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: a look ahead to some key housing data, plus a
Speaker 2: look ahead to corporate earnings from evmaker Rivian.
Speaker 3: I'm Tom Busby in New York. I'm Stephen and Carol
Speaker 3: in London. Borg counting down to a crucial election in
Speaker 3: Europe's biggest economy, Germany.
Speaker 4: I'm Doug Chrisner looking at upcoming earnings from China's Ali Baba,
Speaker 4: along with upcoming eco data out of South Korea.
Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 2: Good day to you. I'm Tom Busby, and we begin
Speaker 2: today's program with some key housing data out this week.
Speaker 2: January housing starts on Wednesday. Existing home sales for that
Speaker 2: same month on Friday Now for more on what do
Speaker 2: you expect and look at the housing sector right now,
Speaker 2: we're joined by Drew Redding, Bloomberg Intelligence, US home building analyst. Well, Drew,
Speaker 2: last month brought brutally cold temperatures across much of the US,
Speaker 2: those devastating wildfires in Los Angeles. Is there any good news,
Speaker 2: any green shoots we can look for in new home
Speaker 2: construction and existing home sales for January?
Speaker 5: Well, thanks for having me. It's a great question. There
Speaker 5: have been a lot of different forces at play. I
Speaker 5: think the market's looking for something about down seven percent
Speaker 5: for housing starts this month, and we think that that
Speaker 5: starts going to remain valuable for the next couple of months.
Speaker 5: And the reason is that the large public builders are
Speaker 5: matching production levels with demand. Given what's happened with rates,
Speaker 5: the expectation for volume growth just not as strong as
Speaker 5: it was a couple of months ago. And you know,
Speaker 5: when we looked at demand in January, it's actually weaker
Speaker 5: than the typical seasonal pattern you would see. So you know,
Speaker 5: we're seeing builders be a bit more cautious on a
Speaker 5: relative basis. We still think that the large public builders
Speaker 5: will see stronger growth compared to their smaller peers who
Speaker 5: continue to struggle with, you know, the availability and cost
Speaker 5: of growth capital. Because you have to remember a lot
Speaker 5: of time this group is looking to regional local banks
Speaker 5: for financing. In an environment where there's a lot more uncertainty,
Speaker 5: it's certainly tougher to get access to that. In terms
Speaker 5: of existing home sales, we think we're going to continue
Speaker 5: to see sales be pressured in the near term. You know, again,
Speaker 5: we've had rates back up where I think seven point
Speaker 5: one point five percent now, prices continue to rise across
Speaker 5: much of the country, and you know, there's just not
Speaker 5: a lot of urgency right now.
Speaker 2: And are these builders you're talking about also having problems
Speaker 2: or or fear of problems getting enough workers. I mean,
Speaker 2: I know skilled labor is hard to get, but any
Speaker 2: workers with the threat that's coming out of the White
Speaker 2: House and deportations. Also land, you know available land. Is
Speaker 2: are they not building spec houses? Is that sort of
Speaker 2: what you mean by you know, you know, just building
Speaker 2: on demand.
Speaker 5: Well, that's a great question on the labor front, because
Speaker 5: the inability of builders to get access to the trades
Speaker 5: has been an issue for much the last cycle. Now
Speaker 5: over the last several quarters, we've seen that improve. You know,
Speaker 5: part of the reason is because the last couple of
Speaker 5: years we've had the largest influx of immigration on record,
Speaker 5: we've also had slowing demand, so the trades have kind
Speaker 5: of been able to catch up with production. But you know,
Speaker 5: in terms of immigration policy, it's certainly a real threat
Speaker 5: to the construction industry. You know, of course, we still
Speaker 5: don't know exactly how this is going to play out,
Speaker 5: but it's not a secret that farm bar and workers
Speaker 5: representing a significant portion of the US construction industry. I
Speaker 5: think that the NHB estimates that it's about thirty three
Speaker 5: percent of the trades, but as you would expect that
Speaker 5: very significantly by market. So if you look at somewhere California, Texas, Nevada,
Speaker 5: and Florida, you're talking about closer to fifty percent of
Speaker 5: the workers being farm born, and there's some estimates out
Speaker 5: there that you know, about one and ten are undocumented.
Speaker 5: So wow. You know, like I said, it remains the
Speaker 5: spe seen how this play out, but we certainly think that,
Speaker 5: you know, builders could have an issue getting products built,
Speaker 5: and certainly we would expect to see COSS rise in
Speaker 5: the event of some type of you know, large scale
Speaker 5: deportation program.
Speaker 2: Wow, a lot of a lot of uncertainty. Well, right now,
Speaker 2: it's the middle of February, just ahead of the busy
Speaker 2: spring housing season. And speaking of uncertainty, you mentioned home
Speaker 2: prices at or near all time highs mortgage rates around
Speaker 2: seven percent, uh, the President's agenda. Where does the whole
Speaker 2: industry stand right now? The home builders and new home construction.
