberg day Break Weekend, our global look ahead
Speaker 6: at the top stories for investors in the coming week.
Speaker 6: I'm Tom Busby in New York. Up later in our
Speaker 6: program to look ahead to India's inflation and trade data
Speaker 6: following its faithful elections. First, the tech sector is booming,
Speaker 6: fueling all time highs on Wall Street thanks to artificial intelligence.
Speaker 6: Giants like Nvidia and the rise of AI will be
Speaker 6: front and center at the upcoming London Tech Week conference,
Speaker 6: bringing together industry leaders from all over the world. And
Speaker 6: for more, Let's go to London and bring in Bloomberg
Speaker 6: Daybreak eurobanker Caroline hepgar Tom.
Speaker 1: As the world contemplates the tech sectors phenomenal growth and transformation,
Speaker 1: many will be asking questions about the future. Are the
Speaker 1: gains sustainable, is the progress ethical? And perhaps more crucially,
Speaker 1: what comes next? Not everyone is convinced. Recently, economics professor
Speaker 1: and Nobel laureate Paul Romer told Bloomberg that confidence in
Speaker 1: artificial intelligence risks repeating the mistakes of the crypto bubble
Speaker 1: of only two years ago. A tech sector bubble popping
Speaker 1: moment is certainly a fear shared by others in the industry.
Speaker 1: Some investors are wary that AI in particular has been overhyped,
Speaker 1: and regulators are fearful of abuse of the technology concerns
Speaker 1: about the future aside, though, tech is also a sector
Speaker 1: that presents enormous opportunities right now for market players who
Speaker 1: are willing to take on risk. It's one of the
Speaker 1: reasons that Apollo Asset Management is so keen to do
Speaker 1: even more deals in the space. After an eleven billion
Speaker 1: dollar collaboration with Intel, the firms co president Scott Kleinman
Speaker 1: told Bloomberg to expect more ventures like it in the future.
Speaker 8: I think you're going to see more and more of
Speaker 8: this coming because absolutely more from a follow but in
Speaker 8: general just the need for this type of capital is insatiable,
Speaker 8: which really, I mean.
Speaker 9: We saw on the earnings report right all these tech
Speaker 9: giants having an insane amount of capex to try to
Speaker 9: get their AI capacity up.
Speaker 10: Intel obviously is one of them.
Speaker 9: They did, though, say that their manufacturing won't be profitable
Speaker 9: until twenty twenty seven, So how much of this also
Speaker 9: is not just apollow backing AI, but apollow backing Intel
Speaker 9: for the long term.
Speaker 8: Absolutely, this is all about partner select structuring. Every situation
Speaker 8: is going to be different. That's the beauty of private capital.
Speaker 8: It doesn't have to fit one single box. You can
Speaker 8: really be creative to meet the needs of the project,
Speaker 8: the needs of the counterparty. And this is just a
Speaker 8: great example of how you're going to see more and
Speaker 8: more of this.
Speaker 9: If you're going to see more of it, I mean,
Speaker 9: does Intel need more They're trying to take a crack
Speaker 9: at video that is no easy feed, right.
Speaker 8: Well, I think Intel's announced over one hundred and fifty
Speaker 8: billion dollars a project, So that's just one of I
Speaker 8: think many companies across lots of different industries that really
Speaker 8: need this type of capital.
Speaker 10: We're talking to other companies to besides Intel for this
Speaker 10: type of thing.
Speaker 8: Well, no comment, but you can probably assume, well is
Speaker 8: the last.
Speaker 9: Thing on this, Scott, because I mean, we are here
Speaker 9: in Europe, this is a europe deal. It's a plant
Speaker 9: in Ireland and Europe has been behind on manufacturing.
Speaker 10: Is there some way that this is almost.
Speaker 9: A test tube, that's a test trial and if this works,
Speaker 9: maybe you do more in Europe like this?
Speaker 8: Well, I think just zooming out a little bit. I
Speaker 8: do think you touch on an important point, which is
Speaker 8: if you compare the growth rates in hero versus the
Speaker 8: growth rates in the US, obviously, it's undeniable.
Speaker 11: What's happening.
Speaker 8: A big part of that is companies access to capital.
