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