Speaker 5: Wells, we're still definitely dealing with the soft market. As
Speaker 5: you mentioned, affordability is near historically low levels, so we're
Speaker 5: seeing that that impacted demand side. We looked at some
Speaker 5: of the latest data for Redfin on the pending home
Speaker 5: sale side, and it's showing that from last month we're
Speaker 5: down about four percent, we're down about six percent from
Speaker 5: last year, and on an absolute basis pending sales, which
Speaker 5: are kind of a more current reflection of the demand
Speaker 5: environment because they're contract signings, we're at the lowest level
Speaker 5: on record. The data is also showing that we're starting
Speaker 5: to see more deals start to fall through, whether that's
Speaker 5: due to qualification issues or buyers getting cold feet, you know.
Speaker 5: Broadly speaking, we think, you know, on the existing home side,
Speaker 5: we're probably hovering around trough levels. The question is when
Speaker 5: does that start to turn. You know, we think we
Speaker 5: can finish the year in positive territory, but you have
Speaker 5: to remember that we're coming off the lowest level of
Speaker 5: volumes in multiple decades, so certainly still a challenging market,
Speaker 5: and we're seeing that in both the resale side and
Speaker 5: the new home sales side.
Speaker 2: Yeah, and another troubling stat you mentioned redfin They say
Speaker 2: more homes are now getting listed, many for the first time,
Speaker 2: but they're staying unsold for the longest stretch in five years. Again,
Speaker 2: the unaffordability of so many of these homes and a
Speaker 2: seven percent interest rate's like a one two punch. That's
Speaker 2: not helping at all.
Speaker 5: Yeah. I think the average time on market is getting
Speaker 5: close to two months, So, you know, the inventory dynamic
Speaker 5: has been something that has really supported the builders over
Speaker 5: the last couple of years. You've had a lack of
Speaker 5: for sale inventory in the resale market, which funneled demand
Speaker 5: towards the builders, who are then able to offer incentives
Speaker 5: and rate buydowns to make the payments look better. But
Speaker 5: now we're in a situation where that competitive environment is
Speaker 5: really starting to change with active listings across many of
Speaker 5: the key markets now well above twenty nineteen levels, and
Speaker 5: you know the ones that come to mind are in
Speaker 5: Florida and Texas. So builders are now having to face
Speaker 5: competition that they really haven't had the last couple of years,
Speaker 5: and we think that could put some pressure not only
Speaker 5: on volumes but also on pricing.
Speaker 6: Well.
Speaker 2: January housing starts out on Wednesday. Existing home sales for
Speaker 2: January out on Friday. Our thanks to Drew Reda, Bloomberg
Speaker 2: Intelligence US home Building analyst. We move now to earnings
Speaker 2: from high end EV maker Rivian, which reports its fourth
Speaker 2: quarter results this Thursday, as it readies big plans for
Speaker 2: the future. For more and what to expect, and a
Speaker 2: look at the broader ev auto sector. We're joined by
Speaker 2: Steve Mann, Bloomberg Intelligence Global Autos and Industrials Research Analysts. Steve,
Speaker 2: thank you so much for joining us. Thanks Well, let's
Speaker 2: begin with what you expect to see in this earnings report.
Speaker 2: What were sales like for Rivian? How did it do
Speaker 2: against Tesla, Lucid, GM, and Ford.
Speaker 7: Well, Rivian actually had better than expected sales in the
Speaker 7: fourth quarter, so we do expect the company to actually
Speaker 7: report positive gross margin in their auto business, and that's
Speaker 7: something they've promised for the last three quarters and I
Speaker 7: think they will be able to achieve that. They've done
Speaker 7: a lot of changes internally in their factories and their
Speaker 7: product to get there. So and lastly, hell on high water,
Speaker 7: they have to hit gross profit because you remember they
Speaker 7: do have a partnership, a joint venture with Volkswagen, and
Speaker 7: for the next billion dollars that they're going to get
Speaker 7: from Volkswagen, they have to hit that gross profit target.
Speaker 2: Now that is a big boost anyone would take the
Speaker 2: billion dollars from the world's second largest automaker. But it's
Speaker 2: also facing a lot of uncertainties, or at least the
Speaker 2: EV industry in the US with Donald Trump back in
Speaker 2: the White House. Yeah, not only the tariffs, but you know,
Speaker 2: he revoked the EV mandate of fifty percent cars sold
Speaker 2: by twenty thirty all evs, the federal tax credit up
Speaker 2: in the air emission standards I mean, is rivian, and
Speaker 2: the whole industry really facing more challenges than ever before.
Speaker 7: I think there's a lot of noise out there. I
Speaker 7: think there's going to be ups and downs in any
Speaker 7: any market, especially you know, auto market is not immune
Speaker 7: to that. I think, you know, there's a lot of
Speaker 7: risk in terms of concerns about auto sales if the
Speaker 7: seventy five hundred tax credit goes away. There's also tariffs,
Speaker 7: you know, the ux Mexico Canada tarriffs may make may
Speaker 7: come on online, the twenty five percent tariff, and that
Speaker 7: could impact the auto industry. I mean, I think the
Speaker 7: tariffs on the supply chain won't impact Revian that much.