Speaker 8: Right in the US, in addition to the banking system,
Speaker 8: you have a very robust capital markets, a securitization market,
Speaker 8: a very deep private capital market. In Europe, all of
Speaker 8: those things either don't exist or are very very small,
Speaker 8: very fragmented, very nascent, And I think you need to
Speaker 8: see more and more of this and you will start
Speaker 8: to see private capital play a bigger role here in Europe.
Speaker 9: Yeah, it's a tougher environment though, because there does feel
Speaker 9: to be more regulation here.
Speaker 10: So how does that impact your global.
Speaker 9: Allocation That there's opportunities here, but they're a little bit
Speaker 9: harder to execute.
Speaker 11: Well, it just makes it more complicated. But you're seeing it.
Speaker 8: I think European leaders are starting to recognize that Europe
Speaker 8: is choked for capital, that that is limiting the amount
Speaker 8: of growth that Europe is falling behind, and it.
Speaker 11: Needs this type of capital.
Speaker 8: It needs to encourage private capital, it needs to encourage
Speaker 8: securitization in order.
Speaker 11: To make that happen.
Speaker 8: And you know, I know you're been talking about it
Speaker 8: for a while, but you know, hopefully this is a
Speaker 8: bit of the wake up call it needs to get going.
Speaker 9: There's also a rate divergent story happening in the first
Speaker 9: cut of this cycle from the ECB. Does that make
Speaker 9: a difference to it all that maybe there's easier policy here.
Speaker 8: No, I think that's more indicative of the need of
Speaker 8: the economy needs to get boosted by i'd say artificial
Speaker 8: lowering of rates, as opposed to the US, where we've
Speaker 8: been saying for some time the economy is so strong
Speaker 8: rate cuts probably don't make sense yet, right.
Speaker 9: Do you think that there's some people in the US
Speaker 9: then that just have been doing the extend and pretend
Speaker 9: that they bought deals at high valuations and have just
Speaker 9: been hoping for a rate cut. So what happens if
Speaker 9: we don't get one this year and maybe only a
Speaker 9: few next year?
Speaker 11: Oh? I think that's absolutely right.
Speaker 8: I think you're going to see a lot of gps
Speaker 8: and LPs coming to the recognition that it's going to
Speaker 8: be a pretty dry spell for the next few years.
Speaker 11: Visa VIV the old portfolio of private equity companies.
Speaker 8: It's going to take longer to monetize valuation gap between
Speaker 8: where folks loaded up on deals versus where where the
Speaker 8: market is today is just there's a big gap and
Speaker 8: it's going to be I think a little bit tougher
Speaker 8: for private equity firms to see the type of returns
Speaker 8: that they were looking for versus years past.
Speaker 10: What does that actually look like or what causes that
Speaker 10: dam to break? And then what does it look like
Speaker 10: when it does.
Speaker 11: Yeah, I don't know that it's so much a dam.
Speaker 8: I think the reality is private equity loaded up at
Speaker 8: the top.
Speaker 11: Of the market using very inexpensive debt.
Speaker 8: Valuation environment has fundamentally changed, and as a result, private
Speaker 8: equity sponsors are just going to have to hold companies longer,
Speaker 8: have to grow into those capital structures, are going to
Speaker 8: need to take on equity to get some refinancings done,
Speaker 8: and all that means it's just math that returns are
Speaker 8: going to be lower over the next few years.
Speaker 9: Well, I'm sure LP's investors who hear the idea that
Speaker 9: they need to hold on for companies longer are not
Speaker 9: going to be happy with that. They've been clamoring to
Speaker 9: get their cash back. So how do they do both
Speaker 9: at the same time.
Speaker 11: They generally don't. They generally don't.
Speaker 8: I think you're going to see sponsors looking for creative
Speaker 8: ways to return and capital, whether that's through structured equity
Speaker 8: investments or other things into these portfolio companies. But eventually
Speaker 8: sponsors are just going to have to accept the valuation
Speaker 8: environment is lower.
Speaker 11: And start selling companies.
Speaker 9: So you're getting ready to buy some deals so you
Speaker 9: get absolutely absolutely.
Speaker 10: Are you hiring to match that?