Speaker 7: They've have been vertically integrating their process and some of
Speaker 7: the changes that made that they made in the middle
Speaker 7: of twenty twenty four really brings all out of production
Speaker 7: in house, so they may not get hit that much
Speaker 7: on tariff's. But the seventy five hundred elimination of the
Speaker 7: semi five hundred tax credit will probably temporary subdue h
Speaker 7: EV sales. You know, it does make EV's a little
Speaker 7: bit more expensive for the consumer, But look, Rivinan is
Speaker 7: going to launch a cheaper model later this year, uh
Speaker 7: and then a new and even cheaper model into in
Speaker 7: twenty twenty six that will expand their their their market
Speaker 7: and hopefully make their vehicles even more affordable for the
Speaker 7: average consumer.
Speaker 2: Well, speaking of expanding, I mean, Rivian is thinking big,
Speaker 2: not only these new models, not only the partnership with
Speaker 2: with Volkswagen, but in the last remaining days of the
Speaker 2: Biden administration, it secured a six point six billion dollar
Speaker 2: loan resuming work on a new assembly plant outside of Atlanta.
Speaker 2: I mean that's big. Thinking that is huge.
Speaker 7: I think it's really positive for for Rivian because you know,
Speaker 7: Rivian still not positive on the bottom line, so they
Speaker 7: you know, and they have negative cash flow. So to
Speaker 7: have that backstop, you know, for their new plant that
Speaker 7: it will be it's really positive. But look, I think
Speaker 7: it'll be a miss if Rivian decides to go ahead
Speaker 7: with the construction of that Georgia plant now, I think
Speaker 7: they're going to have to wait. They should wait. They
Speaker 7: have the R two smaller suv coming up cheaper, and
Speaker 7: then the R three and twenty twenty six. I think
Speaker 7: they should wait until gauge the customer demand for those
Speaker 7: two vehicles before they go ahead and starting building a
Speaker 7: new plant. I think, you know, if they do spend
Speaker 7: that capex now, it's going to be a higher cost
Speaker 7: for the automaker, at least on a per unit basis,
Speaker 7: and they don't need that right now. So it's great
Speaker 7: that they have the money, but I think it'll be uh,
Speaker 7: you know, I don't think the investors will look at
Speaker 7: this positively if they decide to build the plant.
Speaker 2: Now I see now, up until now, it's bread and
Speaker 2: butter from what I see, has been this deal to
Speaker 2: supply delivery trucks to Amazon. I mean tens of thousand
Speaker 2: that I see them everywhere here in New York. Now
Speaker 2: that deal has expired. So what does that mean for Rivian?
Speaker 7: Oh, it's really positive. It's it's a small business for
Speaker 7: them right now. It's it's kind of you know, the
Speaker 7: the impact to the bottom line it's immaterial, but the upside,
Speaker 7: you know, it's he's huge because you know what really
Speaker 7: makes sense for evs is these short hauled delivery trucks,
Speaker 7: right and you know they have to you know, they're
Speaker 7: selling to Amazon. But you know we've also heard that
Speaker 7: there they've been talking to AT and T, and AT
Speaker 7: and T are currently testing vehicles, their service vehicles from Rivian.
Speaker 7: So it opens up a door for a bigger market
Speaker 7: for for Rivian's technology.
Speaker 6: Well, that's great.
Speaker 2: Rivian Q four earnings out this Thursday, and our thanks
Speaker 2: to Steve Mann Bloomberg Intelligence, Global Autos and industrials research
Speaker 2: analyst coming up on Bloomberg day Break weekend to look
Speaker 2: ahead to the upcoming German elections. I'm Tom Busby and
Speaker 2: this is Blue. This is Bloomberg day Break weekend, our
Speaker 2: global look ahead at the top stories for investors in
Speaker 2: the coming week. I'm Tom Busby in New York. Up
Speaker 2: later in our program, we look ahead to earnings from
Speaker 2: China's biggest player in e commerce, but first German said
Speaker 2: to the polls this week, with issues like economic growth,
Speaker 2: domestic security, irregular migration, all on the ballot. Now for more,
Speaker 2: Let's go to London and bring in Bloomberg day Break
Speaker 2: Europe banker Stephen Carroll.
Speaker 3: Tom According to the latest polling, the conservative Friedrich Martz
Speaker 3: of the Christian Democratic Union is the front runner to
Speaker 3: emerge as the next leader of Germany. Time is fast
Speaker 3: running out for the incumbent Olaf Schultz and his Social
Speaker 3: Democrat party to close the gap between them and their opponents,
Speaker 3: currently about fourteen percentage points wide according to an average
Speaker 3: of recent polls. Maybe some indication or consensus about the
Speaker 3: expected results, the path to stability in Germany remains uncertain.
Speaker 3: The recent bad blood between the mainstream parties, which was
Speaker 3: on show during a televised debate during this campaign, has
Speaker 3: sparked concern that it might prove more difficult to negotiate
Speaker 3: a coalition agreement after the election, a process that can
Speaker 3: take several months. Navigating the uncertainty as an investor in
Speaker 3: Europe's largest economy is something that I've been discussing with
Speaker 3: Eliz Badoi, whose City Group's Global markets managing director and
Speaker 3: head of EMEA Research, who does see a potential upside
Speaker 3: to the results if all goes to plan German elections.