Speaker 8: No, we have a pretty robust We have you know,
Speaker 8: several hundred people already here in Europe and feel like
Speaker 8: we have a good footprint down.
Speaker 9: Okay, so you're ready, You're ready for the deals of
Speaker 9: what they come. Absolutely, Look what kind of valuation.
Speaker 10: Discounts do you think we're talking? How hefty could they get?
Speaker 8: Well, I don't think it's so much discounts as it is.
Speaker 8: The current environment is just you know, repriced. When deals
Speaker 8: are purchased at a zero percent rate, that implied a
Speaker 8: valuation environment of x at a five percent rate, you know,
Speaker 8: rich free rate. You know that valuation environment is lower.
Speaker 8: And whether marks reflect that or not tbd. But the
Speaker 8: reality is it's coming.
Speaker 1: That was Apollo Asset Management's co president Scott Kleinman speaking
Speaker 1: to Boombak's Danny Berger at the Super Return International Conference
Speaker 1: in Berlin. Well, the future of tech is just one
Speaker 1: of the many issues that will be discussed at London
Speaker 1: Tech Week in the next few days, and I've been
Speaker 1: looking ahead to the conference with Bloomberg's EMEA technology reporter
Speaker 1: Amy Thompson.
Speaker 12: If you look at the lineup so far this year,
Speaker 12: we're seeing a lot of discussion in the industry about
Speaker 12: the ethics around how AI is being developed and used,
Speaker 12: but also how it's already reshaping entire industries. There's keynotes
Speaker 12: and discussions set up around healthcare and the creative industries
Speaker 12: for example. You know, there's also a big election year globally,
Speaker 12: and with our own election in the UK just weeks away,
Speaker 12: kind of the question of where we stand here on
Speaker 12: the global stage and what needs to be done to
Speaker 12: support the tech ecosystem.
Speaker 1: Yeah, absolutely, So how important do you think then this
Speaker 1: event will be for that to think about that as
Speaker 1: we are, I mean we're fully in kind of election mode,
Speaker 1: election fever.
Speaker 12: Yeah, And so the pace of technological developments moving really fast,
Speaker 12: fast than lawmakers can write regulations or legal cases can
Speaker 12: make their way through the courts. So are there were
Speaker 12: in this period with things like AI where there's a
Speaker 12: lot of gray areas and industry meetings can be a
Speaker 12: really good place for companies and investors to get together,
Speaker 12: to come to some you know, mutual understandings where hard
Speaker 12: rules don't exist. And you know, right now we've got
Speaker 12: super Return going on in Germany, the big financial show
Speaker 12: we had Viva Tech in Paris a couple of weeks ago,
Speaker 12: the can Advertising Conferences a few weeks from now. Founders
Speaker 12: Form is another really interesting UK event coming up this month,
Speaker 12: So you know, before everybody breaks for the summer, there's
Speaker 12: this real push to get together and it'll be interesting
Speaker 12: to see how these different discussions inform each other as
Speaker 12: the year goes on.
Speaker 1: Okay, so then I mean that there's a lot of interest,
Speaker 1: as you say, but there's also a lot of hype,
Speaker 1: there is opportunity. Where do you think the balance is
Speaker 1: between those which one is kind of winning out at
Speaker 1: the moment? Do you think amongst investors like hype around
Speaker 1: AI versus real tangible opportunity for my AI.
Speaker 12: We had just come out of this big pullback and
Speaker 12: investment in the tech industry where we had maybe five
Speaker 12: or six years of record breaking VC investment growth in
Speaker 12: the UK every year. Then we came out of the
Speaker 12: COVID nineteen lockdowns and growth and digital services and platforms
Speaker 12: that we'd seen during the pandemic just weren't holding up.
Speaker 12: The economy suddenly looked really shaky. Investors hit the brakes
Speaker 12: and then came opening I and chat GPT, and it
Speaker 12: ignited this, you know, absolute fire for AI investment and
Speaker 12: all of the infrastructure around it, data centers, chip manufacturing plants,
Speaker 12: anything with AI and the name pretty much you mentioned
Speaker 12: in video's market value at the beginning of the of
Speaker 12: the segment hitting three trillion this week. Startups are raising
Speaker 12: tens of millions or hundreds of millions of dollars when
Speaker 12: they're just a few months old. So it's really tempting
Speaker 12: to look at this and see potentially the makings of
Speaker 12: a bubble. But you know, I guess the two main
Speaker 12: questions for tech though, are, you know, will all the
Speaker 12: investment that we're seeing companies and the backbone to support them,
Speaker 12: which is enormous, will the demand materialize to support that?