Speaker 8: On balance, there hasn't been as much focused globally on them,
Speaker 8: but obviously there are a positive catalyst for the first time.
Speaker 8: We could hear about the regulation, we could hear about
Speaker 8: boosting spending defense, depending on the outcome and the various
Speaker 8: coalition we might get. Now, of course there's always a
Speaker 8: risky selections that we get an extreme party blocking some
Speaker 8: of that, but I think on balance we think seventy
Speaker 8: five percent of the potential outcomes of market friendly.
Speaker 4: So that's one thing that with City.
Speaker 3: Groups, Ali's Badoye. They are speaking to myself and Valerie Titel.
Speaker 3: So what's in store for Germany over the final week
Speaker 3: of campaigning. I've been discussing this with our Germany correspondent
Speaker 3: to Oliver Krook.
Speaker 9: Yeah, listen, I think what is sort of most remarkable,
Speaker 9: the most remarkable future of this election campaign is that
Speaker 9: basically the polls have not moved a whole lot, no
Speaker 9: matter basically what has happened since the sort of snap
Speaker 9: election was called. It teams that basically everything is kept steady.
Speaker 9: And that's really in very sharp contrast to what we
Speaker 9: saw during the last federal election in twenty twenty one,
Speaker 9: where basically the CDU had been leading by like twenty
Speaker 9: three points, gave up that full lead and then was
Speaker 9: not in the government at all. So what we're seeing
Speaker 9: now is the CDU basically holding up at about thirty percent.
Speaker 9: Remember this is Angela Merkel's traditional party now headed by
Speaker 9: Frederick Mertz, with the AfD the Alternative for Deutschland, the
Speaker 9: far right party that wants to leave the Eurozone, very
Speaker 9: hard on immigration, they're twenty percent, and then ESPD, you know,
Speaker 9: the Chancellor's current party, the current Translort party, holding in
Speaker 9: about fifteen sixteen percent, and the Greens right after that.
Speaker 9: I mean, what I think is very sort of interesting though,
Speaker 9: is perhaps a different feature from this election from the others,
Speaker 9: is that all the people that you sort of speak to,
Speaker 9: many of the people that I speak to, when I
Speaker 9: ask them who they're voting for, most of them, I
Speaker 9: will have to say, will say they don't know who
Speaker 9: they're going to vote for. So basically they're considering are
Speaker 9: they going to vote with their conscience? Are they going
Speaker 9: to vote more tactically. This is going to be a
Speaker 9: sort of big question, and it's hard for me to say,
Speaker 9: because the polling is one thing. What people will actually
Speaker 9: do on the day of the election that could cause
Speaker 9: a real sort of discrepancy to what we've generally seen
Speaker 9: in German elections where the polling has been fairly accurate.
Speaker 3: What have been the key moments of the campaign so far?
Speaker 9: Yeah, I mean, I think that the sort of first
Speaker 9: key feature of this election campaign is just the presence
Speaker 9: of the AfD, the Alternative for Deutschland, as the sort
Speaker 9: of far right wing party, as a serious political presence.
Speaker 9: They hold, you know, basically a fifth of the vote
Speaker 9: in this election that has not happened since basically post
Speaker 9: war Germany, and they are in many ways setting the
Speaker 9: tone for a lot of the debate, certainly on immigration
Speaker 9: and some other economic policies as well. I mean, I
Speaker 9: think another sort of of the sort of key moments
Speaker 9: was basically the equestins around whether or not olaft Guilt
Speaker 9: would be the candidate for the SPD going into this election.
Speaker 9: He obviously was very damaged by basically his last term
Speaker 9: that was cut forward because this basically coalition couldn't get along,
Speaker 9: They couldn't figure out how to solve a lot of problems,
Speaker 9: and it eventually brought the government down, calling for an
Speaker 9: early election. And I think that the sort of final
Speaker 9: point that I think has really been significant here is
Speaker 9: basically the CDU and Frederick Mertz, the sort of center
Speaker 9: right party, voting for the very first time on this
Speaker 9: immigration bill in the same direction as the AfD, the
Speaker 9: alternative for Deutschel on that has never happened basically in
Speaker 9: post war Europe where you have a mainstream party voting
Speaker 9: with the AfD. He has said that this is not
Speaker 9: really amount to working with them. He has ruled out
Speaker 9: working in coalition with them. But for much of the
Speaker 9: political system here within Germany was seen as sort of
Speaker 9: breaking the far right firewall and really sort of sundering
Speaker 9: that that taboo, and for many people that made you
Speaker 9: know him potentially untorre strustworthy and ineligible to be the candidate.
Speaker 9: Others say that, you know, he's just being practical and
Speaker 9: he's dealing with an intensely fragmented political landscape here in Germany.
Speaker 3: This concept of the firewall is really central to the
Speaker 3: political conversations happening in Germany. And as you say that
Speaker 3: moment with the CDU putting forward this motion the Bundestag
Speaker 3: that you know, although condemning the AfD in the motion itself,
Speaker 3: did ultimately end up using some of their votes. How
Speaker 3: thinking about what happens post the election, how intact is
Speaker 3: that firewall now? Is there a chance that any of
Speaker 3: these center parties could end up doing work with the AfD?