Speaker 12: And will people be willing to pay for these new
Speaker 12: services to the extent that you can actually get a return?
Speaker 12: And are the valuations more established tech companies that had
Speaker 12: big run ups during the pandemic, are they actually realistic?
Speaker 13: Now?
Speaker 1: Having said that, what about regulation? I mean you mentioned,
Speaker 1: you know, the particular focus here in the UK. We
Speaker 1: obviously had the Safety AI Safety Summit last year. How
Speaker 1: quickly is regulation keeping up? You know, talk us through
Speaker 1: some of the issues that companies in this space are
Speaker 1: actually facing now.
Speaker 12: Yeah, I mean there's a few big themes there. When
Speaker 12: we just saw the Dada scrutiny around Microsoft's the ord
Speaker 12: ANAI company called Inflection, regulators have also had a look
Speaker 12: at Microsoft's relationship with open Ei, though I think it's
Speaker 12: probably important to say that you ruled out a merger
Speaker 12: probe recently on that one. But in this sort of
Speaker 12: race to dominate bleeding EDGEAI tech, how do you make
Speaker 12: sure that you're maintaining competition? And you mentioned the AI
Speaker 12: Safety Summit. There's also the question of laws regulating AI
Speaker 12: in its uses. A few governments have kind of taken
Speaker 12: a swing at it. That you use AI Act from
Speaker 12: last year is probably considered the standard, But we don't
Speaker 12: really have a comprehensive global framework in the industry, and
Speaker 12: everyone's sort of picking their way through how to prevent
Speaker 12: the worst case scenarios or misuse the technology while you know,
Speaker 12: supporting innovation. And then sort of finally, there's a question
Speaker 12: of who owns the data. Media companies, for example, are
Speaker 12: deciding whether or not to strike deals with companies like
Speaker 12: Opening Eye and share their data. But there's also some
Speaker 12: pretty high profile lawsuits happening.
Speaker 1: So that was our EMEA tech reporter Amy Thompson. My
Speaker 1: thanks to her for joining me. I'm Caroline Hepger here
Speaker 1: in London. You can catch us every weekday morning for
Speaker 1: Blueberg Daybreak. Youre at the beginning at six am in London.
Speaker 1: That's one am of woll Street.
Speaker 6: Tom, thank you, Caroline, and coming up on Bloomberg day
Speaker 6: Break weekend to look ahead to inflation and trade data
Speaker 6: out of India. I'm Tom Busby and this is Bloomberg.
Speaker 6: I'm Tom Busby in New York with your global look
Speaker 6: ahead at the top stories for investors in the coming week.
Speaker 6: This week, investors will get the latest inflation and trade
Speaker 6: data coming out of India, and it comes after that
Speaker 6: country's national elections. Let's get to Bloomberg Daybreak Asia co
Speaker 6: host Brian Curtis for more on what it all means.
Speaker 13: Tom, India's inflation has come down to a four percent
Speaker 13: handle from around seven and a half percent last year,
Speaker 13: but it's still too high. Certainly, high levels of inflation
Speaker 13: were a part of the election story that saw Prime
Speaker 13: Minister or Under Mody lose a majority in Parliament. Modi's
Speaker 13: still Prime Minister and still wields a lot of power,
Speaker 13: but his mandate has been weakened. We look ahead to
Speaker 13: India's May inflation report in the coming week and what
Speaker 13: policymakers can do to help people who are missing out
Speaker 13: on India's incredible growth story. Mody has just one backing
Speaker 13: from two key allies in his coalition, allowing him to
Speaker 13: form a government. Earlier, we asked Tanvi Madon, senior fellow
Speaker 13: at the Brookings Institution, what's next for Modi?
Speaker 14: You will need to think about how to ensure more
Speaker 14: inclusive growth. The message from voter seems to be that
Speaker 14: India is shining for some but not for many. It
Speaker 14: doesn't mean that you won't see the same direction. But
Speaker 14: I think there will have to be some tweaks and adaptations.