Speaker 9: Listen, I think I don't think that there's going to
Speaker 9: be anything that they're going to be able to do
Speaker 9: in terms of formal coalitions. But again, I mean, Frederick
Speaker 9: Mertz was testing the water and at the end of
Speaker 9: the day, what he is dealing with is a real
Speaker 9: political problem within Germany, which is the fact that you
Speaker 9: basically have this massive fragmentation, you have basically, you know,
Speaker 9: As you get closer to the election, you know more
Speaker 9: and more of this vote being sort of spread across
Speaker 9: several different parties who have very very different, sort of
Speaker 9: out of different sort of views of the world and
Speaker 9: how to deal with problems within Germany. And the reality
Speaker 9: situation is they're very unwilling to compromise it.
Speaker 10: And this is the issue.
Speaker 9: So you have the CDU basically won't compromise on the
Speaker 9: debt break, the SPD, won't cut social benefits, the Greens
Speaker 9: shut down nuclear power in the middle of an energy crisis.
Speaker 9: This is not a sort of situation in which the
Speaker 9: mainstream parties are able seemingly to get along and make
Speaker 9: some sort of sacrifices in order to get things done
Speaker 9: in Germany. And that is exactly the fact that the
Speaker 9: AfD is exploiting, saying basically, the mainstream parties have failed you.
Speaker 3: Let's think about what happens on Sunday, the twenty third
Speaker 3: of February, when we will get polling day, but also
Speaker 3: when we will get the results of this election. Talk
Speaker 3: us through what happens when the results start to come
Speaker 3: in at polls close at six pm local time, will
Speaker 3: get exits polls almost immediately on that what happens next?
Speaker 10: Yeah, so that's what happens basically six pm.
Speaker 9: You get these exit polls, You get sort of sentiment
Speaker 9: from people being pulled, that walked outside of the polling station,
Speaker 9: from the TV stations. That tends to give you a
Speaker 9: pretty good steer on when things sort of how things
Speaker 9: will pan out, and basically within the hour you have
Speaker 9: a pretty good idea of what the outcome of the
Speaker 9: election is going to be. So the main thing to
Speaker 9: look forward here too is if you actually don't get
Speaker 9: a huge sort of move in, what the sort of
Speaker 9: pulling for the main parties are Actually what's going to
Speaker 9: be most important are the parties that got the least
Speaker 9: number of votes, Because for every party that gets under
Speaker 9: five percent of the vote, they basically get knocked out
Speaker 9: of the Bundestag, and that basically rewrites the whole arithmetic
Speaker 9: of what more than half of the parliament will look like.
Speaker 9: So let's say three parties get knocked out, then suddenly
Speaker 9: that's twelve percent of the vote that's no longer part
Speaker 9: of the party. That means that potentially you could get
Speaker 9: a coalition with two parties where previously you will have
Speaker 9: needed three. So this is going to be some of
Speaker 9: the sort of nitty gritty that we get into on
Speaker 9: the election night and really talk about and looking at
Speaker 9: basically what this next government's going to look forward. But
Speaker 9: I also think that there's going to be sort of
Speaker 9: this dawning reality that a certain point that these mainstream
Speaker 9: parties within Germany will have to learn to commise otherwise
Speaker 9: the next election is going to be a very different one.
Speaker 9: And I think that there are some ways in which
Speaker 9: the AfD has grasped in ways that many other parties
Speaker 9: in Germany have not grasped, the sort of new politics
Speaker 9: of twenty twenty.
Speaker 3: Five in that complicated negotiation that will happen after the election.
Speaker 3: Germany is used to having coalitions in government. It's also
Speaker 3: had a coalition of those two traditional centrist parties, the
Speaker 3: SPD and the CDUCSU as well in the past. Who
Speaker 3: are the other candidates that could be in focus form
Speaker 3: of thinking about potential coalition building? What are the parties
Speaker 3: should we be watching?
Speaker 10: Yeah, so listen.
Speaker 9: I think it's interesting that there's basically only been one
Speaker 9: absolute majority in Germany since the end of the Second
Speaker 9: World War. I mean, this is basically a nation that
Speaker 9: really is built on building coalitions. I think that the
Speaker 9: other parties that you're going to have to pay attention
Speaker 9: to are the Greens. They're the ones who are likely
Speaker 9: to come into to the sort of fourth place potentially,
Speaker 9: So there could be a scenario in which the CDU
Speaker 9: actually would prefer to work with the Greens over the SPD,
Speaker 9: though they may be slightly farther on some issues. There's
Speaker 9: a lot of bad blood right now between the SPD
Speaker 9: and the CDU, so that is going to be absolutely key.
Speaker 9: I mean, there's the FDP, the Liberals, who are basically
Speaker 9: natural sort of mates for the CDU and the center right.
Speaker 9: You know, they're sort of into sort of fiscal disciplines, deregulation,
Speaker 9: a little bit more progressive socially, but they're not really
Speaker 9: going to be They're gonna be potentially a marginal player.