Speaker 14: But I don't think this is necessarily a bad thing.
Speaker 14: It shows that at the end of the day, the
Speaker 14: ultimate guarant of Indian democracy are Indian voters and they
Speaker 14: want choice and the exercise choice.
Speaker 13: Well, joining us now is Rucci Batiya Bloomberg South Asia
Speaker 13: Economy Editor for more insights somewhat comes next. So just
Speaker 13: out of curiosity, Rucci, how can the Prime Minister provide
Speaker 13: more inclusive growth?
Speaker 5: Well, that's going to be his big challenge as he
Speaker 5: takes on the next term because India is a country
Speaker 5: we'll be seeing almost an eight percent growth, but this
Speaker 5: eight percent growth is leaving out many. There's wide inequality
Speaker 5: in the country. Prime Minister Inari movie talks about making
Speaker 5: India a developed economy by twenty forty seven, but that
Speaker 5: is not going to be easy. While India will be
Speaker 5: on a six and a half to seven percent growth
Speaker 5: path over the next decade, for it to really punch
Speaker 5: above its way to all get to a developed country
Speaker 5: status by twenty forty seven, it will have to grow
Speaker 5: consistently at about an eight percent growth level for the
Speaker 5: next quarter of a century and that will not be easy.
Speaker 5: That will need structural reforms, reforms in the farm sector,
Speaker 5: reforms with respect to land and labor, and it will
Speaker 5: need more countries to come into India to set up
Speaker 5: a manufacturing base. To do all of that, to be
Speaker 5: able to provide jobs for its vast young population is
Speaker 5: going to be a tall order. It's a task cut
Speaker 5: out for private misternary in Remo, the.
Speaker 13: Already richie so much to talk about there. I note
Speaker 13: from Moodies that they said the slim margin of victory
Speaker 13: might actually delay some of these far reaching economic reforms.
Speaker 13: Will people see it that way?
Speaker 15: Oh?
Speaker 5: Well, yes and no, because you know, coalition government comes
Speaker 5: with its own set of challenges. The remember, in the
Speaker 5: last one decade, Prime Minister Inner in Remoti has never
Speaker 5: had to rely on allies, and relying on allies now
Speaker 5: would also mean that they would also seek a pound
Speaker 5: of flesh from him. They would ask for chunkyre portfolios.
Speaker 5: On the other hand, I must not forget that some
Speaker 5: of the biggest reforms that have happened in India, case
Speaker 5: in point being the nineteen ninety one liberalization reforms, happen
Speaker 5: under a coalition government. So it will be a ti
Speaker 5: trope walk, certainly for Prime Minister in a Range Remodi.
Speaker 5: While in the last couple of years we have seen
Speaker 5: that India has been able to reduce it's a fiscal
Speaker 5: deficit quite a lot from the pandemic heights of nine
Speaker 5: point two percent to about five point six percent in
Speaker 5: the last fiscal yer. Away from here is the big question,
Speaker 5: and that is something that rating agencies from Moodies to
Speaker 5: S and B will be watching out. Remember S and
Speaker 5: B recently has put India on a path for a
Speaker 5: ratings upgrade. So what really has to watch out as
Speaker 5: to how this is going to play out. Having said that,
Speaker 5: I must also caution our viewers and tell them that
Speaker 5: that India's debt to GDP ratio is a point of
Speaker 5: concern that various rating agencies and also the multinational Multilateral
Speaker 5: Lender IMF keeps talking about. So that's something that India
Speaker 5: still needs to fix.
Speaker 13: So for some of the policies like Hindu first for
Speaker 13: Prime Minister Modi, I've heard people say that that's not
Speaker 13: really going to be in question here, But then they've
Speaker 13: also said Hindu first is fine, but it doesn't put
Speaker 13: food on the table.
Speaker 5: And you know that's quite visible this time around in
Speaker 5: the Indian election results as well, because a Prime Minister
Speaker 5: Modi in the month of January inaugurated the Ram Temple
Speaker 5: and quite interestingly his candidate has lost from that constituency.