Speaker 9: They could maybe be a third party within that. But
Speaker 9: I think the big concern here, Steven is that basically
Speaker 9: you get a situation in Germany where you don't have
Speaker 9: a decisive outcome and you just have general European limping
Speaker 9: in terms of political progress economic progress at a time
Speaker 9: when the United States is really sprinting ahead and basically
Speaker 9: leaving everyone behind and saying basically, you need to sort
Speaker 9: of walk to the beat of our drum, and really
Speaker 9: what you need are stronger European nations, particularly when you
Speaker 9: need to sort of bring the European project closer together
Speaker 9: in order to compete with the likes of Donald Trump
Speaker 9: and of course China.
Speaker 3: Yeah, because of course whoever is chancellor in Germany will
Speaker 3: also play a key part in the decision making process
Speaker 3: that happens in Brussels as well. A word on the
Speaker 3: economy and all of this, Oliver, you know, two years
Speaker 3: of negative growth in Germany. How central has that issue
Speaker 3: been to the campaign?
Speaker 9: Listen, I think it's basically the fundamental issue. I don't
Speaker 9: know that it's the one that's grabbing the most headlines.
Speaker 9: But again we're just to put into context what we're
Speaker 9: talking about here in Germany. It's a statistic that I
Speaker 9: think bears mentioning and repeating and repeating. We are looking
Speaker 9: potentially here, particularly with if we get tariffs on German
Speaker 9: industry from the Trump administration, that would almost guarantee another
Speaker 9: year of contraction in twenty twenty five. That would mean
Speaker 9: three years of consecutive contraction. That has not happened since
Speaker 9: the Berlin wallfell in nineteen eighty nine. This is a
Speaker 9: very difficult period for the German economy and that is
Speaker 9: what's behind so much of what is going on here.
Speaker 9: And I think that it is partially also why there
Speaker 9: is so much vulnerability within the German society, why there's
Speaker 9: so much vulnerability of feeling around that, and of course
Speaker 9: often the impulse towards that is to be very concerned
Speaker 9: with how much money you're spending, yes, but also on
Speaker 9: immigration and partially what is driving the conversation around that.
Speaker 9: And I think that that is basically and there's no
Speaker 9: way of ignoring that in a Nathan that has been very,
Speaker 9: very wealthy for a very very long period of time
Speaker 9: and whose economic model is now basically failing and is
Speaker 9: only going to catch increasing headwinds. The question is going
Speaker 9: to be in this election it do sort of people realize,
Speaker 9: do the politicians realize the scale of what's going on,
Speaker 9: and are they willing to take very sort of potentially
Speaker 9: deep cuts to the welfare state, potentially look at taking
Speaker 9: debt and breaking the debt break and looking to basically
Speaker 9: boost the economy in that way, And that honestly I
Speaker 9: don't know the answer to that question. It may not
Speaker 9: be bad enough quite yet for the Germans to take
Speaker 9: those steps that many think are absolutely necessary in order
Speaker 9: for Germany to stay relevant into the twenty per century.
Speaker 3: My thanks to Bloomberg's Oliver Crook speaking to us from Munich.
Speaker 3: Well have full coverage of the upcoming German elections on
Speaker 3: Bloomberg Radio. I'm Stephen Carolyn London. You can catch us
Speaker 3: every weekday morning here for Bloomberg Daybreak here at beginning
Speaker 3: out six am in London and one am on Wall
Speaker 3: Stras Tom, thank you, Steven.
Speaker 2: And coming up on Bloomberg day Break Weekend, we look
Speaker 2: ahead to earnings from an e commerce giant. I'm Tom Busby,
Speaker 2: and this is Bloomberg. This is Bloomberg day Break Weekend,
Speaker 2: our global look ahead at the top stories for investors
Speaker 2: in the coming week. I'm Tom Busby in New York.
Speaker 2: Earnings out this week from China's biggest player in e commerce,
Speaker 2: Ali Baba. Let's get to Daybreak Asia podcast host Doug
Speaker 2: Krisner for a preview.
Speaker 4: To Ali Baba. Stock has been on a tear lately,
Speaker 4: so farthes here. Baba's Hong Kong listed shares are up
Speaker 4: more than forty percent. So what's driving this price action?
Speaker 4: Let's find out. I'm joined by Bloomberg's Katherine Lim. She
Speaker 4: is a senior consumer and Technology analyst for Bloomberg Intelligence,
Speaker 4: joining us from Singapore. Catherine, thank you so much for
Speaker 4: making time to chat with us. Let's talk first about
Speaker 4: the macro story in China, because I know that Ali
Speaker 4: Baba derives so much of its business from the domestic
Speaker 4: consumer in China. What's happening right now.
Speaker 6: With the Chinese right, you know, on the Chinese consumption side,
Speaker 6: as we step out of the Lunar New Year holidays,
Speaker 6: which likely stimulated retail sales in January because of the
Speaker 6: big festival itself. I do think that with the recent
Speaker 6: consumption stimulus that Beijing has been putting in taking a
Speaker 6: step back with seeing them offering literally cash handouts, you know,
Speaker 6: shopping vouchers to the consumers ahead of the Lunar New
Speaker 6: Yr holidays. We're gonna need to see whether that is
Speaker 6: going to hold up after the holidays itself, and how
Speaker 6: much of these hooks are we still gonna get from
Speaker 6: the central government through the rest of the year. But
Speaker 6: I think we should be you know, on a trajectory
Speaker 6: whereby consumption sentiment in general have stabilized. Doug, you've actually mentioned,
Speaker 6: you know, the markets in general, equity markets, they are up.