Speaker 5: So yes, you know, the Hindu first policy or the
Speaker 5: Hindu nationalist policies does not put food on the table.
Speaker 5: The ground reality is very different. People are concerned about
Speaker 5: high unemployment, people are concerned about high inflation in the country,
Speaker 5: which are some of the things that he will have
Speaker 5: to focus on in his text term. Having said that,
Speaker 5: given the fact that now he's going to be in
Speaker 5: a coalation, you will have to walk a very fine
Speaker 5: line between pushing economic growth and also pushing his Hindu
Speaker 5: First agendas. Some of the things that he talked about
Speaker 5: out in the VJP manifesto, including a uniform civil code,
Speaker 5: it doesn't look like that the coalation partners would be
Speaker 5: okay in pushing such controversial and contentious ideas.
Speaker 13: Rouchie, thanks so much for joining as we do appreciate
Speaker 13: it and sharing your insights with us. Ruchi Bantia, Bloomberg
Speaker 13: South Asia Economy Editor. Next up, we turned to Japan.
Speaker 13: We get more from Doug Grisner.
Speaker 16: Thanks Brian. The Bank of Japan has a policy meeting
Speaker 16: in the week ahead, and the most favored view among
Speaker 16: economists we polled in April was that the boj would
Speaker 16: wait until October before raising rates. However, since that polling
Speaker 16: expectations for an earlier move have risen, and that is
Speaker 16: partly due to continued weakness in the Japanese end, which
Speaker 16: threatens to stoke import price growth. Here so Yuri Sharai,
Speaker 16: professor of economics at Ko University in Tokyo. She's addressing
Speaker 16: the YenS level against the dollar.
Speaker 15: Mohney fifty five. One fifty six is a too chi way.
Speaker 15: A too chi compares to Japan's fundamental So that's why
Speaker 15: Ministeria Financing tad in a forign exchange market at end
Speaker 15: of April and the beginning May. So I think there
Speaker 15: is some kind of consulted action between a Ministry of
Speaker 15: Finance and Banko Japan to present the assurance about further
Speaker 15: recreation to one sixty.
Speaker 16: She is so Yurisarai, professor of economics at Ko University.
Speaker 16: So the question becomes whether the boj mindful of that
Speaker 16: weakness in the Japanese currency, will adjust monetary policy. Joining
Speaker 16: me now from our bureau in Tokyo is Paul Jackson.
Speaker 16: He is Bloomberg Economy Editor.
Speaker 3: Paul.
Speaker 16: It's always a pleasure. I got to ask you right
Speaker 16: out of the gate. I mean, she has a point
Speaker 16: about the weakness in the end, the degree to which
Speaker 16: we've already seen intervention. Do you think this is adding
Speaker 16: a bit of pressure to the BOJ.
Speaker 4: I think it most certainly is. We saw governor who
Speaker 4: had pulled into the Prime Minister's office earlier where he
Speaker 4: had a chat with Promister Fumyo Kishida, and we think
Speaker 4: it was highly likely that they touched on the yen
Speaker 4: weakness and a government who waders comments which clearly we're
Speaker 4: fueling further weakness as he kept underscoring his cautious approach
Speaker 4: to interest rates. So since that meeting with the Prime Minister,
Speaker 4: mister Huida has been far more cautious in his comments
Speaker 4: on the end, and we are expecting them to do
Speaker 4: something at this meeting in June. However, I think it's
Speaker 4: more likely that it will come in the form of
Speaker 4: cutting back on bon buying rather than the actual short
Speaker 4: term interest rate.
Speaker 16: So we talked about the intervention on the part of
Speaker 16: the Ministry of Finance separate from the BOJ. Perhaps they
Speaker 16: work a little hand in glove, and I think the
Speaker 16: mof spent something greater than sixty billion US to intervene
Speaker 16: in support of the currency. But what would allowing bond
Speaker 16: yields to drift higher mean for the EN? Are we
Speaker 16: to understand it? Even that speculation in the market is
Speaker 16: one reason the END has come off its lows against
Speaker 16: the dollar.