Speaker 6: In general, sentiment has recovered from the rock bottom that
Speaker 6: we've seen last year. So I would say that things
Speaker 6: should stabilize this year from a buying sentiment perspective.
Speaker 4: So that's on the business to consumer side. What is
Speaker 4: happening on the B to B side in China? Is
Speaker 4: Ali Baba doing a lot of business on that front?
Speaker 6: Oh yes, absolutely. You know, there b to be a platform,
Speaker 6: whether it's one six eight eight dot com as it
Speaker 6: is known or Alibaba dot Com that targets more of
Speaker 6: the businesses overseas. You know, they have and continue to
Speaker 6: be the gateway for businesses into the factories within China.
Speaker 6: So you know, the transactions are actually still ongoing now.
Speaker 6: Of course, you know, with the rumblings that we have
Speaker 6: seen in the recent you know, two weeks with regards
Speaker 6: to tariff on made in China, you know goods itself.
Speaker 6: What I would say is that this is not totally unexpected.
Speaker 6: There will be neartom disruptions to logistics, to supply chain,
Speaker 6: but there are solutions being put in place by platforms
Speaker 6: like ali Baba, as well as businesses itself to try
Speaker 6: to mitigate and operate in this new environment.
Speaker 4: I'm so glad you brought up the idea of tariffs
Speaker 4: here because I'm also curious about Alibaba's overseas e commerce business,
Speaker 4: particularly in the United States. What do we know about
Speaker 4: what's happening.
Speaker 6: Right you know, they have light PDDs to move been
Speaker 6: looking to diversified outside of China into new markets including US,
Speaker 6: and US tends to be a attractive market for most
Speaker 6: of the e commerce players for region that it is
Speaker 6: a more homogeneous market and there is demand for a
Speaker 6: variety of products out there, which again the Chinese e
Speaker 6: commerce platforms they do have an advantage because they are
Speaker 6: so much closer to factories and the source of these goods.
Speaker 6: So they have also been selling more into US, but
Speaker 6: on a less aggressive basis, if I can put it
Speaker 6: this way.
Speaker 4: Now, the day goes by when we're not discussing artificial intelligence,
Speaker 4: and I know that Ali Baba has a big business
Speaker 4: in terms of cloud computing. How well is that performing
Speaker 4: right now?
Speaker 6: Well, do you know what cloud computing? The revenue, the
Speaker 6: profitability of this business for Ali Baba, it's actually been
Speaker 6: on the up trend for the last two quarters or
Speaker 6: the first half of their physical year. So do you
Speaker 6: know the company had expressed that they were fairly confident
Speaker 6: in driving a double digit cloud revenue growth ahead, and
Speaker 6: I do think that the latest development of you know,
Speaker 6: as they tied up with Apple, hopefully we get confirmation
Speaker 6: of that from the company themselves, definitely is icing on
Speaker 6: the cake for this trajectory. Again, depending on how much
Speaker 6: which they are sinking into R and D infrastructure. I
Speaker 6: will not be surprised if we get you know, upfront
Speaker 6: investment out lays over the next twelve months. But I
Speaker 6: do think that this will and can potentially set a
Speaker 6: very strong foundation for their growth ahead.
Speaker 4: The issue of cap X has been so important when
Speaker 4: we're looking at what's happening in the AI industry in
Speaker 4: the United States and whether or not we're going to
Speaker 4: see at some point a meaningful return on investment. But
Speaker 4: you mentioned Apple there working perhaps with Ali Baba to
Speaker 4: roll out some AI features in China. Do we know
Speaker 4: much about what's happening? I think this story was first
Speaker 4: reported last week by the Information.
Speaker 6: Yes, do you know what not at this juncture company
Speaker 6: has been in blackout, and I'm quite sure you know,
Speaker 6: that will be something that will that questions will be
Speaker 6: raised around it to the best of the ability that
Speaker 6: a company can share what they're working with Apple about.
Speaker 6: But again, you know, taking a step back on the
Speaker 6: developments on Capex, let's not forget that this is a
Speaker 6: company that has committed to share buybacks as well as
Speaker 6: you know, they also started paying out dividends the last
Speaker 6: physical year. So as the Capex demand increases on the
Speaker 6: cloud front as well as logistics, let's not forget that.
Speaker 6: Let's see how they will look to actually maintain this
Speaker 6: commitment to actually try and improve shareholder's new you know,
Speaker 6: in the next one year.
Speaker 4: Catherine, thank you so much for helping us understand more
Speaker 4: about what's happening with Ali Baba as we look to
Speaker 4: the company's earnings report in the week ahead. She is
Speaker 4: Katherine Lim, senior Consumer and Technology analyst for Bloomberg Intelligence,
Speaker 4: joining us from Singapore. We go next to South Korea,
Speaker 4: where we'll get a report this week on consumer confidence.