Speaker 4: We reported that the likelihood of the Bank of Japan
Speaker 4: cutting back on bond buying this meeting is a distinct possibility,
Speaker 4: and I think the END has responded to that. Just
Speaker 4: to give you some feel for how how much these
Speaker 4: yields impact at the end, if you go back to
Speaker 4: last year when there was still like a zero point
Speaker 4: five percent cap on ten year yields, and since then
Speaker 4: they've been allowed to move more freely and at one
Speaker 4: point reached one point one percent, that movement in the
Speaker 4: ten year yield now means that the differential between securities
Speaker 4: in ten year securities in Japan and the US has narrowed.
Speaker 4: I would say that the effect of that is probably
Speaker 4: about about nine YenS worth in terms of the exchange rate.
Speaker 4: That means instead of it being around one five to
Speaker 4: five now, if the BOJ was still keeping that ceiling
Speaker 4: of zero point five percent on yields, I think the
Speaker 4: END would be closer to one six ' four now.
Speaker 16: I think it's important to point out that a weaker
Speaker 16: currency has helped import inflation, and that's been a welcome
Speaker 16: outcome for the Bank of Japan after decades of being
Speaker 16: in a deflationary trap. And I noticed that for the
Speaker 16: month of April, in terms of other influences on inflation,
Speaker 16: wage data was much stronger than expected. Is that solid now?
Speaker 16: I mean, is a durable the increase that we have
Speaker 16: seen in Japanese wages?
Speaker 4: That is the big question, because the Bank of Japan
Speaker 4: has made very clear that if it wants to move
Speaker 4: forward with the normalization of policy, this is the key
Speaker 4: thing that must emerge. And what it's talking about is
Speaker 4: a positive inflation cycle. Yes, good inflation, that's what it's
Speaker 4: looking for. It's inflation that's driven by rising wages and
Speaker 4: that drives consumption and drive growth. And this has really
Speaker 4: been the national objective of Japanese economic policy for more
Speaker 4: than a decade now, and they seem to be getting
Speaker 4: closer to it. But the fact that the matter is
Speaker 4: is that real wages are still falling. That means that
Speaker 4: the wage gains that we've seen, yes they are bigger,
Speaker 4: but they're still lagging inflation. And for the average voter,
Speaker 4: they're still seeing their pay in real terms falling, and
Speaker 4: they have done for the last two years.
Speaker 16: Away from monetary policy. I'm curious as to whether or
Speaker 16: not there are other programs targeted at trying to deal
Speaker 16: with this pickup in Japanese inflation. Is there anything in
Speaker 16: the pipeline that's working well.
Speaker 4: The government for some time now has been offering subsidies
Speaker 4: on energy prices. At one point that was as much
Speaker 4: as twenty percent of your electricity bill was essentially being
Speaker 4: paid by the government. That is a lot of help
Speaker 4: for the average household. But they are pulling the plug
Speaker 4: on that, so that kind of help is getting removed
Speaker 4: and in place. Prime Minister Kishida has introduced a tax rebate.
Speaker 4: This is going to be a one off thing for
Speaker 4: this year. It's going to be worth about two hundred
Speaker 4: and fifty bucks per person, and he's hoping that there'll
Speaker 4: be a good feel good vibe factor from that and
Speaker 4: that that might leave households purchasing power in positive territory
Speaker 4: in real terms in the month of June, and that
Speaker 4: sets him up nicely for an internal leadership party then
Speaker 4: could even lead to an early election after that.
Speaker 16: Paul, it's always a pleasure thanks for helping us set
Speaker 16: up the Bank of Japan meeting in the week Ahead.
Speaker 16: That is Bloomberg's Paul Jackson, our Economy editor from our
Speaker 16: bureau in Tokyo. I'm Doug Krisner. You can join Brian
Speaker 16: Curtison myself weekdays here from Bloomberg Daybreak Asia, beginning at
Speaker 16: eight am in Hong Kong eight pm on Wall Street.
Speaker 6: Tom, Thank you, Doug, and thank you Brian Again. That
Speaker 6: does it for this edition of Bloomberg day Break Weekend.
Speaker 6: Join us again Monday morning at five am Wall Street
Speaker 6: time for the latest on markets overseas and the news
Speaker 6: you need to start your day. I'm Tom Buzby. Stay
Speaker 6: with us. Top stows and global business headlines are coming
Speaker 6: up right now.