Speaker 4: We thought it would be a good time to take
Speaker 4: a look at what's happening in the broader economy in
Speaker 4: South Korea, and for that we'll bring in Bloomberg Sam
Speaker 4: Kim Sam cover the economies of South Korea and Japan
Speaker 4: from our bureau in Seoul. Sam, it's always a pleasure.
Speaker 4: Can you give me an understanding of what's been happening
Speaker 4: with consumers broadly speaking in South Korea?
Speaker 10: Yeah, consumer inflation is generally seen as stable right now
Speaker 10: in South Korea, although it did pick up a little
Speaker 10: bit last month. That's because of higher energy and food prices.
Speaker 10: What happened was the Lunar New Year holiday when families
Speaker 10: gather and they travel out of town. That happened in
Speaker 10: January this year, whereas last year it happened in February.
Speaker 10: So we do get a little bit of year on
Speaker 10: year pickup in inflation, and that's a good reason for
Speaker 10: the Central bank here to kind of downplay the importance
Speaker 10: of that pickup. And we're kind of expecting that the
Speaker 10: Bank of Korea is going to continue to move its
Speaker 10: rate down in order to ease the expenses interest expenses
Speaker 10: for consumers. But at the same time, there are clear
Speaker 10: signs that consumers are not feeling very happy because of
Speaker 10: the political turmo that's been disrupting a lot of you know,
Speaker 10: the political processes here, and there was a plane crash
Speaker 10: in December that really hurt the consumer confidence. And then
Speaker 10: of course we have the Trump effect. There's a lot
Speaker 10: of people who are concerned about what that person is
Speaker 10: going to do in terms of tariffs on a country
Speaker 10: like South Korea which is very, very rely on exports
Speaker 10: for growth.
Speaker 5: Before we get to.
Speaker 4: The tariff part of the story, I'm curious to get
Speaker 4: back to the consumer. You and I have spoken in
Speaker 4: the past about the degree to which the Bank of
Speaker 4: Korea was concerned about elevated property prices. What's the story
Speaker 4: on the real estate market in South Korea right now.
Speaker 10: What happened last year was the Bank of Korea, which
Speaker 10: is the central bank in South Korea, basically maintain its
Speaker 10: interest rate at higher than use level for an extended
Speaker 10: period of time, longer than people thought they would keep
Speaker 10: it there, and that's really helped tempt down the household
Speaker 10: that increases, which are usually correlated with the housing prices.
Speaker 10: So from late last year, we've been seeing the apartment
Speaker 10: and housing market prices more or less behaving, you know,
Speaker 10: staying a little bit under pressure, not going up too high.
Speaker 10: So there's a lot of concerns surrounding the housing market
Speaker 10: have come down so far, and that's what to allow
Speaker 10: the back of Korea to shift their focus.
Speaker 4: So let's take a closer look now at the export
Speaker 4: part of the economy and the degree to which US
Speaker 4: tariffs may negatively impact that. I think it was in
Speaker 4: the last week that South Korea's top economic think tank
Speaker 4: cut the growth forecast for South Korea for the second
Speaker 4: time in four months. How much of that is due
Speaker 4: to the story on exports and the expectation that US
Speaker 4: tariffs will curtail export activity.
Speaker 10: The biggest part of South Care's exports is semiconductors, and
Speaker 10: those semiconductors are produced by companies like Samsung Electronics and Eskaehis.
Speaker 10: That semiconductor rally that South Korea enjoy last year is
Speaker 10: starting to cool now from late last year, we've been
Speaker 10: seeing the export growth numbers for semiconductors starting to go
Speaker 10: down to the single digit levels. You're on your own basis,
Speaker 10: So a lot of people are expecting, given that the
Speaker 10: chip industry has this notorious women bus cycle, Korean economy
Speaker 10: is going to start to suffer because cheap exports are
Speaker 10: going to start to soften. That's at least the expectation
Speaker 10: of many economists and semiconductor watchers here. And it is
Speaker 10: particular concerning given that the US government under Trump is
Speaker 10: likely to impose tariffs on countries not just South Korea,
Speaker 10: but based all around the world. And what happens because
Speaker 10: of that would be South Korea not being able to
Speaker 10: sort of export enough to not just the US but
Speaker 10: other countries that are impacted by the terrorists.
Speaker 4: Sam, We're looking forward to learning a little bit more
Speaker 4: about how the South Korean consumer is performing when we
Speaker 4: look at the data on consumer confidence that's due in
Speaker 4: the week ahead Bloomberg. Sam Kim covers the economies of
Speaker 4: South Korea and Japan from our bureau in Seoul, and
Speaker 4: I'm Doug Chrisner. You can catch us weekdays for the
Speaker 4: Bloomberg Daybreak Asia podcast. It's available wherever you get your podcast. Tom.
Speaker 2: Thank you Doug. And that does it for this edition
Speaker 2: of Bloomberg day Break Weekend. Join us again Monday morning
Speaker 2: at five am Wall Street Time for the latest on
Speaker 2: markets overseas and the news you need to start your day.
Speaker 2: I'm Tom Busby.
Speaker 7: Stay with us.
Speaker 2: Top stories and global business headlines are coming up right now.